nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒10‒09
eight papers chosen by
Maximo Rossi
University of the Republic

  1. Equality, Equity and Incentives: An Experiment By Loukas Balafoutas; Martin G. Kocher; Louis Putterman; Matthias Sutter
  2. Testing for Welfare Comparisons when Populations Differ in Size By Jean-Yves Duclos; Agnès Zabsonré
  3. The Neglected Dimension of Well-Being: Analyzing the Development of "Conversion Efficiency" in Great Britain By Martin Binder; Tom Broekel
  4. China's Overt Economic Rise and Latent Human Capital Investment: Achieving Milestones and Competing for the Top By Constant, Amelie F.; Tien, Bienvenue; Zimmermann, Klaus F.; Meng, Jingzhou
  5. Intergenerational top income mobility in Sweden: Capitalist dynasties in the land of equal opportunity? By Björklund, Anders; Roine, Jesper; Waldenström, Daniel
  6. Why a positive link between age and income-related health inequality? By Nordin , Martin; Gerdtham , Ulf-G
  7. Distributions in motion: Economic growth, inequality, and poverty dynamics By Francisco Ferreira
  8. Identification of Social Interactions By Lawrence E. Blume; William A. Brock; Steven N. Durlauf; Yannis M. Ioannides

  1. By: Loukas Balafoutas; Martin G. Kocher; Louis Putterman; Matthias Sutter
    Abstract: We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjects’ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations.
    Keywords: equality, efficiency, voluntary contribution mechanism, incentives, experiment
    JEL: C91 C92 D31 D63 H41
    Date: 2010–09
  2. By: Jean-Yves Duclos; Agnès Zabsonré
    Abstract: Assessments of social welfare do not usually take into account population sizes. This can lead to serious social evaluation flaws, particularly in contexts in which policies can affect demographic growth. We develop in this paper a little-known though ethically attractive approach to correcting the flaws of traditional welfare analysis, an approach that is population-size sensitive and that is based on critical-level generalized utilitarianism (CLGU). Traditional CLGU is extended by considering arbitrary orders of welfare dominance and ranges of “poverty lines” and values for the “critical level” of how much a life must be minimally worth to contribute to social welfare. Simulation experiments briefly explore the normative relationship between population sizes and critical levels. We apply the methods to household level data to rank Canada’s social welfare across 1976, 1986, 1996 and 2006 and to estimate normatively and statistically robust lower and upper bounds of critical levels over which these rankings can be made. The results show dominance of recent years over earlier ones, except when comparing 1986 and 1996. In general, therefore, we conclude that Canada’s social welfare has increased over the last 35 years in spite (or because) of a substantial increase in population size.
    Keywords: CLGU, welfare dominance, FGT dominance, estimation of critical levels, welfare in Canada
    JEL: C12 D31 D63 I30
    Date: 2010
  3. By: Martin Binder (Max Planck Institute of Economics, Evolutionary Economics Group, Jena); Tom Broekel (Department of Economic Geography, Faculty of Geosciences, Utrecht University)
    Abstract: In Amartya Sen's capability approach, policy makers can focus on different levels to influence the well-being of a society. We argue that improving capability to function as well as absolute levels of functioning achievement should be complemented by attention given to improving individuals' "conversion efficiency", i.e. the efficiency with which individual resources are converted into well-being. In order to examine effects of policies on conversion efficiency and to better understand the trajectories of human well-being over time, it is necessary to measure the development of conversion efficiency. We suggest an intertemporal index of conversion efficiency estimated via a nonparametric order-m approach borrowed from the production efficiency literature to analyze this development of our welfare measure. We exemplify this approach using micro level data from the British Household Panel Survey (BHPS), tracking conversion efficiency for a set of basic functionings in Great Britain from 1991 to 2006. We find that under 30% of the British populace were efficient in their conversion of resources into functionings during the sample horizon. Moreover, age, education and self-employment increase an individual's conversion efficiency, while living in London, being disabled and being separated, divorced or widowed all decrease conversion efficiency. Being married also decreases the conversion efficiency and we find few evidence of gender disparities in conversion efficiency.
    Keywords: capability approach, conversion efficiency, efficiency analysis, intertemporal development
    JEL: I12 I31 D60
    Date: 2010–09–27
  4. By: Constant, Amelie F. (DIW DC, George Washington University); Tien, Bienvenue (DIW DC); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University); Meng, Jingzhou (George Washington University)
    Abstract: We provide an overview of China's economic rise through time. Over the past decade, China has maintained 10% growth in GDP, albeit with a GDP per capita at the low level of a developing country. Its tremendous economic development has overlooked the growing social inequalities and rising resentments of the ‘cheap’ workers and those laid off. The main contributor to its ascension is international trade and investment in physical capital, often at the expense of the environment. The year 1978 was the landmark for the foundation of the Chinese modern higher education system. Since then the number of students enrolled in Chinese higher education institutions has increased dramatically; China is producing serious scholars and a tremendous amount of scholarly output; more and more Chinese students seek higher education abroad; and international students find a rising interest in receiving education in China.
    Keywords: China, human capital, brain drain, higher education
    JEL: F22 J24 N35 O15 O24 O53
    Date: 2010–09
  5. By: Björklund, Anders (Swedish Institute for Social Research, Stockholm University); Roine, Jesper (SITE, Stockholm School of Economics); Waldenström, Daniel (Research Institute of Industrial Economics (IFN))
    Abstract: This paper presents new evidence on intergenerational mobility in the top of the income and earnings distribution. Using a large dataset of matched father-son pairs in Sweden, we find that intergenerational transmission is very strong in the top, more so for income than for earnings. In the extreme top (top 0.1 percent) income transmission is remarkable with an IG elasticity above 0.9. We also study potential transmission mechanisms and find that sons’ IQ, non-cognitive skills and education are all unlikely channels in explaining this strong transmission. Within the top percentile, increases in fathers’ income are, if anything, negatively associated with these variables. Wealth, on the other hand, has a significantly positive association. Our results suggest that Sweden, known for having relatively high intergenerational mobility in general, is a society where transmission remains strong in the very top of the distribution and that wealth is the most likely channel.
    Keywords: Intergenerational income mobility; top incomes; earnings inequality; income inequality; welfare state; quantile regression
    JEL: D31 J62
    Date: 2010–09–27
  6. By: Nordin , Martin (Department of Economics, Lund University); Gerdtham , Ulf-G (Department of Economics, Lund University)
    Abstract: This study uses Swedish data to analyze why the SES-health gradient increases with ageing. Since different measures of SES and health capture different aspects, we use this information to explore the age increase in health inequality and to discriminate between three types of explanations, namely: i) age increase in the causal SES effect; ii) reversed health effect on SES, and iii) lifecycle variation in the measurement errors in SES and health. <p>Thus, our analysis points in the direction that the age increase in health inequality is primarily caused by a reversed causality going from health to annual income, and the probable mechanism is health affecting the labour supply of the individual. In addition the study report that the age variation in health inequality seem to have increased over time, and during the 1980th the age variation was rather limited. The evidence in our study is not conclusive, but all evidence documented agrees and supports this conclusion.
    Keywords: health inequality; socioeconomic status; income; education
    JEL: D30 D31 I10 I12
    Date: 2010–09–29
  7. By: Francisco Ferreira (The World Bank)
    Abstract: The joint determination of aggregate economic growth and distributional change has been studied empirically from at least three different perspectives. A macroeconomic approach that relies on cross-country data on poverty, inequality, and growth rates has generated some interesting stylized facts about the correlations between these variables, but has not shed much light on the underlying determinants. “Meso-” and microeconomic approaches have fared somewhat better. The microeconomic approach, in particular, builds on the observation that growth, changes in poverty, and changes in inequality are simply different aggregations of information on the incidence of economic growth along the income distribution. This paper reviews the evolution of attempts to understand the nature of growth incidence curves, from the statistical decompositions associated with generalizations of the Oaxaca-Blinder method, to more recent efforts to generate “economically consistent” counterfactuals, drawing on structural, reduced-form, and computable general equilibrium models.
    Keywords: Poverty and inequality dynamics; growth incidence curves.
    JEL: D31 I32
    Date: 2010
  8. By: Lawrence E. Blume; William A. Brock; Steven N. Durlauf; Yannis M. Ioannides
    Abstract: While interest in social determinants of individual behavior has led to a rich theoretical literature and many efforts to measure these influences, a mature "social econometrics" has yet to emerge. This chapter provides a critical overview of the identification of social interactions. We consider linear and discrete choice models as well as social network structures. We also consider experimental and quasi-experimental methods. In addition to describing the state of the identification literature, we indicate areas where additional research is especially needed and suggest some directions that appear to be especially promising.
    Keywords: social interactions, social networks, identification
    JEL: C21 C23 C31 C35 C72 Z13
    Date: 2010

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