nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒11‒13
ten papers chosen by
Maximo Rossi
University of the Republic

  1. Inequality, Growth and Public Spending in Central, East and Southeast Europe By Mario Holzner
  2. Explaining the Cross-National Time Series Variation in Life Expectancy: Income, Women’s Education, Shifts, and What Else? By Lant Pritchett; Martina Viarengo
  3. Progress in Health around the World By David Canning
  4. Designing the Inequality-Adjusted Human Development Index (IHDI) By Sabina Alkire; James Foster
  5. The Puzzle of Social Preferences By Jordi Brandts; Enrique Fatas
  6. Measuring Economic Insecurity and Vulerability as Part of Economic Well-Being: Concepts and Context By Lars Osberg
  7. Polarization Measurement and Inference in Many Dimensions: A Note By Gordon Anderson
  8. Emotional Prosperity and the Stiglitz Commission By Oswald, Andrew J
  9. Inequality at Work: The Effect of Peer Salaries on Job Satisfaction By David Card; Alex Mas; Enrico Moretti; Emmanuel Saez
  10. How Much Do Educational Outcomes Matter in OECD Countries? By Eric A. Hanushek; Ludger Woessmann

  1. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The paper analyses the joint determinants of inequality and growth with a special emphasis on public spending structures in transition. The mutual benefit of low real interest rates, to both equity and economic development is a major result of this paper. In terms of public spending items we find a positive correlation with equity and a negative one with growth as several of the government expenditure items seem to act counter-cyclically. In the late 1990s and early 2000s the European integration process allowed most of the transition economies to aim for the best of both worlds: equity and economic development.
    Keywords: inequality, government expenditures, economic growth, transition
    JEL: D63 H5 O4 P2
    Date: 2010–10
  2. By: Lant Pritchett (Kennedy School of Government at Harvard University); Martina Viarengo (London School of Economics and Kennedy School of Government at Harvard University)
    Abstract: This paper examines the variation across countries and evolution over time of life expectancy. Using historical data going back to the beginning of the 20th century several basic facts about the relationship between national income and life expectancy are established. The paper shows that even by examining the augmented Preston curve there is no indication that the Preston curve is “breaking down” and no indication from over 100 years of data that a very strong relationship between national income and life expectancy will not persist, particularly over the ranges of income of primary interest to the Human Development Report. Empirical findings show that there are actually fewer “puzzles” than might appear while trying to reconcile the strong cross-sectional association with the time evolution of life expectancy in specific countries and most of the existing “puzzles” come from using either very short time-horizons or very small moves in income per capita when the Preston curve is a long-run phenomena. The paper also discusses the phenomena of the cross-national convergence, with the life expectancy of the poorer countries increasing, in absolute terms, faster than those of the rich countries and how the findings about the augmented Preston curve relate to discussions of health policy.
    Keywords: economic development, economic growth, health, life expectancy, mortality.
    JEL: I10 O1 O40 J11
    Date: 2010–10
  3. By: David Canning (Harvard School of Public Health)
    Abstract: Health is a key component of the human development index. This paper looks at how health is measured, how the level of health across countries is converging, and which countries are outliers to this global trend. We argue that conceptually health measures should account for illness as well as mortality. However, in practice we show that population mortality and illness measures tend to move closely together, allowing us to use life expectancy as a reasonable proxy for population health. Overall health is improving, and over the last 40 years life expectancy has been converging, with larger gains taking place in countries that initially had lower levels of life expectancy. We show, however, that a detailed analysis gives a more complex picture. Rather than a long term pattern of global convergence we see two distinct groups of countries in the data, clustering around different long run levels of life expectancy. We consider outliers from the general picture found in cross-country analysis. HIV/AIDS plays a large role in explaining the poor health performance of some countries particularly in Sub-Saharan Africa. HIV/AIDS has meant that from 1990 on the process of convergence in health has stopped and is being reversed. Finally we argue that health improvements do not have to wait for national income to rise. Many countries have experienced large health gains without prior income gains, and in countries not affected by HIV/AIDS the last 40 years have largely been a success story in terms of achievements in health.
    Keywords: health, life expectancy, human development.
    JEL: I10 I30
    Date: 2010–10
  4. By: Sabina Alkire (Oxford Poverty and Human Development Initiative at Oxford University); James Foster (George Washington University and Oxford Poverty & Human Development Initiative)
    Abstract: As a measure of wellbeing, national income misses variations in the things income can and cannot buy. It also misses variations in people’s claim on that aggregate income. The Human Development Index attempts to address the first weakness by incorporating two additional dimensions, health and education, into its informational bases. However, the second weakness, inequality, is ignored by the traditional HDI. In practical terms this means that any two countries having the same mean achievements will have the same HDI values even if they have very different distributions of achievements. This calls into question the accuracy of the HDI as a reflection of people’s actual achievements. This paper proposes a method for adjusting the HDI to reflect the distribution of human development achievements across the population, and across dimensions. We begin with a discussion of the proposed indices in an idealized setting where variables and their scales have been identified and the data are available. We then address the practical issues that must be addressed when applying these methods to real data. The final section presents and evaluates another related approach.
    Keywords: Human Development Index, inequality, multidimensional inequality measurement, capability approach, multidimensional welfare.
    JEL: I0 D63 O15 I3
    Date: 2010–10
  5. By: Jordi Brandts (Universitat Autònoma de Barcelona and Instituto de Análisis Económico (CSIC)); Enrique Fatas (Universidad de València)
    Abstract: We present a brief overview of the experimental economics literature on social preferences. In numerous experiments, economically incentivized subjects are willing to sacrifice part of their material earnings to compensate the kind behavior of others, or will be willing to reciprocate at a non-negligible cost, or even pay a positive price for punishing the behavior of selfish individuals. All these actions are labeled as social in economics because there is no apparent way to reconcile them with any reasonable form of pure self-interest. We focus on social dilemma games and want to communicate two main messages. First, research in experimental economics has produced abundant evidence that illustrates the social components of people’s preferences. Second, social sanctions of different types play an important role in facilitating cooperative behavior.
    Date: 2010–10–01
  6. By: Lars Osberg (Department of Economics, Dalhousie University)
    Keywords: economic insecurity; vulnerability; economic well-being; economic security; social protection; welfare state
    Date: 2010–11–04
  7. By: Gordon Anderson
    Abstract: This note extends the Duclos Esteban Ray Polarization Measure to situations in which agents are characterized in many dimensions where the characteristics are both discrete and continuous. It provides a formula for its asymptotic variance and illustrates its use in an application to a sample of Chinese Urban Households where household income, living space and educational status of the household head are the agent characteristics.
    Keywords: Polarization Multidimensional estimation Inference
    JEL: I30
    Date: 2010–11–05
  8. By: Oswald, Andrew J (Warwick Business School, University of Warwick)
    Abstract: This paper argues -- in line with the proposals of the recent Stiglitz Commission on the Measurement of Economic Performance and Social Progress -- that we should now be measuring a nation’s emotional prosperity rather than its economic prosperity (that is, we ought to focus on the level of mental well-being not the number of pounds in people’s bank accounts). The paper reviews recent ideas in this field. It also describes seven recent studies that, worryingly, suggest that emotional prosperity may be declining through time. For labour-market specialists, a key question for future research is how much this downward trend can be traced back to increased pressures in working life. That question currently remains open.
    Keywords: Well-being ; biomarkers ; GHQ ; happiness ; Easterlin paradox JEL Classification: I1 ; I3
    Date: 2010
  9. By: David Card (UC Berkeley); Alex Mas (Princeton University); Enrico Moretti (UC Berkeley); Emmanuel Saez (UC Berkeley)
    Abstract: Economists have long speculated that individuals care about both their absolute income and their income relative to others. We use a simple theoretical framework and a randomized manipulation of access to information on peers’ wages to provide new evidence on the effects of relative pay on individual utility. A randomly chosen subset of employees of the University of California was informed about a new website listing the pay of all University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings indicate that utility depends directly on relative pay comparisons, and that this relationship is non-linear.
    Keywords: income, universities, wage information, job search, pay comparison
    JEL: J01 J31 J40 J24 J39
    Date: 2010–09
  10. By: Eric A. Hanushek; Ludger Woessmann
    Abstract: Existing growth research provides little explanation for the very large differences in long-run growth performance across OECD countries. We show that cognitive skills can account for growth differences within the OECD, whereas a range of economic institutions and quantitative measures of tertiary education cannot. Under the growth model estimates and plausible projection parameters, school improvements falling within currently observed performance levels yield very large gains. The present value of OECD aggregate gains through 2090 could be as much as $275 trillion, or 13.8 percent of the discounted value of future GDP. Extensive sensitivity analyses indicate that, while differences between model frameworks and alternative parameter choices make a difference, the economic impact of improved educational outcomes remains enormous. Interestingly, the quantitative difference between an endogenous and neoclassical model framework – with improved skills affecting the long-run growth rate versus just the steady-state income level – matters less than academic discussions suggest. We close by discussing evidence on which education policy reforms may be able to bring about the simulated improvements in educational outcomes.
    JEL: H0 I2 J24 J48 O4
    Date: 2010–11

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