nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒12‒18
eight papers chosen by
Maximo Rossi
University of the Republic

  1. Beyond the Joneses: inter-country income comparisons and happiness By Leonardo Becchetti; Stefano Castriota; Elena Giachin
  2. The Reservation Wage Unemployment Duration Nexus By John T. Addison; José A. F. Machado; Pedro Portugal
  3. Social preferences during childhood and the role of gender and age - An experiment in Austria and Sweden By Martinsson, Peter; Nordblom, Katarina; Rützler, Daniela; Sutter, Matthias
  4. The Causal Eff ect of Parent’s Schooling on Children’s Schooling By Holmlund, Helena; Lindahl, Mikael; Plug, Erik
  5. Genes, Economics, and Happiness By Jan-Emmanuel De Neve; Nicholas A. Christakis; James H. Fowler; Bruno S. Frey
  6. Education-related Inequity in Health Care with Heterogeneous Reporting of Health By Teresa Bago d'Uva; Maarten Lindeboom; Owen O'Donnell; Eddy van Doorslaer
  7. Longevity, Growth and Intergenerational Equity - The Deterministic Case By Torben M. Andersen; Marias H. Gestsson
  8. Inequality and happiness: When perceived social mobility and economic reality do not match By Christian Bjørnskov; Axel Dreher; Justina A.V. Fischer; Jan Schnellenbach

  1. By: Leonardo Becchetti (Department of Economics, Universitˆ Tor Vergata); Stefano Castriota (Department of Economics, Universitˆ di Perugia); Elena Giachin (Department of Economics, Universitˆ Tor Vergata)
    Abstract: Our paper provides some novel evidence on the burgeoning literature on life satisfaction and relative comparisons by showing that in the last 30 years comparisons with the wellbeing of top income countries have generated progressively more negative feelings on a large sample of individuals in the Eurobarometer survey. The paper contributes in two main directions: (i) it shows that countries, and not just neighbors, can be reference groups; (ii) it documents a globalization effect by which distant countries become progressively closer and comparisons among them more intense and relevant. Our findings may be interpreted in support of the well known hypothesis that migratory decisions are affected by the gap in economic wellbeing between origin and destination country since they document that such gap affects individual life satisfaction.
    Keywords: life satisfaction, relative income, standard of living, comparisons
    JEL: D31 E01 I31 J61
    Date: 2010–12
  2. By: John T. Addison; José A. F. Machado; Pedro Portugal
    Abstract: A thorny problem in identifying the determinants of reservation wages and particularly the role of continued joblessness in their evolution is the simultaneity issue. We deploy a natural control function approach to the problem that involves conditioning elapsed duration on completed unemployment duration in the reservation wage equation. Our analysis confirms that the use of elapsed duration alone compounds two separate and opposing influences. Only with the inclusion of completed duration is the negative effect of continued joblessness on reservation wages apparent. For its part, the completed duration coefficient suggests that higher reservation wages negatively influence the probability of exiting unemployment.
    JEL: J64 J65
    Date: 2010
  3. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Rützler, Daniela (Department of Public Economics, University of Innsbruck, Austria); Sutter, Matthias (Department of Public Economics, University of Innsbruck, Austria)
    Abstract: We examine social preferences of Swedish and Austrian children and adolescents using the experimental design of Charness and Rabin (2002). We find that difference aversion decreases while social-welfare preferences increase with age.<p>
    Keywords: social preferences; children; adolescents; distributional experiment; Austria; Sweden.
    JEL: C91 D63 D64
    Date: 2010–12–10
  4. By: Holmlund, Helena (Swedish Institute for Social Research,); Lindahl, Mikael (Uppsala Center for Labor Studies); Plug, Erik (Uppsala Center for Labor Studies)
    Abstract: We review the empirical literature that estimates the causal effect of parent’s schooling on child’s schooling, and conclude that estimates differ across studies. We then consider three explanations for why this is: (a) idiosyncratic differences in data sets; (b) differences in remaining biases between different identification strategies; and (c) differences across identification strategies in their ability to make out-of-sample predictions. We conclude that discrepancies in past studies can be explained by violations of identifying assumptions. Our reading of past evidence, together with an application to Swedish register data, suggests that intergenerational schooling associations are largely driven by selection. Parental schooling constitutes a large part of the parental nurture effect, but as a whole does not play a large role.
    Keywords: intergenerational mobility; education; causation; selection; identification
    JEL: C13 I21 J62
    Date: 2010–05–31
  5. By: Jan-Emmanuel De Neve; Nicholas A. Christakis; James H. Fowler; Bruno S. Frey
    Abstract: Research on happiness has produced valuable insights into the sources of subjective well-being that are of importance to economics. A major nding from this literature is that people exhibit a "baseline" level of happiness that shows persistent strength over time. Here we explore the extent to which baseline happiness is in uenced by genetic variation. Using data from Add Health, we employ a twin study design to show that ge- netic variation explains about 33% of the variation in happiness, and that the in uence of genes varies by gender (women 26%, men 39%) and tends to rise with age. We also present evidence that variation in a specific gene predicts happiness. Individuals with a transcriptionally more eficient version of the serotonin transporter gene (SLC6A4) are significantly more likely to report higher levels of life satisfaction|having one or two alleles of the more eficient type raises the average likelihood of being very satised with one's life by 8.5% and 17.3%, respectively. Finally, using data from an indepen- dent source (the Framingham Heart Study) we show that a linked single nucleotide polymorphism (rs2020933) in the SLC6A4 gene also predicts life satisfaction. These results are the rst to identify a specific gene that may be associated with baseline levels of happiness.
    Keywords: academia; Happiness; Subjective Well-Being; Genetics
    JEL: A12 Z00
    Date: 2010–12
  6. By: Teresa Bago d'Uva (Erasmus University Rotterdam); Maarten Lindeboom (VU University Amsterdam); Owen O'Donnell (Erasmus University Rotterdam, and University of Macedonia, Thessaloniki, Greece); Eddy van Doorslaer (ESE, and iBMG, Erasmus University Rotterdam)
    Abstract: Reliance on self-rated health to proxy medical need can bias estimation of education-related inequity in health care utilisation. We correct this bias both by instrumenting self-rated health with objective health indicators and by purging self-rated health of reporting heterogeneity identified from health vignettes. Using data on elderly Europeans, we find that instrumenting self-rated health shifts the distribution of doctor visits in the direction of inequality favouring the better educated. There is a further, and typically larger, shift the same direction when correction is made for the tendency of the better educated to rate their health more negatively.
    Keywords: health care; health; equity; reporting heterogeneity; vignettes
    JEL: C35 C42 I12
    Date: 2010–12–06
  7. By: Torben M. Andersen; Marias H. Gestsson
    Abstract: Challenges raised by ageing (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from pre-savings to indexation of retirement ages have been justified in this way. We develop an overlapping generations model in continuous time which encompasses different generations with different mortality rates and thus longevity. Allowing for trend increases in both longevity and productivity, we address the issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and non-material well being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution.
    Date: 2010–10
  8. By: Christian Bjørnskov (Aarhus University); Axel Dreher (University of Goettingen); Justina A.V. Fischer (Faculty of Economics, University of Rome "Tor Vergata"); Jan Schnellenbach (Ruprecht-Karls-Universität Heidelberg,)
    Abstract: In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective wellbeing). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous.
    Keywords: Happiness, life satisfaction, subjective well-being, inequality, income distribution, redistribution, political ideology, justice, fairness, World Values Survey
    JEL: I31 H40 D31 J62 Z13
    Date: 2010–11–08

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