nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2011‒04‒02
four papers chosen by
Maximo Rossi
University of the Republic

  1. The Intergenerational Transmission of Employers in Canada and Denmark By Bingley, Paul; Corak, Miles; Westergård-Nielsen, Niels
  2. Are Intra-Household Allocations Policy Neutral? Theory and Empirical Evidence By Chiappori, Pierre-André; Iyigun, Murat; Lafortune, Jeanne; Weiss, Yoram
  3. Will GDP Growth Increase Happiness in Developing Countries? By Clark, Andrew E.; Senik, Claudia
  4. Life Satisfaction and Income Inequality By Paolo Verme

  1. By: Bingley, Paul (SFI - Danish National Centre for Social Research); Corak, Miles (University of Ottawa); Westergård-Nielsen, Niels (Aarhus School of Business)
    Abstract: The intergenerational transmission of employers between fathers and sons is a common feature of labour markets in Canada and Denmark, with 30 to 40% of young adults having at some point been employed with a firm that also employed their fathers. This is strongly associated with the first jobs obtained during the teen years, but for four to about six percent it also refers to the main job in adulthood. In both countries the transmission of employers is positively associated with paternal earnings, rising distinctly and sharply at the very top of the father's earnings distribution, and has implications for the intergenerational transmission of earnings. Mobility out of the bottom has little to do with inheriting an employer from the father, while the preservation of high income status is distinctly related to this tendency. These findings stress that child adult outcomes are related to the structure of labour markets, and underscore the role of resources parents have – though information, networks, or direct control of the hiring process – in facilitating the job search of their children.
    Keywords: intergenerational mobility, job search, equality of opportunity
    JEL: J62 J64 J24
    Date: 2011–03
  2. By: Chiappori, Pierre-André (Columbia University); Iyigun, Murat (University of Colorado, Boulder); Lafortune, Jeanne (University of Maryland); Weiss, Yoram (Tel Aviv University)
    Abstract: We develop a collective household model with spousal matching in which there exists marital gains to assortative matching and marriage quality for each couple is revealed ex post. Changes in alimony laws are shown to affect existing couples and couples-to-be differently. For existing couples, legislative changes that favor (wo)men benefit them especially if the marriage match quality is low, while, for couples not yet formed, they generate offsetting intra-household transfers and lower intra-marital allocations for the spouses who are the intended beneficiary. We then estimate the effect of granting alimony rights to cohabiting couples in Canada using a triple-difference framework since each province extended these rights in different years and requiring different cohabitation length. We find that obtaining the right to petition for alimony led women to lower their labor force participation. These results, however, do not hold – and, in some cases, are reversed – for newly formed cohabiting couples.
    Keywords: intra-household allocations, matching, cohabitation, alimony laws
    JEL: J12 J16 J24
    Date: 2011–03
  3. By: Clark, Andrew E. (Paris School of Economics); Senik, Claudia (Paris School of Economics)
    Abstract: This paper asks what low-income countries can expect from growth in terms of happiness. It interprets the set of available international evidence pertaining to the relationship between income growth and subjective well-being. Consistent with the Easterlin paradox, higher income is always associated with higher happiness scores, except in one case: whether growth in national income yields higher well-being is still hotly debated. The key question is whether the correlation coefficient is "too small to matter". The explanations for the small correlation between national income growth and subjective well-being over time appeal to the nature of growth itself (from negative side-effects, such as pollution), and to the psychological importance of relative concerns and adaptation. The available evidence contains two important lessons: income comparisons do seem to affect subjective well-being, even in very poor countries; however, adaptation may be more of a rich-country phenomenon. Our stand is that the idea that growth will increase happiness in low-income countries cannot be rejected on the basis of the available evidence. First, cross-country time-series analyses are based on aggregate measures, which are less reliable than those at the individual level. Second, development is a qualitative process involving take-off points and thresholds. Such regime changes are visible to the eye through the lens of subjective satisfaction measures. The case of Transition countries is particularly impressive in this respect: average life satisfaction scores closely mirrored changes in GDP for about the first ten years of the transition process, until the regime became more stable. The greater availability of subjective measures of well-being in low-income countries would greatly help in the measurement and monitoring of the different stages and dimensions of the development process.
    Keywords: income, subjective well-being, comparisons, adaptation, development
    JEL: D63 I3 O1
    Date: 2011–03
  4. By: Paolo Verme (University of Torino)
    Abstract: Do people care about income inequality and does income inequality affect subjective well-being? Welfare theories can predict either a positive or a negative impact of income inequality on subjective well-being and empirical research has found evidence on a positive, negative or non significant relation. This paper attempts to determine some of the possible causes of such empirical heterogeneity. Using a very large sample of world citizens we test the consistency of income inequality in predicting life satisfaction. We find that income inequality has a negative and significant effect on life satisfaction. This result is robust to changes of regressors and estimation choices and also persists across different income groups and across different types of countries. However, this relation is easily obscured or reversed by multicollinearity generated by the use of country and year fixed effects. This is particularly true if the number of data points for inequality is small, which is a common feature of cross-country or longitudinal studies.
    Keywords: Happiness, Inequality
    JEL: D63 I31
    Date: 2010–08

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