nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2011‒09‒16
eleven papers chosen by
Maximo Rossi
University of the Republic

  1. Does parenthood increase happiness? Evidence for Poland. By Anna Baranowska; Anna Matysiak
  2. Is Leisure a Normal Good? Evidence from the European Parliament By Mocan, Naci; Altindag, Duha T.
  3. The Causal Effect of Education on Health: What is the Role of Health Behaviors? By Brunello, Giorgio; Fort, Margherita; Schneeweis, Nicole; Winter-Ebmer, Rudolf
  4. Mothers Do Matter: New Evidence on the Effect of Parents' Schooling on Children's Schooling Using Swedish Twin Data By Amin, Vikesh; Lundborg, Petter; Rooth, Dan-Olof
  5. Cycles of Wage Discrimination By Biddle, Jeff E.; Hamermesh, Daniel S.
  6. Teachers' Salaries in Latin America: How Much Are They (Under or Over) Paid? By Mizala, Alejandra; Nopo, Hugo
  7. Taxes, Wages and Working Hours By Ericson, Peter; Flood, Lennart
  8. The pro-poorness, growth and inequality nexus: Some findings from a simulation study By Thomas Groll; Peter J. Lambert
  9. Tax policy and income inequality in the U.S., 1978—2009: A decomposition approach By Olivier Bargain; Mathias Dolls; Herwig Immervoll; Dirk Neumann; Andreas Peichl; Nico Pestel; Sebastian Siegloch
  10. On the identification of the “middle class” By Anthony B. Atkinson; Andrea Brandolini
  11. Lower and upper bounds of unfair inequality: Theory and evidence for Germany and the US By Judith Niehues; Andreas Peichl

  1. By: Anna Baranowska; Anna Matysiak (Institute of Statistics and Demography, Warsaw School of Economics)
    Abstract: In the recent decade demographers turned their attention to investigating the effects of children on self-rated happiness or life satisfaction. The underlying idea of this strand of research is to find out whether it pays off to individuals to become parents in terms of their subjective wellbeing, given the costs of having children. This paper follows this line of research and studies the impacts of childbearing on individual-level happiness in Poland; a country which experienced a rapid decline in fertility despite particularly strong attachment of young Poles to family values. To this end, we applied methods for panel data analysis which allowed us to control for endogeneity of subjective well-being and parenthood. Our results reveal a significantly positive effect of the first child on the subjective well-being of mothers. For men, this impact is weaker and most likely temporary since it weakens with an increase in child’s age. Importantly, neither for men nor for women does the positive impact of parenthood rise with an increase in parity. This may explain persistence of low fertility in this country.
    Keywords: happiness , life satisfaction, fertility, childbearing, parenthood
    JEL: J13 J17
    Date: 2011
  2. By: Mocan, Naci (Louisiana State University); Altindag, Duha T. (Auburn University)
    Abstract: Prior to July 2009, salaries of the members of the European Parliament were paid by their home country and there were substantial salary differences between parliamentarians representing different EU countries. Starting in July 2009, the salary of each member of the Parliament is pegged to 38.5% of a European Court judge's salary, paid by the EU. This created an exogenous change in salaries, the magnitude and direction of which varied substantially between parliamentarians. Parliamentarians receive per diem compensation for each plenary session they attend, but salaries constitute unearned income as they are independent of attendance to the Parliament. Using detailed information on each parliamentarian of the European Parliament between 2004 and 2011 we show that an increase in salaries reduces attendance to plenary sessions and an increase in per diem compensation increases it. We also show that corruption in home country has a negative effect on attendance for seasoned members of the Parliament.
    Keywords: labor supply, corruption, EU
    JEL: D73 P16 J22 J45
    Date: 2011–08
  3. By: Brunello, Giorgio (University of Padova); Fort, Margherita (University of Bologna); Schneeweis, Nicole (University of Linz); Winter-Ebmer, Rudolf (University of Linz)
    Abstract: In this paper we investigate the contribution of health related behaviors to the education gradient, using an empirical approach that addresses the endogeneity of both education and behaviors in the health production function. We apply this approach to a multi-country data set, which includes 12 European countries and has information on education, health and health behaviors for a sample of individuals aged 50+. Focusing on self reported poor health as our health outcome, we find that education has a protective role both for males and females. When evaluated at the sample mean of the dependent variable, one additional year of education reduces self-reported poor health by 7.1% for females and by 3.1% for males. Health behaviors – measured by smoking, drinking, exercising and the body mass index – contribute to explaining the gradient. We find that the effects of education on smoking, drinking, exercising and eating a proper diet account for at most 23% to 45% of the entire effect of education on health, depending on gender.
    Keywords: health, education, health behaviors, Europe
    JEL: J1 I12 I21
    Date: 2011–08
  4. By: Amin, Vikesh (Binghamton University, New York); Lundborg, Petter (Lund University); Rooth, Dan-Olof (Linneaus University)
    Abstract: Behrman and Rosenzweig (2002) used data on a small sample of MZ (monozygotic, identical) twin parents and their children to show that father's schooling is more important than mother's schooling for children's schooling in the U.S. Recent studies based on much larger samples of twins from registry data in Scandinavian countries reach similar conclusions. Most of these studies, however, are unable to distinguish between MZ and DZ (dizygotic, fraternal) twins. Using data from the Swedish Twin Registry, we replicate the finding that father's schooling matters more than mother's schooling in a combined sample of MZ and DZ twin parents. In contrast, results based on MZ twin parents show that mother's schooling matters at least as much as father's schooling for children's schooling. We also estimate the effect of parents' schooling separately by child gender and find this effect to be entirely driven by the impact of mother's schooling on daughter's schooling. Our results show that (1) it is vital to have zygosity information to estimate causal intergenerational effects and (2) the conclusions reached by Behrman and Rosenzweig (2002) for the U.S. do not apply in Sweden.
    Keywords: twins, twin-fixed effects, schooling, intergenerational mobility
    JEL: J0 I0 J1
    Date: 2011–08
  5. By: Biddle, Jeff E. (Michigan State University); Hamermesh, Daniel S. (University of Texas at Austin)
    Abstract: Using CPS data from 1979-2009 we examine how cyclical downturns and industry-specific demand shocks affect wage differentials between white non-Hispanic males and women, Hispanics and African-Americans. Women's and Hispanics' relative earnings are harmed by negative shocks, while the earnings disadvantage of African-Americans may drop with negative shocks. Negative shocks also appear to increase the earnings disadvantage of bad-looking workers. A theory of job search suggests two opposite-signed mechanisms that affect these wage differentials. It suggests greater absolute effects among job-movers, which is verified using the longitudinal component of the CPS.
    Keywords: women, minorities, beauty, search models
    JEL: E29 J71
    Date: 2011–08
  6. By: Mizala, Alejandra (University of Chile); Nopo, Hugo (Inter-American Development Bank)
    Abstract: This paper documents the extent to which teachers are underpaid vis-à-vis workers in other professional and technical occupations in Latin America circa 2007. These labor earnings differences, attributed to observable socio-demographic and job characteristics, are assessed using a matching methodology (Ñopo, 2008). Teachers' underpayment is found to be stronger than what has been previously reported in the literature, especially among pre-school and primary teachers. Nonetheless, behind the region averages there is an important cross-country heterogeneity. Teachers' underpayment is more pronounced among males, older workers, household heads, part-timers, formal workers, those who work in the private sector, and (mostly) among those with complete tertiary education. Two amenities of the teaching profession, namely the longer job tenure and the flexible job schedules within the year, are also explored. Even after accounting for the possible compensating differentials of these two amenities, teachers' underpayment vis-à-vis that of other professional and technicians prevail.
    Keywords: wage differentials, professional labor markets, Latin America
    JEL: J31 J44 J8 O54
    Date: 2011–08
  7. By: Ericson, Peter (Sim Solution); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper presents estimates of individuals’ responses in hourly wages to changes in marginal tax rates. Estimates based on register panel data of Swedish households covering the period 1992 to 2007 produce significant but relatively small net-of-tax rate elasticities. The results vary with family type, with the largest elasticities obtained for single males and the smallest for married/cohabitant females. Despite these seemingly small elasticities, evaluation of the effects of a reduced state tax using a microsimulation model shows that the effort effect matters. The largest effect is due to changes in number of working hours yet including the effort effect results in an almost self-financed reform. As a reference to the earlier literature we also estimate taxable income elasticities. As expected, these are larger than for the hourly wage rates. However, both specifications produce significantly and positive income effects.<p>
    Keywords: income taxation; hourly wage rates; work effort; micro simulation
    JEL: D31 H24 J22 J31
    Date: 2011–08–31
  8. By: Thomas Groll (University of Oregon); Peter J. Lambert (University of Oregon)
    Abstract: A widely accepted criterion for pro-poorness of an income growth pattern is that it should reduce a (chosen) measure of poverty by more than if all incomes were growing equiproportionately. Inequality reduction is not generally seen as either necessary or sufficient for pro-poorness. As shown in Lambert (2010), in order to conduct nuanced investigation of the pro-poorness, growth and inequality nexus, one needs at least a 3-parameter model of the income distribution. In this paper, we explore in detail the properties of inequality reduction and pro-poorness, using the Watts poverty index and Gini inequality index, when income growth takes place within each of the following models: the displaced lognormal, Singh-Maddala and Dagum distributions. We show by simulation, using empirically relevant parameter estimates, that distributional change preserving the form of each of these income distributions is, in the main, either pro-poor and inequality reducing, or pro-rich and inequality exacerbating. Instances of pro-rich and inequality reducing change do occur, but we find no evidence that distributional change could be both pro-poor and inequality exacerbating.
    Keywords: poverty, growth, pro-poorness, income distribution.
    JEL: I32 D63 D31
    Date: 2011
  9. By: Olivier Bargain (UC Dublin, IZA and CEPS/INSTEAD); Mathias Dolls (University of Cologne and IZA); Herwig Immervoll (OECD, ISER and IZA); Dirk Neumann (University of Cologne and IZA); Andreas Peichl (IZA, University of Cologne, ISER and CESifo); Nico Pestel (University of Cologne and IZA); Sebastian Siegloch (University of Cologne and IZA)
    Abstract: We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method that allows us to disentangle mechanical effects due to changes in pre-tax incomes from direct effects of policy reforms. While tax reforms implemented under Democrat administrations, in particular the EITC reforms in the 1990s and the ARRA in 2009, had an equalizing effect at the lower half of the distribution, the disequalizing effects of Republican reforms are due to tax cuts for high-income families. As a consequence of partisan politics, overall policy effects almost cancel out over the whole time period.
    Keywords: Tax policy, Inequality, Redistribution, Political Economy, Great Recession
    JEL: H23 H31 H53 P16
    Date: 2011
  10. By: Anthony B. Atkinson (Nuffield College); Andrea Brandolini (Bank of Italy)
    Abstract: The paper examines the identification of the “middle class” using data from LIS and LWS. It first considers definitions based purely on income, examining the rationale for different approaches and illustrating the implications for changes over time. It argues that the concept of “class” requires the examination of other dimensions beyond income. The paper considers the role of property and, drawing on the sociological literature, of occupations.
    Keywords: class structure, income distribution
    JEL: J31 D33
    Date: 2011
  11. By: Judith Niehues (SOCLIFE, University of Cologne and IZA); Andreas Peichl (IZA, University of Cologne (FiFo), ISER and CESifo)
    Abstract: Previous estimates of unfair inequality of opportunity (IOp) are only lower bounds because of the unobservability of the full set of endowed circumstances beyond the sphere of individual responsibility. In this paper, we suggest a new estimator based on a fixed effects panel model which additionally allows identifying an upper bound. We illustrate our approach by comparing Germany and the US based on harmonized micro data. We find significant and robust differences between lower and upper bound estimates – both for gross and net earnings based either on periodical or permanent income – for both countries. We discuss the cross-country differences and similarities in IOp in the light of differences in social mobility and persistence.
    Keywords: poverty, growth, pro-poorness, income distribution.
    JEL: D31 D63 H24 J62
    Date: 2011

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