nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2011‒10‒01
seven papers chosen by
Maximo Rossi
University of the Republic

  1. Income inequality, decentralisation and regional development in Western Europe By Vassilis Tselios; Andrés Rodríguez-Pose; Andy Pike; John Tomaney; Gianpiero Torrisi
  2. Following in Your Father's Footsteps: A Note on the Intergenerational Transmission of Income between Twin Fathers and their Sons By Amin, Vikesh; Lundborg, Petter; Rooth, Dan-Olof
  3. Does Expanding Health Insurance Beyond Formal-Sector Workers Encourage Informality? Measuring the Impact of Mexico's Seguro Popular By Aterido, Reyes; Hallward-Driemeier, Mary; Pagés, Carmen
  4. Rising Wage Inequality and Postgraduate Education By Lindley, Joanne; Machin, Stephen
  5. The inequality effects of a dual income tax system By Peter J. Lambert and Thor O. Thoresen
  6. On the implications of essential heterogeneity for estimating causal impacts using social experiments By Ravallion, Martin
  7. Equality of opportunities, redistribution and fiscal policies : the case of Liberia By Abras, Ana; Cuesta, Jose

  1. By: Vassilis Tselios (University of Groningen); Andrés Rodríguez-Pose (IMDEA Social Sciences Institute); Andy Pike (Newcastle University); John Tomaney (Newcastle University); Gianpiero Torrisi (Newcastle University)
    Abstract: This paper deals with the relationship between decentralisation, regional economic development, and income inequality within regions. Using multiplicative interaction models and regionally aggregated microeconomic data for more than 100,000 individuals in the European Union (EU), it addresses two main questions. First, whether fiscal and political decentralisation in Western Europe has an effect on within regional interpersonal inequality. Second, whether this potential relationship is mediated by the level of economic development of the region. The results of the analysis show that greater fiscal decentralisation is associated with lower interpersonal income inequality, but as regional income rises, further decentralisation is connected to a lower decrease in inequality. This finding is robust to the measurement and definition of income inequality, as well as to the weighting of the spatial units by their population size.
    Keywords: Income inequality; income per capita; fiscal and political decentralization; interaction; regions; Europe
    Date: 2011–09–16
  2. By: Amin, Vikesh (Binghamton University, New York); Lundborg, Petter (Lund University); Rooth, Dan-Olof (Linneaus University)
    Abstract: We provide the first twin-based estimates of the intergenerational transmission of income between fathers and sons. Using Swedish register data on the income of monozygotic twin fathers and their sons, we are able to control for unobserved endowments at the twin-pair level when estimating the intergenerational relationship. We find a cross-sectional intergenerational income elasticity of 0.276, while our twin-based intergenerational income elasticity is 0.12. This is close to the estimate of 0.10 found by Björklund et al. (2006) using an adoption design. This suggests that at most half of the income transmission can be given a causal interpretation.
    Keywords: twins, income, intergenerational transmission, intergenerational mobility
    JEL: J0 J1
    Date: 2011–09
  3. By: Aterido, Reyes (World Bank); Hallward-Driemeier, Mary (World Bank); Pagés, Carmen (Inter-American Development Bank)
    Abstract: Seguro Popular (SP) was introduced in 2002 to provide health insurance to the 50 million Mexicans without Social Security. This paper tests whether the program has had unintended consequences, distorting workers' incentives to operate in the informal sector. The analysis examines the impact of SP on disaggregated labor market decisions, taking into account that program coverage depends not only on the individual's employment status, but also on that of other household members. The identification strategy relies on the variation in SP's rollout across municipalities and time, with the difference-in-difference estimation controlling for household fixed effects. The paper finds that SP lowers formality by 0.4-0.7 percentage points, with adjustments largely occurring within a few years of the program's introduction. Rather than encouraging exit from the formal sector, SP is associated with a 3.1 percentage point reduction (a 20 percent decline) in the inflow of workers into formality. Income effects are also apparent, with significantly decreased flows out of unemployment and lower labor force participation. The impact is larger for those with less education, in larger households, and with somebody else in the household guaranteeing Social Security coverage. However, workers pay for part of these benefits with lower wages in the informal sector.
    Keywords: informality, Seguro Popular, Mexico, non-contributory social programs, social assistance
    JEL: J08 J62 I38
    Date: 2011–09
  4. By: Lindley, Joanne (University of Surrey); Machin, Stephen (University College London)
    Abstract: This paper considers what has hitherto been a relatively neglected subject in the wage inequality literature, albeit one that has been becoming more important over time, namely the role played by increases in postgraduate education. We document increases in the number of workers with a postgraduate qualification in the United States and Great Britain. We also show their relative wages have risen over time as compared to all workers and more specifically to graduates with only a college degree. Consideration of shifts in demand and supply shows postgraduates and college only workers to be imperfect substitutes in production and that there have been trend increases over time in the relative demand for postgraduate vis-à-vis college only workers. These relative demand shifts are significantly correlated with technical change as measured by changes in industry computer usage and investment. Moreover, the skills sets possessed by postgraduates and the occupations in which they are employed are significantly different to those of college only graduates. Over the longer term period when computers have massively diffused into workplaces, it turns out that the principal beneficiaries of this computer revolution has not been all graduates, but those more skilled workers who have a postgraduate qualification. This has been an important driver of rising wage inequality amongst graduates over time.
    Keywords: wage inequality, postgraduate education, computers
    JEL: J24 J31
    Date: 2011–09
  5. By: Peter J. Lambert and Thor O. Thoresen (Statistics Norway)
    Abstract: The overall inequality effects of a dual income tax (DIT) system, combining progressive taxation of labor income with proportional taxation of income from capital, are investigated. Simple examples show that correlations between distributions of wage and capital income, the degree of tax rate differentiation in the DIT, and reranking of tax-payers can be expected to complicate the analysis. We trace out what can be said definitively, obtaining sufficient conditions for unambiguous inequality reduction and identifying the nature of the implicit redistribution between labor and capital income which is involved, with the help of Norwegian income tax data.
    Keywords: Personal income tax; dual income tax; redistributive effect
    JEL: D31 D63 H31
    Date: 2011–09
  6. By: Ravallion, Martin
    Abstract: Randomized control trials are sometimes used to estimate the aggregate benefit from some policy or program. To address the potential bias from selective take-up, the randomization is used as an instrumental variable for treatment status. Does this (popular) method of impact evaluation help reduce the bias when take-up depends on unobserved gains from take up? Such"essential heterogeneity"is known to invalidate the instrumental variable estimator of mean causal impact, though one still obtains another parameter of interest, namely mean impact amongst those treated. However, if essential heterogeneity is the only problem then the naïve (ordinary least squares) estimator also delivers this parameter; there is no gain from using randomization as an instrumental variable. On allowing the heterogeneity to also alter counterfactual outcomes, the instrumental variable estimator may well be more biased for mean impact than the naïve estimator. Examples are given for various stylized programs, including a training program that attenuates the gains from higher latent ability, an insurance program that compensates for losses from unobserved risky behavior and a microcredit scheme that attenuates the gains from access to other sources of credit. Practitioners need to think carefully about the likely behavioral responses to social experiments in each context.
    Keywords: Poverty Monitoring&Analysis,Disease Control&Prevention,Poverty Impact Evaluation,Scientific Research&Science Parks,Science Education
    Date: 2011–09–01
  7. By: Abras, Ana; Cuesta, Jose
    Abstract: This paper brings back the fiscal angle to the analysis of equal opportunities both by connecting traditional benefit-incidence analysis of public spending with equal opportunities and by conducting ex-ante micro-simulations on the fiscal cost of equal opportunity policies in education. Four simulations are conducted in Liberia, a country devastated by a civil war, with serious educational enrollment gaps and fiscal policies highly dependent on international aid. Results for the simulated policy scenarios (increases in teachers'salaries, elimination of both fee and non-fee costs borne by households, and targeting public spending on education to rural schools) point to very modest redistributive effects but very different patterns of winners and losers among groups of children in Liberia.
    Date: 2011–09–01

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