nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2011‒11‒14
twelve papers chosen by
Maximo Rossi
University of the Republic

  1. Multidimensional affluence: Theory and applications to Germany and the US By Andreas Peichl; Nico Pestel
  2. Inequality, growth and public spending in Central, East and Southeast Europe By Mario Holzner
  3. Occupational Segregation by Race and Ethnicity in the US: Differences across States By Carlos Gradín; Coral Del Río; Olga Alonso-Villar
  4. Fiscal policy and income redistribution in Latin America: Challenging the conventional wisdom By Nora Lustig
  5. Race, poverty, and deprivation in South Africa By Carlos Gradín
  6. Polarization, inequality and growth: The Indian experience By Sripad Motiram; Nayantara Sarma
  7. Ray-invariant intermediate inequality measures: A Lorenz dominance criterion By Francisco Azpitarte; Olga Alonso-Villar
  8. Is there such thing as middle class values ? Class differences, values and political orientations in Latin America By Lopez-Calva, Luis F.; Rigolini, Jamele; Torche, Florencia
  9. Poverty and the business cycle: The role of the intra-household distribution of unemployment By Luis Ayala; Olga Cantó; Juan G. Rodríguez
  10. The measurement of educational inequality : achievement and opportunity By Ferreira, Francisco H. G.; Gignoux, Jeremie
  11. Should cash transfers be confined to the poor ? implications for poverty and inequality in Latin America By Acosta, Pablo; Leite, Phillipe; Rigolini, Jamele
  12. Redistributive effects of indirect taxes: comparing arithmetical and behavioral simulations in Uruguay By Verónica Amarante; Marisa Bucheli; Cecilia Olivieri; Ivone Perazzo

  1. By: Andreas Peichl (Institute for the Study of Labor (IZA), University of Cologne, ISER and CESifo); Nico Pestel (Institute for the Study of Labor (IZA) and University of Cologne)
    Abstract: This paper suggests multidimensional affluence measures for the top of the distribution. In contrast to commonly used top income shares, they allow the analysis of the extent, intensity and breadth of affluence in several dimensions within a common framework. We illustrate this by analyzing the role of income and wealth as dimensions of multidimensional well-being in Germany and the US in 2007 as well as for the US over the period 1989–2007. We find distinct country differences with the country ranking depending on the measure. While in Germany wealth predominantly contributes to the intensity of affluence, income is more important in the US.
    Keywords: top incomes, multidimensional measurement, richness, wealth, inequality
    JEL: D31 D63 I31
    Date: 2011
  2. By: Mario Holzner (The Vienna Institute for International Economic Studies)
    Abstract: The article analyses the joint determinants of inequality and growth with a special emphasis on public spending structures in transition. We find especially government expenditures on subsidies to be negatively correlated with both inequality and growth, as more generally government expenditures seem to act counter-cyclically and inequality reducing. Also, there is a mutual benefit of low real interest rates, to both equity and economic development. This hints to the fact that in the late 1990's and early 2000's the European integration process allowed several 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: 2011
  3. By: Carlos Gradín; Coral Del Río; Olga Alonso-Villar
    Abstract: Using the 2005–2007 American Community Survey, we analyze the occupational segregation of workers by race and ethnicity across states. Although the unconditional analysis shows great geographical variation in segregation, with the largest levels in the Southwest, the analysis of segregation conditioned on the distribution of characteristics reveals that segregation of workers with similar characteristics is generally greater in the East Central region. To quantify conditional segregation, we adapt a propensity score technique that simultaneously controls for several characteristics, allowing the identification of the factors that explain the geographical variation of unconditional segregation.
    Date: 2011–09
  4. By: Nora Lustig (Commitment to Equity Initiative (CEQ), Inter-American Dialogue and Tulane University)
    Abstract: Conventional wisdom states that fiscal policy redistributes little in Latin America. Lower tax revenues and – above all – lower and less progressive transfers have been identified as the main cause. Existing studies show that, while in Europe the distribution of all transfers combined (cash and in-kind) is egalitarian, the bulk of transfers in Latin America accrue to the upper quintile. Through an in-depth fiscal incidence analysis applied to Argentina, Bolivia, Brazil, Mexico and Peru we argue that conventional wisdom may be wrong. First, the extent and effectiveness of income redistribution and poverty reduction, revenue-collection, and spending patterns vary so significantly across countries that speaking of ?Latin America? as a unity is misleading. The (after direct taxes and transfers) Gini, for example, declines by over 10 percent in Argentina but by only 2.4 percent in Bolivia. In Argentina, Brazil and Bolivia government revenues are close to 40 percent of GDP, whereas in Mexico and Peru they are around 20 percent. Social spending (excluding contributory pensions) as a share of GDP ranges from 17 percent in Brazil to 5.2 percent in Peru. Second, social spending does not accrue to the richest quintile. On the contrary, concentration coefficients for social spending are highly negative (progressive in absolute terms) for Argentina and slightly so for Bolivia and Mexico. In Brazil and Peru social spending is progressive in relative terms only. Third, there is no obvious correlation between the size of government and the size of social spending, on the one hand, and the extent and effectiveness of redistribution, on the other: government size is similar for Argentina and Bolivia but they are on opposite sides in terms of the extent of redistribution. Fourth, due to indirect taxes households are net payers to the ?fisc? beginning in the third decile in Bolivia and Brazil; for Argentina, Mexico and Peru this happens in the fifth decile. Fifth, corrective measures differ too: in Argentina, Bolivia and Brazil they may involve the reduction in revenues and total spending, while revenues and social spending (especially direct transfers to the poor) should be increased in Mexico and Peru. Bolivia and Brazil need to introduce changes to their tax and transfer system so that net payers to the ?fisc? start at higher incomes. All five countries need to improve the progressivity of their spending, including non-social spending components.
    Keywords: fiscal incidence, fiscal policy, inequality, poverty, redistribution, social policy, taxes, transfers; Latin America, Argentina, Bolivia, Brazil, Mexico and Peru
    JEL: D63 H11 H22 H5 I3 O15
    Date: 2011
  5. By: Carlos Gradín (Universidade de Vigo)
    Abstract: The aim of this paper is to explain why poverty and material deprivation in South Africa are significantly higher among those of African descent than among whites. To do so, we estimate the conditional levels of poverty and deprivation Africans would experience had they the same characteristics as whites. By comparing the actual and counterfactual distributions, we show that the racial gap in poverty and deprivation can be attributed to the cumulative disadvantaged characteristics of Africans, such as their current level of educational attainment, demographic structure, and area of residence, as well as to the inertia of past racial inequalities. Progress made in the educational and labor market outcomes of Africans after Apartheid explains the reduction in the racial poverty differential.
    Keywords: poverty, deprivation, race, decomposition, South Africa, households’ characteristics.
    JEL: D31 D63 I32 J15 J71 J82 O15
    Date: 2011
  6. By: Sripad Motiram (Indira Gandhi Institute of Development Research, Mumbai); Nayantara Sarma (Indira Gandhi Institute of Development Research, Mumbai)
    Abstract: We analyze polarization in India roughly in the past two and half decades using consumption expenditure data. We show that both bipolarization and multidimensional polarization (on several dimensions: caste, rural-urban, state, region) have increased since the 1990s. In the case of bipolarization, this is a reversal from the earlier trend (in the 1980s). Overall, our results suggest that the high growth that India has been witnessing since the 1990s has been associated with widening disparities. Comparing polarization and inequality, we find similarities, but also some differences. Our results therefore underscore the importance of studying polarization as distinct from traditional inequality.
    Keywords: Polarization; Inequality; Growth in India.
    JEL: D31 D63
    Date: 2011
  7. By: Francisco Azpitarte (University of Melbourne); Olga Alonso-Villar (Universidade de Vigo)
    Abstract: This paper introduces a new Lorenz dominance criterion that allows ranking income distributions according to ray-invariant intermediate inequality measures. In doing so, it defines a-Lorenz curves by adapting the generalized Lorenz curves to this case. In addition, it provides an empirical illustration of these tools using Australian income data for the period 2001-2008. The results suggest that despite the reduction of relative inequality, inequality increased for most ray-invariant intermediate value judgments.
    Keywords: Income distribution; Lorenz dominance; Intermediate inequality indices; Ray-invariance.
    JEL: D63
    Date: 2011
  8. By: Lopez-Calva, Luis F.; Rigolini, Jamele; Torche, Florencia
    Abstract: Middle class values have long been perceived as drivers of social cohesion and growth. This paper investigates the relation between class (measured by position in the income distribution), values, and political orientations using comparable values surveys for six Latin American countries. The analysis finds that both a continuous measure of income and categorical measures of income-based class are robustly associated with values. Both income and class tend to display a similar association to values and political orientations as education, although differences persist in some important dimensions. Overall, there is no strong evidence of any"middle class particularism": values appear to gradually shift with income, and middle class values are between the ones of poorer and richer classes. If any, the only peculiarity of middle class values is moderation. The analysis also finds changes in values across countries to be of much larger magnitude than the ones dictated by income, education, and individual characteristics, suggesting that individual values vary primarily within bounds dictated by each society.
    Keywords: Inequality,Economic Theory&Research,Social Inclusion&Institutions,Labor Policies,Access&Equity in Basic Education
    Date: 2011–11–01
  9. By: Luis Ayala (Universidad Rey Juan Carlos); Olga Cantó (Instituto de Estudios Fiscales); Juan G. Rodríguez (Universidad Complutense de Madrid)
    Abstract: Conventional wisdom predicts that changes in the aggregate unemployment rate may significantly affect a country’s income distribution and, as a consequence, have a relevant impact on the evolution of the poverty rate. However, the relationship between labour macroeconomic indicators and poverty seems to have become weaker in recent times. Using panel data on unemployment and poverty for Spanish regions we estimate a System GMM model in order to model this relationship taking into account that the intrahousehold distribution of unemployment can be more relevant than aggregate unemployment in order to explain poverty changes. We also test the hypothesis of asymmetric effects of the business cycle on the share of poor individuals in the population. Our results show that unemployment has a positive impact on severe poverty, while inflation has a negative effect. Among the three unemployment measures considered in order to predict poverty, the percentage of households where all active members are unemployed registers the highest explanatory power. We also find that a change in unemployment has a larger effect on poverty during a period of economic recession than during a period of expansion.
    Keywords: poverty forecasting, unemployment, system GMM model
    JEL: E3 I3
    Date: 2011
  10. By: Ferreira, Francisco H. G.; Gignoux, Jeremie
    Abstract: This paper proposes two related measures of educational inequality: one for educational achievement and another for educational opportunity. The former is the simple variance (or standard deviation) of test scores. Its selection is informed by consideration of two measurement issues that have typically been overlooked in the literature: the implications of the standardization of test scores for inequality indices, and the possible sample selection biases arising from the Program of International Student Assessment (PISA) sampling frame. The measure of inequality of educational opportunity is given by the share of the variance in test scores that is explained by pre-determined circumstances. Both measures are computed for the 57 countries in which PISA surveys were conducted in 2006. Inequality of opportunity accounts for up to 35 percent of all disparities in educational achievement. It is greater in (most of) continental Europe and Latin America than in Asia, Scandinavia, and North America. It is uncorrelated with average educational achievement and only weakly negatively correlated with per capita gross domestic product. It correlates negatively with the share of spending in primary schooling, and positively with tracking in secondary schools.
    Keywords: Teaching and Learning,Secondary Education,Education For All,Poverty Impact Evaluation,Tertiary Education
    Date: 2011–11–01
  11. By: Acosta, Pablo; Leite, Phillipe; Rigolini, Jamele
    Abstract: This paper compares for 13 Latin American countries the poverty and inequality impacts of cash transfer programs that are given to all children and the elderly (that is,"categorical"transfers), to programs of equal budget that are confined to the poor within each population group (that is,"poverty targeted"transfers). The analysis finds that both the incidence of poverty and the depth of the poverty gap are important factors affecting the relative effectiveness of categorical versus poverty targeted transfers. The comparison of transfers to children and the elderly also supports the view that choosing carefully categories of beneficiaries is almost as important as targeting the poor for achieving a high poverty and inequality impact. Overall, the findings suggest that although in the Latin American context poverty targeting tends to deliver higher poverty impacts, there are circumstances under which categorical targeting confined to geographical regions (sometimes called"geographic targeting") may be a valid option to consider. This is particularly the case in low-income countries with widespread pockets of poverty.
    Keywords: Rural Poverty Reduction,Services&Transfers to Poor,Regional Economic Development,Poverty Monitoring&Analysis
    Date: 2011–11–01
  12. By: Verónica Amarante (Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República); Marisa Bucheli (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Cecilia Olivieri (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Ivone Perazzo (Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República)
    Abstract: In this brief paper we compare the redistributive effect of a VAT reform using an arithmetical and a behavioral microsimulation model. We analyze the effects of the elimination of the VAT for a basket of goods which is intensively consumed by the poorest population. Our microsimulations are based on data from the expenditure survey. The behavioral model uses the Quadratic Almost Ideal Demand System (QUAIDS) proposed by Banks et al (1997). Our results indicate that the change in the VAT implies a redistributive effect of small magnitude. The comparison of redistributive effects under the arithmetic and the behavioral simulation reveals that they are very similar.
    Keywords: fiscal redistribution, income inequality, taxes
    JEL: D31 H23 H20
    Date: 2011–09

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