nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2012‒02‒01
eleven papers chosen by
Maximo Rossi
University of the Republic

  1. Intergenerational Persistence in Income and Social Class: The Impact of Within-Group Inequality By Jo Blanden; Paul Gregg; Lindsey Macmillan
  2. Work Values in Western and Eastern Europe By Benno Torgler
  3. Time Preference and the Distribution of Wealth and Income By Richard M. H. Suen
  4. Who is at the top? Wealth mobility over the life cycle By Hochguertel, Stefan; Ohlsson, Henry
  5. Redistribution and insurance in the German welfare state By Bartels, Charlotte
  6. Preferences for Redistribution among Emigrants from a Welfare State By Ilpo Kauppinen; Panu Poutvaara
  7. Job Separations, Job loss and Informality in the Russian Labor Market By Hartmut Lehmann; Tiziano Razzolini; Anzelika Zaiceva
  8. Under-investment in state capacity: the role of inequality and political instability By Mauricio Cárdenas; Didem Tuzemen
  9. Identification of Preferences and Evaluation of Income Tax Policy By Charles F. Manski
  10. Mind the Gap: What Gap? A Detailed Picture of the Immigrant-Native Earnings Gap in the UK using Longitudinal Data between 1978 and 2006 By Sara Lemos
  11. New Developments in the Measurement of Welfare and Well-being By Bernard M.S. van Praag; Erik J.S. Plug

  1. By: Jo Blanden; Paul Gregg; Lindsey Macmillan
    Abstract: Family income is found to be more closely related to sons’ earnings for a cohort born in 1970 compared to one born in 1958. This result is in stark contrast to the finding on the basis of social class; intergenerational mobility for this outcome is found to be unchanged. Our aim here is to explore the reason for this divergence. We derive a formal framework which relates mobility in measured family income/earnings to mobility in social class. Building on this framework we then test a number of alternative hypotheses to explain the difference between the trends, finding evidence of an increase in the intergenerational persistence of the permanent component of income that is unrelated to social class. We reject the hypothesis that the observed decline in income mobility is a consequence of the poor measurement of permanent family income in the 1958 cohort.
    Keywords: Intergenerational income mobility, social class fluidity, income inequality.
    JEL: J13 J31 Z13
    Date: 2011–12
    URL: http://d.repec.org/n?u=RePEc:bri:cmpowp:11/277&r=ltv
  2. By: Benno Torgler (The School of Economics and Finance, Queensland University of Technology, research fellows of CREMA – Center for Research in Economics, Management and the Arts, Switzerland and associated with CESifo)
    Abstract: The paper reports on work values in Europe. At the country level we find that job satisfaction is related to lower working hours, higher well-being, and a higher GDP per capita. Moving to the micro level, we turn our attention from job satisfaction to analyse empirically work centrality and work value dimensions (without exploring empirically job satisfaction) related to intrinsic and extrinsic values, power and social elements. The results indicate substantial differences between Eastern and Western Europe. Socio-demographic factors, education, income, religiosity and religious denomination are significant influences. We find additional differences between Eastern and Western Europe regarding work-leisure and work-family centrality that could be driven by institutional conditions. Furthermore, hierarchical cluster analyses report further levels of dissimilarity among European countries.
    Keywords: Work Values, Job Satisfaction, Work-Leisure Relationship, Work-Family Centrality, Eastern Europe, Western Europe
    JEL: P20 D10 J28 J17 J22
    Date: 2011–12
    URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2011.94&r=ltv
  3. By: Richard M. H. Suen (University of Connecticut)
    Abstract: This paper analyzes the connection between time preference heterogeneity and economic inequality. To achieve this, we extend the standard neoclassical growth model by introducing three additional features, namely (i) heterogeneity in consumers’ discount rates, (ii) direct preferences for wealth, and (iii) human capital formation. The second feature prevents the wealth distribution from collapsing into a degenerate distribution. The third feature generates a strong positive correlation between earnings and capital income across consumers. A calibrated version of the model is able to generate patterns of wealth and income inequality that are very similar to those observed in the United States.
    Keywords: Inequality, Heterogeneity, Time Preference, Human Capital
    JEL: D31 E21 O15
    Date: 2012–01
    URL: http://d.repec.org/n?u=RePEc:uct:uconnp:2012-01&r=ltv
  4. By: Hochguertel, Stefan (Uppsala Center for Fiscal Studies); Ohlsson, Henry (Uppsala Center for Fiscal Studies)
    Abstract: Who is wealthy? This paper presents empirical estimates of household movements into and out of the top percents of the wealth distribution over individual life cycles. There are life-cycle motives and precautionary motives for wealth accumulation. The opportunities to accumulate wealth create incentives for education, work effort, and entrepreneurship. We would expect considerable wealth mobility over the life cycle if the life-cycle motives and incentives to accumulate are strong and affect behavior. The data are from an administrative Swedish source that retains wealth information from tax registers. The data are unique, they follow a large sample of households over almost 40 years. There is substantial mobility when we follow individual households over long enough time spans. We find that wealth mobility increased until the end of the 1980s and then started to decrease. Age-wealth probability profiles are consistent with life-cycle motives for wealth accumulation. There are also limited precautionary motives for wealth accumulation when households experience income uncertainty.
    Keywords: intragenerational wealth mobility; wealth durations; life-cycle motives; precautionary motives; panel data
    JEL: D14 D31 D91 H24
    Date: 2012–01–16
    URL: http://d.repec.org/n?u=RePEc:hhs:uufswp:2012_001&r=ltv
  5. By: Bartels, Charlotte
    Abstract: Welfare states redistribute both between individuals (inter-individual redistribution) reducing annual, cross-sectional inequality and over the lifecycle of an individual (intra-individual redistribution) insuring individuals against income risks in the long-term. But studies measuring redistribution often focus on a one-year period and the second aspect is neglected. To quantify both inter- and intra-individual redistribution in Germany this study uses SOEP data from 1984 to 2009 to construct long-term incomes over a 20-year period. Results show that annual, cross-sectional inequality is higher than inequality in the long-run, but the effect of redistribution is also larger annually than in the long-term. Depending on age the distributional focus of the German welfare state differs. When persons are young, state intervention reduces income differences between individuals mainly through the progressive tax system. Getting older and reaching retirement age income-smoothing redistribution via social security pensions becomes central. --
    Keywords: long-term income inequality,income redistribution,social security
    JEL: D31 D63 H53 H55
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:zbw:fubsbe:201125&r=ltv
  6. By: Ilpo Kauppinen (Ifo Institute); Panu Poutvaara (University of Munich and Ifo Institute)
    Abstract: This paper studies attitudes towards income redistribution in the country of origin among those who stay in a welfare state, and those who emigrate. We find a striking gender difference among Danish emigrants. Majority of men opposes increasing income redistribution, while majority of women supports it. Women are somewhat more positive towards redistribution also in Denmark, but the gender difference is much smaller. We study to what extent differences in attitudes towards redistribution are driven by beliefs about the determinants of individual success, generalized trust, assimilation to the new home country, and self-selection of emigrants to the United States and other destinations. We do not find evidence of assimilation to political values prevalent in the new home country.
    Keywords: Migration; Emigration; Welfare state; Redistribution; Political preferences
    JEL: F22 J61 H2
    Date: 2012–01
    URL: http://d.repec.org/n?u=RePEc:nor:wpaper:2012009&r=ltv
  7. By: Hartmut Lehmann; Tiziano Razzolini; Anzelika Zaiceva
    Abstract: Having unique data we investigate the link between job separations (displacement and quits) and informal employment, which we define in several ways posing the general question whether the burden of informality falls disproportionately on job separators in the Russian labor market. After we have established positive causal effects of displacement and quits on informal employment we analyze whether displaced workers experience more involuntary informal employment than their non-displaced counterparts. Our main results confirm our contention that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all the workers who separate but predominantly on workers with low human capital. We also pursue the issue of informality persistence and find that informal employment is indeed persistent as some workers churn from one informal job to the next. Our study contributes to the debate in the informality literature regarding segmented versus integrated labor markets. It also contributes to the literature on displacement by establishing informal employment as an important cost of displacement. We also look at the share of undeclared wages in formal jobs and find that these shares are larger for separators than for incumbents, with displaced workers bearing the brunt of this manifestation of informality
    Date: 2012–01
    URL: http://d.repec.org/n?u=RePEc:mod:depeco:0674&r=ltv
  8. By: Mauricio Cárdenas; Didem Tuzemen
    Abstract: Existing studies have shown that the state's ability to tax, also known as fiscal capacity, is positively related to economic development. In this paper, we analyze the determinants of the government's decision to invest in state capacity, which involves a trade-off between present consumption and the ability to collect more taxes in the future. Using a model, we highlight some political and economic dimensions of this decision and conclude that political stability, democracy, income inequality, as well as the valuation of public goods relative to private goods, are important variables to consider. We then test the main predictions of the model using cross-country data and find that state capacity is higher in more stable and equal societies, both in economic and political terms, and in countries where the chances of fighting an external war are high, which is a proxy for the value of public goods.
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp11-07&r=ltv
  9. By: Charles F. Manski
    Abstract: The merits of alternative income tax policies depend on the population distribution of preferences for income, leisure, and public goods. Standard theory, which supposes that persons want more income and more leisure, does not predict how they resolve the tension between these desires. Empirical studies of labor supply have been numerous but have not shed much light on the matter. A persistent problem is that empirical researchers have imposed strong preference assumptions that lack foundation. This paper examines anew the problem of inference on preferences and considers the implications for comparison of tax policies. I first perform a basic revealed-preference analysis that imposes no assumptions on the preference distribution beyond the presumption that persons prefer more income and leisure. This shows that observation of a person’s labor supply under a status quo tax policy may bound his labor supply under a proposed policy or may have no implications, depending on the shapes of the two tax schedules and the location of status quo labor supply. I next explore the identifying power of two assumptions restricting the population distribution of income-leisure preferences. One assumes that groups of persons who face different choice sets have the same distribution of preferences, while the other adds restrictions on the shape of this distribution. I then address utilitarian policy comparison with partial knowledge of preferences. Partial knowledge of preferences implies partial knowledge of the welfare function. Hence, it may not be possible to rank policies.
    JEL: C14 C25 H21 H24 J22
    Date: 2012–01
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:17755&r=ltv
  10. By: Sara Lemos
    Abstract: Using the underexplored, sizeable and long Lifetime Labour Market Database (LLMDB) we estimated the immigrant-native earnings gap across the entire earnings distribution, across continents of nationality and across cohorts of arrival in the UK between 1978 and 2006. We exploited the longitudinal nature of our data to separate the effect of observed and unobserved individual characteristics on earnings. This helped us to prevent selectivity biases such as cohort bias and survivor bias, which have been long standing unresolved identification issues in the literature. In keeping with the limited existing UK literature, we found a clear and wide dividing line between whites and non-whites in simple comparable models. However, in our more complete models we found a much narrower and subtler dividing line. This confirms the importance of accounting for unobservable individual characteristics, which is an important contribution of this paper. It also suggests that the labour market primarily rewards individual characteristics other than immigration status. We also found that the lowest paid immigrants, whom are disproportionately non-white, suffer an earnings penalty in the labour market, whereas higher paid immigrants, whom are disproportionately white, do not. Finally, we found less favourable earning gaps for cohorts that witnessed proportionately larger non-white and lower paid white immigration.
    Keywords: Immigration; wages; earnings; earnings-gap; UK
    JEL: J24 J31 J61 J71 J82 F22
    Date: 2011–09
    URL: http://d.repec.org/n?u=RePEc:lec:leecon:11/38&r=ltv
  11. By: Bernard M.S. van Praag (University of Amsterdam); Erik J.S. Plug (University of Amsterdam)
    Abstract: This paper is dating from 1995, when it has been presented at the Ragnar Frisch Centennial Memorial Conference in Oslo. It has never been published before. In this paper for the first time the Cantril ladder question data have been employed in the way which later has become known as happiness economics. After two introductory sections 1and 2, Section 3 explains the Leyden School methodology to estimate financial satisfaction or in traditional terms a (cardinal) welfare function of money. In Section 4 the Cantril ladder question is employed to estimate a function of satisfaction with life as a whole. It is found that well-being is quadratic in the number of children, leading to an optimum number of children, given income and given the fact of a one-breadwinner- or two- breadwinners-family. In Section 5 the effects of children on financial satisfaction and on satisfaction with life as a whole are compared. With respect to financial satisfaction it is found that the more children there are the smaller financial satisfaction. Comparison of the two effects makes it possible to distinguish between the monetary cost associated with having children and the non-monetary benefits caused by having children. Part of this paper is based on Plug and Van Praag (1995).
    Keywords: happiness economics; Leyden School; Cantril Ladder; family equivalence scales; costs and benefits of children
    JEL: B50 D19 J1 D6
    Date: 2012–01–16
    URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:20120005&r=ltv

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