nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2012‒06‒25
thirteen papers chosen by
Maximo Rossi
University of the Republic

  1. Happiness, Habits and High Rank: Comparisons in Economic and Social Life By Andrew E. Clark
  2. Changes in Wage Structure in Mexico Going Beyond the Mean: An Analysis of Differences in Distribution, 1987-2008 By Tello, Claudia; Ramos, Raul; Artís, Manuel
  3. Lifetime versus Annual Tax Progressivity: Sweden, 1968–2009 By Bengtsson, Niklas; Holmlund, Bertil; Waldenström, Daniel
  4. Tall or Taller, Pretty or Prettier: Is Discrimination Absolute or Relative? By Hamermesh, Daniel S.
  5. The Quest for More and More Education: Implications for Social Mobility By Lindley, Joanne; Machin, Stephen
  6. Remittances and Well-Being among Rural-to-Urban Migrants in China By Akay, Alpaslan; Giulietti, Corrado; Robalino, Juan David; Zimmermann, Klaus F.
  7. Completing the Bathtub? - The Development of Top Incomes in Germany, 1907-2007 By Christina Anselmann. Hagen M. Krämer
  8. The Great Happiness Moderation By Andrew E. Clark; Sarah Flèche; Claudia Senik
  9. The Wage Premium of Foreign Education: New Evidence from Australia By Chan, Gavin; Heaton, Christopher; Tani, Massimiliano
  10. "Time Use of Mothers and Fathers in Hard Times: The US Recession of 2007-09" By Gunseli Berik; Ebru Kongar
  11. The Evolution of Ideology, Fairness and Redistribution By Alberto Alesina; Guido Cozzi; Noemi Mantovan
  12. Explaining the Income-Distribution Puzzle in Happiness Research: Theory and Evidence By Dluhosch, Barbara; Horgos, Daniel; Zimmermann, Klaus W.
  13. The Effect of Education Policy on Crime: An Intergenerational Perspective By Costas Meghir; Mårten Palme; Marieke Schnabel

  1. By: Andrew E. Clark
    Abstract: The role of money in producing sustained subjective well-being seems to be seriously compromised by social comparisons and habituation. But does that necessarily mean that we would be better off doing something else instead? This paper suggests that the phenomena of comparison and habituation are actually found in a considerable variety of economic and social activities, rendering conclusions regarding well-being policy less straightforward.
    Keywords: Comparison, habituation, income, unemployment, marriage, divorce, health, religion, policy
    JEL: D01 D31 H00 I31 J12 J28
    Date: 2012
  2. By: Tello, Claudia (University of Barcelona); Ramos, Raul (University of Barcelona); Artís, Manuel (University of Barcelona)
    Abstract: This paper conducts an empirical analysis of the relationship between wage inequality, employment structure, and returns to education in urban areas of Mexico during the past two decades (1987-2008). Applying Melly's (2005) quantile regression based decomposition, we find that changes in wage inequality have been driven mainly by variations in educational wage premia. Additionally, we find that changes in employment structure, including occupation and firm size, have played a vital role. This evidence seems to suggest that the changes in wage inequality in urban Mexico cannot be interpreted in terms of a skill-biased change, but rather they are the result of an increasing demand for skills during that period.
    Keywords: wage inequality, quantile regressions, decomposition
    JEL: J31
    Date: 2012–05
  3. By: Bengtsson, Niklas (Uppsala University); Holmlund, Bertil (Uppsala University); Waldenström, Daniel (Uppsala University)
    Abstract: This paper analyzes the evolution of tax progressivity in Sweden from both annual and lifetime perspectives. Using a rich micro panel with administrative records of incomes, taxes and benefits over the period 1968–2009, we calculate tax rates across the income distribution accounting for different tax bases as well as the role of transfers. The uniquely long time span also allows us to compute tax progressivity as realized over a cohort's entire life cycle. Our main finding is that taxes are considerably less progressive over the lifetime than in any single year. In fact, life cycle taxes are close to proportional, bearing a redistributive effect of only a few percent. Intragenerational income mobility seems to be driving this result, although the Swedish economic crisis of the 1990s and the tax reforms of 1971 and 1991 are also important. Labor income taxes contribute less to progressivity in recent years, whereas transfers to unemployed and old-age pensioners have become increasingly important. These findings are robust to the use of different tax rates, tax bases, sample populations, rates of discounting and controls for reranking.
    Keywords: tax progressivity, income distribution, lifetime income, redistributive effect, Kakwani index, transfers
    JEL: D31 H20
    Date: 2012–06
  4. By: Hamermesh, Daniel S. (University of Texas at Austin)
    Abstract: Using several microeconomic data sets from the United States and the Netherlands, and the examples of height and beauty, this study examines whether: 1) Absolute or relative differences in a characteristic are what affect labor-market and other outcomes; and 2) The effects of a characteristic change when all agents acquire more of it – become taller or better-looking. Confronted with a choice among individuals, decision-makers respond more to absolute than to relative differences among them. Also, an increase in the mean of a characteristic's distribution does not alter market responses to differences in it.
    Keywords: beauty, height, discrimination, market responses
    JEL: J71 J78
    Date: 2012–05
  5. By: Lindley, Joanne (University of Surrey); Machin, Stephen (University College London)
    Abstract: In this paper, we discuss the quest for more and more education and its implications for social mobility. We document very rapid educational upgrading in Britain over the last thirty years or so and show that this rise has featured faster increases in education acquisition by people from relatively rich family backgrounds. At the same time, wage differentials for the more educated have risen. Putting these two together (more education for people from richer backgrounds and an increase in the payoff to this education) implies increasing within generation inequality and, by reinforcing already existent inequalities from the previous generation, this has hindered social mobility. We also highlight three important aspects that to date have not been well integrated into the social mobility literature: the acquisition of postgraduate qualifications; gender differences; and the poor education performance of men at the lower end of the education distribution.
    Keywords: wage differentials, wages, inequality, social mobility, education, educational inequality
    JEL: J24 J31
    Date: 2012–05
  6. By: Akay, Alpaslan (IZA); Giulietti, Corrado (IZA); Robalino, Juan David (Imperial College London); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: The main objective of this paper is to propose a systematic approach to empirically analyse the effect of remittances on the utility of migrants, as proxied by their subjective well-being (SWB). Using data from a new survey on China (RUMiC), we estimate models in which a measure of subjective well- being is regressed on the level of remittances, and we find a sizeable positive correlation. The effect of remittances on well-being varies with the socio- economic characteristics of migrants, migration experience and the diversity of family arrangements. As a complementary objective, we use SWB measures to elicit the motivations behind remittances and find evidence that both altruistic (such as pure altruism and reciprocity) and contractual motivations (such as co-insurance and investment) are at work among rural-to-urban migrants in China.
    Keywords: migrants, subjective well-being, remittances
    JEL: J61 D63 D64 I3
    Date: 2012–06
  7. By: Christina Anselmann. Hagen M. Krämer
    Abstract: This paper examines the evolution of top incomes in Germany from 1907-2007 with a special focus on past decades. A more detailed analysis of German top incomes is conducted, beginning with a review of selected income distribution measures which indicate that high incomes have played a significant role for income divergence in recent years. Based on new data it is shown that top income shares have indeed increased substantially in the recent past, a process which is mainly due to a relative rise in employment rather than capital income within the top income groups. Finally, some theories explaining high incomes of the “working rich” are discussed.
    Keywords: Top income shares, income dispersion, executive compensation
    JEL: D31 J30
    Date: 2012
  8. By: Andrew E. Clark (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, IZA - Institute for the Study of Labor - IZA); Sarah Flèche (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA); Claudia Senik (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, UP4 - Université Paris 4, Paris-Sorbonne - Université Paris IV - Paris Sorbonne - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: This paper shows that within-country happiness inequality has fallen in the majority of countries that have experienced a positive income growth over the last forty years, in particular in developed countries. This new stylized fact comes as an addition to the Easterlin paradox, namely that the time trend in average happiness remains flat during episodes of long run income growth. This mean-preserving declining spread of happiness happens via a reduction in both the share of individuals who declare a very low and a very high level of happiness. The rise in income inequality moderates the fall in happiness inequality, and reverts it when it becomes too important, notably in the US starting in the 1990s. Hence, if raising the income of all will not raise the happiness of all, it will at least harmonize the happiness of all, provided that income inequality is not too high. Behind the veil of ignorance, this feature would certainly be considered attractive to risk-averse citizens.
    Keywords: Happiness ; Inequality ; Economic growth ; Development ; Easterlin paradox
    Date: 2012–06
  9. By: Chan, Gavin (Macquarie University, Sydney); Heaton, Christopher (Macquarie University, Sydney); Tani, Massimiliano (Macquarie University, Sydney)
    Abstract: We study whether Australian employers recognise immigrants' education acquired abroad, and if so how. Using data from the Longitudinal Surveys of Immigrants in Australia, we apply interval regression to model migrant hourly earnings. We find substantially higher returns from human capital obtained in Australia and other OECD countries compared with non-OECD countries. These results suggest that the transfer of human capital acquired abroad is mediated by the country in which it was acquired, as found for Israel (Friedberg (2000) and the US (Bratsberg and Ragan (2002)). The results also suggest that immigrants from non-OECD countries are the ones who can gain the most from obtaining further education in Australia, and that targeted rather than generic policies in this area could reduce the extent of the education-occupation mismatch amongst immigrants.
    Keywords: immigration, education, economic assimilation
    JEL: C34 J24 J61
    Date: 2012–05
  10. By: Gunseli Berik; Ebru Kongar
    Abstract: The recession precipitated by the US financial crisis of 2007 accelerated the convergence of women's and men's employment rates, as men experienced disproportionate job losses and women's entry into the labor force gathered pace. Using the American Time Use Survey (ATUS) data for 2003-10, this study examines whether the recession also occasioned a decline in disparity in unpaid work burdens and provided impetus for overall progress toward equity in the workloads, leisure time, and personal care hours of mothers and fathers. Controlling for the prerecession trends, we find that the recession contributed to the convergence of both paid and unpaid work only during the December 2007-June 2009 period. The combined effect of the recession and the jobless recovery was a move toward equity in the paid work hours of mothers and fathers, a relative increase in the total workload of mothers, and a relative decline in their personal care and leisure time.
    Keywords: Economics of Gender; Unemployment; Time Use; Economic Crises
    JEL: D13 J16 J22 J64
    Date: 2012–06
  11. By: Alberto Alesina (Harvard University); Guido Cozzi (Durham Business School); Noemi Mantovan (Bangor University)
    Abstract: Ideas about what is "fair" influence preferences for redistribution. We study the dynamic evolution of different economies in which redistributive policies, perception of fairness, inequality and growth are jointly determined. We show how including beliefs about fairness can keep two otherwise identical countries in di¤erent development paths for a very long time. We show how different initial conditions regarding how "fair" is the same level of inequality can lead to two permanently different steady states. We also explore how bequest taxation can be an efficient way of redistributing wealth to correct "unfair" past accumulation of inequality
    Keywords: Endogenous Growth, Basic and Applied R&D, Endogenous Technological Change, Common Law
    Date: 2012–04–20
  12. By: Dluhosch, Barbara (Helmut Schmidt University, Hamburg); Horgos, Daniel (Helmut Schmidt University, Hamburg); Zimmermann, Klaus W. (Helmut Schmidt University, Hamburg)
    Abstract: The nexus between income and happiness is very much disputed. Many cross-sectional studies see a positive relationship, most longitudinal studies don’t. Starting from the fact that the theoretical basis in happiness research has been comparatively weak, we develop a model that identifies distributional consequences of unemployment with their importance conditional per-capita income as at the heart of the matter. Our theory is backed by empirical evidence on OECD data: in low-income countries, well-being significantly depends on income, in highincome countries on the unemployment-related Gini. Insofar, our findings establish the income-satiation hypothesis of longitudinal studies also in cross-sectional perspective.
    Keywords: Happiness; Welfare Economics; Income Distribution; Unemployment
    JEL: D60 I31 J60
    Date: 2012–06–20
  13. By: Costas Meghir; Mårten Palme; Marieke Schnabel
    Abstract: The intergenerational transmission of human capital and the extent to which policy interventions can affect it is an issue of importance. Policies are often evaluated on either short term outcomes or just in terms of their effect on individuals directly targeted. If such policies shift outcomes across generations their benefits may be much larger than originally thought. We provide evidence on the intergenerational impact of policy by showing that educational reform in Sweden reduced crime rates of the targeted generation and their children by comparable amounts. We attribute these outcomes to improved family resources and to better parenting.
    JEL: I24 J1 J18 J24 J62
    Date: 2012–06

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