nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2012‒09‒03
seven papers chosen by
Maximo Rossi
University of the Republic

  1. The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results By Nora Lustig; George Gray Molina; Sean Higgins; Miguel Jaramillo; Wilson Jimenez; Veronica Paz; Claudiney Pereira; Carola Pessino; John Scott; Ernesto Yanez
  2. The Great Happiness Moderation By Andrew E. Clark; Sarah Flèche; Claudia Senik
  3. Explaining the Gender Wage Gap: Estimates from a Dynamic Model of Job Changes and Hours Changes. By Liu, Kai
  4. Sharp for SARP: nonparametric bounds on the behavioural and welfare effects of price changes By Richard BLUNDELL; Martin BROWNING; Laurens CHERCHYE; Ian CRAWFORD; Bram DE ROCK; Frederic VERMEULEN
  5. Accounting for changes in income inequality: Decomposition analyses for Great Britain, 1968-2009 By Brewer, Mike; Wren-Lewis, Liam
  6. The Evolution of Income Inequality in Germany and Switzerland since the Turn of the Millennium By Markus M. Grabka; Ursina Kuhn
  7. Do Socioeconomic Factors Really Explain Income-Related Inequalities in Health? Applying a Twin Design to Standard Decomposition Analysis By Gerdtham, Ulf-G; Lundborg, Petter; Lyttkens, Carl Hampus; Nystedt, Paul

  1. By: Nora Lustig (Department of Economics, Tulane University); George Gray Molina (Chief Economist for UNDP-Latin America and the Caribbean, New York, New York); Sean Higgins (Department of Economics, Tulane University); Miguel Jaramillo (GRADE (Grupo de Análisis para el Desarrollo), Peru); Wilson Jimenez; Veronica Paz; Claudiney Pereira (Department of Economics, Tulane University); Carola Pessino (School of Government and Executive Director, Centro de Investigaciones y Evaluación en Economía Social para el Alivio de la Pobreza, Universidad Torcuato Di Tella, Buenos Aires, Argentina); John Scott (CIDE (Centro de Investigación y Docencia Económicas), Mexico and,Consejero Académico, CONEVAL (Consejo Nacional de Evaluación de la Política de Desarrollo Social), Mexico); Ernesto Yanez
    Abstract: We apply a standard tax and benefit incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average) especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers-especially transfers that are progressive in absolute terms--as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms is increased, leakages to the nonpoor are reduced and coverage of the extreme poor by direct transfer programs is expanded.
    Keywords: fiscal incidence, inequality, poverty, taxes, social spending, Latin America
    JEL: D31 D63 H11 H22 H5 I14 I24 I3 O15
    Date: 2012–08
  2. By: Andrew E. Clark; Sarah Flèche; Claudia Senik
    Abstract: This paper shows that within-country happiness inequality has fallen in the majority of countries that have experienced 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, which states that the time trend in average happiness is flat during episodes of long-run income growth. This mean-preserving declining spread in happiness comes about via falls in both the share of individuals who declare low and high levels of happiness. Rising income inequality moderates the fall in happiness inequality, and may even reverse it after some point, for example in the US starting in the 1990s. Hence, if raising the income of all does not raise the happiness of all, it will at least harmonize the happiness of all, providing that income inequality does not grow too much. Behind the veil of ignorance, lower happiness inequality would certainly be considered as attractive by risk-averse individuals.
    Keywords: Happiness, inequality, economic growth, development, Easterlin paradox
    JEL: D31 D6 I3 O15
    Date: 2012
  3. By: Liu, Kai (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: I address the causes of the gender wage gap with a new dynamic model of wage, hours, and job changes that permits me to decompose the gap into a portion due to gender differences in preferences for part-time work and in onstraints. The dynamic model allows the differences in constraints to reflect possible gender differences in job arrival rates, job destruction rates, the mean and variance of the wage offer distribution, and the full-time/part-time wage premium. I find that the differences in preferences explain no more than 5% of the gender gap in hourly wages and 7-20% of the gender gap in weekly wages. The differences in constraints, mainly in the form of differences in the mean offered wages, explain the remaining gender wage gap. Most of the gender differences in employment, hours of work and job turnover can be attributed to the differences in preferences.
    Keywords: Gender differences; employment;
    JEL: J16 J31 J63
    Date: 2012–06–22
  4. By: Richard BLUNDELL; Martin BROWNING; Laurens CHERCHYE; Ian CRAWFORD; Bram DE ROCK; Frederic VERMEULEN
    Abstract: Sharp nonparametric bounds are derived for Hicksian compensating and equivalent variations. These “i-bounds” generalize earlier results of Blundell, Browning and Crawford (2008). We show that their e-bounds are sharp under the Weak Axiom of Revealed Preference (WARP). They do not require transitivity. The new i-bounds are sharp under the Strong Axiom of Revealed Preference (SARP). By requiring transitivity they can be used to bound welfare measures. The new bounds on welfare measures are shown to be operationalized through algorithms that are easy to implement.
    Date: 2012–07
  5. By: Brewer, Mike; Wren-Lewis, Liam
    Date: 2012–08–29
  6. By: Markus M. Grabka; Ursina Kuhn
    Abstract: This paper presents and compares trends in income inequality in Switzerland and Germany from 2000 to 2009 using harmonized data from the Socio-Economic Panel (SOEP) and the Swiss Household Panel (SHP). Whereas in Germany inequality has increased substantially during this period, in Switzerland inequality in market incomes has increased only marginally and inequality in disposable incomes has decreased slightly. Economic and demographic indicators suggest that labor market participation—but not economic growth, globalization, or sectoral change—are potential explanations. The decomposition of inequality reveals the effects of Germany’s slightly older population and smaller household sizes, as well as the impact of educational expansion and government redistribution.
    Keywords: Income inequality, subgroup decomposition, income stratification, income mobility, SOEP, SHP
    JEL: I31 D31
    Date: 2012
  7. By: Gerdtham, Ulf-G (Department of Economics, Lund University); Lundborg, Petter (Department of Economics, Lund University); Lyttkens, Carl Hampus (Department of Economics, Lund University); Nystedt, Paul (Department of Economics, Lund University)
    Abstract: The concentration index and decomposition analysis are commonly used in economics to measure and explain socioeconomic inequalities in health. Such analysis builds on the strong assumption that a health production function can be estimated without substantial bias implying that health is caused by socioeconomic outcomes, which is hard to prove. This article contributes to the decomposition literature by applying a twin design to standard decomposition analysis of socioeconomic health inequalities in Sweden. The twin-based decomposition estimates, which control for unobserved endowments at the twin-pair level, are much lower in magnitude than estimates obtained via typical OLS on the same sample. This demonstrates that OLS-based decompositions are severely upward biased due to underlying confounders, exaggerating the contribution of income and education to health inequality, which in turn limits the usefulness of such decompositions for policy purposes.
    Keywords: Causality; Health Inequality; Health; Socioeconomic; Income; Twins
    JEL: I10 I12 I14
    Date: 2012–08–20

This nep-ltv issue is ©2012 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.