nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2012‒10‒20
sixteen papers chosen by
Maximo Rossi
University of the Republic

  1. Empirical Approaches to Inequality of Opportunity: Principles, Measures, and Evidence By X. RAMOS; D. VAN DE GAER
  2. Social Spending, Taxes and Income Redistribution in Uruguay By Marisa Bucheli; Nora Lustig; Maximo Rossi; Florencia Amabile
  3. Wages and informality in developing countries. By Costas Meghir; Renata Narita; Jean-Marc Robin
  4. Consumption Inequality and Family Labor Supply By Blundell, Richard; Pistaferri, Luigi; Saporta-Eksten, Itay
  5. The BIP trilogy (bipolarization, inequality and polarization): One saga but three different stories By Deutsch, Joseph; Fusco, Alessio; Silber, Jacques
  6. The Impact of Redistribution on Income Inequality in Canada and the Provinces, 1981-2010 By Andrew Sharpe; Evan Capeluck
  7. Employment and Taxes in Latin America: An Empirical Study of the Effects of Payroll, Corporate Income and Value-Added Taxes on Labor Outcomes By Eduardo Lora; Deisy Johanna Fajardo
  8. Is Psychological Well-being Linked to the Consumption of Fruit and Vegetables? By Blanchflower, David G.; Oswald, Andrew J.; Stewart-Brown, Sarah
  9. Happiness and Public Policies: Fundamental Issues By Bruno S. Frey
  10. Commitment to Equity Assessment (CEQ): Estimating the Incidence of Social Spending, Subsidies and Taxes Handbook By Nora Lustig; Sean Higgins
  11. The Human Capital (Schooling) of Immigrants in America By Smith, James P.
  12. Top Income Shares in Canada: Recent Trends and Policy Implications By Michael R. Veall
  13. The Patterns of Regional Inequality in China By Tsun Se Cheong
  14. Prosocial norms and degree heterogeneity in social networks By Espinosa Alejos, María Paz; Kovarik, Jaromir; Brañas-Garza, Pablo; Cobo-Reyes, Ramón; Jiménez, Natalia; Ponti, Giovanni
  15. Child Education and the Family Income Gradient in China By Paul Frijters; Luo Chuliang; Xin Meng
  16. The Impact of Immigration on the Educational Attainment of Natives By Hunt, Jennifer

    Abstract: We put together the different conceptual issues involved in measuring inequality of opportunity, discuss how these concepts have been translated into computable measures, and point out the problems and choices researchers face when implementing these measures. Our analysis identifies and suggests several new possibilities to measure inequality of opportunity. The approaches are illustrated with a selective survey of the empirical literature on income inequality of opportunity.
    Keywords: equality of opportunity, measurement, compensation, responsibility, effort, circumstances
    JEL: D3 D63
    Date: 2012–06
  2. By: Marisa Bucheli (Economics Department, Universidad de la Republica, Uruguay); Nora Lustig (Department of Economics, Tulane University); Maximo Rossi (Economics Department, Universidad de la Republica, Uruguay); Florencia Amabile (Economics Department, Universidad de la Republica, Uruguay)
    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: poverty, inequality, Uruguay, social spending
    JEL: I3 H2 H
    Date: 2012–08
  3. By: Costas Meghir (Institute for Fiscal Studies and Yale University); Renata Narita; Jean-Marc Robin (Institute for Fiscal Studies and Sciences Po)
    Abstract: It is often argued that informal labor markets in developing countries promote growth by reducing the impact of regulation. On the other hand informality may reduce the amount of social protection offered to workers. We extend the wage-posting framework of Burdett and Mortensen (1998) to allow heterogeneous firms to decide whether to locate in the formal or the informal sector, as well as set wages. Workers engage in both off the job and on the job search. We estimate the model using Brazilian micro data and evaluate the labor market and welfare effects of policies towards informality.
    Keywords: Wages, informality, developing countries
    Date: 2012–09
  4. By: Blundell, Richard (University College London); Pistaferri, Luigi (Stanford University); Saporta-Eksten, Itay (Stanford University)
    Abstract: In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labor supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of male's and female's permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for, there is little evidence of additional insurance.
    Keywords: consumption, labor supply, earnings, inequality
    JEL: J22
    Date: 2012–10
  5. By: Deutsch, Joseph; Fusco, Alessio; Silber, Jacques
    Abstract: Inequality, bi-polarization and polarization are related but distinct concepts aiming at analysing the income distribution. This paper first recalls the main differences between these three notions of inequality, bipolarization and polarization. It then shows that a close look at the impact of various income sources on these three types of indicators confirms that indeed they measure three different features of an income distribution. The effect of the different income components on inequality, bipolarization and polarization is analyzed via what is known as the Shapley de-composition and the empirical illustration is based on 2008 data for Luxembourg. --
    Keywords: bi-polarization,income sources,inequality,Luxembourg,polarization,Shapley decomposition procedure
    JEL: I31 D63 D31
    Date: 2012
  6. By: Andrew Sharpe; Evan Capeluck
    Abstract: The objective of this report is to provide an overview of trends in income inequality, defined as the Gini coefficient, in Canada and the provinces over the 1981-2010 period and to investigate the impact of redistributive policies – namely, taxes and transfers – on these trends.Income inequality is measured in terms of market income, total income, and after-tax income, with the latter considered the most important from a well-being perspective.
    Date: 2012–09
  7. By: Eduardo Lora; Deisy Johanna Fajardo
    Abstract: This paper empirically explores the effects of payroll taxes, value-added taxes and corporate income taxes on a variety of labor market outcomes such as employment, unemployment, informality, and wages. Using national-level data on labor variables for 15 Latin American countries, the results indicate that the effects of each tax are distinctly different and may depend on several aspects of labor and tax institutions. Payroll taxes reduce employment and increase labor costs when their benefits are not valued by workers, but otherwise increase labor participation and do not raise labor costs. Value-added taxes increase informality and reduce skilled labor demand. In contrast, corporate income taxes may help reduce informality, especially among low-education workers but, when tax enforcement capabilities are strong, may reduce labor participation and employment of medium- and high-education workers.
    JEL: H24 H25 J21 J30 J32
    Date: 2012–09
  8. By: Blanchflower, David G. (Dartmouth College USA); Oswald, Andrew J. (University of Warwick and CAGE UK and IZA Germany); Stewart-Brown, Sarah (Warwick Medical School UK)
    Abstract: Humans run on a fuel called food. Yet economists and other social scientists rarely study what people eat. We provide simple evidence consistent with the existence of a link between the consumption of fruit and vegetables and high well-being. In cross-sectional data, happiness and mental health rise in an approximately dose-response way with the number of daily portions of fruit and vegetables. The pattern is remarkably robust to adjustment for a large number of other demographic, social and economic variables. Well-being peaks at approximately 7 portions per day. We document this relationship in three data sets, covering approximately 80,000 randomly selected British individuals, and for seven measures of well-being (life satisfaction, WEMWBS mental well-being, GHQ mental disorders, self-reported health, happiness, nervousness, and feeling low). Reverse causality and problems of confounding remain possible. We discuss the strengths and weaknesses of our analysis, how government policy-makers might wish to react to it, and what kinds of further research -- especially randomized trials -- would be valuable.
    Keywords: Subjective well-being ; healthy food ; GHQ; diet ; mental health ; depression ; happiness ; WEMWBS.
    Date: 2012
  9. By: Bruno S. Frey
    Date: 2012–10
  10. By: Nora Lustig (Department of Economics, Tulane University); Sean Higgins (Department of Economics, Tulane University)
    Abstract: This handbook presents a step-by-step guide to applying the incidence analysis used in the multi-country project CEQ. We define the pre- and post-net transfers income concepts, discuss the methodological assumptions used to construct them, explain how taxes, subsidies and transfers should be allocated at the household level, and suggest what to do when the information on taxes and transfers is not included in the household survey. We also describe the indicators that are used to assess the distributive impact, progressivity and effectiveness of social spending, subsidies and taxes. In addition, we present sample Stata code for producing some of the indicators.
    Keywords: handbook, taxes and transfers, fiscal incidence, poverty, inequality
    JEL: H22 D31 D63 I32 I38
    Date: 2012–10
  11. By: Smith, James P. (RAND)
    Abstract: This paper deals with several salient issues about immigrants to the United States and their education. These issues include a comparison of the schooling accomplishments of immigrants and the native-born that emphasizes the considerable diversity in the schooling accomplishments among different immigrant sub-groups and between legal and undocumented migrants. I also examine the role of the foreign-born who come to the United States for post-secondary schooling. Finally, I show that the educational generational progress among all groups of immigrants to the United States has been quite impressive during the 19th and 20th centuries.
    Keywords: immigration, education
    JEL: I20 I23 I28 J10 J15 J61
    Date: 2012–10
  12. By: Michael R. Veall
    Abstract: According to Canadian taxfiler data, over the last thirty years there has been a surge in the income shares of the top 1%, top 0.1% and top 0.01% of income recipients, even with longitudinal smoothing by individual using three- or five-year moving averages. Top shares fell in 2008 and 2009, but only by a fraction of the overall surge. Alberta, British Columbia and Ontario have much more pronounced surges than other provinces. Part of the Canadian surge is likely attributable to U.S. factors but a comprehensive explanation remains elusive. Even so, I draw implications for policies which might achieve some support from across the political spectrum, including the elimination of tax preferences that favour those with high incomes, the promotion of shareholder democracy and, to maintain Canada’s relatively high intergenerational mobility, continued wide accessibility to healthcare and education.
    Keywords: income concentration, income polarization, Canadian personal income tax system, intergenerational mobility, corporate governance
    JEL: D31 H31 H24
    Date: 2012–10
  13. By: Tsun Se Cheong (Business School, University of Western Australia)
    Abstract: This paper presents the inequality measures for different spatial groupings in China from 1997 to 2007. The intra-provincial inequality within each province, that is, the inequality amongst the county-level units within each province, is derived. It is found that the levels of inequality in the nation, the coastal and inland regions, the four economic zones, and most of the provinces increased over the study period. The levels of inequality amongst the county-level units in the eastern and western zones were higher than that in the other zones over the study period. The results show that the provinces with a high level of inequality are mostly situated in the northern part of China. The provinces are observed to have very different patterns of inequality, even if they are in the same economic zone. Moreover, it is found that Jiangsu had the highest level of intra-provincial regional inequality in 2007.
    Date: 2012
  14. By: Espinosa Alejos, María Paz; Kovarik, Jaromir; Brañas-Garza, Pablo; Cobo-Reyes, Ramón; Jiménez, Natalia; Ponti, Giovanni
    Abstract: We provide empirical evidence to support the claims that social diversity promotes prosocial behavior. We elicit a real-life social network and its members’ adherence to a social norm, namely inequity aversion. The data reveal a positive relationship between subjects’ prosociality and several measures of centrality. This result is in line with the theoretical literature that relates the evolution of social norms to the structure of social interactions and argues that central individuals are crucial for the emergence of prosocial behavior.
    Keywords: social diversity, social norms, prosocial behavior
    Date: 2012
  15. By: Paul Frijters (School of Economics, The University of Queensland); Luo Chuliang; Xin Meng
    Abstract: This paper looks at the relation between education and family income using a 2008-2009 survey of nearly 10,000 children in 15 cities and nine provinces throughout China. We use school test scores on mathematics and language, as well as parent-reported educational progress, out-of-pocket expenses, and self-reported quality of schooling. Across all measures, children from wealthier families do better, but the gap is much smaller for older children than younger children in rural areas and is almost entirely gone at the end of secondary school. In Chinese cities and in Western countries like the US the opposite is the case, with the gap between children from poor and rich households staying constant or even widening as the kids get older. Our explanation is that it takes a generation of universal education for ability, education, and parental income to become highly correlated, which will already have happened in Chinese cities and in Western countries, but is only just now happening in rural areas in China. Accordingly, the relation between family income and child ability increases over generations, reducing future education and income mobility.
    Date: 2012–10–01
  16. By: Hunt, Jennifer
    Abstract: Using a state panel based on census data from 1940-2010, I examine the impact of immigration on the high school completion of natives in the United States. Immigrant children could compete for schooling resources with native children, lowering the return to native education and discouraging native high school completion. Conversely, native children might be encouraged to complete high school in order to avoid competing with immigrant high-school dropouts in the labor market. I find evidence that both channels are operative and that the net effect is positive, particularly for native-born blacks, though not for native-born Hispanics. An increase of one percentage point in the share of immigrants in the population aged 11-64 increases the probability that natives aged 11-17 eventually complete 12 years of schooling by 0.3 percentage points, and increases the probability for native-born blacks by 0.4 percentage points. I account for the endogeneity of immigrant flows by using instruments based on 1940 settlement patterns.
    Keywords: Education; Immigration
    JEL: I21 J15
    Date: 2012–10

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