nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2012‒11‒17
thirteen 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 Jiménez; Veronica Paz; Claudiney Pereira; Carola Pessino; John Scott; Ernesto Yañez
  2. Social Spending, Taxes and Income Redistribution in Uruguay By Marisa Bucheli; Nora Lustig; Maximo Rossi; Florencia Amábile
  3. Declining Inequality in Latin America in the 2000s: the Cases of Argentina, Brazil, and Mexico By Nora Lustig; Luis F. Lopez-Calva; Eduardo Ortiz-Juarez
  4. Fiscal Incidence, Fiscal Mobility and the Poor: a New Approach By Nora Lustig; Sean Higgins
  5. Wages and Informality in Developing Countries By Meghir, Costas; Narita, Renata; Robin, Jean-Marc
  6. Working time preferences, hours mismatch and well-being of couples: Are there spillovers? By Wunder, Christoph; Heineck, Guido
  7. Gender Gaps in Spain: Family Issues and the Career Development of College Educated Men and Women By González de San Román, Ainara; de la Rica, Sara
  8. Measuring employment deprivation among households in the EU By Carlos Gradin; Olga Canto; Coral del Rio
  9. Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects By Jan-Emmanuel De Neve; Andrew J. Oswald
  10. Empowering Women Through Education: Evidence from Sierra Leone By Colin Cannonier; Naci Mocan
  11. The Impact of Pre-school on Adolescents' Outcomes: Evidence from a Recent English Cohort By Apps, Patricia; Mendolia, Silvia; Walker, Ian
  12. Workplace Heterogeneity and the Rise of West German Wage Inequality By David Card; Jörg Heining; Patrick Kline
  13. Do literacy and numeracy pay off? On the relationship between basic skills and earnings By Antoni, Manfred; Heineck, Guido

  1. By: Nora Lustig (Tulane University and CGD and IAD); George Gray-Molina (UNDP, New York, USA); Sean Higgins (Tulane University); Miguel Jaramillo (GRADE, Lima, Peru); Wilson Jiménez (Instituto Alternativo, La Paz; Bolivia); Veronica Paz (Instituto Alternativo, La Paz; Bolivia); Claudiney Pereira (Tulane University); Carola Pessino (CGD, Washington, DC and CEMA, Buenos Aires, Argentin); John Scott (CIDE and CONEVAL, Mexico City, Mexico); Ernesto Yañez (Instituto Alternativo, La Paz; Bolivia)
    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: 2012–09
  2. By: Marisa Bucheli (Economics Department, Universidad de la Republica, Uruguay); Nora Lustig (Tulane University (Department of Economics; Stone Center for Latin American Studies and CIPR) and Center for Global Development and Inter-American Dialogue.); Maximo Rossi (Economics Department, Universidad de la Republica, Uruguay); Florencia Amábile (Economics Department, Universidad de la Republica, Uruguay)
    Abstract: How much redistribution does Uruguay accomplish through social spending and taxes? How progressive are revenue collection and social spending? A standard fiscal incidence analysis shows that Uruguay achieves a nontrivial reduction in inequality and poverty when all taxes and transfers are combined. In comparison with other five countries in Latin America, it ranks first (poverty reduction) and second (inequality reduction), and first in terms of poverty reduction effectiveness and third in terms of overall (including transfers in kind) inequality reduction effectiveness. Direct taxes are progressive and indirect taxes are regressive. Social spending on direct transfers, contributory pensions, education and health is quite progressive in absolute terms except for tertiary education, which is almost neutral in relative terms.
    Date: 2012–09
  3. By: Nora Lustig (Tulane University); Luis F. Lopez-Calva (World Bank); Eduardo Ortiz-Juarez (UNDP)
    Abstract: Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures and data sources. In depth country studies for Argentina, Brazil and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country.
    Keywords: Income inequality, skill premium, government transfers, progressivity, Latin America
    JEL: D31 I24 H53 O15 O54
    Date: 2012–09
  4. By: Nora Lustig (Tulane University); Sean Higgins (Tulane University)
    Abstract: Taxes and transfers can have significant impacts on poverty and inequality. All standard measures are by definition anonymous in the sense that we do not know the identity of winners and losers. That a given combination of taxes and transfers makes some of the poor poorer, however, may be important information to incorporate into a fiscal incidence analysis. The directional mobility literature provides a useful framework to identify which individuals are adversely/favorably impacted by a particular policy. This paper introduces a “fiscal mobility matrix” to identify winners and losers. We show that taxes and transfers can lower inequality and poverty (including the severity of poverty) but still make a subgroup of the poor worse off. We use Brazilian data to illustrate how indirect taxes make around 11 percent of the non-poor poor, 15 percent of the moderate poor extremely poor, and 4 percent of the extremely poor “ultra-poor” despite any cash transfers they receive, even when standard poverty and inequality indicators decline and overall taxes are progressive.
    Keywords: fiscal incidence, taxes and transfers, inequality, poverty, redistribution, mobility.
    JEL: D31 H22 H53 I32 I38
    Date: 2012–09
  5. By: Meghir, Costas (Yale University and IFS, London); Narita, Renata (World Bank); Robin, Jean-Marc (Sciences Po, Paris and U College London)
    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.
    JEL: J24 J30 J42 J60 O17
    Date: 2012–09
  6. By: Wunder, Christoph; Heineck, Guido
    Abstract: We analyze how well-being is related to working time preferences and hours mismatch. Selfreported measures of life satisfaction are used as an empirical approximation of true wellbeing. Our results indicate that well-being is generally lower among workers with working time mismatch. Particularly underemployment is detrimental for well-being. We further provide first evidence on spillovers from the partner's working time mismatch. However, the spillover becomes insignificant once we control for the partner's well-being. This suggests that well-being is contagious, and the spillover is due to interdependent utilities. Females experience the highest well-being when their partner is working full-time hours. Male wellbeing is unaffected over a wide interval of the partner's working hours. --
    Keywords: subjective well-being,life satisfaction,working time preferences,working time mismatch,spillovers,utility interdependence
    JEL: I31 J21 J22
    Date: 2012
  7. By: González de San Román, Ainara (University of the Basque Country); de la Rica, Sara (University of the Basque Country)
    Abstract: Our goal in this paper is to focus on highly educated men and women and try to explore the trade‐offs between family and working career in Spain, where changes in female behavior with respect to the labor market have been relatively recent but rather important. We compare male and female behavior with respect to labor supply and labor performance along their life cycle for different birth cohorts to explore the connection between family and work over time. Our results indicate that family plays a crucial role as a source of gender differences in the labor market in Spain. By 2008, children are the main determinant of the observed gap in labor supply between college men and women. Furthermore, with respect to hours worked, children are also an important determinant for the decision of college‐educated mothers to choose to work part‐time. However, children do not seem to contribute to explain the observed gender wage gap (5%) between college men and women.
    Keywords: gender gaps, career development, family and work, Spain
    JEL: J12 J2 J3
    Date: 2012–10
  8. By: Carlos Gradin (Universidade de Vigo); Olga Canto (Instituto de Estudios Fiscales); Coral del Rio (Universidade de Vigo)
    Abstract: In this paper, following the literature on well-being, we propose an aggregate measure of employment deprivation among households that is increasing in the incidence of household unemployment (how many households are touched by the lack of employment of any of its members), its intensity (how far are households on average from being employment non-deprived), and inequality of employment exclusion across households (how concentrated is unemployment in a few of them). Based on this measurement framework, we analyze employment deprivation across the European Union using Labor Force Surveys during the current Great Recession. Our results provide evidence for the relevance of incorporating the household dimension in identifying unemployment profiles with different implications in terms of household well-being and vulnerability.
    Keywords: employment deprivation, unemployment measurement, vulnerability, European Union.
    JEL: D30 D63 I31 J64
    Date: 2012–02
  9. By: Jan-Emmanuel De Neve; Andrew J. Oswald
    Abstract: The question of whether there is a connection between income and psychological well-being is a long-studied issue across the social, psychological, and behavioral sciences. Much research has found that richer people tend to be happier. However, relatively little attention has been paid to whether happier individuals perform better financially in the first place. This possibility of reverse causality is arguably understudied. Using data from a large US representative panel we show that adolescents and young adults who report higher life satisfaction or positive affect grow up to earn significantly higher levels of income later in life. We focus on earnings approximately one decade after the person's well-being is measured; we exploit the availability of sibling clusters to introduce family fixed-effects; we account for the human capacity to imagine later socio-economic outcomes and to anticipate the resulting feelings in current wellbeing. The study's results are robust to the inclusion of controls such as education, IQ, physical health, height, self-esteem, and later happiness. We consider how psychological well-being may influence income. Sobel-Goodman mediation tests reveal direct and indirect effects that carry the influence from happiness to income. Significant mediating pathways include a higher probability of obtaining a college degree, getting hired and promoted, having higher degrees of optimism and extraversion, and less neuroticism.
    Keywords: Income, life satisfaction, positive affect
    JEL: I10 J24
    Date: 2012–11
  10. By: Colin Cannonier (Belmont University); Naci Mocan (Louisiana State University, NBER and IZA)
    Abstract: We use data from Sierra Leone where a substantial education program provided increased access to education for primary-school age children but did not benefit children who were older. We exploit the variation in access to the program generated by date of birth and the variation in resources between various districts of the country. We find that the program has increased educational attainment and that an increase in education has changed women’s preferences. An increase in schooling, triggered by the program, had an impact on women’s attitudes towards matters that impact women’s health and on attitudes regarding violence against women. An increase in education has also reduced the number of desired children by women and increased their propensity to use modern contraception and to be tested for AIDS. While education makes women more intolerant of practices that conflict with their well-being, increased education has no impact on men’s attitudes towards women’s well-being.
    Keywords: Health, education, empowerment, violence against women
    Date: 2012–11
  11. By: Apps, Patricia (University of Sydney); Mendolia, Silvia (University of Wollongong); Walker, Ian (Lancaster University)
    Abstract: This paper investigates the relationship between attendance at nursery school and children's outcomes in adolescence. In particular, we are interested in child cognitive development at ages 11, 14 and 16, intentions towards tertiary education, economic activity in early adulthood, and in a group of non-cognitive outcomes, such as risky health behaviours (smoking, early pregnancy, use of cannabis) and personality traits (feelings and commitments about school; psychological well-being). Using matching methods to control for a very rich set of child's and family's characteristics, we find that pre-school childcare largely improves results in cognitive tests at age 11 and 14 and 16, and has a positive effect on intentions towards further education and economic activity at age 19-20. Positive effects are especially noticeable for children coming from disadvantaged socio-economic backgrounds. Results on non-cognitive outcomes are more mixed: we do not find any evidence of improvement in psychological well-being, but we do find some positive effects on health behaviours.
    Keywords: childcare, child outcomes
    JEL: J13 I21
    Date: 2012–10
  12. By: David Card; Jörg Heining; Patrick Kline
    Abstract: We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four distinct time intervals spanning the period 1985-2009. Unlike standard wage models, specifications with both worker and plant-level heterogeneity components can explain the vast majority of the rise in wage inequality. Our estimates suggest that the increasing variability of West German wages results from a combination of rising heterogeneity between workers, rising variability in the wage premiums at different establishments, and increasing assortativeness in the matching of workers to plants. We use the models to decompose changes in wage gaps between different education levels, occupations, and industries, and in all three cases find a growing contribution of plant heterogeneity and rising assortativeness between workers and establishments.
    JEL: J01 J3 J4
    Date: 2012–11
  13. By: Antoni, Manfred; Heineck, Guido
    Abstract: Is there a reward for basic skills in the German labor market? To answer this question, we examine the relationship between literacy, numeracy and monthly gross earnings of full-time employed workers. We use data from the ALWA survey, augmented by test scores on basic cognitive skills as well as administrative earnings data. Our results indicate that earnings are positively related to both types of skills. There furthermore is no evidence for non-linearity in this relationship and only little heterogeneity when differentiating by sub-groups. --
    Keywords: literacy,numeracy,earnings,administrative data,Germany,ALWA
    JEL: I21 J31
    Date: 2012

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