nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2012‒12‒22
ten papers chosen by
Maximo Rossi
University of the Republic

  1. GINI DP 38: Inequality and Happiness: A Survey By Ada Ferrer-i-carbonell; Ramos, X. (Xavier)
  2. Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects By De Neve, Jan-Emmanuel; Oswald, Andrew J.
  3. GINI DP 40: Multidimensional Poverty Measurement in Europe: An Application of the Adjusted Headcount Approach By Christopher Whelan; Brian Nolan; Bertrand Maitre
  4. Heterogeneity in Subjective Wellbeing: An Application to Occupational Allocation in Africa By Falco, Paolo; Maloney, William F.; Rijkers, Bob; Sarrias, Mauricio
  5. GINI DP 71: Mapping and Measuring the Distribution of Household Wealth: A Cross-Country Analysis By Frank Cowell; Karagiannaki, E. (Eleni); Abigail Mcknight
  6. Employment and Distribution Effects of the Minimum Wage By Fabián Slonimczyk; Peter Skott
  7. Intergenerational Earnings Mobility in Japan among Sons and Daughters: Levels and Trends By Lefranc, Arnaud; Ojima, Fumiaki; Yoshida, Takashi
  8. The Developmental Approach to Child and Adult Health By Conti, Gabriella; Heckman, James J.
  9. Well-being of Women in New Zealand: The Changing Landscape By Jessica Dye; Stephanie Rossouw; Gail Pacheco
  10. The effects of being out of the labor market on subsequent wages: evidence for Uruguay By Verónica Amarante; Rodrigo Arim; Andrés Dean

  1. By: Ada Ferrer-i-carbonell (Campus U.A.B., Institut d'Anàlisi Econòmica, IAE(CSIC)); Ramos, X. (Xavier)
    Abstract: In recent years there has been an accumulation of empirical evidence suggesting that individuals dislike inequality (Alesina and Giuliano, 2011 and Dawes et al., 2007). The literature has built upon estimating the degree of this dislike as well as its causes. The use of self-reported measures of satisfaction or well-being as a proxy for utility has been one of the empirical strategies used to this end. In this survey we review the papers that estimate or examine the relationship between inequality and self-reported happiness, and find that inequality reduces happiness in Western societies. The evidence for non-Western societies is more mixed and less reliable. Notwithstanding that, trust in the institutions seems to play an important role in shaping the relationship between income inequality and subjective wellbeing. We conclude with suggestions for further research.
    Date: 2012–05
  2. By: De Neve, Jan-Emmanuel (University College London); Oswald, Andrew J. (University of Warwick)
    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: positive affect, life satisfaction, income
    JEL: I31 J31
    Date: 2012–11
  3. By: Christopher Whelan (Newman Building, School of Sociology); Brian Nolan (School of Applied Social Science, University College Dublin); Bertrand Maitre (The Economic and Social Research Institute)
    Abstract: As awareness of the limitations of relying solely on income to measure poverty and social exclusion has become more widespread, attention has been increasingly focused on multi-dimensional approaches. To date efforts to measure multidimensional poverty and social exclusion in rich countries have been predominantly ad hoc and have relied on data that are far from ideal. Here we apply the approach recently developed by Alkire and Foster, characterized by a range of desirable axiomatic properties but mostly discussed so far in a development context, to European countries, exploiting the potential of harmonized microdata on deprivation newly available for the European Union. The analysis seeks to overcome the limitations of the union and intersection approaches that have characterized many earlier studies. Multidimensional poverty is characterized and decomposed in terms of the contribution of different deprivation dimensions, and an account of cross-national and socio-economic variation in risk levels is presented that is in line with theoretical expectations. Multilevel analysis of multi-dimensional poverty provides the basis for assessment of the role of macro and micro characteristics and their interaction in relation to levels and patterns of multidimensional poverty and social exclusion. Key words: Poverty Measurement; Multidimensional poverty; Deprivation; Social exclusion; EU poverty target.
    Date: 2012–07
  4. By: Falco, Paolo (University of Oxford); Maloney, William F. (World Bank); Rijkers, Bob (World Bank); Sarrias, Mauricio (Universidad Catolica del Norte)
    Abstract: By exploiting recent advances in mixed (stochastic parameter) ordered probit estimators and a unique longitudinal dataset from Ghana, this paper examines the distribution of subjective wellbeing across sectors of employment and offers insights into the functioning of developing country labor markets. We find little evidence for the overall inferiority of the small firm informal sector: there is not a robust average satisfaction premium for formal work vis a vis self-employment or informal salaried work and, in fact, informal firm owners who employ others are on average significantly happier than formal workers. Moreover, the estimated underlying random parameter distributions unveil substantial latent heterogeneity in subjective wellbeing around the central tendency that fixed parameter models cannot detect. All job categories contain both relatively happy and disgruntled workers. Concretely, roughly 67%, 50%, 40% and 59% prefer being a small firm employer, sole proprietor, informal salaried, and civic worker respectively, to formal work. Hence, there is a high degree of overlap in the distribution of satisfaction across sectors. The results are robust to the inclusion of fixed effects, and using alternate measures of satisfaction. Job characteristics, self-perceived autonomy and experimentally elicited measures of attitudes toward risk do not appear to explain these distributional patterns.
    Keywords: subjective wellbeing, mixed ordered probit, self-employment, informality, developing country labor markets, Africa
    JEL: C35 J2 J3 J41 L26 I32 O17
    Date: 2012–11
  5. By: Frank Cowell (CASE, Londeon School of Economics); Karagiannaki, E. (Eleni); Abigail Mcknight (London School of Economics, Centre for Analysis of Social Exclusion)
    Abstract: In this paper we compare the level, composition and distribution of household wealth in five industrial countries: the UK, US, Italy, Finland and Sweden. We exploit the harmonized data within the Luxembourg Wealth Study, which we have extended to allow us to examine trends in the UK and the US between the mid-1990s and the mid-2000s. Remaining differences between surveys, variable definitions and coverage are highlighted to the extent that they impact on cross-country comparisons. We find that the Nordic countries have lower average wealth holdings, smaller absolute gaps between low wealth and high wealth households but high relative measures of wealth inequality. Italian households hold very little debt and are much more likely to own their homes outright, leading to relatively high median levels of wealth. In contrast American households tend to hold much more housing debt well into retirement. Increases in owner occupation and house prices 2000-05 in the UK has led to substantial increases in wealth, particularly median wealth holdings and this had led to falls in relative measures of wealth inequality such as the Gini coefficient even though absolute gaps between high and low wealth households have grown substantially. We show that there are underlying country differences in terms of distributions of age, household composition, educational attainment and income as well as wealth and debt portfolios. Educational loans are increasing in their size and prevalence in some countries and look set to create some marked differences in the distribution of wealth for different age cohorts.
    Keywords: household wealth, wealth inequality, debt, housing assets, educational loans, age-wealth profiles JEL codes: C81, D31, D63, I24, I31
    Date: 2012–11
  6. By: Fabián Slonimczyk (Higher School of Economics, Moscow); Peter Skott (University of Massachusetts Amherst)
    Abstract: This paper analyzes the effects of the minimum wage on wage inequality, relative employment and over-education. We show that over-education can be generated endogenously and that an increase in the minimum wage can raise both total and low-skill employment, and produce a fall in inequality. Evidence from the US suggests that these theoretical results are empirically relevant. The over-education rate has been increasing and our regression analysis suggests that the decrease in the minimum wage may have led to a deterioration of the employment and relative wage of low-skill workers. JEL Categories: J31, J41, J42
    Keywords: Minimum wage, earnings inequality,monopsony, effeciency wage, over-education
    Date: 2012–02
  7. By: Lefranc, Arnaud (University of Cergy-Pontoise); Ojima, Fumiaki (Doshisha University); Yoshida, Takashi (Shizuoka University)
    Abstract: This paper estimates the extent of intergenerational income mobility in Japan among sons and daughters born between 1935 and 1975. Our estimates rely on a two-sample instrumental variables approach using representative data from the Japanese Social Stratification and Mobility (SSM) surveys, collected between 1965 and 2005. Father's income is predicted on the basis of a rich set of variables including education, occupation and job characteristics and we discuss changes in the Japanese earnings structure for cohorts born between the early 1900s and the 1960s. Our main results indicate that the intergenerational income elasticity (IGE) for both sons and daughters, in Japan lies around .35, which is an intermediate value, by international standards. We discuss the sensitivity of the IGE to using either personal or family income as the income variable for both fathers and children and perform some robustness analysis with respect to the first-step specification and to the age selection rule for children. We also examine changes across cohorts in the IGE. Results indicate that intergenerational mobility has been roughly stable over the last decades. Lastly, we estimate the intergenerational correlation of earnings.
    Keywords: intergenerational mobility, elasticity, correlation, earnings differentials, income, inequality, trends, Japan, assortative mating, education
    JEL: D1 D3 J3
    Date: 2012–11
  8. By: Conti, Gabriella (University of Chicago); Heckman, James J. (University of Chicago)
    Abstract: Pediatricians should consider the costs and benefits of preventing rather than treating childhood diseases. We present an integrated developmental approach to child and adult health that considers the costs and benefits of interventions over the life cycle. We suggest policies to promote child health which are currently outside the boundaries of conventional pediatrics. We discuss current challenges to the field and suggest avenues for future research.
    Keywords: health, prevention, remediation, capabilities, technology of capability formation
    JEL: I12 I18
    Date: 2012–12
  9. By: Jessica Dye (Department of Economics, Auckland University of Technology); Stephanie Rossouw (Department of Economics, Auckland University of Technology); Gail Pacheco (Department of Economics, Auckland University of Technology)
    Abstract: As the first country to give women the right to vote in 1893, New Zealand (NZ) has often been viewed as a leader in the global movement towards gender equality. This paper aims to assess trends in overall well-being for NZ women, by pulling together a range of statistical indicators across five key facets of well-being: demographic and family changes, education, employment, health, and crime and violence. From our analysis two contrasting pictures emerge. The first is that NZ women are clearly making up ground in respect of their education, participation in the labour force (less so in terms of wage equality), and overall health outcomes (barring mental health issues, such as depression). In the second, however, NZ women are trailing behind their other developed nation counterparts when one considers crime and violence, both committed against and by them.
    Keywords: Gender equality, women's well-being
    JEL: I10 J10
    Date: 2012–10
  10. By: Verónica Amarante (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Rodrigo Arim (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Andrés Dean (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: Based on administrative data combining workers’ earnings histories and unemployment insurance benefits, we document short and long term wage losses for a large sample of Uruguayan formal workers with high tenure. We are able to study how wage losses vary across age groups, gender, industry and size of the firm. We also assess differences between switchers and non switchers, and consider the effect of the economic cycle. Our data allows providing original evidence about the smoothing role of the unemployment insurance program, even in a developing country. Our main findings indicate that workers loose around 48% of their pre-displacement wages in the first quarter after displacement, and after five years, losses are still 3%.
    Keywords: Wage losses, Displacement
    JEL: J31 J63 J65
    Date: 2012–09

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