nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒02‒03
eighteen papers chosen by
Maximo Rossi
University of the Republic

  1. Social Spending and Income Redistribution in Argentina During the 2000s: the Rising Role of Noncontributory Pensions By Nora Lustig; Carola Pessino
  2. Inequality of Opportunity, Income Inequality and Economic Mobility: Some International Comparisons By Brunori, Paolo; Ferreira, Francisco H.G.; Peragine, Vito
  3. The Drivers of Happiness Inequality: Suggestions for Promoting Social Cohesion By Becchetti, Leonardo; Massari, Riccardo; Naticchioni, Paolo
  4. The New Stylized Facts about Income and Subjective Well-Being By Sacks, Daniel W.; Stevenson, Betsey; Wolfers, Justin
  5. Understanding Urban Wage Inequality in China 1988-2008: Evidence from Quantile Analysis By Appleton, Simon; Song, Lina; Xia, Qingjie
  6. The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007 By Xia, Qingjie; Song, Lina; Li, Shi; Appleton, Simon
  7. Female Labor Supply: Why is the US Falling Behind? By Blau, Francine D.; Kahn, Lawrence M.
  8. Everything You Always Wanted to Know about Sex Discrimination By Cardoso, Ana Rute; Guimaraes, Paulo; Portugal, Pedro
  9. The China Syndrome: Local Labor Market Effects of Import Competition in the United States By Autor, David; Dorn, David; Hanson, Gordon H.
  10. Losing Heart? The Effect of Job Displacement on Health By Black, Sandra E.; Devereux, Paul J.; Salvanes, Kjell G.
  11. The association between perceived income inequality and subjective well-being: Evidence from a social survey in Japan By Oshio, Takashi; Urakawa, Kunio
  12. Understanding the Mechanisms through Which an Influential Early Childhood Program Boosted Adult Outcomes By James J Heckman; Rodrigo Pinto; Peter A. Savelyev
  13. Don't Worry, Be Happy? Happiness and Reemployment By Krause, Annabelle
  14. Children, Spousal Love, and Happiness: An Economic Analysis By Grossbard, Shoshana; Mukhopadhyay, Sankar
  15. Experimental Labor Markets and Policy Considerations: Incomplete Contracts and Macroeconomic Aspects By Casoria, Fortuna; Riedl, Arno
  16. Feeding five billion Asians : a socioeconomic perspective By Cuesta, Jose
  17. Poverty and Self-Control By B. Douglas Bernheim; Debraj Ray; Sevin Yeltekin
  18. The Effects of Living Wage Laws on Low-Wage Workers and Low-Income Families: What Do We Know Now? By Neumark, David; Thompson, Matthew; Koyle, Leslie

  1. By: Nora Lustig (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)
    Abstract: Between 2003 and 2009, Argentina’s social spending as a share of GDP increased by 7.6 percentage points. Marginal benefit incidence analysis for 2003, 2006, and 2009 suggests that the contribution of cash transfers to the reduction of disposable income inequality and poverty rose markedly between 2006 and 2009 primarily due to the launching of a noncontributory pension program – the pension moratorium – in 2004. Noncontributory pensions as a share of GDP rose by 2.2 percentage points between 2003 and 2009 and entailed a redistribution of income to the poor, and from the formal sector pensioners with above minimum pensions to the beneficiaries of the pension moratorium. The redistributive impact of the expansion of public spending on education and health was also sizable and equalizing, but to a lesser degree. An assessment of fiscal funding sources puts the sustainability of the redistributive policies into question, unless nonsocial spending is significantly cut.
    Keywords: social spending, benefit incidence, inequality, poverty, Argentina
    JEL: D31 H22 I38
    Date: 2012–11
  2. By: Brunori, Paolo (University of Bari); Ferreira, Francisco H.G. (World Bank); Peragine, Vito (University of Bari)
    Abstract: Despite a recent surge in the number of studies attempting to measure inequality of opportunity in various countries, methodological differences have so far prevented meaningful international comparisons. This paper presents a comparison of ex-ante measures of inequality of economic opportunity (IEO) across 41 countries, and of the Human Opportunity Index (HOI) for 39 countries. It also examines international correlations between these indices and output per capita, income inequality, and intergenerational mobility. The analysis finds evidence of a "Kuznets curve" for inequality of opportunity, and finds that the IEO index is positively correlated with overall income inequality, and negatively with measures of intergenerational mobility, both in incomes and in years of schooling. The HOI is highly correlated with the Human Development Index, and its internal measure of inequality of opportunity yields very different country rankings from the IEO measure.
    Keywords: equality of opportunity, income inequality, social mobility, mobility
    JEL: D71 D91 I32
    Date: 2013–01
  3. By: Becchetti, Leonardo (University of Rome Tor Vergata); Massari, Riccardo (Sapienza University of Rome); Naticchioni, Paolo (University of Cassino)
    Abstract: This paper identifies and quantifies the contribution of a set of covariates in affecting levels and over time changes of happiness inequality. Using a decomposition methodology based on RIF regression, we analyse the increase in happiness inequality observed in Germany between 1992 and 2007, using the German Socio-Economic Panel (GSOEP) database, deriving the following findings. First, trends in happiness inequality are mainly driven by composition effects, while coefficient effects are negligible. Second, among composition effects, education has an inequality-reducing impact, while the increase in unemployment contributes to the rise in happiness inequality. Third, the increase in average income has a reducing impact on happiness inequality, while the raise in income inequality cannot be considered as a driver of happiness inequality trends. A clear cut policy implication is that policies enhancing education and economic performance contribute to reduce happiness inequality and the potential social tensions arising from it.
    Keywords: happiness inequality, income inequality, education, decomposition methods
    JEL: I31 I28 J17 J21 J28
    Date: 2013–01
  4. By: Sacks, Daniel W. (Wharton School, University of Pennsylvania); Stevenson, Betsey (University of Michigan); Wolfers, Justin (University of Michigan)
    Abstract: In recent decades economists have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In this paper, we review the evidence to assess the importance of absolute and relative income in determining well-being. Our research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. We find that well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. Through these comparisons we show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in well-being are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related.
    Keywords: adaptation, Easterlin Paradox, quality of life, life satisfaction, subjective well-being, economic growth
    JEL: D6 I3 J1 O1
    Date: 2012–12
  5. By: Appleton, Simon (University of Nottingham); Song, Lina (University of Nottingham); Xia, Qingjie (Peking University)
    Abstract: This paper examines change in wage gaps in urban China by estimating quantile regressions on CHIPS data. It applies the Machado and Mata (2005) decomposition, finding sharp increases in inequality from 1988 to 1995 and from 2002 to 2008 largely due to changes in the wage structure. The analysis reports how the returns to education and experience vary across wage quantiles, along with wage differentials by sex and party membership. The role of industrial structure, ownership reform and occupational change are also estimated. In the recent period, 2002 to 2008, falls in the returns to education and experience have been equalising. However, changes in every other category of observed wage differential – by sex, occupation, ownership, industrial sector and province – have served to widened inequality. The gender gap continued to rise, as did the gap between white collar and blue collar workers, and between manufacturing and most other industrial sectors.
    Keywords: China, labour, wages, quantile regression, inequality
    JEL: J31 J42 O15 P23
    Date: 2012–12
  6. By: Xia, Qingjie (Peking University); Song, Lina (University of Nottingham); Li, Shi (Beijing Normal University); Appleton, Simon (University of Nottingham)
    Abstract: This paper examines the effects of state sector domination on wage inequality in urban China. Using Chinese Household Income Project surveys, we conduct two exercises: with quantile regression analysis, we identify wage gaps across the distribution and over time; and we employ the Machado and Mata (2005) decomposition to investigate how urban wage inequality was affected by the changes in wage structure and employment share of the state sector. We find that since the radical state sector reforms designed to reduce over-staffing and improve efficiency since the late 1990s, urban wage gaps were narrowed due to the reduction of employment share in the state sector; the wage premium of the state sector in comparison with the non-state sector increased significantly; and changes in the wage structure of the labour market caused the rise in urban wage inequality.
    Keywords: China, state sector, wage inequality, quantile regression, counterfactual analysis
    JEL: J31 J42 O15 P23
    Date: 2013–01
  7. By: Blau, Francine D. (Cornell University); Kahn, Lawrence M. (Cornell University)
    Abstract: In 1990, the US had the sixth highest female labor participation rate among 22 OECD countries. By 2010, its rank had fallen to 17th. We find that the expansion of "family-friendly" policies including parental leave and part-time work entitlements in other OECD countries explains 28-29% of the decrease in US women's labor force participation relative to these other countries. However, these policies also appear to encourage part-time work and employment in lower level positions: US women are more likely than women in other countries to have full time jobs and to work as managers or professionals.
    Keywords: labor supply, gender
    JEL: J16 J22
    Date: 2013–01
  8. By: Cardoso, Ana Rute (IAE Barcelona (CSIC)); Guimaraes, Paulo (University of Porto); Portugal, Pedro (Banco de Portugal)
    Abstract: Earlier literature on the gender pay gap has taught us that occupations matter and so do firms. However, the role of the firm has received little scrutiny; occupations have most often been coded in a rather aggregate way, lumping together different jobs; and the use of samples of workers prevents any reliable determination of either the extent of segregation or the relative importance of access to firms versus occupations. Our contribution is twofold. We provide a clear measure of the impact of the allocation of workers to firms and to job titles shaping the gender pay gap. We also provide a methodological contribution that combines the estimation of sets of high-dimensional fixed effects and Gelbach's (2009) unambiguous decomposition of the conditional gap. We find that one fifth of the gender pay gap results from segregation of workers across firms and one fifth from job segregation. We also show that the widely documented glass ceiling effect operates mainly through worker allocation to firms rather than occupations.
    Keywords: gender wage gap, high-dimensional fixed effects, segregation
    JEL: J31 J16 J24 J71
    Date: 2012–12
  9. By: Autor, David (MIT); Dorn, David (CEMFI, Madrid); Hanson, Gordon H. (University of California, San Diego)
    Abstract: We analyze the effect of rising Chinese import competition between 1990 and 2007 on U.S. local labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization and instrumenting for U.S. imports using changes in Chinese imports by other high-income countries. Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import-competing manufacturing industries. In our main specification, import competition explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.
    Keywords: trade flows, import competition, local labor markets, China
    JEL: F16 H53 J23 J31
    Date: 2013–01
  10. By: Black, Sandra E. (University of Texas at Austin); Devereux, Paul J. (University College Dublin); Salvanes, Kjell G. (Norwegian School of Economics (NHH))
    Abstract: Job reallocation is considered to be a key characteristic of well-functioning labor markets, as more productive firms grow and less productive ones contract or close. However, despite its potential benefits for the economy, there are significant costs that are borne by displaced workers. We study how job displacement in Norway affects cardiovascular health using a sample of men and women who are predominantly aged in their early forties. To do so we merge survey data on health and health behaviors with register data on person and firm characteristics. We track the health of displaced and non-displaced workers from 5 years before to 7 years after displacement. We find that job displacement has a negative effect on the health of both men and women. Importantly, much of this effect is driven by an increase in smoking behavior. These results are robust to a variety of specification checks.
    Keywords: job loss, health, health behavior
    JEL: I18 C14 J64 J65
    Date: 2012–12
  11. By: Oshio, Takashi; Urakawa, Kunio
    Abstract: Previous studies have shown that income inequality in society is negatively associated with individuals’ subjective well-being (SWB), such as their perceived happiness and self-rated health (SRH). However, it is not realistic to assume that individuals have precise information about actual income distribution measured by the Gini coefficient or other statistical measures. In the current study, we examined how perceived income inequality, rather than actual inequality, was associated with SWB, using cross-sectional data collected from a nationwide, Internet survey conducted in Japan (N = 10,432). We also examined how this association was confounded by individuals’ objective and subjective income status, considering the possibility that individuals with lower income status are more inclined to both perceive income inequality and feel unhappy/unhealthy. In our analysis, we focused on the perception of a widening income inequality (as perceived income inequality), perceived happiness and SRH (as SWB), and household income and living standards compared with one year ago and compared with others (as income status). We also controlled for personality traits. We obtained three key findings: (1) perceived income inequality was negatively associated with SWB; (2) both perceived income inequality and SWB were associated with income status; and (3) the association between perceived income inequality and SWB was attenuated after controlling for income status, but not fully for perceived happiness. These findings suggest that perceived income inequality, which links actual income inequality to SWB, should be further studied.
    Keywords: income status, perceived income inequality, personality traits, self-rated health, subjective well-being
    Date: 2013–01
  12. By: James J Heckman (University of Chicago); Rodrigo Pinto (University of Chicago); Peter A. Savelyev (Vanderbilt University)
    Abstract: A growing literature establishes that high quality early childhood interventions targeted toward disadvantaged children have substantial impacts on later life outcomes. Little is known about the mechanisms producing these impacts. This paper uses longitudinal data on cognitive and personality traits from an experimental evaluation of the influential Perry Preschool program to analyze the channels through which the program boosted both male and female participant outcomes. Experimentally induced changes in personality traits explain a sizable portion of adult treatment effects.
    Keywords: cognitive traits, personality traits, externalizing behavior, academic motivation, factor analysis, human capital, human development, early childhood interventions, social experiments, Perry Preschool program, experimentally estimated production functions
    JEL: I2 J2
    Date: 2012–12–12
  13. By: Krause, Annabelle (IZA)
    Abstract: Subjective well-being is primarily treated as an outcome variable in the economic literature. However, is happiness also a driver of behavior and life's outcomes? Rich survey data of recent entrants into unemployment in Germany show that a significant inverted U-shaped relationship exists between residual happiness and an unemployed individual's future reemployment probability and the reentry wage. Residual life satisfaction displays higher (or lower) satisfaction levels than would be predicted by a number of socioeconomic and demographic characteristics. This paper is the first to show that happiness is mainly a predictor for self-employment and less for standard reemployment. Related findings suggest that happiness matters for male unemployed, and the concept of locus of control is able to explain part of the effect. If reemployment and higher wages are considered desirable outcomes for the unemployed individual and society, the shape of the effect suggests an optimal level of happiness, which is not necessarily the highest.
    Keywords: unemployment, job search, happiness, reemployment, Germany
    JEL: J60 J64 I31
    Date: 2012–12
  14. By: Grossbard, Shoshana (San Diego State University, California); Mukhopadhyay, Sankar (University of Nevada, Reno)
    Abstract: In this paper we examine how children affect happiness and relationships within a family by analyzing two unique questions in the National Longitudinal Study of Youth's 1997 cohort. We find that (a) presence of children is associated with a loss of spousal love; (b) loss of spousal love is associated with loss of overall happiness; but (c) presence of children is not associated with significant loss of overall happiness. If children reduce feelings of being loved by the spouse but do not reduce reported happiness even though spousal love induces happiness, then it must be the case that children contribute to parental happiness by providing other benefits. After ruling out some competing compensation mechanisms we infer that loss of spousal love is compensated with altruistic feelings towards children.
    Keywords: children, happiness, emotions, marriage, religion
    JEL: J13 D10
    Date: 2012–12
  15. By: Casoria, Fortuna (Maastricht University); Riedl, Arno (Maastricht University)
    Abstract: This survey focuses on experimental labor markets investigating two aspects that deem us important for a better understanding of labor market relations and the consequences for labor market policies. The first part of the survey is dedicated to papers that assess the prevalence of reciprocal considerations in incomplete labor contracts. The second part summarizes the relatively small but growing experimental literature exploring labor issues in a macroeconomics and public finance setting and studying the interaction between taxation and labor market outcomes.
    Keywords: laboratory experiment, labor markets, incomplete contracts, gift-exchange, labor market policy
    JEL: C90 C92 C93 D01 D51 E24 E62 F41 J01 J08
    Date: 2012–12
  16. By: Cuesta, Jose
    Abstract: This paper reviews the prospects for long-term food security in Asia, where a significant number of malnourished individuals still live after decades of mixed progress. Evidence shows that poverty reduction on its own will not do the job of eradicating hunger, nor will only increased food production. The region's contribution to high and volatile international food prices is well known, but Asia's potential contributions toward future decreased price uncertainty are much less cited. The changing composition of future food demand in the region will depend on the extent to which poverty reduction effectively leads to middle class expansion, which remains unclear.
    Keywords: Food&Beverage Industry,Regional Economic Development,Rural Poverty Reduction,Nutrition,Population Policies
    Date: 2013–01–01
  17. By: B. Douglas Bernheim; Debraj Ray; Sevin Yeltekin
    Abstract: The absence of self-control is often viewed as an important correlate of persistent poverty. Using a standard intertemporal allocation problem with credit constraints faced by an individual with quasi- hyperbolic preferences, we argue that poverty damages the ability to exercise self-control. Our theory invokes George Ainslie’s notion of “personal rules,” interpreted as subgame-perfect equilibria of an intrapersonal game played by a time-inconsistent decision maker. Our main result pertains to situations in which the individual is neither so patient that accumulation is possible from every asset level, nor so impatient that decumulation is unavoidable from every asset level. Such cases always possess a threshold level of assets above which personal rules support unbounded accumulation, and a second threshold below which there is a “poverty trap”: no personal rule permits the individual to avoid depleting all liquid wealth. In short, poverty perpetuates itself by undermining the ability to exercise self-control. Thus even temporary policies designed to help the poor accumulate assets may be highly effective. We also explore the implications for saving with easier access to credit, the demand for commitment devices, the design of accounts to promote saving, and the variation of the marginal propensity to consume across classes of resource claims.
    JEL: C61 C63 D31 D91 H31 I3 O12
    Date: 2013–01
  18. By: Neumark, David (University of California, Irvine); Thompson, Matthew (Charles River Associates); Koyle, Leslie (Charles River Associates)
    Abstract: We provide updated evidence on the effects of living wage laws in U.S. cities, relative to the earlier research covering only the first six or seven years of existence of these laws. There are some challenges to updating the evidence, as the CPS data on which it relies changed geographic coding systems in the mid-2000s. The updated evidence is broadly consistent with the conclusions reached by prior research, including Holzer's (2008) review of that earlier evidence. Living wage laws reduce employment among the least-skilled workers they are intended to help. But they also increase wages for many of them. This implies that living wage laws generate both winners and losers among those affected by them. For broader living wage laws that cover recipients of business or financial assistance from cities, the net effects point to modest reductions in urban poverty.
    Keywords: living wage, wages, employment, poverty
    JEL: J23 J38
    Date: 2012–12

This nep-ltv issue is ©2013 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.