nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒02‒16
fourteen papers chosen by
Maximo Rossi
University of the Republic

  1. Gender Differences in German Wage Mobility By Aretz, Bodo
  2. China's Life Satisfaction, 1990-2010 By Easterlin, Richard A.; Morgan, Robson; Switek, Malgorzata; Wang, Fei
  3. "Inequality and Household Finance during the Consumer Age" By Barry Z. Cynamon; Steven M. Fazzari
  4. Happiness and Economic Growth: The Evidence By Easterlin, Richard A.
  5. Is the Persistent Gender Gap in Income and Wages Due to Unequal Family Responsibilities? By Angelov, Nikolay; Johansson, Per; Lindahl, Erica
  6. The "Task Approach" to Labor Markets: An Overview By Autor, David
  7. Smoking Bans, Cigarette Prices and Life Satisfaction By Odermatt, Reto; Stutzer, Alois
  8. Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater? By Neumark, David; Salas, J.M. Ian; Wascher, William
  9. Accounting for trends in health poverty: A decomposition analysis for Britain, 1991-2008 By Michał Brzeziński
  10. Partisan Tax Policy and Income Inequality in the U.S., 1979-2007 By Bargain, Olivier; Dolls, Mathias; Immervoll, Herwig; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
  11. Education Policy and Intergenerational Transfers in Equilibrium By Brant Abbott; Giovanni Gallipoli; Costas Meghir; Giovanni L. Violante
  12. The Unfairness of (Poverty) Targets By Allwine, Melanie; Rigolini, Jamele; López-Calva, Luis-Felipe
  13. Happiness and Productivity By Oswald, Andrew; Proto, Eugenio; Sgroi, Daniel
  14. Long-Term Neighborhood Effects on Low-Income Families: Evidence from Moving to Opportunity By Jens Ludwig; Greg J. Duncan; Lisa A. Gennetian; Lawrence F. Katz; Ronald C. Kessler; Jeffrey R. Kling; Lisa Sanbonmatsu

  1. By: Aretz, Bodo (ZEW Mannheim)
    Abstract: This paper analyzes the evolution of wage inequality and wage mobility separately for men and women in West and East Germany over the last four decades. Using a large administrative data set which covers the years 1975 to 2008, I find that wage inequality increased and wage mobility decreased for male and female workers in East and West Germany. Women faced a higher level of wage inequality and a lower level of wage mobility than men in both parts of the country throughout the entire observation period. The mobility decline was sharper in East Germany so that the level of wage mobility has fallen below that of West Germany over time. Looking at long-term mobility, a slowly closing gap between men and women is observed.
    Keywords: wage mobility, wage inequality, administrative data
    JEL: J31 D63
    Date: 2013–01
  2. By: Easterlin, Richard A. (University of Southern California); Morgan, Robson (University of Southern California); Switek, Malgorzata (University of Southern California); Wang, Fei (University of Southern California)
    Abstract: Despite its unprecedented growth in output per capita in the last two decades, China has essentially followed the life satisfaction trajectory of the central and eastern European transition countries – a U-shaped swing and a nil or declining trend. There is no evidence of an increase in life satisfaction of the magnitude that might have been expected to result from the fourfold improvement in the level of per capita consumption that has occurred. As in the European countries, in China the trend and U-shaped pattern appear to be related to a pronounced rise in unemployment followed by a mild decline, and an accompanying dissolution of the social safety net along with growing income inequality. The burden of worsening life satisfaction in China has fallen chiefly on the lowest socioeconomic groups. An initially highly egalitarian distribution of life satisfaction has been replaced by an increasingly unequal one, with decreasing life satisfaction in persons in the bottom third of the income distribution and increasing life satisfaction in those in the top third.
    Keywords: economic growth, Easterlin Paradox, happiness, life satisfaction, subjective well-being, transition countries, China
    JEL: I31 I38 D60 P36
    Date: 2013–01
  3. By: Barry Z. Cynamon; Steven M. Fazzari
    Abstract: One might expect that rising US income inequality would reduce demand growth and create a drag on the economy because higher-income groups spend a smaller share of income. But during a quarter century of rising inequality, US growth and employment were reasonably strong, by historical standards, until the Great Recession. This paper analyzes this paradox by disaggregating household spending, income, saving, and debt between the bottom 95 percent and top 5 percent of the income distribution. We find that the top 5 percent did indeed spend a smaller share of income, but demand drag did not occur because the spending share of the bottom 95 percent rose, accompanied by a historic increase in borrowing. The unsustainable rise in household leverage concentrated in the bottom 95 percent ultimately spawned the Great Recession. The demand drag of rising inequality could be one explanation for the stagnant recovery in the recession’s aftermath.
    Keywords: Consumption; Saving; Inequality; Aggregate Demand
    JEL: D12 D31 E21
    Date: 2013–02
  4. By: Easterlin, Richard A. (University of Southern California)
    Abstract: Long term trends in happiness and income are not related; short term fluctuations in happiness and income are positively associated. Evidence for this is found in time series data for developed countries, transition countries, and less developed countries, whether analyzed separately or pooled. Skeptics, who claim that the long term time series trend relationship is positive, are mistaking the short term association for the long term one, or are misguided by a statistical artifact. Some analysts assert that in less developed countries happiness and economic growth are positively related "up to some point," beyond which the association tends to become nil, but time series data do not support this view. The most striking contradiction is China where, despite a fourfold multiplication in two decades in real GDP per capita from a low initial level, life satisfaction has not improved.
    Keywords: happiness, life satisfaction, subjective well-being, income, long term, short term, Easterlin paradox, developed countries, transition countries, less developed countries, China
    JEL: I31 D60 O10 O5
    Date: 2013–01
  5. By: Angelov, Nikolay (IFAU); Johansson, Per (IFAU); Lindahl, Erica (IFAU)
    Abstract: We compare the income and wage trajectories of women in relation to their male partners before and after parenthood. Focusing on the within-couple gap allows us to control for both observed and unobserved attributes of the spouse and to estimate both short- and long-term effects of entering parenthood. Our main finding is that 15 years after the first child was born, the male-female gender gaps in income and wages have increased with 35 and 10 percentage points, respectively. In line with a collective labor supply model, the magnitude of these effects depends on relative incomes or wages within the family.
    Keywords: gender gap, quantile regression, income, wages
    JEL: J21 D13 C21
    Date: 2013–01
  6. By: Autor, David (MIT)
    Abstract: An emerging literature argues that changes in the allocation of workplace "tasks" between capital and labor, and between domestic and foreign workers, has altered the structure of labor demand in industrialized countries and fostered employment polarization – that is, rising employment in the highest and lowest paid occupations. Analyzing this phenomenon within the canonical production function framework is challenging, however, because the assignment of tasks to labor and capital in the canonical model is essentially static. This essay sketches an alternative model of the assignment of skills to tasks based upon comparative advantage, reviews key conceptual and practical challenges that researchers face in bringing the "task approach" to the data, and cautions against two common pitfalls that pervade the growing task literature. I conclude with a cautiously optimistic forecast for the potential of the task approach to illuminate the interactions among skill supplies, technological capabilities, and trade and offshoring opportunities, in shaping the aggregate demand for skills, the assignment of skills to tasks, and the evolution of wages.
    Keywords: skill demands, technological change, job tasks, Roy model, human capital, occupational choice
    JEL: J23 J24 J30 J31 O31 O33
    Date: 2013–01
  7. By: Odermatt, Reto (University of Basel); Stutzer, Alois (University of Basel)
    Abstract: The consequences of tobacco control policies for individual welfare are difficult to assess. We therefore evaluate the impact of smoking bans and cigarette prices on subjective well-being by analyzing data for 40 European countries and regions between 1990 and 2011. We exploit the staggered introduction of bans and apply an imputation strategy to study the effect of anti-smoking policies on people with different propensities to smoke. We find that higher cigarette prices reduce the life satisfaction of likely smokers. Overall, smoking bans are not related to subjective well-being, but increase the life satisfaction of smokers who recently failed to quit smoking. The latter finding is consistent with cue-triggered models of addiction and the idea of bans as self-control devices.
    Keywords: smoking bans, cigarette prices, life satisfaction, addiction, self-control, tobacco control policies
    JEL: D03 D62 I18 K32
    Date: 2013–01
  8. By: Neumark, David (University of California, Irvine); Salas, J.M. Ian (University of California, Irvine); Wascher, William (Federal Reserve Board)
    Abstract: We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the "new minimum wage research" is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.
    Keywords: minimum wage, employment, control groups
    JEL: J23 J38
    Date: 2013–01
  9. By: Michał Brzeziński (Faculty of Economic Sciences, University of Warsaw)
    Abstract: We use data from the British Household Panel Survey to analyse changes in poverty of self-reported health from 1991 to 2008. Recently introduced ordinal counterparts of the classical Foster, Greer, Thorbecke (1984) (FGT) poverty measures are used to decompose changes in self-reported health poverty over time into within-group health poverty changes and population shifts between groups. We also provide statistical inference for these ordinal FGT indices. Results suggest that the health poverty rate increased independently of health poverty threshold chosen. In case of other ordinal FGT indices, which are sensitive to depth and distribution of health poverty, results depend on the health poverty threshold. The subgroup decompositions of changes in total health poverty in Britain suggest that the most important poverty-increasing factors include a rise of both health poverty and population shares of persons cohabiting and couples with no children as well as an increase of the population of retired persons.
    Keywords: health poverty, ordinal FGT measures, self-reported health, statistical inference, British Household Panel Survey
    JEL: I32 D63 I14
    Date: 2013
  10. By: Bargain, Olivier (University of Aix-Marseille II); Dolls, Mathias (IZA); Immervoll, Herwig (World Bank); Neumann, Dirk (IZA); Peichl, Andreas (IZA); Pestel, Nico (IZA); Siegloch, Sebastian (IZA)
    Abstract: We assess the effects of U.S. tax policy reforms on inequality by applying a new decomposition method that allows us to disentangle the direct policy effect from the effect of changing market incomes. Over the whole period 1979-2007 the cumulative tax policy effect aggravated income inequality by increasing the income share of the top 20% in contrast to the middle class' share. The tax policy effect accounts for up to 29% of the total change in inequality; its contribution increases up to 41% if we take into account behavioral responses. Using our unique policy effect measure and variation in tax policies across U.S. states and time, we also identify the redistributive intention of policymakers. The estimated effect of partisan politics on the U.S. income distribution is statistically significant and economically important. Republican policymakers increased inequality especially at the top whereas Democrats increased the income share of the bottom 80% of the distribution.
    Keywords: tax policy, inequality, redistribution, partisan politics, political economy
    JEL: H23 H31 H53 P16
    Date: 2013–01
  11. By: Brant Abbott; Giovanni Gallipoli; Costas Meghir; Giovanni L. Violante
    Abstract: This paper compares partial and general equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Altruistic parents make inter vivos transfers to their children. Labor supply during college, government grants and loans, as well as private loans, complement parental transfers as sources of funding for college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by two percentage points in the long-run. Any further relaxation of government-sponsored loan limits would have no salient effects. The short-run partial equilibrium effects of expanding tuition grants (especially their need-based component) are sizeable. However, long-run general equilibrium effects are 3-4 times smaller. Every additional dollar of government grants crowds out 20-30 cents of parental transfers.
    JEL: E24 I22 J23 J24
    Date: 2013–02
  12. By: Allwine, Melanie (George Washington University); Rigolini, Jamele (World Bank); López-Calva, Luis-Felipe (World Bank)
    Abstract: Adopted on September 8 of 2000, the United Nations Millennium Declaration stated as its first goal that countries "…[further] resolve to halve, by the year 2015, the proportion of the world's people whose income is less than one dollar a day and the proportion of people who suffer from hunger…" Each country committed to achieve the stated goal, regardless of their initial conditions in terms of poverty and inequality levels. This paper presents a framework to quantify how much initial conditions affect poverty reduction, given a level of "effort" (growth). The framework used in the analysis allows for the growth elasticity of poverty to vary according to changes in the income distribution along the dynamic path of growth and redistribution, unlike previous examples in the literature where this is assumed to be constant. While wealthier countries did perform better in reducing poverty in the last decade and the half (1995-2008), assuming equal initial conditions, the situation reverses: we find a statistically significant negative relation between initial average income and poverty reduction performance, with the poorest countries in the sample going from the worse to the best performers in poverty reduction. The analysis also quantifies how much poorer countries would have scored better, had they had the same level of initial average income as wealthier countries. The results suggest a remarkable change in poverty reduction performance, in addition to the reversal of ranks from worse to best performers. The application of this framework goes beyond poverty targets and the Millennium Development Goals. Given the widespread use of targets to determine resource allocation, in education, health, or decentralized social expenditures, it constitutes a helpful tool to measure policy performance towards all kinds of goals. The proposed framework can be useful to evaluate the importance of initial conditions on outcomes, for a wide array of policies.
    Keywords: initial conditions, targets, poverty reduction
    JEL: D0 I3 O1
    Date: 2013–01
  13. By: Oswald, Andrew (University of Warwick); Proto, Eugenio (University of Warwick); Sgroi, Daniel (University of Warwick)
    Abstract: Some firms say they care about the happiness and ‘well-being’ of their employees. But are such claims hype? Or might they be scientific good sense? This study provides evidence that happiness makes people more productive. First, we examine fundamental real-world shocks (bereavement and family illness) imposed by Nature. We show that lower happiness is associated with lower productivity. Second, within the laboratory, we design two randomized controlled trials. Some individuals are deliberately made happier, while those in a control group are not. The treated individuals have 10-12% greater productivity than those in the control group. These complementary kinds of evidence, with their different strengths and weaknesses, point to a consistent pattern. They suggest that happiness raises human performance.
    Keywords: Happiness; well-being; productivity; personnel economics.
    Date: 2013
  14. By: Jens Ludwig; Greg J. Duncan; Lisa A. Gennetian; Lawrence F. Katz; Ronald C. Kessler; Jeffrey R. Kling; Lisa Sanbonmatsu
    Abstract: We examine long-term neighborhood effects on low-income families using data from the Moving to Opportunity (MTO) randomized housing-mobility experiment, which offered some public-housing families but not others the chance to move to less-disadvantaged neighborhoods. We show that 10-15 years after baseline MTO improves adult physical and mental health; has no detectable effect on economic outcomes, youth schooling and youth physical health; and mixed results by gender on other youth outcomes, with girls doing better on some measures and boys doing worse. Despite the somewhat mixed pattern of impacts on traditional behavioral outcomes, MTO moves substantially improve adult subjective well-being.
    JEL: H43 I18 I38 J38
    Date: 2013–02

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.