nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒03‒16
twelve papers chosen by
Maximo Rossi
University of the Republic

  1. Happiness, Growth, and Public Policy By Easterlin, Richard A.
  2. Inequality and happiness: When perceived social mobility and economic reality do not match. By Bjornskov, Christian; Dreher, Axel; Fischer, Justina A.V.; Schnellenbach, Jan; Gehring, Kai
  3. Fifteen years of inequality in Latin America : how have labor markets helped ? By Azevedo, Joao Pedro; Davalos, Maria Eugenia; Diaz-Bonilla, Carolina; Atuesta, Bernardo; Castaneda, Raul Andres
  4. Ethnic Diversity and Preferences for Redistribution: Reply By Dahlberg, Matz; Edmark, Karin; Lundqvist, Helene
  5. The Distribution of Income in Central America By Gindling, T. H.; Trejos, Juan Diego
  6. Comparing Inequality Aversion across Countries When Labor Supply Responses Differ By Bargain, Olivier; Dolls, Mathias; Neumann, Dirk; Peichl, Andreas; Siegloch, Sebastian
  7. Everything you always wanted to know about sex discrimination By Ana Rute Cardoso; Paulo Guimarães; Pedro Portugal
  8. Career Progression, Economic Downturns, and Skills By Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
  9. The Evolution of Poverty in the European Union: Concepts, Measurement and Data By Koen Decancq; Tim Goedemé; Karel Van den Bosch; Josefine Vanhille
  10. The Joneses in Japan: Income Comparisons and Financial Satisfaction By Andrew Clark; Claudia Senik; Katsunori Yamada
  11. Minimum Wage Increases in a Recessionary Environment By John T. Addison; McKinley L. Blackburn; Chad D. Cotti
  12. Poverty, Inequality, and the Local Natural Resource Curse By Loayza, Norman; Mier y Teran, Alfredo; Rigolini, Jamele

  1. By: Easterlin, Richard A. (University of Southern California)
    Abstract: If society's goal is to increase people's feelings of well-being, economic growth in itself will not do the job. Full employment and a generous and comprehensive social safety net do increase happiness. Such policies are arguably affordable not only in higher income nations but also in countries that account for most of the population of the less-developed world. These conclusions are suggested by an analysis of a wide range of evidence on happiness in countries throughout the world.
    Keywords: happiness, life satisfaction, subjective well-being, economic growth, safety net policies, developed countries, transition countries, less developed countries, China
    JEL: I31 I38 O21 F20 D60 E60
    Date: 2013–02
  2. By: Bjornskov, Christian; Dreher, Axel; Fischer, Justina A.V.; Schnellenbach, Jan; Gehring, Kai
    Abstract: We argue that perceived fairness of the income generation process affects the association between income inequality and subjective well-being, and that there are systematic differences in this regard between countries that are characterized by a high or, respectively, low level of actual fairness. Using a simple model of individual labor market participation under uncertainty, we predict that high levels of perceived fairness cause higher levels of individual welfare, and lower support for income redistribution. Income inequality is predicted to have a more favorable impact on subjective wellbeing for individuals with high fairness perceptions. This relationship is predicted to be stronger in societies that are characterized by low actual fairness. Using data on subjective well-being and a broad set of fairness measures from a pseudo micro-panel from the WVS over the 1990-2008 period, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the predicted differences in individual tolerance for income inequality, and the predicted influence of actual fairness.
    Keywords: Happiness, life satisfaction, subjective well-being, inequality, income distribution, redistribution, political ideology, justice, fairness, World Values Survey
    JEL: D31 H40 I31 J62 Z13
    Date: 2013–03–07
  3. By: Azevedo, Joao Pedro; Davalos, Maria Eugenia; Diaz-Bonilla, Carolina; Atuesta, Bernardo; Castaneda, Raul Andres
    Abstract: Household income inequality has declined in Latin America in the past decades, contributing significantly to poverty reduction in the region. Although available evidence shows that changes in the labor income are among the main factors behind these inequality trends, few studies have analyzed more closely the labor market dynamics that have led to a decline in total income inequality in some countries, but also to an increase in others. Using household survey data for a sample of 15 countries in Latin America from 1995 to 2010, this paper uses an extension of the Juhn-Murphy-Pierce methodology to decompose changes in labor income inequality (hourly wages) into a quantity effect (capturing changes in the distribution of workers'skills), price effect (reflecting returns to skills), and unobservables effect (other components, within skill groups, affecting labor income). The results show that falling returns to skills for both education and experience is, on average, driving the decline in labor income inequality in Latin America. The quantity effect, in turn, has contributed little to inequality reduction, mostly attributable to a larger dispersion in years of experience, possibly linked to the region's demographic transition and to significant increases in female labor force participation. Additional findings show that wage inequality, still high in the region, is coupled with inequality in terms of hours worked. The paper complements the existing literature by presenting separate results for males and females, as well as formal and informal sector workers as an attempt to control for secular shifts in these characteristics.
    Keywords: Poverty Impact Evaluation,Inequality,Services&Transfers to Poor,Labor Policies,Labor Markets
    Date: 2013–03–01
  4. By: Dahlberg, Matz (Uppsala University); Edmark, Karin (Research Institute of Industrial Economics (IFN)); Lundqvist, Helene (Stockholm University)
    Abstract: In a comment to Dahlberg, Edmark and Lundqvist (2012), Nekby and Pettersson-Lidbom (2012) argue (i) that the refugee placement program should be measured with contracted rather than actually placed refugees, and claim that the correlation between the two measures is insignificant and close to zero; (ii) that instead of using the rotating individual panel, we should have used the full cross-sections in combination with municipality fixed effects; and (iii) that immigrants should be defined based on country of birth rather than citizenship. In this response, we discuss why we (i) do not agree that contracted refugees is the preferred measure, and we show that the correlation between the two measures is highly significant and large; (ii) do not agree that the full cross-sections can be used; and (iii) do agree that defining immigrants according to country of birth is preferred. In a re-analysis, the conclusion from Dahlberg, Edmark and Lundqvist (2012) that ethnic diversity has a statistically and economically significant negative effect on preferences for redistribution is only marginally affected.
    Keywords: Income redistribution; Ethnic heterogeneity; Immigration
    JEL: D31 D64 I30 Z13
    Date: 2013–02–15
  5. By: Gindling, T. H. (University of Maryland, Baltimore County); Trejos, Juan Diego (University of Costa Rica)
    Abstract: We document changes in income and earnings inequality in the five Central American countries from the early 1990s to 2009. In the 1990s Costa Rica had the most equal distribution of income in Central America, and one of the most equal distributions of income in Latin America. At the other extreme, Guatemala, Honduras and Nicaragua were among the most unequal countries in Latin America. Inequality in El Salvador was between these extremes. Then, in the first decade of the 21st century inequality in El Salvador and Nicaragua decreased while inequality in Costa Rica, Guatemala and Honduras increased. By 2009 levels of inequality in El Salvador and Nicaragua were similar to those in Costa Rica. In this paper, we examine why income and earning inequality differs between the five Central American countries, and why inequality decreased in El Salvador and Nicaragua but increased in Costa Rica, Guatemala and Honduras.
    Keywords: income inequality, Central America, labour income
    JEL: O15 J31 O54
    Date: 2013–02
  6. By: Bargain, Olivier (University of Aix-Marseille II); Dolls, Mathias (IZA); Neumann, Dirk (University of Cologne); Peichl, Andreas (IZA); Siegloch, Sebastian (IZA)
    Abstract: We analyze to which extent social inequality aversion differs across nations when control- ling for actual country differences in labor supply responses. Towards this aim, we estimate labor supply elasticities at both extensive and intensive margins for 17 EU countries and the US. Using the same data, inequality aversion is measured as the degree of redistribution implicit in current tax-benefit systems, when these systems are deemed optimal. We find relatively small differences in labor supply elasticities across countries. However, this changes the cross-country ranking in inequality aversion compared to scenarios following the standard approach of using uniform elasticities. Differences in redistributive views are significant between three groups of nations. Labor supply responses are systematically larger at the extensive margin and often larger for the lowest earnings groups, exacerbating the implicit Rawlsian views for countries with traditional social assistance programs. Given the possibility that labor supply responsiveness was underestimated at the time these programs were implemented, we show that such wrong perceptions would lead to less pronounced and much more similar levels of inequality aversion.
    Keywords: social preferences, redistribution, optimal income taxation, labor supply
    JEL: H11 H21 D63 C63
    Date: 2013–02
  7. By: Ana Rute Cardoso; Paulo Guimarães; Pedro 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.
    JEL: J31 J16 J24 J71
    Date: 2013
  8. By: Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
    Abstract: This paper analyzes the career progression of skilled and unskilled workers, with a focus on how careers are affected by economic downturns and whether formal skills, acquired early on, can shield workers from the effect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across different regions, we follow workers from labor market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labor supply, and wage progression. Most particularly, our model allows for labor market frictions that vary by skill group and over the business cycle. We find that sources of wage growth differ: learning-by-doing is an important component for unskilled workers early on in their careers, while job mobility is important for workers who acquire skills in an apprenticeship scheme before labor market entry. Likewise, economic downturns affect skill groups through very different channels: unskilled workers lose out from a decline in productivity and human capital, whereas skilled individuals suffer mainly from a lack of mobility.
    JEL: C15 C23 C33 I24 J01 J08 J22 J24 J3 J31 J6 J62
    Date: 2013–02
  9. By: Koen Decancq; Tim Goedemé; Karel Van den Bosch; Josefine Vanhille
    Abstract: This paper considers the measurement of poverty in the European Union (EU). Starting from a definition of poverty that is suitable for the European context, a flexible measurement framework is proposed based on the Foster-Greer-Thorbecke class of poverty measures. Three key issues need to be addressed in the measurement of poverty. First, one has to determine the appropriate metric of individual well-being. Second, a cut-off value or threshold needs to be established under which persons are considered to be poor. Third, it is necessary to outline an aggregation procedure to attain a poverty figure for society as a whole. In what follows, we discuss the different answers that are implicit in the poverty measures applied in this book* and the EU’s social strategy. The EU Statistics on Income and Living Conditions (EU-SILC) are introduced as the main data source for poverty analysis in the EU. Finally, an illustration is provided of how the different conceptual choices in the measurement of poverty affect the empirical findings regarding the evolution of poverty between 2005 and 2009. It turns out that the selection of individual well-being metric and the choice between a county-specific and a pan-European poverty line strongly affect observed patterns of poverty in the EU. * Cantillon, B. and Vandenbroucke, F. (eds.), For Better For Worse, For Richer For Poorer. Labour market participation, social redistribution and income poverty in the EU. Oxford: Oxford University Press (forthcoming).
    Keywords: Europe, Poverty, FGT, EU-wide poverty, Concept, measurement, EU-SILC, top-bottom coding
    JEL: D31 D63 O52
    Date: 2013–02
  10. By: Andrew Clark; Claudia Senik; Katsunori Yamada
    Abstract: This paper uses Japanese data which includes measures of self-declared satisfaction, reference-group income, and the direction and intensity of income comparisons. Relative to Europeans, the Japanese compare more to friends and less to colleagues, and compare their incomes more. The relationship between satisfaction and others' income is negative, and more negative for those who report greater income comparison intensity. A self-reported measure of others' income does better than cell-mean income in explaining satisfaction, and would arguably make a useful addition to many existing surveys.
    Date: 2013–03
  11. By: John T. Addison (Department of Economics, Moore School of Business, University of South Carolina, and GEMF/University of Coimbra); McKinley L. Blackburn (Department of Economics, Moore School of Business, University of South Carolina); Chad D. Cotti (Department of Economics, University of Wisconsin-Oshkosh)
    Abstract: Do seemingly large minimum-wage increases in an environment of deep recession produce clearer evidence of disemployment than is often observed in the modern minimum wage literature? This paper uses three data sets to examine the employment effects of the most recent increases in the U.S. minimum wage. We focus on two high-risk groups – restaurant-and-bar employees and teenagers – for the years 2005-2010. Although the evidence for a general disemployment effect is not uniform, estimates do suggest the presence of a negative minimum wage effect in states hardest hit by the recession.
    Keywords: minimum wages, disemployment, earnings, low-wage sectors, geographically-disparate employment trends, recession.
    JEL: J2 J3 J4 J8
    Date: 2013–02
  12. By: Loayza, Norman (World Bank); Mier y Teran, Alfredo (University of California, Los Angeles); Rigolini, Jamele (World Bank)
    Abstract: The extent to which local communities benefit from commodity booms has been subject to wide but inconclusive investigations. This paper draws from a new district-level database to investigate the local impact on socioeconomic outcomes of mining activity in Peru, which grew almost twentyfold in the last two decades. We find evidence that producing districts have better average living standards than otherwise similar districts: larger household consumption, lower poverty rate, and higher literacy. However, the positive impacts from mining decrease significantly with administrative and geographic distance from the mine, while district-level consumption inequality increases in all districts belonging to a producing province. The inequalizing impact of mining activity, both across and within districts, may explain part of the current social discontent with mining activities in the country, even despite its enormous revenues.
    Keywords: natural resource curse, poverty, inequality, living standards
    JEL: D7 H7 O1 Q3
    Date: 2013–02

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