nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒03‒23
fourteen papers chosen by
Maximo Rossi
University of the Republic

  1. “Changes in Wage Structure in Mexico Going Beyond the Mean: An Analysis of Differences in Distribution, 1987-2008” By Claudia Tello; Raul Ramos; Manuel Artís
  2. Inequality of Opportunity, Income Inequality and Economic Mobility: Some International Comparisons By Paolo Brunori; Francisco H. G. Ferreira; Vito Peragine
  3. Accounting for cross-country differences in wealth inequality By Frank A Cowell; Eleni Karagiannaki; Abigail McKnight
  4. The Sources of Wage Variation: A Three-Way High-Dimensional Fixed Effects Regression Model By Torres, Sónia; Portugal, Pedro; Addison, John T.; Guimaraes, Paulo
  5. Multidimensional Poverty Frontiers: Parametric Aggregators Based on Nonparametric Distributions By Esfandiar Maasoumi; Jeffrey S. Racine
  6. Strengthening Social Cohesion in Luxembourg: Making Efficiency and Equity Go Hand in Hand By Jean-Marc Fournier; Clara Garcia
  7. The Transformation of Hunger Revisited By Gazeley, Ian; Newell, Andrew T.; Bezabih, Mintewab
  8. The β Family of Inequality Measures By Luis José Imedio Olmedo; Encarnación M. Parrado Gallardo; Elena Bárcena Martín
  9. The Emergence of Three Human Development Clubs By Sebastian Vollmer; Hajo Holzmann; Florian Ketterer; Stephan Klasen; David Canning
  10. Is Germany the North Star of Labor Market Policy? By Rinne, Ulf; Zimmermann, Klaus F.
  11. Job polarization in Britain from a task-based perspective.Evidence from the UK Skills Surveys By Martina Bisello
  12. The Labor Market Behavior of Married Women with Young Children in the U.S.: Have Differences by Religion Disappeared? By Lehrer, Evelyn L.; Chen, Yu
  13. The relationship between EU indicators of persistent and current poverty By Stephen P Jenkins; Philippe Van Kerm
  14. A Theoretical Model of the Chinese Labor Market By Fields, Gary; Song, Yang

  1. By: Claudia Tello (Faculty of Economics, University of Barcelona); Raul Ramos (Faculty of Economics, University of Barcelona); Manuel Artís (Faculty of Economics, University of Barcelona)
    Abstract: This paper conducts an empirical analysis of the relationship between wage inequality, employment structure, and returns to education in urban areas of Mexico during the past two decades (1987-2008). Applying Melly’s (2005) quantile regression based decomposition, we find that changes in wage inequality have been driven mainly by variations in educational wage premia. Additionally, we find that changes in employment structure, including occupation and firm size, have played a vital role. This evidence seems to suggest that the changes in wage inequality in urban Mexico cannot be interpreted in terms of a skill-biased change, but rather they are the result of an increasing demand for skills during that period.
    Keywords: wage inequality, quantile regressions, decomposition. JEL classification: J31
    Date: 2013–03
  2. By: Paolo Brunori (University of Bari); Francisco H. G. Ferreira (The World Bank); Vito Peragine (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.
    JEL: D71 D9 I32
    Date: 2013–01
  3. By: Frank A Cowell; Eleni Karagiannaki; Abigail McKnight
    Abstract: This paper adopts a counterfactual decomposition analysis to analyse cross-country differences in the size of household wealth and levels of household wealth inequality. The findings of the paper suggest that the biggest share of cross-country differences is not due to differences in the distribution of household demographic and economic characteristics but rather reflect strong unobserved country effects.
    Keywords: household wealth, wealth inequality, debt, housing assets, educational loans, age-wealth profiles, decomposition
    JEL: C81 D31 D63 I24 I31
    Date: 2013–03
  4. By: Torres, Sónia (Statistics Portugal); Portugal, Pedro (Banco de Portugal); Addison, John T. (University of South Carolina); Guimaraes, Paulo (University of Porto)
    Abstract: This paper estimates a wage equation with three high-dimensional fixed effects, using a longitudinal matched employer-employee dataset covering virtually all Portuguese wage earners over a little more than two decades. The variation in log real hourly wages is decomposed into different components related to worker, firm, and job title characteristics (both observed and unobserved) and a residual component. It is found that worker permanent heterogeneity is the most important source of wage variation (36.0 percent) and that the unobserved component plays a more important role (21.0 percent) than the observed component (15.0 percent) in explaining wage differentials. Firm permanent effects are less important overall (28.7 percent) and are due in almost equal parts to the unobserved component and the observed component. Job title effects emerge as the least important dimension but they still explain close to 10 percent of wage variation. We found definitive evidence of positive assortative matching.
    Keywords: high dimensional fixed effects, wage decomposition, assortative matching
    JEL: J2 J41
    Date: 2013–03
  5. By: Esfandiar Maasoumi; Jeffrey S. Racine
    Abstract: We propose a new technique for the estimation of multidimensional evaluation functions. Technical advances allow nonparametric inference on the joint distribution of continuous and discrete indicators of well-being, such as income and health, conditional on joint values of other continuous and discrete attributes, such as education and geographical groupings. In a multiattribute setting, "quantiles" are "frontiers" that define equivalent sets of covariate values. We identify these frontiers nonparametrically at first. Then we suggest "parametrically equivalent" characterizations of these frontiers that reveal likely, but different, weights for and substitutions between different attributes for different groups, and at different quantiles. These estimated parametric functionals are "ideal" in a certain sense which we make clear. They correspond directly to measures of aggregate well-being popularized in the earliest multidimensional inequality measures in Maasoumi (1986). This new approach resolves a classic problem of assigning weights to dimensions of well-being, as well as empirically incorporating the key component in multidimensional analysis, the relationship between the attributes. It introduces a new way to robust estimation of "quantile frontiers", allowing "complete" assessments, such as multidimensional poverty measurements. We discover massive heterogeneity in individual evaluation functions. This leads us to perform robust, weak uniform rankings as afforded by nonparametric tests for stochastic dominance. A demonstration is provided based on the Indonesian data analyzed for multidimensional poverty in Maasoumi & Lugo (2008).
    Date: 2013–03
  6. By: Jean-Marc Fournier; Clara Garcia
    Abstract: Luxembourg is a rich and fast-growing country. However, inequality of disposable incomes has trended up modestly over the past decades and relative poverty has risen reflecting mainly the rapid growth of high incomes. The relatively high inequality of market incomes is substantially reduced by large social transfers, but the risk of relative poverty still affects the most vulnerable, such as the young, the less educated, single parents and migrants. At the same time the generous transfer systems tend to reduce work incentives. There is significant room for improvement in the design of the tax and transfer system to enhance work incentives and improve targeting, particularly for the less skilled workers. Reforms that tackle poverty traps would both reduce inequality and improve the labour supply of residents. Strong activation policies are important in getting people to jobs. Job opportunities would also be enhanced by improving education outcomes for pupils from low socio-economic backgrounds and for secondgeneration immigrants. Reducing high repetition rates and better targeting education spending to schools with high shares of vulnerable students would help improve outcomes.<P>Renforcer la cohésion sociale au Luxembourg : Concilier efficacité et équité<BR>Le Luxembourg est un pays riche en croissance rapide. Néanmoins, les inégalités de revenus disponibles se sont légèrement accentuées au cours des dernières décennies, et la pauvreté relative a augmenté, essentiellement du fait de l'accroissement rapide des hauts revenus. Les inégalités relativement élevées des revenus marchands sont sensiblement atténuées par d'amples transferts sociaux, mais le risque de pauvreté relative pèse toujours sur les catégories les plus vulnérables, comme les jeunes, les personnes ayant un faible niveau d'instruction, les parents isolés et les migrants. Par ailleurs, le généreux système de transferts tend à réduire les incitations au travail. Il est possible d'améliorer sensiblement le système de prélèvements et de transferts pour renforcer les incitations au travail et améliorer le ciblage des dispositifs, en particulier pour les travailleurs peu qualifiés. Des réformes visant à remédier aux phénomènes de piège de la pauvreté permettraient à la fois de réduire les inégalités et d'améliorer l'offre de travail des résidents. Il importe de renforcer les mesures d'activation pour amener les individus à l'emploi. On pourrait également renforcer leurs perspectives d'emploi en améliorant les résultats scolaires des élèves issus de milieux modestes et des immigrés de deuxième génération. Une réduction des taux élevés de redoublement et un meilleur ciblage des dépenses d'éducation sur les établissements comptant une forte proportion de jeunes vulnérables contribueraient à améliorer les résultats du système d'enseignement.
    Keywords: education, income distribution, Luxembourg, inequality, redistributive effects of taxes and transfers, minimum income, éducation, distribution des revenus, Luxembourg, inégalités, effets redistributifs des taxes et des transferts, revenu minimum
    JEL: D31 H23 H53 I24 I38
    Date: 2013–03–08
  7. By: Gazeley, Ian (University of Sussex); Newell, Andrew T. (University of Sussex); Bezabih, Mintewab (London School of Economics)
    Abstract: We examine Trevon Logan's 2009 claim to have found low levels of nutrition among British worker's households in the late 19th century. Using the same data, we conclude that Logan's estimates are thirty percent too low. Logan buttressed his estimates by claiming that the income elasticity of calories demand was unusually high among these households, relative to other estimates, reflecting great hunger. We find that the elasticity is high, but not outside the range observed in other data sets. We also warn against the simple assertion that a high elasticity implies hunger.
    Keywords: nutrition, living standards, worker's households, late 19th century, Britain
    JEL: I15 I32 N33
    Date: 2013–03
  8. By: Luis José Imedio Olmedo (Dpto. Estadistica y Econometria (68). Facultad de Ciencias Economicas y Empresariales. Campus El Ejido s/n. Universidad de Malaga, 29013 Malaga.); Encarnación M. Parrado Gallardo (Dpto. Estadistica y Econometria (68). Facultad de Ciencias Economicas y Empresariales. Campus El Ejido s/n. Universidad de Malaga, 29013 Malaga); Elena Bárcena Martín (Dpto. Estadistica y Econometria (68). Facultad de Ciencias Economicas y Empresariales. Campus El Ejido s/n. Universidad de Malaga, 29013 Malaga. Telf. +34 952 131 191)
    Abstract: This paper introduces and analyses, both normatively and statistically, a new class of inequality measures. This class generalizes and comprises different well-known families of inequality measures as particular cases. The elements of this new class are obtained by weighting local inequality evaluated through the Bonferroni curve. The weights are the density functions of the beta distributions over [0,1]. Therefore, the weights are not necessarily monotonic. This allows us to choose the inequality measures that are more or less sensitive to changes that could take place in any part of the distribution. As a consequence of the different weighting schemes attached to the indexes, the elements of the class introduce very dissimilar value judgements in the measurement of inequality and welfare. The possibility of choosing the index that focuses on a specific percentile, and not necessarily on the extremes of the distribution, is one of the advantages of our proposal.
    Keywords: Lorenz curve, Bonferroni curve, preference distributions, inequality aversion, beta distribution
    JEL: C10 D31 I38
    Date: 2013–02
  9. By: Sebastian Vollmer (University of Göttingen and Harvard School of Public Health); Hajo Holzmann (University of Marburg); Florian Ketterer (University of Marburg); Stephan Klasen (University of Göttingen); David Canning (Harvard School of Public Health)
    Abstract: We examine the joint distribution of levels of income per capita, life expectancy, and years of schooling across countries in 1960 and in 2000. In 1960 countries were clustered in two groups; a rich, highly educated, high longevity “developed” group and a poor, less educated, high mortality, “underdeveloped” group. By 2000 however we see the emergence of three groups; one underdeveloped group remaining near 1960 levels, a developed group with higher levels of education, income, and health than in 1960, and an intermediate group lying between these two. This finding is consistent with both the ideas of a new “middle income trap” that countries face even if they escape the “low income trap”, as well as the notion that countries which escaped the poverty trap form a temporary “transition regime” along their path to the “developed” group.
    Keywords: income per capita, life expectancy, schooling, income trap
    Date: 2013–03
  10. By: Rinne, Ulf (IZA); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: Germany's recovery from an unemployment disease and its resilience to the Great Recession is remarkable. Its success story makes it a showcase for labor policy and labor market reforms. This paper assesses the potential of the German experience as a model for effective, evidence-based policymaking. Flexible management of working time (through overtime and short-time work, time accounts and labor hoarding), social cohesion and controlled unit labor costs, combined with a rigid, incentive-oriented labor policy supported by effective program evaluation, define the characteristics of a strong reference model. Austerity, sometimes seen as core to the German model, is not viewed as a key element.
    Keywords: labor market reforms, labor policy, unemployment, Great Recession, Germany, austerity
    JEL: J68 J21 P52 O57
    Date: 2013–03
  11. By: Martina Bisello
    Abstract: 2013 This paper analyses the pattern of occupational change in Britain between 1997 and 2006 from a task-based perspective using data from the UK Skills Surveys. We show that employment in Britain has been polarizing at the occupational level with increasing employment shares in high and low-paying occupations, while decreasing for those in the middle of the distribution. Next, we interpret employment changes in light of ALM (2003) "routinization hypothesis", providing evidence that computerization is positively associated with the demand for nonmanual tasks, carried out by high-paid workers, and negatively to that for manual and routine tasks, typical of those who are middlepaid. We also find that middle-paid workers, negatively affected by technological change, did not predominantly reallocate their labour supply to low-paying occupations. Explanations of the increase of low-paid jobs should also take into account the surge of low-skilled immigrants in Britain.
    Keywords: Job polarization, technological change, occupations, tasks.
    JEL: J21 J23 J24 J62
    Date: 2013–03–01
  12. By: Lehrer, Evelyn L. (University of Illinois at Chicago); Chen, Yu (University of Illinois at Chicago)
    Abstract: Using data from the 2006-2010 National Survey of Family Growth, conducted in the United States, we study the role of religious affiliation and participation in the labor supply behavior of non-Hispanic married women with young children. We estimate ordered probit models with a trichotomous dependent variable indicating full-time employment, part-time employment or non-employment. We find that the labor market decisions of Catholic women are not significantly different from those of their mainline Protestant counterparts, and that women affiliated with conservative Protestant denominations continue to stand out for their low levels of labor market attachment. With regard to religious participation, we find a non-linear association: the probability of non-employment is high both among women who have zero attendance at religious services and among those who attend more than once a week - the latter especially. Reasons for these non-linearities are explored. Our results suggest that future research on relationships between religious participation and various economic and demographic outcomes should be based on models that allow for non-linearities and also for differences in the effects of religious participation by religious affiliation.
    Keywords: women's labor market behavior, female employment, religion, religious affiliation, religious participation
    JEL: J22 J24 Z12 Z13
    Date: 2013–02
  13. By: Stephen P Jenkins; Philippe Van Kerm
    Abstract: The current poverty rate and the persistent poverty rate are both included in the EU's portfolio of primary indicators of social inclusion. We show that there is a near-linear relationship between these two indicators across EU countries drawing on empirical analysis of EU-SILC and ECHP data. Using a prototypical model of poverty dynamics, we explain how the near-linear relationship arises and show how the model can be used to predict persistent poverty rates from current poverty information. In the light of the results, we discuss whether the EU's persistent poverty measure and the design of EU-SILC longitudinal data collection require modification.
    Keywords: Persistent poverty, income poverty, poverty, EU-SILC, Europe
    JEL: I32 D31
    Date: 2013–03
  14. By: Fields, Gary (Cornell University); Song, Yang (Renmin University of China)
    Abstract: This paper constructs a theoretical labor market model for China, and utilizes the model to examine the effects of various labor market policies on economic well-being. Two key features of the model are a segmented labor market involving three sectors – state-owned enterprises, private enterprises, and agriculture – and China's unique household registration system (hukou). The major existing theoretical models of employment and development – the Lewis model, the integrated labor market model, the Harris-Todaro model, and various segmented labor market models – stylize different developing countries' labor markets in other ways but do not include these two key features. The paper first formulates the equations of the model, then obtains a closed form solution given initial conditions, and then deduces the labor market and welfare consequences of several policy interventions, which include promoting rural development, reducing the cost-of-living in urban areas for rural hukou holders, and offering some rural workers the chance to convert from rural to urban hukou status. These policy interventions are analyzed using two alternative welfare criteria: first-order stochastic dominance and an abbreviated social welfare function. Using both social welfare criteria, it is shown that the rural development policy is unambiguously welfare-improving, while the other two policies have ambiguous effects on social welfare. None of these policies is unambiguously welfare-decreasing.
    Keywords: labor markets, employment, welfare economics, China, hukou
    JEL: I3 J2 O1 O53
    Date: 2013–03

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