nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒03‒30
nine papers chosen by
Maximo Rossi
University of the Republic

  1. Social Spending, Taxes and Income Redistribution in Paraguay By Sean Higgins; Nora Lustig; Julio Ramirez; Billy Swanson
  2. Subjective and Objective Indicators of Racial Progress By Betsey Stevenson; Justin Wolfers
  3. Minimising misery: a new strategy for public policies instead of maximising happiness? By Lelkes, Orsolya
  4. Inequality and Relative Ability Beliefs By Jeffrey V. Butler
  5. Employment protection and income inequality: is there a role for the informal sector? By Gkinni, Eleni; Vasilaki, Eleni
  6. Spatial Price Differences and Inequality in China: Housing Market Evidence By Chao Li; John Gibson
  7. Linkages between Income Inequality, International Remittances and Economic Growth in Pakistan By Shahbaz, Muhammad; Ur Rehman, Ijaz; Ahmad Mahdzan, Nurul Shahnaz
  8. The Evolution of Canadian Wages over the Last Three Decades By Morissette, Rene<br /> Picot, Garnett<br /> Lu, Yuqian
  9. Faith-inspired, Private Secular, and Public Schools in sub-Saharan Africa: Market Share, Reach to the Poor, Cost, and Satisfaction By Wodon, Quentin

  1. By: Sean Higgins (Department of Economics, Tulane University); Nora Lustig (Department of Economics, Tulane University); Julio Ramirez (CADEP (Centro de Analisis y Difusion de la Economia Paraguaya)); Billy Swanson (Department of Economics, University of California Davis)
    Abstract: How much redistribution does Paraguay accomplish through social spending and taxes? How progressive are revenue collection and social spending? Using a standard fiscal incidence analysis, we quantify the reduction in inequality and poverty in Paraguay across income concepts, and contextualize these results by placing Paraguay in comparative perspective with other Latin American countries. Paraguay achieves a relatively small reduction in inequality, even when in-kind education and health benefits are taken into account. Direct taxes are progressive, indirect taxes are regressive, and total taxes are regressive. Social spending is progressive in relative terms, but less so than in any of the other countries analyzed.
    Keywords: inequality, poverty, Paraguay, social spending, taxes
    JEL: H22 D31 I32 I38
    Date: 2013–02
  2. By: Betsey Stevenson; Justin Wolfers
    Abstract: Progress in closing differences in many objective outcomes for blacks relative to whites has slowed, and even worsened, over the past three decades. However, over this period the racial gap in well-being has shrunk. In the early 1970s data revealed much lower levels of subjective well-being among blacks relative to whites. Investigating various measures of well-being, we find that the well-being of blacks has increased both absolutely and relative to that of whites. While a racial gap in well-being remains, two-fifths of the gap has closed and these gains have occurred despite little progress in closing other racial gaps such as those in income, employment, and education. Much of the current racial gap in well-being can be explained by differences in the objective conditions of the lives of black and white Americans. Thus making further progress will likely require progress in closing racial gaps in objective circumstances.
    JEL: D6 I32 J1 J7 K0 K31 N3
    Date: 2013–03
  3. By: Lelkes, Orsolya
    Abstract: This paper raises the issue whether public policy should focus on minimizing unhappiness rather than maximizing happiness. Using a cross-sectional multi-country dataset with 57 thousand observations from 29 European countries, we show that unhappiness varies a great deal more across social groups than (high levels of) happiness does. Our findings are robust to several alternative specifications, using both self-reported life satisfaction and self-reported happiness, and different cut-off points for defining unhappiness (dissatisfaction) and high levels of happiness (satisfaction). While misery appears to strongly relate to broad social issues (such as unemployment, poverty, social isolation), bliss might be more of a private matter, with individual strategies and attitudes, hidden from the eye of a policy-maker. The social cost of unhappiness may be also reflected in the immense cost of mental health problems. Preventing avoidable unhappiness, however, needs to be complemented with other strategies for promoting happiness, perhaps on a more decentralized level, given the different causes of bliss and that of misery.
    Keywords: Happiness, Unhappiness, Life Satisfaction, Public Policy, Bipolar Scales
    JEL: D02 I31
    Date: 2013–03
  4. By: Jeffrey V. Butler (EIEF)
    Abstract: In this study I present experimental evidence of a novel channel yielding inequality persistence. In an initial experiment, results suggest that individuals respond to salient inequality by adjusting their performance beliefs to justify the inequality. Subsequent experiments reveal: i) that it is beliefs about relative ability, an ostensibly stable trait, rather than effort provision that respond to inequality; and that ii) unequal pay in an initial task affects willingness to compete on a subsequent task for male participants. Taken together, these patterns may cause inequality to become self-perpetuating. I conclude by discussing some implications of these findings.
    Date: 2013
  5. By: Gkinni, Eleni; Vasilaki, Eleni
    Abstract: This paper seeks to examine the effect of employment protection on income inequality. By employing the employment protection data developed by Botero et al. (2004) as well as well established measures of economic inequality for a sample of 83 countries, our analysis suggests that increased employment protection is negatively associated with income inequality. This relationship remains highly robust across several different specifications and estimation methods. In addition, our analysis places the spotlight on the role of the informal economy and investigates how the presence of informal sector may affect the above mentioned relationship. Our results suggest that in the presence of a large unofficial economy the negative impact of employment protection on inequality is crucially mitigated and in some extreme cases may also be reversed.
    Keywords: Employment protection, Shadow Economy, Inequality
    JEL: D63 E26 J08 J3
    Date: 2013–03–13
  6. By: Chao Li (University of Waikato); John Gibson (University of Waikato)
    Abstract: The large literature on regional inequality in China is hampered by incomplete evidence on price dispersion across space, making it hard to distinguish real and nominal inequality. The two main methods used to calculate spatial deflators have been to price a national basket of goods and services across China’s different regions or else to estimate a food Engel curve and define the deflator as that needed for nominally similar households to have the same food budget shares in all regions. Neither approach is convincing with the data available in China. Moreover, a focus on tradable goods like food may be misplaced because of the emerging literature on the rapid convergence of traded goods prices within China that contrasts with earlier claims of fragmented internal markets. In a setting where traded goods prices converge rapidly, the main source of price dispersion across space should come from non-traded items, and especially from housing given the fixity of land. In this paper we use newly available data on dwelling sales in urban China to develop spatially-disaggregated indices of house prices, which are then used as spatial deflators for both provinces and core urban districts. These new deflators complement existing approaches that have relied more on traded goods prices, and are used to re-examine the evidence on the level of regional inequality. Around one-quarter of the apparent spatial inequality disappears once account is taken of cost-of-living differences.
    Keywords: housing; inequality; prices; spatial; China
    JEL: E31 O15 R31
    Date: 2013–03–15
  7. By: Shahbaz, Muhammad; Ur Rehman, Ijaz; Ahmad Mahdzan, Nurul Shahnaz
    Abstract: This paper explores the dynamic linkages between income inequality, international remittances and economic growth using time series data over the period of 1976-2006 in case of Pakistan. The cointegration analysis based on the bounds test confirms the existence of a long-run relationship between income inequality, international remittances and economic growth. Our results reveal that income inequality and international remittances enhance economic growth. The causality analysis based on innovative accounting approach shows bidirectional causality between income inequality and economic growth and same is true for international remittances and income inequality. International remittances are cause of economic growth but not vice versa. Although we find support for Kuznets hypothesis but Pakistan is yet to benefit, in terms of reducing the gaps of income inequality, from the international flow of remittances and economic growth. The paper argues that, from a policy perspective, there is an urgent need for policy makers in Pakistan to reduce the widening gap of income inequality by focusing on income redistribution policies and to go beyond the traditional factors in balancing income inequality.
    Keywords: Income Inequality, International Remittances, Economic Growth
    JEL: F1
    Date: 2013–03–03
  8. By: Morissette, Rene<br /> Picot, Garnett<br /> Lu, Yuqian
    Abstract: This study examines how real wages of Canadian workers evolved from 1981 to 2011 across five dimensions: gender, age, education, industry, and occupation.
    Keywords: Labour, Education, training and learning, Wages, salaries and other earnings, Industries, Outcomes of education, Occupations
    Date: 2013–03–15
  9. By: Wodon, Quentin
    Abstract: The purpose of this study is to build a stronger evidence base on the role of faith-inspired and private secular schools in sub-Saharan Africa using nationally representative household surveys as well as qualitative data. Six main findings emerge from the study: (1) Across a sample of 16 countries, the average market share for faith-inspired schools is at 10-15 percent, and the market share for private secular schools is of a similar order of magnitude; (2) On average faith-inspired schools do not reach the poor more than other groups; they also do not reach the poor more than public schools, but they do reach the poor significantly more than private secular schools; (3) The cost of faith-inspired schools for households is higher than that of public schools, possibly because of a lack of access to public funding, but lower than that of private secular schools; (4) Faith-inspired and private secular schools have higher satisfaction rates among parents than public schools; (5) Parents using faith-inspired schools place a stronger emphasis on religious education and moral values; and (6) Students in faith-inspired and private schools perform better than those in public schools, but this may be due in part to self-selection.
    Keywords: Education; Private Schools; Faith; Development; Poverty; Satisfaction; Cost
    JEL: I25
    Date: 2013–02

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