nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒04‒13
thirteen papers chosen by
Maximo Rossi
University of the Republic

  1. Comparing Inequality Aversion across Countries When Labor Supply Responses Differ By Olivier Bargain; Mathias Dolls; Dirk Neumann; Andreas Peichl; Sebastian Siegloch
  2. The New Stylized Facts About Income and Subjective Well-Being By Sacks, Daniel W.; Stevenson, Betsey; Wolfers, Justin
  3. Factor Components of Inequality: A Cross-Country Study By Cecilia García-Peñalosa; Elsa Orgiazzi
  4. Losing Heart? The Effect of Job Displacement on Health By Black, Sandra; Devereux, Paul J.; Salvanes, Kjell G
  5. Untangling Trade and Technology: Evidence from Local Labor Markets By David H. Autor; David Dorn; Gordon H. Hanson
  6. Comparing Labor Supply Elasticities in Europe and the US: New Results By Olivier Bargain; Christina Orsini; Andreas Peichl
  7. Pay-for-Performance Incentives in Low- and Middle-Income Country Health Programs By Grant Miller; Kimberly Singer Babiarz
  8. Income Concentration in China: What Role for Education? By Saccone Donatella
  9. Demographic Dividends Revisited By Williamson, Jeffrey G
  10. Income Inequality and Poverty in Colombia - Part 2. The Redistributive Impact of Taxes and Transfers By Isabelle Joumard; Juliana Londoño Vélez
  11. Income Inequality and Poverty in Colombia - Part 1. The Role of the Labour Market By Isabelle Joumard; Juliana Londoño Vélez
  12. Hours and Participation with Job Assignment Frictions By Josep Pijoan-Mas; Claudio Michelacci
  13. Race-Specific Agglomeration Economies: Social Distance and the Black-White Wage Gap By Elizabeth Ananat; Shihe Fu; Stephen L. Ross

  1. By: Olivier Bargain (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and IZA); Mathias Dolls (IZA and University of Cologne); Dirk Neumann (IZA and the University of Cologne); Andreas Peichl (IZA, U. of Cologne, CESifo and ISER); Sebastian Siegloch (IZA and the University of Cologne)
    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: 2013–03
  2. By: Sacks, Daniel W.; Stevenson, Betsey; Wolfers, Justin
    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; economic growth; life satisfaction; quality of life; subjective well-being
    JEL: D6 I3 J1 O1
    Date: 2013–01
  3. By: Cecilia García-Peñalosa (Aix Marseille University (Aix Marseille School of Economics), Cnrs and Ehess); Elsa Orgiazzi (University of Rennes 1 and CREM)
    Abstract: This paper uses data from the Luxembourg Income Study to examine some of the forces that have driven changes in household income inequality over the last three decades of the 20th century. We decompose inequality for 6 countries (Canada, Germany, Norway, Sweden, the UK, and the US) into the three sources of market income (earnings, property income and income from self-employment) and taxes and transfers. Our findings indicate that although changes in the distribution of earnings are an important aspect of recent increases in inequality, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings that dampened its impact on overall household income inequality. In some countries the contribution of self-employment income to inequality has been on the rise, while in others, increases in inequality in capital income account for a substantial fraction of the observed distributional changes.
    Keywords: income inequality, factor decomposition, decomposition by population subgroups.
    JEL: D31 D33
    Date: 2013–03
  4. By: Black, Sandra; Devereux, Paul J.; Salvanes, Kjell G
    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: Employment and Health; Job Displacement
    JEL: I1 J6
    Date: 2013–01
  5. By: David H. Autor; David Dorn; Gordon H. Hanson
    Abstract: We juxtapose the effects of trade and technology on employment in U.S. local labor markets between 1990 and 2007. Labor markets whose initial industry composition exposes them to rising Chinese import competition experience significant falls in employment, particularly in manufacturing and among non-college workers. Labor markets susceptible to computerization due to specialization in routine task-intensive activities experience significant occupational polarization within manufacturing and nonmanufacturing but no net employment decline. Trade impacts rise in the 2000s as imports accelerate, while the effect of technology appears to shift from automation of production activities in manufacturing towards computerization of information-processing tasks in non manufacturing.
    JEL: F16 J21 J23 O33
    Date: 2013–04
  6. By: Olivier Bargain (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and IZA); Christina Orsini (U. of Leuven); Andreas Peichl (IZA, U. of Cologne, CESifo and ISER)
    Abstract: We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status, with measurement differences netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously considered. Nonetheless, such differences do exist, and are found not to arise from different tax-benefit systems, wage/hour level or demographic compositions across countries, suggesting genuine differences in work preferences across countries. Furthermore, three other important results for welfare analysis are consistent across countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; and income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses' leisure in the US versus substitution in their household production in Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US.
    JEL: C25 C52 H31 J22
    Date: 2013–03
  7. By: Grant Miller; Kimberly Singer Babiarz
    Abstract: This chapter surveys experience with performance pay in developing country health programs. In doing so, it focuses on four key conceptual issues: (1) What to reward, (2) Who to reward, (3) How to reward, and (4) What unintended consequences might performance incentives create. We highlight that the use of performance pay has outpaced growth in corresponding empirical evidence. Moreover, very little research on performance incentives studies the underlying conceptual issues that we outline. We consider these to be important constraints in the design of better performance incentives.
    JEL: H51 I12 O12 O17
    Date: 2013–04
  8. By: Saccone Donatella (University of Turin)
    Abstract: The paper aims to analyze the relationship between income concentration and inequality in education in China for the period 1989-2006. We first estimate the association between individual attributes and income over time and, then, calculate the contribution of education and its distribution to income concentration. We find that education has become the bulk of income concentration and that the pace of equalizing reforms should be accelerated, since the improvements in terms of educational equality are at risk to be counterbalanced by the fast growth of its importance in determining income distribution
    Date: 2012–01
  9. By: Williamson, Jeffrey G
    Abstract: This paper revisits demographic dividend issues after almost two decades of debate. In 1998, David Bloom and Jeffrey Williamson used a convergence model to estimate the impact of demographic-transition-driven age structure effects and calculated what the literature has come to call the demographic dividend. How do estimates based on these naïve convergence models compare with subsequent and competing OLG models? How much of the (first) demographic dividend is simply a labor participation rate effect, and how much a true growth effect? If there are growth effects, how much of this is based on accelerating human capital accumulation induced by demand side quality-quantity Becker trade-offs versus a co-movement between demographic transitions and exogenous schooling supply side revolutions? Emigration has passed through life cycles much like the demographic transition, and with similar (but lagged) timing. Has emigration actually been driven in part by demography? Has emigration wasted some of the demographic dividend by brain drain? Have within-country rural-urban migrations been driven in part by demographic transitions with different spatial timing? Finally, what has been the lifetime – not just annual -- income inequality impact of demographic transitions?
    Keywords: Asia.; demographic dividends; Demographic transitions; growth; inequality
    JEL: J10 O11 O15 O40 O53
    Date: 2013–03
  10. By: Isabelle Joumard; Juliana Londoño Vélez
    Abstract: Income inequality in Colombia has declined since the early 2000s but remains very high by international standards. While most of the inequality originates from the labour market, wealth – and thus capital income – is also highly concentrated and the tax and transfer system has little redistributive impact. The tax-to-GDP ratio remains low. Consumption taxes, which tend to be regressive, account for the bulk. The progressivity of income taxes had been undermined by generous tax reliefs, which benefit the well-off most and increase tax avoidance opportunities. The tax system should be reformed to enhance progressivity and raise more revenue which could be used to expand social policies. Cash transfers to households are small and dominated by non-redistributive schemes such as contributory pensions. Education coverage has increased steadily but quality and equity in access at the tertiary level remain important issues. Though significant progress has been made towards universal health coverage, the financing and organisation of the health care system could be improved to raise the quality of care and reduce adverse incentives to remain in the informal sector.<P>Inégalités de revenu et pauvreté en Colombie - Partie 2. L'impact redistributif des impôts et prestations sociales<BR>Les inégalités de revenu se sont atténuées depuis le début des années 2000 mais elles restent beaucoup plus fortes que dans la plupart des autres pays. Si le fonctionnement du marché du travail est le principal facteur à l'origine de ces inégalités, il convient de noter que la richesse – et donc les revenus du capital – est aussi très inégalement répartie alors que les impôts et prestations sociales n'ont qu'un faible impact redistributif. Le montant des prélèvements obligatoires en pourcentage du PIB reste faible. Les taxes sur la consommation, qui tendent à être régressives, ont un poids prépondérant. La progressivité des impôts sur le revenu est amoindrie par les dispositifs d'allègements qui bénéficient aux plus fortunés et favorisent l'évasion fiscale. Le système fiscal devrait être réformé afin de renforcer sa progressivité et d'augmenter les recettes qui pourraient être utilisées pour mettre en place des politiques sociales plus ambitieuses. Les prestations sociales sont peu élevées et dominées par des programmes non-redistributifs, en particulier les pensions contributives. Les taux de scolarisation ont augmenté mais la qualité de l'éducation et l'équité d'accès, en particulier pour l'université, restent des défis importants. De même pour la santé, si des progrès remarquables ont été faits concernant la couverture, rendue presque universelle, le financement et l'organisation du système de santé pourraient être réformés afin d'augmenter la qualité des soins et de réduire les incitations au travail informel.
    Keywords: health, education, pensions, property tax, Colombia, value added tax, personal income tax, inequality, conditional cash transfers, water and electricity subsidies, santé, éducation, pensions, impôt sur le revenu, Colombie, impôt sur la propriété, inégalités, prestations sociales conditionnelles, subventions pour l'eau et l'électricité, impôt sur la valeur ajoutée
    JEL: H23 H24 H31 H4 H51 H53 H55 I14 I24 I38
    Date: 2013–03–27
  11. By: Isabelle Joumard; Juliana Londoño Vélez
    Abstract: Income inequality in Colombia has declined since the early 2000s but remains very high by international standards. Income dispersion largely originates from the labour market, which is characterised by a still high unemployment rate, a pervasive informal sector and a wide wage dispersion reflecting a large education premium for those with higher education. Reducing income inequality is a key government objective and this requires improving the performance of the labour market. Raising educational outcomes for all and enhancing training programmes would help improve labour supply and productivity. Formal job creation however remains heavily constrained by restrictive labour market regulations, in particular very substantial non-wage labour costs and a minimum wage which is high compared to average incomes. The 2012 tax reform reduces non-wage labour costs but more decisive steps are needed to create the right conditions and incentives to boost formal employment.<P>Inégalités de revenu et pauvreté en Colombie - Partie 1. Le role du marché de travail<BR>Les inégalités de revenu se sont atténuées depuis le début des années 2000 mais elles restent beaucoup plus fortes que dans la plupart des autres pays. La situation sur le marché du travail explique dans une large mesure ces inégalités, avec un taux de chômage qui reste élevé, un vaste secteur informel et d'amples écarts de salaires révélant un très net avantage pour ceux qui ont fait des études supérieures. La réduction des inégalités de revenu est un objectif important du gouvernement. Pour l'atteindre, il est nécessaire d'améliorer les performances du marché du travail. Réformer le système éducatif pour garantir un meilleur niveau de connaissances pour tous et améliorer la formation professionnelle contribueraient à améliorer l'offre de main d'oeuvre et la productivité. La création d'emplois dans le secteur formel reste néanmoins fortement entravée par des réglementations du travail restrictives, en particulier des coûts non-salariaux particulièrement importants et un salaire minimum qui est élevé par rapport aux revenus moyens. La réforme fiscale de 2012 réduit les coûts non-salariaux mais des mesures plus ambitieuses sont nécessaires pour créer des conditions and incitations plus favorables à la création d'emplois dans le secteur formel.
    Keywords: education, poverty, Colombia, informal economy, inequality, labour taxes, gender discrimination, éducation, pauvreté, Colombie, économie informelle, inégalités, impôts sur le travail, discrimination des femmes
    JEL: H23 H52 I24 I3 I32 J16 J2 J3 O17 O5
    Date: 2013–03–27
  12. By: Josep Pijoan-Mas (CEMFI); Claudio Michelacci (CEMFI)
    Abstract: We consider a competitive equilibrium matching model where technological progress is embodied in new jobs. Jobs are slowly created over time and in equilibrium there is dispersion in job technologies. Workers can be employed in at most one job. They decide on whether to participate in the labor market and on how many hours to work when assigned to a job. This endogenously generates inequality in wages and in labor supply. When the pace of technological progress accelerates differences in job technologies widen and the technology gap with respect to the frontier increases more in worse jobs. As a result, the balance of income and substitution effects on labor supply is asymmetric across jobs and it becomes optimal to work longer hours in the top jobs and work less hours in the worst ones. With a fixed cost of labor supply this implies that the participation rate falls as workers work less often in order to avoid the worst jobs, and they supply longer hours on average when employed. This model can explain the simultaneous fall in labor force participation and the increase in working hours experienced by US male workers since the mid 70s in a context of raising wage inequality. In addition, it can ex- plain the differences across education groups. In the data, less educated workers see both participation and hours fall. Our model predicts assortative matching, and hence, less educated individuals have access to the worst jobs in the economy, those that worsen the most with the increase in the speed of embodied technical change. Hence, for these workers the returns on market work fall disproportionately and they reduce labor supply in both margins
    Date: 2012
  13. By: Elizabeth Ananat (Duke University); Shihe Fu (Xiamen University); Stephen L. Ross (University of Connecticut)
    Abstract: We demonstrate a striking but previously unnoticed relationship between city size and the black-white wage gap, with the gap increasing by 2.5% for every million-person increase in urban population. We then look within cities and document that wages of blacks rise less with agglomeration in the workplace location, measured as employment density per square kilometer, than do white wages. This pattern holds even though our method allows for non-parametric controls for the effects of age, education, and other demographics on wages, for unobserved worker skill as proxied by residential location, and for the return to agglomeration to vary across those demographics, industry, occupation and metropolitan areas. We find that an individual’s wage return to employment density rises with the share of workers in their work location who are of their own race. We observe similar patterns for human capital externalities as measured by share workers with a college education. We also find parallel results for firm productivity by employment density and share college-educated using firm racial composition in a sample of manufacturing firms. These findings are consistent with the possibility that blacks, and black majority firms, receive lower returns to agglomeration because such returns operate within race, and blacks have fewer same-race peers and fewer highly-educated same-race peers at work from whom to enjoy spillovers than do whites. Data on self-reported social networks in the General Social Survey provide further evidence consistent with this mechanism, showing that blacks feel less close to whites than do whites, even when they work exclusively with whites. We conclude that social distance between blacks and whites preventing shared benefits from agglomeration is a significant contributor to overall black-white wage disparities.
    Keywords: Black White Wage Gap, Agglomeration Economies, Human Capital Externalities, Information Networks, Total Factor Productivity
    JEL: J15 J24 J31 R23 R32
    Date: 2013–03

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