nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒05‒05
twelve papers chosen by
Maximo Rossi
University of the Republic

  1. Accounting for cross-country differences in wealth inequality By Frank A Cowell; Eleni Karagiannaki; Abigail McKnight
  2. Subjective Well-Being and Income: Is There Any Evidence of Satiation? By Betsey Stevenson; Justin Wolfers
  3. Smoking Bans, Cigarette Prices and Life Satisfaction By Reto Odermatt; Alois Stutzer
  4. The Cost of Living in China: Implications for Inequality and Poverty By Almås, Ingvild; Johnsen, Åshild Auglænd
  5. Intrahousehold Distribution and Poverty: Evidence from Côte dIvoire By Olivier Bargain; Olivier Donni; Prudence Kwenda
  6. Taxation of human capital and wage inequality: a cross-country analysis By Fatih Guvenen; Burhanettin Kuruscu; Serdar Ozkan
  7. Spatial Income Inequality in Chile and the Rol of Spatial Labor Sorting By Susana Katherine Chacón Espejo; Dusan Paredes Araya
  8. Female Labour Supply, Human Capital and Welfare Reform By Richard Blundell; Monica Costa Dias; Costas Meghir; Jonathan Shaw
  9. Education and lifetime income during demographic transition By Pfeiffer, Friedhelm; Reuß, Karsten
  10. Do extended unemployment benefits lengthen unemployment spells? evidence from recent cycles in the U.S. labor market By Henry S. Farber; Robert G. Valletta
  11. Do Grants to Charities Crowd Out Other Income? Evidence from the UK By James Andreoni; A. Abigail Payne; Sarah Smith
  12. The relationship between EU indicators of persistent and current poverty By Stephen P Jenkins; Philippe Van Kerm

  1. 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
    URL: http://d.repec.org/n?u=RePEc:cep:sticas:/168&r=ltv
  2. By: Betsey Stevenson; Justin Wolfers
    Abstract: Many scholars have argued that once “basic needs” have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs” and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.
    JEL: D6 I3 N3 O1 O4
    Date: 2013–04
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:18992&r=ltv
  3. By: Reto Odermatt; Alois Stutzer (University of Basel)
    Abstract: <p style="margin-bottom:0cm; margin-bottom:.0001pt; line-height: normal; text-autospace:none"><span style="font-family: "Arial","sans-serif"">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.</span>
    Keywords: Smoking bans, cigarette prices, life satisfaction, addiction, self-control, tobacco, control policies
    JEL: D03 D62 I18 K32
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:bsl:wpaper:2013/07&r=ltv
  4. By: Almås, Ingvild (Norwegian School of Economics and Business Administration); Johnsen, Åshild Auglænd (University of Stavanger)
    Abstract: China’s economic development in recent decades has been tremendous, but subject to debate. This paper calculates regional prices that make incomes comparable across both time and space using the Engel-curve approach. Incomes are adjusted using these price indices, providing new estimates of inequality and poverty development. Our findings contrast with measures based on the official consumer price indices (CPIs) – in a time characterized by high economic growth, we find a larger increase in inequality and a more moderate poverty reduction than what is indicated by the CPI-adjusted measures.
    Keywords: China; Poverty; Inequality; CPI
    JEL: D01 E31 F01
    Date: 2013–02–07
    URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2013_006&r=ltv
  5. By: Olivier Bargain; Olivier Donni; Prudence Kwenda (Aix-Marseille Université and IZA; THEMA, Universite de Cergy-Pontoise; University of the Witwatersrand (South Africa))
    Abstract: Poverty measures in developing countries often ignore the distribution of resources within families and the gains from joint consumption. In this paper, we estimate the allocation process and adult economies of scale in households from Côte d'Ivoire using a collective model of household consumption. Identification relies on the observation of adult-specific goods, as in the Rothbarth method, and a joint estimation on couples and singles. Results show that children's shares are small and decline quickly with household size. It results that child poverty, measured on the basis of individual allocations within families, is much larger than in traditional measures ignoring intrahousehold inequality. Adult poverty is smaller because parents are highly compensated by the scale economies due to joint consumption
    Keywords: Collective Model, Engel Curves, Rothbarth Method, Sharing rule, Scale Economies, Equivalence Scales, Indifference Scales.
    JEL: D11 D12 I31 J12
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:ema:worpap:2013-23&r=ltv
  6. By: Fatih Guvenen; Burhanettin Kuruscu; Serdar Ozkan
    Abstract: Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts, focusing on male workers. We construct a life cycle model in which individuals decide each period whether to go to school, work, or stay non-employed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. Consistent with the model, we empirically document that countries with more progressive labor income tax schedules have (i) significantly lower before-tax wage inequality at different points in time and (ii) experienced a smaller rise in wage inequality since the early 1980s. We then study the calibrated model and find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 84% of the difference in inequality at the upper end (log 90-50 differential). In a two-country comparison between the US and Germany, the combination of skill-biased technical change and changing progressivity of tax schedules explains all the difference between the evolution of inequality in these two countries since the early 1980s.
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:fip:fedgfe:2013-20&r=ltv
  7. By: Susana Katherine Chacón Espejo (Master in Regional Sciences - Department of Economics, Universidad Católica del Norte - Chile); Dusan Paredes Araya (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)
    Abstract: The spatial income inequality in Latin American countries is a recent academic affair. Particularly, the case of Chile highlights around the world because it has one of the highest individual and spatial inequality rates. This article analyzes the spatial income inequality in Chile during 1992 2011 evaluating the role of the spatial labor sorting through multilevel models. The findings show that human capital doesn't allocate randomly across the space but its spatial concentration at the biggest urban centers impacts significantly the income inequality between counties. These findings motivate the discussion about spatial dimension of the inequality and suggest that policymakers should consider ways to spread human capital throughout the nation as an alternative to reduce spatial inequality.
    Keywords: Spatial income inequality, spatial labor sorting, human capital, multilevel regression.
    JEL: O15 O18 R12 R23
    Date: 2013–04
    URL: http://d.repec.org/n?u=RePEc:cat:dtecon:dt201315&r=ltv
  8. By: Richard Blundell (University College London); Monica Costa Dias (Institute for Fiscal Studies and CEF-UP at the University of Porto); Costas Meghir (Cowles Foundation, Yale University); Jonathan Shaw (Institute for Fiscal Studies and University College London)
    Abstract: We consider the impact of Tax credits and income support programs on female education choice, employment, hours and human capital accumulation over the life-cycle. We thus analyze both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings we are also able to quantify the insurance value of alternative programs. We find important incentive effects on education choice, and labor supply, with single mothers having the most elastic labor supply. Returns to labour market experience are found to be substantial but only for full-time employment, and especially for women with more than basic formal education. For those with lower education the welfare programs are shown to have substantial insurance value. Based on the model marginal increases to tax credits are preferred to equally costly increases in income support and to tax cuts, except by those in the highest education group.
    Keywords: Female labor supply, Welfare reform, Tax credits, Education choice, Dynamic discrete choice models, Life cycle models
    JEL: H2 H3 J22 J24
    Date: 2013–04
    URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1892&r=ltv
  9. By: Pfeiffer, Friedhelm; Reuß, Karsten
    Abstract: The paper studies the power of educational investments in relation to transfers for fostering lifetime income and for reducing income inequality in Germany. The welfare analysis is based on a model of age-dependent human capital accumulation, featuring dynamic complementarities in skill formation over the life cycle, and calibrated for the period of ongoing demographic transition until 2080. If policy aims at reducing the inequality of lifetime income among people of the same generation, educational investments for people younger than or equal to seventeen do a better job compared to transfers in adulthood. In an intergenerational perspective all cohorts born after 1976 will gain from tax-financed additional investments in preschooleducation introduced in 2011. Additional investments into secondary education will, as a rule, not cause life time income to raise enough to compensate its costs. --
    Keywords: early education,demographic change,inequality over the life span,redistributive policy
    JEL: D63 H55 I20 J11
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:13021&r=ltv
  10. By: Henry S. Farber; Robert G. Valletta
    Abstract: In response to the Great Recession and sustained labor market downturn, the availability of unemployment insurance (UI) benefits was extended to new historical highs in the United States, up to 99 weeks as of late 2009 into 2012. We exploit variation in the timing and size of UI benefit extensions across states to estimate the overall impact of these extensions on unemployment duration, comparing the experience with the prior extension of benefits (up to 72 weeks) during the much milder downturn in the early 2000s. Using monthly matched individual data from the U.S. Current Population Survey (CPS) for the periods 2000-2005 and 2007-2012, we estimate the effects of UI extensions on unemployment transitions and duration. We rely on individual variation in benefit availability based on the duration of unemployment spells and the length of UI benefits available in the state and month, conditional on state economic conditions and individual characteristics. We find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment arising from both sets of UI extensions. The effect on exits and duration is primarily due to a reduction in exits from the labor force rather than a decrease in exits to employment (the job finding rate). The magnitude of the overall effect on exits and duration is similar across the two episodes of benefit extensions. Although the overall effect of UI extensions on exits from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.
    Keywords: Unemployment ; Labor market - United States
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:fip:fedfwp:2013-09&r=ltv
  11. By: James Andreoni; A. Abigail Payne; Sarah Smith
    Abstract: We present new evidence on the effect of grants on charities’ incomes. We employ a novel identification strategy, focusing on charities that applied for lottery grant funding and comparing outcomes for successful and unsuccessful applicants. Overall, grants do not crowd out other income but the effect of grant-funding is not uniform. Looking in more detail we show first, that the positive effects of receiving a grant can persist for several years post-award; second, that grants have a stronger positive effect for small charities; and, third, that grants may have a more positive effect when they provide seed funding.
    JEL: H3 H41 H44
    Date: 2013–04
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:18998&r=ltv
  12. 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
    URL: http://d.repec.org/n?u=RePEc:cep:sticas:/169&r=ltv

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 http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. 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.