nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒05‒22
thirteen papers chosen by
Maximo Rossi
University of the Republic

  1. Exiting Belindia? Lesson from the Recent Decline in Income Inequality in Brazil By Luis F. Lopez-Calva; Sonia Rocha
  2. The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia By Nattavudh Powdthavee; Warn N. Lekfuangfu; Mark Wooden
  3. A Gender (R)evolution in the Making? Expanding Women's Economic Opportunities in Central America : A Decade in Review By World Bank
  4. Better Jobs in Central America : The Role of Human Capital By World Bank
  5. From Low Income, High Poverty to High-Income, No Poverty? An Optimistic View on the Long-Run Evolution of Poverty in Indonesia By International Poverty Lines, 1984–2030 By Peter Edward; Andy Sumner
  6. Has Job Polarization Squeezed the Middle Class? Evidence from the Allocation of Talents By Michael J. Boehm
  7. Education Policy and Intergenerational Transfers in Equilibrium By Brant Abbott; Giovanni Gallipoli; Costas Meghir; Giovanni L. Violante
  8. Arab Republic of Egypt - Inequality of Opportunity in Access to Basic Services among Egyptian Children By World Bank
  10. Switzerland - Using Public Transfers to Reduce Extreme Poverty By World Bank
  11. Self investments of adolescents and their cognitive development By D. Del Boca; C. Monfardini; C. Nicoletti
  12. Unemployment in the Great Recession By Christopher A. Pissarides
  13. Understanding the causes of income inequality in complex economic systems By Brendan Markey-Towler; John Foster

  1. By: Luis F. Lopez-Calva; Sonia Rocha
    Keywords: Poverty Reduction - Poverty Impact Evaluation Social Protections and Labor - Labor Policies Poverty Reduction - Inequality Poverty Reduction - Rural Poverty Reduction Macroeconomics and Economic Growth - Income
    Date: 2012
  2. By: Nattavudh Powdthavee (Centre for Economic Performance, London School of Economics: and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Warn N. Lekfuangfu (University College London); Mark Wooden (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Many economists and educators favour public support for education on the premise that education imporves the overall well-being of citizens. However, little is known about the casual pathwasy through which education shapes people's subjective well-being (SWB). This paper explores the direct and indirect well-being effects of extra schooling induced through compulsory schooling laws in Australia. We find the net effect of schooling on later SWB to be positive, though this effect is larger and statistically more robust for men than for women. We then show that the compulsory schooling effect on male's SWB is indirect and is mediated through income.
    Keywords: Schooling, indirect effect, well-being, mental health, windfall income, HILDA survey
    JEL: I20 I32 C36
    Date: 2013–04
  3. By: World Bank
    Keywords: Gender - Gender and Development Social Protections and Labor - Labor Markets Health, Nutrition and Population - Population Policies Social Protections and Labor - Labor Policies Education - Primary Education
    Date: 2012–01
  4. By: World Bank
    Keywords: Social Protections and Labor - Labor Markets Health, Nutrition and Population - Population Policies Social Protections and Labor - Labor Policies Tertiary Education Access & Equity in Basic Education Education
    Date: 2012–05
  5. By: Peter Edward (Newcastle University Business School); Andy Sumner (King's International Development Institute, King's College London)
    Abstract: Indonesia has achieved well-documented and drastic improvements in average incomes and in the reduction of poverty. Much research has discussed this progress. This paper adds to the literature with a new perspective. We discuss poverty in Indonesia using the international poverty lines ($1.25, $2 and we add $10/day). We generate historic estimates of poverty and make projections based on various growth and inequality trends. We find that Indonesia has the potential to attain high-income country status in a decade or so and at the same time, the potential to end $1.25/day and $2/day poverty but this would require favourable changes in distribution. Looking ahead, the end of poverty in Indonesia may be accompanied by a large proportion of the population vulnerable to poverty for some considerable time to come, suggesting public policy priorities may need to balance insurance and risk management mechanisms with more ‘traditional’ poverty policy. We also find, in contrast to national poverty line analysis, that poverty by the various international poverty lines, is considerably more urbanised, with more than half the poor residing in urban areas currently and the urban proportion of total poverty likely to rise further in the years ahead.
    Keywords: Indonesia, Poverty, Inequality
    JEL: I32 D63
    Date: 2013–05
  6. By: Michael J. Boehm
    Abstract: Over the last two decades, earnings in the United States increased at the top and at the bottom of the wage distribution but not in the middle - the intensely debated middle class squeeze. At the same time there was a substantial decline of employment in middle-skill production and clerical occupations - so-called job polarization. I study whether job polarization has caused the middle class squeeze. So far little evidence exists about this because the endogenous selection of skills into occupations prevents credible identification of polarization's effect on wages. I solve the selection-bias problem by studying the changes in returns to occupation-specific skills instead of the changes in occupational wages using data over the two cohorts of the National Longitudinal Study of Youth (NLSY). This data features multidimensional and pre-determined test scores, which predict occupational sorting and thus measure relative occupation-specific skills. My estimation equations are derived from the Roy (1951) model over two cross-sections with job polarization amounting to a shift in the occupation-specific skill prices. In line with polarization, I find that a one percentage point higher propensity to enter high- (low-) as opposed to middle-skill occupations is associated with a .29 (.70) percent increase in expected wages over time. I then compute a counterfactual wage distribution using my estimates of the shifts in occupation-specific skill prices and show that it matches the increase at the top of the wage distribution but fails to explain the increase at the bottom. Thus, despite the strong association of job polarization with changes in the returns to occupation-specific skills, there remains room for alternative (e.g. policy related) explanations about the increase in the lower part of the wage distribution.
    Keywords: Job polarization, wage inequality, talent allocation, Roy model
    JEL: J21 J23 J24 J31
    Date: 2013–05
  7. By: Brant Abbott (University of British Columbia, Canada); Giovanni Gallipoli (University of British Columbia); Costas Meghir (Yale University and NBER, USA; IFS, UK); Giovanni L. Violante (New York University and NBER, USA; CEPR, UK)
    Abstract: This paper compares partial and general equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Altruistic parents make inter vivos transfers to their children. Labor supply during college, government grants and loans, as well as private loans, complement parental transfers as sources of funding for college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by two percentage points in the long-run. Any further relaxation of government-sponsored loan limits would have no salient effects. The short-run partial equilibrium effects of expanding tuition grants (especially their need-based component) are sizeable. However, long-run general equilibrium effects are 3-4 times smaller. Every additional dollar of government grants crowds out 20-30 cents of parental transfers.
    Keywords: Education, Financial Aid, Inter vivos Transfers, Credit Constraints, Equilibrium
    JEL: E24 I22 J23 J24
    Date: 2013–02
  8. By: World Bank
    Keywords: Early Child and Children's Health Health, Nutrition and Population - Population Policies Health, Nutrition and Population - Adolescent Health Health Monitoring and Evaluation Education - Primary Education
    Date: 2012–06
  9. By: Elizabeth Ananat; Shihe Fu; Stephen L. Ross
    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 isa 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: 2013–04
  10. By: World Bank
    Keywords: Social Protections and Labor - Safety Nets and Transfers Health, Nutrition and Population - Population Policies Poverty Reduction - Rural Poverty Reduction Macroeconomics and Economic Growth - Regional Economic Development
    Date: 2012–11
  11. By: D. Del Boca; C. Monfardini; C. Nicoletti
    Abstract: While a large literature has focused on the impact of parental investments on child cognitive development, very little is known about the role of child's own in- vestments. Information on how children invest their time separately from parents is probably little informative for babies and toddlers, but it becomes more and more important in later stages of life, such as adolescence, when children start to take decisions independently. By using the Child Development Supplement of the PSID (Panel Study of Income Dynamics), we model the production of cognitive ability of adolescents and extend the set of inputs to include the child's own time investments. Looking at investments during adolescence, we find that child's investments matter more than mother's investments. On the contrary, looking at investments during childhood, it is the mother's investments that are more important. Our results are obtained accounting for potential unobserved child's and family's endowments and are robust across several specifications and samples, e.g. considering and not considering father's investments and non-intact families.
    Keywords: time-use, cognitive ability, child development, adolescence
    JEL: J13 D1
    Date: 2012
  12. By: Christopher A. Pissarides
    Abstract: This paper studies the responses of unemployment in Germany, the United States and Britain to the Great Recession of 2008-09 by making use of Beveridge curve analysis, and in the entire OECD with other techniques. It is shown that Britain suffered from recession but no structural problems; the United States suffered from structural unemployment during the recovery; Germany exhibited a much better performance both during and after the recession. The rise in OECD unemployment is broken down into parts due to aggregate activity, the construction sector and a residual attributed to policies and institutions, which is used to reach conclusions about policy.
    Keywords: Unemployment, Great Recession, vacancies, Beveridge curve, construction sector, policies and institutions
    JEL: E24 J6
    Date: 2013–05
  13. By: Brendan Markey-Towler (School of Economics, The University of Queensland); John Foster (School of Economics, The University of Queensland)
    Abstract: We suggest in this paper that inequality in economic systems can be profitably analysed using complex systems analysis. We explain how we can capture, analytically, complexity in an economic system by applying graph theory in networks. We then develop a highly stylised theoretical model of how income inequality arises naturally due to the fact that a skewed income distribution necessarily arises from “preferential attachment†in a complex economic system. We characterise this process, both in the market system broadly defined and, specifically, within a firm. It is argued that such a complex systems approach (despite being vastly simplified here) provides a superior basis for understanding income inequality compared to standard economic analysis.
    Date: 2013–05–10

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