nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒06‒09
eight papers chosen by
Maximo Rossi
University of the Republic

  1. The Paradox of Redistribution Revisited: And That It May Rest in Peace? By Marx, Ive; Salanauskaite, Lina; Verbist, Gerlinde
  2. Inequality and Poverty in the United States: Public Policies for Inclusive Growth By Oliver Denk; Robert Hagemann; Patrick Lenain; Valentin Somma
  3. How Public Pension affects Elderly Labor Supply and Well-being: Evidence from India By Neeraj Kaushal
  4. Money or kindergarten? Distributive effects of cash versus in-kind family transfers for young children By Michael Förster; Gerlinde Verbist
  5. Intertemporal poverty comparisons By Florent Bresson; Jean-Yves Duclos
  6. Female labour supply, human capital and welfare reform By Richard Blundell; Monica Costa Dias; Costas Meghir; Jonathan Shaw
  7. The Impact of Wage Subsidies on Jobseekers' Outcomes and Firm Employment By Sarah Crichton; Maré, David C
  8. Earned income tax credits, unemployment benefits and wages: empirical evidence from Sweden By Bennmarker, Helge; Calmfors, Lars; Larsson Seim, Anna

  1. By: Marx, Ive (University of Antwerp); Salanauskaite, Lina (University of Antwerp); Verbist, Gerlinde (University of Antwerp)
    Abstract: There is a long-standing controversy over the question of whether targeting social transfers towards the bottom part of the income distribution actually enhances or weakens their redistributive impact. Korpi and Palme have influentially claimed that "the more we target benefits at the poor, the less likely we are to reduce poverty and inequality". The basic empirical underpinning of this claim is a strong inverse relationship at the country level between social transfer targeting and redistributive impact. We show that this no longer holds as a robust empirical generalisation. The relationship between the extent of targeting and redistributive impact over a broad set of empirical specifications, country selections and data sources has in fact become a very weak one. For what it matters, targeting tends to be associated with higher levels of redistribution, especially when overall effort in terms of spending is high. We try to make substantive sense of this breakdown of the originally established relationship by focusing on two questions: first, what has changed in the countries originally included in the study and, second, what is different about the countries now additionally included in the analysis?
    Keywords: targeting, tax benefit policies, redistribution, inequality
    JEL: H1 H2 H53
    Date: 2013–05
  2. By: Oliver Denk; Robert Hagemann; Patrick Lenain; Valentin Somma
    Abstract: Income inequality and relative poverty in the United States are among the highest in the OECD and have substantially increased over the past decades. These developments have been associated with a number of other worrying statistics, including low intergenerational social mobility and weak real income growth for many households. A more inclusive pattern of growth would require less pronounced gaps in outcomes and opportunities across social groups and a broader sharing of the benefits of growth. The present paper analyses the causes of US income inequality and relative poverty in an OECD context, especially the role of the tax-and-transfer system, and suggests public policies to promote inclusive growth. To a significant degree, high income inequality is attributable to the large dispersion of earned income, which should be addressed by reforming education, so as to provide disadvantaged students with the skills needed to fully realise their potential. In addition, taxes and transfers contribute less to income redistribution than in other OECD countries. If well designed, reforms that promote inclusive growth could also help reduce the market distortions resulting from the current tax-and-transfer system. In particular, phasing out personal and corporate tax expenditures that disproportionately benefit high earners would lower income inequality and improve resource allocation. As well, social transfers could be more effective in alleviating poverty through better targeting of the truly needy while reducing administrative complexity.<P>Inégalités et pauvreté aux États-Unis : Des politiques publiques en faveur d'une croissance inclusive<BR>Les inégalités de revenus et la pauvreté relative aux États-Unis sont parmi les plus élevées de l’OCDE et se sont considérablement accentuées au cours des dernières décennies. Ces phénomènes se doublent d’un certain nombre d’autres données préoccupantes, notamment la faiblesse de la mobilité sociale intergénérationnelle et l’évolution du revenu réel de nombreux ménages. Une structure de croissance plus inclusive impliquerait de combler les écarts dans la situation et les opportunités offertes aux différents groupes sociaux et un plus large partage des bénéfices de la croissance. La présente étude passe en revue les causes des inégalités de revenus et de la pauvreté relative aux États- Unis par rapport aux pays de l’OCDE, notamment le rôle du système de prélèvements et de prestations, et propose des mesures pour promouvoir une croissance mieux partagée. L’ampleur des inégalités de revenus s’explique dans une large mesure par la forte dispersion des revenus du travail, à laquelle il faudrait s’attaquer en réformant l’éducation pour que les étudiants issus de milieux défavorisés puissent acquérir les compétences dont ils ont besoin pour réaliser pleinement leur potentiel. En outre, le système de prélèvements et de prestations contribue moins à la redistribution du revenu que dans d’autres pays de l’OCDE. À condition d’être bien étudiées, des réformes favorisant une croissance inclusive pourraient également aider à réduire les distorsions de marché induites par le système actuel de prélèvements et de prestations. En particulier, la suppression progressive des dépenses fiscales en faveur des particuliers et des entreprises, qui favorisent les hauts revenus de manière disproportionnée, aurait pour effet d’atténuer les inégalités de revenus et d’améliorer l’allocation des ressources. De même, les transferts sociaux pourraient être employés plus efficacement à faire reculer la pauvreté si l’on ciblait mieux les bénéficiaires réellement nécessiteux tout en réduisant la complexité administrative des programmes.
    Keywords: tax system, United States, capital taxation, poverty, income inequality, tax expenditures, social welfare system, inclusive growth, education systems, income redistribution, transfer system, social insurance, means-tested transfers, États-Unis, dépense fiscale, pauvreté, système éducatif, inégalité des revenus, imposition du capital, système fiscal, croissance inclusive, redistribution du revenu, bien-être social, système de transferts, assurance sociale, transferts sous condition de ressource
    JEL: D31 D63 H2 H5 H7 I3
    Date: 2013–05–27
  3. By: Neeraj Kaushal
    Abstract: We study the effect of a recent expansion in India’s National Old Age Pension Scheme on elderly well-being. Estimates suggest that public pension has a modestly negative effect on the employment of elderly/near elderly men with a primary or lower education but no effect of the employment of similar women. Pension raised family expenditures, lowering poverty, and the effect was smaller on families headed by illiterate persons suggesting lower pension coverage of this most disadvantaged group. Further, households spent most of the pension income on medical care and education. We find some weak evidence that pension raised longevity.
    JEL: I3
    Date: 2013–05
  4. By: Michael Förster; Gerlinde Verbist
    Abstract: Public support to families with pre-school children can be in the form of cash benefits (e.g. child allowances) or of “in-kind” support (e.g. care services such as kindergartens). The mix of these support measures varies greatly across OECD countries, from a cash / in-kind composition of 10%/90% to 80%/20%. This paper imputes the value of services into an “extended” household income and compares the resulting distributive patterns and the redistributive effect of these two strands of family policies. On average, cash and in-kind transfers each constitute 7 – 8% of the incomes of families with young children. Both instruments are redistributive. Cash transfers reduce child poverty by one third, with the estimated impacts in Austria, Ireland, Sweden, Hungary and Finland performing above average. When services are accounted for, child poverty falls by one quarter and poverty among children enrolled in childcare is more than halved. This reduction is highest in Belgium, France, Hungary, Iceland and Sweden. The paper also presents simulations in which cash transfers are replaced by services, and vice versa, to provide a better understanding of these effects. The results from these simulations do not allow us to draw “generalised” conclusions as to which of the two instruments fares “better”. However, in a majority of countries, if all in-kind spending on childcare were transformed into cash benefits, a lump-sum approach (i.e. a basic income supplement to all children) would be more effective in reducing poverty than an up-rating of present child benefits. The analysis in this paper is exploratory in that it considers only the first-round distributive effects of the policy instruments and does not capture additional indirect and longer-term redistributive effects, in particular possible labour supply effects and their potential impact on household incomes. The hypothetical simulations constitute extreme cases in that the entire volume of early childhood education and care (ECEC) services is replaced by cash transfers, and vice versa. The simulations nevertheless provide useful benchmarks for estimating potential losses or gains in redistribution when key elements of the early childhood policy mix are to be changed.
    Keywords: child poverty, income distribution, cash and in-kind transfers, family policy
    JEL: D31 H40 I38 J13
    Date: 2013–04
  5. By: Florent Bresson (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans); Jean-Yves Duclos (CIRPEE - Université de Laval, Department of Economics - Université de Laval)
    Abstract: The paper deals with poverty orderings when the value of multidimensional attributes can be compared on a same scale, such as with income of different types or from different members of the same household. The dominance criteria extend the power of earlier multidimensional dominance tests (see Duclos et al. 2006) by making (reasonable) assumptions on the relative marginal contributions of each dimensional attribute to poverty. The paper focuses on an important special case of this, that is comparisons of poverty over time. In contrast to earlier work on intertemporal poverty comparisons, this paper proposes procedures to check for whether poverty comparisons can be made robust to wide classes of aggregation procedures and to broad areas of intertemporal poverty frontiers.
    Keywords: Poverty comparisons, intertemporal well-being, stochastic dominance, multidimensional poverty, intra-household inequalities.
    Date: 2012–09–12
  6. By: Richard Blundell (Institute for Fiscal Studies and University College London); Monica Costa Dias (Institute for Fiscal Studies and Institute for Fiscal Studies); Costas Meghir (Institute for Fiscal Studies and Yale University); Jonathan Shaw (Institute for Fiscal Studies)
    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 analyse both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings, we quantify the insurance value of alternative programs. We find important incentive effects on education choice and labour supply, with single mothers having the most elastic labour 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.
    Date: 2013–05
  7. By: Sarah Crichton (Labour and Immigration Research Centre, Ministry of Business, Innovation and Employment); Maré, David C (Motu Economic and Public Policy Research)
    Abstract: The study examines the impact of wage subsidies on assisted jobseekers and on the firms that employ them, using propensity matching methods. Overall we find that starting a subsidised job leads to significant employment and earning benefits for assisted jobseekers over several years. Subsidised workers are disproportionately hired into expanding firms, though we cannot determine whether the expansion would have occurred in the absence of the subsidy.
    Keywords: wage subsidy, active labour market policies, propensity matching
    JEL: J08 J38 J64
    Date: 2013–05
  8. By: Bennmarker, Helge (IFAU - Institute for Evaluation of Labour Market and Education Policy); Calmfors, Lars (Institute for International Economics Study, Stockholm University); Larsson Seim, Anna (Department of Economics, Stockholm University)
    Abstract: Although there is a large literature on employment effects of earned income tax credits (EITCs) and unemployment benefits, less is known about wage effects. In our model the impact is via the net (after-tax) replacement rate. Using a panel of individuals from Sweden, we find a positive relationship between the net replacement rate and wages with semi-elasticities in the range 0.2-0.4. This implies that a one percent reduction in the unemployment benefit level or a one percent increase in the net-of-tax rate is associated with a fall in the before-tax wage of 0.1-0.2 per cent. EITCs and unemployment benefit reductions are thus likely to induce wage moderation.
    Keywords: Earned income tax credit; unemployment benefits; wage formation
    JEL: H24 J31 J38
    Date: 2013–05–10

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