nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒07‒15
sixteen papers chosen by
Maximo Rossi
University of the Republic

  1. Economic Consequences of Mispredicting Utility By Bruno S. Frey; Alois Stutzer
  2. Measuring Top Incomes Using Tax Record Data: A Cautionary Tale from Australia By Richard V. Burkhauser; Markus H. Hahn; Roger Wilkins
  3. Changes in Wage Distributions of Wage Earners in Canada: 2000-2005 By Kao-Lee Liaw; Lei Xu
  4. Heterogeneous Self-employment and Subjective Well-Being. Evidence from Latin America By Cortés Aguilar Alexandra; Teresa Garcia-Muñoz; Ana I. Moro Egido
  5. Youth Unemployment in Europe: What to Do about It? By Eichhorst, Werner; Hinte, Holger; Rinne, Ulf
  6. Trust, Growth and Well-being: New Evidence and Policy Implications By Algan, Yann; Cahuc, Pierre
  7. Indicative and Updated Estimates of the Collective Bargaining Premium in Germany By Addison, John T.; Teixeira, Paulino; Evers, Katalin; Bellmann, Lutz
  8. The Idea of Antipoverty Policy By Martin Ravallion
  9. Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable Giving By James Andreoni; A. Abigail Payne; Justin Smith; David Karp
  10. Job polarization and jobless recoveries in Japan: Evidence from 1984 to 2010 By Yosuke Furukawa; Hiroki Toyoda
  11. Labor Market Returns to Early Childhood Stimulation: a 20-year Followup to an Experimental Intervention in Jamaica By Paul Gertler; James Heckman; Rodrigo Pinto; Arianna Zanolini; Christel Vermeersch; Susan Walker; Susan M. Chang; Sally Grantham-McGregor
  12. Winning Big But Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health By Bénédicte Apouey; Andrew E. Clark
  13. Cyclical unemployment, structural unemployment By Peter Diamond
  14. Revealed distributional preferences: Individuals vs. teams By Loukas Balafoutas; Rudolf Kerschbamer; Martin Kocher; Matthias Sutter
  15. Did Age Discrimination Protections Help Older Workers Weather the Great Recession? By David Neumark; Patrick Button
  16. Earnings and labour market volatility in Britain By Cappellari, Lorenzo; Jenkins, Stephen P.

  1. By: Bruno S. Frey; Alois Stutzer
    Abstract: In a simple conceptual framework, we organize a multitude of phenomena related to the (mis)prediction of utility. Consequences in terms of distorted choices and lower wellbeing emerge if people have to trade-off between alternatives that are characterized by attributes satisfying extrinsic desires and alternatives serving intrinsic needs. Thereby the neglect of asymmetries in adaptation is proposed as an important driver. The theoretical analysis is consistent with econometric evidence on commuting choice using data on subjective wellbeing. People show substantial adaptation to a higher labor income but not to commuting. This may account for the finding that people are not compensated for the burden of commuting.
    Keywords: Adaptation, extrinsic/intrinsic attributes, individual decision-making, misprediction, subjective well-being, time allocation
    JEL: A12 D11 D12 D84 I31 J22
    Date: 2013
  2. By: Richard V. Burkhauser (Department of Policy Analysis and Management, Cornell University; and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Markus H. Hahn (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Atkinson, Piketty, and Saez (2011) survey an important new literature using income taxbased data to measure the share of income held by top income groups. But changes in tax legislation that expand the tax base to include income sources (e.g. capital gains, dividends, etc.) disproportionately held by these groups will conflate such an expansion with an increase in the share of income they hold. We provide a cautionary tale from Australia of how comprehensive tax reform legislation in 1985 substantially altered Australian top income series, especially those that do not separate taxable realized capital gains from other taxable income.
    Keywords: Top incomes, income inequality, personal income, tax-based data
    JEL: D3 H2
    Date: 2013–06
  3. By: Kao-Lee Liaw; Lei Xu
    Abstract: This research attempts to figure out whether the wage distributions of Canadian wage earners have been moving towards or away from the flowing three ideals in the early part of the 21th century. First, there be a pattern of wage increase that is shared by a large majority of wage earners. Second, the historical gender inequality in wage be reduced. Third, there be a decrease in wage inequality for both males and females. We use the long-form records of the 2001 and 2006 population censuses to carry out our investigation. A nice feature of these records is that the values of income variables are not top-coded so that the true averages will not be understated and good insights into the situations of those with extremely high incomes can be obtained. We are disappointed by finding that the Canadian economy mostly drifted away from our three ideals, with the main exception being that for female wage earners the improvement in wage was fortunately shared by a large majority. We believe that an important reason for our disappointing finding is the progressive entrenchment of market fundamentalism in Canada. Incidentally, we have discovered that Statistics Canada did a good job in designing the 2006 census questionnaire so that the annoying choppiness that occurred to the 2000 wage distributions vanished in the 2005 wage distributions.
    Keywords: male and female wage distributions, gender inequality, wage inequality, Canada, long-form census records, market fundamentalism
    JEL: D31 H31 H24
    Date: 2013–06
  4. By: Cortés Aguilar Alexandra (Escuela de Economía y Administración, Universidad Industrial de Santander.); Teresa Garcia-Muñoz (Globe and Universidad de Granada.); Ana I. Moro Egido (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper analyzes the relationship between labor status and individual satisfaction in Latin America. Existing evidence for developed countries shows that the self-employed report higher job satisfaction than the employed. The evidence, however, is less conclusive in terms of lifesatisfaction. Moreover, for Latin American countries, the evidence shows that self-employed individuals report lower life-satisfaction than employed individuals do. To clarify the effect of selfemployment on satisfaction, we use the Latinobarómetro survey 2007 for eighteen Latin American and Caribbean countries, considering the category self-employment as a heterogeneous category. Additionally, we control for the distinction between necessity and opportunity self-employed. Contrary to existing evidence, we find that not all self-employed individuals are more satisfied than employed individuals. Specifically, we find evidence revealing that, compared to workers in paid employment (i) precarious self-employed workers are as satisfied as the employed with their life but less with job and household income; (ii) self-employed professionals are more satisfied than the employed only with their incomes; (iii) business owners are more satisfied with their lives, income and job; and (iv) self-employed famers and fisherman are less satisfied with their jobs and income.
    Keywords: Labor informality, voluntary vs. involuntary self-employment,life and job satisfaction
    JEL: C25 I31 J24 J28 O17
    Date: 2013–06–25
  5. By: Eichhorst, Werner (IZA); Hinte, Holger (IZA); Rinne, Ulf (IZA)
    Abstract: Youth unemployment has become a severe economic and societal problem in many European countries. This paper gives an overview of the current situation and assesses different policy options. It emphasizes the role of stronger intra-EU mobility of young workers, policies to make vocational training systems more effective and to adjust employment protection as well as activating labor market policies. However, short-term remedies are not available, despite the fact that the EU has announced massive European initiatives. Rather, European countries should take the opportunity of the crisis to implement forward-looking structural reforms.
    Keywords: youth unemployment, vocational training, Europe, fixed-term contracts
    JEL: J24 J64 J13
    Date: 2013–07
  6. By: Algan, Yann (Sciences Po, Paris); Cahuc, Pierre (Ecole Polytechnique, Paris)
    Abstract: This survey reviews the recent research on trust, institutions and growth. It discusses the various measures of trust and documents the substantial heterogeneity of trust across space and time. The conceptual mechanisms and the methods employed to identify the causal impact of trust on economic performance are reviewed. We document the mechanisms of interactions between trust and economic development in the realms of finance, innovation, the organization of firms, the labor market and the product market. The last part reviews recent progress to identify how institutions and policies can affect trust and well-being.
    Keywords: trust, growth, institutions, well-being
    JEL: O11 O43 Z13
    Date: 2013–06
  7. By: Addison, John T. (University of South Carolina); Teixeira, Paulino (University of Coimbra); Evers, Katalin (Institute for Employment Research (IAB), Nuremberg); Bellmann, Lutz (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This study provides updated evidence on the union contract differential in Germany using establishment-wide wage data and two estimation strategies. It provides pairwise estimates of the union differential based on separate samples of collective bargaining leavers and joiners vis-à-vis the corresponding counterfactual groups. It is reported that average wages increase by 3 to 3.5 percent after entering into a collective agreement and decrease by 3 to 4 percent after abandoning a collective agreement. Excluding establishments that experience mass layoffs little influences these net findings, although such establishments record wage losses – statistically insignificant for joiners but up to 10 percent in the case of leavers, as compared with the counterfactuals. The backdrop to these new indicative estimates, which are properly conditioned on establishment size and industry affiliation, inter al., is one of wage stagnation and continuing union decline.
    Keywords: average wages, union contract premium, collective bargaining transitions, difference-in-differences, matching, Germany
    JEL: J31 J51
    Date: 2013–06
  8. By: Martin Ravallion
    Abstract: How did we come to think that eliminating poverty is a legitimate goal for public policy? What types of policies have emerged in the hope of attaining that goal? The last 200 years have witnessed a dramatic change in thinking about poverty. Mainstream economic thinking in the 18th century held that poverty was necessary and even desirable for a country’s economic success. Today, poverty is more often viewed as a constraint on that success. In short, poverty switched from being seen as a social good to a social bad. This change in thinking, and the accompanying progress in knowledge, has greatly influenced public action, with heightened emphasis on the role of antipoverty policy in sustainable promotion from poverty, as well as protection. Development strategies today typically strive for a virtuous cycle of growth with equity and a range of policy interventions have emerged that aim to help assure that outcome. An expanding body of knowledge has taught us about how effective those interventions are in specific settings, although many knowledge gaps remain.
    JEL: B1 B2 I38
    Date: 2013–07
  9. By: James Andreoni; A. Abigail Payne; Justin Smith; David Karp
    Abstract: We explore the effects of local ethnic and religious diversity on private donations to charity. We find that an increase in religious or ethnic diversity decreases donations. The ethnicity effect is driven by non-minorities and blacks, and is strongest in high income, low education areas. The religious effect is driven by Catholics, and is concentrated in high income, high education areas. We find no evidence that diversity affects the fraction of households that donate. Our results provide a parallel to the negative effects of diversity on publicly provided goods, and opens new challenges for fundraisers and policy makers.
    JEL: H41 R23 J11
    Date: 2013–07
  10. By: Yosuke Furukawa (Graduate School of Economics, Kyoto University); Hiroki Toyoda (Graduate School of Economics, Kyoto University)
    Abstract: This study presents evidence for the existence of job polarization in Japan, identifies its effects across four age cohorts, and shows its relationship to Japan's business cycles during 1984-2010. The findings indicate that middle-skilled occupations decreased most sharply among the youngest workers. Our examination of the relationship between occupational categories and the business cycles demonstrates that job polarization is cyclical rather than gradual. Particularly, only employment in middle-skilled occupations did not recover after recessions. This finding underlies Japan's jobless recovery.
    Keywords: Jobless recoveries, job polarization, business cycles
    JEL: E24 E32 J23 J24
    Date: 2013–06
  11. By: Paul Gertler; James Heckman; Rodrigo Pinto; Arianna Zanolini; Christel Vermeersch; Susan Walker; Susan M. Chang; Sally Grantham-McGregor
    Abstract: We find large effects on the earnings of participants from a randomized intervention that gave psychosocial stimulation to stunted Jamaican toddlers living in poverty. The intervention consisted of one-hour weekly visits from community Jamaican health workers over a 2-year period that taught parenting skills and encouraged mothers to interact and play with their children in ways that would develop their children's cognitive and personality skills. We re-interviewed the study participants 20 years after the intervention. Stimulation increased the average earnings of participants by 42 percent. Treatment group earnings caught up to the earnings of a matched non-stunted comparison group. These findings show that psychosocial stimulation early in childhood in disadvantaged settings can have substantial effects on labor market outcomes and reduce later life inequality.
    JEL: I10 I20 I25 J20 O15
    Date: 2013–06
  12. By: Bénédicte Apouey; Andrew E. Clark
    Abstract: We use British panel data to determine the exogenous impact of income on a number of individual health outcomes: general health status, mental health, physical health problems, and health behaviors (drinking and smoking). Lottery winnings allow us to make causal statements regarding the effect of income on health, as the amount won by winners is largely exogenous. Positive income shocks have no significant effect on self-assessed overall health, but a large positive effect on mental health. This result seems paradoxical on two levels. First, there is a well-known gradient in health status in cross-section data, and, second, general health should partly reflect mental health, so that we may expect both variables to move in the same direction. We propose a solution to the first apparent paradox by underlining the endogeneity of income. For the second, we show that lottery winnings are also associated with more smoking and social drinking. General health will reflect both mental health and the effect of these behaviors, and so may not improve following a positive income shock.
    Keywords: Income, self-assessed health, mental health, smoking, drinking
    JEL: D1 I1 I3
    Date: 2013–07
  13. By: Peter Diamond
    Abstract: Whenever unemployment stays high for an extended period, it is common to see analyses, statements, and rebuttals about the extent to which the high unemployment is structural, not cyclical. This essay views the Beveridge curve pattern of unemployment and vacancy rates and the related matching function as proxies for the functioning of the labor market and explores issues in that proxy relationship that complicate such analyses. Also discussed is the concept of mismatch.
    Keywords: Unemployment ; Structural unemployment
    Date: 2013
  14. By: Loukas Balafoutas; Rudolf Kerschbamer; Martin Kocher; Matthias Sutter
    Abstract: We compare experimentally the revealed distributional preferences of individuals and teams in allocation tasks. We find that teams are significantly more benevolent than individuals in the domain of disadvantageous inequality while the benevolence in the domain of advantageous inequality is similar across decision makers. A consequence for the frequency of preference types is that while a substantial fraction of individuals is classified as inequality averse, this type disappears completely in teams. Spiteful types are markedly more frequent among individuals than among teams. On the other hand, by far more teams than individuals are classified as efficiency lovers.
    Keywords: Distributional Preferences, Social Preferences, Team Decisions, Individual Decisions, Stability of Preferences, Behavioral Economics, Experimental Economics
    JEL: C91 C92 D03 D63 D64
    Date: 2013–06
  15. By: David Neumark; Patrick Button
    Abstract: We examine whether stronger age discrimination laws at the state level moderated the impact of the Great Recession on older workers. We use a difference-in-difference-in-differences strategy to compare older workers in states with stronger and weaker laws, to their prime-age counterparts, both before, during, and after the Great Recession. We find very little evidence that stronger age discrimination protections helped older workers weather the Great Recession, relative to younger workers. The evidence sometimes points in the opposite direction, with stronger state age discrimination protections associated with more adverse effects of the Great Recession on older workers. We suggest that this may be because stronger age discrimination laws protect older workers in normal times, but during an experience like the Great Recession severe labor market disruptions make it difficult to discern discrimination, weakening the effects of stronger state age discrimination protections.
    JEL: J14 J26 J71 J78
    Date: 2013–07
  16. By: Cappellari, Lorenzo; Jenkins, Stephen P.
    Abstract: We provide new evidence about earnings and labour market volatility in Britain over the period 19922008, and for women as well as men. (Most research about volatility refers to earnings volatility for US men.) We show that earnings volatility declined slightly for both men and women over the period but the changes are not statistically significant. When we look at labour market volatility, i.e. including in the calculations individuals with zero earnings as well as employees with positive earnings, there is a marked and statistically significant decline for both women and men, with the fall greater for men. Using variance decompositions, we show that the fall in labour market volatility is largely accounted for by changes in employment attachment rates. Labour market volatility trends in Britain, and what contributes to them, differ from their US counterparts in several respects.
    Date: 2013–07–10

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