nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒08‒23
eleven papers chosen by
Maximo Rossi
University of the Republic

  1. Austria's Well-being Goes Beyond GDP By Oliver Röhn; Rauf Gönenç; Christian Beer; Romina Boarini
  2. Education policy and intergenerational transfers in equilibrium By Brant Abbott; Giovanni Gallipoli; Costas Meghir; Gianluca Violante
  3. Inequality (un)perceived: The emergence of a discourse on economic inequality from the Middle Ages to the Age of Revolutions By Guido Alfani; Elena Roberta Frigeni
  4. Two-Sample Nonparametric Estimation of Intergenerational Income Mobility By Irina Murtazashvil; Di Liu; Artem Prokhorov
  5. Growth still is good for the poor By Dollar, David; Kleineberg, Tatjana; Kraay, Aart
  6. Preferences for Redistribution and Perception of Fairness: An Experimental Study By Ruben Durante; Louis Putterman; Joël van der Weele
  7. Mismatch, sorting and wage dynamics By Jeremy Lise; Costas Meghir; Jean-Marc Robin
  8. Responding to Key Well-being Challenges in Austria By Rauf Gönenç; Oliver Röhn; Christian Beer; Andreas Wörgötter
  9. Taxation and the Allocation of Talent By Eric Weyl; Charles Nathanson; Ben Lockwood
  10. Benefit incidence with incentive effects, measurement errors and latent heterogeneity By Ravallion, Martin; Chen, Shaohua
  11. Keeping up with the Joneses, the Smiths and the Tanakas: Optimal Taxation with Social Comparisons in a Multi-Country Economy By Aronsson, Thomas; Johansson-Stenman, Olof

  1. By: Oliver Röhn; Rauf Gönenç; Christian Beer; Romina Boarini
    Abstract: Austria enjoys strong material well-being and high quality of life. Steady convergence with top GDP per capita levels translated into decisive improvements in household disposable incomes while significant redistribution has ensured low income inequality and poverty. This has been combined with gains in leisure time, especially time spent in retirement, low unemployment, high environmental standards, rising life expectancy, a well-functioning social support network and high subjective well-being. This performance was achieved with a unique combination of supportive conditions for a dynamic business sector, priority for family based care, a wide supply of public services, and a well-functioning social partnership. Particularly remarkable for a small open economy has been the degree of stability, which may have contributed to Austria’s high quality of life. However, a number of weaknesses also exist. Older, unskilled and in particular people with migrant background, have lower labour market attachments. Outcomes in education and health care are subject to inequalities. Family services are still mainly carried out by women, who have closed the gap in education attainment with men but face tensions between work and family responsibilities and a high wage gap. The gaps experienced by people with migrant background are in several dimensions larger than in the average OECD country. This Working Paper relates to the 2013 OECD Economic Survey of Austria (<P>En Autriche, le bien-être ne se limite pas au PIB<BR>En Autriche, le bien-être matériel et la qualité de vie sont élevés. Un mouvement constant de convergence vers un PIB par habitant élevé a permis une nette amélioration du revenu disponible des ménages. Parallèlement, une redistribution importante a permis que les inégalités de revenu et le taux de pauvreté soient faibles. À cela s’ajoutent une augmentation du temps disponible pour les loisirs, en particulier du temps passé à la retraite, un faible taux de chômage, une bonne qualité de l’environnement, un allongement de l’espérance de vie et un bien-être subjectif élevé. L’Autriche doit ces résultats à un modèle unique en son genre, qui associe des conditions favorables au dynamisme du secteur privé, une priorité accordée à la prise en charge familiale, une offre développée de services publics et un système de partenariat social efficace. Un certain nombre de faiblesses existent cependant. Ainsi, les travailleurs âgés et non qualifiés et, surtout, les personnes issues de l’immigration, sont plus éloignés du marché du travail. On observe des inégalités dans les résultats en matière d’éducation et de santé. Les services aux familles restent dans une large mesure l’apanage des femmes, qui, malgré la résorption de l’écart de niveau d’instruction avec les hommes, rencontrent des difficultés à concilier vie professionnelle et familiale et sont confrontées à un gros écart de rémunération. Pour plusieurs dimensions du bien-être, les différences entre les personnes issues de l’immigration et le reste de la population sont supérieures à celles observées dans le pays moyen de l’OCDE. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Autriche, 2013 ( -2013.htm).
    Keywords: productivity, Austria, well-being, quality of life, family, social partnership, productivité, Autriche, bien-être, qualité de vie, famille, partenariat social
    JEL: D31 D60 H40 I31 O52
    Date: 2013–08–05
  2. By: Brant Abbott; Giovanni Gallipoli; Costas Meghir (Institute for Fiscal Studies and Yale University); Gianluca Violante (Institute for Fiscal Studies and New York University)
    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, labour supply, and consumption/saving decisions. Altruistic parents make inter vivos transfers to their children. Labour 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 equilibirum effects of expanding tuition grants (especially their need-based component) are sizable. 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: 2013–08
  3. By: Guido Alfani; Elena Roberta Frigeni
    Abstract: Long-term developments in economic inequality are attracting growing attention. Earlier works focused on producing reliable measures of inequality, which overall suggest that in Europe, inequality levels were already high in preindustrial times and tended to grow almost continuously from the Middle Ages until the eve of the Industrial Revolution. Proposing a significantly different perspective, this article explores whether the change in inequality is connected to a change in how a condition of unequal distribution of property/income was perceived. By referring to large databases of manuscripts and printed editions covering ca. 1100-1830, we measure the occurrences of keywords connected to the notions of equality/inequality to determine when inequality became a topic considered worthy of specific reflection. Key texts are analyzed in depth to discover how and when such keywords acquired an economic meaning. Lastly, changes in meaning are connected to changes in levels of economic inequality. We demonstrate that the notions of equality/inequality appeared first in scholarly fields far from economic concerns and only slowly acquired economic meanings. This process intensified in the decades preceding the French Revolution of 1789, suggesting that changes in inequality levels contributed to brewing political upheaval in the Age of Revolutions.
    Keywords: equality, inequality, economic inequality, social inequality, middle ages, early modern period, French revolution, economic thought
    Date: 2013–07
  4. By: Irina Murtazashvil; Di Liu; Artem Prokhorov
    Abstract: We estimate intergenerational income mobility in the USA and Sweden. To measure the degree to which income status is transmitted from one generation to another we propose a nonparametric estimator, which is particularly relevant for cross-country comparisons. Our approach allows intergenerational mobility to vary across observable family characteristics. Furthermore, it ts situations when data on fathers and sons come from di fferent samples. Finally, our estimator is consistent in the presence of measurement error in fathers' long-run economic status. We fi nd that family background captured by fathers' education matters for intergenerational income persistence in the USA more than in Sweden suggesting that the character of inequality in the two countries is rather different.
    Keywords: Intergeneration Income Persistence; GMM estimation
    JEL: D3 C14
    Date: 2013–08
  5. By: Dollar, David; Kleineberg, Tatjana; Kraay, Aart
    Abstract: Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods and when conditioning on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles.
    Keywords: Achieving Shared Growth,Inequality,Emerging Markets,Economic Theory&Research,Economic Growth
    Date: 2013–08–01
  6. By: Ruben Durante; Louis Putterman; Joël van der Weele
    Abstract: We conduct a laboratory experiment to study how demand for redistribution of income depends on self-interest, insurance motives, and social concerns relating to inequality and efficiency. Our choice environments feature large groups of subjects and real world framing, and differ with respect to the source of inequality (earned or arbitrary), the cost of taxation to the decision maker, the dead-weight loss of taxation, uncertainty about own pre-tax income, and whether the decisionmaker is affected by redistribution. We estimate utility weights for the different sources of demand for redistribution, with the potential to inform modeling in macroeconomics and political economy.
    Keywords: income distribution, political economy, redistribution, social preferences.
    Date: 2013
  7. By: Jeremy Lise (Institute for Fiscal Studies and University College London); Costas Meghir (Institute for Fiscal Studies and Yale University); Jean-Marc Robin (Institute for Fiscal Studies and Sciences Po)
    Abstract: We develop an empirical search-matching model which is suitable for analysing the wage, employment and welfare impact of regulation in a labour market with heterogeneous workers and jobs. To achieve this we develop an equilirium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. We use the model to estimate the potential gain from optimal regulation and we consider the potential gains and redistributive impacts from optimal unemployment insurance policy. The model is estimated on the NLSY using the method of moments.
    Keywords: sorting, mismatch, search-matching, wage dynamics
    Date: 2013–08
  8. By: Rauf Gönenç; Oliver Röhn; Christian Beer; Andreas Wörgötter
    Abstract: Important challenges for the future of Austrian well-being arise from demographic and environmental trends. The ageing of the population calls for a fair balance between life-time pension contributions and entitlements, drawing on the recent pension reform. Such progress will allow Austrians to make more informed choices between the length of their work and contribution periods and retirement length and income according to their preferences, without threatening fiscal sustainability. With female labour force participation rising, family policies should help reconcile equality of opportunity within families by promoting the availability, affordability and quality of support services. A growing share of immigrant groups with low human capital calls for remedial policies to preserve social cohesion. Environmental pressures arise from urban sprawl and the strong expansion of road transport. Turning around these trends will require more appropriate pricing of the externalities and better regional development policies to foster denser settlements that are well connected to public transport. This entails a need to strengthen coordination between different government layers and better integration of regional development with transport and housing policies. This Working Paper relates to the 2013 OECD Economic Survey of Austria (<P>Bien-être en Autriche : les grands défis<BR>Le bien-être des Autrichiens va se heurter à l’avenir à des défis importants liés aux tendances démographiques et environnementales. Le vieillissement de la population nécessite un juste équilibre entre les cotisations et les droits à pension, sur la base de la réforme récente du régime de retraite. Ces progrès vont permettre aux Autrichiens de faire des choix plus éclairés entre la durée de leur vie active et de leurs cotisations et celle de leur retraite ainsi que leurs revenus en fonction de leurs préférences, sans pour autant peser sur la viabilité des finances publiques. Face à l’augmentation du taux d’activité des femmes, les politiques familiales devraient contribuer à l’égalité des chances au sein des familles et favoriser des services de soutien accessibles, abordables et efficaces. La proportion grandissante des groupes immigrés ayant un faible niveau de capital humain exige la mise en place de mesures correctives afin de préserver la cohésion sociale. Les pressions pesant sur l’environnement sont causées par l’étalement urbain et l’expansion rapide du transport routier. Pour contrer ces évolutions, il faudra mettre en place une tarification plus appropriée des externalités et de meilleures politiques de développement régional afin de promouvoir des habitats plus denses et bien desservis par les transports publics. Il faut pour cela renforcer la coordination entre les différents niveaux d’administration et mieux intégrer les politiques de développement régional, de transport et de logement. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Autriche, 2013 ( -2013.htm).
    Keywords: ageing, environment, transport, Austria, immigration, well-being, urban sprawl, family, environnement, transport, vieillissement, Autriche, immigration, démographie, bien-être, étalement urbain, famille
    JEL: D60 J10 O52 Q50
    Date: 2013–08–05
  9. By: Eric Weyl (University of Chicago); Charles Nathanson (Harvard University); Ben Lockwood (Harvard University)
    Abstract: Taxation affects the allocation of talented individuals across industries by blunting material incentives and thus relatively magnifying the non-pecuniary benefits of pursuing a "calling". If higher-paying industries (e.g. finance and management) generate less positive net externalities than lower-paying professions (e.g. public service and education) this may enhance efficiency. We develop a theory of income taxation as implicit Pigouvian taxation of these externalities and calibrate it using data on the distribution of income and talent across industries. Even without any redistributive motive, tax rates are highly sensitive to the externalities assumed within a spectrum many would consider reasonable: they range from extremely regressive to highly progressive at high incomes. Our theory thus offers an alternative, pure efficiency rationale for non-linear income taxation, challenging the connection between high long-run labor supply elasticities and low optimal tax rates and motivating further study of the externalities generated by professions.
    Date: 2013
  10. By: Ravallion, Martin; Chen, Shaohua
    Abstract: Empirical studies of tax and benefit incidence routinely ignore behavioral responses and measurement errors. This paper offers an econometric method of estimating the mean benefit withdrawal rate (marginal tax rate) allowing for incentive effects, measurement errors, and correlated latent heterogeneity in incidence. Under the method's identifying assumptions, a feasible instrumental variables estimator corrects for incentive effects and measurement errors, and provides a bound for the true value when there is correlated incidence heterogeneity. A case study for a large cash transfer program in China indicates that past methods of assessing benefit incidence using either nominal official rates or raw tabulations from survey data are deceptive. The program entails a nominal 100 percent benefit withdrawal rate -- a poverty trap. However, the paper finds that the actual rate is much lower, and clearly too low in the light of the literature on optimal income taxation. The paper discusses likely reasons based on the qualitative observations.
    Keywords: Rural Poverty Reduction,Labor Policies,Services&Transfers to Poor,Inequality,Economic Theory&Research
    Date: 2013–08–01
  11. By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law)
    Abstract: Recent empirical evidence suggests that between-country social comparisons have become more important over time. This paper analyzes optimal income taxation in a multi-country economy, where consumers derive utility from their relative consumption compared with both other domestic residents and people in other countries. The optimal tax policy in our framework reflects both correction for positional externalities and redistributive aspects of such correction due to the incentive constraint facing each government. If the national governments behave as Nash competitors to one another, the resulting tax policy only internalizes the externalities that are due to within-country comparisons, whereas the tax policy chosen by the leader country in a Stackelberg game also reflects between-country comparisons. We also derive a globally efficient tax structure in a cooperative framework. Nash competition typically implies lower marginal income tax rates than chosen by the leader country in a Stackelberg game, and cooperation typically leads to higher marginal income tax rates than the non-cooperative regimes.
    Keywords: Optimal taxation; relative consumption; inter-jurisdictional comparison; asymmetric information; status; positional goods
    JEL: D03 D62 D82 H21
    Date: 2013–08–13

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