nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒08‒31
ten papers chosen by
Maximo Rossi
University of the Republic

  1. The Market for "Rough Diamonds": Information, Finance and Wage Inequality By Theodore Koutmeridis
  2. Cross-Sectional and Longitudinal Equivalence Scales for West Germany Based on Subjective Data on Life Satisfaction: Paper Presented at the Fifth Meeting of the Society for the Study of Economic Inequality (ECINEQ) Bari (Italy), 22th - 24th July 2013 By Jürgen Faik
  3. Distributional Implications of the Crisis in Greece in 2009-2012 By Matsaganis, Manos; Leventi, Chrysa
  4. Econometric Mediation Analyses: Identifying the Sources of Treatment Effects from Experimentally Estimated Production Technologies with Unmeasured and Mismeasured Inputs By Heckman, James J.; Pinto, Rodrigo
  5. The tax treatment of the family By Aspen Gorry; Sita Nataraj Slavov
  6. Elite Capture in Urban Development: Evidence from Indonesia By Rivayani Darmawan; Stephan Klasen
  7. Regression analysis of country effects using multilevel data: A cautionary tale By Bryan, Mark L.; Jenkins, Stephen P.
  8. Older Workers and Working Time By Bell, David N.F.; Rutherford, Alasdair C.
  9. Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes By Doyle, Orla; Harmon, Colm P.; Heckman, James J.; Logue, Caitriona; Moon, Seong Hyeok
  10. European Capitals of Culture and Life Satisfaction By Lasse Steiner; Bruno S. Frey; Simone Hotz

  1. By: Theodore Koutmeridis (University of St. Andrews)
    Abstract: During the past four decades both between and within group wage inequality increased significantly in the US. I provide a microfounded justification for this pattern, by introducing private employer learning in a model of signaling with credit constraints. In particular, I show that when financial constraints relax, talented individuals can acquire education and leave the uneducated pool, this decreases unskilled-inexperienced wages and boosts wage inequality. This explanation is consistent with US data from 1970 to 1997, indicating that the rise of the skill and the experience premium coincides with a fall in unskilled-inexperienced wages, while at the same time skilled or experienced wages do not change much. The model accounts for: (i) the increase in the skill premium despite the growing supply of skills; (ii) the understudied aspect of rising inequality related to the increase in the experience premium; (iii) the sharp growth of the skill premium for inexperienced workers and its moderate expansion for the experienced ones; (iv) the puzzling coexistence of increasing experience premium within the group of unskilled workers and its stable pattern among the skilled ones. The results hold under various robustness checks and provide some interesting policy implications about the potential conflict between inequality of opportunity and substantial economic inequality, as well as the role of minimum wage policy in determining the equilibrium wage inequality.
    Keywords: wage inequality, experience premium, skill premium, employer learning, signaling, financial constraints, minimum wages
    JEL: D31 D82 E44 J31
    Date: 2013–08–01
    URL: http://d.repec.org/n?u=RePEc:san:wpecon:1307&r=ltv
  2. By: Jürgen Faik
    Abstract: The present study calculates variable, cross-sectional as well as longitudinal equivalence scales on the basis of the German 1984-2010 Socio-Economic Panel (SOEP) database for West Germany. It follows the “individual variant” for calculating subjective equivalence scales using “life satisfaction” as a proxy variable for “utility”. The cross-sectional scale estimates are characterized by relatively low scale values which is typical for the subjective scale approach. As a further main result, the estimated longitudinal equivalence scales reveal some but rather slight cohort-specific scale differences. Especially, the unsatisfactory fit of the paper’s regressions points to the need for more research activities in this strand of social science research. The latter must be emphasized since equivalence scales are very important for social policy. Specifically, this holds true for longitudinal scales in order to capture cohort effects and, thus, to deal with intra- and intergenerational aspects of well-being (and corresponding differences).
    Keywords: Equivalence scales, life satisfaction, longitudinal analysis, cohorts’ well-being
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp575&r=ltv
  3. By: Matsaganis, Manos; Leventi, Chrysa
    Abstract: The severe economic crisis affecting Greece since 2009 is having an unprecedented impact in terms of job and income losses, and is widely perceived to have a comparably significant effect in terms of greater inequality and increased poverty. We provide an assessment of whether (and to what extent) the latter is the case. More specifically, we use the European tax-benefit microsimulation model EUROMOD in order to quantify the impact of the austerity (i.e. fiscal consolidation policies) and the recession (i.e. negative developments in the wider economy) on the distribution of incomes in 2009-2012, and estimate how the burden of the crisis has been shared across income groups. We conclude by discussing the policy implications of our research.
    Date: 2013–08–22
    URL: http://d.repec.org/n?u=RePEc:ese:emodwp:em14-13&r=ltv
  4. By: Heckman, James J. (University of Chicago); Pinto, Rodrigo (University of Chicago)
    Abstract: This paper presents an econometric mediation analysis. It considers identification of production functions and the sources of output effects (treatment effects) from experimental interventions when some inputs are mismeasured and others are entirely omitted.
    Keywords: production function, mediation analysis, measurement error, missing inputs
    JEL: C21 C38 C43 D24
    Date: 2013–08
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7552&r=ltv
  5. By: Aspen Gorry; Sita Nataraj Slavov (American Enterprise Institute)
    Abstract: Should the US tax code treat people as families, as it currently does, or as individuals? This paper considers the costs and benefits of switching to a tax system based on individual, rather than family, income.
    Keywords: U.S. tax code,same-sex marriage,proposition 8,Income inequality,defense of marriage act
    JEL: A H
    Date: 2013–05
    URL: http://d.repec.org/n?u=RePEc:aei:rpaper:37807&r=ltv
  6. By: Rivayani Darmawan (Georg-August-University Göttingen); Stephan Klasen (Georg-August-University Göttingen)
    Abstract: It has been argued that the potential gains of community-driven development (CDD) poverty programs are large as these can foster sustained poverty reduction. However, recent literature shows that community involvement can increase the risk of elite capture, particularly in more unequal communities. The risk is higher when the gap between the poor and the non-poor is larger with limited mobility between groups, the poor find it difficult to increase their bargaining power or voice their preferences. This paper contributes to the limited empirical literature on the existence of elite capture in social programs. Using community and household data from the Second Urban Poverty Project in Indonesia, we find robust evidence for the existence of elite capture under unequal communities. We further find that only when decision makers share similar characteristics with non-elites in terms of wealth, education and social networks, the share of pro-poor projects increases.
    Keywords: Elite capture; Community-driven Development; Inequality; Poverty; Indonesia
    JEL: H42 I32 D63
    Date: 2013–08–23
    URL: http://d.repec.org/n?u=RePEc:got:gotcrc:145&r=ltv
  7. By: Bryan, Mark L.; Jenkins, Stephen P.
    Abstract: Cross-national differences in outcomes are often analysed using regression analysis of multilevel country datasets, examples of which include the ECHP, ESS, EU-SILC, EVS, ISSP, and SHARE. We review the regression methods applicable to this data structure, pointing out problems with the assessment of country-level factors that appear not to be widely appreciated, and illustrate our arguments using Monte-Carlo simulations and analysis of womens employment probabilities and work hours using EU SILC data. With large sample sizes of individuals within each country but a small number of countries, analysts can reliably estimate individual-level effects within each country but estimates of parameters summarising country effects are likely to be unreliable. Multilevel (hierarchical) modelling methods are commonly used in this context but they are no panacea.
    Date: 2013–08–19
    URL: http://d.repec.org/n?u=RePEc:ese:iserwp:2013-14&r=ltv
  8. By: Bell, David N.F. (University of Stirling); Rutherford, Alasdair C. (University of Stirling)
    Abstract: Contrary to much of the established literature, this paper finds that though many older workers would prefer to reduce their working hours (the overemployed), there is a significant group who would like to work longer hours (the underemployed). And contrary to the assumption that the self-employed are more easily able than employees to select a desired combination of hours and the wage rate, this paper finds that older self-employed workers are more likely to wish to adjust their hours, both upward and downward than are employees. A new index of underemployment is used to show that for the UK, since the onset of the Great Recession, underemployment among older workers has been growing more rapidly than unemployment. Using longitudinal data from the UK Labour Force Survey, the paper investigates the effects of overemployment and underemployment on transitions from employment and self-employment into other labour market states. It confirms that overemployment is a significant predictor of retirement among employees while underemployed employees are less likely to retire.
    Keywords: retirement, working time, overemployment, underemployment, self-employment
    JEL: J01 J11 J21 J22 J23 J38 J64
    Date: 2013–08
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7546&r=ltv
  9. By: Doyle, Orla (University College Dublin); Harmon, Colm P. (University of Sydney); Heckman, James J. (University of Chicago); Logue, Caitriona (University College Dublin); Moon, Seong Hyeok (University of Chicago)
    Abstract: The literature on skill formation and human capital development clearly demonstrates that early investment in children is an equitable and efficient policy with large returns in adulthood. Yet little is known about the mechanisms involved in producing these long-term effects. This paper presents early evidence on the nature of skill formation based on an experimentally designed, five-year home visiting program in Ireland targeting disadvantaged families - Preparing for Life (PFL). We examine the impact of investment between utero to 18 months of age on a range of parental and child outcomes. Using the methodology of Heckman et al. (2010a), permutation testing methods and a stepdown procedure are applied to account for the small sample size and the increased likelihood of false discoveries when examining multiple outcomes. The results show that the program impact is concentrated on parental behaviors and the home environment, with little impact on child development at this early stage. This indicates that home visiting programs can be effective at offsetting deficits in parenting skills within a relatively short timeframe, yet continued investment may be required to observe direct effects on child development. While correcting for attrition bias leads to some changes in the precision of estimates, overall the results are quite similar.
    Keywords: early childhood intervention, human capital development, randomized control trial, multiple hypotheses, permutation testing
    JEL: C12 C93 J13 J24
    Date: 2013–08
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7550&r=ltv
  10. By: Lasse Steiner; Bruno S. Frey; Simone Hotz
    Abstract: This paper analyzes whether hosting the most prestigious European cultural event, the European Capital of Culture, has an impact on regional economic development or the life satisfaction of the local population. Concerning the economic impact, we show that European Capitals are hosted in regions with above average GDP per capita, but do not causally affect the economic development in a significant way. Even a positive impact on GDP per capita would not imply a positive impact on individual utility or social welfare of the regional population. Surprisingly, using difference-in-difference estimations, a negative effect on the well-being of the regional population is found during the event. Since no effect is found before the event, reverse causality and positive anticipation can be ruled out. The negative effect during the event might result from dissatisfaction with the high levels of public expenditure, transport disruptions, general overcrowding or an increase in housing prices.
    Keywords: Life Satisfaction; Mega-Events; Culture; European Capital of Culture
    JEL: Z11
    Date: 2013–04
    URL: http://d.repec.org/n?u=RePEc:cra:wpaper:2013-07&r=ltv

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