nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒09‒26
eight papers chosen by
Maximo Rossi
University of the Republic

  1. Polarization of Time and Income - A Multidimensional Approach with Well-Being Gap and Minimum 2DGAP: German Evidence By Joachim Merz; Bettina Scherg
  2. What do normative indices of multidimensional inequality really measure? By BOSMANS, Kristof; DECANCQ, Koen; OOGHE, Erwin
  3. The Market for "Rough Diamonds": Information, Finance and Wage Inequality By Theodore Koutmeridis
  4. Multitasking and Wages By Görlich, Dennis; Snower, Dennis J.
  5. Decomposition of Regional Wage Differences Along the Wage Distribution in Portugal: the Importance of Covariates By Aurora Galego; João Pereira
  6. The Gender Unemployment Gap By Albanesi, Stefania; Sahin, Aysegul
  7. Mental Illness and Unhappiness By Dan Chisholm; Richard Layard; Vikram Patel; Shekhar Saxena
  8. A Mapping of Labor Mobility Costs in the Developing World By Erhan Artuç; Daniel Lederman; Guido Porto

  1. By: Joachim Merz; Bettina Scherg
    Abstract: A growing polarization of society accompanied with an erosion of the middle class experiences more and more attention at least in the German recent economic and social policy discussion. Our study contributes to the polarization discussion with respect to multidimensional theoretical measurement and empirical application in two ways: First, we propose extended multidimensional polarization indices based on a CES-type well-being function and present a new measure to multidimensional polarization, the mean minimum polarization gap 2DGAP. This polarization intensity measure provides transparency with regard to each singular attributes – important for targeted policies – and ensures at the same time its interdependent relations. Second, the empirical application – in addition to the traditional income measure – incorporates time as a fundamental resource for any activity. In particular, genuine personal leisure time will take care of social participation in the spirit of social inclusion/exclusion and Amartya Sen’s capability approach. Instead of arbitrarily choosing the attributes’ parameters in the CES well-being function the interdependent relations of time and income will be evaluated by German Society. With the German Socio-Economic Panel (SOEP) and detailed time use diary data of the available German Time Use Survey (GTUS) 1991/92 and 2001/02 we quantify available and extended multidi-mensional polarization measures as well as our new approach for the polarization development of the working poor and the working rich in Germany. Results: Genuine personal leisure time in addition to income is an important polarization attribute. Compensation is of economic and static significance. In particular supported by the new minimum 2DGAP approach, multidimensional polarization increased over that decade in Germany.
    Keywords: Multidimensional polarization, intensity of time and income poverty and affluence, interdependent multidimensional time and income poverty and affluence, minimum multidimensional polarization gap (2DGAP), extended economic well-being, satisfaction/
    JEL: I32 D31 J22
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp574&r=ltv
  2. By: BOSMANS, Kristof (Department of Economics, Maastricht University, NL-6211 LM Maastricht, The Netherlands); DECANCQ, Koen (Herman Deleeck Centre for Social Policy, University of Antwerp, B-2000 Antwerp, Belgium; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); OOGHE, Erwin (Center for Economic Studies, KU Leuven, B-3000 Leuve, Belgium)
    Abstract: We argue that normative indices of multidimensional inequality do not only measure a distribution’s extent of inequity (i.e., the gaps between the better-off and the worse-off), but also its extent of inefficiency (i.e., the non-realized mutually beneficial exchanges of goods). We provide a decomposition that allows quantifying these two parts of inequality. Exact formulas of the inequity and inefficiency components are provided for a generic class of social welfare functions. The inequity component turns out to be a two-stage measure, which applies a unidimensional inequality measure to the vector of well-being levels. We critically discuss two prominent transfer principles, viz., uniform majorization and correlation increasing majorization, in the light of the decomposition. A decomposition of inequality in human development illustrates the analysis.
    Keywords: multidimensional inequality measurement, efficiency, uniform majorization, correlation increasing majorization
    JEL: D31 D63 I31
    Date: 2013–07–09
    URL: http://d.repec.org/n?u=RePEc:cor:louvco:2013035&r=ltv
  3. 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: 2013–09–12
    URL: http://d.repec.org/n?u=RePEc:san:cdmawp:1307&r=ltv
  4. By: Görlich, Dennis; Snower, Dennis J.
    Abstract: This paper sheds light on how changes in the organization of work can help to understand increasing wage inequality. We present a theoretical model in which workers with a wider span of competence (higher level of multitasking) earn a wage premium. Since abilities and opportunities to expand the span of competence are distributed unequally among workers across and within education groups, our theory helps to explain (1) rising wage inequality between groups, and (2) rising wage inequality within groups. Under certain assumptions, it also helps to explain (3) the polarization of the income distribution. Using a rich German data set covering a 20-year period from 1986 to 2006, we provide empirical support for our model.
    Keywords: multitasking; organizational change; tasks; wage inequality
    JEL: J24 J31 L23
    Date: 2013–05
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:9455&r=ltv
  5. By: Aurora Galego (University of Évora, Department of Economics and CEFAGE-UE); João Pereira (University of Évora, Department of Economics and CEFAGE-UE)
    Abstract: Unlike previous studies, in this paper we estimate the contribution of covariates for the regional wage decomposition components along the wage distribution employing Firpo et al. (2009) method. We consider the case of Portugal, a country with persistent and large regional wage gaps. We find that education, occupation and firm size are the most important factors to explain the growing importance of the composition effect. The wage structure effect, in turn, is mainly determined by differences in rewards to experience and tenure. Moreover, we conclude that the importance of these covariates for both effects is not equal along the wage distribution.
    Keywords: Regions; Wage differentials; Wage decompositions; Unconditional quantile regression; Recentered influence function.
    JEL: J31 J38 C21
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:cfe:wpcefa:2013_16&r=ltv
  6. By: Albanesi, Stefania; Sahin, Aysegul
    Abstract: The unemployment gender gap, defined as the difference between female and male unemployment rates, was positive until 1980. This gap virtually disappeared after 1980, except during recessions when men's unemployment rate always exceeds women's. We study the evolution of these gender differences in unemployment from a long-run perspective and over the business cycle. Using a calibrated three-state search model of the labor market, we show that the rise in female labor force attachment and the decline in male attachment can mostly account for the closing of the gender unemployment gap. Evidence from nineteen OECD countries also supports the notion that convergence in attachment is associated with a decline in the gender unemployment gap. At the cyclical frequency, we find that gender differences in industry composition are important in recessions, especially the most recent, but they do not explain gender differences in employment growth during recoveries.
    Keywords: gender differences in unemployment; labor force participation; labor market flows
    JEL: E24 J64
    Date: 2013–04
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:9448&r=ltv
  7. By: Dan Chisholm; Richard Layard; Vikram Patel; Shekhar Saxena
    Abstract: This paper is a contribution to the second World Happiness Report. It makes five main points: 1. Mental health is the biggest single predictor of life-satisfaction. This is so in the UK, Germany and Australia even if mental health is included with a six-year lag. It explains more of the variance of life-satisfaction in the population of a country than physical health does, and much more than unemployment and income do. Income explains 1% of the variance of life-satisfaction or less. 2. Much the most common forms of mental illness are depression and anxiety disorders. Rigorously defined, these affect about 10% of all the world's population - and prevalence is similar in rich and poor countries. 3. Depression and anxiety are more common during working age than in later life. They account for a high proportion of disability and impose major economic costs and financial losses to governments worldwide. 4. Yet even in rich countries, under a third of people with diagnosable mental illness are in treatment. 5. Cost-effective treatments exist, with recovery rates of 50% or more. In rich countries treatment is likely to have no net cost to the Exchequer due to savings on welfare benefits and lost taxes. But even in poor countries a reasonable level of coverage could be obtained at a cost of under $2 per head of population per year.
    Keywords: Mental illness, welfare benefits, healthcare costs, life-satisfaction
    JEL: I10 I14 I18
    Date: 2013–09
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1239&r=ltv
  8. By: Erhan Artuç (WORLD BANK); Daniel Lederman (WORLD BANK); Guido Porto (Universidad Nacional de La Plata)
    Abstract: Estimates of labor mobility costs are needed to assess the responses of employment and wages to a trade shock when factor adjustment is costly. Available methods to estimate those costs rely on panel data, which are seldom available in developing countries. In this paper, we propose a method to estimate mobility costs using data that is more easily obtainable worldwide. Our estimator matches observed employment flows with those flows predicted by a model of costly labor adjustment. We estimate a mapping of labor mobility costs for the developing world and we use those estimates to explore the response of labor markets (wages and employment) to trade policy.
    JEL: F16 D58 J2 J6
    Date: 2013–07
    URL: http://d.repec.org/n?u=RePEc:dls:wpaper:0146&r=ltv

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