nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒10‒18
nine papers chosen by
Maximo Rossi
University of the Republic

  1. Social Spending, Taxes and Income Redistribution in Uruguay By Marisa Bucheli; Nora Lustig; Máximo Rossi; Florencia Amábile
  2. Explaining Rising Income Inequality in Germany, 1991-2010 By Kai Daniel Schmid; Ulrike Stein
  3. Does High Home-Ownership Impair the Labor Market? By Blanchflower, David G.; Oswald, Andrew J.
  4. Shared prosperity : links to growth, inequality and inequality of opportunity By Narayan, Ambar; Saavedra-Chanduvi, Jaime; Tiwari, Sailesh
  5. Understanding income mobility: the role of education for intergenerational income persistence in the US, UK and Sweden By Paul Gregg; Jan. O. Jonsson; Lindsey Macmillan; Carina Mood
  6. Does income deprivation affect people’s mental well-being? By Maite Blázquez Cuesta; Santiago Budría
  7. Understanding Severance Pay By Parsons, Donald O.
  8. From Noise to Signal : The Successful Turnaround of Poverty Measurement in Colombia By João Pedro Azevedo
  9. Measuring the Monetary Value of Social Relations: a Hedonic Approach By Emilio Colombo; Luca Stanca

  1. By: Marisa Bucheli (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Nora Lustig (Department of Economics, Stone Center for Latin American Studies and CIPR, Tulane University); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Florencia Amábile (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: How much redistribution does Uruguay accomplish through social spending and taxes? How progressive are revenue collection and social spending? A standard fiscal incidence analysis shows that Uruguay achieves a nontrivial reduction in inequality and poverty when all taxes and transfers are combined. In comparison with other five countries in Latin America, it ranks first (poverty reduction) and second (inequality reduction), and first in terms of poverty reduction effectiveness and third in terms of overall (including transfers in kind) inequality reduction effectiveness. Direct taxes are progressive and indirect taxes are regressive. Social spending on direct transfers, contributory pensions, education and health is quite progressive in absolute terms except for tertiary education, which is almost neutral in relative terms
    Keywords: poverty, inequality, Uruguay, social spending, taxes
    JEL: I3 H2 H5
    Date: 2012–09
  2. By: Kai Daniel Schmid; Ulrike Stein
    Abstract: In Germany, inequality of net equivalized income increased noticeably in the first half of the new millennium. We aim to identify the main drivers of this rise in income inequality since the early 1990s. We provide a broad overview of the circumstances under which inequality evolved, i.e. which changes in the German economy are most likely to provide an explanation for changes in income concentration. To explain the development of the distribution of net equivalized income we analyze changes in the distribution of market income as well as shifts in the effectiveness of public redistribution mechanisms. We find that cyclical and structural changes in the labor market, the increasing relevance of capital income as well as the decreasing effectiveness of the public mechanisms of income redistribution are the main explanatory factors for the development of income inequality. In addition to this, we discuss several issues that are of high relevance for the distribution of economic resources but are not directly covered in the analysis of net equivalized income. Most significantly, the design of the tax and social security contributions burden as well as the rising relevance of value-added taxes have exhibited negative redistributive effects for low income households.
    Keywords: Income Inequality, Redistribution, SOEP
    JEL: D31 I30 J30
    Date: 2013
  3. By: Blanchflower, David G. (Dartmouth College); Oswald, Andrew J. (University of Warwick)
    Abstract: This study explores the hypothesis that high home-ownership damages the labor market. We show that rises in the home-ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state. The elasticity exceeds unity: a doubling of the rate of home-ownership in a U.S. state is followed in the long-run by more than a doubling of the later unemployment rate. What mechanisms might explain this? We provide evidence that rises in home-ownership are associated with three potential concerns: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. Our argument is not that owners are disproportionately unemployed, nor that the observed patterns are due to Keynesian effects. The evidence implies, instead, that the housing market may produce negative 'externalities' upon the labor market. The time lags are long. That gradualness may explain why these patterns remain little-known.
    Keywords: natural rate of unemployment, labor market, housing market, structural, business cycles, mobility
    JEL: I1 I3
    Date: 2013–09
  4. By: Narayan, Ambar; Saavedra-Chanduvi, Jaime; Tiwari, Sailesh
    Abstract: Focusing on the welfare of the less well off as a measure of real societal progress is the fundamental principle underlying the WBG indicator of"shared prosperity", namely income growth of the bottom 40 percent in every country. This paper uses a database assembled by the World Bank Group to investigate some basic characteristics of shared prosperity, particularly its relationship with overall economic growth and inequality. Initial estimates using this dataset of 79 countries show that median income growth of the bottom 40 percent (circa 2005-2010) was 4.2 percent, a high number in comparison to the 3.1 percent per capita income growth of the overall population. In addition, the low and lower-middle income countries appear to be trailing the upper middle and high income countries in boosting shared prosperity. Establishing conceptual links between income growth of the bottom 40 percent, the overall growth rate and reviewing existing evidence on how these relate to inequality, the paper discusses two main ideas. First, shared prosperity is strongly correlated with overall prosperity implying that the whole host of policies that are important to generate and sustain growth remain relevant. Second, boosting shared prosperity will also require a concerted effort to strengthen the social contract, particularly in the area of promoting equality of opportunity. Growing evidence suggests that improving access for all and reducing inequality of opportunities -- particularly those related to human capital development of children -- are not only about"fairness"and building a"just society", but also about realizing a society's aspirations of economic prosperity.
    Keywords: Rural Poverty Reduction,Inequality,Achieving Shared Growth,Poverty Impact Evaluation,Services&Transfers to Poor
    Date: 2013–10–01
  5. By: Paul Gregg (Department of Social and Policy Science, University of Bath); Jan. O. Jonsson (Nuffield College, Oxford University and Swedish Institute for Social Research, Stockholm University); Lindsey Macmillan (Department of Quantitative Social Science, Institute of Education, University of London); Carina Mood (Institute for Future Studies, Stockholm and Swedish Institute for Social Research, Stockholm University)
    Abstract: A growing number of studies in several countries over the past twenty years have documented the persistence in incomes across generations, and much of the current literature is seeking to understand the processes driving intergenerational mobility and how these differ across time periods and across countries. Education is commonly seen, just as in sociological studies of social mobility or status attainment, as the key driving force of intergenerational associations. In this paper we study the role of education for intergenerational income associations in three countries over time, and across the life-span of sons. We pay particular attention to issues of life-cycle bias and measurement error in modelling income mobility in a comparative setting. To explore the role of education, we utilise a three-stage framework that decomposes the intergenerational elasticity into three parts: the relationship between income and education, the returns to education, and the direct relationship between parental income and their child’s income in the next generation after controlling for education. We find that the US and the UK have high levels of income persistence (low mobility) across generations while Sweden is more moderate. Levels of educational inequality are surprisingly similar in all three countries with the majority of the difference between the US/UK and Sweden working through unequal returns to education and, more strikingly, inequality of opportunities for people with similar educational qualifications.
    Keywords: Intergenerational mobility, children, education
    JEL: J62 J13 J31
    Date: 2013–10–08
  6. By: Maite Blázquez Cuesta (Universidad Autónoma de Madrid); Santiago Budría (CEEAPLA, IZA and Banco de ESpaña)
    Abstract: This paper uses panel data from the 2002-2010 waves of the German Socio-Economic Panel dataset (SOEP) to assess the impact of income deprivation upon individual mental well-being. Unobserved heterogeneity is controlled for by means of a random effects model extended to include a Mundlak term and explicit controls for the respondents’ personality traits. The paper shows that, for a given household income, a less favourable relative position in the income distribution is associated with lower mental well-being. This effect is not statistically significant among women, though. Among men, a one standard deviation increase in income deprivation is found to be as harmful as a reduction in permanent household income of almost 30%. Interestingly, this impact is found to differ among individuals endowed with different sets of non-cognitive skills. We suggest that policies, practices and initiatives aimed at improving well-being among European citizens require a better understanding of individuals’ sensitiveness to others’ income.
    Keywords: mental health, random effects model, deprivation, personality traits
    JEL: C23 D63 I10 I14
    Date: 2013–10
  7. By: Parsons, Donald O. (George Washington University)
    Abstract: Severance pay, a fixed-sum payment to workers at job separation, has been the focus of intense policy concern for the last several decades, but much of this concern is unearned. The design of the ideal separation package is outlined and severance pay emerges as a natural component of job displacement insurance packages, serving both as scheduled reemployment wage insurance and, if search moral hazard is a problem, as scheduled UI. Like any firm-financed separation expenditure, severance pay can induce excessive job retention, but such distortions do not appear to be of practical significance at benefit levels typically mandated in the industrialized world. Moreover there is no evidence that firms attempt to avoid these firing cost distortions by substituting severance savings plans, which have zero firing costs. Indeed severance insurance plans similar to those mandated are often offered voluntarily in the U.S. The appropriate role of government in the market for severance pay is briefly considered.
    Keywords: severance pay, job displacement, firing costs, unemployment insurance, moral hazard
    JEL: J65 J41 J33 J08
    Date: 2013–09
  8. By: João Pedro Azevedo
    Keywords: Poverty Reduction - Rural Poverty Reduction Poverty Reduction - Achieving Shared Growth Macroeconomics and Economic Growth - Regional Economic Development Poverty Monitoring and Analysis Poverty Reduction - Poverty Reduction Strategies
    Date: 2013–05
  9. By: Emilio Colombo; Luca Stanca
    Abstract: This paper presents an application of the hedonic approach to measure the monetary price of social relations. We use individual-level data for housing and labor markets in 103 Italian cities to estimate the price of relational amenities and construct monetary indexes of quality of relational life. We focus on time spent with friends, active participation in associations and frequency of going out for leisure activities, while controlling for standard amenities such as weather, environment, services, and socio-demographic characteristics. We find that individuals are willing to pay a positive and significant monetary price to live in cities where people spend more time with their friends. A one standard deviation increase in the share of those who meet their friends most frequently is worth an extra \euro 1,150 per year in terms of higher housing costs and foregone wages.
    Keywords: social relations, social capital, hedonic prices, quality of life, well-being
    JEL: A13 C4 D6 I31 R2 Z13
    Date: 2013–10

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