nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒11‒09
six papers chosen by
Maximo Rossi
University of the Republic

  1. Subjective wellbeing in Colombia : some insights on vulnerability, job security, and relative incomes By Krauss, Alexander; Graham, Carol
  2. Is workfare cost-effective against poverty in a poor labor-surplus economy? By Murgai, Rinku; Ravallion, Martin; van de Walle, Dominique
  3. U.S. versus Sweden: The Effect of Alternative In-Work Tax Credit Policies on Labour Supply of Single Mothers By Aaberge, Rolf; Flood, Lennart
  4. Why We Don’t See Poverty Convergence: The Role of Macroeconomic Volatility By Jesús Crespo Cuaresma; Stephan Klasen; Konstantin M. Wacker
  5. Time preferences and lifetime outcomes By Lindahl L.; Golsteyn B.H.H.; Grönqvist H.
  6. Failing the Test? The Flexible U.S. Job Market in the Great Recession By Richard B. Freeman

  1. By: Krauss, Alexander; Graham, Carol
    Abstract: A burgeoning literature explores the extent to which consumption or income inadequately reflect people's subjective wellbeing, just as GDP at times can provide an incomplete and misleading picture of national wellbeing. Scholars are increasingly using data on subjective wellbeing to complement traditional welfare indicators and to enrich our understanding of wellbeing and quality of life. The paper builds on the present research but it analyzes a much broader, more interdisciplinary, and more policy-relevant range of potential determinants simultaneously than currently existing in the literature on subjective wellbeing. It first analyzes the relative importance of a wide range of characteristics and conditions at the individual, household, regional and macro levels on levels of subjective wellbeing in Colombia in 2010/11; and second, assesses the marginal effects of a number of factors on perceived changes in levels of subjective wellbeing over time for the same respondents from 2008/09 to 2010/11. Findings show that increasing the quality of life of Colombians is largely conditional on minimizing risks and vulnerabilities: reducing the rate and duration of unemployment; improving the delivery of public health services; increasing the share of people with health and pension plans; enhancing safety and security in communities; and reducing levels of discrimination. It finds that job loss has particularly strong effects on levels of satisfaction that are larger than those for increased income, while also controlling for a decrease in income that is often related to being unemployed, suggesting that the human welfare (non-pecuniary) costs of unemployment are driving the strong effects. Moreover, any job, even a low-quality job, is overall better for one's subjective wellbeing than being unemployed. Finally, policy aimed at improving people's subjective wellbeing will likely have the greatest impact if focused on mitigating vulnerabilities and negative shocks that people face.
    Keywords: Health Monitoring&Evaluation,Population Policies,Poverty Impact Evaluation,Rural Poverty Reduction,Labor Markets
    Date: 2013–10–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:6672&r=ltv
  2. By: Murgai, Rinku; Ravallion, Martin; van de Walle, Dominique
    Abstract: Workfare schemes impose work requirements on beneficiaries. This has seemed an attractive idea for self-targeting transfers to poor people. This incentive argument does not imply, however, that workfare is more cost-effective against poverty than even poorly-targeted options, given hidden costs of participation. In particular, even poor workfare participants in a labor-surplus economy can be expected to have some forgone income when they take up such a scheme. A survey-based method is used to assess the cost-effectiveness of India's Employment Guarantee Scheme in Bihar. Participants are found to have forgone earnings, although these fall well short of market wages on average. Factoring in these hidden costs, the paper finds that for the same budget, workfare has less impact on poverty than either a basic-income scheme (providing the same transfer to all) or uniform transfers based on the government's below-poverty-line ration cards. For workfare to dominate other options, it would have to work better in practice. Reforms would need to reduce the substantial unmet demand for work, close the gap between stipulated wages and wages received, and ensure that workfare is productive -- that the assets created are of value to poor people. Cost-effectiveness would need to be reassessed at the implied higher levels of funding.
    Keywords: Rural Poverty Reduction,Labor Markets,Labor Policies,Banks&Banking Reform,Income
    Date: 2013–10–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:6673&r=ltv
  3. By: Aaberge, Rolf (Research Department at Statistics Norway and ESOP, University of Oslo); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: An essential difference between the design of the Swedish and the US in-work tax credit systems relates to their functional forms. Where the US earned income tax credit (EITC) is phased out and favours low and medium earnings, the Swedish system is not phased out and offers 17 and 7 per cent tax credit for low and medium low incomes and a lump-sum tax deduction equal to approximately 2300 USD for medium and higher incomes. The purpose of this paper is to evaluate the efficiency and distributional effects of these two alternative tax credit designs. We pay particular attention to labour market exclusion; i.e. individuals within as well as outside the labour force are included in the analysis. To highlight the importance of the joint effects from the tax and the benefit systems it appears particular relevant to analyse the labour supply behaviour of single mothers. To this end, we estimate a structural random utility model of labour supply and welfare participation. The model accounts for heterogeneity in consumption-leisure preferences as well as for heterogeneity and constraints in job opportunities. The results of the evaluation show that the Swedish system without phase-out generates substantial larger labour supply responses than the US version of the tax credit. Due to increased labour supply and decline in welfare participation we find that the Swedish reform is self-financing for single mothers, whereas a 10 per cent deficit follows from the adapted EITC version used in this study. However, where income inequality rises modestly under the Swedish tax credit system, the US version with phase-out leads to a significant reduction in the income inequality.
    Keywords: labour supply; single mothers; in-work tax credit; social assistance; random utility model
    JEL: I38 J22
    Date: 2013–10–28
    URL: http://d.repec.org/n?u=RePEc:hhs:gunwpe:0576&r=ltv
  4. By: Jesús Crespo Cuaresma (Vienna University of Economics and Business); Stephan Klasen (Georg-August-University Göttingen); Konstantin M. Wacker (The World Bank Group)
    Abstract: Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of poverty convergence in aggregate data despite the conditional convergence of per capita income levels and the close linkage between growth and poverty reduction in standard neoclassic growth theory and associated empirics. In this contribution we address this puzzle. After showing some evidence of regional convergence, we demonstrate that macroeconomic volatility prevents countries with a higher incidence of poverty from converging in poverty levels to those with less poverty on a global scale. Once volatility is controlled for, the relevant convergence parameter shows the expected negative sign and is robust to various estimation techniques and model specifications. Only if a country’s volatility exceeds a relatively high threshold level, it no longer converges. Similarly, initial poverty only exercises a negative impact on mean (income) convergence in countries where macroeconomic volatility is high.
    Keywords: poverty convergence; macroeconomic volatility
    JEL: I32 D31 E32
    Date: 2013–11–05
    URL: http://d.repec.org/n?u=RePEc:got:gotcrc:153&r=ltv
  5. By: Lindahl L.; Golsteyn B.H.H.; Grönqvist H. (GSBE)
    Abstract: This paper investigates the relationship between time preferences and lifetime social and economic behavior. We use a Swedish longitudinal dataset that links information from a large survey on childrens time preferences at age 13 to administrative registers spanning over four decades. Our results indicate a substantial adverse relationship between high discount rates and school performance, health, labor supply, and lifetime income. Males and high ability children gain significantly more from being future-oriented. These discrepancies are largest regarding outcomes later in life. We also show that the relationship between time preferences and long-run outcomes operates through early human capital investments.
    Keywords: Behavioral Economics: Underlying Principles; Intertemporal Consumer Choice; Life Cycle Models and Saving; Labor Economics: General;
    JEL: D03 D91 J01
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:dgr:umagsb:2013065&r=ltv
  6. By: Richard B. Freeman
    Abstract: The Great Recession tested the ability of the “great U.S. jobs machine” to limit the severity of unemployment in a major economic downturn and to restore full employment quickly afterward. In the crisis the American labor market failed to live up to expectations. The level and duration of unemployment increased substantially in the downturn and the growth of jobs was slow and anemic in the recovery. This article documents these failures and their consequences for workers. The U.S. performance in the Great Recession contravenes conventional views of the virtues of market-driven flexibility compared to institution-driven labor adjustments and the notion that weak labor institutions and greater market flexibility offer the best road to economic success in a modern capitalist economy.
    JEL: J0 J01 J08 J64
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:19587&r=ltv

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