nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒12‒29
fourteen papers chosen by
Maximo Rossi
University of the Republic

  1. The Market for "Rough Diamonds": Information, Finance and Wage Inequality By Theodore, Koutmeridis
  2. Income inequality and social preferences for redistribution and compensation differentials By Kerr, William R.
  3. What Do Labor Market Institutions Do? By Holmlund, Bertil
  4. Poverty trends in Turkey By Jenkins, Stephen P.; Sirma Demir Șeker
  5. Opportunity-sensitive poverty measurement By Brunori, Paolo; Ferreira, Francisco; Lugo, Maria Ana; Peragine, Vito
  6. Upward Social Mobility, Well-being and Political Preferences: Evidence from the BHPS By Andrew E. Clark; Emanuela D'Angelo
  7. Alternative weighting structures for multidimensional poverty assessment By Miniaci, Raffaele; Han, Wei; Cavapozzi, Danilo
  8. Matching, Sorting and Wages By Jeremy Lise; Costas Meghir; Jean-Marc Robin
  9. Trust, Welfare States and Income Equality: What Causes What? By Bergh, Andreas; Bjørnskov, Christian
  10. Democracy, Redistribution and Inequality By Daron Acemoglu; Suresh Naidu; Pascual Restrepo; James A. Robinson
  11. Social Comparisons in Wage Delegation: Experimental Evidence By Charness, Gary; Cobo-Reyes, Ramón; Lacomba, Juan A.; Lagos, Francisco; Pérez, José María
  12. Returns to Skills around the World: Evidence from PIAAC By Eric A. Hanushek; Guido Schwerdt; Simon Wiederhold; Ludger Woessmann
  13. Can subjective questions on economic welfare be trusted ? evidence for three developing countries By Ravallion, Martin; Himelein, Kristen; Beegle, Kathleen
  14. The Polish Wage Curve: Micro Panel Data Analysis Based on the Polish Labor Force Survey By Baltagi, Badi H.; Rokicki, Bartlomiej

  1. By: Theodore, Koutmeridis
    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,
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:edn:sirdps:467&r=ltv
  2. By: Kerr, William R. (Harvard Business School, Bank of Finland, and NBER)
    Abstract: In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe). If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change. Exploring movements around these long-term levels, however, this study finds mixed evidence regarding the vicious cycle hypothesis. On one hand, larger compensation differentials are accepted as inequality grows. This growth in differentials is of a smaller magnitude than the actual increase in inequality, but it is nonetheless positive and substantial in size. Weighing against this, growth in inequality is met with greater support for government-led redistribution to the poor. These patterns suggest that short-run inequality shocks can be reinforced in the labor market but do not result in weaker political preferences for redistribution.
    Keywords: inequality; social preferences; social norms; redistribution; welfare; class warfare
    JEL: D31 D33 D61 D63 D64 D72 H23 H53 I38 J31 R11
    Date: 2013–12–11
    URL: http://d.repec.org/n?u=RePEc:hhs:bofrdp:2013_031&r=ltv
  3. By: Holmlund, Bertil (Uppsala University)
    Abstract: The past couple of decades have seen a huge increase in research on various labor market institutions. This paper offers a brief overview and discussion of research on the labor market impacts of minimum wages (MW), unemployment insurance (UI), and employment protection legislation (EPL). It is argued that research on UI is largely a success story, involving a fruitful interplay between search theory and empirical work. This research has established that UI matters for labor market behavior, in particular the duration of unemployment, although there remains substantial uncertainty about the magnitudes of the effects. The research on MW should have shaken economists' belief in the competitive labor market model as a result of frequent failures to find noticeable employment effects despite considerable effects on wages. EPL research has established that employment protection reduces labor and job turnover but the jury is still out regarding the impact on overall employment and productivity.
    Keywords: minimum wages, unemployment insurance, employment protection
    JEL: J01 J08
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7809&r=ltv
  4. By: Jenkins, Stephen P.; Sirma Demir Șeker
    Abstract: This paper provides new evidence about poverty trends in Turkey between 2003 and 2011 and the factors accounting for them. We give particular attention to issues of statistical inference, and the choice of the poverty line and the poverty measure. Our robust conclusion is that absolute poverty declined rapidly between 2003 and 2008 but fell only slightly between 2008 and 2011. Changes in relative poverty were negligible throughout. Using poverty decomposition methods, we argue that the rate of decline in the absolute poverty rate is largely accounted for by changes in the rate of national economic growth rather than by changes in the income distribution or by changes in the distribution of poverty risks across various subgroups within the population or in population composition.
    Date: 2013–12–10
    URL: http://d.repec.org/n?u=RePEc:ese:iserwp:2013-29&r=ltv
  5. By: Brunori, Paolo; Ferreira, Francisco; Lugo, Maria Ana; Peragine, Vito
    Abstract: This paper offers an axiomatic characterization of two classes of poverty measures that are sensitive to inequality of opportunity -- one a strict subset of the other. The proposed indices are sensitive not only to income shortfalls from the poverty line, but also to differences in the opportunities faced by people with different predetermined characteristics, such as race or family background. Dominance conditions are established for each class of measures and a sub-family of scalar indices, based on a rank-dependent aggregation of type-specific poverty levels, is also introduced. In empirical analysis using household survey data from eighteen European countries in 2005, substantial differences in country rankings based on standard Foster-Greer-Thorbecke indices and on the new opportunity-sensitive indices are found. Cross-country differences in opportunity-sensitive poverty are decomposed into a level effect, a distribution effect, and a population composition effect.
    Keywords: Services&Transfers to Poor,Inequality,Regional Economic Development,Rural Poverty Reduction,Achieving Shared Growth
    Date: 2013–12–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:6728&r=ltv
  6. By: Andrew E. Clark; Emanuela D'Angelo
    Abstract: The paper uses 18 waves of BHPS data to provide evidence of the roles of both own social status and upward mobility relative to one's parents on job and life satisfaction, preferences for redistribution, pro-public sector attitudes and voting. Both own social status and greater mobility with respect to parents are positively associated with subjective well-being. However, this symmetric effect disappears for political preferences. While greater social status is associated with less favourable attitudes to redistribution and the public sector, greater upward mobility is associated with more Left-wing attitudes. These attitudes translate into actual reported voting behaviour. Upwards social mobility produces satisfied Left-wingers.
    Keywords: Social Mobility, Satisfaction, Redistribution, Inequality, Voting
    JEL: A14 C25 D31 D63 J28 J62
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1252&r=ltv
  7. By: Miniaci, Raffaele; Han, Wei; Cavapozzi, Danilo (Groningen University)
    Abstract: A multidimensional poverty assessment requires a weighting scheme to aggregate the well-being dimensions considered. We use Alkire and Foster?s (2011a) framework to discuss the channels through which a change of the weighting structure affects the outcomes of the analysis in terms of overall poverty assessment, its dimensional and subgroup decomposability and policy prescriptions. We exploit the Survey on Health, Ageing and Retirement in Europe to evaluate how alternative weighting structures affect the measurement of poverty for the population of over 50s in ten European countries. Further, we show that in our empirical exercise the results based on hedonic weights estimated on the basis of life satisfaction self-assessments are robust to the presence of heterogeneous response styles across respondents.
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:dgr:rugsom:13018-eef&r=ltv
  8. By: Jeremy Lise; Costas Meghir (UCL Department of Economics); Jean-Marc Robin (Département d'économie)
    Abstract: We develop an empirical search-matching model with productivity shocks so as to analyze policy interventions in a labor market with heterogeneous agents. To achieve this we develop an equilibrium model of wage determination and employment, which is consistent with key empirical facts. As such our model 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 long-term contracts, on-the-job search and counter-offers, and a vacancy creation and destruction process linked to productivity shocks. Importantly, the model allows for the possibility of assortative matching between workers and jobs, a feature that had been ruled out by assumption in the empirical equilibrium search literature to date. We use the model to estimate the potential gain from an optimal unemployment insurance scheme, as well as the redistributive effects of such a policy
    Date: 2013–03
    URL: http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6ggbvnr6munghes9od0s108ro&r=ltv
  9. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Bjørnskov, Christian (Aarhus University)
    Abstract: The cross-country correlation between social trust and income equality is well documented, but few studies examine the direction of causality. We show theoretically that by facilitating cooperation, trust may increase efficiency and lead to more equal outcomes, while the feedback from inequality to trust is ambiguous. Using a structural equations model estimated on a large country sample, we find that trust has a positive effect on both market and net income equality. Larger welfare states lead to higher net equality but neither net income equality nor welfare state size seems to have a causal effect on trust. We conclude that while trust facilitates welfare state policies that may reduce net inequality, this decrease in inequality does not increase trust.
    Keywords: Social trust; Inequality; Welfare State
    JEL: D63 D69 H10
    Date: 2013–12–12
    URL: http://d.repec.org/n?u=RePEc:hhs:iuiwop:0994&r=ltv
  10. By: Daron Acemoglu; Suresh Naidu; Pascual Restrepo; James A. Robinson
    Abstract: In this paper we revisit the relationship between democracy, redistribution and inequality. We first explain the theoretical reasons why democracy is expected to increase redistribution and reduce inequality, and why this expectation may fail to be realized when democracy is captured by the richer segments of the population; when it caters to the preferences of the middle class; or when it opens up disequalizing opportunities to segments of the population previously excluded from such activities, thus exacerbating inequality among a large part of the population. We then survey the existing empirical literature, which is both voluminous and full of contradictory results. We provide new and systematic reduced-form evidence on the dynamic impact of democracy on various outcomes. Our findings indicate that there is a significant and robust effect of democracy on tax revenues as a fraction of GDP, but no robust impact on inequality. We also find that democracy is associated with an increase in secondary schooling and a more rapid structural transformation. Finally, we provide some evidence suggesting that inequality tends to increase after democratization when the economy has already undergone significant structural transformation, when land inequality is high, and when the gap between the middle class and the poor is small. All of these are broadly consistent with a view that is different from the traditional median voter model of democratic redistribution: democracy does not lead to a uniform decline in post-tax inequality, but can result in changes in fiscal redistribution and economic structure that have ambiguous effects on inequality.
    JEL: O10 P16
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:19746&r=ltv
  11. By: Charness, Gary (University of California, Santa Barbara); Cobo-Reyes, Ramón (University of Essex); Lacomba, Juan A. (Universidad de Granada); Lagos, Francisco (Universidad de Granada); Pérez, José María (Universidad de Granada)
    Abstract: This article examines whether social comparisons have behavioral effects on workers' performance when a firm can choose workers' wages or let them choose their own. Firms can delegate the wage decision to neither, one or both workers in the firm. We vary the information workers receive, finding that social comparisons concerning both wages and decision rights affect workers' performance. Moreover, the relative effect of discrimination in relation to decision rights is larger than in relation to wage. We find these treatment effects with both stated effort and a real-effort task, suggesting that both approaches may yield similar results.
    Keywords: delegation, gift-exchange, experiment
    JEL: C91
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7802&r=ltv
  12. By: Eric A. Hanushek; Guido Schwerdt; Simon Wiederhold; Ludger Woessmann
    Abstract: Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard- deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.
    JEL: I20 J31
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:19762&r=ltv
  13. By: Ravallion, Martin; Himelein, Kristen; Beegle, Kathleen
    Abstract: While self-assessments of welfare have become popular for measuring poverty and estimating welfare effects, the methods can be deceptive given systematic heterogeneity in respondents'scales. Little is known about this problem. This study uses specially-designed surveys in three countries, Tajikistan, Guatemala, and Tanzania, to study scale heterogeneity. Respondents were asked to score stylized vignettes, as well as their own household. Diverse scales are in evidence, casting considerable doubt on the meaning of widely-used summary measures such as subjective poverty rates. Nonetheless, under the identifying assumptions of the study, only small biases are induced in the coefficients on widely-used regressors for subjective poverty and welfare.
    Keywords: Rural Poverty Reduction,Economic Theory&Research,Biodiversity,Poverty Lines,Regional Economic Development
    Date: 2013–12–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:6726&r=ltv
  14. By: Baltagi, Badi H. (Syracuse University); Rokicki, Bartlomiej (Warsaw University)
    Abstract: This paper analyzes the Polish wage curve using individual data from the Polish Labor Force Survey (LFS) at the 16 NUTS2 regions over the period 1999 - 2010. This survey does not gather information on wages of self-employed or paid family workers. After excluding the unemployed, inactive and missing observations, we are left with over 102,924 observations. We find evidence in favor of the Polish wage curve with an unemployment elasticity of -0.06. We also find that males in Poland are significantly more responsive to local unemployment rates (-0.08) than their female counterparts (-0.04). Moreover, if the lagged unemployment rate is used as an instrument for current unemployment rate, we find that the unemployment elasticity increases substantially for less experienced and temporary workers.
    Keywords: wage curve, fixed effects, regional labor markets
    JEL: C26 J30 J60
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7812&r=ltv

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