nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2014‒04‒05
five papers chosen by
Maximo Rossi
University of the Republic

  1. Consumption inequality and family labor supply By Blundell, Richard; Pistaferri, Luigi; Saporta-Eksten, Itay
  2. The Distribution of wealth and the MPC: implications of new European data By Carroll, Christopher D.; Slacalek, Jiri; Tokuoka, Kiichi
  3. Food prices and poverty reduction in the long run: By Headey, Derek D.
  4. The impact of Bolsa Família on schooling: Girls’ advantage increases and older children gain: By de Brauw, Alan; Gilligan, Daniel O.; Hoddinott, John F.; Roy, Shalini
  5. Happiness - before and after the Kids By Mikko Myrskylä; Rachel Margolis

  1. By: Blundell, Richard; Pistaferri, Luigi; Saporta-Eksten, Itay
    Abstract: In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labour supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of male’s and female’s permanent shocks to wages. Once family labour supply, assets and taxes are properly accounted for there is little evidence of additional insurance. JEL Classification: D11, D12, D31, D91
    Keywords: consumption, earnings, inequality, labor supply
    Date: 2014–03
  2. By: Carroll, Christopher D.; Slacalek, Jiri; Tokuoka, Kiichi
    Abstract: Using new micro data on household wealth from fifteen European countries, the Household Finance and Consumption Survey, we first document the substantial cross-country variation in how various measures of wealth are distributed across individual households. Through the lens of a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks we then study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). We find that the aggregate consumption response ranges between 0.1 and 0.4 and is stronger (i) in economies with large wealth inequality, where a larger proportion of households has little wealth, (ii) under larger transitory income shocks and (iii) when we consider households only using liquid assets (rather than net wealth) to smooth consumption. JEL Classification: D12, D31, D91, E21
    Keywords: consumption dynamics, cross-country comparisons, liquid assets, MPC, wealth inequality
    Date: 2014–03
  3. By: Headey, Derek D.
    Abstract: Standard microeconomic methods consistently suggest that, in the short run, higher food prices increase poverty in developing countries. In contrast, macroeconomic models that allow for an agricultural supply response and consequent wage adjustments suggest that the poor ultimately benefit from higher food prices. In this paper we use international data to systematically test the relationship between changes in domestic food prices and changes in poverty. We find robust evidence that in the long run (one to five years) higher food prices reduce poverty and inequality. The magnitudes of these effects vary across specifications and are not precisely estimated, but they are large enough to suggest that the recent increase in global food prices has significantly accelerated the rate of global poverty reduction.
    Keywords: Food prices, Poverty, income, poverty alleviation, Food crisis, inequality, income growth,
    Date: 2014
  4. By: de Brauw, Alan; Gilligan, Daniel O.; Hoddinott, John F.; Roy, Shalini
    Abstract: We estimate the impact of Bolsa Família on a range of education outcomes, including school participation, grade progression, grade repetition, and dropout rates. Using a large-sample household panel survey from 2005–2009 collected for this evaluation, we develop a statistically balanced comparison group of eligible nonparticipant households and estimate impacts using propensity-score-weighted regression. We estimate that Bolsa Família increased average school participation among all children age 6 to 17 years by (a weakly significant) 4.5 percent. It had no effect on grade promotion, on average. However, within the subsample of girls, Bolsa Família caused substantial improvements in schooling outcomes, including significant increases in school participation (8.2 percent) and rates of grade progression (10.4 percent). We show that the gains in girls’ schooling do not derive from catch-up effects, but rather increase girls’ existing advantage in schooling attainment. In general, impacts are larger among older children, in rural areas, and in the Northeast.
    Keywords: Education, Gender, Poverty, conditional cash transfers (CCT) programs, Bolsa Família,
    Date: 2014
  5. By: Mikko Myrskylä; Rachel Margolis
    Abstract: Understanding how having children influences the parents’ subjective well-being (“happiness”) has great potential to explain fertility behavior. We study parental happiness trajectories before and after the birth of a child using large British and German longitudinal data sets. We account for unobserved parental characteristics using fixed-effects models and study how sociodemographic factors modify the parental happiness trajectories. Consistent with existing work, we find that happiness increases in the years around the birth of the first child, then decreases to before-child levels. Moreover, happiness increases before birth, suggesting that the trajectories may capture not only the effect of the birth but also the broader process of childbearing which may include partnership formation and quality. Sociodemographic factors strongly modify this pattern. Those who have children at older ages or have more education have a particularly positive happiness response to a first birth, and although the first two children increase happiness, the third does not. The results are similar in Britain and Germany and suggest that up to two, children increase happiness, and mostly among those who postpone childbearing. This pattern is consistent with the fertility behavior emerging during the second demographic transition and provides new insights into low and late fertility.
    Keywords: Fertility, well-being, life course, parenthood
    Date: 2014

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