nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2014‒07‒13
eight papers chosen by
Maximo Rossi
University of the Republic

  1. Trust and the Welfare State: The Twin Peaks Curve By Algan, Yann; Cahuc, Pierre; Sangnier, Marc
  2. The Minimum Wage from a Two-Sided Perspective By Brown, Alessio J. G.; Merkl, Christian; Snower, Dennis J.
  3. Optimal Taxation, Inequality and Top Incomes By Andrienko, Yuri; Apps, Patricia; Rees, Ray
  4. Breaking the Glass Ceiling? The Effect of Board Quotas on Female Labor Market Outcomes in Norway By Bertrand, Marianne; Black, Sandra E.; Jensen, Sissel; Lleras-Muney, Adriana
  5. Why Minimum Wage Increases Are a Poor Way to Help the Working Poor By Burkhauser, Richard V.
  6. The Consequences of Increased Enforcement of Legal Minimum Wages in a Developing Country: An Evaluation of the Impact of the Campaña Nacional de Salarios Mínimos in Costa Rica By Gindling, T. H.; Mossaad, Nadwa; Trejos, Juan Diego
  7. Union Decline and the Coverage Wage Gap in Germany By Addison, John T.; Teixeira, Paulino; Stephani, Jens; Bellmann, Lutz
  8. Fiscal adjustment and income inequality : sub-national evidence from Brazil By Azevedo, Joao Pedro; David, Antonio C.; Bastos, Fabiano Rodrigues; Pineda, Emilio

  1. By: Algan, Yann (Sciences Po, Paris); Cahuc, Pierre (Ecole Polytechnique, Paris); Sangnier, Marc (University of Aix-Marseille II)
    Abstract: We show the existence of a twin peaks relation between trust and the size of the welfare state that stems from two opposing forces. Uncivic people support large welfare states because they expect to benefit from them without bearing their costs. But civic individuals support generous benefits and high taxes only when they are surrounded by trustworthy individuals. We provide empirical evidence for these behaviors and this twin peaks relation in the OECD countries.
    Keywords: welfare state, trust, civism, corruption, redistribution
    JEL: H1 Z1
    Date: 2014–06
  2. By: Brown, Alessio J. G. (IZA); Merkl, Christian (University of Erlangen-Nuremberg); Snower, Dennis J. (Kiel Institute for the World Economy)
    Abstract: This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms' job offer and workers' job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that sufficiently low minimum wages may do no harm to employment, since their job-offer disincentives are countervailed by their job-acceptance incentives.
    Keywords: job offer, unemployment, employment, labor market, minimum wage, job acceptance
    JEL: J3 J6 J2
    Date: 2014–06
  3. By: Andrienko, Yuri (University of Sydney); Apps, Patricia (University of Sydney); Rees, Ray (University of Munich)
    Abstract: In a number of high-income countries over the past few decades there has been a large growth in income inequality and at the same time a shift in the burden of taxation from the top to the middle of the income distribution. This paper applies the theory of optimal piecewise linear taxation to the issue of the taxation of top incomes. Our results suggest that an appropriate response to rising inequality is a shift towards a more progressive multi-bracket income tax system, with a more differentiated structure of rates in the top percentiles.
    Keywords: optimal taxation, income distribution, top incomes, inequality
    JEL: H21 H24 D31 D63
    Date: 2014–06
  4. By: Bertrand, Marianne (University of Chicago); Black, Sandra E. (University of Texas at Austin); Jensen, Sissel (Norwegian School of Economics); Lleras-Muney, Adriana (University of California, Los Angeles)
    Abstract: In late 2003, Norway passed a law mandating 40 percent representation of each gender on the board of publicly limited liability companies. The primary objective of this reform was to increase the representation of women in top positions in the corporate sector and decrease gender disparity in earnings within that sector. We document that the newly (post-reform) appointed female board members were observably more qualified than their female predecessors, and that the gender gap in earnings within boards fell substantially. While the reform may have improved the representation of female employees at the very top of the earnings distribution (top 5 highest earners) within firms that were mandated to increase female participation on their board, there is no evidence that these gains at the very top trickled-down. Moreover the reform had no obvious impact on highly qualified women whose qualifications mirror those of board members but who were not appointed to boards. We observe no statistically significant change in the gender wage gaps or in female representation in top positions, although standard errors are large enough that we cannot rule economically meaningful gains. Finally, there is little evidence that the reform affected the decisions of women more generally; it was not accompanied by any change in female enrollment in business education programs, or a convergence in earnings trajectories between recent male and female graduates of such programs. While young women preparing for a career in business report being aware of the reform and expect their earnings and promotion chances to benefit from it, the reform did not affect their fertility and marital plans. Overall, in the short run the reform had very little discernable impact on women in business beyond its direct effect on the newly appointed female board members.
    Keywords: gender discrimination, board of directors
    JEL: J1 J3
    Date: 2014–06
  5. By: Burkhauser, Richard V. (Cornell University)
    Abstract: Minimum wage increases are not a very effective mechanism for reducing poverty. They are not related to decreases in poverty rates. They can cost some low-income workers their jobs. And most minimum wage earners who gain from a higher minimum wage do not live in poor (or near-poor) families. A better tool for reducing poverty, and at lower cost, is the earned income tax credit. It is a much more targeted way to provide income to workers in poor families. It raises the wages of only workers in low-income families and rises with the number of dependent children in a family.
    Keywords: minimum wage, earned income tax credit, working poor
    JEL: J31 J41 J42
    Date: 2014–06
  6. By: Gindling, T. H. (University of Maryland, Baltimore County); Mossaad, Nadwa (University of Maryland, Baltimore County); Trejos, Juan Diego (University of Costa Rica)
    Abstract: In August 2010 the Costa Rican government implemented a comprehensive program to increase compliance with legal minimum wages, the Campaign for Minimum Wages. To evaluate the impact of the Campaign, we use a regression discontinuity approach, which compares what happened to workers who before the campaign had been earning below the minimum wage to those who before the Campaign had been earning above the minimum wage. We analyze a panel data set with information on workers from before the Campaign began (July 2010) and after the Campaign had been in operation for some time (July 2011). We find evidence that the Campaign led to an increase in compliance with minimum wage laws in Costa Rica; the mean earnings of those earning less than the minimum wage in 2010 increased by approximately 10% more than the earnings of those who had been earning more than the minimum wage. The Campaign led to the largest increases in the wages of women, younger workers and less-educated workers. We find no evidence that the Campaign had a negative impact on the employment of full-time workers whose wages were increased. We find some weak evidence that the Campaign had a negative impact on the employment of part-time private sector employees. Although increased inspections were mainly targeting minimum wage violations, we also observe an increase in compliance with a broader set of labor standards and a positive spillover effect relative to other violations of labor laws.
    Keywords: Latin America, labor code enforcement, minimum wages, employment, wages
    JEL: J3 J33 J38
    Date: 2014–06
  7. By: Addison, John T. (University of South Carolina); Teixeira, Paulino (University of Coimbra); Stephani, Jens (Institute for Employment Research (IAB), Nuremberg); Bellmann, Lutz (Institute for Employment Research (IAB), Nuremberg)
    Abstract: Using linked employer-employee data, this paper estimates the effect of collective bargaining coverage on wages over an interval of continuing decline in unionism. Unobserved firm and worker heterogeneity is dealt with using two establishment sub-samples, comprising collective bargaining joiners and never members on the one hand and collective bargaining leavers and always members on the other, each in combination with subsets of worker job stayers. The counterfactuals are then reversed for robustness checks. Joining a sectoral agreement is found always to produce higher wages, while exiting a sectoral agreement no longer produces wage losses if the transition is to a firm agreement. Leaving a firm agreement to non-coverage also leads to wage reductions, while joining one from non-coverage seems decreasingly favourable. The reverse counterfactuals yield correspondingly smaller estimates (in absolute value) of wage development than reported for the initial counterfactuals. Finally, although small, the union wage gap persists.
    Keywords: Germany, sectoral collective bargaining, firm-level agreements, wages, spell fixed-effects
    JEL: J31 J51 J53
    Date: 2014–06
  8. By: Azevedo, Joao Pedro; David, Antonio C.; Bastos, Fabiano Rodrigues; Pineda, Emilio
    Abstract: The paper combines state-level fiscal data with household survey data to assess the links between sub-national fiscal policy and income inequality in Brazil over the period 1995-2011. The results indicate that a tighter fiscal stance at the sub-national level is not associated with a deterioration in inequality measures. This finding contrasts with the conclusions of several papers in the burgeoning literature on the effects of fiscal consolidation on inequality using national data for OECD economies. In addition, the authors find that a tighter stance is typically positively associated with a measure of"shared prosperity". Hence, the results caution against extrapolating policy implications of the literature focusing on advanced economies to other settings.
    Keywords: Subnational Economic Development,Debt Markets,Inequality,Economic Theory&Research,Poverty Impact Evaluation
    Date: 2014–06–01

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