nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2014‒08‒20
eleven papers chosen by

  1. Trust and the Welfare State: The Twin Peaks Curve By Yann Algan; Pierre Cahuc; Marc Sangnier
  2. Moving Towards Estimating Lifetime Intergenerational Economic Mobility in the UK By Paul Gregg; Lindsey Macmillan; Claudia Vittori
  3. Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill By Borowczyk-Martins, Daniel; Bradley, Jake; Tarasonis, Linas
  4. Can Income Mobility Reduce Income Inequality? Evidence From Turkey By Aytekin Guven; Basak Dalgic; Aysit Tansel
  5. Skill Disparities and Unequal Family Outcomes By Lundberg, Shelly
  6. Trade Liberalization, Inequality and Poverty in Brazilian States By Marta Castilho; Marta Menéndez; Aude Sztulman
  7. Can Arts-Based Interventions Enhance Labor Market Outcomes among Youth? Evidence from a Randomized Trial in Rio de Janeiro By Calero, Carla; Corseuil, Carlos Henrique; Gonzales, Veronica; Kluve, Jochen; Soares, Yuri
  8. Accessibility and the Allocation of Time: Changes in Travel Behavior 1990-2010 By Martin P. Brosnan; David Levinson
  9. Family Structure and the Education Gender Gap: Evidence from Italian Provinces By Bertocchi, Graziella; Bozzano, Monica
  10. Changes in Bargaining Status and Intra-Plant Wage Dispersion in Germany: A Case of (Almost) Plus Ça Change? By Addison, John T.; Kölling, Arnd; Teixeira, Paulino
  11. Can Increasing Inequality Be a Steady State? By Lars Osberg

  1. By: Yann Algan (Sciences Po); Pierre Cahuc (CREST-ENSAE, École Polytechnique, IZA, CEPR); Marc Sangnier (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    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: Paul Gregg (Department of Social and Policy Sciences, University of Bath); Lindsey Macmillan (Department of Quantitative Social Science, Institute of Education); Claudia Vittori (Department of Social and Policy Sciences, University of Bath)
    Abstract: Estimates of intergenerational economic mobility that use point in time measures of income and earnings suffer from lifecycle and attenuation bias. We consider these issues for the National Child Development Study (NCDS) and British Cohort Study (BCS) for the first time, highlighting how common methods used to deal with these biases do not eradicate these issues. To attempt to overcome this, we offer the first estimates of lifetime intergenerational economic mobility for the UK. In doing so, we discuss a third potential bias, regularly ignored in the literature, driven by spells out of work. When all three biases are considered, our best estimate of lifetime intergenerational economic persistence in the UK is 0.43, significantly higher than previously thought. We discuss why there is good reason to believe that this is still a lower bound.
    Keywords: Intergenerational mobility, measurement, income inequality
    JEL: I20 J62 J24
    Date: 2014–08–07
  3. By: Borowczyk-Martins, Daniel (University of Bristol); Bradley, Jake (University of Bristol); Tarasonis, Linas (Aix-Marseille University)
    Abstract: In the US labor market the average black worker is exposed to a lower employment rate and earns a lower wage compared to his white counterpart. Lang and Lehmann (2012) argue that these mean differences mask substantial heterogeneity along the distribution of workers' skill. In particular, they argue that black-white wage and employment gaps are smaller for high-skill workers. In this paper we show that a model of employer taste-based discrimination in a labor market characterized by search frictions and skill complementarities in production can replicate these regularities. We estimate the model with US data using methods of indirect inference. Our quantitative results portray the degree of employer prejudice in the US labor market as being strong and widespread, and provide evidence of an important skill gap between black and white workers. We use the model to undertake a structural decomposition and conclude that discrimination resulting from employer prejudice is quantitatively more important than skill differences to explain wage and employment gaps. In the final section of the paper we conduct a number of counterfactual experiments to assess the effectiveness of different policy approaches aimed at reducing racial differences in labor market outcomes.
    Keywords: employment and wage differentials, discrimination, job search
    JEL: J31 J64 J71
    Date: 2014–05
  4. By: Aytekin Guven (Department of Economics, Abant İzzet Baysal University); Basak Dalgic (Department of Public Finance, Hacettepe University); Aysit Tansel (Department of Economics, Middle East Technical University, Institute for the Study of Labor (IZA) Bonn, Germany and Economic Research Forum (ERF) Cairo, Egypt)
    Abstract: Increasing income inequality has made economists focus on income mobility issue which enables individuals to relocate their income position up to higher income groups. Income mobility and its effects on inequalities have begun to be investigated following 2000s and rather for developed countries while there are only a limited number of studies to reach a general conclusion regarding the issue. This study aims to contribute to the literature by analyzing income inequality and income mobility together for a developing country Turkey which is one of the countries having most unequal income distributions. The results of this study can be summarized as follows; i) income mobility increases over time but this mobility raises income inequality instead of reducing it. ii) the individuals at the two tails of the distribution are more mobile with respect to the ones in the middle. iii) 30 percent of the individuals at the lowest income group become unemployed while only 1.5 percent of them move up to the highest income group in the considering sub-periods.
    Keywords: Income Mobility, Income Inequality, Turkey.
    JEL: D31 D63 J60
    Date: 2014–07
  5. By: Lundberg, Shelly (University of California, Santa Barbara)
    Abstract: The prevalence and stability of marriage has declined in the United States as the economic lives of men and women have converged. Family change has not been uniform, however, and the widening gaps in marital status, relationship stability, and childbearing between socioeconomic groups raise concerns about child wellbeing in poor families and future inequality. This paper uses data from a recent cohort of young adults – Wave IV of the National Longitudinal Study of Adolescent Health – to investigate whether disparities in cognitive ability and non-cognitive skills contribute to this gap. Blinder-Oaxaca decompositions of differences in key family outcomes across education groups show that, though individual non-cognitive traits are significantly associated with union status, relationship instability and single motherhood, they collectively make no significant contribution to the explanation of educational gaps for almost all of these outcomes. Measured skills can explain as much as 25 percent of differences in these outcomes by family background (measured by mother's education), but this effect disappears when own education is added to the model. Both cognitive and non-cognitive skills are strongly predictive of education attainment but, conditional on education, explain very little of the socioeconomic gaps in family outcomes for young adults.
    Keywords: cognitive ability, non-cognitive skills, family, marriage, inequality
    JEL: I24 J12 J24
    Date: 2014–07
  6. By: Marta Castilho (Universidade Federal Fluminense - Universidade Federal Fluminense); Marta Menéndez (DIAL - Développement, institutions et analyses de long terme - Institut de recherche pour le développement [IRD], UP9 - Université Paris 9, Dauphine - Université Paris IX - Paris Dauphine, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA)); Aude Sztulman (LEDa - DIAL - Laboratoire d'Economie de Dauphine - Equipe Economie de la mondialisation et du développement - Université Paris IX - Paris Dauphine)
    Abstract: This paper studies the impact of globalization on household income inequality end poverty using detailed microdata across Brazilian states from 1987 to 2005. Results suggest that the Brazilian states more exposed to tariff cuts experienced smaller reductions in household poverty and inequality. Contrasting results emerge when we disaggregate into rural and uraban areas within states: trade liberalization contributes to growth in poverty and inequality in urban areas and may be linked to evidence indicating that state poverty and inequality in Brazil decrease with rising export exposure and increase with import penetration.
    Keywords: Trade Liberalization ; Poverty and inequality ; Latin America ; Brazilian states
    Date: 2014–03–28
  7. By: Calero, Carla (Inter-American Development Bank); Corseuil, Carlos Henrique (Institute for Applied Economic Research (IPEA), Brazil); Gonzales, Veronica (Inter-American Development Bank); Kluve, Jochen (Humboldt University Berlin, RWI); Soares, Yuri (Inter-American Development Bank)
    Abstract: This paper provides findings of a small-scale, innovative labor training program that uses expressive arts and theatre as a pedagogical tool. The corresponding life skills training component is combined with a technical component teaching vocational skills. To our knowledge, this is the first paper to rigorously evaluate the effectiveness of a training program constructed around expressive arts. Using a randomized assignment of favela youth into program and control groups, we look at the short-run treatment effects on a comprehensive set of outcomes including employment and earnings as well as measures of personality traits and risk behavior. We find positive short-run employment and earnings impacts five months after the program finalized; no impacts are found for shorter periods. These short-run impacts are economically very large, compared to those typically found in the literature: a 33.3 per cent increase in the probability of being employed, and a 23.6 per cent increase in earnings. We find no evidence of significant program impacts on other outcomes, including personality-related traits, providing evidence that these traits may not be malleable for young adults in the short-run. We argue that the estimated labor market impacts are due to a combination of both skills formation and signaling of higher quality workers to employers.
    Keywords: labor market training, youths, randomized controlled trial, life skills
    JEL: J24 J68 I38
    Date: 2014–05
  8. By: Martin P. Brosnan; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Using detailed travel surveys conducted by the Metropolitan Council of the Minneapolis/St Paul (Twin Cities) Region in Minnesota for 1990, 2000-2001, and 2010-2011, this paper conducts a detailed analysis of journey-to-work times, activity allocation and accessibility. This study corroborates previous studies showing that accessibility is a significant factor in commute durations. Adjusting land use patterns to increase the number of workers in job-rich areas and the number of jobs in labor-rich areas is a reliable way of reducing auto commute durations. The finding that accessibility and commute duration have a large affect on the amount of time spent at work shows that activity patterns are influenced by transportation and the urban environment in very impactful ways. The descriptive results of this analysis show a measurable decline in the time people spend outside of their homes as well as the amount of time people spend in travel over the past decade. Although trip distances per trip are not getting any shorter, the willingness to make those trip is declining, and as a result fewer kilometers are being traveled and less time on average is being allocated to travel.
    Keywords: Accessibility, Transport Geography, Travel Behavior, Networks
    JEL: R40
    Date: 2014
  9. By: Bertocchi, Graziella (University of Modena and Reggio Emilia); Bozzano, Monica (University of Modena and Reggio Emilia)
    Abstract: We investigate the determinants of the education gender gap in Italy in historical perspective with a focus on the influence of family structure. We capture the latter with two indicators: residential habits (nuclear vs. complex families) and inheritance rules (partition vs. primogeniture). After controlling for economic, institutional, religious, and cultural factors, we find that over the 1861-1901 period family structure is a driver of the education gender gap, with a higher female to male enrollment rate ratio in upper primary schools being associated with nuclear residential habits and equal partition of inheritance. We also find that only the effect of inheritance rules persists over the 1971-2001 period.
    Keywords: education gender gap, Italian Unification, family types, inheritance, institutions, religion, convergence
    JEL: E02 H75 I25 J16 N33 O15
    Date: 2014–07
  10. By: Addison, John T. (University of South Carolina); Kölling, Arnd (Berlin School of Economics and Law); Teixeira, Paulino (University of Coimbra)
    Abstract: Recent studies have pointed to the association between declining collective bargaining coverage and rising overall wage inequality. This association holds more or less across-the-board, at least for broad swathes of recent history. That said, the exact contribution of deununionization is a matter of debate, perhaps no more so than in Germany, our case study. The present paper takes a less conventional approach to this particular source of rising inequality by examining intra-plant wage dispersion in the wake of establishments either exiting from or entering into collective agreements. Several measures of inequality are constructed for German establishments over the twelve-year period 1996-2008, an interval of continuously declining union representation. Using linked employer-employee data, our estimation strategy hinges upon the identification of comparable groups of establishments and on both instantaneous and medium- to long-term changes in the wage structure. A modest widening effect on dispersion of exiting from a sectoral agreement is detected in the data once we effect a comparison across observationally-equivalent individuals. The converse does not apply in respect of joiners. The scale of the former effect casts doubt on some of the more exaggerated claims of the importance of deunionization to wage inequality and the resurgence of Germany more generally.
    Keywords: Germany, collective bargaining, deunionization, intra-plant wage inequality, sectoral agreement exits and accessions
    JEL: J31 J51 J53
    Date: 2014–07
  11. By: Lars Osberg
    Abstract: Historically, discussions of income inequality have emphasised cross-sectional comparisons of levels of inequality of income. These comparisons have been used to argue that countries with more inequality are less healthy, less democratic, more crime-infested, less happy, less mobile and less equal in economic opportunity, but such comparisons implicitly presume that current levels of inequality are steady state outcomes. However, the income distribution can only remain stable if the growth rate of income is equal at all percentiles of the distribution. This paper compares long-run levels of real income growth at the very top, and for the bottom 90% and bottom 99% in the United States, Canada and Australia to illustrate the uniqueness of the post-WWII period of balanced growth (and consequent stability in the income distribution). The ‘new normal’ of the United States, Canada and Australia is ‘unbalanced’ growth – specifically, over the last thirty years the incomes of the top 1% have grown significantly more rapidly than those of everyone else. The paper asks if auto-equilibrating market mechanisms will spontaneously equalise income growth rates and stabilise inequality. It concludes that the more likely scenario is continued unbalanced income growth. This, in turn, implies, on the economic side, consumption and savings flows which accumulate to changed stocks of indebtedness, financial fragility, and periodic macroeconomic crises; and, on the social side, to increasing inequality of opportunity and political influence. Greater economic and socio-political instabilities are therefore the most likely consequence of increasing income inequality over time. Souvent, la question des inégalités de revenu est traitée essentiellement à travers des comparaisons transversales entre les niveaux d’inégalité de revenu, et on se fonde sur ces comparaisons pour conclure que dans les pays les plus concernés, les inégalités de revenu se traduisent par un moins-disant en matière de santé, de démocratie, de criminalité, de bonheur et d’opportunités économiques. Mais ces comparaisons posent implicitement que les niveaux actuels d’inégalité sont constants. Or, la distribution des revenus ne peut être constante que si les revenus croissent au même rythme à tous les centiles de la distribution. Dans le présent document, on compare les niveaux de croissance réelle des revenus à long terme tout au sommet de l’échelle ainsi que pour les 90 % et 99 % inférieurs aux États-Unis, au Canada et en Australie afin d’illustrer la particularité propre à la période post-1945, caractérisée par une croissance équilibrée (et donc par la stabilité dans la distribution des revenus). Aux États-Unis, au Canada et en Australie, la « nouvelle norme » est celle d’une croissance « déséquilibrée » - ces trente dernières années, les revenus des 1 % les plus riches ont augmenté bien plus rapidement que tous les autres. Ce document pose la question suivante : des mécanismes d’équilibrage du marché vont-ils spontanément égaliser les taux de croissance du revenu et stabiliser l’inégalité ? Il conclut que le scenario le plus probable est la persistance d’un déséquilibre de la croissance des revenus, qui aura des répercussions économiques (variation des stocks d’endettement due à l’évolution de la consommation et de l’épargne, fragilité financière et déclenchement périodique de crises macroéconomiques) et sociales (hausse des inégalités des chances et des inégalités de poids politique). Le creusement continu des inégalités de revenu se traduira donc selon toute vraisemblance par une instabilité économique et socio-politique accrue.
    Date: 2014–06–18

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