nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2015‒01‒26
six papers chosen by

  1. The gap between the conditional wage distributions of incumbents and the newly hired employees: decomposition and uniform ordering By Maasoumi, Esfandiar; Pitts, M. Melinda; Wu, Ke
  2. Labor market reform and wage inequality in Korea By Kim, Hyeon-Kyeong; Skott, Peter
  3. Learning New Technology: the Polarization of the Wage Distribution By Manuel Hidalgo-Pérez; Benedetto Molinari
  4. Lifecycle Human Capital Accumulation Across Countries: Lessons From U.S. Immigrants By Tommaso Porzio; Todd Schoellman; Nancy Qian; Benjamin Moll; David Lagakos
  5. Income Inequality, Capitalism and Ethno-linguistic Fractionalization By Jan-Egbert Sturm; Jakob de Haan
  6. Long-Run Determinants of Intergenerational Transfers By John Karl Scholz; Ananth Seshadri; Kamil Sicinski

  1. By: Maasoumi, Esfandiar (Emory University); Pitts, M. Melinda (Federal Reserve Bank of Atlanta); Wu, Ke (Emory University)
    Abstract: We examine the cardinal gap between wage distributions of the incumbents and newly hired workers based on entropic distances that are well-defined welfare theoretic measures. Decomposition of several effects is achieved by identifying several counterfactual distributions of different groups. These go beyond the usual Oaxaca-Blinder decompositions at the (linear) conditional means. Much like quantiles, these entropic distances are well defined inferential objects and functions whose statistical properties have recently been developed. Going beyond these strong rankings and distances, we consider weak uniform ranking of these wage outcomes based on statistical tests for stochastic dominance. We focus the empirical analysis on employees with at least 35 hours of work in the 1996–2012 monthly Current Population Survey. Among other findings, we find incumbent workers enjoy a better distribution of wages, but the attribution of the gap to wage inequality and human capital characteristics varies between quantiles. For instance, highly paid new workers are mainly due to human capital components and, in some years, even better wage structure.
    Keywords: wage gap; metric entropy distance; stochastic dominance; wage distributions; counterfactual analysis; human capital; inequality; labor markets
    JEL: C43 I31
    Date: 2014–11–01
  2. By: Kim, Hyeon-Kyeong (Korea Institute for Health and Social Affairs); Skott, Peter (The University of Massachusetts at Amherst)
    Abstract: Temporary workers make up a sizeable part of the labor force in many countries and typically receive wages that are significantly lower than their permanent counterparts. This paper uses an efficiency wage model to explain the wage gap between temporary and permanent workers. High-performing temporary workers may gain promotion to permanent status, and a high wage to permanent workers therefore serves a dual purpose: it affects the effort of both permanent and temporary workers. Applying the model to the Korean experience, we discuss the effects of the labor market reforms in 1998 on inequality.
    Keywords: Temporary workers, inequality, deregulation, efficiency wages,Korea.
    JEL: J31 D33
    Date: 2014
  3. By: Manuel Hidalgo-Pérez (Department of Economics, Universidad Pablo de Olavide); Benedetto Molinari (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper presents novel evidence regarding the relationship between technological progress, occupational tasks and wage inequality. By applying a counterfactual quantile regression analysis to historic U.S. data, we show that the evolution of wage inequality in the lower echelon of the wage distribution was due entirely to a reduction of within-group wage inequality, which was determined, in turn, by more homogeneous remuneration paid to workers performing routine tasks. Changes in the differential between the remuneration paid to technology-complementary and technology-substitute tasks had only a negligible impact on wage inequality among low-wage workers, which casts some doubt on the validity of basing a theory of wage inequality on routinization-biased technical change operating through a labor demand channel. To reconcile the routinization hypothesis with the data, we develop a model in which skill-heterogeneous workers face endogenous occupational choices and learning costs in connection with operating a new technology. Even in the absence of changes in wage differentials, the model argues that technical change can generate an empirically consistent non-monotone effect on wage inequality by affecting the average level of skills within different groups of workers.
    Keywords: Residual Wage Inequality, Wage Polarization, Price and Composition Effects, Routinization hypothesis, Skill Biased Technical Change, Occupational Tasks, Job Polarization.
    JEL: J24 J31 O33
    Date: 2015–01
  4. By: Tommaso Porzio (Yale University); Todd Schoellman (Arizona State University); Nancy Qian (Yale University); Benjamin Moll (Princeton University); David Lagakos (University of California, San Diego)
    Abstract: Does lifecycle human capital accumulation vary across countries? If so, why? This paper seeks to answer these questions by studying U.S. immigrants, who come from a wide variety of countries but work in a common labor market. We document that returns to potential experience among U.S. immigrants are higher on average for workers coming from rich countries than for those coming from poor countries. To understand this fact we build a Ben-Porath model of lifecycle human capital accumulation that features three potential theories, working respectively through cross-country differences in: selection, skill loss, and human capital accumulation. To distinguish between theories, we use new data on the characteristics of immigrants and non-migrants in a large set of countries. We conclude that the most likely theory is that immigrants from poor countries accumulate relatively less human capital in their home countries before migrating. Our data suggest that lower quality schooling in poor countries may be the proximate cause of their workers’ lower lifecycle human capital accumulation.
    Date: 2014
  5. By: Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jakob de Haan (University of Groningen, NL)
    Abstract: We examine the relationship between capitalism and income inequality for a large sample of countries using an adjusted economic freedom index as proxy for capitalism and Gini coefficients based on gross-income as proxy for income inequality. Our results suggest that there is no robust relationship between economic freedom and income inequality. In addition, we analyze the relationship between income redistribution (measured by the ratio of the income distribution resulting from market processes and the income distribution after redistribution) and ethno-linguistic fractionalization. We find that the impact of ethno-linguistic fractionalization on income redistribution is conditional on the level of economic freedom: countries that have a high degree of fractionalization have less income redistribution, while capitalist countries that have a low degree of fractionalization have more income distribution.
    Keywords: economic freedom, ethno-linguistic fractionalization, income inequality, Economic Freedom, redistribution
    JEL: D31 D63 F02 O11 O15
    Date: 2014–12
  6. By: John Karl Scholz (University of Wisconsin-Madison); Ananth Seshadri (University of Wisconsin-Madison); Kamil Sicinski (University of Wisconsin-Madison)
    Abstract: Understanding whether the elderly are saving adequately is fundamental to understanding whether elderly households are able to maintain reasonable living standards. One factor that affects wealth accumulation is the extent to which parents need to support children and the extent to which children need to support parents. The presence of Social Security may affect intergenerational transfers, but the extent to which it ‘crowds out’ transfers from parents to children is controversial. The ideal dataset to analyze these issues would have detailed information on two or three generations and measures of long range outcomes of parents and their children. The Wisconsin Longitudinal Study (WLS) offers a possibility to analyze the impact of transfer patterns on wealth accumulation. We look at transfers over a long time period, informed by different theories of transfer behavior, as well as how cognitive skills and other attributes earlier in the life-cycle influence transfer and saving behavior later on in life. Long-term transfers are less equally distributed across siblings than short-term transfers, and the sum of transfers and inheritances is less equally distributed than transfers and inheritances alone. Transfers from parents-in-law are positive but statistically insignificantly correlated with the amount of transfers received from one’s own parents. Inter-vivos transfers from parents are not affected by transfers from parents-in-law. We find a strong positive association between the incidence of giving to own children and having received a gift from own parents, conditional on income and net worth.
    Date: 2014–09

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.