nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2015‒02‒11
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Money, well-being and loss aversion: does an income loss have a greater effect on well-being than an equivalent income gain? By James Banks; Gordon D.A. Brown; Christopher J. Boyce; Alex M. Wood; Andrew E. Clark
  2. Social comparisons, health and well-being By Andrew E. Clark
  3. A quantitative review of Marriage Markets: How Inequality is Remaking the American Family by Carbone and Cahn By Kirsten Cornelson; Aloysius Siow
  4. On the Welfare Cost of Consumption Fluctuations in the Presence of Memorable Goods, Second Version By Rong Hai; Dirk Krueger; Andrew Postlewaite
  5. Measuring rank mobility with variable population size By Walter Bossert; Conchita D'Ambrosio
  6. A Review of the OECD Income Distribution Database By Leonardo Gasparini; Leopoldo Tornarolli
  7. Changes in Wage Inequality in Canada: An Interprovincial Perspective By Fortin, Nicole M.; Lemieux, Thomas
  8. Vertical transmission of overweight: evidence from English adoptees By Joan Costa-Font; Mireia Jofre-Bonet; Julian Le Grand
  9. Reservation wages and the wage flexibility puzzle By Felix Koenig; Alan Manning; Barbara Petrongolo

  1. By: James Banks; Gordon D.A. Brown; Christopher J. Boyce; Alex M. Wood; Andrew E. Clark
    Abstract: Higher income is associated with greater well-being, but do income gains and losses impact on well-being differently? Loss aversion, whereby losses loom larger than gains, is typically examined with relation to decisions about anticipated outcomes. Here, using subjective well-being data from Germany (N = 28,723) and the UK (N = 20,570), we find that experienced falls in income have a larger impact on well-being than equivalent income gains. The effect is not explained by the diminishing returns to well-being of income. Our findings show that loss aversion applies to experienced losses, counteracting suggestions that loss aversion is only an affective forecasting error. Longitudinal studies of the income/well-being relationship may, by failing to take account of loss aversion, have overestimated the positive effect of income for well-being. Moreover, societal well-being may be best served by small and stable income increases even if such stability impairs long-term growth.
    Keywords: loss aversion; money; income; subjective well-being
    JEL: J1
    Date: 2014–01
  2. By: Andrew E. Clark
    Abstract: Health and well-being are socially determined. One of the ways in which this comes about is via social comparisons with other individuals in the same personal, geographic or social networks, with the comparisons referring either to income or other aspects of economic and social life. The existence of such comparison effects with respect to income may help to explain the social gradient in health.
    Keywords: well-being; comparisons; income; unemployment; divorce; religion; social health gradient
    JEL: N0
    Date: 2013–08
  3. By: Kirsten Cornelson; Aloysius Siow
    Abstract: Carbone and Cahn argue that growing earnings inequality and the increased educational attainment of women, relative to men, have led to declining marriage rates for less educated women and an increase in positive assortative matching since the 1970's. These trends have negatively affected the welfare of children, as they increase the proportion of poor, single-female headed households. Using data on marriage markets defined by state, race and time, and the Choo Siow marriage matching function, this review provides a quantitative assessment of these claims. We show that changes in earnings inequality had a qualitatively consistent, but modest quantitative impact on marriage rates and positive assortative matching. Neither changes in the wage distributions nor educational attainments can explain the large decline in marriage rates over this period.
    Keywords: Carbone, Cahn, marriage market, inequality, review
    JEL: J0
    Date: 2015–01–21
  4. By: Rong Hai (Department of Economics, University of Chicago); Dirk Krueger (Department of Economics, University of Pennsylvania); Andrew Postlewaite (Department of Economics, University of Pennsylvania)
    Abstract: We propose a new category of consumption goods, memorable goods, that generate a flow of utility after consumption. We analyze an otherwise standard consumption model that distinguishes memorable goods from other nondurable goods. Consumers optimally choose lumpy consumption of memorable goods. We empirically document differences between levels and volatilities of memorable and other goods expenditures. Memorable goods expenditures are about twice durable goods expenditures and half the volatility. The welfare cost of consumption fluctuations driven by income shocks are overstated if memorable goods are not accounted for and estimates of excess sensitivity of consumption might be due to memorable goods.
    Keywords: Memorable Goods, Consumption Volatility, Welfare Cost
    JEL: D91 E21
    Date: 2014–04–15
  5. By: Walter Bossert (Department of Economics and CIREQ, University of Montreal, Canada); Conchita D'Ambrosio (INSIDE, University of Luxembourg, Luxembourg)
    Abstract: We provide characterizations of a class of rank-mobility measures and of a specific member of this class. These measures are based on the Kemeny distance for orderings. We use the well-known replication-invariance property to ensure that our measures are applicable in variable-population settings. The rank-based approach to mobility has a natural connection with the study of social status. Rank-based measures are widely applied in empirical research but their theoretical foundation is still in need of further investigation, and we consider our approach to be a contribution towards this objective.
    Keywords: Rank mobility, Kemeny distance, variable population.
    JEL: D63
    Date: 2014–12
  6. By: Leonardo Gasparini (CEDLAS-UNLP); Leopoldo Tornarolli (CEDLAS-UNLP)
    Abstract: In this review we expose the OECD Income Distribution Database to critical scrutiny, identifying its strengths and weaknesses. As it is almost inevitable in any critical assessment, we could not avoid being somewhat biased toward highlighting the limitations, without being similarly emphatic about the virtues of the database. To partly compensate for this asymmetry, we should make clear from the outset that this database is a remarkable undertaking that greatly contributes to the study of income inequality in the OECD countries and that deserves full praise for allowing researchers free and easy access to the data. The following comments should then be read bearing always in mind this positive assessment.
    Date: 2014–11
  7. By: Fortin, Nicole M.; Lemieux, Thomas
    Abstract: This paper uses the Canadian Labour Force Survey to understand why the level and dispersion of wages have evolved differently across provinces from 1997 to 2013. The starker interprovincial differences are the much faster increase in the level of wages and decline in wage dispersion in Newfoundland, Saskatchewan, and Alberta. This is accounted for by the growth in the extractive resources sectors, which benefited less educated and younger workers the most. We also find that increases in minimum wages since 2005 are the main reason why wages at the very bottom grew more than in the middle of the distribution.
    Keywords: wage inequality, provinces, minimum wage, extractive resources industries
    JEL: J31 I24
    Date: 2015–01–25
  8. By: Joan Costa-Font; Mireia Jofre-Bonet; Julian Le Grand
    Abstract: We examine the vertical transmission of overweight drawing upon a sample of English children, both adopted and non-adopted, and their families. Our results suggest strong evidence of an intergenerational association of overweight among adoptees, indicating transmission through cultural factors. We find that, when both adoptive parents are overweight, the likelihood of an adopted child being overweight is between 10% and 20% higher than when they are not. We also find that the cultural transmission of overweight is not aggravated by having a full-time working mother, so do not confirm the existence of a female labour market participation penalty on child overweight among adoptees. Overall, our findings, despite subject to data limitations, are robust to a battery of robustness checks, specification and sample selection corrections.
    Keywords: Vertical transmission; cultural transmission; overweight; children; natural parents; Body Mass Index; sample selection
    JEL: D13 I18 Z1
    Date: 2015–01
  9. By: Felix Koenig; Alan Manning; Barbara Petrongolo
    Abstract: Wages are only mildly cyclical, implying that shocks to labour demand have a larger short-run impact on unemployment rather than wages, at odds with the quantitative predictions of the canonical search and matching model. This paper provides an alternative perspective on the wage flexibility puzzle, explaining why the canonical model can only match the observed cyclicality of wages if the replacement ratio is implausibly high. We show that this failure remains even if wages are only occasionally renegotiated, unless the persistence in unemployment is implausibly low. We then provide some evidence that part of the problem comes from the implicit model for the determination of reservation wages. Estimates for the UK and West Germany provide evidence that reservation wages are much less cyclical than predicted even conditional on the observed level of wage cyclicality. We present evidence that elements of perceived “fairness” or “reference points” in reservation wages may address this model failure.
    Keywords: Reservation wages; wage cyclicality; reference points.
    JEL: E24 J31 J64
    Date: 2014–12

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