nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2015‒05‒02
thirteen papers chosen by
Maximo Rossi
Universidad de la República

  1. Equality of Opportunity: Theory and Evidence By Ferreira, Francisco H. G.; Peragine, Vito
  2. Conspicuous Work: Peer Working Time, Labour Supply and Happiness for Male Workers By Collewet, Marion; de Grip, Andries; de Koning, Jaap
  3. Optimal Social Assistance and Unemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings By Haan, Peter; Prowse, Victoria L.
  4. Uncovering the Gender Participation Gap in the Crime Market By Gavrilova, Evelina; Campaniello, Nadia
  5. Permanent Income and Subjective Well-Being By Albert Park; Shu Cai
  6. Partial Insurance and Investments in Children By Carneiro, Pedro; Ginja, Rita
  7. Home-Ownership, Unemployed's Job Search Behavior and Post-Unemployment Outcomes By Caliendo, Marco; Gielen, Anne C.; Mahlstedt, Robert
  8. Is Self-employment a Way to Escape from Skill Mismatches? By Albiol Sanchez, Judit; Diaz-Serrano, Luis; Teruel, Graciela
  9. The Dynamics of Capital Accumulation in the US: Simulations after Piketty By Philippe De Donder; John E. Roemer
  10. Wages and Labor Market Slack: Making the Dual Mandate Operational (DRAFT) By David G. Blanchflower; Adam S. Posen
  11. Partial Insurance and Investments in Children By Carneiro, Pedro; Ginja, Rita
  12. The Big Trade-Off in the World of Labor By Zimmermann, Klaus F.
  13. Poverty, Inequality and Macroeconomic Instability By Ricardo Paes de Barros; Carlos Corseuil; Rosane Mendonça; Maurício Cortez Reis

  1. By: Ferreira, Francisco H. G. (World Bank); Peragine, Vito (University of Bari)
    Abstract: Building on earlier work by political philosophers, economists have recently sought to define a concept of equity that accommodates the fairness of reward to individual responsibility and effort, while allowing for the existence of some inequalities which are unfair and should be compensated. This paper – commissioned as a chapter for the Oxford Handbook of Well Being and Public Policy – provides a critical review of the economic literature on equality and inequality of opportunity. A simple 'canonical model' of equal opportunity is proposed, and used to explore the two fundamental concepts in this (relatively) new theory of social justice: the principles of compensation and reward. Ex-ante and ex-post versions of the compensation principle are presented, and the tensions between them are discussed. Different approaches to the measurement of inequality of opportunity – and empirical applications – are reviewed, and implications for the measurement of poverty and of the rate of economic development are discussed.
    Keywords: equality of opportunity, inequality of opportunity, compensation, reward
    JEL: D63 I32
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp8994&r=ltv
  2. By: Collewet, Marion (Maastricht University); de Grip, Andries (ROA, Maastricht University); de Koning, Jaap (Erasmus University Rotterdam)
    Abstract: This paper uncovers 'conspicuous work' as a new form of status seeking that can explain social interactions in labour supply. We analyse how peer working time relates to both labour supply and happiness for Dutch male workers. Using a unique measure of peer weekly working time, we find that men's working time increases with that of their peers and that peer working time is negatively related to men's happiness. These findings are consistent with a 'conspicuous work' model, in which individuals derive status from working time.
    Keywords: well-being, social norms, working hours
    JEL: J22 I31 D62
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9011&r=ltv
  3. By: Haan, Peter (DIW Berlin); Prowse, Victoria L. (Cornell University)
    Abstract: We analyze empirically the optimal design of social insurance and assistance programs when families obtain insurance by making labor supply choices for both spouses. For this purpose, we specify a structural life-cycle model of the labor supply and savings decisions of singles and married couples. Partial insurance against wage and employment shocks is provided by social programs, savings and the labor supplies of all adult household members. The optimal policy mix focuses mainly on Social Assistance, which provides a permanent universal household income floor, with a minor role for temporary earnings-related Unemployment Insurance. Reflecting that married couples obtain intra-household insurance by making labor supply choices for both spouses, the optimal generosity of Social Assistance decreases in the proportion of married individuals in the population. The link between optimal program design and the family context is strongest in low-educated populations.
    Keywords: life-cycle labor supply, family labor supply, unemployment insurance, social assistance, design of benefit programs, intra-household insurance, household savings, employment risk, added worker effect
    JEL: J18 J68 H21 I38
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp8980&r=ltv
  4. By: Gavrilova, Evelina (Norwegian School of Economics); Campaniello, Nadia (University of Essex)
    Abstract: Using data from the U.S. National Incident Based Reporting System we document a gender gap in the number of crimes committed in the property crime market: only 30% of the crimes are committed by women. Starting from the classical Becker's model on crime we investigate some potential reasons for the participation gap looking at the differential incentives, measured in terms of earnings and probability of arrest. We observe that women obtain on average 32% less criminal earnings and face a 10% higher probability of arrest with respect to males. Once we account for type of crime and the attributes of offending, such as weapons, we find that the earnings gap is zero on average, while females still face a 1% higher probability of arrest than males. We also observe that females sort into offense types, characterized by a lower variation in the earnings risk, which reveals that females in the crime market are more risk averse than males. Furthermore, we analyze the participation gap by looking at the perceived incentives. We estimate the elasticities of crime with respect to the expected earnings and to the expected probability of not being arrested for both genders. We find that males respond to both these incentives, while females respond less to the incentive for higher earnings than males and they do not respond to the probability of arrest. Finally, we use a Blinder-Oaxaca type decomposition technique to measure crime differentials between females and males that arise due to different responses to incentives. We find that, in a counter factual scenario where the female elasticities increase to the level of the male ones, women would commit 40% more crimes than they actually do, reducing the male-female participation gap by almost 50%.
    Keywords: participation gap, gender discrimination, crime
    JEL: J71 J16 K42
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp8982&r=ltv
  5. By: Albert Park (Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Shu Cai (Department of Economics, Hong Kong University of Science and Technology)
    Abstract: We provide a new explanation for the stronger relationship between income and subjective wellbeing (SWB) found in cross-sectional versus panel studies based on the predictions of a rational expectations model of utility maximization with permanent and transitory income shocks. The model predicts that SWB is affected by unanticipated rather than anticipated income, and is more influenced by permanent rather than transitory income shocks. We hypothesize that share of cross-sectional income variation accounted for by permanent income is greater than the share of changes in income over time accounted for by unanticipated shocks to permanent income. We test our predictions using a unique panel dataset from rural China which includes subjective expectations of future income and actual income in each wave, enabling us to separately identify the effects of unanticipated permanent and transitory income shocks. The results confirm the predictions, providing support for the importance of permanent income in explaining SWB.
    Keywords: subjective well-being, permanent income, transitory income
    JEL: O12 I31
    Date: 2015–02
    URL: http://d.repec.org/n?u=RePEc:hku:wpaper:201508&r=ltv
  6. By: Carneiro, Pedro (University College London); Ginja, Rita (Uppsala University)
    Abstract: This paper studies the impact of permanent and transitory shocks to income on parental investments in children. We use panel data on family income, and an index of investments in children in time and goods, from the Children of the National Longitudinal Survey of Youth. Consistent with the literature focusing on non-durable expenditure, we find that there is only partial insurance of parental investments against permanent income shocks, but the magnitude of the estimated responses is small. We cannot reject the hypothesis full insurance against temporary shocks. Another interpretation of our findings is that there is very little insurance available, but the fact that skill is a non-separable function of parental investments over time results in small reactions of these investments to income shocks, especially at later ages.
    Keywords: insurance, human capital, consumption
    JEL: D12 D91 I30 J1
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp8979&r=ltv
  7. By: Caliendo, Marco (University of Potsdam); Gielen, Anne C. (Erasmus University Rotterdam); Mahlstedt, Robert (IZA)
    Abstract: Although home-ownership has been shown to restrict geographic labor mobility and to affect job search behavior of unemployed, there is no evidence so far on how it affects their future re-employment outcomes. We use two waves of detailed German survey data of newly unemployed individuals to study the effect of home-ownership on the job search behavior of unemployed and their re-employment outcomes. We show that unemployed who own a home are less willing to move and also less likely to apply for jobs for which one would have to move. However, we do not find any evidence for compensations of their restricted mobility by more intensive (more search channels or applications) or different (more active or informal) search behavior. Furthermore, we find that home-ownership does not seem to harm the employment prospects of the unemployed. Although the re-employment probability in the short-run is slightly lower, we find that after one year home-owning unemployed have found better re-employment jobs, in terms of wages and job satisfaction, than their renting counterparts.
    Keywords: job search behavior, home-ownership, search effort, reservation wage, unemployment duration
    JEL: J64 J61
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp8972&r=ltv
  8. By: Albiol Sanchez, Judit (Universitat Rovira i Virgili); Diaz-Serrano, Luis (Universitat Rovira i Virgili); Teruel, Graciela (National Council for the Evaluation of Social Development Policy (CONEVAL))
    Abstract: During the last two decades, skill mismatches have become one of the most important issues of policy concern in the EU (European Commission, 2008). Hence, the literature has stressed the necessity to reduce skill mismatches. We contribute to this literature by analyzing the impact of the transition from salaried employment to self-employment on self-reported skill mismatches. To do so, we resort to the European Community Household Panel (ECHP) covering the period 1994-2001. Using panel data, we track individuals over time and measure their self-reported skill mismatch before and after the transition. Our empirical findings indicate not only that the average self-employee is less likely to declare being skill-mismatched but also that those individuals who transit from salaried employment to self-employment reduce their probability of skill mismatches after the transition.
    Keywords: self-employment, skill mismatches, salaried employment
    JEL: L26 J24 B23
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9008&r=ltv
  9. By: Philippe De Donder (Toulouse School of Economics); John E. Roemer (Dept. of Political Science & Cowles Foundation, Yale University)
    Abstract: We calibrate a sequence of four nested models to study the dynamics of wealth accumulation. Individuals maximize a utility function whose arguments are consumption and investment. They desire to accumulate wealth for its own sake — this is not a life-cycle model. A competitive firm produces a single good from labor and capital; the rate of return to capital and the wage rate are market-clearing. The second model introduces political lobbying by the wealthy, whose purpose is to reduce the tax rate on capital income. The third model introduces differential rates of return to capitals of different sizes. The fourth model introduces inheritance and intergenerational mobility.
    Keywords: Piketty, Dynamics of wealth accumulation, Intergenerational mobility, Kantian equilibrium
    JEL: D31 D58 E37
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1998&r=ltv
  10. By: David G. Blanchflower (Peterson Institute for International Economics); Adam S. Posen (Peterson Institute for International Economics)
    Abstract: The new chair of the Federal Reserve, Janet Yellen, contends that there is considerable slack in the labor market, and that the Fed is monitoring several measures of labor market conditions to assess that problem. This Policy Brief provides new analysis on one of these measures, the US labor force participation rate. It questions the view that much of the decline is structural in nature, attributable to demographic factors. Underemployment—the phenomenon of workers wanting to work more hours but who are unable to do so—has also kept wages down. The implication for Federal Reserve policy is that low labor participation provides an additional measure of labor market slack, and that a substantial portion of US workers inactive in the labor market should not be treated as gone forever, but should be expected to spring back into the labor market if demand rises to create jobs. The Fed should be trying to address this issue along with trying to stabilize prices.
    Date: 2014–04
    URL: http://d.repec.org/n?u=RePEc:iie:pbrief:pb14-10&r=ltv
  11. By: Carneiro, Pedro; Ginja, Rita
    Abstract: This paper studies the impact of permanent and transitory shocks to income on parental investments in children. We use panel data on family income, and an index of investments in children in time and goods, from the Children of the National Longitudinal Survey of Youth. Consistent with the literature focusing on non-durable expenditure, we find that there is only partial insurance of parental investments against permanent income shocks, but the magnitude of the estimated responses is small. We cannot reject the hypothesis full insurance against temporary shocks. Another interpretation of our findings is that there is very little insurance available, but the fact that skill is a non-separable function of parental investments over time results in small reactions of these investments to income shocks, especially at later ages.
    Keywords: human capital; insurance
    JEL: J1
    Date: 2015–04
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:10557&r=ltv
  12. By: Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: The world is changing rapidly. This paper describes key shifts and it discusses their likely impacts on employment-related aspects. Labor market pressures are felt around the globe, and robots and automation increasingly become reality. However, there will be no "end of work". Rather, it is that work will take on different forms. Important innovations are required nonetheless to carefully and smartly balance the positives and negatives of the changing workforce and workplace. But societies have already shown their ability to cope with great changes in the past.
    Keywords: robots, automation, productivity, technological change, demographic change, informality, flexibility
    JEL: J08 J24 O33 O38 O15
    Date: 2015–05
    URL: http://d.repec.org/n?u=RePEc:iza:izapps:pp100&r=ltv
  13. By: Ricardo Paes de Barros; Carlos Corseuil; Rosane Mendonça; Maurício Cortez Reis
    Abstract: Over the past seventeen years the Brazilian macroeconomic performance has been considerably weaker than in previous decades. Inflation reached unprecedented levels and economic growth declined considerably. Despite the overall perception that macroeconomic performance is closely related to poverty and inequality, very few quantitative estimates are available in Brazil and elsewhere about the relationship between macroeconomic performance and income distribution. In this study we use monthly time series to access the relation between this weak and unstable macroeconomic performance on poverty and inequality. The estimates using aggregated and pooling time series reveal that inflation seems to have little association with inequality and particularly with poverty. However, since the variation in the monthly inflation rate over the past seventeen years has been very substantial, the associated variation of poverty became quite significant. As far as the impact of unemployment is concerned, the estimates indicate relatively weak relation between this variable and poverty or inequality. Finally, time-varying regressions indicate that the major results of this study, although applicable to most of the period analyzed, may not necessarily reflect the current situation. In fact, the time-varying estimates reveal a sharp recent decline in the association between unemployment and poverty or inequality, consistent with the drop in poverty and inequality in 1995, despite a considerably increase in the unemployment rate. There is also evidence that the relation between inflation and poverty or inequality declines as inflation accelerates. Nas últimas duas décadas o Brasil experimentou uma performance macroeconômica muito aquém da registrada para o período imediatamente anterior. A inflação alcançou níveis sem precedentes e o crescimento econômico desacelerou consideravelmente. Apesar da percepção generalizada de que a performance macroeconômica estaria relacionada aos níveis de pobreza e desigualdade, existem poucas estimativas quantitativas sobre esta relação para o Brasil, ou mesmo para qualquer outro país. Neste artigo usamos séries de tempo mensais para estimar a relação entre a performance macroeconômica e os níveis de pobreza e desigualdade no Brasil. As estimativas usando tanto dados agregados como um pooling de séries regionais revelam que a inflação parece estar pouco relacionada com pobreza e desigualdade. No entanto, quando se leva em consideração que a variação na taxa mensal de inflação foi bastante alta, mostra-se que as variações correspondentes nos níveis de pobreza e desigualdade são significativos. Com relação ao desemprego as estimativas indicam uma tênue relação desta variável com pobreza e desigualdade. Finalmente, quando se considera a possibilidade de estas relações estimadas variarem ao longo do período analisado, foi identificada uma mudança nas estimativas relacionadas ao período mais recente (pós-real). De fato, a relação entre desemprego e pobreza ou desigualdade se torna bem mais tênue no final do período, o que parece consistente com a queda da pobreza observada a partir de 1995 quando o desemprego assume uma trajetória ascendente. Também há evidências de que a relação entre inflação e pobreza ou desigualdade é mais fraca nos períodos de aceleração inflacionária.
    Date: 2015–01
    URL: http://d.repec.org/n?u=RePEc:ipe:ipetds:0093&r=ltv

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