nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2016‒04‒09
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Higher education and the fall and rise of inequality By Klaus Prettner; Andreas Schaefer
  2. Education and equality of opportunity: what have we learned from educational reforms? By Holmlund, Helena
  3. Segregated Integration: Recent Trends in the Austrian Gender Division of Labor By Margareta Kreimer; Ricardo Mora
  4. Education policy and intergenerational transfers in equilibrium By Brant Abbott; Giovanni Gallipoli; Costas Meghir; Gianluca Violante
  5. Poverty trends in Turkey By Sirma Demir Șeker; Stephen P. Jenkins
  6. U.S. Inequality, Fiscal Progressivity, and Work Disincentives: An Intragenerational Accounting By Alan J. Auerbach; Laurence J. Kotlikoff; Darryl R. Koehler
  7. National Happiness and Genetic Distance: A Cautious Exploration By Proto, Eugenio; Oswald, Andrew J.
  8. Residential Segregation from Generation to Generation: Intergenerational Association in Socio-Spatial Context among Visible Minorities and the Majority Population in Metropolitan Sweden By Gustafsson, Björn Anders; Katz, Katarina; Österberg, Torun
  9. Moral-Hazard-Free First-Best Unemployment Insurance By Parsons, Donald O.

  1. By: Klaus Prettner (University of Hohenheim, Germany); Andreas Schaefer (ETH Zurich, Switzerland)
    Abstract: We investigate the effect of higher education on the evolution of inequality. In so doing we propose a novel overlapping generations model with three social classes: the rich, the middle class, and the poor. We show that there is an initial phase in which no social class invests in higher education of their children, such that the evolution of inequality is entirely driven by the level of bequests. Once a certain income threshold is surpassed, the rich start to invest in higher education of their children, which partially crowds out bequests and thereby reduces inequality in the short run. The better educated children of the rich, however, enjoy higher incomes and inequality starts to rise again. As time goes by, the middle class and eventually also the poor start to invest in higher education, but now the increase in inequality is driven by different levels of education. As the economy proceeds toward a balanced growth path, educational differences between social groups and thus inequality decline again. We argue that (1) the proposed mechanism has the potential to explain the Ushaped evolution of inequality in rich countries in the second half of the 20th Century and the first decade of the 21st Century and (2) the currently observed increase in inequality is rather a transitory phenomenon.
    Keywords: Higher education, inequality, growth regime switch, middle income trap, Piketty curve
    JEL: I23 I24 I25 O11 O41
    Date: 2016–03
    URL: http://d.repec.org/n?u=RePEc:eth:wpswif:16-240&r=ltv
  2. By: Holmlund, Helena (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: Equality of opportunity has been one of the central ideas governing education policy in the Nordic welfare state. This paper takes its starting point in the shared history of educational reform in the Nordic countries, and presents evidence that the comprehensive school reforms that implied a shift from selective two-tier schooling systems to unified compulsory schools were beneficial for equality of opportunity. This evidence is compared to a choice and voucher reform that in the 1990's introduced pedagogical as well as organizational variety in the education system in Sweden. The Swedish choice reform is unique in an international perspective, and has reshaped the education sector dramatically as a growing number of pupils attend non-public independent schools. The current education debate shows a widespread concern that the introduction of choice has led to a backlash for equality of opportunity. Parental background remains a strong determinant of pupil performance. However, recent research finds no indication that family background has become more important over time in explaining pupil outcomes. The Swedish education system nevertheless faces a number of challenges if it is to level the playing field and create equal opportunities for all pupils: schools are becoming increasingly more segregated, much as a consequence of immigration, and disadvantaged pupils are less likely to exercise school choice compared to their more advantaged peers.
    Keywords: educational reform; equality of opportunity
    JEL: I20 I24
    Date: 2016–03–14
    URL: http://d.repec.org/n?u=RePEc:hhs:ifauwp:2016_005&r=ltv
  3. By: Margareta Kreimer (University of Graz); Ricardo Mora (Universidad Carlos III)
    Abstract: Using micro data from the Austrian Labor Force Survey from 1996 to 2010, this paper explores the effects on gender segregation of two opposing trends in gender differentials: decreasing gender differentials in participation rates and increasing gender differentials in the incidence of part-time jobs. To do so, we propose an index for the gender division of labor and look at the contributions of gender differences in participation, the incidence of part-time jobs, and in occupational choices to its evolution. Our main results show that the gender division of labor is very stable over the 15-year period. This is because the positive effects from the rising female labor force participation rates are counterbalanced by the negative effects from increasing gender differences in the incidence of part-time jobs. We also find that occupational segregation is the most important source of the gender division of labor and that its contribution remains stable throughout the entire period. These results are robust to alternative definitions of economic activity and labor market involvement and are also found after controlling for educational levels and fields.
    Keywords: Gender Division of Labor; Sources of Gender Segregation; Segregation Indexes, Mutual Information
    JEL: J16 J24 J62
    Date: 2016–04
    URL: http://d.repec.org/n?u=RePEc:grz:wpaper:2016-06&r=ltv
  4. By: Brant Abbott (Institute for Fiscal Studies); Giovanni Gallipoli (Institute for Fiscal Studies and University of British Columbia); Costas Meghir (Institute for Fiscal Studies and Yale University); Gianluca Violante (Institute for Fiscal Studies)
    Abstract: This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Driven by both altruism and paternalism, parents make inter vivos transfers to their children. Both cognitive and non-cognitive skills determine the non-pecuniary cost of schooling. Labor supply during college, government grants and loans, as well as private loans, complement parental resources as means of funding college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by 4-5 percentage points in the long-run. Further expansions of government-sponsored loan limits or grants would have no salient aggregate effects because of substantial crowding-out: every additional dollar of government grants crowds out 30 cents of parental transfers plus an equivalent amount through a reduction in student’s labor supply. However, a small group of high-ability children from poor families, especially girls, would greatly benefit from more generous federal aid.
    Keywords: Education, Financial Aid, Intergenerational Transfers, Altruism, Paternalism, Credit Constraints, Equilibrium.
    JEL: E24 I22 J23 J24
    Date: 2016–03
    URL: http://d.repec.org/n?u=RePEc:ifs:ifsewp:16/04&r=ltv
  5. By: Sirma Demir Șeker; Stephen P. Jenkins
    Abstract: This paper provides new evidence about poverty trends in Turkey between 2003 and 2012 and the factors accounting for them. We give particular attention to issues of statistical inference, and the choice of the poverty line and the poverty measure. Our robust conclusion is that absolute poverty declined rapidly between 2003 and 2008 but fell only slightly between 2008 and 2012. Changes in relative poverty were negligible throughout. Using decomposition methods, we argue that the declines in the absolute poverty rate are largely accounted for by changes in the rate of economic growth rather than by distributional changes or changes in population composition.
    Keywords: poverty; Turkey; poverty dominance; consumption; basic needs; poverty line; poverty decomposition
    JEL: C12 D31 I32
    Date: 2015
    URL: http://d.repec.org/n?u=RePEc:ehl:lserod:61012&r=ltv
  6. By: Alan J. Auerbach; Laurence J. Kotlikoff; Darryl R. Koehler
    Abstract: This study combines the 2013 Federal Reserve Survey of Consumer Finances data and the Fiscal Analyzer, a highly detailed life-cycle consumption-smoothing program, to a) measure ultimate economic inequality – inequality in lifetime spending power – within cohorts, b) assess fiscal progressivity within cohorts, c) calculate marginal remaining lifetime net tax rates, taking into account all major federal and state tax and transfer policies, d) evaluate the ability of current income to correctly classify households as rich, middle class, and poor, e) determine whether current-year average net tax rates accurately capture actual fiscal progressivity, and f) determine whether current-year marginal tax rates on labor supply accurately capture actual remaining lifetime marginal net tax rates. We find far less inequality in spending power than in wealth or labor earnings due to the fiscal system’s high degree of progressivity. But U.S. fiscal redistribution generally comes with very high work disincentives for households of all ages, regardless of income class. There is, however, substantial dispersion in marginal net tax rates, which seems hard to reconcile with standard norms of optimal taxation. We also find that current income is a very poor proxy for remaining lifetime resources and that current-year net tax rates can provide a highly distorted picture of true fiscal progressivity and work disincentives.
    JEL: A0 D31 D63 D91 E25 E62 H20 H21 H22 H55
    Date: 2016–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:22032&r=ltv
  7. By: Proto, Eugenio (University of Warwick); Oswald, Andrew J. (University of Warwick)
    Abstract: This paper studies a famous unsolved puzzle in quantitative social science. Why do some nations report such high levels of mental well-being? Denmark, for instance, regularly tops the league table of rich countries’ happiness; Britain and the US enter further down; some nations do unexpectedly poorly. The explanation for the longobserved ranking - one that holds after adjustment for GDP and other socioeconomic variables - is currently unknown. Using data on 131 countries, the paper cautiously explores a new approach. It documents three forms of evidence consistent with the hypothesis that some nations may have a genetic advantage in well-being.
    Keywords: Well-being; international; happiness; genes; 5HTT; countries JEL Classification: I30; I31
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:cge:wacage:273&r=ltv
  8. By: Gustafsson, Björn Anders (University of Gothenburg); Katz, Katarina (Karlstad University); Österberg, Torun (University of Gothenburg)
    Abstract: In this paper, we investigate to what degree young adults live in neighbourhoods that are similar, in terms of relative average household income, to the neighbourhoods in which they grew up. We use regression analysis on register data for all individuals who were born in 1974 and lived in metropolitan Sweden in both 1990 and 2006. During this period, the distribution of income in Sweden became far more unequal, unemployment rose dramatically, earlier housing policies were dismantled, the share of "visible minorities" increased dramatically and residential segregation increased very considerably. We find a correlation between average neighbourhood incomes at these two points in the sample's life cycle of 0.44, which is more than three times as high as the household income correlation. We find that half of the children of "visible minorities" grew up in the poorer quartile of neighbourhoods, and of these almost two-thirds remained in the poorest quartile of neighbourhoods as adults. Several measures indicate that intergenerational persistency in context is lower in metropolitan Sweden than was found in a similar study in the United States. However, it appears, that if visible minority individuals lived in a neighbourhood in the lowest part of the distribution in Sweden as a child, the probability that they will do so also as adults is as high as the corresponding probability for a African-American person in the US.
    Keywords: Sweden, residential segregation, immigrants, intergenerational persistence
    JEL: J15 J62 R23
    Date: 2016–03
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9837&r=ltv
  9. By: Parsons, Donald O. (George Washington University)
    Abstract: Unemployment insurance replacement rates world-wide are well below 100 percent, a fact often attributed to search moral hazard concerns. As Blanchard and Tirole (2008) have illustrated, however, neither search nor layoff moral hazard (firing cost) distortions need arise in first-best insurance plans. Their counterexample depends on the functional form of the state utility function--utility with a single argument, consumption plus monetized leisure. The monetized leisure model is unattractive if leisure is a choice variable, however, and a review of the optimal UI literature reveals a surprising variety of alternative utility function assumptions. A standard neoclassical utility function is used to characterize the utility function conditions required to generate moral-hazard-free (MHF) first-best contracts. Two conditions emerge: (i) the necessary condition that leisure and consumption be substitutes (the cross-derivative of consumption and leisure be negative) and (ii) the sufficient condition that leisure be an inferior good, Rosen (1985). Leisure appears to be a normal good, which rules out the possibility of first-best moral-hazard-free (FB MHF) utility structures, but the first-best UI replacement rate remains very much an open question. The rich empirical literature on the "retirement consumption paradox" suggests that the rate is below 100 percent, easing moral hazard concerns, if not eliminating them.
    Keywords: unemployment insurance, utility functions, moral hazard, firing costs, consumption, retirement
    JEL: J65 J41 J33 J08
    Date: 2016–03
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9824&r=ltv

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