nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2016‒08‒21
eleven papers chosen by
Maximo Rossi
Universidad de la República

  1. Allocating Effort and Talent in Professional Labor Markets By Derek Neal; Gadi Barlevy
  2. Does personality matter? : The impact of the big five on the migrant and gender wage gaps By Brenzel, Hanna; Laible, Marie-Christine
  3. Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment By Dustmann, Christian; Schönberg, Uta; Stuhler, Jan
  4. Understanding the Dynamics of Labor Income Inequality in Latin America By Carlos Rodríguez-Castelán; Luis F. López-Calva; Nora Lustig; Daniel Valderrama
  5. (In)Equality and (In)Justice By Jasso, Guillermina
  6. Pareto models, top incomes, and recent trends in UK income inequality By Jenkins, Stephen P.
  7. Delving into the Demand Side: Changes in Workplace Specialization and Job Polarization By Cortes, Guido Matias; Salvatori, Andrea
  8. Poverty and Aging By Marchand, Joseph; Smeeding, Timothy
  9. The Health Equivalent Adjusted Level (HEAL): Taking an Ordinal Approach to the Measurement of a Society's Health Achievements By SILBER, Jacques; XU, Yongsheng
  10. Wages and Labor Market Slack: Making the Dual Mandate Operational By David G. Blanchflower; Adam S. Posen
  11. Gender Wage Gaps and Risky vs. Secure Employment: An Experimental Analysis By Jung, Seeun; Choe, Chung; Oaxaca, Ronald L.

  1. By: Derek Neal (University of Chicago); Gadi Barlevy (Federal Reserve Bank of Chicago)
    Abstract: In many professional service firms, new associates work long hours while competing in up-or-out promotion contests. Our model explores why these firms require young professionals to take on heavy work loads while facing significant risks of dismissal. We argue that the productivity of skilled partners in professional service firms, e.g. law, consulting, investment banking, public accounting, etc, is quite large relative to the productivity of their peers who are competent and experienced but not well-suited to the partner role. Therefore, these firms adopt personnel policies that facilitate the identi- fication of new partners. In our model, both heavy work loads and up-or-out rules serve this purpose. Market participants learn more about new workers who perform more tasks, and when firms replace experienced associates with new less productive workers, they gain the opportunity to identify talented professionals who will have long careers as partners. Both of these personnel practices are costly. However, when the gains from increasing the number of talented partners exceed these costs, firms employ both practices in tandem. We present evidence on life-cycle patterns of hours and earnings among lawyers that support our claim that both heavy work loads and up-or-out rules are screening mechanisms.
    Date: 2016
  2. By: Brenzel, Hanna (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Laible, Marie-Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "We investigate whether the Big Five Personality Dimensions contribute to explaining gender and migrant wage gaps by using a linked employer-employee dataset. We expand the scarce literature concerning personality traits and gender wage gaps in Germany and we provide first evidence for the relationship between the Big Five and the migrant wage gap. Our results reveal that the genders differ in their average personality traits, as do migrants and natives. Further, we find significant associations between the Big Five and wages. The magnitude of this relationship varies across the gender and the migratory status. The results of Oaxaca-Blinder wage decompositions suggest that the Big Five significantly contribute to explaining gender and migrant wage gaps." (Author's abstract, IAB-Doku) ((en))
    JEL: J15 J16 J24 J31
    Date: 2016–08–15
  3. By: Dustmann, Christian (University College London); Schönberg, Uta (University College London); Stuhler, Jan (Universidad Carlos III de Madrid)
    Abstract: By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standard models of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or non-employment, suggesting that "outsiders" shield "insiders" from the increased competition.
    Keywords: immigration, wage effects, labor supply elasticity, internal migration
    JEL: J21 J22 J61 R23
    Date: 2016–08
  4. By: Carlos Rodríguez-Castelán (Poverty and Equity Global Practice, World Bank); Luis F. López-Calva (Poverty and Equity Global Practice, World Bank); Nora Lustig (Department of Economics, Tulane University); Daniel Valderrama (Poverty and Equity Global Practice, World Bank)
    Abstract: Since the early 2000s, after a long period of wide and persistent gaps, Latin America has experienced a steady decline in income inequality. This paper presents evidence of a trend reversal in labor income inequality, which is considered the main factor behind such a decline in income inequality across the region. Our analysis shows that, while labor income inequality increased during the 1990s, with heterogeneous experiences across countries, it fell in a synchronized way across countries beginning in the early 2000s. This systematic decline was supported by an expansion in real hourly earnings among the bottom of the wage distribution and, to a lesser extent, the middle part of the earnings distribution, thus reducing both upper and lower tail inequality. This trend reversal is explained by a lower dispersion of earnings among workers with observable different attributes and by a much less extensive dispersion of residual labor inequality. Regarding the earnings differentials among workers with observable different attributes, our analysis concludes that the decline in labor inequality in Latin America has been closely associated with a reduction in the college/primary education premium and in the urban-rural earnings gap, coupled with a steady drop in the high school/primary education premium, which accelerated markedly since the 2000s, as well as a reduction in the experience premium across all age-groups.
    Keywords: Inequality, Labor Incomes, Education Premium, Experience Premium, Latin America.
    JEL: D63 E24 J21 J31 O54
    Date: 2016–08
  5. By: Jasso, Guillermina (New York University)
    Abstract: Understanding the exact connection between inequality and justice is important because justice is classically regarded as the first line of defense against self-interest and inequality. Absent a strong and clear link between inequality and justice, the sense of justice would not awaken to exert its moral suasion, no matter how great the inequality or how fast its increase. We obtain exact links between economic inequality and three parameters of the justice evaluation distribution–the mean, median, and variance–across a comprehensive set of inequality measures and a substantial starter set of just reward scenarios. This work shows that there is no general necessary connection between inequality and justice–inequality effects can be nonexistent, or can occur in opposite directions. There is, however, a striking pattern in some justice situations: As economic inequality increases, the average of the justice evaluations moves leftward, deeper into the territory of unjust underreward, and the distribution stretches outward, increasing the gulf between underrewarded and overrewarded and hollowing out the middle class. Further work specifying and strengthening the logical foundation will help guide development of sharp new empirical strategies for deeper understanding of the inequality-justice connection in all its manifestations.
    Keywords: lognormal distribution, fairness, justice, inequality, Pareto distribution, power-function distribution, Gini coefficient, Atkinson inequality, Theil MLD, general inequality parameter, justice evaluation, justice evaluation function, justice evaluation distribution
    JEL: C02 C65 D31 D6 I3
    Date: 2016–08
  6. By: Jenkins, Stephen P.
    Date: 2016–08–04
  7. By: Cortes, Guido Matias (University of Manchester); Salvatori, Andrea (ISER, University of Essex)
    Abstract: This paper offers the first study of job polarization in Great Britain using workplace level data. We document widespread and increasing occupational specialization within establishments, along with substantial heterogeneity in specialization within industries. Changes in the specialization profiles of workplaces account for most of the changes in the aggregate occupational shares between 1998 and 2011. The sharp rise in the fraction of workplaces specializing in non-routine tasks is associated with a large increase in the concentration of non-routine workers in workplaces that specialize in such occupations. We find no evidence of a decline in routine employment among establishments that report the adoption of new technologies, as would be expected from the standard routine-biased technological change hypothesis. Instead, we uncover new evidence that suggests that the increase in non-routine cognitive workplaces is linked to the growth in outsourcing of cognitive tasks.
    Keywords: job polarization, technology, firm-level data, outsourcing
    JEL: J21 J23
    Date: 2016–08
  8. By: Marchand, Joseph (University of Alberta, Department of Economics); Smeeding, Timothy (University of Wisconsin-Madison, Robert M. La Follette School of Public Affairs)
    Abstract: This chapter explores the relationship between poverty and aging, in terms of its measurement and trends, as well as its alleviation, with particular attention on the most vulnerable individuals at each end of the age distribution. The measurement addresses both the definition of poverty and its aggregation over various age groups. The trends highlight a significant reduction in poverty among the elderly and a gradual increase in poverty among children and working age individuals, both in the United States and across the greater developed world, over the past fifty years. The alleviation of poverty is attributed to the labor market and to social expenditure and its associated policies, which have been especially effective for the elderly. A summary of key contributions and a discussion follow that set forth an agenda for further research and policy.
    Keywords: aging; children; distribution; elderly; income support; labor market; poverty; public policy; social expenditure
    JEL: D30 D60 H50 I30 J10 J20 J30
    Date: 2016–08–16
  9. By: SILBER, Jacques; XU, Yongsheng
    Abstract: This paper, following earlier work on the cardinal measurement of ordinal health inequality, proposes an axiomatic derivation of the health achievement in a population when only ordinal information on health is available. An empirical illustration based on EU data for 27 countries during the period 2005-2012 is then presented which confirms the usefulness of the new measure of health achievement that has been introduced.
    Keywords: axiomatic approach, European Union, health achievement, ordinal information
    JEL: I14 I31
    Date: 2016–08
  10. By: David G. Blanchflower (Peterson Institute for International Economics); Adam S. Posen (Peterson Institute for International Economics)
    Abstract: In this paper we examine the impact of rises in inactivity on wages in the US economy and find evidence of a statistically significant negative effect. These nonparticipants exert additional downward pressure on wages over and above the impact of the unemployment rate itself. This pattern holds across recent decades in the US data, and the relationship strengthens in recent years when variation in participation increases. We also examine the impact of long-term unemployment on wages and find it has no different effect from that of short-term unemployment. Our analysis provides strong empirical support, we argue, for the assessment that continuing labor market slack is a key reason for the persistent shortfall in inflation relative to the Federal Open Market Committee’s (FOMC) 2 percent inflation goal. Further, we suggest our results point towards using wage inflation as an additional intermediate target for monetary policy by the FOMC.
    Keywords: unemployment, wages, inactivity, monetary policy, spare capacity, labor market
    JEL: J01 J11 J21 J23 J38 J64
    Date: 2014–09
  11. By: Jung, Seeun (Inha University); Choe, Chung (Hanyang University); Oaxaca, Ronald L. (University of Arizona)
    Abstract: In addition to discrimination, market power, and human capital, gender differences in risk preferences might also contribute to observed gender wage gaps. We conduct laboratory experiments in which subjects choose between a risky (in terms of exposure to unemployment) and a secure job after being assigned in early rounds to both types of jobs. Both jobs involve the same typing task. The risky job adds the element of a known probability that the typing opportunity will not be available in any given period. Subjects were informed of the exogenous risk premium being offered for the risky job. Women were more likely than men to select the secure job, and these job choices accounted for between 40% and 77% of the gender wage gap in the experiments. That women were more risk averse than men was also manifest in the Pratt-Arrow Constant Absolute Risk Aversion parameters estimated from a random utility model adaptation of the mean-variance portfolio model.
    Keywords: occupational choice, gender wage differentials, risk aversion, lab experiment
    JEL: J16 J24 J31 C91 D81
    Date: 2016–08

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