nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2016‒12‒18
eleven papers chosen by
Maximo Rossi
Universidad de la República

  2. The Anatomy of the Wage Distribution: How do Gender and Immigration Matter? By Suphanit Piyapromdee; Jean Marc Robin; Rasmus Lentz
  3. Promoting Youth Employment in Europe: Evidence-based Policy Lessons By Eichhorst, Werner; Rinne, Ulf
  4. Hires and Separations in Equilibrium By Edward P. Lazear; Kristin McCue
  5. The Demand for Bad Policy when Voters Underappreciate Equilibrium Effects By Ernesto Dal Bó; Pedro Dal Bó; Erik Eyster
  6. Globalization and Wage Inequality By Helpman, Elhanan
  7. Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers By Ali Enami; Nora Lustig; Rodrigo Aranda
  8. A Gendered Analysis of Age Discrimination among Older Jobseekers in Australia By Michael McGann; Rachel Ong; Dina Bowman; Alan Duncan; Helen Kimberley; Simon Biggs
  9. Macroeconomic Conditions and Well-being: Do Social Interactions Matter? By Emilio, Colombo; Valentina, Rotondi; Luca, Stanca;
  10. Labor Market Participation, Political Ideology and Distributive Preferences By Simona Demel; Abigail Barr; Luis Miller; Paloma Ubeda
  11. The Life-cycle Benefits of an Influential Early Childhood Program By Jorge Luis Garcia; James J. Heckman; Duncan Ermini Leaf; Maria Jose Prados

  1. By: Kanbur, Ravi; Stiglitz, Joseph E.
    Abstract: One often heard counter to the concern on rising income and wealth inequality is that it is wrong to focus on inequality of outcomes in a “snapshot.” Intergenerational mobility and “equality of opportunity”, so the argument goes, is what matters for normative evaluation. In response to this counter, we ask what pattern of intergenerational mobility leads to lower inequality not between individuals but between the dynasties to which they belong? And how does this pattern in turn relate to commonly held views on what constitutes equality of opportunity? We revive and revisit here our earlier contributions which were in the form of working papers (Kanbur and Stiglitz (1982, 1986) in order to engage with the current debate. Focusing on bistochastic transition matrices in order to hold constant the steady state snapshot income distribution, we develop an explicit partial ordering which ranks matrices on the criterion of inequality between infinitely lived dynasties. A general interpretation of our result is that when comparing two transition matrices, if one matrix is “further away” from the identity matrix then it will lead to lower dynastic inequality. More specifically, the result presents a computational procedure to check if one matrix dominates another on dynastic inequality. We can also assess “equality of opportunity”, defined as identical prospects irrespective of starting position. We find that this is not necessarily the mobility pattern which minimizes dynastic inequality.
    Keywords: Agricultural and Food Policy, Consumer/Household Economics,
    Date: 2015–03
  2. By: Suphanit Piyapromdee (University College London); Jean Marc Robin (Sciences Po); Rasmus Lentz (University of Wisconsin Madison)
    Abstract: ​Workers with similar observed characteristics may have different wage paths because their unobserved characteristics are rewarded differently or because they have different mobility patterns. For example, controlling for observed characteristics, a native worker may have a steeper wage profile than his counterpart immigrant because he has different unobserved characteristics or because he is more likely to be employed at a more productive firm (likewise for male versus female workers). Understanding the contributions of worker and firm heterogeneity to wage and mobility differentials can shed light on many key economic issues such as wage inequality, statistical discrimination and wage assimilation of immigrants. In this paper, we propose an estimation method that allows for unrestricted interactions between worker and firm unobserved characteristics in both wages and the moving probability. Related to Bonhomme, Lamadon and Manresa (2014) (BLM), our method identifies double sided unobserved heterogeneity through an application of the EM-algorithm. The analysis estimates both wage and mobility patterns using Danish matched employer-employee data and decomposes wage dispersion into mobility and wage variation across firms and workers.
    Date: 2016
  3. By: Eichhorst, Werner (IZA); Rinne, Ulf (IZA)
    Abstract: Youth unemployment has become a severe economic and societal problem in many European countries. Based on the existing empirical evidence on different policy options, this chapter draws lessons for future policy making in order to effectively promote youth employment in Europe. In conclusion, one should not be overly optimistic by expecting any short-term remedies. Although effective policy tools are available, they largely require forward-looking structural reforms.
    Keywords: labor policy, labor market institutions, vocational education and training, employment protection, minimum wage, activation
    JEL: J08 J13 J21 J24 J38 J61 J68 J88
    Date: 2016–12
  4. By: Edward P. Lazear; Kristin McCue
    Abstract: Hiring occurs primarily to fill vacant slots that occur when workers separate. Equivalently, separation occurs to move workers to better alternatives. A model of efficient separations yields several specific predictions. Labor market churn is most likely when mean wages are low and the variance in wages is high. Additionally, over the business cycle, churn decreases during recessions, with hires falling at the beginning of recessions and separations declining later to match hiring. Furthermore, the young disproportionately bear the brunt of employment declines. More generally, hires and separations are positively correlated over time as well as across industry and firm. These predictions are borne out in the LEHD microdata at the economy and firm level.
    Date: 2016–01
  5. By: Ernesto Dal Bó; Pedro Dal Bó; Erik Eyster
    Abstract: Although most of the political-economy literature blames inefficient policies on institutions or politicians' motives to supply bad policy, voters may themselves be partially responsible by demanding bad policy. In this paper, we posit that voters may systematically err when assessing potential changes in policy by underappreciating how new policies lead to new equilibrium behavior. This biases voters towards policy changes that create direct benefits—welfare would rise if behavior were held constant—even if these policies lower welfare because people adjust behavior. Conversely, voters are biased against policies that impose direct costs even if they induce larger indirect benefits. Using a lab experiment, we find that a majority of subjects vote against policies that, while inflicting negative direct effects, would help them to overcome social dilemmas and thereby increase welfare; conversely, subjects support policies that, while producing direct benefits, create social dilemmas and ultimately hurt welfare; both mistakes arise because subjects fail to fully anticipate the equilibrium effects of new policies. More precisely, we establish that subjects systematically underappreciate the extent to which policy changes affect other people's behavior, and that these mistaken beliefs exert a causal effect on the demand for bad policy.
    JEL: D02 D7 H2
    Date: 2016–12
  6. By: Helpman, Elhanan
    Abstract: Globalization has been blamed for rising inequality in rich and poor countries. Yet the views of many protagonists in this debate are not based on evidence. To help form an evidence-based opinion, I review in this paper the theoretical and empirical literature on the relationship between globalization and wage inequality. While the initial analysis that started in the early 1990s focused on a particular mechanism that links trade to wages, subsequent studies have considered several other channels, and the quantitative assessment of the size of these influences has been carried out in multiple studies. Building on this research, I conclude that trade played an appreciable role in increasing wage inequality, but that its cumulative effect has been modest, and that globalization does not explain the preponderance of the rise in wage inequality within countries.
    Keywords: college wage premium; inequality; International Trade; residual inequality
    JEL: F10 F61 F66
    Date: 2016–12
  7. By: Ali Enami (Tulane University and CEQ Institute.); Nora Lustig (Stone Center for Latin American Studies, Department of Economics, Tulane University.); Rodrigo Aranda (Tulane University and CEQ Institute.)
    Abstract: This paper provides a theoretical foundation for analyzing the redistributive effect of taxes and transfers for the case in which the ranking of individuals by pre-fiscal income remains unchanged. We show that in a world with more than a single fiscal instrument, the simple rule that progressive taxes or transfers are always equalizing not necessarily holds, and offer alternative rules that survive a theoretical scrutiny. In particular, we show that the sign of the marginal contribution unambiguously predicts whether a tax or a transfer is equalizing or not.
  8. By: Michael McGann (School of Social and Political Sciences, University of Melbourne); Rachel Ong (Bankwest Curtin Economic Centre, Curtin University); Dina Bowman (Research and Policy Centre, Brotherhood of St Laurence); Alan Duncan (Bankwest Curtin Economic Centre, Curtin University); Helen Kimberley (Research and Policy Centre, Brotherhood of St Laurence); Simon Biggs (School of Social and Political Sciences, University of Melbourne)
    Abstract: This paper investigates how age and gender interact to shape older jobseekers’ experiences of age discrimination within a mixed methods framework. The analysis reveals that there has been a considerable decline in levels of perceived ageism among older men nationally relative to older women. These findings suggest that the nature of ageism experienced by older women is qualitatively different from men. Hence, policy responses to ageism need to be far more tailored in their approach because present, one-size-fits all, business case approaches rely on an overly narrow concept that obscures the gender and occupational dimensions of ageism.
    Keywords: Age discrimination, ageism, gender, older workers
    JEL: J01 J16 J71
    Date: 2016–05
  9. By: Emilio, Colombo; Valentina, Rotondi; Luca, Stanca;
    Abstract: This paper investigates the role played by social interactions in explaining the effects of macroeconomic conditions on well-being. Using survey data for a representative sample of Italian individuals, we find that social interactions play a dual role as both moderators and mediators of the effects of macroeconomic conditions. On the one hand, the well-being of people who spend more time with their friends or go out more often is less sensitive to the effects of macroeconomic fluctuations. On the other hand, social interactions are negatively affected by worsening macroeconomic conditions, thus playing a relevant role in the transmission of macroeconomic shocks to subjective well-being. More specifically, the negative impact of macroeconomic downturns on frequency of going out and active participation in associations contributes to explain the adverse effects of recessions on satisfaction with life and with individual life domains.
    Keywords: macroeconomic fluctuations, unemployment, subjective well-being
    JEL: E32 I31 I38
    Date: 2016–12–13
  10. By: Simona Demel (School of Economics and Business, University of the Basque Country (UPV/EHU)); Abigail Barr (Department of Economics, University of Nottingham); Luis Miller (School of Economics and Business, University of the Basque Country (UPV/EHU)); Paloma Ubeda (School of Economics and Business, University of the Basque Country (UPV/EHU))
    Abstract: Using a political-frame-free, lab-in-the-field experiment, we investigate the effects of employment status and political ideology on preferences for redistribution. The experiment consists of a real-effort task, followed by a four-player dictator game. In one treatment, initial endowments depend on participants’ performance in the real-effort task, i.e., they are earned, in the other, they are randomly determined.We find that being employed or unemployed affects revealed redistributive preferences, while the political ideology of the employed and unemployed does not. In contrast, the revealed redistributive preferences of students are strongly related to their political ideologies. The employed and right-leaning students redistribute earnings less than windfalls, the unemployed and left-leaning students make no such distinction. We conclude that, when people are not exposed to the sometimes harsh realities of the labor market, their redistributive preferences depend on their political ideology but, when they are exposed, the effect of those realities overrules their ideology.
    Keywords: economic status, lab-in-the-field experiments,left-right scale, redistribution
    Date: 2016
  11. By: Jorge Luis Garcia (The University of Chicago); James J. Heckman (The University of Chicago); Duncan Ermini Leaf (Leonard D. Schaeffer Center for Health Policy and Economics); Maria Jose Prados (Dornsife Center for Economic and Social Research)
    Abstract: This paper estimates the large array of long-run benefits of an influential early childhood program targeted to disadvantaged children and their families. It is evaluated by random assignment and follows participants through their mid-30s. The program is a prototype for numerous interventions currently in place around the world. It has substantial beneficial impacts on (a) health and the quality of life, (b) the labor incomes of participants, (c) crime, (d) education, and (e) the labor income of the mothers of the participants through subsidizing their childcare. There are substantially greater monetized benefits for males. The overall rate of return is a statistically significant 13.0% per annum with an associated benefit/cost ratio of 6.3. These estimates account for the welfare costs of taxation to finance the program. They are robust to a wide variety of sensitivity analyses. Accounting for substitutes to treatment available to families randomized out of treatment shows that boys benefit much less than girls from low quality alternative childcare arrangements.
    Keywords: childcare, early childhood education, gender differences, Health, long-term prediction, quality of life, randomized trials, substitution bias
    JEL: J13 I28 C93
    Date: 2016–12

This nep-ltv issue is ©2016 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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.