nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2017‒02‒19
eight papers chosen by
Maximo Rossi
Universidad de la República

  1. Creative destruction and subjective well-being By Philippe Aghion; Ufuk Akcigit; Angus Deaton; Alexandra Roulet
  2. Racial/Ethnic Differences in Non-Work at Work By Daniel S. Hamermesh; Katie R. Genadek; Michael Burda
  3. The fall and rise of inequality By Schäfer, Andreas; Prettner, Klaus
  4. Concentrating on the Fall of the Labor Share By David Autor; David Dorn; Lawrence F. Katz; Christina Patterson; John Van Reenen
  5. Upward Nominal Wage Rigidity By Guimaraes, Paulo; Martins, Fernando; Portugal, Pedro
  6. Global Inequality Dynamics: New Findings from By Facundo Alvaredo; Lucas Chancel; Thomas Piketty; Emmanuel Saez; Gabriel Zucman
  7. Parental Sleep and Employment: Evidence from a British Cohort Study By Joan Costa-Font; Sarah Flèche
  8. Paternalism against Veblen: Optimal Taxation and Non-Respected Preferences for Social Comparisons By Aronsson, Thomas; Johansson-Stenman, Olof

  1. By: Philippe Aghion; Ufuk Akcigit; Angus Deaton; Alexandra Roulet
    Abstract: In this paper we analyze the relationship between turnover-driven growth and subjective well-being. Our model of innovation-led growth and unemployment predicts that: (i) the effect of creative destruction on expected individual welfare should be unambiguously positive if we control for unemployment, less so if we do not; (ii) job creation has a positive and job destruction has a negative impact on well-being; (iii) job destruction has a less negative impact in areas with more generous unemployment insurance policies; and (iv) job creation has a more positive effect on individuals that are more forward-looking. The empirical analysis using cross sectional MSA (metropolitan statistical area)-level and individual-level data provide empirical support to these predictions.
    JEL: I31 J63 J65 O33 O38
    Date: 2016–12
  2. By: Daniel S. Hamermesh; Katie R. Genadek; Michael Burda
    Abstract: Evidence from the American Time Use Survey 2003-12 suggests the existence of small but statistically significant racial/ethnic differences in time spent not working at the workplace. Minorities, especially men, spend a greater fraction of their workdays not working than do white non-Hispanics. These differences are robust to the inclusion of large numbers of demographic, industry, occupation, time and geographic controls. They do not vary by union status, public-private sector attachment, pay method or age; nor do they arise from the effects of equal-employment enforcement or geographic differences in racial/ethnic representation. The findings imply that measures of the adjusted wage disadvantages of minority employees are overstated by about 10 percent.
    JEL: J15 J22 J31
    Date: 2017–01
  3. By: Schäfer, Andreas; Prettner, Klaus
    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 towards 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 u-shaped 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.
    JEL: I24 I25 O11
    Date: 2016
  4. By: David Autor; David Dorn; Lawrence F. Katz; Christina Patterson; John Van Reenen
    Abstract: The recent fall of labor’s share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a “superstar firm” model where industries are increasingly characterized by “winner take most” competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor’s share.
    JEL: J3 L11
    Date: 2017–01
  5. By: Guimaraes, Paulo (Banco de Portugal); Martins, Fernando (Banco de Portugal); Portugal, Pedro (Banco de Portugal)
    Abstract: In Portugal, as in many other countries in continental Europe, the collective wage agreements between trade unions and employer associations that define wage floors for specific job titles are systematically extended to the whole industry. This means that many firms are obliged to increase the wages of their workforce in order to comply with the newly-agreed bargained wages. With some trepidation, we call this phenomenon upward nominal wage rigidity, in close symmetry with the Keynesian notion of downward nominal wage rigidity. In this paper we provide evidence that firms that are more heavily affected by the change in the bargained wage floors decrease their hiring rates and, more importantly, significantly increase their separation rates. As a complement to our analysis, we suggest the estimation of a measure that attempts to disentangle the strength of internal and external wage conditions. Based on this measure we show that firms whose wages are more influenced by external wages exhibit much lower net job creation rates.
    Keywords: wage rigidity, worker flows, collective bargaining, newly-hired workers
    JEL: J31 J52 J23
    Date: 2017–01
  6. By: Facundo Alvaredo; Lucas Chancel; Thomas Piketty; Emmanuel Saez; Gabriel Zucman
    Abstract: This paper presents new findings on global inequality dynamics from the World Wealth and Income Database (, with particular emphasis on the contrast between the trends observed in the United States, China, France, and the United Kingdom. We observe rising top income and wealth shares in nearly all countries in recent decades. But the magnitude of the increase varies substantially, thereby suggesting that different country-specific policies and institutions matter considerably. Long-run wealth inequality dynamics appear to be highly unstable. We stress the need for more democratic transparency on income and wealth dynamics and better access to administrative and financial data.
    JEL: E01 H2 H5 J3
    Date: 2017–02
  7. By: Joan Costa-Font; Sarah Flèche
    Abstract: We show that sleep deprivation exerts a strong negative effect on labour market performance. We exploit variations in child sleep quality to instrument for parental sleep quality. A one-hour reduction in sleep duration significantly decreases labour force participation, the number of hours worked and household income. In addition, we find that low-skilled mothers are more likely to opt out of the labour market and work less hours than high-skilled mothers when exposed to sleep deprivation. We argue that sleep is a major determinant of employment outcomes that needs more attention in designing economic models of time allocation and employment policies.
    Keywords: child sleep, sleep, maternal employment, working hours, job satisfaction, ALSPAC
    JEL: J13 J22 I18 J28
    Date: 2017–02
  8. By: Aronsson, Thomas (Department of Economics, Umeå University); Johansson-Stenman, Olof (School of Business, Economics and Law, University of Gothenburg)
    Abstract: This paper compares optimal nonlinear income tax policies of welfarist and paternalist governments, where the latter does not respect individual preferences regarding relative consumption. Consistent with previous findings, relative consumption concerns under welfarism typically imply higher marginal income tax rates. Remarkably, the optimal marginal tax rules are very similar in the paternalist case. For example, if relative consumption concerns are based on mean value comparisons and all consumers are equally positional, then the first-best tax rules are identical between the governments. Extensive numerical simulations supplement the theoretical results, and make it possible to compare also tax levels and overall redistribution.
    Keywords: nonlinear taxation; redistribution; status; positional goods
    JEL: D62 H21 H23
    Date: 2017–02–10

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