nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2017‒07‒16
eight papers chosen by
Maximo Rossi
Universidad de la República

  1. Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK's SPI Adjustment? By Burkhauser, Richard V.; Herault, Nicolas; Jenkins, Stephen P.; Wilkins, Roger
  2. Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France (1800-2014) By B. Garbinti; J. Goupille-Lebret; T. Piketty
  3. Occupational Choice and Matching in the Labor Market By Aloysius Siow; Eric Mak
  4. Immigration, Occupations, and Local Labor Markets: Theory and Evidence from the U.S. By Lin Tian; Jonathan Vogel; Gordon Hanson; Ariel Burstein
  5. Human Capital Development and Parental Investment in India By Orazio Attanasio; Costas Meghir; Emily Nix
  6. The Difficult School-To-Work Transition of High School Dropouts: Evidence from a Field Experiment By Cahuc, Pierre; Carcillo, Stéphane; Minea, Andreea
  7. Tony Atkinson and His Legacy By Brandolini, Andrea; Jenkins, Stephen P.; Micklewright, John
  8. Paying more for less: why don't households in Tanzania take advantage of bulk discounts? By Brian Dillon; Joachim De Weerdt; Ted O'Donoghue

  1. By: Burkhauser, Richard V. (Cornell University); Herault, Nicolas (Melbourne Institute of Applied Economic and Social Research); Jenkins, Stephen P. (London School of Economics); Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research)
    Abstract: Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK's pioneering 'SPI adjustment' method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of 'very rich' individuals are adjusted using information from 'very rich' individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under-coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.
    Keywords: inequality, income inequality, survey under-coverage, SPI adjustment, top incomes, tax return data, survey data
    JEL: D31 C81
    Date: 2017–06
  2. By: B. Garbinti; J. Goupille-Lebret; T. Piketty
    Abstract: This paper combines different sources and methods (income tax data, inheritance registers, national accounts, wealth surveys) in order to deliver consistent, unified wealth distribution series for France over the 1800-2014 period. We find a large decline of the top 10% wealth share from the 1910s to the 1980s, mostly to the benefit of the middle 40% of the distribution. Since the 1980s-90s, we observe a moderate rise of wealth concentration, with large fluctuations due to asset price movements. In effect, rising inequality in saving rates and rates of return pushes toward rising wealth concentration, in spite of the contradictory effect of housing prices. We develop a simple simulation model highlighting how the combination of unequal saving rates, rates of return and labor earnings leads to large multiplicative effects and high steady-state wealth concentration. Small changes in the key parameters appear to matter a lot for long-run inequality. We discuss the conditions under which rising concentration is likely to continue in the coming decades.
    Keywords: saving rate, steady-state, wealth inequality.
    JEL: D31 E21 N34
    Date: 2017
  3. By: Aloysius Siow (University of Toronto); Eric Mak (Shanghai University of Finance and Economics)
    Abstract: Every labor market have many occupations. Within most occupation, the distribution of earnings is single peaked and right skewed. Firm and establishment effects have large explanatory power in log earnings regressions. Within several countries, most of the recent changes in earnings inequality are due to changes in earnings inequality across firms and not within firms. The paper investigates a model of team production consistent with these findings. Workers differ by cognitive and non-cognitive skills. The labor market sorts workers into different teams and roles within teams. The model integrates the Roy model of occupational choice with Becker’s model of positive assortative matching. We use the model to quantitatively evaluate the role of increased educational attainment in reducing recent earnings inequality in Brazil.
    Date: 2017
  4. By: Lin Tian (Columbia University); Jonathan Vogel (Columbia); Gordon Hanson (University of California, San Diego); Ariel Burstein (UCLA)
    Abstract: In this paper, we show that labor-market adjustment to immigration differs across tradable and nontradable occupations. Theoretically, we derive a simple condition under which the arrival of foreign-born labor crowds native-born workers out of (or into) immigrant-intensive jobs, thus lowering (or raising) relative wages in these occupations, and explain why this process differs within tradable versus within nontradable activities. Using data for U.S. commuting zones over the period 1980 to 2012, we find that consistent with our theory a local influx of immigrants crowds out employment of native-born workers in more relative to less immigrant-intensive nontradable jobs, but has no such effect within tradable occupations. Further analysis of occupation wage bills is consistent with adjustment to immigration within tradables occurring more through changes in output (versus changes in prices) when compared to adjustment within nontradables, thus confirming the theoretical mechanism behind differential crowding out between the two sets of jobs. We then build on these insights to construct a quantitative framework to evaluate the consequences of counterfactual changes in U.S. immigration. Reducing inflows from Latin America, which tends to send low-skilled immigrants to specific U.S. regions, raises local wages for native-born workers in more relative to less-exposed nontradable occupations by much more than for similarly differentially exposed tradable jobs. By contrast, increasing the inflow of high-skilled immigrants, who are not so concentrated geographically, causes tradables and nontradables to adjust in a more similar fashion. For the nontradable-tradable distinction in labor-market adjustment to be manifest, as we find to be the case in our empirical analysis, regional economies must vary in their exposure to an immigration shock.
    Date: 2017
  5. By: Orazio Attanasio (University College London, IFS, NBER); Costas Meghir (Cowles Foundation, Yale University); Emily Nix (Dept. of Economics, UCL)
    Abstract: We estimate production functions for cognition and health for children aged 1-12 in India, where over 70 million children aged 0-5 are at risk of developmental deficits. The inputs into the production functions include parental background, prior child cognition and health, and child investments. We use income and local prices to control for the endogeneity of investments. We find that cognition is sensitive to investments throughout the age range we consider, while health is mainly affected by early investments. We also find that inputs are complementary, and crucially that health is very important in determining cognition. Our paper contributes in understanding how investments and early health outcomes are important in child development.
    Keywords: Early childhood development, Human capital, India, Nonlinear factor models, Young lives survey, Health, Cognition
    JEL: I14 I15 I25 I32 J13 J24 O15
    Date: 2015–12
  6. By: Cahuc, Pierre (Ecole Polytechnique, Paris); Carcillo, Stéphane (OECD); Minea, Andreea (Sciences Po, Paris)
    Abstract: This paper investigates the effects of the labor market experience of high school dropouts four years after leaving school by sending fictitious résumés to real job postings in France. Compared to those who have stayed unemployed since leaving school, the callback rate is not raised for those with employment experience, whether it is subsidized or non-subsidized, in the market or non-market sector, if there is no training accompanied by skill certification. In particular, we find no stigma effect associated with subsidized or non-market sector work experience. Moreover, training accompanied by skill certification improves youth prospects only when the local unemployment rate is sufficiently low, which occurs in one fifth of the commuting zones only.
    Keywords: youth, unemployment, training
    JEL: J08 J60
    Date: 2017–06
  7. By: Brandolini, Andrea (Bank of Italy); Jenkins, Stephen P. (London School of Economics); Micklewright, John (University College London)
    Abstract: Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across economics. His death on 1 January 2017 deprived the world of both an intellectual giant and a deeply committed public servant in the broadest sense of the term. This collective tribute highlights the range, depth and importance of Tony's enormous legacy, the product of over fifty years' work.
    Keywords: Anthony B. Atkinson, inequality, poverty, public economics
    JEL: D3 H00 I3
    Date: 2017–06
  8. By: Brian Dillon; Joachim De Weerdt; Ted O'Donoghue
    Abstract: Despite average per-capita consumption of roughly $1 per day, many Tanzanian households do not take advantage of bulk discounts for staple goods. Using transaction diaries covering nearly 57,000 purchases by 1,499 households over two weeks, we find that through bulk purchasing the average household could spend 8.9% less on observed quantities (or consume 15.6% more at observed expenditure). We investigate several explanations for the observed purchasing patterns, and find evidence consistent with inattention, worries about over-consumption, avoidance of social taxation, and coordination problems. Contrary to prior work, we find little evidence that liquidity constraints prevent poor households from bulk purchasing.
    Keywords: bulk discounts, liquidity constraints, inattention, social taxes, coordination costs, self-control problems, consumer behavior
    Date: 2017–05

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