nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2017‒07‒23
eight papers chosen by
Maximo Rossi
Universidad de la República

  1. Gender Wage Gaps and Risky vs. Secure Employment: An Experimental Analysis By SeEun Jung; Chung Choe; Ronald L. Oaxaca
  2. Misperceptions of income distributions: Cross-country evidence from a randomized survey experiment By Elisabeth Bublitz
  3. Challenged by migration: Europe's options By Constant, Amelie F.; Zimmermann, Klaus F.
  4. The Employment Effects of Minimum Wages: Some Questions We Need to Answer By David Neumark
  5. Wealth Accumulation, On the Job Search and Inequality By Shouyong Shi; Gaston Chaumont
  6. Wealth, Top Incomes and Inequality By Frank Cowell; Brian Nolan; Javier Olivera; Philippe Van Kerm
  7. Human Capital Development and Parental Investment in India. By Orazio Attanasio; Costas Meghir; Emily Nix
  8. Macroprudential policy and household wealth inequality By Jean-Francois Carpantier; Javier Olivera; Philippe Van Kerm

  1. By: SeEun Jung (Department of Economics, Inha University); Chung Choe (Hanyang University); Ronald L. Oaxaca (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: 2017–07
  2. By: Elisabeth Bublitz
    Abstract: This paper investigates whether the individual misperception of income distributions helps explain why, opposite to Meltzer and Richard (1981), higher initial inequality levels do not correlate positively with redistribution. I conduct a representative survey experiment in Brazil, France, Germany, Russia, Spain, and the United States, providing a personalized information treatment on the income distribution to a randomly chosen subsample. Most respondents misperceive their own position in the income distribution. These biases di_er by country and the true income position. Misperceptions of the median income relate negatively to misperceived income positions, showing evidence for biased reference points. Correcting misperceptions slightly shifts the demand towards less redistribution in Germany and Russia which appears to be driven by respondents with a negative position bias. Apart from Spain and the US, treatment reactions lead to a convergence of the demand for redistribution across countries. The treatment also alters trust levels in government and beliefs about the importance of luck but not equally across bias types.
    Keywords: Income distribution, biased perceptions, inequality, survey experiment
    JEL: D31 D63 H20
    Date: 2017–04
  3. By: Constant, Amelie F. (Princeton University); Zimmermann, Klaus F. (UNU-MERIT, and Maastricht University)
    Abstract: This paper examines the migration and labour mobility in the European Union and elaborates on their importance for the existence of the EU. Against all measures of success, the current public debate seems to suggest that the political consensus that migration is beneficial is broken. This comes with a crisis of European institutions in general. Migration and labour mobility have not been at the origin of the perceived cultural shift. The EU in its current form and ambition could perfectly survive or collapse even if it solves its migration challenge. But it will most likely collapse, if it fails to solve the mobility issue by not preserving free internal labour mobility and not establishing a joint external migration policy.
    Keywords: labour mobility, migration, European Union, refugees
    JEL: D01 D02 D61 F02 F16 F22 F66
    Date: 2017–03–29
  4. By: David Neumark
    Abstract: The literature on the employment effects of minimum wages is about a century old, and includes hundreds of studies. Yet the debate among researchers about the employment effects of minimum wages remains intense and unsettled. This essay discussed the key questions that have arisen in the past research that, if we can answer them, may prove most useful in making sense of the conflicting evidence. I also focus on additional questions we should consider to better inform the policy debate, in particular in the context of the very high minimum wages coming on line in the United States, about which past research is quite uninformative.
    JEL: J23 J38
    Date: 2017–07
  5. By: Shouyong Shi (Pennsylvania State University); Gaston Chaumont (Pennsylvania State University)
    Abstract: To study equilibrium interactions between wealth accumulation and labor market search, this paper constructs a model where individuals can accumulate non-contingent assets under a borrowing limit, all workers can search for jobs, and search is directed. On-the-job search generates a wage ladder, which affects inequalities in earnings, wealth and consumption. Employed workers have incentive to save as a precaution for exogenous separation into unemployment. In the reverse direction, wealth and earnings affect search decisions by changing the optimal tradeoff between the wage and the matching probability. The calibrated model reveals that wealth significantly reduces a worker's transition rates from unemployment to employment and from one job to another. Moreover, search frictions increase wealth inequality significantly by increasing the mass of wealthy individuals and lengthening the right tail of the wealth distribution. However, the effect of wealth on job search widens frictional wage dispersion by only a small amount. In addition, on-the-job search is important for frictional wage dispersion.
    Date: 2017
  6. By: Frank Cowell; Brian Nolan; Javier Olivera; Philippe Van Kerm
    Abstract: Although it is heartening to see wealth inequality being taken seriously, key concepts are often muddled, including the distinction between income and wealth, what is included in "wealth", and facts about wealth distributions. This chapter highlights issues that arise in making ideas and facts about wealth inequality precise, and employs newly-available data to take a fresh look at wealth and wealth inequality in a comparative perspective. The composition of wealth is similar across countries, with housing wealth being the key asset. Wealth is considerably more unequally distributed than income, and it is distinctively so in the United States. Extending definitions to include pension wealth however reduces inequality substantially. Analysis also sheds light on life-cycle patterns and the role of inheritance. Discussion of the joint distributions of income and wealth suggests that interactions between increasing top income shares and the concentration of wealth and income from wealth towards the top is critical.
    Keywords: Inequality,Wealth,Income,Households,Inheritance,Top Incomes,Cross national,comparative
    Date: 2017–07
  7. By: Orazio Attanasio (University College of London); Costas Meghir (Yale University); Emily Nix (UCL and USC FBE Marshall)
    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. Classification-I14,I15,I25,I32,J13,J24,O 15
    Date: 2017–07
  8. By: Jean-Francois Carpantier (University of Aix-Marseille); Javier Olivera (Luxembourg Institute of Socio-Economic Research); Philippe Van Kerm (Luxembourg Institute of Socio-Economic Research and University of Luxembourg)
    Abstract: Macroprudential policies, such as caps on loan-to-value (LTV) ratios, have become part of the policy paradigm in emerging markets and advanced countries alike. Given that housing is the most important asset in household portfolios, relaxing or tightening access to mortgages may affect the distribution of household wealth in the country. In a stylised model we show that the final level of wealth inequality depends on the size of the LTV ratio, housing prices, credit cost and the strength of a bequest motive; ultimately with no unequivocal effect of LTV ratios on wealth inequality. These trade-offs are illustrated with estimations of ``Gini Recentered Inuence Function'' regressions on household survey data from 12 eurozone countries that participated in the first wave of the Household Finance and Consumption Survey (HFCS). The results show that, among the households with active mortgages, high LTV ratios at the time of acquisition are related to high contributions to wealth inequality today, while house price increases are negatively related to inequality contributions. A proxy for the strength of bequest motives tends to be negatively related with wealth inequality, but credit cost does not show a significant link to the distribution of wealth.
    Keywords: Household Finance, Macroprudential policy, Inequality, LTV ratio, Wealth distribution.
    JEL: D31 E5 E21 G21
    Date: 2017–06

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