nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2018‒01‒15
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Intergenerational mobility, school inequality and social segregation By ARENAS Andreu; HINDRIKS Jean
  2. Labor Market Search, Informality and Schooling Investments By Bobba, Matteo; Flabbi, Luca; Levy, Santiago
  3. How do Latin American migrants in the U.S. stand on schooling premium? What does it reveal about education quality in their home countries? By Daniel Alonso-Soto; Hugo Ñopo
  4. Taxation, redistribution and observability in social dilemmas By Daniel Brent; Lata Gangadharan; Anca Mihut; Marie Villeval
  5. The Welfare Implications of Addictive Substances: A Longitudinal Study of Life Satisfaction of Drug Users By Moschion, Julie; Powdthavee, Nattavudh
  6. On measuring social tensions: with applications to Brazil By Neri, Marcelo Cortes; Kakwani, Nanak
  7. Productivity and Pay: Is the link broken? By Anna M. Stansbury; Lawrence H. Summers
  8. Government Programs Can Improve Local Labor Markets, But Do They? A Re-Analysis of Ham, Swenson, Imrohoroğlu, and Song (2011) By Neumark, David; Young, Timothy
  9. Wealthier, Happier and More Self-Sufficient: When Anti-Poverty Programs Improve Economic and Subjective Wellbeing at a Reduced Cost to Taxpayers By Titus Galama; Robson Morgan; Juan E. Saavedra

  1. By: ARENAS Andreu (Université catholique de Louvain, CORE, Belgium); HINDRIKS Jean (Université catholique de Louvain, CORE, Belgium)
    Abstract: We study the role of school inequality and social segregation for human capital accu-mulation, inequality and intergenerational mobility. We augment the Becker-Tomes-Solon model of intergenerational mobility, introducing a regime switch model of social segregation at school. Depending on the social background of their parents, children have di erent probability of access to di erent school quality. Abstracting from genetic transmission of ability, we focus on the e ect of social segregation and school inequality on parental in-vestments, education and income levels and inequality, and on intergenerational mobility. We obtain that segregation and school inequality have ambiguous e ects on parental in-vestment. However, we also find that segregation and school inequality raise the average level of educational attainment and income. This is due to the complementarity between parental investment and school quality. Lastly, we show that the e ect of segregation and school inequality on the intergenerational mobility is ambiguous and depends on the distribution of parental income.
    Keywords: Intergenerational mobility; education, school system; equality of opportu-nity; segregation
    JEL: I22 J62
    Date: 2017–06–30
    URL: http://d.repec.org/n?u=RePEc:cor:louvco:2017019&r=ltv
  2. By: Bobba, Matteo; Flabbi, Luca; Levy, Santiago
    Abstract: We develop a search and matching model where firms and workers are allowed to form matches (jobs) that can be formal or informal. Workers optimally choose the level of schooling acquired before entering the labor market and whether searching for a job as unemployed or as self-employed. Firms optimally decide the formality status of the job and bargain with workers over wages. The resulting equilibrium size of the informal sector is an endogenous function of labor market parameters and institutions. We focus on an increasingly important institution: a "dual" social protection system whereby contributory benefits in the formal sector coexist with non-contributory benefits in the informal sector. We estimate preferences for the system - together with all the other structural parameters of the labor market using labor force survey data from Mexico and the time-staggered entry across municipalities of a non-contributory social program. Policy experiments show that informality may be reduced by either increasing or decreasing the payroll tax rate in the formal sector. They also show that a universal social security benefit system would decrease informality, incentivize schooling, and increase productivity at a relative fiscal cost that is similar to the one generated by the current system.
    Keywords: Labor market frictions; Search and matching; Nash bargaining; Informality; Returns to schooling
    Date: 2017–11
    URL: http://d.repec.org/n?u=RePEc:tse:wpaper:32223&r=ltv
  3. By: Daniel Alonso-Soto (Organization for Economic Co-operation and Development (OECD)); Hugo Ñopo (Grupo de Análisis para el Desarrollo (GRADE))
    Abstract: Indicators for quality of schooling are not only relatively new in the world but also unavailable for a sizable share of the world’s population. In their absence, some proxy measures have been devised. One simple but powerful idea has been to use the schooling premium for migrant workers in the U.S. (Bratsberg and Terrell, 2002). In this paper we extend this idea and compute measures for the schooling premium of immigrant workers in the U.S over a span of five decades. Focusing on those who graduated from either secondary or tertiary education in Latin American countries, we present comparative estimates of the evolution of such premia for both schooling levels. The results show that the schooling premia in Latin America have been steadily low throughout the whole period of analysis. The results stand after controlling for selective migration in different ways. This contradicts the popular belief in policy circles that the education quality of the region has deteriorated in recent years. In contrast, schooling premium in India shows an impressive improvement in recent decades, especially at the tertiary level.
    Keywords: Schooling premium (returns to education), Wage differentials, Immigrant workers
    JEL: J31 J61
    Date: 2017–12
    URL: http://d.repec.org/n?u=RePEc:apc:wpaper:2017-112&r=ltv
  4. By: Daniel Brent (LSU - Louisiana State University - Louisiana State University [Baton Rouge]); Lata Gangadharan (Department of Economics and Business - Monash University); Anca Mihut (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Marie Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.
    Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment
    Date: 2017–10–04
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01609971&r=ltv
  5. By: Moschion, Julie (Melbourne Institute of Applied Economic and Social Research); Powdthavee, Nattavudh (University of Warwick)
    Abstract: This paper provides an empirical test of the rational addiction model, used in economics to model individuals' consumption of addictive substances, versus the utility misprediction model, used in psychology to explain the discrepancy between people's decision and their subsequent experiences. By exploiting a unique data set of disadvantaged Australians, we provide longitudinal evidence that a drop in life satisfaction tends to precede the use of illegal/street drugs. We also find that the abuse of alcohol, the daily use of cannabis and the weekly use of illegal/street drugs in the past 6 months relate to lower current levels of life satisfaction. This provides empirical support for the utility misprediction model. Further, we find that the decrease in life satisfaction following the consumption of illegal/street drugs persists 6 months to a year after use. In contrast, the consumption of cigarettes is unrelated to life satisfaction in the close past or the near future. Our results, though only illustrative, suggest that measures of individual's subjective wellbeing should be examined together with data on revealed preferences when testing models of rational decision-making.
    Keywords: life satisfaction, rational addiction, drugs, homeless, Australia, happiness
    JEL: D03 I12 I18 I30
    Date: 2017–11
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp11181&r=ltv
  6. By: Neri, Marcelo Cortes; Kakwani, Nanak
    Abstract: There are a number of different types of social tensions that can generate social unrest. Starting from standard inequality and poverty concerns to the ones related to temporal fluctuations in living standards including both sistemic and idiosyncratic sources of risk. These social tensions may also include social groups immobility, polarization and middle class related considerations. This paper provides a common methodology to model different sources of social tensions and applies it to the recent Brazilian experience.
    Date: 2017–12–21
    URL: http://d.repec.org/n?u=RePEc:fgv:epgewp:791&r=ltv
  7. By: Anna M. Stansbury; Lawrence H. Summers
    Abstract: Since 1973 median compensation has diverged starkly from average labor productivity. Since 2000, average compensation has also begun to diverge from labor productivity. These divergences lead to the question: to what extent does productivity growth translate into compensation growth for typical American workers? We investigate this, regressing median, average and production/nonsupervisory compensation growth on productivity growth in various specifications. We find substantial evidence of linkage between productivity and compensation: over 1973-2016, one percentage point higher productivity growth has been associated with 0.7 to 1 percentage points higher median and average compensation growth and with 0.4 to 0.7 percentage points higher production/nonsupervisory compensation growth. These results suggest that other factors orthogonal to productivity have been acting to suppress typical compensation even as productivity growth has been acting to raise it. Several theories of the cause of the productivity-compensation divergence focus on technological progress. These theories have a testable implication: periods of higher productivity growth should be associated with periods of faster productivity-pay divergence. We do not find substantial evidence of co-movement between productivity growth and the labor share or mean/median compensation ratio. This tends not to provide strong support for pure technology-based theories of the productivity-compensation divergence.
    JEL: E24 J24 J3
    Date: 2017–12
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:24165&r=ltv
  8. By: Neumark, David (University of California, Irvine); Young, Timothy (University of California, Irvine)
    Abstract: Research on the effects of enterprise zones – especially state programs – has generally failed to find evidence of beneficial effects such job growth or poverty reduction. In contrast, Ham, Swenson, Imrohoroğlu, and Song (2011, hereafter HSIS) present evidence that state and federal enterprise zones (EZs) established in the 1990s substantially reduced poverty. However, their estimates of the effects of EZs in reducing poverty are badly overstated for two reasons. First, HSIS have a substantial error in their data on poverty rates by Census tract, which accounts for most of the estimated impact of state EZs that they find. Second, their estimates of the effects of federal Empowerment Zones (EMPZs) and Enterprise Communities (ENTCs) appear to be strongly influenced by selection of areas that experienced negative shocks. An estimator based on comparing federally designated zones to more-comparable areas that applied for and were rejected as zones, or became zones in the future, yields much smaller estimates than those in HSIS. And the large poverty-reduction effects of ENTCs that HSIS found are largely spurious – not surprisingly, given that ENTCs received meager benefits and had no hiring credits.
    Keywords: enterprise zones, poverty
    JEL: J23 J38 R12
    Date: 2017–11
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp11168&r=ltv
  9. By: Titus Galama (University of Southern California); Robson Morgan (University of Southern California); Juan E. Saavedra (University of Southern California)
    Abstract: We document how an anti-poverty program improves economic and subjective wellbeing, and self-sufficiency. Familias en Accion Urbano, a conditional cash transfer program implemented at scale in the country of Colombia, uses a means-test cutoff score selection rule that provides exogenous variation in program participation. We reproduce the score assignment rule in a nationally representative living standards household survey that measures multiple dimensions of economic and evaluative wellbeing. Three years into the program, beneficiary households at the margin report greater income, consumption and formal employment participation for both the household head and partner. Household income increased by ten times the amount of the government transfer, likely because of gains in formal employment. Beneficiary households at the margin also report greater overall satisfaction with life, greater happiness and greater satisfaction with food. These results support the hypothesis that among households with basic unmet needs, policies that have a permanent impact on income and consumption may also have a lasting impact on subjective wellbeing and self-sufficiency. Moreover, relatively small subsidies, further offset by additional government tax receipt, may generate substantial benefits to poor families at a reduced cost to taxpayers.
    Keywords: subjective well-being, self-sufficiency, evaluation of social programs, score assignment rule
    JEL: H53 I30 I32 I38 O38 O54
    Date: 2017–12
    URL: http://d.repec.org/n?u=RePEc:hka:wpaper:2017-090&r=ltv

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