nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2018‒09‒10
ten papers chosen by
Maximo Rossi
Universidad de la República

  1. Unhappiness and Pain in Modern America: A Review Essay, and Further Evidence, on Carol Graham’s Happiness for All? By Blanchflower, David G.; Oswald, Andrew J.
  2. Is Envy Harmful to a Society’s Psychological Health and Wellbeing? A Longitudinal Study of 18,000 Adults By Mujcic, Redzo; Oswald, Andrew J.
  3. Employer power, labor saving technical change, and inequality By Nancy H. Chau; Ravi Kanbur
  4. Should Robots be Taxed? By Joao Guerreiro; Pedro Teles; Sergio Rebelo
  5. The Supply of Skill and Endogenous Technical Change: Evidence from a College Expansion Reform By Carneiro, Pedro; Liu, Kai; Salvanes, Kjell G.
  6. Unfairness at work: Well-being and quits By Conchita D’Ambrosio; Andrew E. Clark; Marta Barazzetta
  7. Underemployment in the US and Europe By David N.F. Bell; David G. Blanchflower
  8. Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior By Arindrajit Dube; Laura Giuliano; Jonathan Leonard
  9. Testing By Bergbauer, Annika B.; Hanushek, Eric A.; Woessmann, Ludger
  10. How valid are synthetic panel estimates of poverty dynamics? By Nicolas Hérault; Stephen P. Jenkins

  1. By: Blanchflower, David G.; Oswald, Andrew J.
    Abstract: In Happiness for All?, Carol Graham raises disquieting ideas about today’s United States. The challenge she puts forward is an important one. Here we review the intellectual case and offer additional evidence. We conclude broadly on the author’s side. Strikingly, Americans appear to be in greater pain than citizens of other countries, and most subgroups of citizens have downwardly trended happiness levels. There is, however, one bright side to an otherwise dark story. The happiness of black Americans has risen strongly since the 1970s. It is now almost equal to that of white Americans.
    Keywords: Financial Economics
    Date: 2018–02–02
  2. By: Mujcic, Redzo; Oswald, Andrew J.
    Abstract: Nearly 100 years ago, the philosopher and mathematician Bertrand Russell warned of the social dangers of widespread envy. One view of modern society is that it is systematically developing a set of institutions -- such as social media and new forms of advertising -- that make people feel inadequate and envious of others. If so, how might that be influencing the psychological health of our citizens? This paper reports the first large-scale longitudinal research into envy and its possible repercussions. The paper studies 18,000 randomly selected individuals over the years 2005, 2009, and 2013. Using measures of SF-36 mental health and psychological well-being, four main conclusions emerge. First, the young are especially susceptible. Levels of envy fall as people grow older. This longitudinal finding is consistent with a cross-sectional pattern noted recently by Nicole E. Henniger and Christine R. Harris, and with the theory of socioemotional regulation suggested by scholars such as Laura L. Carstensen. Second, using fixed-effects equations and prospective analysis, the analysis reveals that envy today is a powerful predictor of worse SF-36 mental health and well-being in the future. A change from the lowest to the highest level of envy, for example, is associated with a worsening of SF-36 mental health by approximately half a standard deviation (p <0.001). Third, no evidence is found for the idea that envy acts as a useful motivator. Greater envy is associated with slower -- not higher -- growth of psychological well-being in the future. Nor is envy a predictor of later economic success. Fourth, the longitudinal decline of envy leaves unaltered a U-shaped age pattern of well-being from age 20 to age 70. These results are consistent with the idea that society should be concerned about institutions that stimulate large-scale envy.
    Keywords: Financial Economics
    Date: 2018–02–02
  3. By: Nancy H. Chau (Cornell University); Ravi Kanbur (Cornell University)
    Abstract: How does employer power mediate the impact of labor saving technical change on inequality? This question has largely been neglected in the recent literature on the wage and distributional consequences of automation, where the labor market is assumed to be competitive. In a simple task-based model, with search frictions which generate an equilibrium wage distribution even with identical firms and workers, we explore the implications of labor saving technical change for equilibrium outcomes. We show that employer power is a crucial determinant of the nuanced comparative statics of technical change. Among a range of results, we show the possibility of Kuznetsian inverse-U relationships between employer power and inequality, and labor saving technical change and inequality. We further show that when employer power is sufficiently low, labor saving technical change can both increase total output and increase wage inequality. With free entry of firms, labor saving technical change leads to both a first order dominating shift in the age distribution and an increase in the Gini coefficient of wage inequality.
    Keywords: employer power, labor saving technical change, wage inequality, search model, equilibrium wage distribution.
    JEL: J31 J42 D31 O34
    Date: 2018–05
  4. By: Joao Guerreiro (Northwestern University); Pedro Teles (Banco de Portugal, Univ Catolica Portugu); Sergio Rebelo (Northwestern University)
    Abstract: We use a model of automation to show that with the current U.S. tax system, a fall in automation costs could lead to a massive rise in income inequality. This inequality can be reduced by raising marginal income tax rates and taxing robots. But this solution involves a substantial efficiency loss for the reduced level of inequality. A Mirrleesian optimal income tax can reduce inequality at a smaller efficiency cost, but is difficult to implement. An alternative approach is to amend the current tax system to include a lump-sum rebate. In our model, with the rebate in place, it is optimal to tax robots only when there is partial automation.
    Date: 2018
  5. By: Carneiro, Pedro (University College London); Liu, Kai (University of Cambridge); Salvanes, Kjell G. (Norwegian School of Economics)
    Abstract: We examine the labor market consequences of an exogenous increase in the supply of skilled labor in several cities in Norway, resulting from the construction of new colleges in the 1970s. We find that skilled wages increased as a response, suggesting that along with an increase in the supply there was also an increase in demand for skill. We also show that college openings led to an increase in the productivity of skilled labor and investments in R&D. Our findings are consistent with models of endogenous technical change where an abundance of skilled workers may encourage firms to adopt skill-complementary technologies, leading to an upward-sloping long-run demand for skill.
    Keywords: endogenous technical change, college reform
    JEL: J23 J24
    Date: 2018–07
  6. By: Conchita D’Ambrosio (Université du Luxembourg); Andrew E. Clark (Paris School of Economics - CNRS); Marta Barazzetta (Université du Luxembourg)
    Abstract: We here consider the effect of the level of income that individuals consider to be fair for the job they do, which we take as measure of comparison income, on both subjective well-being and objective future job quitting. In six waves of German Socio-Economic Panel data, the extent to which own labour income is perceived to be unfair is significantly negatively correlated with subjective well-being, both in terms of cognitive evaluations (life and job satisfaction) and affect (the frequency of feeling happy, sad and angry). Perceived unfairness also translates into objective labour-market behaviour, with current unfair income predicting future job quits.
    Keywords: Fair income, subjective well-being, quits, SOEP.
    JEL: D63 J28 J31
    Date: 2018–02
  7. By: David N.F. Bell; David G. Blanchflower
    Abstract: Large numbers of part-time workers around the world, both those who choose to be part-time and those who are there involuntarily and would prefer a full-time job report they want more hours. Full-timers who say they want to change their hours mostly say they want to reduce them. When recession hit in most countries the number of hours of those who said they wanted more hours, rose sharply and there was a fall in the number of hours that full-timers wanted their hours reduced by. Even though the unemployment rate has returned to its pre-recession levels in many advanced countries, underemployment in most has not. We produce estimates for a new, and better, underemployment rate for twenty-five European countries. In most underemployment remains elevated. We provide evidence for the UK and the US as well as some international evidence that underemployment rather than unemployment lowers pay in the years after the Great Recession. We also find evidence for the US that falls in the home ownership rate have helped to keep wage pressure in check. Underemployment replaces unemployment as the main influence on wages in the years since the Great Recession.
    JEL: J21 J3
    Date: 2018–08
  8. By: Arindrajit Dube; Laura Giuliano; Jonathan Leonard
    Abstract: We analyze how separations responded to arbitrary differences in own and peer wages at a large U.S. retailer. Regression-discontinuity estimates imply large causal effects of own wages on separations, and on quits in particular. However, this own-wage response could reflect comparisons either to market wages or to peer wages. Estimates using peer-wage discontinuities show large peer-wage effects and imply the own-wage separation response mostly reflects peer comparisons. The peer effect is driven by comparisons with higher-paid peers—suggesting concerns about fairness. Separations appear fairly insensitive when raises are similar across peers—suggesting search frictions and monopsony are relevant in this low-wage sector.
    JEL: D9 D91 J01 J3 J42 J63
    Date: 2018–08
  9. By: Bergbauer, Annika B. (Ifo Institute for Economic Research); Hanushek, Eric A. (Stanford University); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: School systems regularly use student assessments for accountability purposes. But, as highlighted by our conceptual model, different configurations of assessment usage generate performance-conducive incentives of different strengths for different stakeholders in different school environments. We build a dataset of over 2 million students in 59 countries observed over 6 waves in the international PISA student achievement test 2000-2015. Our empirical model exploits the country panel dimension to investigate reforms in assessment systems over time, where identification comes from taking out country and year fixed effects along with a rich set of student, school, and country measures. We find that the expansion of standardized external comparisons, both school-based and student-based, is associated with improvements in student achievement. The effect of school-based comparison is stronger in countries with initially low performance. Similarly, standardized monitoring without external comparison has a positive effect in initially poorly performing countries. By contrast, the introduction of solely internal testing and internal teacher monitoring including inspectorates does not affect student achievement. Our findings point out the pitfalls of overly broad generalizations from specific country testing systems.
    Keywords: student assessment, testing, accountability, student achievement, international, PISA
    JEL: I28 H52 L15 D82 P51
    Date: 2018–07
  10. By: Nicolas Hérault (University of Melbourne, Australia); Stephen P. Jenkins (LSE)
    Abstract: A growing literature uses repeated cross-section surveys to derive ‘synthetic panel’ data estimates of poverty dynamics statistics. It builds on the pioneering study by Dang, Lanjouw, Luoto, and McKenzie (Journal of Development Economics, 2014) providing bounds estimates and the innovative refinement proposed by Dang and Lanjouw (World Bank Policy Research Working Paper 6504, 2013) providing point estimates of the statistics of interest. We provide new evidence about the accuracy of synthetic panel estimates relative to benchmarks based on estimates derived from genuine household panel data, employing high quality data from Australia and Britain, while also examining the sensitivity of results to a number of analytical choices. Overall, we are more agnostic about the validity of the synthetic panel approach applied to these two rich countries than are earlier validity studies in their applications focusing on middle- and low-income countries.
    Keywords: synthetic panel, pseudo panel, poverty dynamics, poverty entry, poverty exit, BHPS, HILDA.
    JEL: I32 D31 C52
    Date: 2018–04

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