nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2018‒11‒19
four papers chosen by
Maximo Rossi
Universidad de la República

  1. Euler Equations, Subjective Expectations and Income Shocks By Attanasio, Orazio; Molnar, Krisztina; Kovacs, Agnes
  2. Behavioral Inattention By Gabaix, Xavier
  3. Are the Spanish Long-Term Unemployed Unemployable? By Samuel Bentolila; J. Ignacio García-Pérez; Marcel Jansen
  4. A Gini Coefficient for Measuring Relative Distributional Inequality in a Collection of Distributions: A Note. By Gordon Anderson

  1. By: Attanasio, Orazio (University College London); Molnar, Krisztina (Dept. of Economics, Norwegian School of Economics and Business Administration); Kovacs, Agnes (University of Manchester)
    Abstract: In this paper, we make three substantive contributions: first, we use elicited subjective income expectations to identify the levels of permanent and transitory income shocks in a life-cycle framework; second, we use these shocks to assess whether households' consumption is insulated from them; third, we use the shock data to estimate an Euler equation for consumption. We find that households are able to smooth transitory shocks, but adjust their consumption in response to permanent shocks, albeit not fully. The estimates of the Euler equation parameters with and without expectational errors are similar, which is consistent with rational expectations. We break new ground by combining data on subjective expectations about future income from the Michigan Survey with micro data on actual Income from the Consumer Expenditure Survey.
    Keywords: life cycle models; estimating Euler Equations; survey expectations
    JEL: C13 D12 D84 D91 E21
    Date: 2018–10–25
  2. By: Gabaix, Xavier
    Abstract: Inattention is a central, unifying theme for much of behavioral economics. It permeates such disparate fields as microeconomics, macroeconomics, finance, public economics, and industrial organization. It enables us to think in a rather consistent way about behavioral biases, speculate about their origins, and trace out their implications for market outcomes. This survey first discusses the most basic models of attention, using a fairly unified framework. Then, it discusses the methods used to measure attention, which present a number of challenges on which a great deal of progress has been achieved, although much more work needs to be done. It then examines the various theories of attention, both behavioral and more Bayesian. It finally discusses some applications. For instance, inattention offers a way to write a behavioral version of basic microeconomics, as in consumer theory and Arrow-Debreu. A last section is devoted to open questions in the attention literature. This chapter is a pedagogical guide to the literature on attention. Derivations are self-contained.
    Date: 2018–10
  3. By: Samuel Bentolila (CEMFI, Centro de Estudios Monetarios y Financieros); J. Ignacio García-Pérez (Universidad Pablo de Olavide and FEDEA); Marcel Jansen (Universidad Autónoma de Madrid and FEDEA)
    Abstract: Long-term unemployment reached unprecedented levels in Spain in the wake of the Great Recession and it still affects around 57% of the unemployed. We document the sources that contributed to the rise in long-term unemployment and analyze its persistence using state-of-the-art duration models. We find pervasive evidence of negative duration dependence, while personal characteristics such as mature age, lack of experience, and entitlement to unemployment benefits are key to understand the cross-sectional differences in the incidence of long-term unemployment. The negative impact of low levels of skill and education is muted by the large share of temporary contracts, but once we restrict attention to employment spells lasting at least one month these factors also contribute to a higher risk of long-term unemployment. Surprisingly, workers from the construction sector do not fare worse than similar workers from other sectors. Finally, self-reported reservation wages are found to respond strongly to the cycle, but much less to individual unemployment duration. In view of these findings, we argue that active labour market policies should play a more prominent role in the fight against long-term unemployment while early activation should be used to curb inflows.
    Keywords: Long-term unemployment, great recession, duration models, survival probability, Spain.
    JEL: J63 J64 J65 C41
    Date: 2017–01
  4. By: Gordon Anderson
    Abstract: In many situations a collection of distributions need to be compared and contrasted. International comparisons of all kinds, be it health, wealth, education, income etc. are essentially about comparing aspects of their respective distributions of those variates of interest. The convergence-polarization and equality of opportunity literatures are similarly concerned with comparing collections of distributions. An aid to such comparisons would be some measure of the extent to which those distributions are collectively different. Here a Gini-like coefficient recording the extent of relative distributional inequality of a collection of (potentially multivariate) distributions is proposed.
    Keywords: Gini Coefficient; Distributional Inequality
    JEL: I31 I32
    Date: 2018–11–07

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