nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2019‒09‒09
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Does inequality reduce mobility? The Great Gatsby Curve and its mechanisms By Brandén, Gunnar
  2. The interplay of economic, social and political fragmentation By Steven Jacob Bosworth; Dennis J. Snower
  3. Better Late Than Never? How Late Completion Affects the Early Careers of Dropouts By Albæk, Karsten; Asplund, Rita; Barth, Erling; Lindahl, Lena; Strom, Marte; Vanhala, Pekka
  4. Inequality and growth: The cholesterol hypothesis By Gustavo A. Marrero; Juan Gabriel Rodríguez
  5. Disincentives from Redistribution: Evidence on a Dividend of Democracy By Rupert Sausgruber; Axel Sonntag; Jean-Robert Tyran
  6. Preschool Quality and Child Development By Alison Andrew; Orazio Attanasio; Raquel Bernal; Lina Cardona Sosa; Sonya Krutikova; Marta Rubio-Codina
  7. On Measuring Global Poverty By Martin Ravallion
  8. Fooled by the Cycle: Permanent versus Cyclical Improvements in Social Indicators By José Andrée Camarena; Luciana Galeano; Luis Morano; Jorge Puig; Daniel Riera-Crichton; Carlos Vegh; Lucila Venturi; Guillermo Vuletin
  9. The Early Life Influences of Teachers' Genders on Later Life Charitable Giving: Evidence from the Natural Disasters in Japan By Yamamura, Eiji; Powdthavee, Nattavudh

  1. By: Brandén, Gunnar (Umeå University)
    Abstract: A body of evidence has emerged in the literature on intergenerational mobility documenting that countries with large income differences also have less intergenerational mobility: a relationship known as the Great Gatsby Curve. In this paper, I estimate the Great Gatsby Curve within Sweden exploiting both cross-sectional and longitudinal variation. I find that men who grew up in regions or periods with high levels of income inequality experienced less intergenerational mobility as adults, thereby confirming the existence of a Great Gatsby Curve in Sweden. I also present new evidence on the underlying mechanisms of the Great Gatsby Curve. By decomposing intergenerational mobility into separate transmission channels, I find that the mediating effects that educational attainment and cognitive and non-cognitive skills have on the persistence of socioeconomic status across generations drive the Great Gatsby Curve.
    Keywords: Intergenerational mobility; equality of opportunity; inequality
    JEL: D31 I24 J62 R00
    Date: 2019–09–04
  2. By: Steven Jacob Bosworth (University of Reading); Dennis J. Snower (Christian-Albrechts-University of Kiel)
    Abstract: We develop a model of the social fragmentation along communitarian vs. individualistic values. The endogenous adoption of social values hinges on whether people choose to derive more utility from comparisons with others (materialistic but universalist values) or derive relatively more utility from membership of a group with its distinguishing characteristics (communitarian but exclusive values). Those more well-off, socioeconomically, gravitate towards individualism while those of lower status gravitate towards communitarianism. Crucially, those at the lower end of the middle classes are predicted to align more and more with communitarian values when the status advantage of those at the top increases, holding their own income constant (i.e. rising socioeconomic inequality). Conversely, those at the higher end of the middle classes are predicted to align more and more with individualist values, polarising society. These shifts also increase size of the political constituency for enacting protectionist policies, which act as a stabilising force against socioeconomic polarisation. The model therefore predicts political realignments from the incidence of income growth and the importance of status-oriented (conspicuous) consumption.
    Keywords: inequality, values, political fragmentation, nationalism
    JEL: A13 D63 F50 O00 Q43
    Date: 2019–08–27
  3. By: Albæk, Karsten (Danish National Centre for Social Research (SFI)); Asplund, Rita; Barth, Erling (Institute for Social Research, Oslo); Lindahl, Lena (SOFI, Stockholm University); Strom, Marte (Institute for Social Research, Oslo); Vanhala, Pekka (ETLA - The Research Institute of the Finnish Economy)
    Abstract: Across the OECD countries, dropouts from upper secondary schooling fare worse in the labor market, with higher NEET rates more spells of unemployment and lower earnings. Among the dropouts, there are however significant shares who complete at a later age. In this paper, we thus ask the question: Does it pay for young adults who do not complete upper secondary schooling by the age of 21, to do so at some point during the subsequent 7 years, that is, before turning 28? In all four Nordic countries under scrutiny, we find that late completion lowers the probability of being outside employment, education or training (NEET) at age 28. Moreover, the exact age of completion does not seem to matter. Our estimates are robust to the inclusion of extensive controls for socioeconomic background and early schooling paths, and similar to the ones produced by event history analysis with individual fixed effects. This indicates that late completion of upper secondary schooling plays an important role for the labor market inclusion of young dropouts.
    Keywords: upper secondary schooling, dropouts, NEET rates
    JEL: I21 J24 J64
    Date: 2019–08
  4. By: Gustavo A. Marrero (Universidad de la Laguna); Juan Gabriel Rodríguez (Universidad Complutense de Madrid)
    Abstract: A fundamental unsolved question in economics is whether inequality is good or bad for growth. We argue here that this lack of consensus is due to the cholesterol hypothesis. This hypothesis states that the part of inequality generated by factors beyond the individuals’ control, referred to as inequality of opportunity (IO), is growth-deterring, while the type of inequality generated by the difference in the willingness to exert effort, referred to as inequality of pure effort (IE), is growth-enhancing. We first build an overlapping generation model with human capital to derive a reduced-form growth equation consistent with this hypothesis, and the existing interaction between poverty and inequality. Then, given the inherent difficulty to decompose total inequality into IO and IE, we develop a strategy to test the cholesterol hypothesis: by extending the standard inequality-growth equation with a proxy of IO, the estimated coefficient of inequality must increase, while the coefficient of the IO proxy must be negative. Next, we use the best available data at worldwide level and, given the limitations of the existing IO indices, we construct an alternative proxy of IO by considering that the quality of institutions and ethnic and religious tensions are relevant macroeconomic drivers of IO. Using an instrumental variable approach and different samples and IO measures, our results do not reject the cholesterol hypothesis at worldwide level.
    Keywords: growth, inequality, inequality of opportunity, poverty, human capital.
    JEL: O40 D63 E24 I32
    Date: 2019–07
  5. By: Rupert Sausgruber (Vienna University of Economics and Business); Axel Sonntag (University of Vienna and IHS Vienna); Jean-Robert Tyran (Department of Economics, University of Copenhagen, Denmark)
    Abstract: We experimentally study the disincentive effect of taxing work and redistributing tax revenues when redistribution is imposed vs. democratically chosen in a vote. We find a "dividend of democracy" in the sense that the disincentive effect is substantially smaller when redistribution is chosen in a vote than when it is imposed. Redistribution seems to be more legitimate, and hence less demotivating, when accepted in a vote.
    Keywords: Redistribution, disincentive effect, voting, legitimacy, realeffort task, lab experiment
    JEL: C92 D31 D72 H23
    Date: 2019–06–03
  6. By: Alison Andrew; Orazio Attanasio; Raquel Bernal; Lina Cardona Sosa; Sonya Krutikova; Marta Rubio-Codina
    Abstract: Global access to preschool has increased dramatically yet preschool quality is often poor. We use a randomized controlled trial to evaluate two approaches to improving the quality of Colombian preschools. We find that the first, which was rolled out nationwide and provides additional resources for materials and new staff, did not benefit children’s development and, unintentionally, led teachers to reduce their involvement in classroom activities. The second approach additionally trains teachers to improve their pedagogical methods. We find this addition offset the negative effects on teacher behavior, improved the quality of teaching and raised children’s cognition, language and school readiness.
    JEL: H43 I10 I20 J13
    Date: 2019–08
  7. By: Martin Ravallion
    Abstract: The paper critically assesses prevailing measures of global poverty. A welfarist interpretation of global poverty lines is augmented by the idea of normative functionings, the cost of which varies across countries. In this light, current absolute measures are seen to ignore important social effects on welfare, while popular strongly-relative measures ignore absolute levels of living. It is argued that a new hybrid measure is called for, combining absolute and weakly-relative measures consistent with how national lines vary across countries. Illustrative calculations indicate that we are seeing a falling incidence of poverty globally over the last 30 years. This is mainly due to lower absolute poverty counts in the developing world. While fewer people are poor by the global absolute standard, more are poor by the country-specific relative standard. The vast bulk of poverty, both absolute and relative, is now found in the developing world.
    JEL: I32 O0
    Date: 2019–08
  8. By: José Andrée Camarena; Luciana Galeano; Luis Morano; Jorge Puig; Daniel Riera-Crichton; Carlos Vegh; Lucila Venturi; Guillermo Vuletin
    Abstract: This paper studies the time-series behavior of a set of widely-used social indicators and uncovers two important stylized facts. First, not all social indicators are created equal in terms of the importance of cyclical fluctuations. While some social indicators such as the unemployment rate and monetary poverty show large cyclical fluctuations, other social measures such as the Human Development Index are, by construction, dominated by long-run trends. Second, a large fraction of the cyclical fluctuations in social indicators can be explained by the cyclical changes in income (proxied by real GDP per capita). Since cyclical income volatility is much larger in the developing world, these two critical facts raise fundamental issues regarding how permanent are improvements in social indicators (like the ones observed in many developing countries during the last commodity super-cycle). Finally, and relying on a global sample of industrial and developing countries, we dig deeper into the importance of cyclical versus permanent components by extending the seminal contribution of Datt and Ravallion (1992). In particular, we show that more than 40 percent of the fall in monetary poverty observed in Latin America and the Caribbean during the so-called Golden Decade can be attributed to cyclical changes in income.
    JEL: E32 I32 O54
    Date: 2019–08
  9. By: Yamamura, Eiji (Seinan Gakuin University); Powdthavee, Nattavudh (University of Warwick)
    Abstract: What determines human beings' decisions to donate money to a charity? Using a nationally representative survey of the Japanese population, we demonstrate that having been taught by a female teacher in their first year of school makes individuals more likely to donate to charities following natural disasters. The findings are robust in controlling for lessons on prosocial behaviors, such as group learning. We tested our results separately for men and women, as well as on prosocial attitude outcomes. Overall, our results suggest potential prosocial implications may arise from teacher-student gender matching.
    Keywords: charitable giving, gender, prosocial, Japan, natural disaster, donation
    JEL: D64 I20
    Date: 2019–08

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