nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2019‒11‒11
eleven papers chosen by
Maximo Rossi
Universidad de la República

  1. Economic Insecurity and the Rise of the Right By Walter Bossert; Andrew E. Clark; Conchita D'Ambrosio; Anthony Lepinteur
  2. The Dynamics of Individual Happiness By Lionel WILNER
  3. Poverty alleviation strategies under informality: Evidence for Latin America By Martín Caruso Bloeck; Sebastian Galiani; Federico Weinschelbaum
  4. Effort: The Unrecognized Contributor to US Income Inequality By J. Rodrigo Fuentes; Edward E. Leamer
  5. Marriage, Fertility, and Cultural Integration of Immigrants in Italy By Alberto Bisin; Giulia Tura
  6. The Effects of Social Media Use on the Well-Being of Users. The Wonderland of HaikuJAM By Andrén, Daniela
  7. Breaking Up: Experimental Insights into Economic (Dis)Integration By Gabriele Camera; Lukas Hohl; Rolf Weder
  8. Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine! By Hernán Bejarano; Brice Corgnet; Joaquín Gómez-Miñambres
  9. Measuring household wealth in the Panel Study of Income Dynamics: the role of retirement assets By Cooper, Daniel H.; Dynan, Karen E.; Rhodenhiser, Hannah
  10. Productivity and Wages: Common Factors and Idiosyncrasies Across Countries and Industries By Edward P. Lazear
  11. Behavioral Responses to Wealth Taxes: Evidence from Switzerland By Marius Brülhart; Jonathan Gruber; Matthias Krapf; Kurt Schmidheiny

  1. By: Walter Bossert; Andrew E. Clark; Conchita D'Ambrosio; Anthony Lepinteur
    Abstract: Economic insecurity has attracted growing attention in social, academic and policy circles. However, there is no consensus as to its precise definition. Intuitively, economic insecurity is multi-faceted, making any comprehensive formal definition that subsumes all possible aspects extremely challenging. We propose a simplified approach, and characterize a class of individual economic-insecurity measures that are based on the time profile of economic resources. We then apply our economic-insecurity measure to data on political preferences. In US, UK and German panel data, and conditional on current economic resources, economic insecurity is associated with both greater political participation (support for a party or the intention to vote) and notably more support for parties on the right of the political spectrum. We in particular find that economic insecurity predicts greater support for both Donald Trump before the 2016 US Presidential election and the UK leaving the European Union in the 2016 Brexit referendum.
    Keywords: Economic index numbers, Insecurity, Political participation, Conservatism, Right-leaning political parties, Trump, Brexit
    JEL: D63 D72 I32
    Date: 2019–10
  2. By: Lionel WILNER (Insee-Crest.)
    Abstract: This paper unveils the role played by state dependence in self-assessed happiness. It estimates a dynamic nonlinear model of subjective well-being on longitudinal data, primarily from France, as well as from Australia, Germany, and the UK. Life satisfaction is found to be highly persistent over time, which static models ignore. The impact of state dependence is large in comparison with usual determinants of happiness in static models. More-over, this persistence is heterogeneous across individuals and concerns those already happy with their lives.
    Keywords: Happiness; subjective well-being; life satisfaction; dynamic model; state dependence; correlated random effects; initial condition.
    JEL: I31
    Date: 2019–08–25
  3. By: Martín Caruso Bloeck; Sebastian Galiani; Federico Weinschelbaum
    Abstract: Strategies based on growth and inequality reduction require a long-run horizon, and this paper therefore argues that those strategies need to be complemented by poverty alleviation programs. With regards to such programs, informality in Latin America and the Caribbean is a primary obstacle to carry out means testing income-support programs, and countries in the region have therefore mostly relied on proxy means testing mechanisms. This paper studies the relative effectiveness of these and other mechanisms by way of a formal model in which workers choose between job opportunities in the formal and informal sectors. Although the means testing mechanism allows for a more pro-poor design of transfers, it distorts labor decisions made by workers. On the other hand, (exogenous) proxy means testing does not cause distortions, but its pro-poor quality is constrained by the power of observable characteristics to infer income levels. However, since taxation is necessary to fund programs, redistribution becomes less effective, especially for programs other than means testing. The paper concludes by discussing the implications of these results for the design of more efficient targeting programs.
    Keywords: Poverty, inequality, means testing, proxy means testing, Latin America and the Caribbean
    JEL: J38 I38
    Date: 2019–10–31
  4. By: J. Rodrigo Fuentes; Edward E. Leamer
    Abstract: This paper provides theory and evidence that worker effort has played an important role in the increase in income inequality in the United States between 1980 and 2016. The theory suggests that a worker needs to exert effort enough to pay the rental value of the physical and human capital, thus high effort and high pay for jobs operating expensive capital. With that as a foundation, we use data from the ACS surveys in 1980 and 2016 to estimate Mincer equations for six different education levels that explain wage incomes as a function of weekly hours worked and other worker features. One finding is a decline in annual income for high school graduates for all hours worked per week. We argue that the sharp decline in manufacturing jobs forces down wages of those with high school degrees who have precious few high-effort opportunities outside of manufacturing. Another finding is that incomes rose only for those with advanced degrees and with weekly hours in excess of 40. We attribute this to the natural talent needed to make a computer deliver exceptional value and to the relative ease with which long hours can be chosen when working over the Internet.
    JEL: J3 J31
    Date: 2019–11
  5. By: Alberto Bisin; Giulia Tura
    Abstract: We study the cultural integration of immigrants, estimating a structural model of marital matching along ethnic dimensions, exploring in detail the role of fertility, and possibly divorce in the integration process. We exploit rich administrative demographic data on the universe of marriages formed in Italy, as well as birth and separation records from 1995 to 2012. We estimate strong preferences of ethnic minorities' towards socialization of children to their own identity, identifying marital selection and fertility choices as fundamental socialization mechanisms. The estimated cultural intolerance of Italians towards immigrant minorities is also substantial. Turning to long-run simulations, we nd that cultural intolerances, as well as fertility and homogamy rates, slow-down the cultural integration of some immigrant ethnic minorities, especially Latin America, East Asia and Sub-Saharan Africa. Nonetheless, 75% of immigrants integrate into the majoritarian culture over the period of a generation. Interestingly, we show by counterfactual analysis that a lower cultural intolerance of Italians towards minorities would lead to slower cultural integration by allowing immigrants a more widespread use of their own language rather than Italian in heterogamous marriages. Finally, we quantitatively assess the effects of large future immigration inflows.
    Keywords: intermarriage, marital matching, cultural transmission, integration
    JEL: D10 J12 J13 J15
    Date: 2019–11
  6. By: Andrén, Daniela (Örebro University School of Business)
    Abstract: Internet usage in general and social networking platforms (SNPs) in particular have dramatically changed the way we spend our time. A relevant question is how this change in time-use affected the well-being of people in general and younger people in particular. We answer this question by reporting, for the first time, detailed information about time-use in SNPs and the well-being of Jammers, the users of HaikuJAM (HJ), a mobile app that aims to boost emotional well-being using collaborative writing techniques. HaikuJAM is output-dependent. Our explorative analysis finds that Jammers who spent most of their SNP time in HJ have, on average, a slightly higher level of both life satisfaction and other domain satisfactions (especially satisfaction with family and friends) than the other Jammers. They also have a few sociodemographic characteristics that are statistically significant different from the other Jammers (i.e., they are slightly older and more of them work and are married). Predominant Jammers also have higher expectations about the importance of the use of HaikuJAM for their well-being and their personal development. Our results suggests that the app features attract a specific group of users who have a relatively high level of satisfaction with their life in general and with their family and friends, in particular. It is quite possible that creative individuals who might be introverts and/or are lonely are using HaikuJAM not only to write but also to connect with other individuals who like to write. Despite the fact that our analysis is largely exploratory, our results suggest a few possibilities to addresses the causality between users’ time spent in a SNP and their well-being.
    Keywords: well-being; life satisfaction; social networking platform; social media; communit; time-use; collaborative writing; poetry; haiku; HaikuJAM App; Jammers; predominant Jammers.
    JEL: A12 D60 I31
    Date: 2019–11–05
  7. By: Gabriele Camera (Economic Science Institute, Chapman University and University of Bologna); Lukas Hohl (University of Basel); Rolf Weder (University of Basel)
    Abstract: Standard international economic theory suggests that people should embrace economic integration because it promises large gains. But recent events such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment, based on a strategic analytical framework, of how size and distribution of potential gains from integration in?uence outcomes and individuals’ inclination to embrace integration. We ?nd that cross-country inequality in potential gains acts as a friction to realize those gains. This suggests that to better understand recent phenomena, international economic theory should account for distributional considerations and behavioral aspects it currently ignores.
    Keywords: Endogenous institutions; Globalization; Indefinitely repeated games; Social dilemmas
    JEL: C70 C90 F02
    Date: 2019
  8. By: Hernán Bejarano (CIDE, Department of Economics); Brice Corgnet (Emlyon Business School); Joaquín Gómez-Miñambres (Lafayette College, Department of Economics and Economic Science Institute, Chapman University)
    Abstract: We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the giftexchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions are unstable.
    Keywords: Gift-exchange; Incentives; Self-serving Biases; Reference-dependent Utility; Laboratory Experiments; Labor Conflicts
    JEL: C92 D23 M54
    Date: 2019
  9. By: Cooper, Daniel H. (Federal Reserve Bank of Boston); Dynan, Karen E. (Harvard University); Rhodenhiser, Hannah (Federal Reserve Bank of Boston)
    Abstract: While the Panel Study of Income Dynamics (PSID) has much to offer researchers studying household behavior, one limitation is that its summary measure of wealth is not as broad as those of other commonly used surveys, such as the Survey of Consumer Finances (SCF), because it does not include the value of defined-contribution (DC) pensions. This paper describes the pension data available in the PSID and shows how they can be used to create a more comprehensive picture of household finances. We then compare various measures derived from these data with their counterparts from the SCF. Along a number of dimensions, the PSID data line up fairly well. Notably, an augmented summary measure of PSID wealth that includes the value of DC pensions is considerably closer to the SCF summary measure than to the standard measure for the median household. We conclude by presenting several examples of research areas where using a broader measure of wealth might be important.
    Keywords: household wealth; retirement assets; household survey data
    JEL: E21
    Date: 2019–08–01
  10. By: Edward P. Lazear
    Abstract: Average wage growth is closely related to aggregate productivity growth across countries and within countries over time. The commonality of patterns across OECD countries suggests that common factors are at work. Are productivity-based explanations of wage changes consistent with increasing variance in wages as well as increases in mean wages as suggested by skill-biased technological change or other factors? To answer this, it is necessary to observe education-specific productivity growth. Cross-industry comparisons reveal that industries dominated by highly educated workers experienced higher-than-average productivity growth that is more than sufficient to account for increasing skill differentials.
    JEL: J00 J30 M50
    Date: 2019–11
  11. By: Marius Brülhart; Jonathan Gruber; Matthias Krapf; Kurt Schmidheiny
    Abstract: We study how reported wealth responds to changes in wealth tax rates. Exploiting rich intra-national variation in Switzerland, the country with the highest revenue share of annual wealth taxation in the OECD, we find that a 1 percentage point drop in the wealth tax rate raises reported wealth by at least 43% after 6 years. Administrative tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arise from taxpayer mobility and 20% from house price capitalization. Savings responses appear unable to explain more than a small fraction of the remainder, suggesting sizable evasion responses in this setting with no third-party reporting of financial wealth.
    Keywords: wealth taxation, behavioral responses, taxpayer mobility, evasion, Switzerland
    JEL: H24 H31 H73
    Date: 2019

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