nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2020‒06‒15
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Innovation and top income inequality By Aghion, Philippe; Akcigit, Ufuk; Bergeaud, Antonin; Blundell, Richard; Hemous, David
  2. Health versus Wealth: On the Distributional Effects of Controlling a Pandemic By Andy Glover; Jonathan Heathcote; Dirk Krueger; Jose Victor Rios-Rull
  3. Inequality Aversion, Externalities, and Pareto-Efficient Income taxation By Aronsson, Thomas; Johansson-Stenman, Olof
  4. Changes in Assortative Matching and Inequality in Income: Evidence for the UK By Pierre-André Chiappori; Monica Costa Dias; Sam Crossman; Costas Meghir
  5. Capital Gains and UK Inequality By Advani, Arun; Summers, Andy
  6. Inequality and Panel Income Changes: Conditions for Possibilities and Impossibilities By Duval Hernández, Robert; Fields, Gary S.; Jakubson, George H.
  7. Do Reemployment Programs for the Unemployed Work for Youth? Evidence from the Great Recession in the United States By Marios Michaelides; Peter Mueser; Jeffrey Smith
  8. Ex Ante Inequality of Opportunity in Health among the Elderly in China: A Distributional Decomposition Analysis of Biomarkers By Ding, Lanlin; Jones, Andrew M.; Nie, Peng
  9. Modelling Errors in Survey and Administrative Data on Employment Earnings: Sensitivity to the Fraction Assumed to Have Error-Free Earnings By Jenkins, Stephen P.; Rios-Avila, Fernando

  1. By: Aghion, Philippe; Akcigit, Ufuk; Bergeaud, Antonin; Blundell, Richard; Hemous, David
    Abstract: In this article, we use cross-state panel and cross-U.S. commuting-zone data to look at the relationship between innovation, top income inequality and social mobility. We find positive correlations between measures of innovation and top income inequality. We also show that the correlations between innovation and broad measures of inequality are not significant. Next, using instrumental variable analysis, we argue that these correlations at least partly reflect a causality from innovation to top income shares. Finally, we show that innovation, particularly by new entrants, is positively associated with social mobility, but less so in local areas with more intense lobbying activities.
    Keywords: Citations; Entrant; Incumbents; Inequality; Innovation; Patenting; Social Mobility; Top Income
    JEL: O30 O31 O33 O34 O40 O47 D63 J14 J15
    Date: 2019–01–01
  2. By: Andy Glover (Federal Reserve Bank of Kansas City); Jonathan Heathcote (Federal Reserve Bank of Minneapolis); Dirk Krueger (University of Pennsylvania); Jose Victor Rios-Rull (University of Minnesota)
    Abstract: To slow the spread of COVID-19, many countries are shutting down non-essential sectors of the economy. Older individuals have the most to gain from slowing virus diffusion. Younger workers in sectors that are shuttered have the most to lose. In this paper, we build a model in which economic activity and disease progression are jointly determined. Individuals differ by age (young and retired), by sector (basic and luxury), and by health status. Disease transmission occurs in the workplace, in consumption activities, at home, and in hospitals. We study the optimal economic mitigation policy of a utilitarian government that can redistribute across individuals, but where such redistribution is costly. We show that optimal redistribution and mitigation policies interact, and reflect a compromise between the strongly diverging preferred policy paths of different subgroups of the population. We find that the shutdown in place on April 12 is too extensive, but that a partial shutdown should remain in place through the fall. People prefer deeper and longer shutdowns if a vaccine is imminent, especially the elderly.
    Keywords: COVID-19, economic policy, redistribution
    JEL: I14 I18 J14 J17
    Date: 2020–05
  3. By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper analyzes Pareto-efficient marginal income taxation taking into account externalities induced through individual inequality aversion, meaning that people have preferences for equality. In doing so, we distinguish between four different and widely used models of inequality aversion. The results show that empirically and experimentally quantified degrees of inequality aversion have potentially very strong implications for Pareto-efficient marginal income taxation. It also turns out that the type of inequality aversion (self-centered vs. non-self-centered), and the specific measures of inequality used, matter a great deal. For example, based on simulation results mimicking the disposable income distribution in the U.S., the preferences suggested by Fehr and Schmidt (1999) imply monotonically increasing marginal income taxes, with large negative marginal tax rates for low-income individuals and large positive marginal tax rates for high-income ones. In contrast, the in many respects comparable model by Bolton and Ockenfels (2000) implies close to zero marginal income tax rates for all.
    Keywords: Keywords: Pareto-efficient taxation; Inequality aversion; Self-centered inequality aversion; Non-self-centered; inequality aversion; Fehr and Schmidt preferences; Bolton and Ockenfels preferences; GINI coefficient; Coefficient of variation
    JEL: D03 D62 H23
    Date: 2020–05
  4. By: Pierre-André Chiappori (Columbia University); Monica Costa Dias (Institute for Fiscal Studies, Centre for Economics and Finance); Sam Crossman (Institute for Fiscal Studies); Costas Meghir (Yale University)
    Abstract: The extent to which like-with like marry is important for inequality as well as for the outcomes of children that result from the union. In this paper we present evidence on changes in assortative mating and its implications for household inequality in the UK. Our approach contrasts with others in the literature in that it is consistent with an underlying model of the marriage market. We argue that a key advantage of this approach is that it creates a direct connection between changes in assortativeness in marriage and changes in the value of marriage for the various possible matches by education group. Our empirical results do not show a clear direction in the change in assortativeness in the UK, between the birth cohorts of 1945-54 and 1965-74. We find that changes in assortativeness pushed income inequality up slightly, but that the strong changes in education attainment across the two cohorts contributed to scale down inequality.
    Keywords: Marriage, mobility, UK
    JEL: J12 J13 D31
    Date: 2020–05
  5. By: Advani, Arun (University of Warwick, CAGE, the Institute for Fiscal Studies (IFS), and the LSE International Inequalities Institute (III)); Summers, Andy (London School of Economics, International Inequalities Institute (III), and CAGE)
    Abstract: Aggregate taxable capital gains in UK have tripled in past decade. Using confidential administrative data on the universe of UK taxpayers, we show that including gains changes the picture of UK inequality over the past two decades. These taxable gains are largely repackaged income, so their exclusion biases the picture of inequality. Including them changes who is at the top of the distribution, adding more business owners and older people. The share of income plus gains (both pre- and post-tax) going to the top 1% is 3pp higher than for income only, and this gap has been steadily rising.
    Keywords: inequality ; capital gains ; income shifting ; top shares JEL codes: D31 ; E01 ; H2
    Date: 2020
  6. By: Duval Hernández, Robert (University of Cyprus); Fields, Gary S. (Cornell University); Jakubson, George H. (Cornell University)
    Abstract: The question of who benefits from economic growth is usually assessed by using cross section data to calculate changes in income inequality. An alternative is to assess patterns of panel income changes. We derive theoretical conditions reconciling changes in inequality together with various measures of convergent/divergent panel income changes. For a large number of inequality indices, as well as for Lorenz curves: we show that rising inequality can coexist with convergent panel changes provided the latter are "large" (and in the right direction), where the meaning of "large" varies depending on the particular regression under analysis; we show that it is impossible to have both falling inequality together with divergent panel income changes in shares or in proportions; and we establish a condition linking convergence/divergence in dollars to changes in the coefficient of variation.
    Keywords: income inequality, economic mobility, panel income changes
    JEL: J31 D63
    Date: 2020–04
  7. By: Marios Michaelides (University of Cyprus); Peter Mueser (University of Missouri, and IZA); Jeffrey Smith (University of Wisconsin, NBER, IZA, CESifo, and HCEO)
    Abstract: We present experimental evidence on the effects of four U.S. reemployment programs for youth Unemployment Insurance (UI) recipients during the Great Recession. The three programs that emphasized monitoring and service referrals reduced UI receipt but had minimal effects on employment and earnings; these programs mainly induced the early exit of participants. The fourth program, which combined mandatory job counseling with monitoring, caused the largest reductions in UI receipt and clearly increased employment and earnings. Both early participant exits and effective job counseling underlie these impacts. We conclude that policymakers should require job counseling for youth UI recipients during recessions.
    Keywords: Youth, Great Recession, REA, WPRS, job counseling, active labor market policies, unemployment, Unemployment Insurance, program evaluation
    JEL: J6 H4
    Date: 2020–05
  8. By: Ding, Lanlin; Jones, Andrew M. (University of York); Nie, Peng (Xi’an Jiaotong University)
    Abstract: We present a comprehensive analysis of ex ante inequality of opportunity (IOp) in health among Chinese adults aged 60+ and decompose the contributions of different sets of circumstances. Data are drawn from the 2011 and 2015 waves of the China Health and Retirement Longitudinal Study (CHARLS) linked with the 2014 CHARLS Life History Survey. We use a range of blood-based biomarkers, and apply a re-centered influence function (RIF) approach and a Shapley-Shorrocks decomposition to partition the contribution of circumstances across different quantiles of the biomarker distributions. We find that IOp accounts for between 3.75% and 29.57% of total health inequality in old age across the range of biomarkers. Shapley-Shorrocks decompositions show that spatial circumstances such as urban/rural residence and province of residence are the dominant determinants of IOp for most of the biomarkers. Distributional decompositions further reveal that the relative contributions to IOp in health of household socioeconomic status and health and nutrition conditions in childhood increase towards the right tails of the distribution for most of the biomarkers, where the clinical risk is focused.
    Keywords: biomarkers, CHARLS, China, inequality of opportunity, Shapley-Shorrocks decomposition, unconditional quantile regressions
    JEL: D63 I12 I14
    Date: 2020–05
  9. By: Jenkins, Stephen P. (London School of Economics); Rios-Avila, Fernando (Levy Economics Institute)
    Abstract: Kapteyn and Ypma (Journal of Labour Economics 2007) is an influential study of errors in survey and administrative data on employment earnings. To fit their mixture models, Kapteyn and Ypma assume a specific fraction of their sample have error-free earnings. Using a new UK dataset, we assess the sensitivity of model estimates and post-estimation statistics to variations in this fraction and find some lack of robustness.
    Keywords: measurement error, misclassification error, labour earnings, Kapteyn-Ypma model
    JEL: C81 C83 D31
    Date: 2020–04

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