nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2020‒12‒14
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Short and Long-Run Distributional Impacts of COVID-19 in Latin America By Nora Lustig; Guido Neidhöfer; Mariano Tommasi
  2. Predistribution vs. Redistribution: Evidence from France and the U.S By Antoine Bozio; Bertrand Garbinti; Jonathan Goupille-Lebret; Malka Guillot; Thomas Piketty
  3. Parental Gender Stereotypes and Student Wellbeing in China By Chu, Shuai; Zeng, Xiangquan; Zimmermann, Klaus F.
  4. The Easterlin Paradox By Easterlin, Richard A.; O’Connor, Kelsey J.
  5. Start What You Finish! Ex ante risk and schooling investments in the presence of dynamic complementarities By Andrew D. Foster; Esther Gehrke
  6. Inequality and Social Policy in Latin America By Nora Lustig
  7. Informality and work status By Gary S. Fields
  8. Welfare, Workfare and Labor Supply: A Unified Ex Post and Ex Ante Evaluation By Francesco Agostinelli; Emilio Borghesan; Giuseppe Sorrenti
  9. Can Unearned Income Make Us Fitter? Evidence from Lottery Wins By Costa-Font, Joan; Gyori, Mario

  1. By: Nora Lustig (Tulane University and Commitment to Equity Institute); Guido Neidhöfer (ZEW Mannheim); Mariano Tommasi (Universidad de San Andrés)
    Abstract: We simulate the short- and long-term distributional consequences of COVID-19 in the four largest Latin American economies: Argentina, Brazil, Colombia and Mexico. We show that the short-term impact on income inequality and poverty can be very significant, but that additional spending on social assistance has a large offsetting effect in Brazil and Argentina. The effect is much smaller in Colombia and nil in Mexico, where there has been no such expansion. To project the long- term consequences, we estimate the impact of the pandemic on human capital and its intergenerational persistence. Hereby, we use information on school lockdowns, educational mitigation policies, and account for educational losses related to health shocks and parental job loss. Our findings show that in all four countries the impact is strongly asymmetric and affects particularly the human capital of children from disadvantaged families. Consequently, inequality of opportunity is expected to increase substantially, in spite of the mitigation policies.
    Keywords: COVID-19; Lockdowns; Inequality; Poverty; Human capital; School closures; Social spending; Intergenerational persistence; Latin America; Argentina; Brazil; Colombia; Mexico.
    JEL: C63 D31 I24 I32 I38 J62
    Date: 2020–11
  2. By: Antoine Bozio (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab); Bertrand Garbinti (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], WIL - World Inequality Lab); Jonathan Goupille-Lebret (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Malka Guillot (ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology in Zürich [Zürich], IPP - Institut des politiques publiques, WIL - World Inequality Lab); Thomas Piketty (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab)
    Abstract: How much redistribution policies can account for long-run changes in inequality? To answer this question, we quantify the extent of redistribution over time by the percentage reduction from pretax to post-tax inequalities, and decompose the changes in post-tax inequalities into different redistributive policies and changes in pretax inequalities. To estimate these redistributive statistics, we construct homogenous annual series of post-tax national income for France over the 1900-2018 period, and compare them with those recently constructed for the U.S. We obtain three major findings. First, redistribution has increased in both countries over the period, earlier in the U.S., later in France, to reach similar levels today. Second, the substantial long-run decline in post-tax inequality in France over the 1900-2018 period is due mostly to the fall in pretax inequality (accounting for three quarters of the total decline), and to a lesser extent to the direct redistributive role of taxes, transfers and other public spending (about one quarter). Third, the reason why overall inequality is much smaller in France than in the U.S. is entirely due to differences in pretax inequality. These findings suggest that policy discussions on inequality should, in the future, pay more attention to policies affecting pretax inequality and should not focus exclusively on "redistribution".
    Date: 2020–10
  3. By: Chu, Shuai; Zeng, Xiangquan; Zimmermann, Klaus F.
    Abstract: Non-cognitive abilities are supposed to affect student's educational performance, who are challenged by parental expectations and norms. Parental gender stereotypes are shown to strongly decrease student wellbeing in China. Students are strongly more depressed, feeling blue, unhappy, not enjoying life and sad with no male-female differences while parental education does not matter.
    Keywords: Gender identity,gender stereotypes,student wellbeing,non-cognitive abilities,mental health,subjective wellbeing
    JEL: I12 I26 I31 J16
    Date: 2020
  4. By: Easterlin, Richard A. (University of Southern California); O’Connor, Kelsey J. (STATEC Research – National Institute of Statistics and Economic Studies)
    Abstract: The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.
    Keywords: Easterlin Paradox, economic growth, income, happiness, life satisfaction, subjective well-being, long-term, short-term, trends, fluctuations, transition countries, less developed countries, developed countries
    JEL: I31 D60 O10 O5
    Date: 2020–12
  5. By: Andrew D. Foster; Esther Gehrke
    Abstract: We study the relationship between risk and schooling investment in a low income setting, with a particular focus on possible ex ante effects. We first present a model that shows that such effects can arise if the human capital production function exhibits dynamic complementarity and parental preferences for human capital are not too concave. We then estimate the key parameters of the model using multiple rounds of panel data from rural India that contain, in each round, three seasons of time allocation for each sampled child. These estimates suggest an elasticity of schooling investments with respect to risk of -0.09 in this context. We then use cross-round differences in village-level irrigation interacted with rainfall variability to estimate the relationship between income risk and school time. Using this variation, we find an estimated elasticity of study time with respect to risk between -0.05 and -0.04. Finally, we simulate the effects of an implicit social insurance program, modeled after the National Rural Employment Guarantee Scheme (NREGS). Our results suggest that the risk-reducing effect of the NREGS may offset adverse effects on child education that were evident during the NREGS phase-in due to rising wages.
    Date: 2020
  6. By: Nora Lustig (Tulane University and Commitment to Equity Institute)
    Abstract: This paper analyzes the evolution and determinants of inequality between 1990 and 2017 in Latin America. Throughout the period, inequality in the region has demonstrated three trends: it increased during the 1990s; decreased between 2002 and 2013; and, since 2014, it has remained constant or even increased depending on the country. The reduction of inequality in the second period corresponded to two main changes in social policy: (I) the expansion in access to education in the previous period, which led to a decrease in the salary gap; and (II) the expansion and progresivity of monetary transfers. However, despite improvements in income distribution, in recent years, there has been a wave of protests in various countries. This paper proposes possible explanations of this apparently paradoxical phenomenon. Finally, this paper analyzes the impact of fiscal policy on inequality and poverty using comparative data from fiscal incidence analysis. Although in all countries the combination of taxes, social spending, and consumption subsidies reduces inequality, it does not always reduce poverty.
    Keywords: Fiscal incidence; Inequality; Poverty; Taxes; Social spending; Latin America.
    JEL: H22 D63 D31 D74
    Date: 2020–11
  7. By: Gary S. Fields
    Abstract: The most important determinant of households' livelihoods is how much they earn for their labour. People in informal work are more likely to be low earners, to live in poverty, and to make fewer transitions into the higher-paying work statuses. The paper is divided into three main sections: what we mean by informality and work status, why we should differentiate between work statuses, and what we can learn by analysing work statuses and transitions between them.
    Keywords: informal work, work status, livelihoods, Poverty, transitions
    Date: 2020
  8. By: Francesco Agostinelli (University of Pennsylvania); Emilio Borghesan (University of Pennsylvania); Giuseppe Sorrenti (University of Amsterdam)
    Abstract: This paper analyzes the extent to which labor supply adjusts to incentives created by social programs. We find new evidence of highly elastic labor supply for single mothers in the United States, with sizable responses to the Earned Income Tax Credit (EITC) and welfare (AFDC/TANF) reforms during the 1990s. We reconcile some conflicting results in the literature by showing how the difference in differences design fails to identify a meaningful treatment parameter when a reform expands a pre-existing social program and when multiple programs change simultaneously. Finally, we use our quasi-experimental estimates to identify a structural model of labor supply with multiple tax and transfer programs. Model counterfactuals show that the effect of the EITC on labor supply depends on the regime of taxes and transfers in place. We conclude that evidence-based policymaking must explicitly model the tax and transfer system when using past reforms (ex post analysis) to draw inference about the effects of future reforms (ex ante analysis) on the labor market.
    Keywords: evaluation of social programs, EITC, TANF, tax and transfer
    JEL: I38 J08 H30 J38
    Date: 2020–11
  9. By: Costa-Font, Joan (London School of Economics); Gyori, Mario (London School of Economics)
    Abstract: Although lower income is associated with overweight (and obesity), such an association is explained by a number of other confounding effects such as omitted variables (e.g., time preferences) explaining that income effect on overweight. We study the effect of unearned income shocks resulting from a lottery win (windfall income) on both overweight (alongside obesity and body mass index) distribution. We draw upon longitudinal data from the United Kingdom, a country where about half of a population plays the lottery. Our results suggest no evidence of contemporaneous effects of income on overweight, but a significant lagged effect. We find a reduction in overweight 12 months after a lottery win. A 10,000-sterling win reduces overweight by 2-3 percentage points. Furthermore, we document a nonlinear effect up to 36 months after the lottery win, suggesting that small wins increase overweight and large wins reduce it. The effect of a lottery win varies depending on an individual's working hours and educational attainment. A lottery win among low education individuals decreases the risk of overweight.
    Keywords: obesity, overweight, income, windfall income, lottery wins, body mass index (BMI)
    JEL: I12 I18 J30
    Date: 2020–11

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