nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2021‒03‒01
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Racial and Socioeconomic Test-Score Gaps in New England Metropolitan Areas: State School Aid and Poverty Segregation By Katharine L. Bradbury
  2. The Making and Unmaking of Opportunity: Educational Mobility in 20th Century-Denmark By Kristian Karlson; Rasmus Landersø
  3. Homoploutia: Top Labor and Capital Incomes in the United States, 1950-2020 By Yonatan Berman; Branko Milanovic
  4. The true returns to the choice of occupation and education By Andrew E. Clark; Maria Cotofan; Richard Layard
  5. Gender norms, fairness and relative working hours within households By Sarah Flèche; Anthony Lepinteur; Nattavudh Powdthavee
  6. Do Employees Benefit from Worker Representation on Corporate Boards? By David Arnold; Will Dobbie; Peter Hull
  7. Worker well-being before and during the COVID-19 restrictions: A longitudinal study in the UK By Diane Pelly; Michael Daly; Liam Delaney; Orla Doyle
  8. Trade and Informality in the Presence of Labor Market Frictions and Regulations By Rafael Dix-Carneiro; Pinelopi K. Goldberg; Costas Meghir; Gabriel Ulyssea
  9. Wages, Minimum Wages, and Price Pass-Through: The Case of McDonald's Restaurants By Orley Ashenfelter; Stepan Jurajda

  1. By: Katharine L. Bradbury
    Abstract: Test-score data show that both low-income and racial-minority children score lower, on average, on states’ elementary-school accountability tests compared with higher-income children or white children. While different levels of scholastic achievement depend on a host of influences, such test-score gaps point toward unequal educational opportunity as a potentially important contributor. This report explores the relationship between racial and socioeconomic test-score gaps in New England metropolitan areas and two factors associated with unequal opportunity in education: state equalizing school-aid formulas and geographic segregation of low-income students. The underlying methods do not allow a strict causal interpretation; however, both aspects are strongly related to test-score gaps, with poverty segregation between school districts especially important in New England. The report first explores the degree to which state school aid is progressive, that is, distributed disproportionately to districts with high fractions of students living in poverty; more progressive distributions are associated with smaller test-score gaps in high-poverty metropolitan areas. All U.S. states distribute some state revenue to support local school districts, but the extent to which such aid is focused on districts with greater concentrations of poverty varies considerably. The relationships estimated in the empirical analysis suggest that New England metro areas with high average district poverty in states with more progressive aid distributions, such as Springfield, Massachusetts, should see somewhat smaller racial and socioeconomic test-score gaps than metro areas with lower district poverty in states with less progressive school aid, such as Burlington, Vermont; that predicted difference in white-Black test-score gaps amounts to about one-quarter of the actual difference between Springfield’s gap and Burlington’s gap. The second factor explored is poverty segregation; test-score gaps are larger in metropolitan areas where, compared with white children or higher-income children, minority children or low-income children go to school with, or are in school districts with, more students from low-income families. Partly because school districts (and cities and towns) are relatively small geographically in New England, poverty segregation in the region’s metropolitan areas is most pronounced between districts, not between schools within school districts. The sizes of the estimated relationships suggest that metro areas with the highest between-district poverty segregation, such as Bridgeport-Stamford-Norwalk, Connecticut, should have markedly larger test-score gaps than metro areas with moderate poverty segregation between districts, such as Manchester-Nashua, New Hampshire; those predicted differences amount to 60 percent to 90 percent of the actual test-score gap differences between the Bridgeport and Manchester metro areas. States can alter either or both of these factors via policy changes. States set the terms—and thereby the progressivity—of school-aid policy. Many states include cost adjustments in their aid formulas to offset some of the additional costs of educating students from low-income families, and some recent proposals (such as for Connecticut) or policy changes (such as in Massachusetts) involve more closely targeting state equalizing aid to high-poverty districts. State policy levers regarding between-district poverty segregation are less direct and potentially more controversial. Nonetheless, statewide affordable housing policies, such as those in Massachusetts and Rhode Island, if applied more comprehensively, might reduce concentrations of poverty and provide more low-income families access to the higher-quality schools in low-poverty suburban districts.
    Keywords: racial segregation; socioeconomic segregation; state aid to public schools; student test-score gaps; inequality of opportunity; New England; NEPPC; education funding; segregation; low income
    Date: 2021–02–01
    URL: http://d.repec.org/n?u=RePEc:fip:fedbcr:89959&r=all
  2. By: Kristian Karlson (University of Copenhagen); Rasmus Landersø (Rockwool Foundation Research Unit)
    Abstract: We study intergenerational educational mobility in Denmark over the 20th century during which the comprehensive Danish welfare state was rolled out. While mobility initially was low, schooling reforms benefiting children from disadvantaged backgrounds led to dramatic increases in mobility for cohorts born between 1940 and 1960. However, the college expansion affecting cohorts born from 1970 onward has mainly benefited children from affluent backgrounds, resulting in rapidly declining mobility. Comparisons to educational mobility trends in the U.S. reveal that the two countries converge in mobility levels for the most recent cohorts despite the dramatically different welfare policies in place.
    Keywords: educational mobility, Inequality, schooling reforms, skill
    JEL: H00 I00 J00
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:hka:wpaper:2021-008&r=all
  3. By: Yonatan Berman (London Mathematical Laboratory, Stone Center on Socio-Economic Inequality, The Graduate Center - CUNY Graduate Center - CUNY - City University of New York [New York]); Branko Milanovic (The Graduate Center - CUNY Graduate Center - CUNY - City University of New York [New York], Stone Center on Socio-Economic Inequality, International Inequalities Institute)
    Abstract: Homoploutia describes the situation in which the same people (homo) are wealthy (ploutia) in the space of capital and labor income in some country. It can be quantified by the share of capital-income rich who are also labor-income rich. In this paper we combine several datasets covering different time periods to document the evolution of homoploutia in the United States from 1950 to 2020. We find that homoploutia was low after World War II, has increased by the early 1960s, and then decreased until the mid-1980s. Since 1985 it has been sharply increasing: In 1985, about 17% of adults in the top decile of capital-income earners were also in the top decile of labor-income earners. In 2018 this indicator was about 30%. This makes the traditional division to capitalists and laborers less relevant today. It makes periods characterized by high interpersonal inequality, high capital-income ratio and high capital share of income in the past fundamentally different from the current situation. High homoploutia has far-reaching implications for social mobility and equality of opportunity. We also study how homoploutia is related to total income inequality. We find that rising homoploutia accounts for about 20% of the increase in total income inequality in the United States since 1986.
    Keywords: income inequality,homoploutia,political economy
    Date: 2020–12
    URL: http://d.repec.org/n?u=RePEc:hal:wilwps:halshs-03130546&r=all
  4. By: Andrew E. Clark; Maria Cotofan; Richard Layard
    Abstract: Which occupations are best for wellbeing? There is a large literature on earnings differentials, but less attention has been paid to occupational differences in non-pecuniary rewards. However, information on both types of rewards is needed to understand the dispersion of wellbeing across occupations. We analyse subjective wellbeing in a large representative sample of UK workers to construct a measure of "full earnings", the sum of earnings and the value of non-pecuniary rewards, in 90 different occupations. We first find that the dispersion of earnings underestimates the extent of inequality in the labour market: the dispersion of full earnings is one-third larger than the dispersion of earnings. Equally, the gender and ethnic gaps in the labour market are larger than data on earnings alone would suggest, and the true returns to completed secondary education (though not to a degree) are underestimated by earnings differences on their own. Finally, we show that our main results are similar, and stronger, for a representative sample of US workers.
    Keywords: occupation, wages, non-pecuniary benefits, inequality
    JEL: I31 J31
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1746&r=all
  5. By: Sarah Flèche (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, Centre for Economic Performance - LSE - London School of Economics and Political Science); Anthony Lepinteur (University of Luxembourg [Luxembourg]); Nattavudh Powdthavee (WBS - Warwick Business School - University of Warwick [Coventry], IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics)
    Abstract: Using data in the United States, UK and Germany, we show that women whose working hours exceed those of their male partners report lower life satisfaction on average. By contrast, men do not report lower life satisfaction from working more hours than their female partners. An analysis of possible mechanisms shows that in couples where the woman works more hours than the man, women do not spend significantly less time doing household chores. Women with egalitarian ideologies are likely to perceive this unequal division of labour as unfair, ultimately reducing their life satisfaction.
    Keywords: gender identity,housework,life satisfaction,relative working hours,fairness
    Date: 2020–08
    URL: http://d.repec.org/n?u=RePEc:hal:journl:hal-03139138&r=all
  6. By: David Arnold (University of California, San Diego - Department of Economics); Will Dobbie (Harvard University - Harvard Kennedy School; NBER); Peter Hull (University of Chicago - Department of Economics; NBER)
    Abstract: Do employees benefit from worker representation on corporate boards? Economists and policymakers are keenly interested in this question – especially lately, as worker representation is widely promoted as an important way to ensure the interests and views of the workers. To investigate this question, we apply a variety of research designs to administrative data from Norway. We find that a worker is paid more and faces less earnings risk if she gets a job in a firm with worker representation on the corporate board. However, these gains in wages and declines in earnings risk are not caused by worker representation per se. Instead, the wage premium and reduced earnings risk reflect that firms with worker representation are likely to be larger and unionized, and that larger and unionized firms tend to both pay a premium and provide better insurance to workers against fluctuations in firm performance. Conditional on the firm’s size and unionization rate, worker representation has little if any effect. Taken together, these findings suggest that while workers may indeed benefit from being employed in firms with worker representation, they would not benefit from legislation mandating worker representation on corporate boards.
    JEL: C26 J15 K42
    Date: 2020
    URL: http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-184&r=all
  7. By: Diane Pelly; Michael Daly; Liam Delaney; Orla Doyle
    Abstract: The potential impact of COVID-19 restrictions on worker well-being is currently unknown. In this study we examine 15 well-being outcomes collected from 621 full-time workers assessed before (November, 2019 - February, 2020) and during (May-June, 2020) the COVID-19 pandemic. Fixed effects analyses are used to investigate how the COVID-19 restrictions and involuntary homeworking affect well-being and job performance. The majority of worker well-being measures are not adversely affected. Homeworkers feel more engaged and autonomous, experience fewer negative emotions and feel more connected to their organisations. However, these improvements come at the expense of reduced homelife satisfaction and job performance.
    Keywords: COVID-19 restrictions; Workers; Homeworking; Subjective well-being; Productivity; Mental health; Job satisfaction; Engagement
    JEL: J08 J24 I31
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:ucn:wpaper:202105&r=all
  8. By: Rafael Dix-Carneiro (Duke University); Pinelopi K. Goldberg (Cowles Foundation, Yale University); Costas Meghir (Cowles Foundation, Yale University); Gabriel Ulyssea (University College London)
    Abstract: We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous ï¬ rms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show that: (1) Trade openness unambiguously decreases informality in the tradable sector, but has ambiguous effects on aggregate informality. (2) The productivity gains from trade are understated when the informal sector is omitted. (3) Trade openness results in large welfare gains even when informality is repressed. (4) Repressing informality increases productivity, but at the expense of employment and welfare. (5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. (6) The informal sector works as an “unemployment,†but not a “welfare buffer†in the event of negative economic shocks.
    JEL: F14 F16 J46 O17
    Date: 2021–01
    URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:2271&r=all
  9. By: Orley Ashenfelter; Stepan Jurajda
    Abstract: We use highly consistent national-coverage price and wage data to provide evidence on wage increases, labor-saving technology introduction, and price pass-through by a large low-wage employer facing minimum wage hikes. Based on 2016-2020 hourly wage rates of McDonald’s Basic Crew and prices of the Big Mac sandwich collected simultaneously from almost all US McDonald’s restaurants, we find that in about 25% of instances of minimum wage increases, restaurants display a tendency to keep constant their wage ‘premium’ above the increasing minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages, with little heterogeneity related to how binding minimum wage increases are for restaurants. Minimum wage hikes lead to increases in real wages (expressed in Big Macs an hour of Basic Crew work can buy) that are one fifth lower than the corresponding increases in nominal wages.
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:cer:papers:wp684&r=all

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