nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2021‒08‒30
nine papers chosen by
Maximo Rossi
Universidad de la República

  1. Missing incomes in the UK: Evidence and policy implications By Advani, Arun; Ooms, Tahnee; Summers, Andy
  2. Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence By Hermo, Santiago; Päällysaho, Miika; Seim, David; Shapiro, Jesse
  3. Why Does Happiness Respond Differently to an Increase vs. Decrease in Income? By Easterlin, Richard A.
  4. Publishing Economics: How Slow? Why Slow? Is Slow Productive? Fixing Slow? By Hadavand, Aboozar; Hamermesh, Daniel S.; Wilson, Wesley W.
  5. Global Income Inequality, 1820-2020: The Persistence and Mutation of Extreme Inequality By Lucas Chancel; Thomas Piketty
  6. The Economics of Walking About and Predicting Unemployment By David G. Blanchflower; Alex Bryson
  7. The Welfare Effects of Time Reallocation: Evidence from Daylight Saving Time By Joan Costa-Font; Sarah Fleche; Ricardo Pagan
  8. (Successful) Democracies Breed Their Own Support By Daron Acemoglu; Nicolás Ajzenman; Cevat Giray Aksoy; Martin Fiszbein; Carlos A. Molina
  9. Measurement error and misclassification in linked earnings data: Estimation of the Kapteyn and Ypma model By Stephen Jenkins; Fernando Rios-Avila

  1. By: Advani, Arun (University of Warwick, CAGE, the Institute for Fiscal Studies (IFS), and the LSE International Inequalities Institute (III).); Ooms, Tahnee (London School of Economics); Summers, Andy (London School of Economics, III, and CAGE.)
    Abstract: Policymakers tend to ‘treasure what is measured’ and overlook phenomena that are not. In an era of increased reliance on administrative data, existing policies also often determine what is measured in the first place. We analyse this two-way interaction between measurement and policy in the context of the investment incomes and capital gains that are missing from the UK’s official income statistics. We show that these ‘missing incomes’ change the picture of economic inequality over the past decade, revealing rising top income shares during the period of austerity. The underestimation of these forms of income in official statistics has diverted attention from tax policies that disproportionately benefit the wealthiest. We urge a renewed focus on how policy affects and is affected by measurement.
    Keywords: Inequality statistics; welfare measurement; savinga and investment income; capital gains; top incomes; tax policy JEL Classification:
    Date: 2021
    URL: http://d.repec.org/n?u=RePEc:cge:wacage:543&r=
  2. By: Hermo, Santiago (Brown University); Päällysaho, Miika (Dept. of Economics, Stockholm University); Seim, David (Dept. of Economics, Stockholm University); Shapiro, Jesse (Brown University)
    Abstract: A large literature in cognitive science studies the puzzling “Flynn effect” of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort’s mix of skills is determined by different skills’ relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 36 percent of the measured increase in reasoning skill, and can also explain the decline in knowledge. An original survey of parents, an analysis of trends in school curricula, and an analysis of occupational characteristics show evidence of increasing emphasis on reasoning as compared to knowledge.
    Keywords: Flynn effect; IQ; skill investment; human capital; administrative data
    JEL: J24 J31 O52
    Date: 2021–08–23
    URL: http://d.repec.org/n?u=RePEc:hhs:sunrpe:2021_0002&r=
  3. By: Easterlin, Richard A. (University of Southern California)
    Abstract: The answer is that people's evaluations of their income situation are based on different considerations when the economy is expanding and when it is contracting. When, in the course of economic growth, incomes generally are rising, evaluations tend to be dominated by "social comparison"—what is happening to the incomes of others. An increase in the incomes of others undercuts the tendency for happiness to grow with an increase in one's own income, and happiness remains fairly constant. But in a recession, as people increasingly have difficulty meeting their fixed financial obligations, the benchmark for income evaluations turns inward. "Financial hardship", the shortfall from one's own previous peak income, takes over, and the greater the shortfall, the less one's happiness. There is thus an asymmetry in the psychological roots of income evaluations when income is rising vs. falling , and this causes a corresponding asymmetry in the response of happiness to the direction of income change.
    Keywords: happiness, life satisfaction, subjective well-being, economic growth, GDP, income, easterlin paradox, recession, social comparison, financial hardship
    JEL: I31 D60 O10
    Date: 2021–08
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp14645&r=
  4. By: Hadavand, Aboozar (Minerva University); Hamermesh, Daniel S. (Barnard College); Wilson, Wesley W. (University of Oregon)
    Abstract: Publishing in economics proceeds much more slowly on average than in the natural sciences, and more slowly than in other social sciences and finance. It is even relatively slower at the extremes. We demonstrate that much of the lag, especially at the extremes, arises from authors' dilatory behavior in revising their work. The marginal product of an additional round of re-submission at the top economics journals is productive of additional subsequent citations; but conditional on re-submission, journals taking more time is not productive, and authors spending more time is associated with reduced scholarly impact. We offer several proposals to speed up the publication process. These include no-revisions policies, such as Economic Inquiry's; limits on authors' time revising articles, and limits on editors waiting for dilatory referees.
    Keywords: procrastination, top journals, sociology of economics, slowness, editorial behavior
    JEL: A11 B20
    Date: 2021–08
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp14643&r=
  5. By: Lucas Chancel (WIL - World Inequality Lab , PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 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); Thomas Piketty (WIL - World Inequality Lab , PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 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)
    Abstract: In this paper, we mobilize newly available historical series from the World Inequality Database to construct world income distribution estimates from 1820 to 2020. We find that the level of global income inequality has always been very large, reflecting the persistence of a highly hierarchical world economic system. Global inequality increased between 1820 and 1910, in the context of the rise of Western dominance and colonial empires, and then stabilized at a very high level between 1910 and 2020. Between 1820 and 1910, both between-country and within-country inequality were increasing. In contrast, these two components of global inequality have moved separately between 1910 and 2020: within-country inequality dropped in 1910- 1980 (while between-country inequality kept increasing) but rose in 1980-2020 (while between-country inequality started to decline). As a consequence of these contradictory and compensating evolutions, early 21st century neo-colonial capitalism involves similar levels of inequality as early 20th century colonial capitalism, though it is based upon a different set of rules and institutions. We also discuss how alternative rules such as fiscal revenue sharing could lead to a significant drop in global inequality.
    Date: 2021–07
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03321887&r=
  6. By: David G. Blanchflower (Bruce V. Rauner ’78 Professor of Economics, Dartmouth College, Hanover, NH 03755-3514. Adam Smith School of Business, University of Glasgow and NBER); Alex Bryson (Professor of Quantitative Social Science, UCL Social Research Institute, University College London, 20 Bedford Way, London WC1H 0AL)
    Abstract: Unemployment is notoriously difficult to predict. In previous studies, once country fixed effects are added to panel estimates, few variables predict changes in unemployment rates. Using panel data for 29 European countries - Austria; Belgium; Bulgaria; Croatia; Cyprus; Czechia; Denmark; Estonia; Finland; France; Germany; Greece; Hungary; Ireland; Italy; Latvia; Lithuania; Luxembourg; Malta; Netherlands; Poland; Portugal; Romania; Slovakia; Slovenia; Spain; Sweden; Turkey and the UK - over 439 months between January 1985 and July 2021 in an unbalanced country*month panel of just over 10000 observations, we predict changes in the unemployment rate 12 months in advance based on individuals’ fears of unemployment, their perceptions of the economic situation and their own household financial situation. Fear of unemployment predicts subsequent changes in unemployment 12 months later in the presence of country fixed effects and lagged unemployment. Individuals’ perceptions of the economic situation in the country and their own household finances also predict unemployment 12 months later. Business sentiment (industry fear of unemployment) is also predictive of unemployment 12 months later. The findings underscore the importance of the “economics of walking about”. The implication is that these social survey data are informative in predicting economic downturns and should be used more extensively in forecasting. We also generate a 29 country-level annual panel on life satisfaction from 1985-2020 from the World Database of Happiness and show that the consumer level fear of unemployment variable lowers wellbeing over and above the negative impact of the unemployment rate itself. Qualitative survey metrics were able to predict the Great Recession and the economic slowdown in Europe just prior to the COVID pandemic.
    Keywords: unemployment, fear, sentiment, social attitudes, life satisfaction, recession, COVID
    JEL: J60 J64 J68
    Date: 2021–08–01
    URL: http://d.repec.org/n?u=RePEc:qss:dqsswp:2124&r=
  7. By: Joan Costa-Font (CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Sarah Fleche (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science); Ricardo Pagan (Universidad de Málaga [Málaga] = University of Málaga [Málaga])
    Abstract: Daylight Saving Time (DST) is currently implemented by more than seventy countries, yet we do not have a clear knowledge of how it affects individuals' welfare. Using a regression discontinuity design combined with a differences-in-differences approach, we find that the Spring DST causes a significant decline in life satisfaction. By inducing a reallocation of time, the transition into DST deteriorates sleep and increases time stress, which in turn affects physical and emotional health. After performing a simple cost-benefit analysis, we find evidence suggestive that ending DST would exert a positive effect on welfare, namely the wellbeing costs associated with DST exceed its benefits.
    Keywords: Daylight Saving Time,wellbeing,health,sleep,time stress
    Date: 2021–08–19
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03322741&r=
  8. By: Daron Acemoglu; Nicolás Ajzenman; Cevat Giray Aksoy; Martin Fiszbein; Carlos A. Molina
    Abstract: Using large-scale survey data covering more than 110 countries and exploiting within-country variation across cohorts and surveys, we show that individuals with longer exposure to democracy display stronger support for democratic institutions. We bolster these baseline findings using an instrumental-variables strategy exploiting regional democratization waves and focusing on immigrants’ exposure to democracy before migration. In all cases, the timing and nature of the effects are consistent with a causal interpretation. We also establish that democracies breed their own support only when they are successful: all of the effects we estimate work through exposure to democracies that are successful in providing economic growth, peace and political stability, and public goods.
    JEL: P16
    Date: 2021–08
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:29167&r=
  9. By: Stephen Jenkins (London School of Economics and Political Science); Fernando Rios-Avila (Levy Economics Institute)
    Abstract: Kapteyn and Ypma (KY; 2007, https://doi.org/10.1086/513298) is an influential study for the analysis of linked administrative and survey earnings data that was the first to allow for measurement errors in both sources of data. Allowing for measurement errors in administrative data, they find evidence that the oft-cited feature of mean-reversion errors in survey data virtually disappeared. In this talk, I introduce a new set of commands that facilitates the estimation of the KY measurement error model, expanding on the theoretical model proposed by KY, and incorporating insights from Meijer, Rohwedder, and Wansbeek (2012, https://doi.org/10.1198/jbes.2011.08166). These commands are ky_fit, a command that can be used to fit the KY model, including the proposed extensions; ky_estat, an add-on for estat that allows the user to obtain summary statistics of important features of the KY model, including measurements of data reliability; ky_p, an add-on for predict and margins that allows obtaining model predictions and marginal effects of the model; and ky_sim, a command that can simulate data based on the fitted models.
    Date: 2021–08–07
    URL: http://d.repec.org/n?u=RePEc:boc:scon21:33&r=

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