nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2021‒11‒29
six papers chosen by
Maximo Rossi
Universidad de la República

  1. Redistributive effect and the progressivity of taxes and benefits: evidence for the UK, 1977–2018 By Hérault, Nicolas; Jenkins, Stephen P.
  2. Graduate Earnings Premia in the UK : Decline and Fall? By Boero, Gianna; Nathwani, Tej; Naylor, Robin; Smith, Jeremy
  3. The Intergenerational Transmission of Cognitive Skills: An Investigation of the Causal Impact of Families on Student Outcomes By Eric A. Hanushek; Babs Jacobs; Guido Schwerdt; Rolf van der Velden; Stan Vermeulen; Simon Wiederhold
  4. The Health Effects of Universal Early Childhood Interventions: Evidence from Sure Start By Sarah Cattan; Gabriella Conti; Christine Farquharson; Rita Ginja; Maud Pecher
  5. Birds of a Feather: Life Cycle Social Externalities, Heterogeneous Beliefs, and Development Bias By Young-Chul Kim; Glenn C. Loury
  6. Coevolution of Job Automation Risk and Workplace Governance By Belloc, Filippo; Burdin, Gabriel; Cattani, Luca; Ellis, William; Landini, Fabio

  1. By: Hérault, Nicolas; Jenkins, Stephen P.
    Abstract: We apply the Kakwani approach to decomposing redistributive effect into average rate, progressivity, and reranking components using yearly UK data covering 1977–2018. We examine cash and in-kind benefits, and direct and indirect taxes. In addition, we highlight an empirical implementation issue – the definition of the reference (‘pre-fisc’) distribution. Drawing on an innovative counterfactual approach, our empirical analysis shows that trends in the redistributive effect of cash benefits are largely associated with cyclical changes in average benefit rates. In contrast, trends in the redistributive effects of direct and indirect taxes are mostly associated with changes in progressivity. For in-kind benefits, changes in the average benefit rate and progressivity each played the major roles at different times.
    Keywords: Kakwani decomposition; inequality; redistributive effect; progressively reranking; benefits; taxes
    JEL: D31 H24 H50 I38
    Date: 2021–11
  2. By: Boero, Gianna (Department of Economics, University of Warwick); Nathwani, Tej (Higher Education Statistics Agency); Naylor, Robin (Department of Economics, University of Warwick); Smith, Jeremy (Department of Economics, University of Warwick)
    Abstract: A long-standing puzzle in the economics of education concerns the observed constancy of the average earnings premium for a degree despite a prolonged period of substantial growth in the share of graduates in the working population in the UK. Focusing on birth cohorts between 1970 and 1990, we produce evidence of a recent decline in the earnings premium for graduates over non-graduates by age 26. For those born in 1990, we estimate an average graduate earnings premium of 10%, contrasting with an estimate of 17% for the 1970 birth cohort. We also find a substantial increase in dispersion around the average premium according to class of degree awarded. Combined with a falling average, this has left the earnings of 1990-born graduates awarded lower degree classes only 3% above that of non-graduates. Among the 1970-born cohort, the equivalent earnings premium was 14%. We suggest that this precipitous fall is consistent with a ‘double-scarring’ effect associated with the combination of increased higher education participation and a rise in the proportion of graduates awarded an upper honours degree over the span of the two cohorts.
    Date: 2021
  3. By: Eric A. Hanushek; Babs Jacobs; Guido Schwerdt; Rolf van der Velden; Stan Vermeulen; Simon Wiederhold
    Abstract: The extensive literature on intergenerational mobility highlights the importance of family linkages but fails to provide credible evidence about the underlying family factors that drive the pervasive correlations. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations. We identify a causal connection between cognitive skills of parents and their children by exploiting within-family between-subject variation in these skills. The data also permit novel IV estimation that isolates variation in parental cognitive skills due to school and peer quality. The between-subject and IV estimates of the key intergenerational persistence parameter are strikingly similar and close at about 0.1. Finally, we show the strong influence of family skill transmission on children’s choices of STEM fields.
    JEL: I24
    Date: 2021–11
  4. By: Sarah Cattan (Institute for Fiscal Studies); Gabriella Conti (University College London); Christine Farquharson (Institute for Fiscal Studies); Rita Ginja (University of Bergen); Maud Pecher (Institute for Fiscal Studies)
    Abstract: We evaluate the short- and medium-term heath impacts of Sure Start, a large-scale and universal early childhood program in England. We exploit the rollout of the program and implement a difference-in-difference approach, combining data on the exact location and opening date of Sure Start centers with administrative data on the universe of admissions to public-sector hospitals. Exposure to an additional Sure Start center per thousand age-eligible children increases hospitalization by 10% at age 1 (around 6,700 hospitalizations per year), but reduces them by 8-9% across ages 11 to 15 (around 13,150 hospitalizations per year). These findings show that early childhood programs that are less intensive than small-scale ‘model programs’ can deliver significant health benefits, even in contexts with universal healthcare. Impacts are driven by hospitalizations for preventable conditions and are concentrated in disadvantaged areas, suggesting that enriching early childhood environments might be a successful strategy to reduce inequalities in health.
    Keywords: health, difference-in-difference
    JEL: I10 I14 I18
    Date: 2021–11
  5. By: Young-Chul Kim (Department of Economics, Sogang University, Korea); Glenn C. Loury (Department of Economics, Brown University, USA)
    Abstract: This study models how social networks that span an individual’s entire life cycle affect human capital acquisition and subsequent employment outcomes. Early-life social affiliations can affect the cost of human capital, while later-life connections can affect the earnings derived from previously acquired human capital. The dynamic interactions between early-life network-mediated investments and later-life networkmediated returns give rise to multiple, fully consistent, rational expectations equilibria. These self-fulling expectations imply development bias, wherein heterogeneous beliefs about the future persistently generate unequal outcomes among social groups. When the model is applied to a country’s development cycle, the theoretical findings suggest that, while between-group inequality can reduce economic growth in a mature economy, it may increase growth in an economy in the initial stages of its development. Relevant historical examples of between-group dynamics are discussed extensively.
    Keywords: Group Inequality, Social Externality, Development Bias, Expectation Trap
    JEL: I30 J15 Z13
    Date: 2021
  6. By: Belloc, Filippo (University of Siena); Burdin, Gabriel (Leeds University Business School); Cattani, Luca (University of Bologna); Ellis, William; Landini, Fabio (University of Parma)
    Abstract: This paper analyzes the interplay between the allocation of authority within firms and workers' exposure to automation risk. We propose an evolutionary model to study the complementary fit of job design and workplace governance as resulting from the adoption of worker voice institutions, in particular employee representation (ER). Two organisational conventions are likely to emerge in our framework: in one, workplace governance is based on ER and job designs have low automation risk; in the other, ER is absent and workers are involved in automation-prone production tasks. Using data from a large sample of European workers, we document that automation risk is negatively associated with the presence of ER, consistently with our theoretical framework. Our analysis helps to rationalize the historical experience of Nordic countries, where simultaneous experimentation with codetermination rights and job enrichment programs has taken place. Policy debates about the consequences of automation on labour organization should avoid technological determinism and devote more attention to socio-institutional factors shaping the future of work.
    Keywords: automation risk, job design, employee representation, evolutionary game
    JEL: O33 J51 C73
    Date: 2021–10

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