nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2023‒11‒06
seven papers chosen by
Maximo Rossi, Universidad de la República

  1. What accounts for the rising share of women in the top 1 percent? By Burkhauser, Richard V.; Hérault, Nicolas; Jenkins, Stephen P.; Wilkins, Roger
  2. Optimal Taxation and Other-Regarding Preferences By Aronsson, Thomas; Johansson-Stenman, Olof
  3. On the Origins of Socio-Economic Inequalities: Evidence from Twin Families By Bingley, Paul; Cappellari, Lorenzo; Tatsiramos, Konstantinos
  4. The fundamental properties, stability and predictive power of distributional preferences By Ernst Fehr; Thomas Epper; Julien Senn
  5. Inherited inequality: a general framework and an application to South Africa By Brunori, Paolo; Ferreira, Francisco H. G.; Salas-Rojo, Pedro
  6. Flying to Mars and Venus - the gendered nature of in-work poverty in Europe By Anna Schwarz
  7. Intergenerational Transmission of Inequality: Maternal Endowments, Investments, and Birth Outcomes By Sadegh Eshaghnia; James J. Heckman

  1. By: Burkhauser, Richard V.; Hérault, Nicolas; Jenkins, Stephen P.; Wilkins, Roger
    Abstract: The share of women in the top 1 percent of the UK’s income distribution has been growing over the last two decades (as in several other countries). Our first contribution is to account for this trend using regressions of the probability of being in the top 1 percent, fitted separately for men and women, in order to contrast between the sexes the role of changes in characteristics and changes in returns to characteristics. We show that the rise of women in the top 1 percent is primarily accounted for by their greater increases in the number of years spent in full-time education. Although most top income analysis uses tax return data, we derive our findings taking advantage of the much more extensive information about personal characteristics that is available in survey data. Our use of survey data requires justification given survey under-coverage of top incomes. Providing this justification is our second contribution.
    Keywords: top 1%; top incomes; inequality; gender differences; survey under-coverage
    JEL: D31 J16 C81
    Date: 2023–03–01
  2. By: Aronsson, Thomas (Department of Economics, Umeå University); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, University of Gothenburg)
    Abstract: The present paper analyzes optimal redistributive income taxation in a Mirrleesian framework extended with other-regarding preferences at the individual level. We start by developing a general model where the other-regarding preference component of the utility functions is formulated to encompass almost any form of preferences for other people’s disposable income, and then continue with four prominent special cases. Two of these reflect self-centered inequality aversion, based on Fehr and Schmidt (1999) and Bolton and Ockenfels (2000), whereas the other two reflect non-self-centered inequality aversion, where people have preferences for a low Gini coefficient and a high minimum income level in society, respectively. We find that other-regarding preferences may substantially increase the marginal tax rates, including the top rates, and that different types of other-regarding preferences have very different implications for optimal taxation.
    Keywords: Optimal Taxation; Redistribution; Social Preferences; Inequality Aversion
    JEL: D62 D90 H21 H23
    Date: 2023–10–19
  3. By: Bingley, Paul (VIVE - The Danish Centre for Applied Social Science); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Tatsiramos, Konstantinos (University of Luxembourg, LISER)
    Abstract: We propose a twin family model linking twins with their spouses and children to quantify the relative importance of genetic and environmental factors in explaining the variance of socio-economic outcomes. Using data from the Danish Twins Registry and population registers, we test and relax the assumptions of the standard behavioral genetics model most frequently applied in economics using twins or adoptees. Exploiting an education reform differentially affecting parents, we find no evidence of gene-environment interactions. While we find some assortative mating based on genetic factors, differentially shared environments are key: they explain half of the variance in years of schooling, whereas genetic factors explain only nine percent. We find similar percentages for earnings, income, and wealth. Decomposing intergenerational elasticities reveals that shared environments explain 50% for earnings, 60% for income, 70% for wealth, and 80% for schooling. Family environments are more important than previously understood.
    Keywords: nature, nurture, family background, genes, environment, inequality
    JEL: D31 D63 E21 E24 I24
    Date: 2023–10
  4. By: Ernst Fehr; Thomas Epper; Julien Senn
    Abstract: Parsimony is a desirable feature of economic models but almost all human behaviors are characterized by vast individual variation that appears to defy parsimony. How much parsimony do we need to give up to capture the fundamental aspects of a population’s distributional preferences and to maintain high predictive ability? Using a Bayesian nonparametric clustering method that makes the trade-off between parsimony and descriptive accuracy explicit, we show that three preference types—an inequality averse, an altruistic and a predominantly selfish type—capture the essence of behavioral heterogeneity. These types independently emerge in four different data sets and are strikingly stable over time. They predict out-of-sample behavior equally well as a model that permits all individuals to differ and substantially better than a representative agent model and a state-of-the-art machine learning algorithm. Thus, a parsimonious model with three stable types captures key characteristics of distributional preferences and has excellent predictive power.
    Keywords: Distributional preferences, altruism, inequality aversion, preference heterogeneity, stability, out-of-sample prediction, parsimony, bayesian nonparametrics
    JEL: D31 D63 C49 C90
    Date: 2023–10
  5. By: Brunori, Paolo; Ferreira, Francisco H. G.; Salas-Rojo, Pedro
    Abstract: Scholars have sought to quantify the extent of inequality which is inherited from past generations in many different ways, including a large body of work on intergenerational mobility and inequality of opportunity. This paper makes three contributions to that broad literature. First, we show that many of the most prominent approaches to measuring mobility or inequality of opportunity fit within a general framework which involves, as a first step, a calculation of the extent to which inherited circumstances can predict current incomes. The importance of prediction has led to recent applications of machine learning tools to solve the model selection challenge in the presence of competing upward and downward biases. Our second contribution is to apply transformation trees to the computation of inequality of opportunity. Because the algorithm is built on a likelihood maximization that involves splitting the sample into groups with the most salient differences between their conditional cumulative distributions, it is particularly well-suited to measuring ex-post inequality of opportunity, following Roemer (1998). Our third contribution is to apply the method to data from South Africa, arguably the world’s most unequal country, and find that almost threequarters of its current inequality is inherited from predetermined circumstances, with race playing the largest role, but parental background also making an important contribution.
    Keywords: inequality; opportunity; mobility; transformation trees; South Africa
    JEL: D31 D63 J62
    Date: 2023–09–01
  6. By: Anna Schwarz (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper addresses the invisibility of women in in-work poverty research by analyzing the Eurostat in-work poverty indicator in combination with a novel individualized in-work poverty indicator. The latter relies on individual income, but still accounts for the household in defining the poverty threshold. I show that men are more often in-work poor due to assumed sharing with other household members, while women are mostly individually poor, but lifted out of poverty on the household level. The latter is not captured by the Eurostat indicator. This seems to be driven by household dynamics. Living with children makes women more financially dependent on their partner- increases individualized in-work poverty-, which in turn increases the burden on men's income - increases Eurostat in-work poverty. This pattern is most prevalent in countries with a stronger gender division of labor. My results uncover the blind spots in in-work poverty measurement and additionally highlight the potential of using the individualized indicator to measure financial dependency within the household.
    Keywords: poverty measurement, gender, intra-household inequality, in-work poverty
    JEL: I32 J16 O57 D13 D31
    Date: 2023–09
  7. By: Sadegh Eshaghnia; James J. Heckman
    Abstract: Newborn health is an important component in the chain of intergenerational transmission of disadvantage. This paper contributes to the literature on the determinants of health at birth in two ways. First, we analyze the role of maternal endowments and investments (education and smoking in pregnancy) on the probability of having a baby who is small for gestational age (SGA). We estimate both the total impact of maternal endowments on birth outcomes, and we also decompose it into a direct, “biological” effect and a “choice” effect, mediated by maternal behaviors. Second, we estimate the causal effects of maternal education and smoking in pregnancy, and investigate whether women endowed with different traits have different returns. We find that maternal cognition affects birth outcomes primarily through maternal education, that personality traits mainly operate by changing maternal smoking, and that the physical fitness of the mother has a direct, “biological” effect on SGA. We find significant heterogeneity in the effects of education and smoking along the distribution of maternal physical traits, suggesting that women with less healthy physical constitutions should be the primary target of prenatal interventions.
    JEL: I12 I14 J24
    Date: 2023–10

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