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on Unemployment, Inequality and Poverty |
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Issue of 2023‒12‒11
six papers chosen by |
| By: | Ernst ⓡ Fehr; Thomas ⓡ Epper; Julien ⓡ Senn; Ernst Fehr |
| 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 behaviour 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 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10727&r=ltv |
| By: | Lustig, Nora; Martinez Pabon, Valentina; Pessino, Carola |
| Abstract: | This paper uses standard fiscal incidence analysis to study how much income redistribution and poverty reduction are accomplished through the fiscal system in eighteen Latin American and Caribbean (LAC) countries. We show there is considerable heterogeneity in the income inequality and poverty-reducing power of LAC fiscal systems. While all LAC fiscal systems reduce income inequality, fiscal systems in nine LAC countries are poverty-increasing, and this startling characteristic has not improved over time. When analyzing specific fiscal elements, we find that direct taxes, direct transfers, and in-kind transfers are all equalizing, and spending on education and health is often pro-poor. Moreover, contrary to expectations, indirect taxes and subsidies are more frequently equalizing than unequalizing. |
| Keywords: | fiscal policy; inequality; poverty; Latin America |
| JEL: | D31 D60 E62 H22 I32 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120683&r=ltv |
| By: | McGee, Andrew (University of Alberta); McGee, Peter (University of Arkansas, Fayetteville) |
| Abstract: | Women report setting lower reservation wages than men in survey data. We show that women set reservation wages that are 14 to 18 percent lower than men's in laboratory search experiments that control for factors not fully observed in surveys such as offer distributions and outside options. This gender gap—which exists even controlling for overconfidence, preferences, personality, and intelligence—leads women to spend less time searching than men while accepting lower wages. Women—but not men—set reservation wages that are too low relative to theoretically optimal values given their risk preferences early in search, reducing their earnings. |
| Keywords: | reservation wages, gender wage gaps, search experiments |
| JEL: | J16 J64 C91 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16577&r=ltv |
| By: | Pessino, Carola; Rasteletti, Alejandro; Artana, Daniel; Lustig, Nora |
| Abstract: | This chapter analyzes the incidence on income distribution by a comprehensive array of direct and indirect taxes in ten Latin American countries circa 2018. The study finds that although there is a significant heterogeneity, the redistributive impact is equalizing for direct taxes and unequalizing for indirect taxes. Overall, redistribution through taxes, without accounting for spending effects and interactions, is slightly equalizing for some countries and unequalizing for others, but the burden on the poor is high and even higher than on the rich. This is mainly a consequence of the high share of indirect taxes in the tax structures, and of low personal income tax collection and coverage. The inclusion of the redistributive effect of the corporate income tax contributes to improve redistribution and accounts for better comparison with the redistributive impact in more developed countries, where dividends are taxed heavily with personal income taxes rather than corporate income taxes as in Latin America. High levels of evasion and informality make payroll taxes more regressive in integrated labor markets with high informality, but make indirect taxes less regressive, since the poor pay little or no indirect taxes on some of their purchases. |
| Keywords: | taxes; inequality; informality; Latin America |
| JEL: | D31 E26 H22 H26 N36 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120697&r=ltv |
| By: | Altube, Matias Guizzo; Scartascini, Carlos; Tommasi, Mariano |
| Abstract: | Predominant views on the political economy of Latin America and the Caribbean tend to emphasize that elite domination helps to understand the high levels of inequality. The contemporary fiscal version of that assertion goes something like “the rich are powerful and they don't like taxes, hence we have little taxation and little redistribution.” That is a good approximation to the reality of some countries, but not of others. There are cases in the region where there are high levels of taxation and non-negligible redistributive efforts. But in some of those cases such redistribution comes hand in hand with macroeconomic imbalances, high inflation, low growth, as well as low-quality public policies. When redistributive efforts are short-sighted and attempted with inefficient public policies, fiscal imbalances lead to inflation and to frequent macroeconomic crises that reduce growth and thwart poverty reduction efforts. The argument of this paper is that there are various possible political configurations (including elite domination and populism among others) that lead to different economic and social outcomes (including the degree of redistribution and others). We postulate that each configuration of social outcomes emerges out of different political economy equilibria. Different countries in the region will be in different political economy equilibria, and hence will have different combinations of political economy syndromes and of socioeconomic outcomes. In this paper, we characterize the countries regarding the size of the public sector, how much fiscal redistribution there is, and how efficient this public action is. We summarize various strands of literature that attempt to explain some elements of that fiscal vector one at a time; and then attempt to provide a simple framework that might explain why different countries present different configurations of size, distributiveness, and efficiency. |
| Keywords: | inequality; redistribution; political economy; growth; poverty |
| JEL: | H20 H23 E62 P16 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120678&r=ltv |
| By: | Ferreira, Francisco H. G. |
| Abstract: | Thirty years after the “Washington Consensus”, is there a new policy consensus that addresses the problem of inequality? This paper argues that there is widespread acceptance that multiple, interrelated and mutually reinforcing inequalities exist – in income, wealth, education, health, power, and recognition – and that these inequalities are generally “too high”. There has also been a significant shift towards a shared view that these inequalities matter, both intrinsically and because of their instrumental effects on economic efficiency and political institutions. There is much less consensus, perhaps surprisingly, on what the actual levels of income inequality are, and there are common misperceptions about their trends. In policy terms, there is something approaching a consensus regarding the desirability of various “pre-distribution” policies, ranging from early childhood development to investment in better teaching. In certain quarters, there is also agreement that sharper antitrust regulation, freer labor unions, and more progressive taxation is needed in most countries. But much less is known about how to provide the poor with genuine opportunities to break the cycle of intergenerational transmission of disadvantage in a durable way. (Stone Center on Socio-Economic Inequality Working Paper) |
| Date: | 2023–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:cyw3d&r=ltv |