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on Unemployment, Inequality and Poverty |
| By: | Mogstad, Magne (University of Chicago); Salvanes, Kjell G. (Norwegian School of Economics); Torsvik, Gaute (University of Oslo) |
| Abstract: | Policymakers, public commentators, and researchers often cite the Nordic countries as examples of a social and economic model that successfully combines low income inequality with prosperity and growth. This article aims to critically assess this claim by integrating theoretical perspectives and empirical evidence to illustrate how the Nordic model functions and why these countries experience low inequality. Our analysis suggests that income equality in the Nordics is primarily driven by a significant compression of hourly wages, reducing the returns to labor market skills and education. This appears to be achieved through a wage bargaining system characterized by strong coordination both within and across industries. This finding contrasts with other commonly cited explanations for Nordic income equality, such as redistribution through the taxtransfer system, public spending on goods that complement employment, and public policies aimed at equalizing skills and human capital distribution. We consider the potential lessons for other economies that seek to reduce income equality. We conclude by discussing several underexplored or unresolved questions and issues. |
| Keywords: | facts and myths, Nordic Model |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17677 |
| By: | Boustan, Leah Platt (Princeton University and NBER); Jensen, Mathias Fjællegaard (University of Oxford); Abramitzky, Ran (Stanford University); Jácome, Elisa (Northwestern University); Manning, Alan (London School of Economics); Perez, Santiago (University of California, Davis); Watley, Analysia (Princeton University); Adermon, Adrian (Institute for Evaluation of Labour Market and Education Policy (IFAU)); Arellano-Bover, Jaime (Yale University); Aslund, Olof (Uppsala University); Connolly, Marie (University of Melbourne); Deutscher, Nathan (University of Technology, Sydney); Gielen, Anne C. (Erasmus University Rotterdam); Giesing, Yvonne (Ifo Institute for Economic Research); Govind, Yajna (Copenhagen Business School); Halla, Martin (Vienna University of Economics and Business); Hangartner, Dominik (Stanford University); Jiang, Yuyan (University of Cambridge); Karmel, Cecilia (Australian National University); Landaud, Fanny (CNRS); Macmillan, Lindsey (University College London); Martínez, Isabel Z. (KOF Swiss Economic Institute); Polo, Alberto (New York University); Poutvaara, Panu (University of Munich); Rapoport, Hillel (Paris School of Economics); Roman, Sara (IFAU); Salvanes, Kjell G. (Norwegian School of Economics); San, Shmuel (The Hebrew University of Jerusalem); Siegenthaler, Michael (ETH Zurich); Sirugue, Louis (London School of Economics); Espín, Javier Soria (Paris School of Economics); Stuhler, Jan (Universidad Carlos III de Madrid); Violante, Giovanni L. (Princeton University); Webbink, Dinand (Erasmus University Rotterdam); Weber, Andrea (Central European University); Zhang, Jonathan (McMaster University); Zhang, Angela (University of Sydney); Zohar, Tom (CEMFI) |
| Abstract: | We estimate intergenerational mobility of immigrants and their children in fifteen receiving countries. We document large income gaps for first-generation immigrants that diminish in the second generation. Around half of the second-generation gap can be explained by differences in parental income, with the remainder due to differential rates of absolute mobility. The daughters of immigrants enjoy higher absolute mobility than daughters of locals in most destinations, while immigrant sons primarily enjoy this advantage in countries with long histories of immigration. Cross-country differences in absolute mobility are not driven by parental country-of-origin, but instead by destination labor markets and immigration policy. |
| Keywords: | immigration, intergenerational mobility |
| JEL: | J15 J61 J62 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17711 |
| By: | Angelini, Viola (University of Groningen); Costa-Font, Joan (London School of Economics); Ozcan, Berkay (London School of Economics) |
| Abstract: | We study whether receiving a monetary gift from parents increases the intensity of parent-child social contact. We use unique longitudinal data that follows adult children and their older parents for more than a decade (between 2004 and 2015) across various European countries. We first document that bequests, being more visible and subject to legal restrictions on their division, tend to be equalized among children, whereas gifts are less conspicuous and often unevenly distributed. Leveraging the exogenous variation induced by fiscal incentives resulting from inheritance tax legislation reforms, we use an instrumental variable (IV) and an endogenous treatment strategy to investigate the effect of gift-giving on parent-child social contact. Our findings suggest that financial transfers from parents to children lead to an increase in the intensity of parent-child interactions. We estimate that the receipt of a gift gives rise to a 12% increase in social contact. |
| Keywords: | gift giving, inter-vivos transfers, upstream social contact, inheritance tax-reforms, inheritance tax, gifts, bequests Europe |
| JEL: | J14 H29 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17706 |
| By: | Frank A. Cowell; Emmanuel Flachaire |
| Abstract: | We examine whether mobility measures appropriately represent changes in individual status, like income or ranks. We suggest three elementary principles for mobility comparisons and show that many commonly used indices violate one or more of them. These principles are used to characterise two classes of measures that have a natural interpretation in terms of distributional analysis. Class-1 measures are based on the summation of power functions of individual status levels and have connections with generalised-entropy and Kolm inequality measures. Class-2 measures are based on the weighted aggregation of individual status changes and have connections with (extended) Gini inequality measures. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.19608 |
| By: | Portugal, Pedro (Banco de Portugal); Reis, Hugo (Banco de Portugal); Guimaraes, Paulo (Banco de Portugal); Cardoso, Ana Rute (IAE Barcelona (CSIC)) |
| Abstract: | We employ a regression model with spillover effects to show that the impact of peer quality on wages is quite large. We estimate that a 10 percent increase in peer quality implies a 2.1 percent increase in an individual's wage. In addition, we estimate the external returns to education using a novel identification strategy, which is strictly based on the peer effect channel, netting out the role of homophily and labor market sorting. We show that a one-year increase in the co-workers' education leads to a 0.58 percent increase in wages. We also show that both effects fade smoothly over time. |
| Keywords: | wage distribution, human capital spillovers, external returns to education, peer effects, linked employer-employee data, high-dimensional fixed effects, workplace, job and occupation |
| JEL: | J31 J24 I26 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17690 |
| By: | Moschion, Julie (University of Queensland); van Ours, Jan C. (Erasmus School of Economics) |
| Abstract: | Using a sample of disadvantaged Australians, we compare trajectories of those who left school before 18 with those who left later, in terms of homelessness, incarceration, substance use and mental health issues. We estimate a staggered difference-in-difference to account for heterogenous treatment effects across cohorts and time. Results indicate that leaving school before 18 increases males' likelihood of experiencing homelessness, being incarcerated, using cannabis daily and illegal street drugs weekly several years after school-leaving. In contrast, for females the difference-in-difference strategy eliminates the correlations between school-leaving age and their outcomes. We also show that while parental separation and other adverse behaviours coincide with early school-leaving, our results are robust to accounting for these, providing support for a causal interpretation of our findings. |
| Keywords: | education, homelessness, substance use, incarceration, mental health, Australia |
| JEL: | C23 I12 I24 I32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17702 |