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on Unemployment, Inequality and Poverty |
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Issue of 2013‒07‒20
nine papers chosen by |
| By: | Steven Fazzari; Barry Z. Cynamon |
| Abstract: | One might expect that rising US income inequality would reduce demand growth and create a drag on the economy because higher-income groups spend a smaller share of income. But during a quarter century of rising inequality, US growth and employment were reasonably strong, by historical standards, until the Great Recession. This paper analyzes this paradox by disaggregating household spending, income, saving, and debt between the bottom 95 percent and top 5 percent of the income distribution. We find that the top 5 percent did indeed spend a smaller share of income, but demand drag did not occur because the spending share of the bottom 95 percent rose, accompanied by a historic increase in borrowing. The unsustainable rise in household leverage concentrated in the bottom 95 percent ultimately spawned the Great Recession. The demand drag of rising inequality could be one explanation for the stagnant recovery in the recession's aftermath. |
| Date: | 2013–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:thk:rnotes:23&r=ltv |
| By: | Cahuc, Pierre (Ecole Polytechnique, Paris); Carcillo, Stéphane (OECD); Rinne, Ulf (IZA); Zimmermann, Klaus F. (IZA and University of Bonn) |
| Abstract: | France and Germany are two polar cases in the European debate about rising youth unemployment. Similar to what can be observed in Southern European countries, a "lost generation" may arise in France. In stark contrast, youth unemployment has been on continuous decline in Germany for many years, hardly affected by the Great Recession. This paper analyzes the diametrically opposed developments in the two countries to derive policy lessons. As the fundamental differences in youth unemployment are primarily resulting from structural differences in labor policy and in the (vocational) education system, any short-term oriented policies can only have temporary effects. Ultimately, the youth unemployment disease in France and in other European countries has to be cured with structural reforms. |
| Keywords: | labor policy, labor market institutions, Great Recession, youth unemployment, minimum wages, demographic trends, vocational education and training, employment protection |
| JEL: | J24 J38 J68 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7490&r=ltv |
| By: | Gertler, Paul; Heckman, James; Pinto, Rodrigo; Zanolini, Arianna; Vermeerch, Christel; Walker, Susan; Chang-Lopez, Susan; Grantham-McGregor, Sally |
| Abstract: | This paper finds large effects on the earnings of participants from a randomized intervention that gave psychosocial stimulation to stunted Jamaican toddlers living in poverty. The intervention consisted of one-hour weekly visits from community Jamaican health workers over a 2-year period that taught parenting skills and encouraged mothers to interact and play with their children in ways that would develop their children's cognitive and personality skills. The authors re-interviewed the study participants 20 years after the intervention. Stimulation increased the average earnings of participants by 42 percent. Treatment group earnings caught up to the earnings of a matched non-stunted comparison group. These findings show that psychosocial stimulation early in childhood in disadvantaged settings can have substantial effects on labor market outcomes and reduce later life inequality. |
| Keywords: | Educational Sciences,Disease Control&Prevention,Health Monitoring&Evaluation,Primary Education,Labor Policies |
| Date: | 2013–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6529&r=ltv |
| By: | Jose Manuel Roche |
| Abstract: | Important steps have been taken at international summits to set up goals and targets to improve the wellbeing of children worldwide. Now the world also has more and better data to monitor progress. This paper presents a new approach to monitoring progress in child poverty reduction based on the Alkire and Foster adjusted headcount ratio and an array of complementary techniques. A theoretical discussion is accompanied by an assessment of child poverty reduction in Bangladesh based on four rounds of the Demographic Household Survey (1997-2007). Emphasis is given to dimensional monotonicity and decomposability as desirable properties of multidimensional poverty measures. Complementary techniques for analysing changes over time are also illustrated, including the Shapley decomposition of changes in overall poverty, as well as a range of robustness tests and statistical significance tests. The results from Bangladesh illustrate the value added of these new tools and the information they provide for policy. The analysis reveals two paths to multidimensional poverty reduction - either decreasing the incidence of poverty or its intensity - and exposes an uneven distribution of national gains across geographical divisions. The methodology allows an integrated analysis of overall changes yet simultaneously examines progress in each region and in each dimension, retaining the positive features of dashboard approaches. The empirical evidence highlights the need to move beyond the headcount ratio towards new measures of child poverty that reflect the intensity of poverty and multiple deprivations that affect poor children at the same time. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:qeh:ophiwp:ophiwp057&r=ltv |
| By: | Aziz, Omar; Gemmell, Norman; Laws, Athene |
| Abstract: | This paper examines the age and gender dimensions of income distribution and fiscal incidence in New Zealand using Household Expenditure Survey (HES) data for 2010 and a non-behavioural micro-simulation model. Since many fiscal policies are likely to have quite different incidences across age groups and genders, and with population ageing changing the age and gender composition of the voting population in many countries, age/gender dimensions of fiscal incidence become increasingly relevant. While this single ‘age distribution snapshot’ cannot fully capture lifecycle incidences, it avoids the complex and uncertain assumptions implicit in the latter and is an important component of lifetime redistribution calculations. We explore alternative methods of intra-family allocation of resources including ‘unequal share’ assumptions based on recent research into how families allocate their spending. Our evidence, which in general is not highly sensitive to sharing assumptions, suggests a strong ‘life cycle’ aspect to fiscal incidence whereby net tax liabilities are low, and generally negative, at younger and older ages but positive during much of the ‘working age’ period. Women, on average, are found to have a systematically and persistently lower net fiscal liability than men, most pronounced at older ages when greater female longevity exercises a strong influence. Nevertheless, considerable heterogeneity of fiscal incidence for both men and women is observed with the distributions of various fiscal incidence measures showing substantial overlap. |
| Keywords: | Income distribution, Fiscal incidence, Gender, Age, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:2852&r=ltv |
| By: | David H. Autor; David Dorn; Gordon H. Hanson; Jae Song |
| Abstract: | In the past two decades, China’s manufacturing exports have grown spectacularly, U.S. imports from China have surged, but U.S. exports to China have increased only modestly. Using representative, longitudinal data on individual earnings by employer, we analyze the effect of exposure to import competition on earnings and employment of U.S. workers over 1992 through 2007. Individuals who in 1991 worked in manufacturing industries that experienced high subsequent import growth garner lower cumulative earnings and are at elevated risk of exiting the labor force and obtaining public disability benefits. They spend less time working for their initial employers, less time in their initial two-digit manufacturing industries, and more time working elsewhere in manufacturing and outside of manufacturing. Earnings losses are larger for individuals with low initial wages, low initial tenure, low attachment to the labor force, and those employed at large firms with low wage levels. Import competition also induces substantial job churning among high-wage workers, but they are better able than low-wage workers to move across employers with minimal earnings losses, and are less likely to leave their initial firm during a mass layoff. These findings, which are robust to a large set of worker, firm and industry controls, and various alternative measures of trade exposure, reveal that there are significant worker-level adjustment costs to import shocks, and that adjustment is highly uneven across workers according to their conditions of employment in the pre-shock period. |
| JEL: | F16 J62 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19226&r=ltv |
| By: | Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Jenkins, Stephen P. (London School of Economics) |
| Abstract: | We provide new evidence about earnings and labour market volatility in Britain over the period 1992-2008, and for women as well as men. (Most research about volatility refers to earnings volatility for US men.) We show that earnings volatility declined slightly for both men and women over the period but the changes are not statistically significant. When we look at labour market volatility, i.e. including in the calculations individuals with zero earnings as well as employees with positive earnings, there is a marked and statistically significant decline for both women and men, with the fall greater for men. Using variance decompositions, we show that the fall in labour market volatility is largely accounted for by changes in employment attachment rates. Labour market volatility trends in Britain, and what contributes to them, differ from their US counterparts in several respects. |
| Keywords: | labour market volatility, earnings volatility, earnings instability, BHPS |
| JEL: | J31 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7491&r=ltv |
| By: | Jason Fletcher |
| Abstract: | Recent evidence has suggested that popularity during high school is linked with wages during mid-life using the Wisconsin Longitudinal Study. The results were shown to be robust to a large set of individual-level heterogeneity included completed schooling, cognitive ability, and personality measures. This paper revisits this question by first replicating the results using an alternative dataset that is very similar in structure. Like the previous results, the Add Health baseline effects suggest that an additional high school friendship nomination is linked to a 2% increase in earnings around age 30. However, leveraging the unique sibling structure of the Add Health shows that sibling comparisons eliminate any associations between popularity and earnings. The findings suggest that families, rather than friends, may be the cause of the association. |
| JEL: | J01 J1 J3 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19232&r=ltv |
| By: | Omar A Aziz; Christopher Ball; John Creedy; Jesse Eedrah (The Treasury) |
| Abstract: | This paper examines the potential distributional impacts of demographic change, particularly population ageing, and changes to labour force participation that are projected to arise over the next 50 years. The approach involves calibration weighting of the Treasury’s microsimulation model, Taxwell, based on the New Zealand Household Economic Survey. The weights are adjusted for each projection year to ensure that a range of population aggregates (by age and gender) match the projected values provided by Statistics New Zealand. Measures of income inequality and poverty, along with the incidence of income tax, Goods and Services Tax and a number of components of government spending (namely health and education) across age groups, are obtained. The results suggest that population ageing and expected changes in labour force participation, in isolation, do not have a significant impact on population-level measures of income inequality. |
| Keywords: | Inequality; population ageing; survey calibration; poverty; fiscal incidence |
| JEL: | H24 I14 I24 J1 H24 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/13&r=ltv |