The NEP-LTV Blog

This blog is an experiment to explore the feasibility of scientific discussion on an Economics blog. NEP-LTV disseminates every week new working papers in the field of Unemployment, Inequality & Poverty. Among them, the NEP-LTV editor selects one to be discussed. Everyone is invited to comment. Try to stay civil, or your comments will be removed. And encourage others to read or join in the discussion.

Intertemporal poverty comparisons

By: Florent Bresson (LEO – Laboratoire d’économie d’Orleans – CNRS : UMR7322 – Université d’Orléans)
Jean-Yves Duclos (CIRPEE – Université de Laval, Department of Economics – Université de Laval)

URL:
http://d.repec.org/n?u=RePEc%3Ahal%3Awpaper%3Ahalshs-00828049&r=ltv

The paper deals with poverty orderings when the value of multidimensional attributes can be compared on a same scale, such as with income of different types or from different members of the same household. The dominance criteria extend the power of earlier multidimensional dominance tests (see Duclos et al. 2006) by making (reasonable) assumptions on the relative marginal contributions of each dimensional attribute to poverty. The paper focuses on an important special case of this, that is comparisons of poverty over time. In contrast to earlier work on intertemporal poverty comparisons, this paper proposes procedures to check for whether poverty comparisons can be made robust to wide classes of aggregation procedures and to broad areas of intertemporal poverty frontiers.
Keywords: Poverty comparisons, intertemporal well-being, stochastic dominance, multidimensional poverty, intra-household inequalities.

The Paradox of Redistribution Revisited: And That It May Rest in Peace?

By: Marx, Ive (University of Antwerp)
Salanauskaite, Lina (University of Antwerp)
Verbist, Gerlinde (University of Antwerp)

URL:
http://d.repec.org/n?u=RePEc%3Aiza%3Aizadps%3Adp7414&r=ltv

There is a long-standing controversy over the question of whether targeting social transfers towards the bottom part of the income distribution actually enhances or weakens their redistributive impact. Korpi and Palme have influentially claimed that “the more we target benefits at the poor, the less likely we are to reduce poverty and inequality”. The basic empirical underpinning of this claim is a strong inverse relationship at the country level between social transfer targeting and redistributive impact. We show that this no longer holds as a robust empirical generalisation. The relationship between the extent of targeting and redistributive impact over a broad set of empirical specifications, country selections and data sources has in fact become a very weak one. For what it matters, targeting tends to be associated with higher levels of redistribution, especially when overall effort in terms of spending is high. We t! ry to make substantive sense of this breakdown of the originally established relationship by focusing on two questions: first, what has changed in the countries originally included in the study and, second, what is different about the countries now additionally included in the analysis?
Keywords: targeting, tax benefit policies, redistribution, inequality
JEL: H1

Intergenerational Long Term Effects of Preschool – Structural Estimates from a Discrete Dynamic Programming Model

By:	James J. Heckman Lakshmi K. Raut
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:19077&r=ltv
This paper formulates a structural dynamic programming model of preschool investment choices of altruistic parents and then empirically estimates the structural parameters of the model using the NLSY79 data. The paper finds that preschool investment significantly boosts cognitive and non-cognitive skills, which enhance earnings and school outcomes. It also finds that a standard Mincer earnings function, by omitting measures of non-cognitive skills on the right hand side, overestimates the rate of return to schooling. From the estimated equilibrium Markov process, the paper studies the nature of within generation earnings distribution and intergenerational earnings and schooling mobility. The paper finds that a tax financed free preschool program for the children of poor socioeconomic status generates positive net gains to the society in terms of average earnings and higher intergenerational earnings and schooling mobility.
JEL:	I21

Does High Home-Ownership Impair the Labor Market?

By:	David G. Blanchflower Andrew J. Oswald
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:19079&r=ltv
We explore the hypothesis that high home-ownership damages the labor market. Our results are relevant to, and may be worrying for, a range of policy-makers and researchers. We find that rises in the home- ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state. The elasticity exceeds unity: a doubling of the rate of home-ownership in a U.S. state is followed in the long-run by more than a doubling of the later unemployment rate. What mechanism might explain this? We show that rises in home-ownership lead to three problems: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. Our argument is not that owners themselves are disproportionately unemployed. The evidence suggests, instead, that the housing market can produce negative ‘externalities’ upon the labor market. The time lags are long. That gradualness may explain why these important patterns are so little-known.
JEL:	J01

Accounting for cross-country differences in wealth inequality

By:	Frank A Cowell Eleni Karagiannaki Abigail McKnight
URL:	http://d.repec.org/n?u=RePEc:cep:sticas:case168&r=ltv
This paper adopts a counterfactual decomposition analysis to analyse cross-country differences in the size of household wealth and levels of household wealth inequality. The findings of the paper suggest that the biggest share of cross-country differences is not due to differences in the distribution of household demographic and economic characteristics but rather reflect strong unobserved country effects.
Keywords:	household wealth, wealth inequality, debt, housing assets, educational loans, age-wealth profiles, decomposition
JEL:	C81

Inequality of Opportunity, Income Inequality and Economic Mobility: Some International Comparisons

 

By:	Paolo Brunori (University of Bari) Francisco H. G. Ferreira (The World Bank) Vito Peragine (University of Bari)
URL:	http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2013-284&r=ltv
Despite a recent surge in the number of studies attempting to measure inequality of opportunity in various countries, methodological differences have so far prevented meaningful international comparisons. This paper presents a comparison of ex-ante measures of inequality of economic opportunity (IEO) across 41 countries, and of the Human Opportunity Index (HOI) for 39 countries. It also examines international correlations between these indices and output per capita, income inequality, and intergenerational mobility. The analysis finds evidence of a “Kuznets curve” for inequality of opportunity, and finds that the IEO index is positively correlated with overall income inequality, and negatively with measures of intergenerational mobility, both in incomes and in years of schooling. The HOI is highly correlated with the Human Development Index, and its internal measure of inequality of opportunity yields very different country rankings from the IEO measure
Keywords:	Equality of opportunity, income inequality, social mobility.
JEL:	D71

The unfairness of (poverty) targets

By:	Allwine, Melanie Rigolini, Jamele Lopez-Calva, Luis F.
URL:	http://d.repec.org/n?u=RePEc:wbk:wbrwps:6361&r=ltv
Adopted on September 8, 2000, the United Nations Millennium Declaration stated as its first goal that countries”…[further] resolve to halve, by the year 2015, the proportion of the world’s people whose income is less than one dollar a day and the proportion of people who suffer from hunger…”Each country committed to achieve the stated goal, regardless of their initial conditions in terms of poverty and inequality levels. This paper presents a framework to quantify how much initial conditions affect poverty reduction, given a level of”effort”(growth). The framework used in the analysis allows for the growth elasticity of poverty to vary according to changes in the income distribution along the dynamic path of growth and redistribution, unlike previous examples in the literature where this is assumed to be constant. While wealthier countries did perform better in reducing poverty in the last decade and a half (1995-2008), assuming equal initial conditions, the situation reverses: the paper finds a statistically significant negative relation between initial average income and poverty reduction performance, with the poorest countries in the sample going from the worst to the best performers in poverty reduction. The analysis also quantifies how much poorer countries would have scored better, had they had the same level of initial average income as wealthier countries. The results suggest a remarkable change in poverty reduction performance, in addition to the reversal of ranks from worst to best performers. The application of this framework goes beyond poverty targets and the Millennium Development Goals. Given the widespread use of targets to determine resource allocation in education, health, or decentralized social expenditures, it constitutes a helpful tool to measure policy performance toward all kinds of goals. The proposed framework can be useful to evaluate the importance of initial conditions on outcomes, for a wide array of policies.
Keywords:	Achieving Shared Growth,Regional Economic Development,Rural Poverty Reduction,Poverty Monitoring&Analysis,Services&Transfers to Poor