The NEP-LTV Blog

September 27, 2010

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.

Pareto and the upper tail of the income distribution in the UK: 1799 to the present

October 25, 2016


By: A.B. Atkinson
The Pareto distribution has long been a source of fascination to economists, and the Pareto coefficient is widely used, in theoretical and empirical studies, as a summary of the degree of concentration of top incomes. This paper examines the empirical evidence from income tax data concerning top incomes in the UK, contrasting the dramatic changes that took place in the twentieth century, after 1918, with the much more modest changes in the preceding nineteenth century. Probing beneath the surface, it identifies a number of features of the evolution of the UK income inequality that warrant closer attention. These include the changing shape of the upper tail, where there is a link with Pareto’s theory of elites, the need for a richer functional form to describe top incomes, and the limited evidence at the top of the distribution for a Kuznets curve in nineteenth century Britain.
Keywords: Pareto, income, distribution, tail
JEL: D63 I31 N33


Education Quality and Teaching Practices

October 25, 2016


By: Marina Bassi ; Costas Meghir ; Ana Reynoso
This paper uses a RCT to estimate the effectiveness of guided instruction methods as implemented in under-performing schools in Chile. The intervention improved performance substantially for the first cohort of students, but not the second. The effect is mainly accounted for by children from relatively higher income backgrounds. Based on the CLASS instrument we document that quality of teacher-student interactions is positively correlated with the performance of low income students; however, the intervention did not affect these interactions. Guided instruction can improve outcomes, but it is a challenge to sustain the impacts and to reach the most deprived children.
JEL: I21 I24 I25 I3


Coping with change: International differences in returns to skills

October 25, 2016


By: Eric A. Hanushek (Hoover Institution, Standford University, USA) ; Guido Schwerdt (Department of Economics, University of Konstanz, Germany) ; Simon Wiederhold (ifo Institute, Germany) ; Ludger Woessmann (ifo Institute, Germany)
Expanded international data from the PIAAC survey of adult skills allow us to analyze potential sources of the cross-country variation of comparably estimated labor-market returns to skills in a more diverse set of 32 countries. Returns to skills are systematically larger in countries that have grown faster in the recent past, consistent with models where skills are particularly important for adaptation to dynamic economic change.
Keywords: cognitive skills; returns to education; economic growth; international comparisons
JEL: J31 I20 O15


Transfers to Households with Children and Child Development

October 25, 2016


By: Del Boca, Daniela ; Flinn, Christopher J ; Wiswall, Matthew
In this paper we utilize a model of household investments in the development of children to explore the impact of various transfer policies on the distribution of child outcomes. We develop a cost criterion that can be used to compare the cost effectiveness of unrestricted, restricted, and conditional cash transfer systems, and find that an optimally chosen conditional cash transfer program is the most cost efficient way to attain any given gain in average child quality. We explore several design elements for the conditional cash transfer system and discuss the role of production function uncertainty and measurement error.
Keywords: child development; conditional cash transfers; Income Transfers; Time allocation
JEL: D1 J13

The Richness of Giving: Charity Selection and Charitable Gifts in a Large Field Experiment

October 19, 2016


By: Daniel Lee ; John List ; Michael Price ; Shachar Kariv
We build on previous work in the charitable giving literature by examining not only how much subjects give to charity, but also which charities subjects prefer. We operationalize this choice in an artefactual field experiment with a representative sample of respondents. We then use these data to structurally model motives for giving. The novelty of this design allows us to ask several interesting questions regarding the choices one undertakes when deciding both whether and how much to give to charity. Further, we ask these questions in the context of a standard utility framework. Given the unique set up of this experiment, we also explore how these distributional preference parameters differ by charity choice and from what we have observed in the past. We find that there is more variation within demographics and charity types than across distributions.


Earnings among Nine Ethnic Minorities and the Han Majority in China’s Cities

October 19, 2016


By: Gustafsson, Björn Anders (University of Gothenburg) ; Yang, Xiuna (China Development Research Foundation)
This paper asks if economic growth and steps towards a market economy have affected earnings gaps between the Han and nine large urban ethnic minorities: Zhuang, Hui, Manchurian, Tujia, Uighur, Miao, Tibetan, Mongol and Korean. It also asks how earnings premiums and earnings penalties have changed for the nine ethnic minorities. For the analysis we use a subsample of the 2005 China’s Inter-Census Survey. We find examples of three different changes over time in earnings premiums and earnings penalties: One ethnic minority for whom the development has been more favourable than for the Han majority; a second category in which development has been similar; and a third category for which development has been unfavourable. We conclude from the analysis that it can be misleading to infer the experience of one ethnic minority from that of another.
Keywords: earnings, ethnic minorities, Uighur, Tibetan, Korean
JEL: J15 J31 J71 P23


Inequality Aversion and Marginal Income Taxation

October 19, 2016


By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics, Umeå University) ; Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University)
This paper deals with tax policy responses to inequality aversion by examining the first-best Pareto-efficient marginal tax structure when people are inequality averse. In doing so, we distinguish between four different and widely used models of inequality aversion. The results show that empirically and experimentally quantified degrees of inequality aversion have potentially very strong implications for Pareto-efficient marginal income taxation. It also turns out that the exact type of inequality aversion (self-centered vs. non-self-centered), and the measures of inequality used, matter a great deal. For example, based on simulation results mimicking the disposable income distribution in the US in 2013, the preferences suggested by Fehr and Schmidt (1999) imply monotonically increasing marginal income taxes, with large negative marginal tax rates for low-income individuals and large positive marginal tax rates for high-income individuals. In contrast, the often considered similar model by Bolton and Ockenfels (2000) implies close to zero marginal income tax rates for all.
Keywords: Pareto-efficient taxation; Inequality aversion; Inequity aversion; Self-centered inequality aversion; Non-self-centered inequality aversion; Fehr and Schmidt preferences; Bolton and Ockenfels preferences
JEL: D03 D62 H23