Inequality among the Wealthy

July 29, 2011

By: Frank A Cowell


Using the evidence from the Luxembourg Wealth Study it appears that the distribution of wealth in the UK is considerably less than in Canada, the US or Sweden. But does this result come from an underestimate of inequality among the wealthy and of the wealth differential between the rich and the rest? Using a Pareto model for the upper tail of the distribution we can see that the inequality of comparisons of the UK with the other countries is indeed robust.
Keywords: wealth distribution
JEL: D31

The UK Minimum Wage at Age 22: A Regression Discontinuity Approach

July 28, 2011

By: Richard Dickens (Department of Economics, University of Sussex)
Rebecca Riley (National Institute of Economic and Social Research)
David Wilkinson (National Institute of Economic and Social Research)


A regression discontinuity approach is used to analyse the effect of the legislated increase in the UK National Minimum Wage (NMW) that occurs at age 22 on various labour market outcomes. Using data from the Labour Force Survey we find a 2- 4% point increase in the employment rate of low skilled individuals. Unemployment declines among men and inactivity among women. We find no such effect before the NMW was introduced and no robust impacts at age 21 or 23 years. Our results are robust to a range of specification tests.
Keywords: Minimum Wage Legislation, Low Wage
JEL: J31

Clashing Theories of Unemployment

July 28, 2011
By: Robert E. Hall
General-equilibrium models for studying monetary influences in general and the zero lower bound on the nominal interest rate in particular contain implicit theories of unemployment. In some cases, the theory is explicit. When the nominal rate is above the level that clears the current market for output, the excess supply shows up as diminished output, lower employment, and higher unemployment. Quite separately, the Diamond-Mortensen-Pissarides model is a widely accepted and well-developed account of turnover, wage determination, and unemployment. The DMP model is a clashing theory of unemployment, in the sense that its determinants of unemployment do not include any variables that signal an excess supply of current output. In consequence, a general-equilibrium monetary model with a DMP labor market generally has no equilibrium. After demonstrating the clash in a minimal but adequate setting, I consider modifications of the DMP model that permit the complete model to have an equilibrium. No fully satisfactory modification has yet appeared.
JEL: E12

The Effect of Public Sector Employment on Women’s Labour Market Outcomes

July 18, 2011

By: Anghel, Brindusa (FEDEA, Madrid)
de la Rica, Sara (University of the Basque Country)
Dolado, Juan José (Universidad Carlos III de Madrid)


This paper addresses the role played by Public Sector (PS) employment across different OECD labour markets in explaining: (i) gender differences regarding choices to work in either PS or private sector, and (ii) subsequent changes in female labour market outcomes. To do so, we provide some empirical evidence about cross-country gender differences in choice of employment in the PS vs. the private sector, using the European Community Household Panel (ECHP), in the light of different theories on gender behaviour in the labour market. We also analyze the main determinants of the hourly wage gaps across these two sectors for males and females separately. Finally, we document the main stylized facts about labour market transitions by male and female workers among inactivity, unemployment, working in the PS and working in the private sector.

Keywords: labour market transitions, gender gaps, public sector employment

JEL: J45

Fat Chance! Obesity and the Transition from Unemployment to Employment

July 6, 2011

By: Caliendo, Marco (IZA) and Lee, Wang-Sheng (RMIT University)


This paper focuses on estimating the magnitude of any potential weight discrimination by examining whether obese job applicants in Germany get treated or behave differently from non-obese applicants. Based on two waves of rich survey data from the IZA Evaluation dataset, which includes measures that control for education, demographic characteristics, labor market history, psychological factors and health, we estimate differences in job search behavior and labor market outcomes between obese/overweight and healthy weight individuals. Unlike other observational studies which are generally based on obese and non-obese individuals who might already be at different points in the job ladder (e.g., household surveys), in our data, individuals are newly unemployed and all start from the same point. The only subgroup we find in our data experiencing any possible form of labor market discrimination is obese women. Despite making more job applications and engaging more in job training programs, we find some indications that they experienced worse (or at best similar) employment outcomes than healthy weight women. Obese women who found a job also had significantly lower wages than healthy weight women.

Keywords: obesity, discrimination, employment, labor demand

JEL: I10