The rise and fall of income inequality in Latin America

August 31, 2011

By: Leonardo Gasparini (CEDLAS, Universidad de La Plata)
Nora Lustig (Tulane University and Center for Global Development)

URL: http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2011-213&r=ltv

Concluding remarks
The income distributions in Latin American countries went through two distinct phases in the 
last three decades. During the 1980s and 1990s they  became more concentrated. In several 
countries (though not in all) the increase in inequality during this period was associated with 
macroeconomic crises and  market-oriented reforms in a context of weak labor institutions 
and social safety nets.
From the  late 1990s/early 2000s income inequality in Latin America  has  declined.
Two main factors  appear to be behind this phenomenon: a fall in the earnings gap of 
skilled/low-skilled workers and an increase in government transfers targeted to the poor. The 
fall in  the  earnings gap, in turn, is  due to a wide set of factors, including  the  improved 
macroeconomic conditions that fostered employment, the petering out of the one-time 
unequalizing effect  in the labor market  of some market-oriented reforms in the  1990s, the 
expansion of coverage in basic education during the last couple of decades, and stronger 
labor institutions. Probably due to the improved fiscal situation and the increased concern on 
social issues, most Latin American countries  augmented social spending and in particular 
adopted or expanded conditional cash transfers programs. The evidence  suggests that these 
programs are well targeted on the poor, and are thus highly progressive. 
In spite of this undeniable progress, Latin America still remains a region with  very 
high income inequality, in which governments redistribute relatively little through taxes and 
transfers. Despite the evident progress in making public policy more pro-poor, a large share 
of government spending is neutral or regressive, and the collection of personal income and 
wealth taxes is relatively low. In order to continue on the path towards more equitable 
societies, it is crucial that public spending is made more progressive and efforts are redoubled 
to improve access to quality services (education, in particular) for the poor.

Enforcement of Labor Regulation and Informality

August 23, 2011

By: Almeida, Rita K. (World Bank)
Carneiro, Pedro (University College London)

URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp5902&r=ltv

Enforcement of labor regulations in the formal sector may drive workers to informality because they increase the costs of formal labor. But better compliance with mandated benefits makes it attractive to be a formal employee. We show that, in locations with frequent inspections workers pay for mandated benefits by receiving lower wages. Wage rigidity prevents downward adjustment at the bottom of the wage distribution. As a result, lower paid formal sector jobs become attractive to some informal workers, inducing them to want to move to the formal sector.
Keywords: informality, labor regulation
JEL: J2


Economic Returns to Education: What We Know, What We Don’t Know, and Where We Are Going – Some Brief Pointers

August 21, 2011

By: Matt Dickson (UCD Geary Institute, University College Dublin CMPO, University of Bristol)
Colm Harmon (UCD Geary Institute, University College Dublin Research School of Economics, Australian National University IZA, Bonn)

URL: http://d.repec.org/n?u=RePEc:ucd:wpaper:201115&r=ltv

The estimation of the economic return to education has perhaps been one of the predominant areas of analysis in applied economics for over 50 years. In this short note we consider some of the recent directions taken by the literature, and also some of the blockages faced by both science and policymakers in pushing forward some key issues. This serves by way of introduction to a set of papers for a special issue of the Economics of Education Review.
Keywords: Returns to education, education policy
JEL: J08


The Feasibility and Importance of Adding Measures of Actual Experience to Cross-Sectional Data Collection

August 10, 2011

By: Blau, Francine D. (Cornell University), Kahn, Lawrence M. (Cornell University)
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp5873&r=ltv

We use Michigan Panel Study of Income Dynamics data and data from a 2008 telephone survey of adults conducted by Westat for the Princeton Data Improvement Initiative (PDII) to explore the importance and feasibility of adding retrospective questions about actual work experience to cross-sectional data sets. We demonstrate that having such actual experience data is important for analyzing women’s post-school human capital accumulation, residual wage inequality, and the gender pay gap. Further, our PDII survey results show that it is feasible to collect actual experience data in cross-sectional telephone surveys like the March Current Population Survey annual supplement.
Keywords: gender, microeconomic data collection, human capital, work experience
JEL: C81


Financial capability, income and psychological wellbeing

August 10, 2011

By: Taylor, Mark P., Jenkins, Stephen P. and Sacker, Amanda
URL: http://d.repec.org/n?u=RePEc:ese:iserwp:2011-18&r=ltv

We examine whether financial capability has impacts on psychological health independent of income and financial resources more generally using a nationally representative survey. British Household Panel Survey data are used to construct a measure of financial capability, which we relate to respondents psychological health using the 12-item General Health Questionnaire. We find that financial capability has significant and substantial effects on psychological health over and above those associated with income and material wellbeing more generally. The sizes of these impacts are considerably larger than those associated with changes in household income. Furthermore having low financial capability exacerbates the psychological costs associated with unemployment and divorce.


Financial capability, income and psychological wellbeing

August 7, 2011

By: Taylor, Mark P.; Jenkins, Stephen P.; Sacker, Amanda

URL: http://d.repec.org/n?u=RePEc:ese:iserwp:2011-18&r=ltv

We examine whether financial capability has impacts on psychological health independent of income and financial resources more generally using a nationally representative survey. British Household Panel Survey data are used to construct a measure of financial capability, which we relate to respondents psychological health using the 12-item General Health Questionnaire. We find that financial capability has significant and substantial effects on psychological health over and above those associated with income and material wellbeing more generally. The sizes of these impacts are considerably larger than those associated with changes in household income. Furthermore having low financial capability exacerbates the psychological costs associated with unemployment and divorce.