Accounting for cross-country differences in wealth inequality

March 25, 2013
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
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Inequality of Opportunity, Income Inequality and Economic Mobility: Some International Comparisons

March 25, 2013

 

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

March 14, 2013
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

Social spending, taxes and income redistribution in Uruguay

March 14, 2013
By: Bucheli, Marisa
Lustig, Nora
Rossi, Maximo
Amabile, Florencia
URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:6380&r=ltv
How much redistribution does Uruguay accomplish through social spending and taxes? How progressive are revenue collection and social spending? A standard fiscal incidence analysis shows that Uruguay achieves a nontrivial reduction in inequality and poverty when all taxes and transfers are combined. In comparison with five other countries in Latin America, it ranks first (poverty reduction) and second (inequality reduction), and first in terms of poverty reduction effectiveness and third in terms of overall (including transfers in-kind) inequality reduction effectiveness. Direct taxes are progressive and indirect taxes are regressive. Social spending on direct transfers, contributory pensions, education and health is quite progressive in absolute terms except for tertiary education, which is almost neutral in relative terms.
Keywords: Rural Poverty Reduction,Emerging Markets,Debt Markets,Services&Transfers to Poor,Economic Theory&Research

The long-run history of income inequality in Denmark: Top incomes from 1870 to 2010

March 4, 2013
By: A. B. Atkinson (Nuffield College, Oxford and Institute for New Economic Thinking at the Oxford Martin School)
J. E. Søgaard (University of Copenhagen and the Danish Ministry of Finance)
URL: http://d.repec.org/n?u=RePEc:kud:epruwp:13-01&r=ltv
We use historical publications and – for more recent years – micro-data from the income tax and wealth tax returns to estimate the development in income inequality in Denmark over the last 140 years. The paper breaks new ground in treating the specific features of the Danish Tax system and in analysing the implications of the switch from joint to individual taxation. We show that income inequality have declined substantially over the last century with an income share for the top 1 per cent dropping from 27.6 per cent from its peak in 1917 to 6.4 in 2010. However the decline is not simply a secular downward trend consistent with the downward part of a Kuznets curve. Instead there seems to be several distinct phases, interleaved with periods of stability.
Keywords: Income inequality, Income distribution, Wealth distribution, Top incomes, Taxation, Denmark
JEL: D31

Life Satisfaction and Air Quality in Europe

March 4, 2013

By: Akay, Alpaslan
Brereton, Finbarr
Cunado, Juncal
Ferreira, Susana
Martinsson, Peter
Moro, Mirko
Ningal, Tine F
URL: http://d.repec.org/n?u=RePEc:stl:stledp:2013-02&r=ltv
Concerns for environmental quality and its impact on people’s welfare are fundamental arguments for the adoption of environmental legislation in most countries. In this paper, we analyse the relationship between air quality and subjective well-being in Europe. We use a unique dataset that merges three waves of the European Social Survey with a new dataset on environmental quality including SO2 concentrations and climate in Europe at the regional level. We find a robust negative impact of SO2 concentrations on self-reported life satisfaction.
Keywords: GIS; European Social Survey; Europe; Life Satisfaction; Subjective Well-Being; SO2 Concentrations; Air Quality
Date: 2013-02
By: Akay, Alpaslan
Brereton, Finbarr
Cunado, Juncal
Ferreira, Susana
Martinsson, Peter
Moro, Mirko
Ningal, Tine F
URL: http://d.repec.org/n?u=RePEc:stl:stledp:2013-02&r=ltv
Concerns for environmental quality and its impact on people’s welfare are fundamental arguments for the adoption of environmental legislation in most countries. In this paper, we analyse the relationship between air quality and subjective well-being in Europe. We use a unique dataset that merges three waves of the European Social Survey with a new dataset on environmental quality including SO2 concentrations and climate in Europe at the regional level. We find a robust negative impact of SO2 concentrations on self-reported life satisfaction.
Keywords: GIS; European Social Survey; Europe; Life Satisfaction; Subjective Well-Being; SO2 Concentrations; Air Quality

The New Stylized Facts About Income and Subjective Well-Being

March 4, 2013
By: Justin Wolfers
Daniel W. Sacks
Betsey Stevenson
URL: http://d.repec.org/n?u=RePEc:een:camaaa:2013-03&r=ltv
In recent decades economists have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In this paper, we review the evidence to assess the importance of absolute and relative income in determining well-being. Our research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. We find that well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. Through these comparisons we show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in well-being are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related.
Keywords: Subjective well-being, life satisfaction, quality of life, Easterlin Paradox, adaptation, economic growth
JEL: D6