Intertemporal poverty comparisons

June 14, 2013

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)


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?

June 14, 2013

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


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

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

June 11, 2013
By: James J. Heckman
Lakshmi K. Raut
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?

June 11, 2013
By: David G. Blanchflower
Andrew J. Oswald



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