Challenged by migration: Europe’s options

April 9, 2018
By: Constant, Amelie F. (Princeton University) ; Zimmermann, Klaus F. (UNU-MERIT, and Maastricht University)
This paper examines the migration and labour mobility in the European Union and elaborates on their importance for the existence of the EU. Against all measures of success, the current public debate seems to suggest that the political consensus that migration is beneficial is broken. This comes with a crisis of European institutions in general. Migration and labour mobility have not been at the origin of the perceived cultural shift. The EU in its current form and ambition could perfectly survive or collapse even if it solves its migration challenge. But it will most likely collapse, if it fails to solve the mobility issue by not preserving free internal labour mobility and not establishing a joint external migration policy.
Keywords: labour mobility, migration, European Union, refugees
JEL: D01 D02 D61 F02 F16 F22 F66

Wealth, Top Incomes and Inequality

April 9, 2018
By: Frank Cowell ; Brian Nolan ; Javier Olivera ; Philippe Van Kerm
Although it is heartening to see wealth inequality being taken seriously, key concepts are often muddled, including the distinction between income and wealth, what is included in “wealth”, and facts about wealth distributions. This chapter highlights issues that arise in making ideas and facts about wealth inequality precise, and employs newly-available data to take a fresh look at wealth and wealth inequality in a comparative perspective. The composition of wealth is similar across countries, with housing wealth being the key asset. Wealth is considerably more unequally distributed than income, and it is distinctively so in the United States. Extending definitions to include pension wealth however reduces inequality substantially. Analysis also sheds light on life-cycle patterns and the role of inheritance. Discussion of the joint distributions of income and wealth suggests that interactions between increasing top income shares and the concentration of wealth and income from wealth towards the top is critical.
Keywords: Inequality,Wealth,Income,Households,Inheritance,Top Incomes,Cross national,comparative

Misperceptions of income distributions: Cross-country evidence from a randomized survey experiment

April 9, 2018
By: Elisabeth Bublitz
This paper investigates whether the individual misperception of income distributions helps explain why, opposite to Meltzer and Richard (1981), higher initial inequality levels do not correlate positively with redistribution. I conduct a representative survey experiment in Brazil, France, Germany, Russia, Spain, and the United States, providing a personalized information treatment on the income distribution to a randomly chosen subsample. Most respondents misperceive their own position in the income distribution. These biases di_er by country and the true income position. Misperceptions of the median income relate negatively to misperceived income positions, showing evidence for biased reference points. Correcting misperceptions slightly shifts the demand towards less redistribution in Germany and Russia which appears to be driven by respondents with a negative position bias. Apart from Spain and the US, treatment reactions lead to a convergence of the demand for redistribution across countries. The treatment also alters trust levels in government and beliefs about the importance of luck but not equally across bias types.
Keywords: Income distribution, biased perceptions, inequality, survey experiment
JEL: D31 D63 H20

Gender Wage Gaps and Risky vs. Secure Employment: An Experimental Analysis

April 9, 2018
By: SeEun Jung (Department of Economics, Inha University) ; Chung Choe (Hanyang University) ; Ronald L. Oaxaca (University of Arizona)
In addition to discrimination, market power, and human capital, gender differences in risk preferences might also contribute to observed gender wage gaps. We conduct laboratory experiments in which subjects choose between a risky (in terms of exposure to unemployment) and a secure job after being assigned in early rounds to both types of jobs. Both jobs involve the same typing task. The risky job adds the element of a known probability that the typing opportunity will not be available in any given period. Subjects were informed of the exogenous risk premium being offered for the risky job. Women were more likely than men to select the secure job, and these job choices accounted for between 40% and 77% of the gender wage gap in the experiments. That women were more risk averse than men was also manifest in the Pratt-Arrow Constant Absolute Risk Aversion parameters estimated from a random utility model adaptation of the mean-variance portfolio model.
Keywords: Occupational Choice, Gender Wage Differentials, Risk Aversion, Lab Experiment
JEL: J16 J24 J31 C91 D81

Tony Atkinson and His Legacy

April 9, 2018
By: Brandolini, Andrea (Bank of Italy) ; Jenkins, Stephen P. (London School of Economics) ; Micklewright, John (University College London)
Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across economics. His death on 1 January 2017 deprived the world of both an intellectual giant and a deeply committed public servant in the broadest sense of the term. This collective tribute highlights the range, depth and importance of Tony’s enormous legacy, the product of over fifty years’ work.
Keywords: Anthony B. Atkinson, inequality, poverty, public economics
JEL: D3 H00 I3

The Difficult School-To-Work Transition of High School Dropouts: Evidence from a Field Experiment

April 9, 2018
By: Cahuc, Pierre (Ecole Polytechnique, Paris) ; Carcillo, Stéphane (OECD) ; Minea, Andreea (Sciences Po, Paris)
This paper investigates the effects of the labor market experience of high school dropouts four years after leaving school by sending fictitious résumés to real job postings in France. Compared to those who have stayed unemployed since leaving school, the callback rate is not raised for those with employment experience, whether it is subsidized or non-subsidized, in the market or non-market sector, if there is no training accompanied by skill certification. In particular, we find no stigma effect associated with subsidized or non-market sector work experience. Moreover, training accompanied by skill certification improves youth prospects only when the local unemployment rate is sufficiently low, which occurs in one fifth of the commuting zones only.
Keywords: youth, unemployment, training
JEL: J08 J60

Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK’s SPI Adjustment?

April 9, 2018
By: Burkhauser, Richard V. (Cornell University) ; Herault, Nicolas (Melbourne Institute of Applied Economic and Social Research) ; Jenkins, Stephen P. (London School of Economics) ; Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research)
Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK’s pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under-coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.
Keywords: inequality, income inequality, survey under-coverage, SPI adjustment, top incomes, tax return data, survey data
JEL: D31 C81