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Begin New Search Topic Income Inequality Content Type Working Paper Publication Year within 3 Years

1. Structural Change, Income Distribution and Unemployment Related to COVID-19: An Agent-based Model

Author:
Branimir Jovanovic, Michael Landesmann, Oliver Reiter, and Torben Schütz
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
We study the distributional consequences of COVID-19 by using a stock-flow consistent agent-based model that captures some of the aspects of pandemic-related lockdowns. In particular, the model distinguishes between ‘essential’ and ‘non-essential’ industries, between jobs that can be done from home and jobs that must be carried out on site, and takes into account that firms need to hire a certain amount of overhead labour. Allowing for government-financed short-time working schemes and loan guarantees, we find that these policies significantly reduce the rise in firm liquidations and income inequality (the ‘Keynesian’ result). However, we also find that the absence of government policies leads to higher levels of productivity and GDP in the aftermath of the crisis, as it means that more of the less productive firms face liquidation during lockdowns (the ‘Schumpeterian’ result). The last finding must be taken with adequate caution as our model is designed to describe the short run, while statements about the long run would require the inclusion of additional features such as technological progress and the entry of new firms.
Topic:
Income Inequality, Macroeconomics, Unemployment, and COVID-19
Political Geography:
Europe and Austria

2. Determinants of Social Cohesion: Cross-Country Evidence

Author:
Yabibal M. Walle
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Noting that few studies to date have investigated the determinants of social cohesion in a comprehensive and systematic manner, this paper examines the macro-level determinants of social cohesion using a panel of up to 92 developing and developed countries for the period 1990–2020. Employing the system GMM dynamic panel data estimator, which addresses endogeneity concerns by means of internal instruments, I find that the levels of education, government size, globalisation, and economic development have significantly positive effects on most dimensions of a country’s social cohesion. In contrast, inflation, corruption and income inequality are detrimental to social cohesion.
Topic:
Corruption, Development, Income Inequality, Inflation, and Social Cohesion
Political Geography:
Global Focus

3. An Economic Defense of Multiple Antitrust Goals: Reversing Income Inequality and Promoting Political Democracy

Author:
Mark Glick
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Two recent papers by prominent antitrust scholars argue that a revived antitrust movement can help reverse the dramatic rise in economic inequality and the erosion of political democracy in the United States. Both papers rely on the legislative history of the key antitrust statutes to support their case. Not surprisingly, their recommendations have been met with alarm in some quarters and with skepticism in others. Such proposals by antitrust reformers are often contrasted with the Consumer Welfare Standard that pervades antitrust policy today. The Consumer Welfare Standard suffers from several defects: (1) It employs a narrow, unworkable measure of welfare; (2) It excludes important sources of welfare based on the assumption that antitrust seeks only to maximize wealth; (3) It assumes a constant and equal individual marginal utility of money; and (4) It is often combined with extraneous ideological goals. Even with these defects, however, if applied consistent with its theoretical underpinnings, the consideration of the transfer of labor rents resulting from a merger or dominant firm conduct is supported by the Consumer Welfare Standard. Moreover, even when only consumers (and not producers) are deemed relevant, the welfare of labor still should consistently be considered part of consumer welfare. In contrast, fostering political democracy—a prominent traditional antitrust goal that was jettisoned by the Chicago School—falls outside the Consumer Welfare Standard in any of its constructs. To undergird such important broader goals requires that the Consumer Welfare Standard be replaced with the General Welfare Standard. The General Welfare Standard consists of modern welfare economics modified to accommodate objective analyses of human welfare and purged of inconsistencies.
Topic:
Economics, Democracy, Income Inequality, and Antitrust Law
Political Geography:
Global Focus

4. Policy Options for an Equitable Re-globalization

Author:
Constantine Michalopoulos
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
Developing countries made impressive gains in reducing poverty and global income inequality in the past half century, many riding the wave of globalization. But the dozen years that followed the 2008 financial crisis witnessed a deterioration of global commitments to a more equitable economic order made in the early years of the 21st century. The pandemic undermined development prospects, intensified pre-existing anti-globalization sentiments, and raised questions about the effectiveness of the international institutions within which developing countries achieved great progress. Russia’s invasion of Ukraine created a major geopolitical split and contributed to large increases in energy and food prices with disastrous results for developing countries, many of which were just recovering from the increased poverty created by the pandemic. This paper sets out an agenda for what I call a more equitable re-globalization. This has several parts: addressing climate change, providing economic assistance to help reduce poverty in low income countries, strengthening the social safety net, limiting the power of MNCs, and reestablishing an effective multilateral trading system. The potential calamities of future pandemics and the threats posed by climate change require countries to submerge narrow national political objectives and develop a collaborative global multilateral approach. The last part of the paper discusses the steps the international community must take to revitalize multilateralism to enable it to cope with global challenges effectively and equitably.
Topic:
Globalization, Poverty, Income Inequality, and Multilateralism
Political Geography:
Global Focus

5. Household Wealth Inequalities in the wake of the Greek Debt Crisis

Author:
Apostolos Fasianos
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
Despite the renowned interest in wealth disparities, the distribution of wealth in Greece is largely understudied. This study maps the levels, dynamics, and composition of household wealth using data from the three waves of the Household Finance and Consumption Survey for Greece for the period after the debt crisis of 2009-10 till 2017. The evidence suggests that the richest 1% of the population holds roughly as much wealth as the poorest 50%, while the richest 10% holds about four times the wealth of the poorest 50%. Most inequality indicators employed indicate increasing trends in wealth disparities between 2009 and 2017. During this period, average and median wealth holdings decreased by about one third, and the share of financially fragile households increased by about 20%. Estimates from factor inequality decompositions suggest that, although relatively evenly distributed, housing asset holdings explain much of the increase in overall wealth inequality in Greece, followed by self-employment business equity; financial assets play a negligible role. Financial wealth inequality is much more pronounced than housing wealth inequality in Greece. The findings of the paper carry important implications for the design of appropriate policies aiming at reducing wealth inequalities and strengthening financial resilience.
Topic:
Debt, Income Inequality, Economic Crisis, and Wealth
Political Geography:
Europe and Greece

6. The Role of Non-Pecuniary Considerations: Location Decisions of College Graduates from Low Income Backgrounds

Author:
Yifan Gong, Todd Stinebrickner, Yuxi Yao, and Ralph Stinebrickner
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Centre for Human Capital and Productivity (CHCP), Western University
Abstract:
We examine the initial post-college geographic location decisions of students from hometowns in the Appalachian region that often lack substantial high-skilled job opportunities, focusing on the role of non-pecuniary considerations. Novel survey questions allow us to measure the full non-pecuniary benefits of each relevant geographic location, in dollar equivalents. A new specification test is designed and implemented to provide evidence about the quality of these non-pecuniary measures. Supplementing perceived location choice probabilities and expectations about pecuniary factors with our new non-pecuniary measures allows a new approach for obtaining a comprehensive understanding of the importance of pecuniary and non-pecuniary factors for location decisions. We compare this approach to alternative expectations-based approaches. We also combine the non-pecuniary measures with realized location and earnings outcomes to characterize inequality in overall welfare.
Topic:
Income Inequality, Welfare, Higher Education, Data, and Location Choice
Political Geography:
North America, United States of America, and Appalachia

7. Robots, Exports and Top Income Inequality: Evidence for the U.S.

Author:
Andrés César, Guillermo Falcone, and Pablo Garriga
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
The last decades have witnessed a revolution in manufacturing production characterized by increasing technology adoption and a strong expansion of international trade. Simultaneously, the income distribution has exhibited both polarization and concentration among the richest. Combining datasets from the U.S. Census Bureau, the U.S. Internal Revenue Service, the International Federation of Robotics, EU KLEMS, and COMTRADE, we study the causal effect of industrial automation on income inequality in the U.S. during 2010–2015. We exploit spatial and time variations in exposure to robots arising from past differences in industry specialization across U.S. metropolitan areas and the evolution of robot adoption across industries. We document a robust positive impact of robotics on income for only the top 1 percent of taxpayers, which is largest for top income fractiles. Therefore, industrial automation fuels income inequality and, particularly, top income inequality. According to our estimates, one more robot per thousand workers results in relative increments of the total taxable income accruing to fractiles P99 to P99.9, P99.9 to P99.99 and P99.99 to P100, of 2.1 percent, 3.5 percent and 5.9 percent, respectively. We also find that robotization leads to increased exports to high-income and upper-middle-income economies, and that this is one of the key mechanisms behind the surge in top income inequality.
Topic:
Income Inequality, Exports, Automation, and Robotics
Political Geography:
North America and United States of America

8. Does the Minimum Wage Affect Wage Inequality? A Study for the Six Largest Latin American Economies

Author:
Carlo Lombardo, Lucía Ramírez-Leira, and Leonardo Gasparini
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
Minimum wage (MW) policies are widespread in the developing world and yet their effects are still unclear. In this paper we explore the effect of national MW policies in Latin America’s six largest economies by exploiting the heterogeneity in the bite of the national minimum wage across local labor markets and over time. We find evidence that the MW has a compression effect on the wage distribution of formal workers. The effect was particularly large during the 2000s, a decade of sustained growth and strong labor markets. In contrast, the effect seems to vanish in the 2010s, a decade of much weaker labor markets. We also find suggestive evidence of a lighthouse effect: the MW seems to have an equalizing effect also on the wage distribution of informal workers.
Topic:
Income Inequality, Economy, Labor Market, Minimum Wage, and Informal Economy
Political Geography:
South America and Latin America

9. Four Decades of Canadian Earnings Inequality and Dynamics across Workers and Firms

Author:
Audra J. Bowlus, Emilien Gouin-Bonenfant, Huju Liu, Lance Lochner, and Youngmin Park
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Centre for Human Capital and Productivity (CHCP), Western University
Abstract:
This paper studies the evolution of individual earnings inequality and dynamics in Canada from 1983 to 2016 using tax files and administrative records. Linking these individuals to their employers (and rich administrative records on firms) beginning in 2001, it also documents the relationship between the earnings dynamics of workers and the size and growth of their employers. It highlights three main patterns over this period: First, with a few exceptions (sharp increase in top 1% and declining gender gap), Canada has experienced relatively modest changes in overall earnings inequality, volatility, and mobility between 1983 and 2016. Second, there is considerable variability in earnings inequality and volatility over the business cycle. Third, the earnings dynamics of individuals are strongly related to the size and employment growth of their employers.
Topic:
Labor Issues, Employment, Income Inequality, Business, History, and Earnings
Political Geography:
Canada and North America

10. The Role of Global Climate Change in Structural Transformation of Sub-Saharan Africa

Author:
Askar Mukashov and Christian Henning
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
With increasing evidence that rural households in Sub-Saharan Africa (SSA) opt for deagrarianization as an adaptation strategy to climate change, it is becoming important to understand the role of Global Climate Change (GCC) in ongoing structural transformation processes in these countries. We use Senegal as a case study country and analyze how various GCC scenarios affect the country's economic sectors, households' welfare, and structural transformation patterns. Our simulation results suggest that GCC can increase the country's deagrarianization pace, with industrial and service sectors in the capital Dakar being the most important destinations of the former agricultural labor force. Although unplanned urbanization smoothes the overall negative impact of GCC and decreases spatial income disparities, uncontrolled deagrarianization is also associated with negative externalities. Previous growth-focused studies suggest that services partaking in Senegal’s deagrarianization can hamper its long-term growth prospects, and our results suggest that productivity increase of services can redirect part of the former agricultural labor force towards industrial sectors.
Topic:
Agriculture, Climate Change, Economics, Environment, Labor Issues, Income Inequality, Rural, and Housing
Political Geography:
Africa and Senegal

11. The Evolution of the Earnings Distribution in a Volatile Economy: Evidence from Argentina

Author:
Andres Blanco, Bernardo Diaz de Astarloa, Andres Drenik, Christian Moser, and Danilo Trupkin
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
This paper studies earnings inequality and dynamics in Argentina between 1996 and 2015. Following the 2001–2002 crisis, the Argentine economy transitioned from a low- to a highinflation regime. At the same time, the number of collective bargaining agreements increased, and minimum wage adjustments became more frequent. We document that this macroeconomic transition was associated with a persistent decrease in the dispersion of real earnings and cyclical movements in higher-order moments of the distribution of earnings innovations. To understand this transition at the micro level, we estimate processes of regular wage adjustments within job spells. As the Argentine economy transitioned from low to high inflation, the monthly frequency of regular wage adjustments almost doubled, while the distribution of changes in regular wages morphed from having a mode close to zero and being positively skewed to having a positive mode and being more symmetric.
Topic:
Income Inequality, Inflation, Volatility, and Wages
Political Geography:
Argentina and South America

12. The Risk of Automation in Latin America

Author:
Irene Brambilla, Andrés César, Guillermo Falcone, Leonardo Gasparini, and Carlo Lombardo
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
In this paper we characterize workers’ vulnerability to automation in the near future in the six largest Latin American economies as a function of the exposure to routinization of the tasks that they perform and the potential automation of their occupation. We combine (i) indicators of potential automatability by occupation and (ii) worker’s information on occupation and other labor variables. We find that the ongoing process of automation is likely to significantly affect the structure of employment. In particular, unskilled and semi-skilled workers are likely to bear a disproportionate share of the adjustment costs. Automation will probably be a more dangerous threat for equality than for overall employment.
Topic:
Employment, Income Inequality, Economy, and Automation
Political Geography:
Latin America

13. Poverty in Latin America

Author:
Leonardo Gasparini, María Emma Santos, and Leopoldo Tornarolli
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
Despite some progress in recent decades, poverty remains a top social concern in Latin America. A large proportion of Latin Americans live with very low incomes and are deprived in other fundamental welfare dimensions such as education, health, housing and sanitation. The measurement of income and multidimensional poverty in the region has advanced significantly in recent decades. In particular, there has been a remarkable increase in the availability of microdata from national household surveys and of poverty statistics published by governments and other institutions. Yet, the measurement of poverty in Latin America still has some limitations that should be addressed in the years to come. This chapter discusses the measurement of monetary and multidimensional poverty in Latin America, and documents the main patterns and trends. By providing an updated assessment of the level, changes and characteristics of poverty in the region we expect to contribute to the more ambitious debate on its determinants and policy implications. The rest of the chapter is organized as follows. In Section 2 we describe the data sources and main methodological issues regarding the measurement of income poverty, while in Section 3 we document the main patterns and trends over the recent decades. We repeat the sequence for the measurement of multidimensional poverty: Section 4 for methodological issues and Section 5 for evidence. The paper concludes in Section 6 with some brief concluding remarks.
Topic:
Poverty, Income Inequality, Economy, and Sanitation
Political Geography:
Latin America

14. The distributional effect of a massive exodus in Latin America and the role of downgrading and regularization

Author:
Carlo Lombardo, Julian Martinez-Correa, Leonardo Penaloza-Pacheco, and Leonardo Gasparini
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
The massive displacement of Venezuelan citizens to Colombia is the second most important episode of forced migration in the world. We study the impact of this demographic shock on the Colombian income distribution exploiting the geographical heterogeneity in the intensity of migration. We use RIF regressions in an instrumental variables approach to account for the non-random pattern of location of immigrants. We find that despite the fact that Venezuelan immigrants are relatively skilled compared to native Colombian workers, the exodus had a larger negative effect on the lower tail of the wage distribution, implying increases in income inequality and poverty. We link this result to a sizeable downgrading of (mostly unregistered) Venezuelan recent migrants who work in more routine tasks and earn lower wages than natives with similar characteristics. We also explore a large regularization program for immigrants and find that it was associated to a reduction in the extent of downgrading, and hence, to a mitigation of the unequalizing impact of the exodus.
Topic:
Migration, Income Inequality, and Labor Market
Political Geography:
Colombia, South America, and Venezuela