The Atkinson Inequality Measure and its Sampling Properties: Bayesian and Classical Approaches

This paper examines several Bayesian methods of obtaining posterior probability density functions of the Atkinson inequality measure and its associated social welfare function, in the context of grouped income distribution data. The methods are compared with asymptotic standard errors. The role of the number of income classes is investigated using a simulated distribution. If only a small number of groups is available in published data, there is a clear gain from generating the posterior probability density function when using an explicit income distribution assumption. Even with a small number of groups, the Bayesian approach gives results that are close to the sample values obtained using the corresponding individual observations.     

INCOME‐GENERATING ACTIVITY: AN AVENUE TO IMPROVE THE SUSTAINABILITY OF SHGs

Self‐help groups (SHGs) are formed to work for increased income through collective effort and use of banking facilities by initiating some income‐generating activities taking advantage of the financial strength of a group. Taking into consideration the significance of SHGs to economic growth, the present study analyzes and compares the management of the income‐generating activities of SHGs in rural and urban areas. It also explores the extent of resource mobilization through various income‐generating activities, and the constraints faced by the SHGs while undertaking these activities. It is an exploratory research in which a multi‐stage stratified cluster random sampling technique was used for the selection of SHGs. Data were collected at group level and member level through purposely developed interview schedules and focused group discussions. The study revealed that, because of various financial and marketing‐related problems occurring while initiating and conducting the activities, very few SHG members actually started new income‐generating activities. Testing of hypotheses indicated that SHGs do not fulfil all the requirements of income‐generating activities carried out by its members. An overall low to medium level of resource mobilization by a majority of the SHGs presented a poor picture of SHGs in generating resources for undertaking entrepreneurial activities.     

Why don't firms export more? Product quality and Colombian plants

Exporting firms around the world ship only a small fraction of their output overseas. For firms in a large country, such as the United States, this behavior can be explained by the existence of a large domestic market. For firms in a small lower income country, such as Colombia, the lower share of exports remains a puzzle. This paper begins by illustrating the failure of current models to explain plant export patterns in Colombia. Even models that do well in describing the US export distribution fail when confronted with the Colombian data. In response to this puzzle, this paper suggests that Colombia's export distribution can be explained with a two-dimensional productivity space where output productivity is considered separately from quality productivity. Predictions of this theory are tested on Colombian plant level data from 1981–1991. Overall, product quality is shown to be a significant factor in explaining the tendency for Colombian plants to under-export manufactured goods to the United States.     

CHANGING INCOME DISTRIBUTION UNDER DEVELOPMENT: COLOMBIA

This paper examines the available evidence relative to the distribution of income in a developing country, Colombia, over a relatively long span of years, roughly from the mid-30s to the mid-60s, especially in the context of the argument that recent growth has been characterized by worsening distribution and stable or declining incomes for lower income groups. The basic conclusions are that income distribution within agriculture worsened throughout the period, while non-agricultural income probably worsened from the mid-30s to the early 50s, improved from then to the mid-60s, and then leveled off. During the period of improvement in non-agricultural income, it appears that the overall distribution also improved somewhat. Over the period as a whole, the main gainers have been the second and third deciles from the top; the top decile appears to have lost. The bottom two deciles also appear to have lost.     

Structural change in the Australian electricity industry during the 1990s and the effect on household income distribution: A macro–micro approach

The Australian electricity industry experienced significant structural change during the 1990s mainly as a result of microeconomic reform. We analyse the effects of the structural change on the distribution of household income using a macro–micro approach. Our work shows that, nationwide, all income deciles experience higher real incomes in the order of 2%. Our results show that a previously state-owned monopoly industry can experience significant structural change while generating significant improvements in household real income without leading to significantly adverse impacts on national or regional income inequality. It suggests that policy makers in advanced economies should seriously consider such reforms given that they may generate large economic benefits with rather small economic costs.     

Income distribution functions with disturbances

Recent exercises in the maximum likelihood estimation of income distribution functions provide goodness of fit tests which lead to the rejection of most models. This result is usually ignored on the ground that the test is too strict, since it allows for sampling variation only. If income distribution functions, like other econometric models, are not meant to hold exactly, we should introduce disturbances in the statistical model. Here we treat observed income as the sum of a systematic component with a specific two-parameter distribution — Pareto, Gamma, or Lognormal — and an independent normal error. The ensuing models fit conventional U.S. income data much better than their traditional counterparts, but they still fail a goodness of fit test.     

The permanent income hypothesis in underdeveloped economies:: Additional evidence

Laumas and Laumas find no support for the permanent income hypothesis in recent work on a consumption function for India. However, permanent income has been used not only in consumption but also in demand for money functions. Estimates of demand for money in 10 Asian LDCs indicate that substitution of permanent for current income is warranted. In particular, the estimate for India is improved substantially by the use of permanent instead of current income. Furthermore, the weights obtained from a polynomial lag distribution are almost identical to the Laumas' exponential weights with which they construct permanent income.     

Pareto–lognormal distributions: Inequality,poverty, and estimation from grouped income data

The (double) Pareto–lognormal is an emerging parametric distribution for income that has a sound underlying generating process, good theoretical properties, and some limited favorable evidence of its fit to data. We extend existing results for this distribution in 3 directions. (1) We derive closed form formula for its moment distribution functions, and for various inequality and poverty measures. (2) We show how it can be estimated from grouped data using GMM. (3) Using grouped data from ten countries, we compare its performance with that of another leading 4-parameter income distribution, the generalized beta-2 distribution. The results confirm that, when using grouped data, both distributions provide a good fit, with the double Pareto–lognormal distribution outperforming the beta distribution in 4 out of 10 cases.     

POVERTY AND INCOME INEQUALITY IN LATIN AMERICA DURING THE 1980s

On average, poverty and income inequality increased in Latin America during the 1980s. Forty-six percent of the increase in poverty took place in the cities of Brazil alone, though part of this reflects the migration of poor rural inhabitants to urban areas. There is strong evidence that both income inequality and poverty mirrored the economic cycle, rising during recession and falling during recovery. Economies that grew (e.g. Colombia, Costa Rica) performed better with respect to poverty and income inequality than those that stagnated. In particular, countries that failed to stabilize effectively (e.g. Brazil, Peru) experienced substantial increases in poverty. Educational attainment has the greatest correlation with both income inequality and the probability of being poor. From a policy standpoint, there is a clear association between the provision of education, lessening of income inequality, and poverty reduction.     

Incentives and income taxation: the implementation of individual revenue requirement functions

Consider an economy where a fixed amount of revenue is to be raised, perhaps to finance a public good, by a tax on income. The only two goods in the economy are labour (or capital) and a consumption good, and workers are differentiated by only one parameter. A map describing ability to pay, from the agent types to tax liability, is given. Under what conditions on preferences can such a map be implemented by an income tax, in the sense that each agent pays exactly what is desired, after all behavioural adjustments? We find sufficient conditions on preferences and the map, as well as necessary conditions. The only restriction on tax functions is that they be measurable; bunching and gaps are allowed. Applications to both normative and positive public finance are discussed.     

Migration selectivity and the effects of public programs

"A model of the spatial distribution of mobile heterogeneous agents is formulated to assess how a price change or program subsidy that is location-specific affects the composition of local residents via selective migration and thus biases evaluations of the effectiveness of the program based on its local consequences. Longitudinal data from Colombia are used to test the implications of migration selectivity. The findings confirm the existence of selective migration, suggesting that local subsidies to human capital attract high-income but, within income groups, low-fertility households and those with low human capital endowments. These migration patterns are shown to be consistent with the dominance of endowment over tastes heterogeneity in the population under plausible behavioral assumptions."     

Taxation and income distribution: The Colombian tax reform of 1974

In late 1974 the Government of Colombia implemented a major tax reform package embracing virtually all aspects of the revenue system. The reform was designed to serve allocative and stabilization as well as redistributive goals. This paper focuses upon the likely impact of the 1974 tax measures upon income distribution. Section 2 describes the prevailing distribution of income prior to the reform. Section 3 presents a short outline of the principal features of the 1974 package, and sections 4 through 6 provide an evaluation of its redistributive effects. The authors conclude that the initial impact of the reform was undoubtedly progressive, as it likely served to shift as much as 1.5 percent of GDP away from the top quintile of the income distribution.     

A smooth coefficient quantile regression approach to the social capital–economic growth nexus

This analysis assesses the role of social capital in generating heterogeneity in growth processes across U.S. counties by estimating growth regressions, using the novel semiparametric smooth coefficient quantile regression method in which parameters are unspecified functions of a measure of social capital. The results indicate substantial differences across the quantiles of economic growth in the profile shapes of the coefficient estimates over the level of social capital. Moreover, the coefficient function estimates are highly nonlinear over the level of social capital, providing evidence that the growth process that links initial income, education attainment, ethnic diversity, inequality, population density, and government activity to growth varies with social capital in a nonlinear way.     

Aggregation bias-correcting approach to the health–income relationship: Life expectancy and GDP per capita in 148 countries, 1970–2010

A large amount of data consisting of 148 countries for the years 1970 to 2010 is analysed in the context of the health–income relationship. The literature suggests that the biased income–health effect obtained with macro data can be a result of the aggregation of individual concave income functions on average health. This aggregation problem is analysed in detail, and a bias-correcting method is proposed to overcome it. The results with new model alternatives show that they correct the income effects on average health in the right direction; that is, they produce smaller parameter estimates than biased models. Augmenting the results with the quantile regression approach, which is sensitive to health differences between countries, indicates that the poorest countries’ income gradient is still much larger than that of rich countries. However, the median life expectancy effect of the log of GDP per capita across the countries decreased during the sample decennials. The results for income inequality measured with the Gini coefficient indicate that the effects of inequality on health are still significant in the poorest countries but non-significant among rich countries after the year 2000. We argue that the proposed bias-correcting method retains the interest in macro health modelling and offers new model alternatives in other contexts.     

THE DYNAMIC AND DISTRIBUTIONAL ASPECTS OF IMPORT TARIFFS

We use a dynamic trade model with two sectors and two types of workers to analyze the optimal setting of income‐generating tariffs. We study dynamic and distributional aspects focusing on the time horizon of policymakers and workers. The level of tariffs preferred by workers depends on the sector where they are employed as well as their skill class, with the relative weight of both aspects determined by the time horizon of the workers. Unskilled workers in the unskilled‐intensive sector are the ones most in favor of protectionism and might even benefit from a trade war.     

Dual interpersonal comparisons of utility and the welfare economics of income distribution

Interpersonal comparisons can be of utility levels and/or of utility differences. Comparisons of levels can be used to define equity in distributing income. Comparisons of differences can be used to construct an additive Bergson social welfare function over income distributions. When both utility levels and utility differences are compared, one can require the constructed additive Bergson social welfare function to indicate a preference for more equitable income distributions. This restricts the form of both the individual utility functions and the optimal distribution of income. The form of these restrictions depends on whether the levels and differences of the same utility functions are being compared.     

Do elites benefit from democracy and foreign aid in developing countries?

A popular argument for the absence of any beneficial effects of foreign aid is that it is skimmed by political elites in recipient countries. However, studies also suggest that aid may be more effective in relatively democratic developing countries. By exploring data on income quintiles derived from the World Income Inequality Database for 88 developing countries, a set of results indicate that foreign aid and democracy in conjunction are associated with a higher share of income held by the upper quintile. It thus appears that foreign aid, contrary to popular beliefs, leads to a more skewed income distribution in democratic developing countries while the effects are negligible in autocratic countries. The paper closes with a discussion of potential mechanisms generating this perverse effect.     

Converting Forests to Farms: The Economic Benefits of Clearing Forests in Agricultural Settlements in the Amazon

Agricultural expansion into tropical forests is believed to bring local economic benefits at the expense of global environmental costs. The resulting tension is reflected in Brazilian government policy. The national agrarian reform program has settled farm families in the Amazon region since the 1970s, with the expectation that they will clear forests in order to farm the land. On the other hand, recent Brazilian policy initiatives seek to reduce deforestation to mitigate climate change. We contribute to the policy debate that surrounds these dual goals for the Amazon by estimating the marginal effects of new agricultural land on the full income and assets of farm settlers over a 13-year period from 1996 to 2009. Using micro panel data from agrarian settlements where forest was being rapidly cleared, and controlling for factors that would otherwise confound the relationship, we estimate the effect of converting forest to agriculture on total household income to estimate the opportunity cost of conserving forest. Our measure of income reflects any re-allocation of resources by utility maximizing households and any productivity effects due to loss of forest ecosystem services. The estimated effect of new agricultural land on income is positive, but small relative to the income per hectare of previously cleared land. However, we show that income increases investment in physical assets, which raises households’ income generating capacity and future accumulation of assets. Thus, while there is only a small immediate income gain from clearing more forest, the long-term effects on wealth are still substantial. This demonstrates that given the right conditions, conversion of forest to agricultural land can be an impetus for asset accumulation by smallholders. It also highlights the importance of considering the indirect and long-term welfare benefits of new agricultural land when assessing the opportunity costs of forest conservation.     

解释中国农村区域间的收入不平等:一种基于回归方程的分解方法

本文提出了一个分解不平等的框架 ,在这一框架中 ,诸如收入之类的因变量的不平等可以分解为相关的回归方程中自变量或代理变量的贡献。本文所提出的分析框架可以被运用于分解任何不平等指标 ,并且对回归模型的限制条件也不多。通过将Box Cox和Box Tidwel收入决定函数结合起来的方式 ,本文定量分析了导致中国农村地区间收入不平等的根源     

Counting the uncounted: The consequences of children's domestic chores for health and education in Ethiopia

Much of the existing literature on the economics of child labor assumes that child labor is synonymous with employment in income‐generating activities. However, children also perform domestic chores, and excessive involvement in chores may be detrimental to their wellbeing. This paper investigates the effect on child health and education outcomes of participation in domestic chores as well as participation in income‐generating activities. Our data come from the 2014 Young Lives survey of Ethiopia. We use the guidelines of the 18th International Conference of Labor Statisticians and the United Nations Children's Fund to make a distinction between light work and harmful work, and apply this distinction to both domestic chores and income‐generating work. Using an instrumental variables approach, we find that involvement in harmful domestic chores is strongly associated with poor health and education outcomes. Our findings suggest that excessive involvement in domestic chores constitutes a form of child labor. Ignoring domestic chores will lead to an underestimate of the prevalence of child labor, especially among girls, whose exposure to chores is much higher, on average, than that of boys.