Endogenous Inequality

Does the market economy exacerbate inequality across households? In a capitalistic society, do the rich maintain a high level of wealth at the expense of the poor? Or would an accumulation of the wealth by the rich eventually trickle down to the poor and pull the latter out of poverty? This paper presents a theoretical framework, in which one can address these questions in a systematic way. The model focuses on the role of the credit market, which determines the joint evolution of the distribution of wealth and the interest rate. A complete characterization of the steady states is provided. Under some configurations of the parameter values, the model predicts an endogenous and permanent separation of the population into the rich and the poor, where the rich maintains a high level of wealth partially due to the presence of the poor. Under others, the model predicts the Kuznets curve, i.e. the wealth eventually trickles down from the rich to the poor, eliminating inequality in the long run.     

Human capital investment,credentialing, and wage differentials

This study considers how individuals determine at what ratio they will invest in two different types of education. The first type contributes to the development of labor skills, while the other does not. We refer to the former as human capital investment and the latter as unproductive investment, which improves test scores but has no beneficial effect on students' human capital. We formulate an overlapping‐generations economy in which the rich and poor households invest in both types of education. We find that the ratio of human capital investment to unproductive investment is lower in the economy with medium size of the wage differentials. In a dynamic analysis, we identify two patterns of stable steady states for the dynamics of the wage differentials, namely, no‐inequality and high‐inequality steady states. Further, we show that a rapid increase in the level of skill‐biased technology may cause a switch from a steady state with no‐inequality to one with high inequality. This causes at least a temporary increase in the ratio of unproductive investment during the transition to the new steady state.     

WILL TAX‐BASED HEALTH INSURANCE REFORMS HELP THE SELF‐EMPLOYED STAY IN BUSINESS?

The self‐employed face a tax‐induced disadvantage relative to wage and salary workers when it comes to the payment of health insurance premiums. This paper uses a panel of individual tax return data to test whether lower health insurance premium costs because of an expanded tax incentive result in longer periods of self‐employment. The results suggest that households claiming the deduction are indeed less likely to exit self‐employment. Equalizing the treatment of health insurance premiums for the self‐employed and wage workers by allowing full deductibility from Self‐Employment Contributions Act (SECA) taxes would result in a 7% decrease in the probability of exit. (JEL H32, I18, L26)     

RETIREMENT WEALTH AND LIFETIME EARNINGS*

This article argues that a satisfactory theory of wealth inequality should account not only for the marginal distribution of wealth, but also for the joint distribution of wealth and earnings. The article describes the joint distribution of retirement wealth and lifetime earnings in the Panel Study of Income Dynamics. It then evaluates the ability of a stochastic life‐cycle model to account for key features of this distribution. The life‐cycle model fails to account for three key features of the data. (1) The correlation between lifetime earnings and retirement wealth is too high. (2) The wealth gaps between earnings rich and earnings poor households are too large. (3) Wealth inequality among households with similar lifetime earnings is too small. Models in which households differ in rates of return or time preferences account much better for the joint distribution of retirement wealth and lifetime earnings.     

MEASURING POVERTY USING BOTH INCOME AND WEALTH: A CROSS‐COUNTRY COMPARISON BETWEEN THE U.S. AND SPAIN

We study the correspondence between a household's income and its vulnerability to income shocks in two developed countries: the U.S. and Spain. Vulnerability is measured by the availability of wealth to smooth consumption in a multidimensional approach to poverty, which allows us to identify three groups of households: the twice‐poor group, which includes income‐poor households who lack an adequate stock of wealth; the group of protected‐poor households, which are all those income‐poor families with a buffer stock of wealth they can rely on; and the vulnerable‐non‐poor group, including households above the income‐poverty line that do not hold any stock of wealth. Interestingly, the risk of belonging to these groups changes over the life‐cycle in both countries while the size of the groups differs significantly between Spain and the U.S., although this result is quite sensitive to whether the housing wealth component is included in the wealth measure or not.     

IS MINIMUM WAGE AN EFFECTIVE ANTI‐POVERTY POLICY IN JAPAN?

This paper considers whether the minimum wage is a well‐targeted antipoverty policy by examining the backgrounds of minimum‐wage workers. Whether raising the minimum wage reduces employment for unskilled workers is also investigated. An examination of micro data from a large‐scale government household survey, the Employment Structure Survey (Shugyo Kozo Kihon Chosa), reveals that approximately half of minimum‐wage workers belong to households with annual incomes of more than 5 million yen as a non‐head of household. A regression analysis indicates that an increase in the minimum wage moderately reduces the employment of male teenagers and middle‐aged married women, while it encourages the employment of high‐school age youth.     

Domestic agricultural value chain development and pro‐poor growth: A computable general equilibrium microsimulation application for the Democratic Republic of Congo

The economy of the Democratic Republic of Congo has gained momentum between 2003 and 2015, with a high annual growth rate of over 6%. However, poverty and employment outcomes were relatively poor, while inequality increased. This study uses a computable general equilibrium (CGE) microsimulation model to study the pro‐poor effect of alternative growth strategy that is likely to strengthen the competitiveness of agro‐food products from the Congo. We experimented with three different scenarios: labor productivity growth, marketing efficiency, and transportation efficiency. The simulations demonstrated that improving the productivity of workers in agro‐food industries has not only produced strong relative pro‐poor effects, but also has the potential to lead to income convergence between rich and poor households. The analysis also revealed the underestimated contribution of agro‐food marketing and transportation efficiency. The major finding is that marketing efficiency favors the middle class. Efficiency gains in the transportation of agro‐food products generate strong pro‐poor effects in absolute and relative terms and are likely to be particularly effective in leading to income convergence. This policy has the potential not only to increase income and employment, but also to provide positive price impacts for both producers and consumers and benefits to all households, particularly low‐income households.     

Entrepreneurship in post‐conflict transition1

We examine new self‐employment entry and its viability in Bosnia and Herzegovina, using a rich household survey for the years 2001–2004. We find that wealthier households are more likely to engage in viable self‐employment and create employment suggesting an important role for financing constraints. Specifically, although having an existing bank relationship is not significantly related to the entry decision, it is positively related to the survival for new entrepreneurs and their employment creation. We also find a non‐linear relationship between remittances and entry in that individuals not receiving remittances are more likely to enter self‐employment; but, if they do receive them, the likelihood of starting a business increases in the fraction of wealth received from domestic remittances. Finally, people working in the informal sector are more likely to become viable entrepreneurs, particularly those provided with loans from micro‐credit organizations. These findings support the perception of the informal sector as an incubator for formal self‐employment in the early years of transition.     

Inequality,unemployment, and endogenous growth in a political economy with a minimum wage

This paper presents development of an endogenous growth model with heterogeneous households and political determination of the minimum wage. We investigate the interaction of inequality, unemployment, and economic growth. First, the arguments in this paper show that a positive correlation exists between inequality and unemployment, Second, the interaction between inequality and economic growth is shown to be a positive relation if high inequality pertains in a society. It is a negative relation if low inequality pertains.      

LUXURY AND WEALTH*

I develop a dynamic theory of luxury consumption, particularly emphasizing the causal effect that pursuit of luxury goods has on wealth accumulation. A quasi‐luxury is defined as a good whose marginal rate of substitution is increasing in a utility index. Under certain conditions, it is indeed a luxury good. When current wealth holding falls short of (exceeds) long‐run needs, luxury consumption is postponed more (less) easily than necessity consumption, due to a lower (higher) time preference for luxury and/or a higher intertemporal elasticity of substitution thereof. Preferences for quasi‐luxuries lead to a higher steady‐state value of wealth or capital.

相似文献   

Government Spending Shocks and Rule‐of‐Thumb Consumers with Steady‐State Inequality*

In the body of literature concerning fiscal policy, a central result is that government spending might stimulate private consumption because only some households save, while others spend their entire income each period. Although such heterogeneity naturally causes inequality, this complication is commonly avoided by assuming that transfers redistribute steady‐state wealth. I show that this steady‐state assumption drives short‐run results. Without redistribution, the equilibrium is indeterminate, and the labor‐market structure that is imposed to support the expansive result is theoretically inconsistent. On a more positive note, I propose a labor‐market formulation under which the expansive effects of government spending might arise.     

The Dynamics of Poverty and the Promotion of Transition from Non‐Regular to Regular Employment in Japan: Economic Effects of Minimum Wage Revision and Job Training Support

Comparison between Japan and other advanced countries shows that the relative poverty rate is high in Japan, and that many of the poor households are those with a non‐regular worker. As for mobility between income classes, the proportion of households remaining in the poor class for a long period of time in Japan is close to the average for EU countries. The panel estimation of its effect on wages shows that the raising of the minimum wage is statistically significantly associated with an increase in wages of non‐regular workers, in particular, female, but does not seem to decrease employment. The result shows that for male non‐regular workers, firm‐provided training promotes their transition to regular employment, and that for female non‐regular workers, occupational training promotes their transition to regular employment at different firms.     

新古典模型中收入和财富分配持续不平等的动态演化

本文讨论了当个人劳动能力和偏好存在差异的情况下，资本收入和劳动收入分配的差异如何通过遗产机制影响收入和财富分配的持续性不平等程度。论文分析表明：在偏好、个人劳动能力和个人收入的随机冲击的影响下，如果市场是完善的，整个经济系统存在收入和财富分配的稳定不平等状态，而且，这种稳定的不平等状态与初始的财富分配的不平等和一次性的产权配置都是无关的。最后，本文分析了资本收入税和劳动收入税对持续不平等程度的影响，通过分析指出：从长期来看，在劳动能力和初始财富存在差异而偏好没有差异的情况下，征收劳动收入税比征收资本收入税更有利于改善由于能力差异所造成的持续不平等。     

The Causal Effects of the Minimum Wage Introduction in Germany – An Overview

In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short‐run effects of this new minimum wage on a wide set of socioeconomic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self‐employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non‐compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low‐wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialised in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non‐compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.     

The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis

This paper examines the potential effects on inequality and poverty of a minimum wage increase, based on a microsimulation model that captures the details of household composition and the income tax and welfare benefit system and allows for labour supply responses. Results suggest that, largely due to the composition of household incomes, a policy of increasing the minimum wage has a relatively small effect on the inequality of income per adult equivalent person, and a money metric utility measure, using several inequality indices. Hence, the minimum wage policy does not appear to be particularly well targeted, largely due to many low wage earners being secondary earners in higher income households, while many low income households have no wage earners at all. These results are reinforced when allowing for wage spillovers further up the wage distribution. Nevertheless, a minimum wage increase can have a more substantial effect on some poverty measures for sole parents in employment.     

Wage subsidies, work incentives, and the reform of the Austrian welfare system

We analyze the employment and income effects of a needs-based minimum benefit system (“Bedarfsorientierte Mindestsicherung”) which has recently been introduced in Austria. The aim of this reform was to reduce poverty as well as to increase work incentives for recipients of social assistance. On the basis of a behavioral microsimulation model we show that this new system slightly increases employment but reduces incomes for the poorest households remaining unemployed. As an alternative, we analyze a budgetary neutral reform proposal which reduces financial incentives for marginal employment and provides a wage subsidy rewarding working longer hours. This alternative reform would yield larger positive employment effects, but more households would suffer from income losses. Overall, income inequality and poverty are affected little, however, both under the new social welfare system and the alternative reform proposal.     

Wealth inequality and employment fluctuations

This paper is concerned with the business cycle dynamics in search and matching models of the labor market when agents are ex-post heterogeneous. We focus on heterogeneity caused by different labor market histories and the resulting wealth inequality they generate. We show that this inequality implies wage rigidity relative to a complete insurance economy. The fraction of wealth poor agents prevents real wages from falling too much in recessions, since small decreases in income imply large losses in utility. Analogously, wages rise less during expansions than in models with homogeneous workers as small increases are enough for poor workers to accept job offers. This mechanism reduces the volatility of wages but generates more volatile employment levels.     

MODELING THE INCIDENCE OF SELF‐EMPLOYMENT: INDIVIDUAL AND EMPLOYMENT TYPE HETEROGENEITY

Modeling the incidence of self‐employment has traditionally proved problematic. Although the supply‐side characteristics of the self‐employed are well documented, we argue that the literature has neglected demand‐side aspects. We explore the determinants of self‐employment using the U.S. Survey of Consumer Finances. We present results from an econometric framework that allows us to model, separately and simultaneously, the influences of individual heterogeneity (i.e., supply‐side factors) and employment type heterogeneity (i.e., demand‐side factors) on the probability of self‐employment. Our findings suggest that while individual characteristics are important determinants of self‐employment, there are factors specific to the type of employment that influence self‐employment. (JEL J23, J33, C25, C10)     

边际工资补贴对区域经济的影响

The main research of this paper is the regional effects of marginal wage subsidies. Some regional economic issues are discussed such as production scales, operating profits, industry distribution, and expenditure distribution across the rich and poor regions. It is proven that, marginal wage subsidies improve the employment and raise the industrial share of the poor region, but meanwhile the expenditure share in the rich region increases for marginal wage subsidies. It is also showed that, the relationship between the effectiveness of marginal wage subsidies and the level of openness to trade is ambiguous when the wage level is very high, however, if the wage level is low enough thus marginal wage subsidies can cause relatively large employment increase, marginal wage subsidies cooperating with freer trade policy would be more effective.