Functional components of public expenditure,fiscal consolidations,and economic activity

This paper analyses how the functional components of public expenditure and spending‐driven consolidations affect the economic growth, unemployment, and income inequality. A dynamic panel data least squares dummy variable estimator estimator is employed over a sample of 15 European Union countries during the period 1990–2012. The empirical results show that real GDP growth decreases when fiscal austerity measures are implemented, especially if they are spending‐driven. Cuts in public expenditure undermine economic growth, namely if they slash spending on public order, recreation, and education. Spending cuts on education, in particular, affect the investment in human capital, harming not only growth but also economic, social, and human development. The unemployment rate also proved to be significantly boosted when austerity measures restrict spending on education, whereas income inequality rises when social protection expenditures are cut.     

Managerial capital,occupational choice and inequality in a global economy

This study proposes a simple theory of trade with endogenous firm productivity, occupational choice and income inequality. Individuals with different managerial talent choose to become entrepreneurs or workers. Entrepreneurs enhance firm productivity by investing in managerial capital. The model generates three income classes: low‐income workers facing the prospect of unemployment, middle‐income entrepreneurs managing domestic firms and high‐income entrepreneurs managing global firms. Trade liberalization policies raise unemployment and improve welfare. A reduction in per‐unit trade costs raises top incomes and generates labour‐market polarization. A reduction in fixed exporting costs has an ambiguous effect on top incomes and personal income distribution. Policies reducing labour‐market frictions or the costs of managerial‐capital acquisition create more jobs and improve welfare. The income distributional effects of labour‐market policies depend on which policy is implemented.     

Low level equilibrium trap,unemployment, efficiency of education system,child labour and human capital formation

This paper builds an overlapping generations household economy model to examine the impact of adult unemployment on the human capital formation of a child and on child labour, as viewed through the lens of the adult’s expectations of future employability. The model indicates that the higher the adult unemployment rate in the skilled sector, the lesser is the time allocated by an unskilled adult towards schooling of her child. We also find that an increase in the unskilled adult’s wage may or may not decrease child labour in the presence of unemployment. The model predicts that an increase in child wage increases schooling and human capital growth rate only if the adults in the unskilled sector earn less than subsistence consumption expenditure. As the responsiveness of skilled wage to human capital increases, schooling and human capital growth rates increase. The model dynamics bring out the importance of education efficiency and parental human capital in human capital formation of the child. In the case of an inefficient education system, generations will be trapped into low level equilibrium. Only in the presence of an efficient education system, steady growth of human capital is possible. Suitable policies that may be framed to escape the child labour trap are discussed as well.     

Job creators,job creation,and the tax code

This paper considers the role of the tax code in determining income dispersion and vacancy creation. A “span‐of‐control” model is embedded into a search and matching environment. A cut to the tax on profits in isolation improves job creation and reduces before‐tax income inequality. The impact of a budget‐balancing increase in the wage tax depends on the bargaining power of firms. When it is high, firms pick up the lion's share of the tax burden. The tax acts like a barrier to entry: it benefits large firms at the expense of marginal ones. Net effects are an increase in unemployment and before‐tax income dispersion. Low firm bargaining power means workers pick up more of the tax burden. It acts like a subsidy to entrepreneurship reinforcing the impact of the profit tax reduction. Taxes on the returns to capital leave everyone worse off.     

Public Expenditure,Environment, and Economic Growth

This paper attempts to develop a model of endogenous growth with special consideration to the role of productive public expenditure in the presence of congestion effect of private capital and environmental pollution. We analyze the properties of the optimal fiscal policy in the steady‐state equilibrium when the level of production of the final good is the source of emission. Government allocates its income tax revenue between pollution abatement expenditure and productive public expenditure. In the steady‐state equilibrium, optimum ratio of productive public expenditure to national income is less than the competitive output share of the public input; and this ratio varies inversely with the magnitude of the emission‐output coefficient. The steady‐state equilibrium appears to be a saddle point; and the market economy growth rate is not necessarily less than the socially efficient growth rate in the steady‐state equilibrium.     

Tax Havens,Growth, and Welfare

This paper develops an endogenous growth model featuring tax havens, and uses it to examine how the existence of tax havens affects the economic growth rate and social welfare in high‐tax countries. We show that the presence of tax havens generates two conflicting channels in determining the growth effect. First, the public investment effect states that tax havens may erode tax revenues and in turn decrease the government's infrastructure expenditure, thereby reducing growth. Second, the tax planning effect of tax havens reduces marginal cost of capital and hence encourages capital accumulation so as to spur economic growth. The overall growth effect is ambiguous and is determined by the extent of these two effects. The welfare analysis shows that tax havens are more likely to be welfare‐enhancing if the government expenditure share in production is low, or the initial income tax rate is high. Moreover, the welfare‐maximizing income tax rate is lower than the growth‐maximizing income tax rate if tax havens are present.     

Long-term unemployment, unemployment benefits and social assistance: The Polish experience

This paper provides a comprehensive account of the regulations governing the systems of unemployment support and social assistance in post-communist Poland. To provide a solid foundation for a further discussion of these issues, the paper extensively characterizes the Polish labor force in terms of the prevalence and duration of unemployment. A final aspect of our empirical analysis concerned the question of what are the main sources of personal income for labor force participants, unemployed workers and long-term unemployed workers. In conclusion, we argue for a reform of the Polish systems of income support that separates the objectives of employment growth and poverty alleviation, and that improves upon the implementation of support schemes.     

Poverty and Income Dynamics in Philippine Villages, 1985–2004

The authors examined the long‐term changes in household income structure and decline in poverty in three rice‐growing villages in the rural Philippines from 1985 to 2004. They found a shift of household income structure away from farm to nonfarm sources, accompanied by a decline in the incidence of poverty by about one‐half. Such a decline can be explained primarily by the rise in returns to the “quantity” attributes of human capital, measured by age composition, and, secondly, by the rise in returns to the “quality” attributes, measured by the proportion of household members completing secondary and tertiary schooling. It is clear that the poor benefited from the development of the nonfarm labor market where they were able to fully utilize their only asset, that is unskilled labor.     

A Positive Theory of Income Redistribution

This article examines how redistribution of human capital expenditure can come about voluntarily. A model is developed in which, in the absence of redistribution, human capital expenditure is financed through tax revenue collected locally. However, circumstances are shown under which transfers of human capital expenditure across neighborhoods can take place voluntarily, even in the absence of interfamily altruism. These transfers can eliminate absolute inequality and reduce relative inequality. In addition, the effect on aggregate income of such human capital funding transfers across neighborhoods is evaluated. Empirical evidence supporting the model's implications for the impact of redistribution of human capital expenditure on the persistence of income inequality is presented     

Capital Expansion, Endogenous Growth and Equilibrium Unemployment

A model is developed, which captures the interactions of unemployment and economic growth in general equilibrium. The economy evolves along a correct-expectations equilibrium path exhibiting endogenous job rationing, and productivity growth is driven by installation of new capital. Under the maintained hypothesis that the elasticity of substitution between capital and labour is less than unity, unemployment benefits are shown to shift up the whole path of equilibrium unemployment, leaving the economy with a higher natural rate of unemployment and lowering the long-run growth rate permanently. Investment tax credits financed by lump sum taxes on total income are capable of lowering the natural rate and raising the economy's growth rate.     

中国城市老年人贫困程度的探讨

根据国际流行的贫困距指数研究方法，在中国老龄科研中心1992年调查和2000年调查数据的基拙上，以城市老年人家庭作为计量单位，从支出口径探讨了中国部分省、直辖市的城市老年人90年代贫困的状况和发展趋势。对比了两次调查相同省份城市低收入老年人群体的收入变化情况。这一特定群体的老年人在90年代收入增长缓慢，有可能陷入以收入口径侧量的深度贫困。对如何改善城市贫困老年人的救助提出了对策建议。     

Entrepreneurs,jobs, and trade

We propose a simple theory of endogenous firm productivity, unemployment, and top income inequality. High-talented individuals choose to become self-employed entrepreneurs and acquire more managerial (human) capital; whereas low-talented individuals become workers and face the prospect of equilibrium unemployment. In a two-country global economy, trade openness raises firm productivity, increases top income inequality, and may reduce welfare in the country exporting the good with lower relative labor-market frictions. Trade openness reduces firm productivity, lowers top income inequality, and necessarily raises welfare in the other country. The effect of trade on unemployment is ambiguous. Unilateral job-creating policies increase welfare in both countries. However, they reduce unemployment and raise top income inequality in the policy-active country; and reduce top income inequality while increasing unemployment in the policy-passive country.     

Externalities,Productivity and Sustained Growth

This paper shows that the existence of endogenous growth, in the closed‐form solution, in a single sector economy with a convex technology in an overlapping generations (OLG) framework, which attempts to fill the current gap in endogenous growth theory. It finds there is an unbounded growth when trade, in the form of knowledge spillover, affects labor productivity through the formation of human capital with self‐education that is not an independent sector but builds the human capital here. This conclusion holds even though there is the “limited income” expressed as the “non‐increasing wage/investment ratio” for each generation. Moreover, it shows the convergence of growth rates for each country, which is unique and constant, while the growth rate per capita negatively relates with each country's population growth rate. Also, there is no “poverty trap” with the introduction of externalities that is different from existing literature.     

The transition to a globalized economy: Poverty,human capital and the informal sector in a structuralist CGE model

Recent econometric evidence suggests that trade liberalization has an elusive relationship to growth and income distribution. This paper provides an explanation for these results via numerical simulations of a dynamic structuralist CGE. The conclusion is that if families become too poor to finance human capital accumulation, or the state too stingy to supply it at a reasonable cost, exports of skill-intensive goods can become uncompetitive and the transition to openness may involve increasing poverty, unemployment and stagnation. The model design incorporates an informal sector as well as accumulation of human capital. The paper simulates two trajectories, a “green” path in which per capita income grows steadily with a rapid rate of human capital accumulation and a reduction in the level of economic informality. A second, or “red” path is also possible, however, with a growth rate that is much lower, an expanding informal sector and an inadequate rate of human capital formation.     

The impact of natural disasters on household income,expenditure, poverty and inequality: evidence from Vietnam

Natural disasters are expected exacerbate poverty and inequality, but little evidence exists to support the impact at household level. This article examines the effect of natural disasters on household income, expenditure, poverty and inequality using the Vietnam Household Living Standard Survey in 2008. The effects of a natural disaster on household income and expenditure, corrected for fixed effects and potential endogeneity bias, are estimated at 6.9% and 7.1% declines in Vietnamese household per capita income and expenditure, respectively. Natural disasters demonstrably worsen expenditure poverty and inequality in Vietnam, and thus should be considered as a factor in designing poverty alleviation policies.     

Regional unemployment and human capital in transition economies1

Differences in regional unemployment in post‐communist economies are large and persistent. We show that within‐country regional variation in inherited human capital in four such economies explains the bulk of regional variation in unemployment; we explore potential explanations. Our evidence suggests that internal skill‐biased migration and the flow of foreign direct investment are not working as adjustment mechanisms but rather help explain the lack of convergence in regional unemployment rates. Although this capital and labour mobility pattern is consistent with the presence of regional skill spillovers, we find little support for this hypothesis. Instead, the observed migration pattern appears to arise from different skill‐specific adjustments to regional shocks brought about in part by labour‐market institutions such as guaranteed welfare income.     

Disentangling the Poverty Effects of Sectoral Output,Prices, and Policies in India

This paper attempts to disentangle the poverty effects of key policy variables that directly affect the poor (namely the government‐led channel of development spending and financing) in both agricultural and non‐agricultural sectors after accounting for the effect of respective sectoral per capita income and prices, using data from India over five decades. The paper emphasizes the sectoral composition of income and prices as mechanisms influencing the level of poverty and establishes empirically that it is the rise in non‐agricultural per capita income that reduces rural poverty via the channel of internal migration, after having controlled for the variation in key components of fiscal spending and monetary/financial policy via the availability of credit. Uneven sectoral growth pattern explains why urban poverty becomes a spill‐over of persistent rural poverty when the agricultural sector shrinks. While checking for robustness, there is evidence that the rise in non‐agricultural income alone may not reduce rural poverty, when measured in terms of rural infant mortality rate as a non‐income indicator of well‐being.     

A Consistent Poverty Approach to Assessing the Sensitivity of Income Poverty Measures and Trends

This paper examines the sensitivity of estimates of income poverty rates and trends to variations in the poverty line and to whether or not certain households are included or excluded from the sample used to estimate poverty. The approach draws on the concept of consistent poverty, which has been used to identify those with incomes below the poverty line who also experience deprivation. Our approach involves excluding households with incomes below the poverty line if they report zero or negative income or are self‐employed, have expenditure well in excess of their income, have substantial wealth holdings, or if they do not report having experienced financial stress over the past year. The combined impact of all four exclusions is to reduce the half‐median income poverty rate from 9.9 per cent to 5.4 per cent, but also suggests that poverty increased by more over the decade to 2003–04 than the original estimates indicate.     

REDISTRIBUTIVE POLITICS AND GOVERNMENT DEBT IN A BORROWING‐CONSTRAINED ECONOMY

We develop a two‐period, three‐class of income model where low‐income agents are borrowing constrained because of capital market imperfections, and where redistributive expenditure is financed by tax and government debt. When the degree of capital market imperfection is high, there is an ends‐against‐the‐middle equilibrium where the constrained low‐income and the unconstrained high‐income agents favour low levels of government debt and redistributive expenditure; these agents form a coalition against the middle. In this equilibrium, the levels of government debt and expenditure might be below the efficient levels, and the spread of income distribution results in a lower debt‐to‐GDP ratio.     

中国城市老年人贫困程度的探讨

根据国际流行的贫困距指数研究方法,在中国老龄科研中心1992年调查和2000年调查数据的基础上,以城市老年人家庭作为计量单位,从支出口径探讨了中国部分省、直辖市的城市老年人90年代贫困的状况和发展趋势。对比了两次调查相同省份城市低收入老年人群体的收入变化情况。这一特定群体的老年人在90年代收入增长缓慢,有可能陷入以收入口径测量的深度贫困。对如何改善城市贫困老年人的救助提出了对策建议。