Losers amongst the Losers:: The welfare effects of the great recession across cohorts

This paper studies the effect of deep recessions on intergenerational inequality by quantifying the welfare effects on households at different phases of the life cycle. Deep recessionary episodes are characterized by large declines in the prices of real and financial assets and in employment. The former levies high welfare costs on older households who own financial wealth, the latter determines labour income losses and destroys the human capital of younger cohorts, lowering their productivity. The paper extends previous analyses in the literature by including permanent labour income losses in an OLG model calibrated to match the Great Recession. The analysis shows that younger households lose more than double of all other living cohorts, as younger household become unemployed and experience a decline in their future income. The dynamics of households’ consumption and portfolio composition between 2007 and 2013 in the US are consistent with the predictions of the model.     

Can entrepreneurship bring happiness? Evidence from China

This paper investigates the relationship between entrepreneurial activities and the happiness of entrepreneurs. We estimate the effects of entrepreneurial decision-making, business experience and other factors on happiness by using China Household Finance Survey data. Our results derived from maximum likelihood estimation methods indicate that entrepreneurial decision-making and entrepreneurial experience affect household happiness significantly. The family well-being is significantly increased if the family is entrepreneurial, and it will be higher if actively entrepreneurial. Both entrepreneurial experience and entrepreneurial investment of time have significantly positive effect on the probability of family well-being. In addition, we find that the mechanism by which entrepreneurship brings happiness to households is through raising household income and wealth, that is, income effects and wealth effects.     

HOUSEHOLD SAVING AND PORTFOLIO CHANGE: EVIDENCE FROM THE 1983–89 SCF PANEL

There are few sources of high-quality data on the dynamics of wealth accumulation. This paper uses newly available data from the 1983 89 panel of the Survey of Consumer Finances to examine household saving and portfolio change over the 1980s. Our main findings are as follows. First, median household wealth rose modestly over the period. Second, while overall wealth inequality increased, households in the top 1 percent of the wealth distribution in 1983 saw their share of total wealth decline, probably reflecting turnover among the very wealthy. Third, although age, income, and initial wealth had significant effects in regressions on household saving, a large part of the variation in saving was unexplained. Finally, there were clear life-cycle patterns in the portfolios of assets and liabilities held by households, with younger households acquiring homes, businesses and all types of debts, and older households divesting themselves of these assets and debts.     

Distributional consequences of asset price inflation in the Euro Area

We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively few households, while the median household strongly benefits from housing price increases. The capital gains from bond price increases (relative to household net wealth) do not correlate with household net wealth (or income). Bond price increases thus leave net wealth inequality largely unchanged. In contrast, equity price increases largely benefit the top end of the net wealth (and income) distribution, thus amplify net wealth inequality. Housing price increases display a hump shaped pattern over the net wealth distribution, with the poorest and richest households benefitting least, but there exists considerable heterogeneity across Euro Area countries. The ECB's OMT announcements over the summer of 2012 had quantitatively similar distributional implications as an unexpected loosening of the policy rate by about 175 basis points.     

Entrepreneurship and income inequality: a spatial panel data analysis

The main objective of this paper is to empirically analyze the relationship between entrepreneurship and income inequality. We use a spatial panel data analysis for both 33 high-income countries and 39 middle- and low-income countries over a period of 11 years. Estimation results and rigorous diagnostic analysis suggest that: (i) there is a strong support for the existence of an inverted U-shaped relationship between entrepreneurship and income inequality espoused by the Kuznets Curve hypothesis; (ii) the relationship between entrepreneurship and income inequality is negatively moderated by country’s level of economic development; (iii) regardless of income inequality levels, entrepreneurship has a non-linear relationship with income per capita; (iv) gross domestic expenditure on research and development exhibits significant negative impacts on entrepreneurship; (v) significant mixed effects on the likelihood of entrepreneurial activity are observed with governance, globalization, population growth rate, and competitiveness variables; (vi) there are significant mixed feedback effects on entrepreneurship; and (vii) there are statistically significant, positive as well as negative spatial spillovers to country-level entrepreneurial activity.     

A NEW LOOK AT THE WEALTH ADEQUACY OF OLDER U.S. HOUSEHOLDS

We examine the current wealth adequacy of older U.S. households using the 1998–2006 waves of the Health and Retirement Study (HRS). We find that the median older U.S. household is reasonably well situated, with a ratio of comprehensive net wealth to present value poverty‐line wealth of about 3.9 in 2006. About 18 percent of households, however, have less wealth than would be needed to generate 150 percent of poverty‐line income over their expected future lifetimes. We see similar patterns of wealth adequacy when we examine ratios of annualized comprehensive wealth to pre‐retirement earnings. Comparing the leading edge of the baby boomers in 2006 to households of the same age in 1998, we find that the baby boomers show slightly less wealth, in real terms, than their elders did, but still appear to have adequate resources at the median. Moreover, we find a rising age profile of annualized wealth, even within households over time and after controlling for other factors, suggesting that older households are not spending their wealth as quickly as their survival probabilities are falling.     

Income inequality among minority farmers in China: Does social capital have a role?

We used recently available household panel data collected by China's National Bureau of Statistics to examine the effects of natural, human, material, and social capital on income inequality among minority farmers in China's Xinjiang Province between 2011 and 2012. Results obtained from panel quantile regression and correlated random effects’ models show that income inequality and the poverty of ethnic farmers have been decreasing to some extent. Results also indicated that human capital exacerbates income inequality among the minorities, whereas the effect of natural capital on income inequality is not evident. Social and material capital reduce income inequality among ethnic minorities. Results from the decomposition of the Gini coefficient indicate that material and social capital contribute to a substantial majority of the income inequality in the region.     

Optimal diversification and risk-taking: a theoretical and empirical analysis

Among the justifications for capital property income received by private households is that it is a ‘return to risk-taking’. However, portfolio diversification provides an obvious means toward the reduction of risk. Moreover, it is widely believed that the wealthier the household, the more diversification it practices: the larger tends to be the proportion of its total portfolio allocated to publicly traded stock, and the larger tends to be the number of individual stock issues included in its portfolio. Using a simple ‘homogeneous securities’ model, explicit functional forms are obtained for both the optimal proportion of the portfolio allocated to stocks, and the optimal number of individual stock issues in the portfolio. Empirical evaluation of these theoretical results, using a dataset derived from the 2004 Survey of Consumer Finances (SCF), lends substantial support to the model. Applying these empirical results, it is found that as household capital wealth increases, expected capital income increases while simultaneously a reasonable risk indicator (the probability of incurring a negative return on the capital portfolio) decreases owing to the higher level of portfolio diversification. This indication casts significant doubt on the ‘return to risk-taking’ justification for capital property income received by wealthy private households.     

A test of the household income process using consumption and wealth data

The evolution of household income can be explained almost equally well by rival models. However, rival models have very different implications for other household behaviours, such as consumption. I therefore test between two prominent models in the UK using panel data on consumption and wealth, as well as income, over 1991–2006. To operate the test, I show that long-lived income shocks transmit far less than one-for-one through to consumption, and particularly so for younger households. I then compare these estimates of transmission with estimates of households’ ability to smooth shocks, captured by the data on wealth. Conditional on the suitability of the consumption model, my estimates provide evidence against the restricted income process (RIP) and in favour of an alternative heterogeneous income process (HIP). This finding also explains why cross-sectional consumption inequality grew slowly over the period even though the variance of long-lived shocks was high. Finally, I conclude that it is important to consider mean reversion of shocks when constructing life-cycle consumption models.     

A COMPARISON OF ALTERNATIVE MEASURES OF ECONOMIC WELL-BEING FOR GERMANY AND THE UNITED STATES

This paper, using six waves of data (1984-89) from the United States Panel Study of Income Dynamics (PSID) and the German Socio-Economic Panel (GSOEP), compares economic well-being using single year income, multi-year income, and wealth as measures. We find inequality to be greater in the United States than in Germany regardless of the measure used. However, the relative degree of inequality varies across measures. When we disaggregate our data by age and gender categories, in general we find greater inequality in the United States, but wealth inequality among older Germans is greater than it is among older Americans.     

Thomas Piketty's Historical Macroeconomics: A Critical Analysis

There has been a great deal of interest in the data on income and wealth inequality collected by Thomas Piketty. This paper does not question that data; rather, it questions the framework of Piketty's analysis, both theoretically and empirically—namely the alleged upward tendency of the ratio of wealth to national income and the rise of wealth inequality. First, in the mechanism put forward, wealth can only grow as a result of savings, thus ruling out any form of price effect (as in urban land). Second, Piketty’s second law defines an asymptotical trajectory, in which variables grow in parallel, something incompatible with the rise of the ratio between two variables. In addition, Piketty’s model does not match data for the USA. The historical profile of the ratio of wealth/national income is actually the inverted image of the productivity of capital (the ratio of output/firms’ fixed capital). Doubts are also expressed concerning the dramatic fall of the ratio of wealth/national income in Europe around World War I.     

Capabilities and (Missed) Opportunity for Women’s Entrepreneurship in Kuwait

Abstract

Kuwait offers a powerful context for investigating the entrepreneurial cultures developing in Gulf countries in response to the concurrent trends of pursuing economic diversification and efficiency, and the constraints posed by cultural narratives that maintain inequality between the sexes. Bringing a capabilities lens to the analysis of entrepreneurship promotion programs means shifting from a focus on meeting basic human needs to ensuring capabilities development. To begin, we discuss the capabilities approach to entrepreneurship with a focus on the necessity/opportunity classification. Next, we review the entrepreneurship ecosystem in Kuwait, including its focus on opportunity entrepreneurs and the legal, economic, and sociocultural framework in which they operate. After considering the impact of Kuwait’s gender-blind approach on women’s entrepreneurship, we conclude with some suggestions for strengthening Kuwait’s potential for capability expansion through entrepreneurship.     

A natural experiment of the effect of advertising on sales: the SASOL case

China's so-called ‘reform and opening up’ policy (Gai Ge Kai Fang), implemented nearly 30 years ago, has led to tremendous economic development. China's nominal Gross Domestic Product (GDP) was 3.25 trillion US dollars in 2007, making it the fourth largest economy in the world. At the same time, income inequality has become quite skewed in China, inviting considerable criticism. Moreover, the trend towards greater income inequality persists. Of particular public policy relevance is the effect of income inequality on health disparities in China, particularly for low-income households. This study addresses this issue using a longitudinal dataset from the China Health and Nutrition Survey (CHNS) over the period 1997 to 2006. Our central finding is that income inequality affects health differently by socioeconomic status: income inequality harms individual health among low income households by more than it does among high income households. More specifically, health is more adversely affected by greater income inequality for households with low incomes. China's central government is committed to making further investments in the health care system. As part of that effort, attention should be directed at low income households to reduce health inequality, possibly providing them with a health insurance safety net similar to Medicaid in USA.     

Estimating the marginal propensity to consume using the distributions of income,consumption, and wealth

Studies of economic inequality almost always separately examine income, consumption, and wealth inequality, and hence, miss the important synergy amongst the three measures explicit in the life-cycle budget constraint. These joint distributions, however, are important in evaluating macroeconomic impacts of changes in income because the response may differ across the wealth distribution. This heterogeneity in the response to income changes can have significant impact on the effectiveness of government fiscal policy. Using the Panel Study of Income Dynamics from 1999–2013, we examine how the marginal propensity to consume (MPC) differs across the wealth distribution. We find that the MPC is lower at higher wealth quintiles, indicating that low wealth households cannot smooth consumption as much as other households. This implies that increasing wealth inequality likely reduces aggregate consumption, which, in turn, could limit economic growth.     

中国城镇居民的财产分配

本文利用住户调查数据对 1 995年的中国城镇住户的财产分配状况进行了经验分析 ,包括对财产分配的差距进行了测量 ,影响财产分配的主要因素进行了估计 ,并将中国城镇住户的财产分配进行了国际比较。与大部分市场经济国家相比 ,中国城镇居民之间财产分配的差距并不大。但是中国城镇居民的财产分配差距超过了收入分配差距 ,而且从长期趋势上可能会出现加速扩大的势头。中国城镇居民之间财产分配的不均等并非全是经济市场化过程的结果。一些不均等的原因来自于传统计划经济遗留下来的分配模式。本文还发现 ,在户主一生中财产积累出现了两个高峰值。这是与正统的生命周期理论不同的。本文还表明了财产分配和收入分配之间的较强相关性。     

Economic inequality in Spain: the european community household panel dataset

This article uses data from the 1998 European Community Household Panel to study economic inequality in Spain. It reports data on the Spanish distributions of income, labor income, and capital income, and on related features of inequality, such as age, employment status, educational attainment, and marital status. It also reports data on the income mobility of Spanish households, and data on income inequality in other European countries and in the US. We find that income, earnings, and, especially, capital income are very unequally distributed in Spain and that economic inequality in Spain is well above the European average.     

区域创业比较:基于江苏样本企业的实证研究

本文基于江苏创业活动的问卷调研数据,从区域社会资本差异、区域创业能力差异、区域创业战略差异、区域创业主体差异4个方面进行定量比较。比较发现:苏南苏北地区创业者的社会资本结构存在显著差异,不同社会资本类别对创业与创业发展的重要度也不一样,而且苏南地区创业者社会资本的冗余高于苏北地区,但在社会资本的利用方式上差异不明显。苏南地区的区域创业能力稍好于苏北,但均只处于中等水平。苏南苏北地区在创业方式、创业行业、创业规模与市场定位层面均存在有明显差异,苏南地区创业者更多的选择了独立创业,在行业上更多的进入了服务性行业,新创企业的规模整体上小于苏北,而且更多的定位于国内市场。从创业主体属性差异比较看,苏南创业者中女性比例高于苏北,创业者平均年龄低于苏北,平均受教育水平明显高于苏北,异地创业者所占比例明显高于苏北。     

Endogenous Persistent Occupations and Inequality

The paper argues that human capital is the leading force determining inequality persistence. We show that, in a context of a perfect capital market where agents inherit human capital and wealth, it is the inherited human capital level that determines agents' occupational choice and investment. The critical assumption is that the entrepreneurial activity is of increasing returns to scale. This creates a higher profile of revenue for entrepreneurs. Although every agent can choose to become an entrepreneur, and although there is no barrier of entry in entrepreneurship, only those who receive a relatively higher human capital will do so. Agents whose inherited human capital is lower than the human capital threshold, endogenously determined, are better off becoming workers. Even in the context of a perfect capital market, which allows less endowed agents to borrow and invest in education, it turns out that the agents who inherit a low level of human capital bear a greater utility cost in their education investment. So they are better off investing less in education, lending their savings, and working as workers. As a result, agents' occupational choice depends on the intergenerational transmission of human capital. In the long run, the population is polarized into the rich entrepreneurs and the poor workers, magnifying inequality persistence in human capital level and revenue.     

中国农村家庭脆弱性的测量与分解

在理论层面上,本文在效用理论基础上对脆弱性进行了定义并对其分解以反映消费的不平等性和波动性。在实证分析层面上,本文使用CFPS(Chinese Family Panel Studies)数据对中国农村家庭脆弱性进行量化与分解。量化结果表明多数农村家庭是脆弱的;分解结果发现相对于村间不平等,村内不平等是脆弱性的主要组成部分。家庭脆弱性及五个分解部分对家庭特征集合变量的OLS回归结果表明:增加农村家庭收入是降低其脆弱性最有效的手段;提高劳动力平均受教育水平能够有效降低家庭脆弱性,但大学教育支出会显著提高家庭的脆弱性水平,这较好地解释了目前出现的农村籍高中生弃考大学这一现象;新型农村合作医疗和社会保险能有效降低农村家庭脆弱性;社会资本、更大的家庭规模和更高的劳动力占比有利于降低家庭脆弱性,这能较好地解释中国农村家庭频繁的送礼活动以及倾向于组建大家庭的现象。     

THE DISTRIBUTION OF WEALTH IN URBAN CHINA AND IN CHINA AS A WHOLE IN 1995

The composition, inequality and determinants of wealth among households in urban China in 1995 are studied. In addition, we compare the wealth distribution in urban China with the wealth distribution in rural China and present the first estimates of inequality in the distribution of household wealth in China as a whole. The results show that housing wealth makes up a large part of net worth in urban China. Most urban Chinese households keep a bank account; debts are unusual. A household's net worth is strongly related to its income and location. Net worth is more unequally distributed among urban households than among rural households. However, compared to the situation in most industrialized countries, net worth in urban China and in China as a whole appear to be rather equally distributed.