CORRUPTION AND INCOME INEQUALITY IN THE UNITED STATES

In this study we analyze the effects of corruption on income inequality. Our analysis advances the existing literature in three ways. First, instead of using one of the corruption indices assembled by various investment risk services, we use an objective measure of corruption: the number of public officials convicted in a state for crimes related to corruption. Second, we minimize the problems which are likely to arise because of data incomparability by examining the differences in income inequality across the United States. Finally, we exploit both time series and cross‐sectional variation in the data. We find robust evidence that an increase in corruption increases income inequality. (JEL D31, D73, I32)     

OCCUPATIONAL EARNINGS BEHAVIOR AND THE INEQUALITY OF EARNINGS BY SEX AND RACE IN THE UNITED STATES*

This paper examines differences in earnings by occupations, and within occupations by sex and by race, on the basis of the 1/100 Public Use Samples of the 1960 and 1970 U.S. Population Censuses. It employs interval analysis to establish 32 categories of occupations with similar characteristics. Little relation was found between mean earnings of occupational groups and the degree of earnings inequality within them. When the figures are examined by sex, it was found that men, on average, earned over twice as much as women in both years, but women's earnings were more unequally distributed (as measured by the Gini coefficient). Women are concentrated in the traditional “female” occupations, which tend to be those at the bottom of the earnings scale, and men have a monopoly of the higher paid occupations. But mean earnings for men exceeded those for women in all occupational groups except one, even in the primarily female occupations. Standardizing first for occupational distribution and then for earnings by occupation, it was found that earnings differences between males and females within occupation had a greater impact on the overall male-female earnings ratio than did differences in occupational distribution by sex. In contrast, when the figures are examined by race, the change in occupational distribution (primarily the movement of blacks out of farming and of blacks and Spanish speakers out of personal services) was the major factor. There was also a considerable degree of earnings inequality within demographic groups. The degree of inequality was in the main reduced when the demographic groups were subdivided into occupations, but it was still substantial. Additional factors like time worked, schooling, and experience must be taken into consideration in understanding this phenomenon.     

THE GROWTH OF FAMILY EARNINGS INEQUALITY IN CANADA, 1980–2005

In this study we document recent trends in family earnings inequality using data from the Canadian Census and provide insight into the various factors that drive changes in the family earnings distribution. Over the period 1980–95 we observe substantial increases in family earnings inequality. In contrast, we find that some decrease in inequality occurred over the period 1995–2005 although the earnings of the richest 1 percent of families increased substantially. We use semi‐parametric decomposition methods to show that increases in the employment rates of men and women, increases in their educational attainment, and decreases in assortative mating tended to have equalizing effects on the family earnings distribution. We also show that increases in the returns to higher education and increases in the proportion of single individuals as well as lone‐parent families drove increases in family earnings inequality.     

INTERSTATE INCOME INEQUALITY IN THE UNITED STATES: MEASUREMENT, MODELLING AND SOME CHARACTERISTICS

Five points are made in this study. First, using a well-recommended measure, interstate income inequality is reported for each year from 1950 through 1989, and its very small magnitude is pointed out along with the U-shaped profile. Second, it is shown that a simple quadratic-form model fits the data extremely well. Third, inequality indices for 1977 and 1988 are recomputed after adjusting for interstate price-level variations, and large reductions in the indices, and a virtual disappearance of the increase in inequality after 1978, are noted. Fourth, a simple decomposition shows that income changes account for most of the inequality change in each decade. Last, states that have contributed most to inequality are identified.     

SPECIALIZATION, THE INTERMEDIATE NATURE OF TRADED PRODUCTS AND THE MYTH OF IMPORT DRIVEN WAGE INEQUALITY IN THE UNITED STATES

Abstract.  Using a model that recognises the prevalent cross-country specialization in production and the intermediate nature of all traded products, I investigate the effect of observed trends in the prices of ordinary intermediate and semi-final imports on the expanding wage differential between skilled and unskilled labour in the USA. Contrary to widely accepted stylised facts, my results suggest that decreases in import prices increase both wage rates, while compressing their differential. Sources of wage dispersion are, however, found in skill-biased economy-wide dynamic processes of capital accumulation and technical change.     

RELIABILITY OF THE QUARTERLY NATIONAL INCOME AND PRODUCT ACCOUNTS OF THE UNITED STATES, 1947–1971*

The reliability of the quarterly national income and product (NIP) accounts of the United States is examined from several standpoints. First, possible sources of error in the quarterly NIP accounts are explored, the most important being the lack of appropriate data, seasonal adjustment errors, sampling errors and biases, and the nature of the U.S. statistical system. Next, four ways of assessing the reliability of the accounts are considered. The most weight is given to measures of revisions in early estimates of the quarterly NIP aggregates. Results of previous studies of revisions are reviewed, and a summary of a major study of revisions for the period 1947–71 is given. The other ways of assessing reliability which are examined are the effect of errors on economic policy making, analysis of the statistical discrepancy, and expert judgment on sources and methodology. The degree of accuracy is judged to be generally sufficient for the policy decisions for which the NIP estimates are used. The early estimates of a quarter's change in GNP almost always distinguish whether the ultimate estimate will be large or small and will usually distinguish whether the ultimate estimate will be larger or smaller than the preceding quarter. While the accuracy of the estimates has generally been sufficient, the accuracy for 1965 was judged insufficient by policymakers. There is some evidence that errors have been reduced over time.     

INFLATION INEQUALITY IN THE UNITED STATES

Different spending patterns across households and differences in price increases across goods and services lead to unequal levels of inflation faced by different households. In this paper we measure the degree of inequality in inflation across U.S. households for the period 1987–2000. The broad picture that emerges from our results is that over our whole sample period there are substantial differences in the inflation experiences across U.S. households. We find that the cost of living increases were generally higher for the elderly, in large part because of their health care expenditures, and that the cost of living of poor households is most sensitive to the, historically large, fluctuations in gasoline prices. Still, when looking at the whole population, we find that individual households that are confronted with high inflation in one year do not generally face high inflation in the subsequent year as well.     

GENDER WAGE DIFFERENCES IN AUSTRALIA, SWEDEN AND THE UNITED STATES

In this paper I use microdata from the Luxembourg Income Study t s investigate the contributions of industrial structure, occupational mix and personal and family characteristics to observed gender differences in wages in Australia, Sweden and the United States. A particular effort is made to analyse differences in distribution as well as level of wages. The conclusion reached is that different factors determine the wages of low- and high-wage workers. For higher-wage workers, personal and family characteristics are important explanations for wage variation. For lower-wage workers, occupation plays a more significant role.     

AN EXPLORATORY COMPARISON OF INCOME RISK IN GERMANY AND THE UNITED STATES

Using longitudinal data, 1 estimate the impact of redistribution on the welfare cost of income risk in Germany and the United States. The estimates account fully for behavior because individuals in each country have responded optimally to that country's policy. The results indicate that the welfare cost of income risk is 5.4 percent of disposable income in Germany, 8.5 percent in the U.S. Redistribution has reduced these risks from their pre-tax, pre-transfer levels by 43 percent in Germany, 21 percent in the U.S. The political importance of income security is evident in both countries, as risk relief often eliminates the net burden of redistributive taxes among middle-class households. The conclusions are robust across several models of income expectations.     

THE IMPACT OF FEMALE WORK ON FAMILY INCOME DISTRIBUTION IN THE UNITED STATES: BLACK-WHITE DIFFERENTIALS*

Using data from the 1973 National Survey of Family Growth, the present study analyzes, for blacks and whites separately, the impact of female market activity on the inequality of the income distribution among households. The family life cycle is divided into three stages, according to the presence and age of children: (1) the interval between marriage and the birth of the first child, (2) the child-rearing interval, and (3) a final period which begins when all the children have reached school age. Using the coefficient of variation as an indicator of inequality, the empirical results show that in period 1, the contribution of white working wives has a large equalizing impact, while that of their black counterparts results in a slight increase in dispersion. In the child-rearing and post child-rearing stages, the labor supply of mothers decreases family income inequality by a small amount for both black and white households. A decomposition of the squared coefficient of variation of family income is presented to aid in the interpretation of these findings.     

DRUG POLICY AND INTERGENERATIONAL INCOME MOBILITY IN THE UNITED STATES

A conviction for drug possession blocks some of the most common pathways through which individuals from low income families achieve upward economic mobility in the United States, such as access to higher education, entry‐level employment, and military service. These considerations are of growing importance because the number of drug‐related arrests have nearly quadrupled since 1980. This article estimates the effect of a conviction for drug possession on earnings mobility using a sample of individuals born between 1980 and 1984, some of the first cohorts to come of age in the context of intensive U.S. drug criminalization and enforcement. To distinguish the effect of a drug conviction from the effect of drug use or general criminality, I compare mobility among individuals with drug convictions to control groups who self‐report significant drug use and who have had interactions with the criminal justice system that did not lead to a drug conviction. I find that relative to these groups, a drug conviction reduces the probability of transitioning upward from various points in the lower half of the income distribution by 10–15 percentage points, or as much as 50%, and that these effects are substantially stronger for non‐whites than for whites. These findings suggest that a policy of decriminalizing nonviolent drug possession would substantially increase intergenerational mobility among low income populations, and this effect should be weighed alongside more conventional costs and benefits in formulating optimal drug policy. (JEL J38, J15, K42)     

"NOMINAL" AND "REAL" INTERSTATE INCOME INEQUALITY IN THE UNITED STATES: SOME ADDITIONAL EVIDENCE

Using a good inequality index, and data on personal income and cost-of-living estimates for the period 1981–90, interstate inequality in "nominal" and "real" personal income per capita is compared. Four points are noted. First, inequality in real income is smaller than that in nominal income. Second, while the nominal-income inequality shows the well-known increase over the 1980s, real-income inequality declined during the period. Third, inequality patterns in the wage and the non-wage components of income are somewhat different. Last, even the nominal-income inequality indicates a decline in the early 1990s.     

ADDRESSING THE FORCES DRIVING INEQUALITY IN THE UNITED STATES

Presentation of multiple dimensions of current inequality in the United States, with some discussion of some causes and some policy issues. (JEL D3)     

EARNINGS INEQUALITY IN GREAT BRITAIN 1975–90: THE ROLE OF AGE

This paper is concerned with the growing earnings dispersion among British men. The study is based on unit record data drawn from the New Earnings Survey. It is found that increases in inequality within age groups account for most of the rise in earnings inequality overall. Occupation too is a significant explanation of growing inequality among workers, but the major part of increased inequality within age groups remains unexplained.     

IMMIGRANT WAGE GROWTH IN THE UNITED STATES: THE ROLE OF OCCUPATIONAL UPGRADING

Immigrants to the United States routinely take jobs below their skill qualifications because of barriers to entering occupations. We use a structural model of immigrant job choice to quantify the benefits of potential policies to promote entry into suitable occupations. We estimate the model using longitudinal labor market data on immigrants to the United States. Our counterfactual results show that eliminating barriers to occupational entry would lead to only a small earnings increase for the average immigrant in our sample, but a substantial earnings increase for the most highly skilled immigrants.     

CHANGES IN CANADIAN FAMILY INCOME AND FAMILY CONSUMPTION INEQUALITY BETWEEN 1978 AND 1992

This paper uses Canadian cross-sectional income and expenditure data to examine changes in the distribution of family income and family consumption during the period 1978 to 1992. Family consumption data are analyzed because in the presence of intertemporal consumption smoothing, the cross-sectional distribution of consumption may characterize the distribution of lifetime wealth. I find that both Canadian family income inequality and Canadian family consumption inequality moved countercyclically. In addition, both Canadian family income inequality and Canadian family consumption inequality trended upward over the period; however, the change in family consumption inequality was much smaller than the change in family income inequality, suggesting that inequality in the distribution of lifetime wealth may have changed much less than is suggested by changes in the distribution of income.     

ACCRUED CAPITAL GAINS, PERSONAL INCOME AND SAVING IN THE UNITED STATES, 1948–1964

Capital gains are an important source of personal income in the United States but they are not included in the national accounts or the official estimate of personal income and saving. Individuals report their realized gains for tax purposes but the economic theorist would include both realized and accrued gains in income. National income theorists continue to debate whether capital gains should be included in income but, because of the many conceptual and statistical problems involved in estimating capital gains, no satisfactory estimates have been developed. Consequently, the debate has stayed mainly at the theoretical level. This paper deals with the methodology of estimating accrued capital gains. A simple analytical model is developed to estimate capital gains from data on market value and net acquisitions of an asset but the model can be adapted to incorporate asset prices directly. It is shown that the methods used for estimating accrued gains in the past are special cases of the model proposed in the paper. The model is then used for estimating gains accruing to individuals in the United States on their holdings of corporate stock, real estate and livestock during 1948–1964.
During this period accrued gains have amounted to roughly five times the realized gains reported for tax purposes; corporate stock and real estate are the most important sources of capital gains and corporate stock accounts for almost two-thirds of all accrued gains. The paper goes on to examine the implications of these estimates for the existing series on personal income and saving in the United States. The inclusion of accrued gains would increase the variance in the official estimates but personal saving is affected more than personal income. The paper concludes with an evaluation of these results and some suggestions for further research.     

LABOR EARNINGS AND HOUSEHOLD INCOME MOBILITY IN REUNIFIED GERMANY: A COMPARISON OF THE EASTERN AND WESTERN STATES

Using data from the German Socio-Economic Panel, we compare income mobility of persons from the eastern and western states of Germany between 1990 and 1995. We consider income mobility between consecutive years and between the first and the final year of this time period. We find that gross individual labor income mobility was much higher in the east than in the west during the first years after reunification, but that this difference has become much smaller until 1995. Changing to measures that reflect economic well-being more accurately, we observe that gross equivalent labor income mobility and net equivalent income mobility initially were also much higher in the eastern states than in the western states, but converged over time as well. This convergence has been particularly strong for net equivalent income mobility, suggesting that the social protection system has greatly reduced mobility risks associated with the transformation process in the eastern states of Germany.