Ownership and earnings inequality in urban China

Along with advances in urban state-owned enterprise reform, fast growth of private sector and changes in the wage structure, earnings inequality in urban China has been increasing. Using data from the 1988 and 2007 waves of the urban household survey conducted by China Household Income Project, this paper attempts to examine the impact of the change in ownership structure on earnings distribution in urban China. We find that developing non-state-owned enterprises (nonSOEs) or privatization of state-owned enterprises (SOEs) enlarge earnings inequality, but the difference in earnings level between the two sectors is small. Although workers in SOEs receive higher income than in nonSOEs, the difference is more caused by endowment difference rather than coefficient differences. Introducing market power to wage determination system is more influential to the rising earnings inequality which leads more rewards on working experience and educational attainment.     

Consumption,income and earnings inequality in Britain

This paper presents an analysis of the trends in inequality across income, earnings and consumption in Britain since 1978. It documents the episodic nature of inequality growth over this period largely dominated by the inequality ‘boom’ in earnings inequality of the 1980s. It builds a consistent picture across these key measures of inequality to provide a coherent link between the microeconomic and macroeconomic analysis of the evolution of inequality.     

Market volatility and inequality in earnings: experimental evidence

We analyze the volatility of actions in experimental oligopoly markets. Can the volatility, measured as the total variation in actions, be predicted by inequality in earnings of the previous period? We examine two types of differentiated markets, Cournot and Bertrand, and two informational conditions. We find for both types of markets and regardless of the information available to firms that inequality in earnings is a major factor for explaining volatility. The more equal profits are distributed, the less volatility is observed.     

Increasing dispersion of skills and rising earnings inequality

In recent decades many countries have simultaneously liberalized their trading regimes and expanded their education systems. The theoretical effect of these regime shifts on the wage differential between skilled and unskilled workers is ambiguous. On the one hand, openness to trade causes demand shifts in the labor market which may widen or narrow the differential. This result depends on whether the unskilled wage is depressed, as in the case of importing countries, or raised, as in the case of exporting countries. On the other hand, an increased supply of more educated workers reduces their wages and narrows the skill wage gap. In this study of the labor market of Hong Kong, we document that recent changes in response to the trade liberalization of Mainland China and expanded access to education have increased the earnings differential between skilled and unskilled workers. Using detailed census data, we argue that the main reason for this outcome is the widened dispersion of skills across the earnings distribution, resulting from demand and supply shifts in the labor market caused by trade openness and expanded access to higher education.     

Gender earnings inequality in the service and manufacturing industries in the U.S.

This paper compares earnings inequality between women and men in a growing sector of the U.S. economy – the service sector, and a shrinking sector – manufacturing. We examine the hypothesis that deindustrialization will reduce inequality, and find that the absolute magnitude of the gender earnings gap is, in fact, smaller in the service sector. Decomposition analysis is used to partition the gender earnings gap into three parts: (1) earnings differences due to differences in mean characteristics – such as education and experience; (2) earnings differences due to preferential treatment of men; and (3) earnings differences due to disadvantageous treatment of women. The latter two constitute estimates of gender discrimination. The results of this study suggest that, ceteris paribus, deirndustrialization will likely reduce the gender gap in hourly earnings. However, this will come at the cost of lower earnings for both males and females, with the drop in earnings being particularly large for males. While deindustrialization is predicted to reduce the absolute magnitude of male-female earnings inequality, evidence suggests that gender discrimination will persist – discrimination explains about 60 percent of the gender wage gap in both the service and the manufacturing sectors.     

Increasing earnings inequality and the gender pay gap in Canada: Prospects for convergence

This paper retraces the evolution of Canadian women's labour force participation and of the gender earnings ratio across the generations to understand better the prospects for gender convergence in pay. Using data from the public use Labour Force Surveys (LFS) and administrative annual earnings data from the Longitudinal Worker Files (LWF), the paper assesses the role of increasing top earnings inequality in the persistence of the gender pay gap. Having identified a growing role for the under‐representation of women among top earners, the paper then performs an evaluation and critical analysis of existing gender equality policies, centred on horizontal occupational gender segregation, and discusses alternative policies for the future.     

What caused earnings inequality to increase in Canada during the 1980s?

While broad consensus exists that earnings inequality increasedin Canada during the 1980s, as in other industrialised countries,there is little agreement about the causes. The main contributionof this paper is the simultaneous, empirical examination ofeight hypotheses of increased earnings inequality, using multivariateregression analysis, namely: the decline in unionisation, minimumwages and industrialisation, as well as the increase in unemployment,trade, relative supply of university-educated workers and relativesupply of female workers, and technological change. In Canada,during the 1980s, employment and unionisation factors stronglyand consistently explain the increase in annual earnings andhourly wage-rate inequality, after controlling for six otherpossible determinants. The results also point to the importanceof considering a multidimensional explanation of increased earningsinequality and avoiding generalisations across gender, incomeand work status groups.     

Ethnic enclaves and immigrant earnings growth

Abstract.  The impact of living in an ethnic enclave on earnings growth of immigrants in Canada is examined using the 1981–2001 Censuses. Consistent with U.S. findings, enclaves are found to have a negative impact on the earnings growth of male immigrants. A negative impact is also found for female immigrants. Living in an enclave was found to be particularly harmful for individuals immigrating as adults, especially for females, but did not affect immigrants who arrived at a young age. Enclaves had a more negative impact on high-skilled male immigrants, especially if they had received the bulk of their education outside Canada. Enclaves were also found to hinder language skills.     

Cohort patterns in Canadian earnings: assessing the role of skill premia in inequality trends

In this paper we document the pattern of change in age-earnings profiles across cohorts and evaluate its implications. Using synthetic cohorts from the survey of Consumer Finances over the period 1971 to 1993, wwe show that the age-earnings profiles of Canadian men have been deteriorating for more recentcohorts in comparison with older cohorts. We find this pattern for both high school and university educated workers. In no case do we find evidence that the return to gaining experience has been increasing over time, nor do we find increased within-cohort dispersion of earnings. We view these findings as conflicting with the hypothesis that increased skill premia largely explain the observed increase in dispersion of male weekly earnings. JEL Classification: J31, O33
Ce mémoire documente le pattern de changements dans les relations âges-gains d'une cohorte à l'autre, et en analyse les implications. Utilisant des cohortes synthétiques pour la période 1971–93, on montre que les profils âges-gains des hommes au Canada se sont détériorés dans les cohortes les plus récentes. On ne trouve pas de résultats qui montreraient que le rendement sur l'expérience accumulée s'est accru dans le temps ou qu'il y a dispersion accrue des gains à l'intérieur des cohortes. Les auteurs suggèrent que ces résultats contredisent l'hypothèse que des primes accrues pour les habiletés expliqueraient l'accroissement qu'on a observé dans la dispersion des gains des hommes au Canada.     

Earnings dynamics of men and women in Finland: permanent inequality versus earnings instability

I decompose the earnings variance of Finnish male and female workers into its permanent and transitory components using the approach of Baker (J Labor Econ,15:338–375, 1997) and Haider (J Labor Econ, 19:799–836, 2001) in the spirit of scientific replication. I find that the increasing earnings inequality of men and women is driven by both the transitory and permanent components of earnings. In addition, I find considerable differences in the earnings dynamics of men and women, that have been largely neglected in previous studies of earnings dynamics. The inequality among men is dominated by the permanent component. Conversely, permanent and transitory components are of comparable magnitudes to women. As a corollary, men experience more stable income paths but display larger permanent earnings differences. Women, on the other hand, face more unstable earnings profiles but show smaller permanent differences in earnings.     

Income inequality and economic growth

Despite the extensive existing literature on income inequality and economic growth, there remains considerable disagreement on the effect of inequality on economic growth. Existing literatures find either a positive or a negative relationship. In this paper, we attempt to theoretically examine that relationship with a stochastic optimal growth model. We make the disagreement clear within a single model. We conclude (i) that both are possible – that is, higher inequality can retard growth in the early stage of economic development, and can encourage growth in a near steady state, (ii) that income redistribution by high income tax does not always reduce income inequality. Income inequality can be reduced by higher income tax in a near steady state, but it cannot be reduced in the early stage of economic development, and (iii) that two government polices – rapid economic growth and low income inequality – can be achieved by low income tax in the early stage of economic development, but both cannot be achieved simultaneously in a near steady state.     

Unfair inequality and growth*

Fighting against economic inequality is one fundamental social goal in the agendas of most governments. However, recent studies highlight that people actually prefer unequal societies, as they accept inequality generated by an individual's effort and wish to reduce only unfair inequality (generated by factors beyond an individual's control). This distinction might help to explain the fundamental unsolved question about whether inequality is good or bad for growth: unfair inequality (UI) could be growth-deterring, while fair inequality (FI) might be growth-enhancing. We derive a reduced-form growth equation from a stylized overlapping-generations model with human capital that includes FI, UI, and poverty. Then, using an instrumental variable approach, we show for alternative samples and inequality measures at the worldwide level that the estimated coefficient associated with UI is always negative, while the coefficient of total inequality increases when UI is included in the regression. Moreover, we find that poverty mediates this relationship because the higher the poverty rate, the smaller the impact of either type of inequality on growth.     

Economic growth and the environment: Theory and facts

Several recent papers propose competing theoretical explanations for the empirical observation of an inverted U-shape relationship between environmental degradation and per-capita income. We propose the following test of the theory: calibrate a theoretical model to an already developed economy using information unrelated to the pollution–income curve. Then simulate the model starting from a less developed initial condition and compare the predicted pollution–income relationship with that in the data. Our results are mixed. Some support exists for the theory that the inverted U-shape results from a corner solution in which less developed countries do not abate pollution. However, because we find abatement is relatively inexpensive, the model predicts pollution peaks at a level of per capita income much lower than that observed in our U.S. data. For some pollutants, we find evidence of a structural break in preferences in the early 1970s. When the structural break is added, the model performs better for two of three pollutants.     

Poverty,inequality and growth in Albania

This article studies the distribution of well‐being and, specifically, the degree of poverty and deprivation in Albania, in the years 2002 and 2005, using Living Standard Measurement Surveys (LSMS). The distribution analysis is performed by applying both one‐dimensional and multidimensional approaches, in particular to better examine the link between economic growth, inequality and poverty in Albania. Furthermore, by estimating a non‐monetary indicator, as proposed by Bossert et al. ( 2007 ), and a nonlinear principal component model together with a probit model, the paper focuses on the multidimensional measures of poverty to address the relationship between poverty and socio‐economic factors. Our evidence shows that absolute poverty decreased from 2002 to 2005 while national relative poverty increased; economic growth reduced poverty in Albania over the observed period; and living in rural and mountain areas, being female, poorly educated and with a large family increased the probability of suffering from deprivation.     

Magnitude and evolution of gender and race contributions to earnings inequality across US regions

This paper studies individual characteristics of earnings inequality within the population of blacks and whites in the United States over the period 2005–2017. Beyond education and age serving as a proxy for professional experience, applying a new Shapley income decomposition methodology enables us to isolate and measure two discriminative factors in earnings differences: race and gender. We show that these two factors explain a significant share of total earnings inequality, as defined by the Gini index, for all the geographical administrative divisions used. Whatever the division, the share of earnings inequality associated with gender greatly exceeds that of race. While gender earnings inequality has fallen over time, inequality associated with race has tended to increase since 2010 and is stronger in the Southeast of the country.     

Land inequality and the transition to modern growth

Can the initial distribution of land, in a country's early history, affect its subsequent economic development? In this paper, I show that when land ownership is sufficiently concentrated, the landed elite will lobby the government to raise barriers to industrialization in order to protect its rents in the rural economy. I develop a small open economy model in which barriers take the form of tariffs on the imports of intermediate inputs used in industry. Such tariffs can affect both the timing and the pace of industrialization. The quantitative application of the theory is motivated by an important question in economic history: why did Argentina not replicate Canadian economic success, despite reasonable expectations to the contrary in the late 19th century? I provide evidence that Argentina had a markedly higher inequality in land ownership than Canada. Taking as given the observed differences in land distributions in the early 20th century, the model produces differences in equilibrium tariffs similar to the ones observed at the time, and the ones required to account for the Canadian–Argentine income gap until 1950. Over time however, as land becomes unimportant in production, land inequality ceases to be a source of policy disparities and income gaps.     

Behind rising inequality and falling growth

This paper investigates why the upsurge of top income shares has coincided with economic slowdowns in the US since the late 1970s. I argue that a fast-growing unearned income from ‘wealth residual’ – the unexplained increase in wealth that is not accompanied by any increase in real output – lies behind them. To support this hypothesis, I measure wealth residual from the national accounts and associated statistics, and then perform a set of panel regressions using a comprehensive panel dataset of the US at the state level. The estimation results demonstrate that the rapid growth of wealth residual during the last four decades has contributed to a co-evolution of fast-growing inequality and falling growth.     

Redistributive policy,inequality and growth

Does redistribution increase inequality? Is inequality harmful for growth? Both questions have recently been addressed in a number of single-tax models. In this paper, I examine the relationship between policy, growth and inequality when income and inherited wealth can be taxed at different rates. In the model, parents accumulate human capital and a return-bearing, storable good in order to increase the quality of their children. Inequality arises because the learning ability of children is stochastic. Redistributive labor income taxation has a negative impact on short- and long-run growth while taxation of inherited stocks increases growth. Effects of both taxes on income inequality are ambiguous. A switch from income to inheritance taxation may increase average utility of all generations involved. I calculate a structure-induced equilibrium of the political process by means of a stochastic simulation of the model. In the short run initial wealth-inequality can stimulate growth, while initial inequality of the endowment with human capital is harmful for growth.     

Demography, growth, and inequality

We extend the single-sector endogenous growth model to allow for a general demographic structure. The model shows that due to the “generational turnover term,” the equilibrium growth rate is less than that of a representative agent model. We find the local dynamics about the balanced growth path (bgp) to be unstable, implying that the bgp is the only viable equilibrium. Using numerical simulations, we analyze how economic consequences of a change in the population growth rate differ, depending on the source of the demographic change. In addition, we analyze the relationship between changes in the demographic structure and what we call the “natural rate of wealth inequality”. Finally, we use our model to study how the demographic transition experienced by the United States has affected the economic growth rate and the degree of wealth inequality.