Changes in Employment and Hours,and Family Income Inequality in the United.States, 1969–1989

This paper estimates how much changes in employment and hours worked for family heads and spouses contributed to the rise in the family income inequality between 1969 and 1989. Change in labor market activity of family heads accounts for half of the increase in the income gap between the top and bottom 10th families. The effect of change in work effort on the income inequality is considerably weaker where four-fifths of families in the middle of income distribution are considered. This result is robust to changes in the selection of the population. The rise in the inequality of labor market activity occurred largely within families headed by prime-age men. The rise in the percentage of families headed by female and the decline in employment rate for older family heads are relatively minor factors. [J2, E2, N3]     

A European Geopolitical Subject in the Making? EU,Russia and the Kaliningrad Question

This article engages the recent studies that have treated the European Union (EU) in geopolitical terms, as an empire engaged with enlargement. The article introduces the meta-concept of geopolitical subjectivity. This meta-concept enables us to situate such imperial interpretations of the EU into a theoretically informed, comparative setting. The meta-concept is defined as goal-oriented ordering of territories and political spaces, extending from one's own sphere of sovereign rule to broader regional contexts. It is used to study the EU-Russian interaction in creating order to the Kaliningrad region that is set to become a Russian enclave/exclave within the enlarged EU. The article concludes by arguing that in this case, the EU's geopolitical subjectivity is constituted more strongly by Russia's recognition of this status than by the EU's own identity and interest projects.     

Income–happiness paradox in Australia: Testing the theories of adaptation and social comparison

This paper investigates whether the theories of adaptation and social comparison can explain the income–happiness puzzle (Easterlin Paradox) in Australia. Alternative specifications of happiness model that incorporate adaption, comparison incomes and other relevant variables are estimated using the panel data from the five waves (2001–2005) of the Household Income and Labour Dynamics in Australia (HILDA) surveys. The statistical tests provide no support for the adaptation effect on happiness. However, we find strong support for the theory of social comparison as an explanation for the happiness paradox. An increase in peer group income hurts the poor more than the rich, suggesting that a redistribution of income is likely to enhance the overall wellbeing of society. A sensitivity analysis is conducted to check the robustness of results.     

Regional Income Inequality in the United States: 1969–2017

Abstract:

This article contains an analysis of the nation’s 100 lowest and 100 highest per capita income counties in the United States from 1969 to 2017. The low-income counties are very different from the high-income counties. Compared to the high-income counties, the low-income counties are generally small, mainly rural, and geographically concentrated. The people of the low-income counties are also more likely to be from minority groups than the people of either the nation or the high-income counties. Despite major institutional and technological change, both groups of counties exhibit considerable stability over the last half century. A reasonable assertion from the analysis is that the nature of regional income inequality is not likely to change substantially over the next half-century.     

Changes in Global Trade Patterns and Women's Employment in Manufacturing, 1995–2011

This study investigates the feminization and defeminization trends in manufacturing employment in thirty countries from 1995 to 2011. Utilizing two separate methods, structural decomposition analysis (SDA) and factor content analysis (FCA), the study identifies the major industries and trade partners behind the structural shifts in trade that have induced changes in employment and thus in the rates of women’s employment. The findings highlight that, as a general trend, defeminization in manufacturing has persisted in the Global North, led by a negative trade impact in low-technology industries. In the Global South, feminization and defeminization trends are not as straightforward. Despite positive changes in women’s share of employment in medium-high- and high-technology industries, negative gender bias effects of trade changes are found particularly in high-technology industries, where occupations are notably gendered.     

Banking,currency, stock market and debt crises in Spain, 1850–1995

What type of crisis is generated when debt increases? We extend the literature by framework by introducing currency and stock market crises in the analysis. We apply our proposal to the case of Spain, since this is a country that has experienced a very important amount of financial crises from the nineteenth century onwards. We find the same results as the previous literature for the determinants of banking and debt crises but substituting external and public debt with perpetual debt and where perpetual debt has a less important role than crises in the private sector. Moreover, we find evidence in favour of the hypothesis that currency crises depend strongly and positively on financial centre crises and negatively and mildly on perpetual debt. We justify the negative relalionship due to an inflation tax. We also find evidence in favour of the hypothesis that stock market crises depend only positively and strongly on financial centre crises.     

Policy,Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?

Isolating the impact of policy, demographic shifts, and market volatility on changes in income inequality is of great interest to policymakers. However, such estimation can be difficult due to the complex interactions and evolutions in the social and economic environment. Through an extended decomposition framework, this paper estimates the effect of four main components (policy, demography, market income and other factors) on the year-over-year changes in income inequality in Australia between 2002 and 2016. This was a period marked by substantial policy, population, and economic shifts due to factors such as the mining boom, the global financial crisis and increasing immigration. The framework also incorporates a flexible non-parametric market income model which captures demand-side shock better than a standard parametric model. Our results suggest that market income was the primary driver of income inequality for all segments of the income distribution in Australia over the past 15 years. Policy factors, moreover, have had the largest net impact on reducing inequality overall, especially for lower income earners.     

International factor mobility,environmental pollution and skilled–unskilled wage inequality in developing countries

This paper establishes a static three-sector general equilibrium model by accommodating environmental pollution to investigate the impact exerted by skilled immigrants and foreign direct investment on the skilled–unskilled wage inequality. Environment is treated as an input for agricultural production. The production process of the urban low-skill sector generates environmental pollution, which deteriorates the rural environment and thereby influences agricultural production. The present paper highlights the role of environmental pollution in the determination of the skilled–unskilled wage inequality due to skilled immigrants and foreign direct investment.     

Functional distribution of income,aggregate demand,and economic growth in the Chinese economy, 1978–2007

This paper seeks to analyse the relationship between the functional distribution of income, aggregate demand and growth in the Chinese reform economy. For this purpose, the Bhaduri-Marglin Model is used to indicate the theoretical possibility of both profit-led and wage-led growth regimes. Previously, the principal literature on the evolution of factor shares in China was reviewed. The statistical series for the period 1978–2007 are reconstructed to carry out our analysis of the relations between capital share and investment, on one hand, and labour share and consumption, on the other. Supported by empirical analysis and the model estimations, it is argued that Chinese growth has been profit-driven. Finally, the implications are presented concerning Chinese economic prospects.     

Factor mobility and skilled–unskilled wage inequality in the presence of internationally traded product varieties

Most existing studies examine the issue of skilled–unskilled wage inequality by using models that are relevant only in the long-run. In addition, studies that utilise product variety models assume that varieties of producer services are non-traded. Using a product variety model, this paper examines the issue of the skilled–unskilled wage inequality when producer services are internationally traded. The paper shows that, irrespective of the size of income share of capital, inflow of capital (which can also be interpreted as foreign direct investment) has no effect on skilled–unskilled wage inequality in the short-run. However, in the long-run, inflow of capital can decrease the skilled–unskilled wage inequality. An increase in the price of the agricultural good can decrease the skilled–unskilled wage inequality in the short-run.     

Parameter estimates comparison of earnings functions in the PSID and CPS data, 1976–2007

Comparing earnings equations in the Panel Study of Income Dynamics (PSID) and the Current Population Survey, we find that the PSID considerably underestimates the returns to education during the 1992–2007 period. Non-random selection in the PSID sample appears to be the reason.     

The Evolution of Income Composition Inequality in Italy, 1989–2016

We study the evolution of inequality in income composition in terms of capital and labor income in Italy between 1989 and 2016. We document a rise in the share of capital income accruing to the bottom of the distribution, while the top of the distribution increases its share of labor income. This implies a falling degree of income composition inequality in the period considered and a weaker relationship between the functional and personal distribution of income in Italy. This result is robust to various specifications of self-employment income; nonetheless, it hinges crucially on the treatment of rental incomes. While the dynamics of imputed rents has brought about a more equitable distribution of capital incomes across the income distribution, that of actual rents has led to higher concentration of capital incomes at the top in the decade preceding the outbreak of the financial crisis. Finally, we conceptualize a rule of thumb for policy makers seeking to reduce income inequality in the long run.     

Saving,investment and capital mobility in EU member countries: a panel data analysis of the Feldstein–Horioka puzzle

ABSTRACT

In this paper, we reexamine the long-standing and puzzling correlation between national saving and investment in 14 European Union (EU) countries. We employ a panel data set for the period 1970–2015 and we apply recently developed maximum likelihood panel cointegration methodologies. We find that there exists a long-run relationship between savings and investment for this panel of EU member countries, with the savings retention coefficient being low in magnitude but statistically different than zero. Therefore, we argue that there is weak evidence in favour of the Feldstein–Horioka puzzle and that the long-run international solvency condition is maintained in most of these countries. This evidence implies a moderate degree of capital mobility which is consistent with the macroeconomic experience of these countries during the period under investigation.     

Purchasing Power Parity: A Time Series Analysis of the U.S. and Mexico, 1995–2007

This paper presents indirect evidence that absolute purchasing power parity (PPP) may hold in the long-run between Mexico and the U.S., but due to data limitations, the relationship could not be tested directly. Thus it is not clear if absolute PPP holds in the long run between the U.S. and Mexico. Given that relative PPP is a necessary, but not sufficient, condition for absolute PPP to hold, this study tests the relationship between the change in the log of the exchange rate, and the changes in the log of the U.S. producer price index (PPI) and the Mexican PPI. Here, the absence of relative PPP would indicate that absolute PPP could not hold. Given that all the relevant variables in first difference log are stationary, PPP in its relative form holds and OLS can be applied directly in a VAR model setting, viz., treating all variables initially as potentially endogenous. The estimates indicate one-way Granger causality from the percentage change in the exchange rate to the percentage change in the Mexican price level, which is not an implausible result for an emerging nation such as Mexico which imports a significant fraction of (dollar denominated) intermediate products and capital inputs.     

Entrepreneurship and limited access: rethinking business–state relations in Russia

Predominant theories of the Russian political economy explain the vulnerability of independent business to the state, but they do not adequately explain why businesses survive and some thrive. Recent empirical studies of business conditions have not helped in this regard because most focus on ascertaining entrepreneurs’ attitudes rather than observing their behaviour. During ethnographic fieldwork within a Siberian business, the author found that informants were pessimistic about business conditions, but that they did not expect any improvement and had developed pragmatic approaches to securing their position in the local market and competencies required to generate a profit. Their relations with dominant elites were, moreover, cordial rather than antagonistic. To account for these findings, the author draws on Douglass C. North et al.’s Limited Access Order theory and Aleksei Yurchak’s concept of ‘entrepreneurial governmentality’, and seeks to reconceptualise the relationship between business and the state.     

Income,inequality, and the stability of democracy — Another look at the Lipset hypothesis

This paper studies the endogenous emergence of political regimes, in particular democracy, oligarchy and mass dictatorship, in societies in which productive resources are distributed unequally and institutions do not ensure political commitments. The political regime is shown to depend not only on income levels, but also, in particular, on resource inequality. The main results imply that under any economic environment a distribution of resources exists such that democracy is the political outcome. This distribution is independent of the particular income level if the income share generated by the poor is sufficiently large. On the other hand, there are distributions of resources for which democracy is infeasible in equilibrium regardless of the level of economic development. The model also delivers results on the stability of democracy. Variations in inequality across several dimensions due to unbalanced technological change, immigration or changes in the demographic structure affect the scope for democracy or may even lead to its breakdown. Among other historical examples, the results are consistent with the different political regimes that emerged in Germany after its unification in 1871.     

GROWING LIKE SPAIN: 1995–2007

Measured total factor productivity (TFP) fell in Spain during the boom years of 1995–2007. Using administrative data from the quasi-universe of firms, we show that there was an increase in misallocation, which was more severe in sectors where connections with public officials are more important for business success. We write and estimate a simple model of cronyism in which heterogeneous firms invest in political connections. Our quantitative exercise concludes that the institutional decline over this period costed 1.9% growth in TFP per year and a 0.8% annual increase in the resources spent by firms in establishing political connections.