HOW INCOME INEQUALITY CHANGED IN GERMANY FOLLOWING REUNIFICATION: AN EMPIRICAL ANALYSIS USING DECOMPOSABLE INEQUALITY MEASURES

This paper analyzes how inequality in Before and After Government income has changed in Germany since reunification using the 1990 through 1992 waves of the German Socio-Economic Panel. A Theil decomposable inequality index is used to measure inequality in Germany and in its eastern and western states. Massive public transfers from west to east have narrowed the east-west income gap, substantially offset the rise in income inequality from private sources, and lowered overall inequality in the western states. The net result of this policy has been a drop in After Government income inequality in Germany between 1990 and 1992.     

MEASURING EARNINGS INEQUALITY: AN ECONOMIC ANALYSIS OF THE BONFERRONI INDEX

This paper studies the economic content of the Bonferroni index. The most remarkable property of the Bonferroni index is that it overweights income transfers among the poor, and the weights are higher the lower the transfers occur on the income distribution. Hence, it is a good measure of inequality when changes in the living standards of the poor are concerned. There are many problems—especially in labor economics—that fall into this category. Using a version of the assignment model, we show that the Bonferroni index can be formulated endogenously within a mechanism featuring efficient assignment of workers to firms. This formulation is useful in evaluating the interactions between the distribution of skills and earnings inequality with a special emphasis on the lower tail of the earnings distribution. Moreover, it allows us to think about earnings inequality by separately analyzing the contribution of each economic parameter.     

MATCHING AND MARKET DESIGN: AN INTRODUCTION TO SELECTED TOPICS*

This paper provides a survey of the research in matching and market design. We discuss both basic theories and recent advances. Emphasis is placed on applications of the theory to practical problems.     

THE POLITICAL ECONOMY OF EUROPEAN MONETARY UNIFICATION: AN ANALYTICAL INTRODUCTION

European monetary unification (EMU) - the creation of a single European currency and a European Central Bank - is both an economic and a political phenomenon. Yet few studies have attempted to address simultaneously the political and economic dimensions of the process. In this introduction, we review and extend the relevant literatures. The evidence leads us to conclude that EMU is driven mainly by political rather than economic factors, although our understanding of even these political forces remains incomplete.     

THE MEASUREMENT OF INEQUALITY OF OPPORTUNITY: THEORY AND AN APPLICATION TO LATIN AMERICA

Building on the existing literature, this paper constructs a simple scalar measure of inequality of opportunity and applies it to six Latin American countries. The measure—which captures between‐group inequality when groups are defined exclusively on the basis of predetermined circumstances—is shown to yield a lower‐bound estimate of true inequality of opportunity. Absolute and relative versions of the index are defined, and alternative parametric and non‐parametric methods are employed to generate robust estimates. In the application to Latin America, we find inequality of opportunity shares ranging from one quarter to one half of total consumption inequality. An opportunity‐deprivation profile that identifies the worst‐off types in each society is also formally defined, and described for the same six countries. In three of them, 100 percent of the opportunity‐deprived were found to be indigenous or Afro‐descendants.     

INCOME INEQUALITY AND POLITICAL POLARIZATION AND FRACTURALIZATION:AN EMPIRICAL INVESTIGATION OF SOME EUROPEAN COUNTRIES

This paper investigates the relationship between economic inequality and the distribution of votes among political parties, namely political polarization and fracturalization. Economic inequality is captured by the Gini index, whereas new measures of political polarization and fracturalization are offered. This is the first paper to calculate political polarization and fracturalization indices by a methodology previously used for ethnic, religious and linguistic polarization and fracturalization. Empirical analysis uses data for 17 European countries and for three decades, 1980s, 1990s and 2000s. It is shown that increased income inequality increases political party polarization and reduces fracturalization and that political party polarization decreases with increased GDP per capita.     

THE INTERPLAY OF INEQUALITY AND REFERENCE DEPENDENCE WITH TRUST AN EXPERIMENTAL STUDY

Using a canonical trust game, we investigate whether the inequality of endowment between trustor and trustee and the acquired versus permanent financial state affect trust and trustworthiness. We found that trust and trustworthiness are reference‐dependent and that individuals with permanent financial state receive more trust and are more trustworthy than others. In our experiment, unequal endowments do not significantly affect trust, but trustworthiness increases significantly when the trustor is poorer.     

HOUSING AND HOUSING FINANCE IN AN ERA OF INFLATION AND DISINFLATION: INTRODUCTION

So far, the 1980s have been the decade of disinflation in the housing market. The United States has experienced four remarkable years during which house prices have declined in real terms, and, at least in some markets, in nominal terms as well. At the same time, mortgage interest rates have risen to unprecedented levels, and the housing finance system has experienced extraordinary stresses, which are contributing to a remarkably rapid process of fundamental structural change. This comes immediately after a 15-year period of variable, but persistent and accelerating inflation, culminating in a speculative housing boom from 1977 to 1979.     

AN ESTIMATE OF AVERAGE INCOME AND INEQUALITY IN BYZANTIUM AROUND YEAR 1000

Using recent economic statistics from the peak period of Byzantine political and economic influence, we estimate the average income around the year 1000 to have been about 6 nomismata per capita per annum. This is then translated into current prices using two independent methods. They both yield an estimate around $PPP 640–680 in 1990 international prices. It is argued that this amount is some 20 percent below an average estimate of Roman incomes at the time of Augustus (around year one). Assuming that most of income differences in Byzantium were due to the differences in average incomes between social classes, we estimate the Gini coefficient to have been in the range between 40 and 45.     

THE DECOMPOSITION OF INCOME INEQUALITY: AN ANALYSIS BASED ON THE NORTHERN IRELAND FAMILY EXPENDITURE SURVEY FOR 1985

This paper conducts an empirical investigation into the issue of inequality decomposition, using the 1985 FES micro data tapes for Northern Ireland. It is hoped that it makes three contributions. First, by using the raw data, it permits a fairly rich disaggregation of individuals. The disaggregation employed in this paper viz. by individuals belonging to different'family types'and individuals of different'economic status'seems particularly relevant to social policy. Second the data also permits a disaggregation of total income by type of income: this permits one to assess, for example, how much of total inequality is caused by inequality in the distribution of income from different sources. Finally, the analysis is consistent with the existing theoretical literature on inequality decomposition.
The main results may be summarized briefly. When the FES sample was divided by subgroups of family type or economic status, then, in 1985, most of income inequality in NI was due to within group rather than to between group inequality. When total income was disaggregated by income type, then inequalities in the distribution of wages and salaries made the largest contribution to the inequality of total income. Prosperous families in NI tended to contain within them a far greater proportion of secondary workers than did the less well off families. It was not implausible therefore that the distribution of employment between families made a major contribution to wage inequalities between them.     

HEALTHY MINDS IN HEALTHY BODIES: AN INTERNATIONAL COMPARISON OF EDUCATION-RELATED INEQUALITY IN PHYSICAL HEALTH AMONG OLDER ADULTS

We study education-related inequality in the physical health of older adults across 11 European countries and the United States. Combining the data from Health and Retirement Study 2002, the English Longitudinal Study of Ageing 2002 and the Survey of Health, Ageing and Retirement in Europe 2004, our results suggest that education is strongly correlated with health both across and within countries. Education-related inequality in health is larger in Mediterranean and Anglo-Saxon countries than in western European countries. We find no evidence of a trade-off between health levels and equity in health. Education-related inequality in health is hardly driven by income or wealth effects (except in the United States), and differences in health behaviours (smoking) by education level contribute little to health differences across education groups.     

城市化、城乡差距以及全国居民总体收入差距的变动-收入差距倒U形假说的实证检验

本文利用两部门模型,从理论和实证上分析了城市化、城乡差距与全国居民总体收入差距的关系。研究结果表明,改革开放以来,城市化是导致倒U现象出现的主要原因。首先,城市化的加快使得由城乡人口流动导致的收入差距于2001年开始缩小;其次,城市化意味着低收入农村人口比例的缩小和低收入城市人口比例的增加;最后,城市化促使我国农村内部收入差距拉大的速度放缓。由此,全国总体收入差距将在2006—2009年迎来倒U形曲线的拐点。     

INEQUALITY OF OPPORTUNITIES VS. INEQUALITY OF OUTCOMES: ARE WESTERN SOCIETIES ALL ALIKE?

This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the 1990s. Equality of opportunity is defined as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. We measure social origin by parental education and occupation and use the database built by Roemer et al. (2003 ). Stochastic dominance is assessed using nonparametric statistical tests. Our results indicate strong disparities in the degree of equality of opportunity across countries and a strong correlation between inequality of outcomes and inequality of opportunity. The U.S. and Italy show up as the most unequal countries in terms of both outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are almost the same in Scandinavian countries even before any redistributive policy. We complement the ordinal comparison by resorting to an original scalar “Gini” index of opportunities, which can be decomposed into a risk and a return component. In our sample, inequality of opportunity is mostly driven by differences in mean income conditional on social origin, and differences in risk compensate the return element in most countries.     

RELATIVE INEQUALITY, ABSOLUTE INEQUALITY, AND WELFARE: LARGE SAMPLE TESTS FOR PARTIAL ORDERS

Two general welfare criteria, mean-relative Lorenz and mean-absolute Lorenz dominance, induce partial orders on income distributions. We propose asymptotically distribution-free inference procedures, based on the union-intersection principle, for these two welfare criteria. Unlike classical tests, our procedures allow one to distinguish among dominance, equality, and noncomparability. We show that union-intersection tests must be used to test for partial orders, and that the statistical ordering is acyclic. The tests are applied to compare the UK distribution of real family income to five other countries.     

HEALTH-CARE COMPETITION: INTRODUCTION

Medicare expenditures increased 497 percent, federal medicaid expenditures 484 percent, and state and local medicaid expenditures 458 percent between 1970 and 1981. Private health-insurance premiums increased 329 percent, while patient direct payments rose 214 percent.¹ Although these results include quantity and price changes, Waldo and Gibson (1982) show that "price inflation has been a major factor in the increase in health-care spending." Moreover, health-care expenditures exceeded 10 percent of GNP (10.5 percent) for the first time in 1982 (Office of the Secretary 1983); the comparable figure in 1960 was 5.3 percent of GNP.
This rapid growth in price and quantity ("expenditures" or "costs"in the nontechnical literature) has raised a cry across the land for cost containment or increased competition in the health-care sector. Curiously, when one searches for a definition of "competition" in the same nontechnical literature, it is not immediately obvious what the word means.