Deprivation and the Dimensionality of Welfare: A Variable‐Selection Cluster‐Analysis Approach

We approach the problems of measuring the dimensionality of welfare and that of identifying the multidimensionally poor, by first finding the poor using the original space of attributes, and then reducing the welfare space. The starting point is the notion that the “poor” constitutes a group of individuals that are essentially different from the “non‐poor” in a truly multidimensional framework. Once this group has been identified through a clustering procedure, we propose reducing the dimension of the original welfare space using recent blinding methods for variable selection. We implement our approach to the case of Latin America based on the Gallup World Poll, which contains ample information on many dimensions of welfare.     

Take‐Up of Social Assistance Benefits: The Case of the French Homeless

A considerable number of studies have been conducted to measure and analyze the phenomenon of the non‐take‐up of social assistance. However, the homeless portion of this population has long remained outside the scope of this research, so that little is known about their non‐take‐up behavior. In this paper, we focus on this population using a French national survey and we derive measures for the non‐take‐up of French basic income support. Our findings indicate that there is a substantial rate of non‐take‐up among the homeless, but that this rate is lower than that for the general population: approximately 18% of eligible homeless persons do not claim benefits compared to 35% of the general population. Using a large set of variables, we investigate the determinants of non‐take‐up. We show that although some of these determinants are shared with the general population, as identified in the literature, the homeless population exhibits some particularities. Furthermore, our results also suggest that the poorest of the homeless have a larger non‐take‐up rate than other homeless.     

Assessing the Possible Antipoverty Effects of Recent Rises in Age‐Specific Minimum Wages in New Zealand

Real minimum wages increased by nearly 33 percent for adults and 123 percent for teenagers in New Zealand between 1999 and 2008. Where fewer than 2 percent of workers were being paid a minimum wage at the outset of this sample period, more than 8 percent of adult workers and 60 percent of teenage workers were receiving hourly earnings close to the minimum wage by the end of this period. These policy changes provide a unique opportunity to estimate the effects of the minimum wage on poverty. Although minimum wage workers are more likely to live in the poorest households, they are relatively widely dispersed throughout the income distribution. This is particularly true of teenage minimum wage workers. Furthermore, low‐income households often do not contain any working members. We estimate that a 10 percent increase in minimum wages, even without a loss in employment or hours of work, would lower the relative poverty rate by less than one‐tenth of a percentage point.     

A Bayesian Measure of Poverty in the Developing World

We propose a new methodology to revise the international poverty line (IPL) after Ravallion et al . (2009) using the same database, but augmented with new variables to take into account social inclusion in the definition of poverty along the lines of Atkinson and Bourguignon (2001). We provide an estimation of the world income distribution and of the corresponding number of poor people in the developing world. Our revised IPL is based on an augmented two‐regime model estimated using a Bayesian approach, which allows us to take into account uncertainty when defining the reference group of countries where the IPL applies. The influence of weighting by population is discussed, as well as the IPL revision proposed in Deaton (2010). We also discuss the impact of using the new 2011 PPP and the recent IPL revision made by the World Bank.     

Give and Take Between Households and the State: Development and Application of A Benefaction–Contribution Ratio

This study defines a “Benefaction–Contribution Ratio” (BCR), describing the extent to which households are net beneficiaries of or contributors to the economy in relation to income and consumption. Such issues are central to assessment and targeting of policies such as social welfare and taxation. We apply the ratio to 21,144 South African households. South Africa employs various taxation‐funded social grants and subsidized services. A central question is how such transfers affect real household income and consumption. We find that the constitution of social transfers as a function of tax adjusted earned income significantly augments household buying power. Furthermore, we hypothesize and find a negative curvilinear shape which has implications for design of taxation and welfare. This constitution and distribution of this ratio may be useful for international benchmarking and household planning, and as an economic predictor of outcomes such as job seeking, entrepreneurial behavior, family planning, migration, and tax evasion.     

A dynamic‐efficiency rationale for public investment in the health of the young

In this paper we assume away standard distributional and static‐efficiency arguments for public health and instead seek a dynamic efficiency rationale. We study a lifecycle model wherein young agents make health investments to reduce mortality risk. We identify a welfare rationale for public health under dynamic efficiency and exogenous mortality even when private and public investments are perfect substitutes. If health investment reduces mortality risk but individuals do not internalize its effect on the life‐annuity interest rate, the “Philipson‐Becker effect” emerges; when the young are net borrowers, this works together with dynamic efficiency to support a role for public health.     

The impact of microcredit on self‐employment profits in Vietnam

This study examines the impact of microcredit on household self‐employment profits in Vietnam. For two indicators of credit participation – a dichotomous participation dummy and the accumulated amount of microcredit received per household – the analysis reveals a positive effect on household profits. The analysis also reveals that an instrumental variable method within a fixed‐effects framework can control for the possible endogeneity of credit and thereby identify the true effect of credit.     

The Effects of Monetary Policy Shocks in the USA: A Forecast‐Augmented VAR Approach

This paper formulates a forward‐looking monetary policy function for the USA in a structural vector autoregression (VAR) model, by using forecasts of key macroeconomic variables, in addition to the ex post realised variables used in a standard VAR. Since this forecast‐augmented VAR (FOAVAR) uses both forecasted and realised variables, and the standard VAR uses only realised variables, the standard VAR is nested in the FOAVAR. I find that the Fed responds to forecasted macroeconomic variables more significantly than realised variables. I also find that the monetary policy shock in the FOAVAR generates impulse responses of variables that are consistent with the predictions of economic theories, while the policy shock in the standard VAR causes a price puzzle: an increase in the price level due to a contractionary policy shock. These results suggest that a monetary policy function identified in a standard VAR, by using only realised macroeconomic variables, may incorrectly represent the Fed's policy function.     

Measuring the Consistency of Cross‐Sectional and Longitudinal Income Information in EU‐SILC

The EU‐wide survey “Statistics on Income and Living Conditions” (EU‐SILC) is extremely important for international social science research and policy advice. It is therefore crucial to ensure that the data are of the highest quality and international comparability. This paper is aimed at identifying unexpected developments in income levels, income mobility, and inequality in the EU‐SILC data between 2005 and 2009. We examine the consistency of EU‐SILC by comparing cross‐sectional results with findings based on two‐year longitudinal samples. Although the data represent similar populations, for several countries the results of this comparison differ widely. One important outcome is the high degree of variability over time in countries that obtain their income information from register data. This suggests methodological challenges in the clear designation of new subsample members, in the reweighting of the data, in imputation of missing values, and in other areas.     

A Measure of the Shadow Economy in a Small Economy: Evidence from Household‐Level Expenditure Patterns

In this paper we measure the size of the shadow economy in North Cyprus by using micro‐econometric approaches and then calculate its implications on national accounts and fiscal balances. There is a relatively new strand of literature that focuses on comparing income–expenditure patterns of households to calculate the degree of underreporting of income levels by self‐employed and privately employed individuals, as compared with public servants. We use the 2008 Household Budget Survey of North Cyprus and analyze the differences in food consumption patterns among three kinds of employees: self‐employed, privately employed, and public. We found that self‐employed and privately employed individuals underreport their income levels by 20 percent and 13 percent, respectively, compared with publicly employed individuals. This has important implications for the aggregate economy in North Cyprus, where we estimate that the shadow economy created by underreporting is as much as 8.6 percent of GNP and 11.1 percent of total tax revenue.     

Inequity in American Schools: A New Perspective on the Distributional Effects of School Expenditures on Economic Well‐Being

This article explores how inequities in public K‐12 school spending impact the distribution of economic well‐being across American households with public school students in 1989 and 2000. Adapting concepts from the public finance literature, I explore the impact of school spending on the vertical and horizontal equity and its impact relative to other types of public spending on social programs and taxation. Conventionally, vertical equity refers to the size of the income gaps between households. Horizontal equity refers to the ranking of households along the income distribution with any change in ranks producing horizontal inequity. My main findings show that school spending, when converted into a component of income, served to reduce extended‐income inequality through improvements in vertical equity without the discriminatory implications of exacerbating horizontal inequity across households. Additionally, this impact was at least as large as that of spending on other social programs. This finding bolsters standard arguments for equity and progressivity of school finance across students.