A COMPARISON OF LIVING STANDARDS ACROSS THE UNITED STATES OF AMERICA

We use an expected utility model to examine how living standards, or welfare, vary across the United States and how each state's welfare has evolved over time, accounting for cross-state variations in mortality, consumption, education, leisure, and inequality. We find considerable cross-state heterogeneity in welfare levels. This is robust to allowing for endogenous interstate migration and to computing welfare conditional on education, gender, and race. Although states experienced heterogeneous welfare growth rates between 1999 and 2015 (1.68–3.73% per year), there is no evidence of convergence in welfare levels, including during the subperiods preceding and following the Great Recession.     

COSTLY INTERMEDIATION AND THE POVERTY OF NATIONS*

This article has two goals: (i) to reduce the 7‐fold productivity differential required to explain the observed 33‐fold income difference between the richest and poorest countries of the world; and (ii) to explain cross‐country differences in the capital‐output ratio. To achieve the first goal we modify the production function of the standard neoclassical growth model to include public capital whose provision is subject to intermediation costs. For the second goal we distort private investment by introducing credit frictions. The model, quantified using cross‐country data, generates an income gap of 33 with productivity differences of only 3 under the measured variations in public and private capital. The required productivity gap declines even further, to 2.1, when we introduce a home‐production sector. On the second goal, however, credit frictions do a poor job of explaining cross‐country variations in the capital‐output ratio.     

THE MINIMUM WAGE, WAGE SUBSIDIES, AND POVERTY

In an attempt to augment the lowest wages, the United States and several other countries utilize legal minimum wages. However, the minimum wage has potentially adverse employment effects. The analysis here suggests that an alternative policy that combines a minimum wage and a wage subsidy is superior to either by itself. Such a combination can assist the low wage worker, avoid disemployment effects, and maximize market efficiency.     

FORECASTING THE DEMAND FOR HEALTH CARE IN OECD NATIONS AND CHINA

This article argues that the nations of the Organisation for Economic Co-operation and Development (OECD) are facing a potential disaster: intergenerational conflicts between the large number of workers approaching retirement at an earlier age than ever before in history and the smaller number entering the labor market. These nations are confronted with the choice of whether to default on commitments to pensions and health care, to reduce benefits, or to increase the taxes borne by younger workers. The author argues that this new intergenerational conflict is the result of technophysio evolution , a synergism between technological and physiological improvements that has produced a form of human evolution that is biological but not genetic, rapid, culturally transmitted, and not necessarily stable. The author goes on to argue that an important aspect of technophysio evolution has been a change in the structure of consumption and in the division of discretionary time between work and leisure. The ongoing debate over whether or not the rapid advances in biotechnology will spare OECD nations' health systems from a financial crisis is addressed. Finally, the implications this argument has for forecasting China's future health care costs are discussed.     

FUND SUBSTITUTION AND THE INCENTIVE EFFECT OF PUBLIC INVESTMENT SUBSIDIES

This paper analyses the observed phenomenon of public for private fund substitution in industrial assistance, by examining the public and private sector funding of investment under different assumptions about the nature of the private capital market. This bears on the effectiveness of industrial subsidies, and has implications for welfare and the design of optimal assistance contracts. It is shown that fund substitution depends crucially on the elasticity of investment with respect to the user cost of capital in the without-subsidy position, and on the nature of any amount and rate constraints on the assistance contract.     

ELDERLY AND NON-ELDERLY IN THE EUROPEAN UNION: A COMPARISON OF LIVING STANDARDS

The paper compares the living standards of the elderly vis-a-vis the rest of the population in EU countries in the late 1980s using the data of Household Budget Surveys. Elderly and non-elderly are compared in terms of consumption expenditure, income and non-monetary indicators of welfare. The results show that in all EU countries the non-elderly are better-off than the elderly. In some countries the differences in the living standards of the two groups are marginal, whereas in others they are substantial. These differences tend to be larger in the Southern European EU countries (with the exception of Spain) and smaller in the Northern European EU countries (with the exception of the U.K.).     

NONCASH INCOME, EQUIVALENCE SCALES, AND THE MEASUREMENT OF ECONOMIC WELL-BEING

Little attention has been paid to the importance of consistency between the specifications of the income and the equivalence scales used in measuring economic well-being when noncash income is included in the definition of income. This article finds that inconsistency between the income and needs sides of a comparison can be important when some types of noncash income are included. An upward bias in the measured economic status of the aged when Medicare is included in income and an ordinary equivalence scale is used is presented as an example of the important effects of this consistency problem.     

THE WEALTH OF NATIONS: GROWTH, IDEAS, AND TECHNOLOGY

In the following articles Freedman and Jordan examine institutional arrangements that promote high and rising incomes. The quality of institutions may be as important as human capital, investment, and population growth in determining which nations are most prosperous.     

THE HOUSING STOCK,HOUSING PRICES,AND USER COSTS: THE ROLES OF LOCATION,STRUCTURE, AND UNOBSERVED QUALITY

Which housing characteristics are important for understanding homeownership rates? How are housing characteristics priced in rental and owner-occupied markets? What can answers to these questions tell us about economic theories of homeownership? Using the English Housing Survey, we estimate a selection model of property allocations to the owner-occupied and rental sectors. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for rent-to-price ratio estimates and explains some puzzling correlations between rent-to-price ratios and homeownership rates. These patterns are consistent with, among others, hypotheses of rental market contracting frictions related to housing maintenance.     

THE EFFECT ON POVERTY STATUS IN ISRAEL OF CONSIDERING WEALTH AND VARIABILITY OF INCOME

This paper assesses the effects of including wealth and the variability of income on the incidence of poverty and the degree of income inequality in Israel. A special survey, which includes data on the wealth and income of a national sample of Israeli families in 1963–64 and 1964–65, allows us to go beyond measures based on current income alone.
The first section reviews earlier studies of poverty in Israel. The next section looks at poverty and inequality in terms of current income, current wealth, and a combined measure of income and wealth. The combined measure is the Hansen-Weisbrod measure (HW), which equals income plus the annuity value of wealth, assuming all wealth is just consumed at the time of death. It is interesting that, in spite of the much higher wealth inequality than income inequality, the HW measure was slightly more equally distributed than income. This result occurred because the annuity component made up a low share of the total HW measure and the correlation between income and wealth was well under 1. Although overall inequality and poverty were similar for income and HW measures, the incidence of poverty by subgroup depended on the measure used.
The final section presents a dynamic view of poverty and inequality. Year-to-year changes in poverty were substantial. Because of the use of a relative poverty concept and the rise in real incomes, the real income poverty line rose by 15 percent between 1963 and 1964. Still, of those in income poverty in 1963, 37 percent managed to escape poverty in 1964. The paper shows how the degree to which poverty was stable or transitory varied substantially by age and country of origin.