Spatial differences in the cost of living

A method is described for constructing spatial indices of the cost of a basket of basic “requirements” of food and nonfood categories. The proposed index for nonfood items is built up from household expenditure, since their prices are unavailable in most developing countries. Using Peru as a case study, it is shown that the cost differences have significant implications for measures of real income and poverty across regions and between urban and rural areas.     

Estimation of food demand in Turkey: method of an almost ideal demand system

In this study, data of the household income and consumption expenditure surveys conducted by the Turkish Statistical Institute for 1994 and 2003 years were used; income, price, and cross price elasticities under six aggregated product groups were estimated within the framework of the an almost ideal demand system approach for food expenditures; and estimation of household consumers’ food demand in Turkey was analyzed. According to the findings obtained, it was established that a price-bound change would appear in the food demand, and elasticities were calculated. Expenditures by product groups and price elasticities were obtained, and the product groups were aggregated as bread and cereals; meat, fish, and poultry; milk and dairy products, oil and egg; vegetables and fruits; various fast food and alcoholic and non-alcoholic beverages.     

The Effects of Fiscal Decentralization on Household Income Inequality: Some Empirical Evidence

Abstract

We investigate the effects of fiscal decentralization on income inequality using a sample of 23 OECD countries over the period 1971–2000. We utilize novel and robust measures of fiscal decentralization based on different degrees of fiscal autonomy of sub-central governments. Our results highlight the importance of both the nature of fiscal decentralization—expenditure versus revenue—and the extent to which independent spending responsibility and taxing powers are actually assigned to local governments. A higher degree of tax decentralization is associated with higher household income inequality within a country. Thus, even if fiscal decentralization could be attractive according to efficiency reasons, it may actually have undesirable consequences on the income distribution.     

Income: the real and the incomparable

The main propositions of this paper are: inter-temporal and interspatial comparisons lose meaning when the arrays of goods and services being priced are too dissimilar; the composition and pricing of GDP are a function of income distribution; income tends to circulate among persons of broadly similar wealth and culture; a significant part of what is recorded as final household expenditure is intermediate in nature; public expenditure is intrinsically intermediate, and poses a variety of conceptual difficulties. Growth is associated with changes which undermine the validity of its measurement.     

Equity aspects of VAT in emerging European countries: A case study of Serbia

A belief that consumption taxation is inherently inequitable has been entrenched in a significant portion of the general public and was supported by early empirical evidence that suggested a highly regressive annual VAT incidence. However, it has been shown that much of the estimated annual VAT regressivity is due to the income under-reporting bias inherent in sample surveys. This bias is particularly important in emerging European countries due to a high shadow economy and the evasion of direct income taxes, which suggests household expenditures as a more meaningful indicator of well-being than registered income. Furthermore, theoretical considerations favor the lifetime incidence approach, whereby VAT is estimated to be proportional or mildly progressive. A micro-simulation analysis of the Serbian expenditure survey data yields incidence estimates in line with the existing literature from other countries. We show that a significant presence of own-source (small) farming production of food in many emerging European countries, including Serbia, presents an important progressivity-enhancing buffer compared to the VAT incidence in developed European countries. We conclude that the common beliefs of inherently inequitable VAT taxation are vastly overstated and poorly founded in the economic reality of emerging European countries such as Serbia, where VAT can be most adequately described as being mildly progressive.     

WHO BENEFITS FROM PUBLIC EDUCATION EXPENDITURES?

In most countries, governments remain the largest financiers and providers of education. This note examines the evidence on the extent to which public expenditure on education have been effective in reaching the poor. The distribution of educational expenditures is inequitable, especially at the post-primary levels, where poor income groups are under-represented as compared with higher income groups. Targeted financing and a redefinition of the role of the government vis-á-vis the non-public sector can help achieve greater equity and efficiency.     

Public and private sector jobs,unreported income and consumption gap in India: Evidence from micro-data

This paper documents the wage and consumption gap between private and public sector employees in India. We empirically investigate the wage gap as well as difference in consumption expenditure using household survey from the 2004-05 National Sample Survey of India. Our results show that despite a lower level of public sector income in some of the income quantiles, the consumption of durable goods is not different between these two groups, statistically. After checking for competing explanations, we conclude that the absence of statistically significant consumption gap could be an outcome of ‘unreported’ income earned by public sector workers in India.     

Food Deserts and Real‐Estate‐Led Social Policy

Since the early 2000s in the United States, food deserts—neighborhoods in which households have limited geographic access to full‐service supermarkets or grocery stores— have become conceptually central in public policy research on food security. Analyzing this phenomenon from a ‘policy mobility’ perspective, this article traces the food desert's emergence in policy discourse, locating it within an entrepreneurial social policy paradigm that privileges real estate development over direct economic relief. In the context of property‐led anti‐poverty efforts, the identification and mapping of food deserts catalyzes a logic that leads to subsidy to grocery store development in low‐income areas (or ‘fresh food financing’), while at the same time officials are cutting programs such as the Supplemental Nutrition Assistance Program (food stamps), which directly supplements household food budgets. The article contributes to widening critical discussion of the food desert paradigm and the policy interventions with which it is associated. It calls on urban researchers and practitioners to reframe discussions of food access and nutrition around the shortage of basic income and a need for higher wage floors.     

Redistribution and regional development under tax competition

This paper considers how capital tax competition affects transfer and development policies in the presence of regional income disparity. In each country, development policies determine the number of rich (poor) regions that (do not) engage in production activities, while transfer policies redistribute income between rich and poor regions. The mix of transfer and development policies is inefficient under tax competition: conditional on the equilibrium tax rate, too much revenue is spent on development policies and too little on transfer policies. This analysis of the expenditure mix implies that development policies are used as a means of regional redistribution even if transfer policies are efficient instruments for this purpose. Moreover, it is shown that the overall level of public expenditure may be too high because of the possibility of over-development.     

Shrinking the state or the Big Society? Public service employment relations in an era of austerity

The Big Society is an integral part of the coalition's plans for public service retrenchment, but it is premature to dismiss it as exclusively concerned with expenditure cuts and privatisation. The Big Society signals the government's ambition to transform public services and it is the rubric that is being used to shrink the state and undermine long‐standing systems of public service employment relations. This article considers the origins and meaning of the Big Society and then assesses its consequences for public service provision and the workforce. The Big Society is integrally connected to deficit reduction with the voluntary sector and an increased emphasis on volunteering promoted as a more user‐centred and cost‐effective way of delivering public services in tough times. For the workforce, more competition between diverse providers in conjunction with budget cuts is placing downward pressure on terms and conditions and encouraging employers to question the continuation of national pay determination in many parts of the public sector.     

Future changes in age and household patterns: Some implications for public finances

Using stochastic forecasting techniques, this paper assesses the consequences for public finances of changes in age and household structures in Denmark over the period 2008–2037. Focusing on components of welfare provisions and tax payments with noticeable differences across age and household status, we show that, based on a point forecast, the fiscal impact of changes in household structures amounts to an annual negative effect of 0.5% of GDP, and the effect of changes in age structures is forecast to worsen the public budget by 3.7% of GDP per year. While being subject to a considerable amount of uncertainty, the prospect of such a dramatic weakening of public finances is likely to trigger demands for welfare reforms characterized by a more individualized system of public transfer and tax payments, in addition to the measures that have already been taken to address the fiscal effects of population ageing.     

COMPETITIVENESS WITHIN THE EURO AREA: THE PROBLEM THAT STILL NEEDS TO BE SOLVED

Unsustainable public debt, low competitiveness and high current account deficits are major problems for the so‐called PIIGS countries. These countries experienced consumer price and wage inflation above the euro area average in the first decade of the euro, basically fuelled by buoyant capital inflows. The resulting real appreciation against low‐inflation countries led to a deterioration in their competitiveness, but rigid labour markets now prevent a quick market‐based readjustment of real wages to the changed situation. Thus, both public expenditure cuts and structural labour market reforms are urgent to reduce the likelihood of a euro area break‐up.     

PUBLIC EXPENDITURE CUTS AND JOB LOSS: A UNION RESPONSE

This article is based upon the findings of a survey which was directed at assessing the response of a public sector union to job loss amongst its members. The study was prompted by the anticipated effects on the union of cuts in public expenditure announced by Mrs. Thatcher's Government in 1979 and 1980. The purpose of the survey was, first, to investigate the processes through which job loss occurred and, secondly, to examine the ways in which the union contested those managerial decisions that affected the job security of its members. The main conclusion of the paper is that union resistance has been relatively sparse and it is suggested that this may be in part explained by the way in which job loss occurred. Of particular importance in this context is the loss of jobs through what we have called ‘job erosion’.     

An Income Tax Increase to Fund Higher Education: A CGE Analysis for Chile

An increase in income taxes to fund education was one of the demands made by the social movements that emerged in Chile in 2011. Currently, the Chilean Congress is enacting a tax reform to raise money for higher education. This study aims to show the dynamic effects on the general equilibrium of the Chilean economy under two alternative approaches: a subsidy to lower the price of higher education (public and private), and greater spending on public higher education to reduce household payments for education. The social accounting matrix (SAM) used to calibrate the computable general equilibrium (CGE) model has 38 economic sectors, including the production structure of private education and public education. The study mainly concludes that a subsidy policy has significant advantages over increasing higher public education spending, regarding its effects on variables such as GDP, investment, and household incomes, while both policies have a similar effect on poverty and income distribution.     

Does military expenditure crowd out health-care spending? Cross-country empirics

The trade-off between military expenditure and public health spending has remained an unsettled empirical issue. This paper investigates whether military expenditure has crowded out public health spending in 116 countries (including a subsample of 87 non-OECD countries) over the period 2000–2017. Through our system generalized methods of moments (GMM) estimations, we find that military expenditure, whether it is measured on a per-capita basis or as a proportion of total government expenditure, has a positive impact on the demand for health care. Nonetheless, we find a significant crowding-out effect of military expenditure on domestic government health spending by taking into account government fiscal capacity. The evidence we present supports the long-standing view that military expenditure has a particular ability to compete government financial resources away from publicly funded health spending. By interacting the military expenditure variable with income per capita, we find that an increase in income per capita has neutralized the crowding-out effect of military expenditure on domestic government health spending – less well-off countries stand to suffer most, and wealthy ones stand to suffer least, from the crowding-out effect. The crowding-out effect is statistically more specific to middle- and low-income countries in our samples.

     

Effects of residential relocation on household and commuting expenditures in Shanghai, China

Over the past three decades, China's cities have undergone massive spatial restructuring in the wake of market reforms and economic growth. One consequence has been a rapid migration of urban residents to the periphery. Some movers have been forced out either by rising urban rents or government reclamation of their residences. Others have relocated willingly to modernized housing or for other lifestyle reasons. This article examines the effects of relocation to the urban edge on household well-being. It explores the factors underlying changes in housing and transportation costs as households move to the periphery. The research also examines whether those who moved involuntarily are affected differently from those who moved by choice. Results show that, relative to those who moved by choice, involuntary movers are disproportionately and adversely affected in terms of job accessibility, commute time, housing consumption and disposable income. The findings also show that, compared with higher-income households, lower-income groups are disproportionately affected in relation to housing costs, accessibility losses, disposable income and household worker composition. These results indicate that relocation compensation for involuntarily relocated households should be expanded to include more than just housing value: it should encompass urban location changes, household needs and relocation costs.     

School Finance Reform and Private School Enrollment: Evidence from California

Abstract: This paper uses the school finance reforms in California in the 1970s to examine whether the constraints such reforms impose on school districts lead to switching to private schools. Misspecifications of demand in previous work have led to understatement of reform effects. An empirical model of schooling share equations is derived from a discrete choice framework. Large biases are shown to result from failure to account for heterogeneity of demanders and school-district-specific fixed effects. Simulations indicate that the changes in public provision potentially resulting from reform explain a sizeable portion of the growth in the private school share.     

EXTENSIONS TO THE MULTIPLIER DECOMPOSITION APPROACH IN A SAM FRAMEWORK: AN APPLICATION TO VIETNAM

The aim of this paper is to provide an extension of a technique recently introduced by Pyatt and Round (2006) to decompose each element of the ‘global multiplier matrix’ in ‘microscopic detail’ in order to capture the linkages between each household groups’ income and the exogenously injected income of other accounts. The methodology we propose allows dividing the impact of exogenous injections into four different effects: direct-direct effect (D-D); direct-indirect effect (D-I); indirect-direct effect (I-D) and indirect-indirect effect (I-I). Results using the 2000 Vietnamese SAM show that the highest direct effects on the income of household groups are related to exogenous injections into the agricultural sector, while the highest indirect effects result from investing in other agriculture-related sectors such as, for example, food processing. Policy interventions focusing on the agricultural sector and on rural households will thus have the greatest effect on reducing the level of income inequality.     

Inference on inequality from household survey data

I develop a theory of asymptotic inference for the Lorenz curve and the Gini coefficient for testing economic inequality when the data come from stratified and clustered household surveys with large number of clusters per stratum. Using the asymptotic framework of Bhattacharya [Asymptotic Inference from multi-stage surveys. Journal of Econometrics 126(1), 145–171], I derive a weak convergence result for the continuously-indexed Lorenz process even when the underlying density is not uniformly bounded away from zero. I provide analytical formulae for the asymptotic covariance functions that are corrected for both stratification and clustering and develop consistent tests for Lorenz dominance. Inference on the Gini coefficient follows as a corollary. The methods are applied to per capita household expenditure data from the complexly designed Indian national sample survey to test for changes in inequality before and after the reforms of the early 1990s. Ignoring the survey design is seen to produce qualitatively different results, especially in the urban sector where the population sorts more completely into rich and poor neighborhoods.     

Substitution Bias and Cost of Living Variability for U.S. Demographic Groups:

A bstract . Intertemporal cost of living variability is analyzed for households with differing income levels and family characteristics. These indexes are based upon the parameter estimates of a comprehensive system of expenditure equations, the quadratic expenditure system. Despite considerable differences in the group-specific share parameters as well as nonlinearities in the Engle curves for each group, little variation occurs in these indexes for several U.S. price series over the 1967–1984 time period. As a result, we find little evidence that group-specific fixed weight indexes are better cost of living approximations than a general Consumer Price Index even though all substitution bias estimates, by income and household type, are quite small.