WEALTH HOLDINGS AND POVERTY STATUS IN THE U.S.

Families below the poverty line are better off in terms of wealth than income. In 1962, the ratio of mean income between families below and above the poverty line is 0.19 and the ratio of mean wealth is 0.29. The corresponding ratios for 1983 are 0.16 and 0.19. On average, the elderly poor are better off in terms of wealth than the younger poor, particularly relative to their own income. However, the poor have become worse off in terms of wealth between 1962 and 1983, when their real income grew by 6 percent and their real wealth declined by 11 percent. The inclusion of pension and social security wealth in the household portfolio narrows the wealth gap between the poor and non-poor, particularly for families under 65 years of age. Alternative poverty rates are also calculated based on the inclusion of annuity flows from wealth in household income. The reduction in the poverty rate between 1962 and 1983, from 21 to 15 percent on the basis of the official rate, is considerably lower with these alternative definitions.     

A COMPARISON OF DISTRIBUTIONS OF ANNUAL AND LIFETIME INCOME: SWEDEN AROUND 1970.

The concern with income distribution has always mainly existed because of a concern with individuals' economic welfare. In recent years, the question has arisen whether the distribution of annual income—the distribution most often studied—is the best proxy for the distribution of economic welfare. Other measures, such as lifetime income, have been proposed instead.
The paper starts with a discussion of how to define and measure the distribution of lifetime income. By using a simulation model, which partly consists of estimated functions and partly of tax functions taken directly from tax laws, distributions of lifetime income, variously defined, are then constructed. These distributions are compared with each other, and with distributions of annual income. The simulations indicate that the distribution of lifetime income is considerably less unequal than the distribution of annual income. Whether inheritances are included or not seems to be of no importance for the inequality of lifetime income. If, on the other hand, we include the value of leisure time in lifetime income, inequality increases by about 10–15 percent. Distributions of income after tax have Gini coefficients which are approximately 25 percent less than the Ginis for the before-tax distributions. We thus find that the picture of inequality we get is very much dependent on which income concept we use.     

THE REDISTRIBUTIVE IMPACT OF ALTERNATIVE INCOME MAINTENANCE SCHEMES: A MICROSIMULATION STUDY USING SWISS DATA

Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62 percent is required to make it viable. Aggregate work hours are reduced by approximately 10 percent and average disposable income falls by 9.3 percent under such circumstances. A participation income restricted to adults in employment and covering 50 percent of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland.     

WEALTH AND THE DISTRIBUTION OF INCOME, CANADA 1969–70

This paper explores the sensitivity of the size distribution of family income in Canada to alternative definitions of income. These alternative definitions examine both wealth generally in the form of an annuity equivalent, and home ownership in the form of imputed rent. An adjustment for family size differences is also made. The impact of these adjustments is assessed for average incomes, inequality, and the incidence of low income for different age groups. The adjustments do have significant effects that vary by age; in particular, the economic position of the elderly seems understated by the usual data. Also, methodological considerations, such as the direct use of micro data and the choice of inequality indicator are shown to be significant.     

INCOME DISTRIBUTION AND REDISTRIBUTION: A MICRODATA ANALYSIS FOR SEVEN COUNTRIES

This paper reports the detailed results of a comparison of the distribution and redistribution of income in seven countries using the Luxembourg Income Study (LIS) database. Use of LIS facilitates comparisons of inequality in respect to similarly-defined variables, permits methodological alternatives to be used, and allows the countries to be compared on aspects of income ranking and policy equity in ways not otherwise possible.
The results indicate a pattern of inequality in which Sweden is the most equal, followed by Norway, the U.K. and Canada, while among the less equal countries Israel is generally more equal than Germany-or the USA., whose relative inequality depends on the measure chosen. Use of the LIS database also allows a more detailed explanation of these results, noting, for example, the role of cash benefits in increasing equality in Sweden and the U.K., and in aiding the bottom quintile in Germany; and the important part played by self-employment income in contributing to the high top quintile shares in Germany and Israel, and in rendering the Norwegian distribution less equal than that of its Scandinavian neighbour.
The wealth of the database, however, means that methodological issues need to be treated both more explicitly and more carefully than is possible with more restrictive data. To interpret the data also requires a considerable degree of knowledge about the institutional features of tax and social provisions in each country, so that an income microdatabase could usefully be completed by one focused on the details of such provisions.     

CHINESE REGIONAL INEQUALITIES IN INCOME AND WELL-BEING

Dividing China into seven regions reveals rural income and consumption divergence for both 1980–2005 and 2000–05. But while real rural consumption growth averaged 7.7 percent over 1985–2005 in the eastern coastal region, it averaged 6.5 percent uniformly in the interior. In evaluating well-being, such rapid improvement in all regions arguably overshadows negative connotations of divergence. Twenty years of household survey data reveal dramatic increases in rural household savings, as rural consumption improved more slowly than income in some periods. This raises questions about the suitability of consumption as a basis for measuring well-being and its distribution. Increased savings appear to be transient, as some households save while others dissave to purchase durables and afford lumpy services like education and healthcare—supplies of which became more plentiful in the 1990s. The paper argues that more meaningful measures of regional disparities come from differences in regional poverty headcounts. It also suggests that higher regional inequality and accompanying interregional migration indicate that inequality plays an important positive role in inducing economic actors voluntarily to move to more productive locations and activities as a mechanism for ensuring sustainable improvements in individual well-being.     

Household wealth, public consumption and economic well-being in the United States

Standard official measures of household economic well-beingin several countries are based on money income. The generalconsensus is that such measures are limited because they ignorecertain crucial determinants of well-being. We examine two suchdeterminants—household wealth and public consumption—inthe context of the US. Our findings suggest that the level anddistribution of economic well-being is substantially alteredwhen money income is adjusted for wealth or public consumption.Over the 1989–2000 period, median well-being appears toincrease faster when these adjustments are made than when standardmoney income is used. Adding imputed rent and annuity from householdwealth to household income increases measured inequality, whileadding public consumption reduces it. However, all three measuresshow about the same rise in inequality over the period.     

THE ACCOUNTING TREATMENT OF HUMAN INVESTMENT AND CAPITAL

Defining investment as outlays that increase income- and output-producing capacity, the author presents estimates of human investment in the United States 1929–69, comprising rearing costs, education, training, health, safety and mobility outlays. He develops an economic accounting framework to accommodate human investments and research and development in national and sector capital accounts, with appropriate adjustments to the current accounts to provide consistency. The associated balance sheets and wealth statements are also developed.
The wealth and corresponding income estimates are used to compute rates of return on human, non-human, and total capital. In the business economy the average net rate of return on total capital was 10.6 percent in 1969, compared with 10.0 percent in 1929. The average and marginal rates of return on human capital were generally somewhat higher than on non-human capital throughout the period.     

TRENDS IN HOUSEHOLD WEALTH IN THE UNITED STATES, 1962–83 AND 1983–89

Using the 1983 and 1989 Surveys of Consumer Finances, I find evidence of sharply increasing house-hold wealth inequality over this period. Whereas mean wealth increased by 23 percent in real terms, median wealth grew by only 8 percent. The share of the top one-half percentile rose by five percentage points, while the wealth of the bottom two quintiles showed an absolute decline. The Gini coefficient increased from 0.80 to 0.84. Almost all the growth in real wealth accrued to the top 20 percent of wealthholders. In contrast, the degree of wealth inequality was almost identical in 1983 as in 1962, and real wealth growth was more evenly distributed across the wealth distribution. There is also evidence that the sharp increase in wealth inequality from 1983 to 1989 was due to a correspondingly sharp rise in income inequality, the increase of stock prices relative to housing prices, and relatively slow inflation.     

A NEW LOOK AT THE WEALTH ADEQUACY OF OLDER U.S. HOUSEHOLDS

We examine the current wealth adequacy of older U.S. households using the 1998–2006 waves of the Health and Retirement Study (HRS). We find that the median older U.S. household is reasonably well situated, with a ratio of comprehensive net wealth to present value poverty‐line wealth of about 3.9 in 2006. About 18 percent of households, however, have less wealth than would be needed to generate 150 percent of poverty‐line income over their expected future lifetimes. We see similar patterns of wealth adequacy when we examine ratios of annualized comprehensive wealth to pre‐retirement earnings. Comparing the leading edge of the baby boomers in 2006 to households of the same age in 1998, we find that the baby boomers show slightly less wealth, in real terms, than their elders did, but still appear to have adequate resources at the median. Moreover, we find a rising age profile of annualized wealth, even within households over time and after controlling for other factors, suggesting that older households are not spending their wealth as quickly as their survival probabilities are falling.     

A COMPARISON OF ALTERNATIVE MEASURES OF ECONOMIC WELL-BEING FOR GERMANY AND THE UNITED STATES

This paper, using six waves of data (1984-89) from the United States Panel Study of Income Dynamics (PSID) and the German Socio-Economic Panel (GSOEP), compares economic well-being using single year income, multi-year income, and wealth as measures. We find inequality to be greater in the United States than in Germany regardless of the measure used. However, the relative degree of inequality varies across measures. When we disaggregate our data by age and gender categories, in general we find greater inequality in the United States, but wealth inequality among older Germans is greater than it is among older Americans.     

CHANGES IN INCOME INEQUALITY: AUSTRALIA, 1968–69 TO 1973–74

The period 1968–69 to 1973–74 saw a redistribution of incomes in Australia. This is evidenced first by declining differentials between dissimilar persons and secondly by changes in two measures of income inequality, the Gini and Theil coefficients.
The inequality coefficients are decomposed into components which distinguish between that part of total inequality due to income differences between dissimilar persons and that part due to inequality between similar persons. It is found that the reduction in inequality was due to the reduction in differentials between dissimilar persons and that inequality between similar persons probably did not change over the period.     

RANK AND QUANTITY MOBILITY IN THE EMPIRICAL DYNAMICS OF INEQUALITY

Horizontal and vertical measures of inequality are related through mobility. The paper draws attention to two types of mobility: quantity mobility, which refers to mobility in income itself, and rank mobility, which refers to mobility in the position in the distribution of income. Individually matched census data for earnings in Israel are used to illustrate these concepts empirically. Mobility is measured between 1983 and 1995. It is shown that earnings in Israel are highly mobile. The high degree of earnings mobility implies that horizontal measures of inequality considerably overstate the underlying level of inequality. The method of errors in variables is used to distinguish between current and permanent mobility and inequality. Permanent earnings are more equal than current earnings and less mobile. Finally, the methodology is applied to PSID. It is shown that earnings were more mobile in Israel than in the United States.     

INTERTEMPORAL COMPARABILITY OF NATIONAL INCOME IN CZECHOSLOVAKIA

The national income and product account (United Nations concept) in current prices itemized by distributive shares and by type of expenditure is given for the period 1929–1937. The national income by industrial origin and the reproducible national wealth are computed for the year 1930. Differences between the U.N. and the material concept are explained by means of the 1939 data.
The national product series in real terms are computed (a) by means of the price deflation of the types of expenditure, and (b) as the physical output of goods and services by industrial origin (since 1926). Major changes In distributive shares are explained with the help of Price-cost analysis.
The national product in real terms attains the lowest point in 1935 and not in 1933, as the industrial production and foreign trade series indicate. The structure of gross national expenditure reveals the same pattern of shifts, as is well known from other industrially developed countries during the business cycle.
The development of national product by industrial origin, however, reveals some conspicuous singularities. Especially the uninterrupted increase in trade services (in terms of both persons engaged and turnover in constant prices) is an anomaly in the period of 1929–1937.
Further, the Increase of rent (due to the gradual abolition of rent control), contrasting with the general fall of prices, led to a major shift in the distribution of national income during the early thirties. The other remarkable change resulting mainly from the changing price structure was the decrease of the farmers' share in national income.
The production, transportation and distribution series in real terms reveal some time-lags. These result partly from the shift from the foreign to the home market, partly from the compensatory effects of stock movements, and partly from the delayed adjustment of consumers to declining income.     

A STATISTICAL ANALYSIS OF PRODUCTIVITY IN SELECTED SERVICE INDUSTRIES IN THE UNITED STATES, 1939–1963

This paper examines differentials in output, employment and productivity across seventeen service industries in the United States from 1939 to 1963. Included are 9 retail trades and 8 services mostly from the personal service group. The industries chosen were those for which it was possible to obtain from available data reasonably comparable measures of output and input for selected years since 1939. Also, they are industries for which it is possible to calculate a measure of real output that is not based on labor input.
Sixteen of the industries show positive rates of change of real output per man. Thus there appears to be no basis for assuming that productivity cannot or does not increase in industries providing services. However, the rate of increase for the group as a whole was not as rapid as in manufacturing or in goods production as a whole.
The data for the seventeen industries give strong support to the hypothesis of a positive correlation between industry rates of growth and rates of change of productivity. The correlations are of the same order of magnitude as those found by other investigators in studies of manufacturing industries.
The coefficient of correlation between growth of output per man and growth of output is .93; between growth of output per man and growth of employment it is .54 for 1939–1963. The comparable coefficients for the 1948–1963 period are .70 and .13.
The results also parallel those reported for manufacturing in one other respect, namely, the absence of any correlation between changes in output per man and changes in compensation per man.
The paper concludes with a discussion of the problems encountered in measuring changes in real output in these industries and presents some alternative estimates based on different concepts and different sources.     

EQUIVALENCE SCALES, WELL-BEING, INEQUALITY, AND POVERTY: SENSITIVITY ESTIMATES ACROSS TEN COUNTRIES USING THE LUXEMBOURG INCOME STUDY (LIS) DATABASE

The Luxembourg Income Study (LIS) database on which this article is based offers researchers exciting new possibilities for international comparisons based on household income microdata. Among the choices the LIS microdata allows a researcher, e.g. income definition, income accounting unit, etc., is the choice of family equivalence scale, a method for estimating economic well-being by adjusting income for measurable differences in need.
The range of potential equivalence scales that can and are being used in the ten LIS countries and elsewhere to adjust incomes for size and related differences in need span a wide spectrum. The purpose of this paper is to review the available equivalence scales and to test the sensitivity of various income inequality and poverty measures to choice of equivalence scale using the LIS database. The results of our analysis indicate that choice of equivalence scale can sometimes systematically affect absolute and relative levels of poverty; and inequality and therefore rankings of countries (or population subgroups within countries). Because of these sensitivities, one must carefully consider summary statements and policy implications derived from cross-national comparisons of poverty and/or inequality.     

Do inward looking trade policies affect poverty and income inequality? Evidence from Indonesia's recent wave of rising protectionism

Unlike previous studies which often focus on trade liberalisation, this paper examines the impact of protectionism in the form of import tariffs and mineral export taxes on rural and urban poverty and income inequality for the first time. Using a dynamic computable general equilibrium model on Indonesia, mineral export taxes were found to adversely affect urban and rural poverty but income inequality hardly changed as the decline in income in the higher income group is not significantly different to the decline in low income groups. However, if smelters for mineral ore are developed, then there is not only a fall in poverty, more so for the rural than urban, but there is some decline in income inequality. On the other hand, although the current imposed import tariffs do not affect poverty or income inequality, any further increases from the current low average MFN applied rates, will see a rise in rural and urban poverty and income inequality. By and large, any small improvements in the trade balance brought upon by the mineral tax and import tariffs are more than outweighed by the substantial decline in real household consumption expenditure due to falls in employment and wages, thereby leading to a fall in GDP growth.     

Sen measures of poverty in the United States: Cash versus comprehensive incomes in the 1990s

Recently developed statistical inference procedures for the Sen index and its components – the headcount, income gap and Gini index among the poor – are used to test explicit hypotheses concerning aggregate poverty in the United States for the period 1989 to 1997. Changes in Sen measures of poverty are investigated for cash and comprehensive income using the official poverty line and six additional poverty lines drawn using thresholds set at 50, 75, 125, 150, 175 and 200 percent of the official level. The paper also reports on the effects of using comprehensive income on subgroup poverty rates and on the demographic composition of the poor.     

TRENDS IN AGGREGATE HOUSEHOLD WEALTH IN THE US., 1900–83

New estimates of aggregate household wealth for the U S. covering selected years in the period from 1900 to 1983 are presented. I find that marketable wealth per capita grew at 1.46 percent per year in real terms over the 1900–83 period, while real wealth per household grew at 0.81 percent per year. However, the growth rate was not uniform over the period, with the rates high during the 1900–29 and the 1949–69 periods, and slow during the other years. Moreover, real per capita wealth actually increased more slowly than real per capita disposable income and real per capita GNP over the century. I also find dramatic changes in the composition of household wealth over the century. In particular, both tangibles and fixed claim assets increased relative to total assets over the period from 1900 to 1983, while equities fell from about half to a quarter. Owner-occupied housing increased only moderately as a proportion of assets, from 17 percent in 1900 to 20 percent in 1983. Unincorporated business equity fell from over a third of total assets to 12 percent. Among financial assets, the biggest relative growth occurred in deposits in financial institutions, which grew from 8 percent in 1900 to 22 percent in 1983. Corporate stock had the most volatile behavior in the household portfolio, growing from 13 percent of total assets in 1900 to 27 percent in 1929, falling to 10 percent in 1949, rising to 22 percent in 1965, and then falling to 11 percent by 1983. Debt as a proportion of total assets rose from 5 percent in 1900 to 16 percent in 1983. Finally, both pension reserves and social security wealth increased relative to marketable assets from virtually zero in 1900 to 12 and 48 percent, respectively.