Some tests for money illusion and distribution effects in the aggregate consumption function

The hypothesis that the aggregate consumption displays money illusion in the sense that consumers mistake an increase in nominal incomes for an increase in real incomes and thus consume more out of given real incomes in response to a rise in the price level and the hypothesis that the aggregate consumption depends on the distribution of income are tested using Finnish annual and quarterly data. The money illusion hypothesis is rejected by annual data, while it meets success with quarterly data. The hypothesis of distribution effects in the aggregate consumption is supported by annual data. Particularly, equalizing the distribution of income would increase the aggregate consumption. In view of the quality of data on personal income distribution this conclusion cannot be regarded as more than tentative.     

Monopolistic competition and income dispersion

We develop a model of monopolistic competition that accounts for consumers’ heterogeneity in both incomes and preferences. This model makes it possible to study the implications of income redistribution on the toughness of competition. We show how the market outcome depends on the joint distribution of consumers’ tastes and incomes and obtain a closed-form solution for a symmetric equilibrium. Competition toughness is measured by the weighted average elasticity of substitution. Income redistribution generically affects the market outcome, even when incomes are redistributed across consumers with different tastes in a way such that the overall income distribution remains the same.     

Growth,mobility and social progress

We evaluate social progress on the basis of panel data on individual incomes by comparing the value of social welfare in the observed panel data to its value in a situation where individuals receive their first period income in each period. We derive necessary conditions for the welfare gain to be positive, and show how it can be decomposed in an effect of economic growth, a mobility effect and a cost due to aversion to time fluctuations given individuals’ ranks in the income distribution. The mobility effect, generated by reranking in the income distribution has two components: a cost due to time fluctuations in incomes and a benefit, due to equalization in time averaged incomes. We illustrate the analysis using CNEF data for Australia, Korea, Germany, Russia, Switzerland and the US. Our results indicate that the largest component of social progress is the equalization of time averaged income, induced by reranking. In countries with high growth (Australia, Korea and Russia), the growth effect is larger than the mobility effect, but in countries with low growth (Germany, Switzerland and the US), the opposite holds true. The poor performance of the US is explained by the large costs of income fluctuations and the way economic growth is distributed.     

Forest incomes and rural livelihoods in Chiradzulu District, Malawi

This paper examines forest income among rural dwellers in one of Malawi's most densely populated districts, Chiradzulu. 160 households were interviewed in two sites, only 20 km apart, purposely selected on the basis of access to a forest reserve. People are extremely poor, with 97% having incomes of less than 1 USD/day. Forest income constitutes around 15% of total income; only non-farm income (47%) and agriculture (28%) rank higher. The poorest segment depends more on forest income than the least poor group, but the medium income group exhibits the highest dependence. Fuelwood constitutes the major source of such income followed by fodder. The incomes mainly support current consumption. People with better access to the forest reserve have higher total income, forest income, and relative forest income. As revealed through a Gini-coefficient analysis, forest resources have an important income equalizing effect across rural households. A particular group of resource poor farmers (8.1% of sample), with little access to agricultural land and a high representation of female heads, derives an average of 65% of their income from the forest. An important policy lesson is that restricting people's access to forest resources can have substantial effects on household livelihoods and welfare, and would serve to increase income inequalities in the area. Livelihood researchers should now recognize the substantial income from forest resources.     

收入分布、破坏性创新与社会福利

通过构建破坏性创新企业与在位企业进行市场竞争的双寡头博弈模型,分析在具有不同收入分布特征市场中破坏性创新企业的市场绩效及社会福利。研究发现,在收入差距较大的市场中,破坏性创新企业获得更大的市场份额和利润,社会福利相对较小;相反,在收入水平较高且分布趋向同质的市场中,在位企业获得更大的市场份额和利润,并且,破坏性创新厂商的利润随着收入水平的提高而降低。同时,随着收入水平的提高,两企业的产品质量不断提高,但质量差距不断扩大,社会总福利也随之增加。最后,进一步阐释了破坏性创新更多地发生于贫富差距较大的新兴市场的微观机制,为企业根据不同市场的收入分布特征选择竞争战略提供理论依据,为相关国家基于收入分布特点制定限制或支持破坏性创新创业政策提供理论参考。     

职业分层、中产阶级与收入分配

社会职业不仅反映着人们在社会、经济生活中所处的分工角色,它也带来了人们在收入水平和社会经济地位方面的差距和不同,在各种职业背后存在着以生产条件的占有关系为依据的社会生产关系。社会不可能通过消除普通生产劳动行业和职业,让人们都进入"中等收入"职业。因此,要缩小社会收入分配领域的巨大差距,必须改变现有的分配结构,在初次分配领域,即物质生产领域,进行分配制度的改革,增加普通劳动者的收入,使普通劳动者能够通过勤奋劳动达到"中等收入"水平,这才是在社会主义制度下"扩大中等收入者群体"的正确途径。所谓"人力资本"的收益不过是在雇佣劳动制度的生产方式下,部分人能以物质生产乃至资本主义竞争所必需的知识为条件,进入社会生产关系中具有一定社会经济地位的职业,在这种职业上他们利用社会生产关系所赋予的对生产与竞争能力的控制,从社会剩余产品中占有一定份额。因此,"人力资本"所有者的收入并不是所谓"人力资本"的创造,而是由社会生产关系所决定的收入分配形式。     

收入差距、位置消费与社会稳定

适度、合理的收入差距,不仅是激励人们竞争,促进发展的重要务件,也是位置消费产生的基本条件;但过分悬殊的收入差距则不仅会影响人们的社会心理,不利于提高有效消费,而且可能产生畸形的位置消费行为,甚至会因此影响社会的稳定.在分析和研究目前收入分配问题时,应当从位置消费的新视角研究它们对社会稳定的影响.研究位置消费有利于我们从人们相互比较的满意度中观察改革的效果,权衡各项利弊得失,并及时地采取微调措施,尽可能地减少改革的摩擦和阻力.     

Redistribution,inequality, and efficiency with credit constraints: Implications for South Africa

We develop a model that jointly determines the distribution of income and the aggregate macrodynamics. We identify multiple channels through which alternative public policies such as transfers, consumption and income taxes, and public investment will affect the inequality-efficiency trade-off. Income tax and transfers have both a direct income and an indirect substitution effect; a consumption tax has only the latter. We present extensive numerical simulations motivated by the South African National Development Plan 2030, the objective of which is to reduce soaring inequality and increase per capita GDP. Our results illustrate how the judicious combination of social grants and a consumption tax may help achieve these targets. The simulations also suggest that the sharp decline in the private-public capital ratio, coupled with a high degree of complementarity between public and private capital may help explain the persistence of market inequality in South Africa during the last two decades.     

Household income mobility in rural China: 1989–2006

This article analyzes household income mobility in rural China between 1989 and 2006. The results indicate that incomes in rural China are highly mobile. The high degree of rank and quantity mobility implies re-ranking and mean convergence in income distribution, but the disparity between them also enlarged with leveling-up and Gini divergence brought about by economic growth. In addition, there exists considerable transitorily poor and rich in positional mobility. Though, transitory movement provides an opportunity for both poor and rich and decreases long-term inequality, it also causes considerable income fluctuations and economic insecurity. Moreover, the equalizing effect of income mobility on income inequality is weakening.     

A concern about low relative income, and the alignment of utilitarianism with egalitarianism

A utilitarian social planner who maximizes social welfare assigns the available income to those who are most efficient in converting income into utility. However, when individuals are concerned about their income falling behind the incomes of others, the optimal income distribution under utilitarianism is equality of incomes.     

Non-monotonic welfare dynamics in a growing economy

In an overlapping generations economy with endogenous income growth, I combine themes from the work of Cooper et al. (2001), Kapur (2005) and Eaton and Eswaran (2009) in order to provide an example of an economy whose welfare dynamics are non-monotonic. Particularly, the evolution of social welfare can be distinguished between two different regimes that arise naturally during the process of economic development. At relatively early stages, status concerns are inactive and welfare increases following the rising consumption of normal goods. During the later stages, however, individuals engage in some type of status competition that does not allow consumption to improve their well-being: their welfare actually declines as successive generations of agents increase labour effort at the expense of leisure.     

Showing off to the new neighbors? Income,socioeconomic status and consumption patterns of internal migrants

This paper analyses incomes and socioeconomic status of internal migrants over time and in comparison to their new neighbors and investigates whether status consumption is a way for newly arrived city dwellers to signal their social standing. Using a novel dataset from the emerging economy of Kazakhstan we find that internal migrants earn an income and status premium for their move. In a comparison to indigenous city dwellers their earnings and household incomes are not significantly different; however, mobile households report a significantly higher subjective socio-economic status. Exploiting expenditure data, we find that recent migrant households gain status from using visible consumption to impress their new neighbors. This signaling might be used as adaptation to the new economic and social environment or to gain access to social capital.     

Health, Wealth, and Fairness

How much health should we have and how should it be distributed? This paper studies how to define social objectives for the allocation of health and income in a setting where individuals may differ in their preferences about health and consumption, earning ability, and health disposition. It is shown, on the basis of three simple ethical principles, that a reasonable social objective is to apply the maximin criterion to “full‐health equivalent” incomes. An application to the choice of the optimal health policy illustrates how this social objective may be used.     

间接税负担对收入分配的影响分析

本文利用城市住户调查资料考察了中国增值税、消费税和营业税这三项主要的间接税在不同收入群体的负担情况。我们的研究表明 ,低收入家庭收入中负担增值税和消费税的比例大于高收入家庭 ,但高收入家庭收入中负担营业税的比例大于低收入家庭。整个间接税是接近成比例负担的。间接税恶化了收入分配 ,但并不显著     

Heterogeneous preferences and in-kind redistribution: Theory and evidence

This paper examines the impact of social heterogeneity on in-kind redistribution. We contribute to the previous literature in two ways: we consider (i) the provision of several public goods and (ii) agents different not only in income, but also in their preferences over the various goods provided by the public sector. In this setting, both the distribution and size of goods provision depend on the heterogeneity of preferences. Our main result is that preference heterogeneity tends to decrease in-kind redistribution, while income inequality tends to increase it. An empirical investigation based on United States Census Bureau data confirms these theoretical findings.     

Evasion Effects of Changing the Tax Mix*

This study assesses claims that shifting toward greater indirect taxes will reduce evasion, thereby improving the distribution of real net incomes and generating a 'fiscal dividend'. Practical considerations suggest that industry sectors which evade income taxes will also be strongly inclined to evade indirect taxes on their output. A general equilibrium analysis finds that changing the tax mix will have little or none of the claimed anti–evasion or distributional effects. Increased indirect taxes on evaders' consumption purchases will be shifted onto suppliers in the compliant sector. Evaders will end up evading less income taxes but evading more indirect taxes     

Optimal Dynamic Taxation with Distinctive Forms of Social Status Attainment

We examine the role of both consumption‐ and wealth‐induced social comparisons in setting dynamic optimal income taxation. Under complete information, state‐invariant labor income taxes are used to remedy the externality caused by consumption‐induced social comparisons, while state‐contingent capital income taxes are used to remedy the externalities caused by both consumption‐ and wealth‐induced social comparisons. Under incomplete information, distinct types of agents are subject to an identical marginal capital income tax, which removes social comparisons. To solve the information problem, low‐productivity agents could be subject to a lower marginal labor tax than high‐productivity agents, which contradicts the traditional result in the Mirrlees–Stiglitz models.     

Income Mobility, Inequality and Social Welfare

It is often argued that an observation of rising annual income inequality need not have negative normative implications. The argument is that if there has been a sufficiently large simultaneous increase in mobility, the inequality of income measured over a longer time period can be lower despite the rise in annual inequality. In this paper, it is shown by example that if normative implications are drawn from a standard social welfare function, the set of circumstances put forward in the above argument are not sufficient to guarantee that social welfare will improve. The reason is that even though rising mobility does reduce longer term inequality, it also increases the variability of income profiles over time and the latter has a detrimental social welfare effect. Hence, there are two types of mobility: one which reduces inequality (regression to the mean), but another that increases inequality (relative movements uncorrelated with incomes). Further, if individuals' aversion to income variabiltiy is sufficiently larger than the social welfare judge's aversion to inequality, then an increase in mobility, no matter how large, cannot offset the negative normative effect of rising annual inequality.     

Understanding Rising Income Inequality in Germany, 1999/2000–2005/2006

We examine the factors behind rising income inequality in Europe's most populous economy. From 1999/2000 to 2005/2006, Germany experienced an unprecedented rise in net equivalized income inequality and poverty. At the same time, unemployment rose to record levels, part‐time and marginal part‐time work grew, and there was evidence for a widening distribution of labor incomes. Other factors that possibly contributed to the rise in income inequality were changes in the tax and transfer system, changes in the household structure (in particular the rising share of single parent households), and changes in other socio‐economic characteristics (e.g., age or education). We address the question of which factors were the main drivers of the observed inequality increase. Our results suggest that the largest part of the increase was due to increasing inequality in labor incomes, but that changes in employment outcomes and changes in the tax system also contributed considerable shares. By contrast, changes in household structures and household characteristics, as well as changes in the transfer system only seem to have played a minor role.     

Wage subsidies, work incentives, and the reform of the Austrian welfare system

We analyze the employment and income effects of a needs-based minimum benefit system (“Bedarfsorientierte Mindestsicherung”) which has recently been introduced in Austria. The aim of this reform was to reduce poverty as well as to increase work incentives for recipients of social assistance. On the basis of a behavioral microsimulation model we show that this new system slightly increases employment but reduces incomes for the poorest households remaining unemployed. As an alternative, we analyze a budgetary neutral reform proposal which reduces financial incentives for marginal employment and provides a wage subsidy rewarding working longer hours. This alternative reform would yield larger positive employment effects, but more households would suffer from income losses. Overall, income inequality and poverty are affected little, however, both under the new social welfare system and the alternative reform proposal.