How Many Jobs Must We Provide for a Balanced Postwar Economy

This study investigates how unemployment and income influence the length of time an individual remains in good health. This is a complex relationship since unemployment or low income deteriorates health but poor health can become a barrier to obtaining higher income or gaining re-employment. Data are from the British Household Panel Survey, using two measures of physical health: an index of mobility problems and a measure of self-assessed health. The results show that unemployment, low income and poor education adversely affect the time that people remain in good health. These results have important implications for public policy, particularly in an age of austerity when social protection mechanisms are under threat. In fact, the results suggest that to improve health and reduce health inequality, more investment needs to be directed at policies that enhance labour force participation, improve education and reduce income inequality.     

Can social spending cushion the inequality effect of globalization?

This paper examines whether social spending cushions the effect of globalization on within‐country inequality. Using information on disposable and market income inequality and data on overall social spending, and health and education spending from the ILO and the World Bank/WHO, we analyze whether social spending moderates the association between economic globalization and inequality. The results confirm that economic globalization—especially economic flows—associates with higher income inequality, an effect driven by non‐OECD countries. Health spending is strongly associated with lower inequality, but we find no robust evidence that any kind of social spending negatively moderates the association between economic globalization and inequality.     

公共支出结构对收入不均等影响研究——基于公共服务均等化视角分析

收入不均等影响到社会公平与经济发展,而收入公平分配是政府的主要责任,也是政府公共支出的依据之一.影响收入分配不均等的因素有很多,其中由于政府相应责任缺位,公共支出结构偏向,使得公共支出中基本公共服务支出不足是其主要原因.本文实证分析得出公共支出总量与结构严重影响基本公共服务供给,进而影响着收入不均等的水平,成为社会公平和稳定的重要因素.政府应从制度上进行公共支出改革,规范督促地方政府优化公共支出结构,不断提高对民生支出的主动性,逐步缩小基本公共服务的差距,缩小收入不均等的水平.     

SOCIAL STATUS,EDUCATION AND GOVERNMENT SPENDING IN A TWO‐SECTOR MODEL OF ENDOGENOUS GROWTH*

This paper extends the relative wealth specification of status preference to the two‐sector Uzawa (1965 )– Lucas (1988 ) model and examines the effectiveness of government spending on economic growth. It is found that the desire for relative wealth‐induced social status and/or the education component of relative wealth‐induced social status are important ingredients in determining the growth rate effects of government spending. Provided that the agent is concerned with his or her relative social position, the education‐induced social status plays a more important role than the physical‐asset‐induced social status in determining the validity of public spending on growth. If individuals do not care about their education‐driven social rewards, then an increase in government spending has no effect on the balanced growth rate regardless of the presence of the physical‐asset‐induced social status. A rise in government spending reduces the long‐run growth rate if the education‐induced social status is present.     

Pro‐social leadership under authoritarianism

Authoritarianism is regarded as being unaccountable for people's needs, but few studies have documented how authoritarian countries balance their policy goals. China is known to use a promotion system to incentivize local leaders to develop the economy, while neglecting social spending. This paper documents that more leaders having a liberal arts background have been promoted as top provincial leaders. After carefully ruling out other channels, we provide evidence that the shift of top provincial leaders’ college educational backgrounds from science/technology to liberal arts/social science has increased fiscal expenditure shares on science, education, culture and public health and cut economic construction expenditures accordingly. The finding is mainly driven by the post‐1994 period, when local leaders had stronger incentives for economic growth. This indicates that Chinese top authorities are promoting more pro‐social local leaders when providing pro‐growth incentives in general.     

Social security, public education and the growth-inequality relationship

We study how the relationship between economic growth and inequality depends upon the levels of funding of two of the largest government programs, public education and social security. We do this in the context of an overlapping generations economy with heterogeneous agents where the government collects a tax on labor income to finance these programs. We show that in our model an increase in government spending on social security reduces income inequality and can have a non-monotonic effect on growth. When the initial level of social security funding is low, as is the case in most poor economies, then its increase will enhance growth. When its funding level is high as is typical for developed countries, we show that its further increase can slow down growth while reducing income inequality. These results obtain regardless of whether the increase in social security funding is financed by a tax increase or by cutting the public education budget. We also find that the effects of increasing the level of public education expenditures or the overall size of the government budget (holding the budget composition fixed) are characterized by similar non-monotonic growth-inequality relationships.     

Income inequality,unemployment, and poverty in Nigeria: a vector autoregressive approach

The main features of poverty are low levels of consumption and income, a fact‐of‐life in most African countries. This paper analyzes the fundamental trends of per capita income, government capital expenditure, the human development index, and the rate of unemployment in the Nigeria. A vector autoregressive model finds that: A reduced unemployment rate improves human development and consequently reduces poverty. As growth in public capital expenditure rises, unemployment falls and the human development index improves. Therefore, infrastructure‐based policies, which initially reduce unemployment, will also improve the living conditions of Nigerians in the end.     

GROWTH,INEQUALITY, AND ECONOMIC FREEDOM: EVIDENCE FROM THE U.S. STATES

This article returns to the discussion of how income inequality affects economic growth. The main argument of the article is that economic freedom is likely to mediate the association between inequality and growth. In a panel of 300 observations from six 5‐year periods across the 50 U.S. states, I employ five different measures of inequality. The results show that across measures, the growth effects of inequality turn more positive with more economic freedom. The moderating effects are mainly driven by measures of public sector consumption. (JEL O11, O38, O43, P48)     

Which country uses public social expenditure efficiently among OECD countries?

In this study, we estimate the efficiency of public social expenditure and examine what exogenous factors affect the efficiency for OECD countries. In doing so, we use the Stochastic Frontier Model. Our findings suggest the following. First, public social expenditure related to unemployment and family as well as tax burden ratio significantly reduce income inequality. Second, corruption affects the efficiency of public social expenditure. This implies that even though two countries incur the same public social expenditure, a country with a low corruption index has higher efficiency of public social expenditure than that with a high corruption index.     

On indeterminacy and growth under progressive taxation and productive government spending

We examine the theoretical interrelations between equilibrium (in)determinacy and economic growth in a one‐sector representative‐agent model of endogenous growth with progressive taxation of income and productive flow of public spending. We analytically show that, if the demand‐side effect of government purchases is weaker, the economy exhibits an indeterminate balanced‐growth equilibrium and belief‐driven growth fluctuations when the tax schedule is sufficiently progressive or regressive. If the supply‐side effect of public expenditures is weaker, indeterminacy and sunspots arise under progressive income taxation. In sharp contrast to traditional Keynesian‐type stabilization policies, our analysis finds that raising the tax progressivity may destabilize an endogenously growing economy with fluctuations driven by agents’ self‐fulfilling expectations.     

The political economy of public education

I study the relationship between income inequality and public spending in education in a voting model. Voters collectively choose the uniform quality level of public education, the amount of a public good, and the tax rate on labor income. Parents can decide to opt-out of the public education system by purchasing private education at the desired quality level, and children’s expected income is assumed to be increasing in the quality of education. I show that higher income inequality is associated with higher governmental spending in education if and only if the expected marginal returns to education are larger for the children of relatively low income parents. In turn, better public education tends to reduce future inequality. These results are consistent with most findings in the empirical literature about public investment in education. Lastly, I show that for other kind of publicly provided goods, such as health care, the relationship with income inequality exhibits an ambiguous or opposite sign.     

Heterogeneity in Ability and Inheritance,Disparities, and Development

This paper investigates the impact of income inequality on economic growth. A two-period overlapping generations model is developed where agents are heterogeneous in innate abilities and inheritance. In the first period, they receive their inheritance and their abilities are revealed. There are only two types of abilities: high and low. Individuals decide on their education level, and divide their inheritance between spending on education and saving. In the second period, individuals supply their labor and allocate the labor income and the return to their saving between consumption and bequests to their offsprings. Initial capital stock is owned entirely by the capitalists. In this context, a more equal distribution of income enhances economic growth if the economy is lower than a threshold capital-labor ratio, while income inequality has an insignificant effect above this threshold. The predictions of the model are tested empirically using the Hansen (1999) threshold estimation. The results, using a panel of 70 countries for the period 1971-1999, suggest that there is a statistically significant threshold income per capita, below which the coefficient on the relationship between inequality and economic growth is significantly negative and above which the estimate is not significant.     

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.     

Heterogeneous Preferences, Education Expenditures and Income Distribution

This paper introduces heterogeneous preferences to a growth model which incorporates human capital, accumulated through either public or private education. The implications of heterogeneous preferences for income and its distribution are the focus of the paper. Public education expenditure is determined through a voting mechanism where the median preference rather than median income household is the decisive voter. The paper extends the work of Glomm and Ravikumar (1992) and shows first, that heterogeneous preferences increase income inequality in the private education model and second, public education can overcome the added heterogeneity and reduce income inequality. The results strengthen the arguments for public education as a redistributive mechanism.     

财政分权、城乡收入差距与经济增长

利用1994年分税制后的经验数据,本文估计了一个包含增长方程、城乡收入差距方程和财政支出方程的联立方程模型,来估算财政分权对经济增长和城乡收入差距的影响。研究结果表明,财政分权使地方政府的财政支出显著增加,但财政支出的增加并不必然有利于经济增长和拉大城乡收入差距。如果在地方财政支出水平上升的同时,使科学教育和农业支出,特别是科学教育支出在总支出中的比重得以增加,将有可能在保持经济高增长的同时,使城乡收入差距得以缩小。     

Redistribution in the age of austerity: evidence from Europe 2006–2013

We examine the relationship between changes in a country’s public sector fiscal position on inequality at the top and bottom of the income distribution during the age of austerity from 2006 to 2013. We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on Statistics of Income and Living Conditions (EU-SILC) and IMF data for 12 European countries, we find that more severe adjustments to the cyclically adjusted primary balance (i.e., more austerity) are associated with a more unequal distribution of income driven by rising inequality at the top. The data also weakly suggests a decrease in inequality at the bottom. The distributional impact of austerity measures reflects the reliance on regressive policies and likely produces increased incentives for rent-seeking while reducing incentives for workers to increase productivity.     

Subsidizing healthcare in the presence of market distortions

The paper develops a three-sector full-employment general equilibrium model for a small open developing economy with exogenous labour market imperfection and a non-traded sector providing healthcare services, the consumption of which generates positive externalities. Our main objective is to show that the optimal consumption subsidy to healthcare, if solely judged from the standpoint of economic growth, is strictly positive (zero) when the production technology of the healthcare sector is of the variable (fixed) coefficient type. However, in the variable coefficient case, the optimal per capita expenditure on healthcare crucially hinges on the degree of labour market imperfection and the quality of services provided by the healthcare sector. The latter result can possibly be considered as a theoretical justification why the magnitude of per capita public spending on healthcare services is significantly lower in the developing countries compared to that in the developed nations. Besides, using the Sen's (1974) index of social welfare that takes into consideration both the growth and income inequality aspects, we have proved that the optimal health subsidy is positive irrespective of the nature of production technology of the healthcare sector. Furthermore, most of these results are found to be valid even in the presence of Harris-Todaro type unemployment. Finally, the results lead to a few important policy implications in the context of the developing countries.     

The spillover effects of innovative ideas on human capital

This paper extends a two‐period overlapping generations model of endogenous growth where the interactions between public infrastructure and human capital with research and development (R&D) activities and growth are studied. The paper makes two important contributions. First, it accounts for the spillover effect of the stock of ideas on learning, which in turn promotes the production of innovative technologies. In doing so, it brings to the fore a two‐way interaction between human capital and innovation. The paper then applies various econometric methods which confirm the above theoretical thesis. Second, the solutions of the model emphasize the important role public spending on infrastructure, human capital and R&D can play in promoting economic growth. However, the findings also show that trade‐offs in the allocation of public spending may inevitably emerge. In particular, investment in public infrastructure at the expense of spending on R&D is less likely to succeed in promoting economic growth, whereas it may be more effective to foster growth through an offsetting cut in another productive component, namely, education. In light of these potential trade‐offs, governments in low‐income countries need to use their limited budgets as part of holistic measures in order to achieve efficient outcomes.     

Tax Havens,Growth, and Welfare

This paper develops an endogenous growth model featuring tax havens, and uses it to examine how the existence of tax havens affects the economic growth rate and social welfare in high‐tax countries. We show that the presence of tax havens generates two conflicting channels in determining the growth effect. First, the public investment effect states that tax havens may erode tax revenues and in turn decrease the government's infrastructure expenditure, thereby reducing growth. Second, the tax planning effect of tax havens reduces marginal cost of capital and hence encourages capital accumulation so as to spur economic growth. The overall growth effect is ambiguous and is determined by the extent of these two effects. The welfare analysis shows that tax havens are more likely to be welfare‐enhancing if the government expenditure share in production is low, or the initial income tax rate is high. Moreover, the welfare‐maximizing income tax rate is lower than the growth‐maximizing income tax rate if tax havens are present.     

Effect of the Tax System ON R&D Intensity,Growth, Wages and Consumption Share

We propose a general equilibrium knowledge‐driven (semi‐)endogenous‐growth model with horizontal R&D, which is extended to consider two types of labour, skilled and unskilled, and exogenous government expenditure, financed through taxes on financial assets and on labour income, to analyse the implications of the tax system on R&D intensity, economic growth, wage inequality and consumption share in the output. In particular, we show that: (i) taxes have negative influence in the consumption share, being higher the marginal effect of the labour‐income tax; (ii) for any given government expenditure share, an increase (a decrease) in financial‐assets tax decreases (increases) the labour‐income tax; (iii) only the financial‐assets tax affects negatively the R&D intensity and the skill‐premium; thus, to reduce the skill‐premium the financial‐assets tax must increase; (iv) ignoring the effect on wage inequality and on R&D intensity, taxes are substitutes.