Equity-regarding poverty measures: differences in needs and the role of equivalence scales

Abstract .  The paper investigates the definition of equity-regarding poverty measures when there are different household types in the population. It demonstrates the implications of a between-type regressive transfer principle for poverty measures, for the choice of poverty lines, and for the measurement of living standard. The role of equivalence scales, which are popular in empirical work on poverty measurement, is clarified.     

Chronic and transient poverty: Measurement and estimation, with evidence from China

The paper contributes to the measurement of poverty and vulnerability in three ways. First, it proposes a new approach to separating poverty into chronic and transient components. Second, it provides corrections for the statistical biases introduced when using a small number of periods to estimate the importance of vulnerability and transient poverty. Third, it applies these tools to the measurement of chronic and transient poverty in China using a rich panel data set that extends over 17 years. Alternative measurement techniques are found to yield significantly different estimates of the relative importance of chronic and transient poverty. The precision of the estimates is also considerably enhanced by simple statistical corrections.     

Globalization, rent protection institutions, and going alone in freeing trade

We construct a two-country North-South Product-cycle model of trade with endogenous growth and trade barriers. We remove the scale effects on growth by incorporating rent protection activities by Northern incumbents. We examine the effects of two forms of globalization - an expansion of the relative size of the South and unilateral trade liberalization by either country. We find that the location of rent protection institutions and the sectoral trade structure determine whether or not globalization raises steady-state economic growth. We demonstrate that for accelerating worldwide economic growth, contrary to conventional wisdom, unilateral Northern trade liberalization is preferable to bilateral trade liberalization.     

A simple unit root test against asymmetric STAR nonlinearity with an application to real exchange rates in Nordic countries

Existing tests of the unit root hypothesis against the alternative hypothesis of exponential smooth transition autoregressive (ESTAR) nonlinearity implicitly assume symmetry under the alternative. This paper proposes a simple unit root test against the alternative of symmetric or asymmetric ESTAR nonlinearity. In the event that the unit root hypothesis is rejected, a simple test of symmetric versus asymmetric ESTAR nonlinearity is also proposed. The asymptotic distributions of the test statistics are straightforward to establish and finite-sample performance is studied with Monte Carlo simulations. An empirical application involving the real exchange rates of four Nordic countries against the U.S. dollar illustrates the usefulness of the new tests.     

An exercise to evaluate an anti-poverty program with multiple outcomes using program evaluation

To measure the effectiveness of programs with multiple outcomes, I combine multidimensional poverty measures with difference-in-difference matching estimators. I apply this technique on an anti-poverty program and show it is a more comprehensive measure of poverty reduction than a unidimensional measure.     

Default and liquidity regimes in the bond market during the 2002–2012 period

Using a real‐time random regime shift technique, we identify and discuss two different regimes in the dynamics of credit spreads during 2002–2012: a liquidity regime and a default regime. Both regimes contribute to the patterns observed in credit spreads. The liquidity regime seems to explain the predictive power of credit risk on the 2007–2009 NBER recession, whereas the default regime drives the persistence of credit spreads over the same recession. Our results complement the recent dynamic structural models as well as monetary and credit supply effects models by empirically supporting two important patterns in credit spreads: the persistence and the predictive ability toward economic downturns.     

A framework for the decomposition of poverty differences with an application to poverty differences between countries

We propose an Oaxaca-Blinder-like decomposition of poverty differences. The decomposition is based on a parametric model of the income distribution and can be used to decompose differences in poverty rates across countries or years. Poverty differences are decomposed into differences in the underlying distribution of poverty-relevant characteristics and differences in the incidence of poverty conditional on these characteristics. We illustrate our method by comparing levels and patterns of relative poverty in the USA, Great Britain and Germany during the 1990s. Our results suggest that the higher aggregate poverty rates in the USA and in Britain relative to Germany were mostly accounted for by higher poverty rates conditional on characteristics, which were partly offset by a more favourable distribution of poverty-relevant characteristics, in particular higher employment rates.This paper is part of the research programme of the TMR Network ‘Living Standards, Inequality and Taxation’. Financial support from the European Union (Contract #ERBFMRXCT980248), the UK Economic and Social Research Council, the University of Essex, and the Deutsche Forschungsgesellschaft (DFG) is gratefully acknowledged. The data used in this study were made available by Cornell University (Cross-National Equivalent File), the University of Michigan (Panel Study of Income Dynamics), the UK Data Archive (British Household Panel Survey), and the German Institute for Economic Research (German Socio-Economic Panel). Martin Biewen would like to thank the Institute for European Studies and the Department for Policy and Management at Cornell University, in particular Jonas Pontusson, Richard Burkhauser and Dean Lillard, for their hospitality and support. We are also grateful for comments by Bernd Fitzenberger, Joachim Winter, Christoph M. Schmidt, an anonymous referee and seminar participants in Essex, Heidelberg and Mannheim. Last but not least, we thank Nick Cox for providing us with updated versions of his Stata programs for drawing quantile plots.First version received: May 2003/Final version received: December: 2003     

The risk and cost of job loss in Canada, 1978–2008

We assess the risk and cost of worker displacement in Canada over the last three decades. We show that neither the risk of job loss nor the short‐term earnings losses of displaced workers trended upwards during that period. However, short‐term earnings losses of workers displaced from manufacturing increased in recent years, as a smaller proportion found a post‐displacement job in that sector. In line with Stevens ( 1997 ) and Couch and Placzek ( 2010 ), we find that high‐seniority workers and individuals with stable labour market attachment experienced, five years after displacement, earnings losses that ranged between 10% and 18%.     

Poverty,undernutrition and vulnerability in rural India: role of rural public works and food for work programmes

This paper analyses the effects of access to Rural Public Works (RPW) or Food for Work programme (FFW) on consumption poverty, vulnerability and undernutrition in India using the large household data sets constructed by the National Sample Survey for 1993 and 2004. The treatment-effects model is used to take account of sample selection bias in evaluating the effects of RPW in 1993 or FFW in 2004 on poverty. We have found significant and negative effects of participation in RPW and the Food for Work Programme on poverty, undernutrition (e.g. protein) and vulnerability in 1993 and 2004.     

Returns to scale: concept,estimation and analysis of Japan's turbulent 1964–88 economy

Abstract There is policy interest in factoring productivity growth into technical progress and returns to scale components. Our approach uses exact index number methods to reduce the parameters that must be estimated, and allows us to exploit the cross‐sectional dimension of plant‐level panel data. We show that the same equation can also be used to estimate ‘Harberger’ scale economies and technical progress indicators that require fewer assumptions. Estimates of the elasticity of scale for Japanese establishments in three major industries over 1964–88 are presented. Our study spans the high growth era of the 1960s, two oil shocks, and other exogenous shocks.     

REASSESSING SEGMENTATION IN THE LABOUR MARKET: AN APPLICATION FOR ITALY 1995–2004

The aim of this paper is to test for the presence of dualism in a standard wage regression. The disparity in wages between primary and secondary workers, according to labour market segmentation theory, is not provided by worker characteristics, but rather by job characteristics. A standard way to assess this situation is by looking at the estimated coefficients in a standard regression for comparable workers across different labour market segments. In an attempt to avoid arbitrary modelling choices, we deploy mixture regression methods which allow for endogenous determination of the number of existing labour market segments. Using Italian data, our modelling strategy outlines stark differences in returns to human capital between homogeneous workers in different markets. Thus, future policies should consider these findings when implementing labour market measures.     

Exploring the big jump in the Spanish unemployment rate: Evidence on an ‘added-worker’ effect

Spain is destroying more jobs than any other European country. In the third quarter of 2009, the unemployment rate stood at 17.9%, the second-highest rate in the 27-nation EU and the highest rate in the euro area (EA-16). The exponential growth of the Spanish unemployment rate is the by-product of falling employment rates. However, there is a second explanation which is often overlooked by unemployment forecasters: changes in labour force participation rates. On the one hand, in times of recession participation rates tend to increase in order to safeguard sustainable household incomes. This phenomenon is known as the ‘added-worker’ effect. On the other hand, there is also an opposite effect in that individuals leave the labour force in recessions because chances to find employment are low. This is the ‘discouraged-worker’ effect. Applying a threshold cointegration model to Spanish quarterly data over the period 1976-2008, we find that the added-worker effect dominates the discouraged-worker effect, but only when unemployment is below 11.7%. Above this threshold, the two effects cancel each other out so that the participation rate is not influenced by further deteriorations of economic conditions. Since Spain recently passed the 11.7% unemployment threshold, our model predicts that there will be no further increases in the participation rate in the near future.     

A GM(1,1)–Markov chain combined model with an application to predict the number of Chinese international airlines

In this paper, we propose a new dynamic analysis model which combines the first-order one-variable grey differential equation model (abbreviated as GM(1,1) model) from grey system theory and Markov chain model from stochastic process theory. We abbreviate the combined GM(1,1)–Markov chain (MC) model as MCGM(1,1) model. This combined model takes advantage of the high predictable power of GM(1,1) model and at the same time take advantage of the prediction power of Markov chain modelling on the discretized states based on the GM(1,1) modelling residual sequence. For prediction accuracy improvements, Taylor approximation is applied to MCGM(1,1) model. We call the improved version as T-MCGM(1,1) model. As an example, we use the statistical data of the number of Chinese international airlines from 1985 to 2003 for a validation of the effectiveness of the T-MCGM(1,1) model.     

The treatment effect, the cross difference, and the interaction term in nonlinear “difference-in-differences” models

In any nonlinear “difference-in-differences” model with strictly monotonic transformation function, the treatment effect is the cross difference of the observed outcome minus the cross difference of the potential non-treatment outcome, which equals the incremental effect of the interaction term coefficient.     

Internal and external exchange rate equilibrium in a cointegration framework. An application to the Spanish peseta

A simple cointegration methodology is used to compute the equilibrium real exchange rate for the peseta. The stock of foreign assets and the evolution of sectoral prices are considered to be the fundamentals for the real exchange rate. After testing for cointegration, we proceed to decompose the series into a permanent and a transitory component, following the method devised by Gonzalo and Granger. The permanent component of the real exchange rate corresponds to its (time-varying) equilibrium value, and the deviation of the actual real exchange rate from this equilibrium value gives an estimation of the degree of misalignment of the real exchange rate. By the end of the sample (1998:1), the peseta is estimated to be undervalued around 6%.     

Education, segregation and marital sorting: theory and an application to the UK

This paper presents a model of the intergenerational transmission of education and marital sorting. Parents matter both because of their household income and because their human capital determines the distribution of a child's disutility from making an effort to become skilled. We show that an increase in segregation has potentially ambiguous effects on the proportion of individuals that become skilled in the steady state, and hence on marital sorting, the personal and household income distribution, and welfare. We calibrate the steady state of our model to UK statistics. We find that an increase in the correlation of spouses in their years of education will bring about a small increase in the proportion of skilled individuals when the relative supply of skilled individuals is variable at the family level and a decrease when this supply is fixed. Ex-ante utility (of an unborn individual) increases in the first case and decreases in the second. The welfare effect of increased sorting is negative for unskilled individuals and positive for skilled individuals. Increased segregation always leads to an increase in welfare inequality between skilled and unskilled individuals.     

Farm settlement with imperfect capital markets: a life-cycle application to Upper Canada, 1826–1851

Farm settlement, where borrowing is constrained, is addressed with a life‐cycle model. Because a pioneer farm must be cleared before becoming productive, the settler first accumulates in order to purchase supplies and maintain consumption during the initial years. Implications of the model are explored using data from Upper Canada, 1826–1851: age at settlement is delayed. Settlers eventually receive higher incomes than those who do not settle; rising life expectancy contributes to settlement; an immediate income is a prerequisite to settlement. Such findings conform to the experience of Upper Canada and other pioneer areas and may also illuminate aspects of migration. JEL classification: N31, J61 Colonisation agricole quand les marchés du capital sont imparfaits:une application du modèle du cycle de vie au Haut‐Canada, 1826–51. L'auteur examine le processus de colonisation agricole quand il y a contraintes sur les emprunts à l'aide d'un modèle de cycle de vie. Parce qu'un pionnier doit d'abord défricher avant que la ferme ne soit productive, le colon doit avoir préalablement accumulé un certain pécule afin de pouvoir acheter le matériel nécessaire et maintenir sa consommation durant les premières années de colonisation. On analyse les implications de ce modèle en utilisant les données pour le Haut Canada de 1826 à1851. Entre autres résultats, on note que l'âge où l'on s'installe est reporté; que ceux qui colonisent éventuellement reçoivent des revenus beaucoup plus élevés que ceux qui ne le font pas; que la croissance de l'espérance de vie tend à encourager la colonisation; et qu'une source immédiate de revenus est un prérequis à la colonisation. Ces résultats et certains autres sont conformes à ce que l'on observe dans le Haut Canada et dans les autres zones de colonisation, et il peuvent jeter un peu de lumière sur certains aspects du processus de migration.     

The Dynamics of Poverty and the Promotion of Transition from Non‐Regular to Regular Employment in Japan: Economic Effects of Minimum Wage Revision and Job Training Support

Comparison between Japan and other advanced countries shows that the relative poverty rate is high in Japan, and that many of the poor households are those with a non‐regular worker. As for mobility between income classes, the proportion of households remaining in the poor class for a long period of time in Japan is close to the average for EU countries. The panel estimation of its effect on wages shows that the raising of the minimum wage is statistically significantly associated with an increase in wages of non‐regular workers, in particular, female, but does not seem to decrease employment. The result shows that for male non‐regular workers, firm‐provided training promotes their transition to regular employment, and that for female non‐regular workers, occupational training promotes their transition to regular employment at different firms.     

Poverty, inequality, and growth in urban China, 1986–2000

Although urban China has experienced spectacular income growth over the last two decades, increases in inequality, reduction in social welfare provision, deregulation of grain prices, and increases in income uncertainty in the 1990s have increased urban poverty. Using a large repeated cross section household survey from 1986 to 2000, this study maps the changes in income, inequality, and poverty over the fifteen-year period and investigates the determinants of poverty. We find that the increase in poverty in the 1990s is associated with the increase in the relative food price and the need to purchase items that were previously provided free or at highly subsidized prices by the state, i.e., education, housing and medical care. In addition, the increased saving rate of poor households, which is due to an increase in income uncertainty, contributes significantly to the increase in poverty measured in terms of expenditure. Journal of Comparative Economics 33 (4) (2005) 710–729.