INEQUALITY OF OPPORTUNITY IN EARNINGS AND CONSUMPTION EXPENDITURE: THE CASE OF INDIAN MEN

The paper associates inequality of opportunities with outcome differences that can be accounted by predetermined circumstances which lie beyond the control of an individual, such as parental education, parental occupation, caste, religion, and place of birth. The non‐parametric estimates using parental education as a measure of circumstances reveal that the opportunity share of earnings inequality in 2004–05 was 11–19 percent for urban India and 5–8 percent for rural India. The same figures for consumption expenditure inequality are 10–19 percent for urban India and 5–9 percent for rural India. The overall opportunity share estimates (parametric) of earnings inequality due to circumstances, including caste, religion, region, parental education, and parental occupation, vary from 18 to 26 percent for urban India, and from 16 to 21 percent for rural India. The overall opportunity share estimates for consumption expenditure inequality are close to the earnings inequality figures for both urban and rural areas. The analysis further finds evidence that the parental education specific opportunity share of overall earnings (and consumption expenditure) inequality is largest in urban India, but caste and geographical region also play an equally important role when rural India is considered.     

INEQUALITY OF OPPORTUNITY IN BRAZIL

This paper proposes a measure of the contribution of unequal opportunities to earnings inequality. Drawing on the distinction between "circumstance" and "effort" variables in John Roemer's work on equality of opportunity, we associate inequality of opportunities with five observed circumstances which lie beyond the control of the individual—father's and mother's education; father's occupation; race; and region of birth. The paper provides a range of estimates of the importance of these opportunity-forming circumstances in accounting for earnings inequality in one of the world's most unequal countries. We also decompose the effect of opportunities into a direct effect on earnings and an indirect component, which works through the "effort" variables. The decomposition is applied to the distribution of male earnings in urban Brazil, in 1996. The five observed circumstances are found to account for between 10 and 37 percent of the Theil index, depending on cohort and allowing for the possibility of biased coefficient estimates due to unobserved correlates. On average, 60 percent of this impact operates through the direct effect on earnings. Parental education is the most important circumstance affecting earnings, but the occupation of the father and race also play a role.     

农村劳动力迁移与中国工资收入不平等的地区差异:来自2005年全国人口抽样调查的证据

利用2005年全国1%人口抽样调查数据研究中国各地区农村劳动力流动和地区(县/区)内部工资性收入不平等的关系。中国地区间的差异是个人工资收入不平等最突出的决定因素,而地区内不平等程度也存在着很大的差别。农村劳动力人口的迁入有助于降低区内的收入不平等,而迁出则起相反的作用,而且这两种作用在县、县级市和市辖区间存在着显著差别。在研究中国劳动力流动与地区内和地区间的不平等关系时,应该从迁入、迁出两个角度分析其影响,并将城乡分割的二元劳动力市场状况考虑进来。     

Employment polarisation and inequality in the UK and Hungary

This paper uses household budget survey microdata to explorethe growth in household income inequality in Hungary in theperiod 1987–1995, and compares it with inequality in theUK in 1995–96. Decomposition of inequality according toboth household characteristics and income sources shows that,while inequality did grow rapidly in Hungary over the earlyTransition period, several factors prevented its growth to higherlevels. One of these factors, the distribution of employmentand earnings between households, is explored in some detail.While there was considerable polarisation between householdswith and without employed members in the UK in 1995–96,this was less of a feature in Hungary, in spite of a massivewithdrawal of men and women from the labour market between 1987and 1995. Rather, a narrowing of the gender pay gap and a continuedhigh level of female participation in employment appears tohave ensured that, even as earnings inequality in Hungary increasedto the extent that it surpassed earnings inequality in the UK,the distribution of household earnings, and the distributionof household incomes, remained more equal in Hungary.     

Earnings inequality and informal employment in Russia

In this paper, we explore the relationship between informality and earnings inequality using the data from the Russia Longitudinal Monitoring Survey (RLMS-HSE) for 2000–2010. We determine that during the entire period, earnings inequality was substantially higher in the informal sector. Informality increases earnings polarization, widening both tails of the earnings distribution. Nonetheless, inequality has declined in both formal and informal sectors. In the formal sector, changes in the distribution of monthly earnings between 2000 and 2010 were primarily generated by changes in the distribution of hourly earnings. In the informal sector, reduction of variation in monthly earnings went through two channels: declining differences in hourly rates and considerable compositional shifts within the informal sector. The results point to the importance of distributional analysis of earnings gaps and explicit accounting for the sector choice.     

Impact of Human Capital Endowments on Inequality of Outcomes in Cameroon

This paper evaluates the impact of human capital endowments on measured inequality in Cameroon. We first estimate determinants of household economic well‐being (HEW) in which human capital endowments are considered as endogenous effort‐related regressors, while controlling for exogenous circumstance‐related variables. Second, we simulate alternative counterfactual distributions of HEW: one in which human capital endowments are equalized; and the other in which variations are entirely attributable to the unobservable terms. Finally we compare inequality in the factual distribution of household well‐being with inequality in each of the simulated distributions. Direct and indirect exogenous opportunity‐inducing circumstances are inequality‐augmenting, whereas human capital endowments are inequality‐reducing in the actual distribution. Education and health interventions will ameliorate well‐being and mitigate inequality. Thus, leveling the playing ground for individuals to have equitable exposure to education, health and labor market participation is required for a low‐income country like Cameroon to enhance equity and sustainable household economic growth.     

Earnings inequality and unemployment in South Africa

Unemployment and earnings inequality have moved together remarkably closely in South Africa in recent years. This article explores the relationship between unemployment and earnings inequality in South Africa, investigating the extent to which changes in unemployment can account for changes in earnings inequality. Static and dynamic decompositions of earnings inequality by employment status reveal the centrality of unemployment in accounting for the both level and trend of earnings inequality. The distribution of employment in the formal and informal sectors is found to be of lesser importance in explaining earnings inequality, as is wage dispersion within each of these categories. The findings point to the central importance of reducing unemployment in South Africa if the extremely high levels of inequality are to be reduced.     

Accounting for United States Household Income Inequality Trends: The Changing Importance of Household Structure and Male and Female Labor Earnings Inequality

Using a shift‐share analysis on March CPS data, this paper estimates the degree to which changes in labor earnings, employment, and marriage patterns account for household income inequality growth in the United States since 1979. The factors contributing to the rapid rise in income inequality in the 1980s differ substantially from those contributing to its slower increase since that time. Unlike findings for the 1980s when changes in the correlation of spouses' earnings accounted for income inequality growth, this factor is no longer a major contributor toward its continued increase. Additionally, the 2000s business cycle is the first full business cycle in at least 30 years where changes in earnings of male household heads accounted for declines in income inequality. Instead, the continued growth in income inequality in the 2000s was accounted for primarily by increases in female earnings inequality and declines in both male and female employment.     

Inequality of opportunity in sub-Saharan Africa

Inequality of opportunity is defined as the difference in individuals’ outcome systematically correlated with morally irrelevant pre-determined circumstances, such as ethnicity, socio-economic background, area of birth. This definition has been extensively studied by economists on the assumption that, in addition to being normatively undesirable, it can be related to low potentials for growth. However, empirical estimations of inequality of opportunity require accessing rich data sources, rarely available in poorer countries. In this paper, we exploit 13 consumption household surveys to evaluate inequality of opportunity in 10 Sub-Saharan African countries. According to our results, the portion of total inequality that can be attributed to exogenous circumstances is between 40% and 56% for the generality of countries. Our estimates are significantly higher than what has been found by previous studies. We detect a positive association between total consumption inequality and inequality of opportunity, and we study the different sources of unequal opportunities. The place of birth and the education of the father appear to exert the most relevant role in shaping inequality of opportunity in the region.     

What caused earnings inequality to increase in Canada during the 1980s?

While broad consensus exists that earnings inequality increasedin Canada during the 1980s, as in other industrialised countries,there is little agreement about the causes. The main contributionof this paper is the simultaneous, empirical examination ofeight hypotheses of increased earnings inequality, using multivariateregression analysis, namely: the decline in unionisation, minimumwages and industrialisation, as well as the increase in unemployment,trade, relative supply of university-educated workers and relativesupply of female workers, and technological change. In Canada,during the 1980s, employment and unionisation factors stronglyand consistently explain the increase in annual earnings andhourly wage-rate inequality, after controlling for six otherpossible determinants. The results also point to the importanceof considering a multidimensional explanation of increased earningsinequality and avoiding generalisations across gender, incomeand work status groups.     

Changes in the structure of earnings during the Polish transition

We document changes in the structure of earnings during the economic transition in Poland. We find that inequality in labor earnings increased substantially from 1988 to 1996. A common view is that the reallocation of workers from a public sector with a compressed wage distribution, to a private sector with much higher wage inequality, accounts for the bulk of increased earnings inequality during transition (see, e.g., the models of Aghion and Commander (1999) [Aghion, Philippe, Commander, Simon, 1999. On the dynamics of inequality in the transition. Economics of Transition 7, 275–2898.] and Commander and Tolstopiatenko (1998) [Commander, Simon, Tolstopiatenko, Andrei, 1998. The role of unemployment and restructuring in the transition. In: Commander, Simon (Ed.), Enterprise Restructuring and Unemployment in Models of Transition. The World Bank, Washington, pp. 169–192.]). However, our decomposition of the sources of the increase in inequality suggests that this compositional effect accounts for only 39% of the increase. Fully 52% of the increase is due to the increase in the variance of wages within sectors. That is, earnings inequality within both the private and public sectors grew substantially, and by similar amounts. This is consistent with prior work suggesting that even state-owned enterprises in Poland moved towards competitive wage setting as they restructured (see, e.g., Pinto et al. (1993) [Pinto, Brian, Belka, Marek, Krajewski, Stefan, 1993. Transforming state enterprises in Poland: evidence on adjustment by manufacturing firms. Brookings papers on Economic Activity, 213-70.] Commander and Dhar (1998) [Commander, Simon, Dhar, Sumana, 1998. Enterprises in the Polish transition. In Simon Commander (Ed.), Enterprise Restructuring and Unemployment in Models of Transition. The World Bank, Washington, pp. 109-142.]).A substantial part of the increase in earnings inequality was between group, due largely to increased education premiums. However, changes in inequality within education–experience–gender groups account for about 60 percent of the increase in overall earnings inequality. The increases in within-group inequality were very different across skill groups, with much larger increases for highly educated workers. These patterns hold in both the private and public sectors, although increases in education premiums were somewhat greater in the private sector.     

Inequality and the business cycle: evidence from U.S. survey data

ABSTRACT

We study the effects of macroeconomic shocks on measures of economic inequality obtained from U.S. survey data. To identify aggregate supply, aggregate demand, and monetary policy shocks, we estimate vector autoregressions and impose sign and zero restrictions on impulse response functions. We find that the effects of the macroeconomic shocks on inequality depend on the type of shock as well as on the measure of inequality considered. Contractionary monetary policy shocks increase expenditure and consumption inequality, whereas income and earnings inequality are less affected. Adverse aggregate supply and demand shocks increase income and earnings inequality, but reduce expenditure and consumption inequality. Our results suggest that different channels dominate in the transmission of the shocks. The earnings heterogeneity channel is consistent with the inequality dynamics after monetary policy shocks, but it appears to be less crucial when the economy is hit by either aggregate supply or aggregate demand shocks. Using variance decompositions, we find that although the macroeconomic shocks account for large shares of the variation in the macroeconomic variables, their contributions to the dynamics of the inequality measures are limited.     

Ownership and earnings inequality in urban China

Along with advances in urban state-owned enterprise reform, fast growth of private sector and changes in the wage structure, earnings inequality in urban China has been increasing. Using data from the 1988 and 2007 waves of the urban household survey conducted by China Household Income Project, this paper attempts to examine the impact of the change in ownership structure on earnings distribution in urban China. We find that developing non-state-owned enterprises (nonSOEs) or privatization of state-owned enterprises (SOEs) enlarge earnings inequality, but the difference in earnings level between the two sectors is small. Although workers in SOEs receive higher income than in nonSOEs, the difference is more caused by endowment difference rather than coefficient differences. Introducing market power to wage determination system is more influential to the rising earnings inequality which leads more rewards on working experience and educational attainment.     

EARNINGS INEQUALITY, LABOUR SUPPLY AND SCHOOLING IN HUSBAND–WIFE FAMILIES

This paper describes the association between market work and earnings inequality across families over the life cycle and over calendar time with special attention to the different experiences of college‐educated and high‐school‐educated people. A concise and effective accounting framework is developed that allows for an assessment of the effect of the growing market employment of married women on family earnings inequality. Applying this framework to pseudo‐panel data from successive Current Population Surveys indicates that the increase in wives' employment has diminished the growth in family earnings inequality especially for well‐educated couples. Inferences about the level and change in earnings inequality depend on the degree of labor market attachment of the people studied especially in the case of wives.     

Creative Destruction and the Rise of Inequality

Common wisdom interprets the rise in inequality of the last two decades as the result of a skill-biased labor demand shift. This explanation does not account for two important observations: (i) within-group inequality has also markedly risen, and (ii) the rise of inequality has been accompanied by a rise of the volatility of earnings. This paper argues that a dual labor market structure, where some workers are paid efficiency-wages can account for the empirical regularities, in the absence of skilled biased technological change. The analysis demonstrates that an unbiased innovation, as well as North–South trade, can contribute to the efficiency wage premium, and thus to wage inequality, by increasing labor turnover.     

EQUALITY OF OPPORTUNITY: EAST VS. WEST GERMANY

The case of German reunification has been subject to extensive research on earnings inequality and labour market integration. However, little is known about the development of equality of opportunity (EOp) in East and West Germany after 1990. Using German micro data, we empirically analyse how circumstances beyond the sphere of individual control relate to inequality in East and West Germany. Our results show that EOp is larger in East than in West Germany. However, despite increasing income inequality, EOp remained surprisingly constant.     

THE GROWTH OF FAMILY EARNINGS INEQUALITY IN CANADA, 1980–2005

In this study we document recent trends in family earnings inequality using data from the Canadian Census and provide insight into the various factors that drive changes in the family earnings distribution. Over the period 1980–95 we observe substantial increases in family earnings inequality. In contrast, we find that some decrease in inequality occurred over the period 1995–2005 although the earnings of the richest 1 percent of families increased substantially. We use semi‐parametric decomposition methods to show that increases in the employment rates of men and women, increases in their educational attainment, and decreases in assortative mating tended to have equalizing effects on the family earnings distribution. We also show that increases in the returns to higher education and increases in the proportion of single individuals as well as lone‐parent families drove increases in family earnings inequality.     

Sources of earnings inequality: Estimates from an on-the-job search model of the US labor market

Since the early 1980s the labor market in the United States has seen a substantial increase in earnings dispersion. We study the issue by developing an on-the-job search model of the US labor market that allows for wage and employment mobility as a result of optimal individual behavior. We estimate its structural parameters on PSID data at different points in time to clarify the sources of the evolution of earnings inequality and instability between 1987 and 1996. This procedure allows to: compute lifetime measure of inequality on top of the usual cross-sectional measure of inequality and provide counterfactual experiments that evaluate the contribution of different parameters to changes over time by taking into account some equilibrium effects. We find that the increase in lifetime inequality and in cross-sectional inequality have been generated by different sources and that these sources are different by skills: changes in the wage offer distribution are the main determinant of the increase in inequality for skilled workers while both mobility changes and wage offer distribution changes are needed to explain changes for the unskilled.     

Earnings distribution,corporate governance and CEO pay

We investigate the relationship between earnings differentials and the pay of CEOs of 190 British companies between 1970 and 1990. We find that (i) changes in the differential between the 90th and 50th weekly earnings percentiles for non‐manual adult male workers [90:50] explain changes in the level of real CEO salary and bonus in our sample of companies; (ii) changes in this differential also account for changes in the elasticity of CEO pay to firm size; (iii) a broader measure of earnings inequality does far worse than 90:50 at explaining changes in both the level and the firm size elasticity of CEO pay; (iv) fitting the model on data for 1970–1983 and predicting pay levels for the period starting with the widespread adoption of executive share option schemes in 1984, we find a structural break in the relationship between lower management pay differentials and the pay of the CEO. We conclude first that top executive pay prior to 1984 was a stable function of both firm size and earnings differentials lower on the administrative ladder, consistent with a hypothesis advanced by Herbert Simon in 1957; and second that the use of share options from 1984 onward represents not simply a change in the mode of top executive compensation, but a de‐linking of the pay of top executives and that of their subordinates.     

CAN HOUSEHOLDS AND WELFARE STATES MITIGATE RISING EARNINGS INSTABILITY?

We compare the evolution of earnings instability in Germany and the United Kingdom, two countries which stand for different types of welfare states. Deploying data from the German Socio‐Economic Panel (SOEP) and the British Household Panel Survey (BHPS), we estimate permanent and transitory variances of male income over the period 1984–2009 and 1991–2006, respectively. Studies in this literature generally use individual labor earnings. To uncover the role of welfare state and households in smoothening earnings shocks, we compute different income concepts ranging from gross earnings to net equivalent household income. We find evidence that the overall inequality of earnings in Germany and the United Kingdom has been rising throughout the period due to both higher permanent earnings inequality and higher earnings volatility. However, taking institutions of the welfare state and risk‐sharing households into account, we find that the volatility of net household income has remained fairly stable. Furthermore, redistribution and risk insurance provided by the welfare state is more pronounced in Germany than in the United Kingdom.