Trade liberalization and wage inequality: Evidence from Korea

This paper investigates the heterogeneous income distribution effects of trade liberalization using Korean survey data from years of 2000–2015. Following the Stolper-Samuelson theorem most of previous research studying the effects of trade liberalization on wage differences focus on workers’ characteristics (e.g., skilled or unskilled) while heterogeneity within the same worker group has not been yet substantially investigated. To fill this gap, this paper provides empirical evidence of wage inequality across firms within the same group of workers caused by trade liberalization, potentially implied in the new-new trade models with firm heterogeneity. Employing a difference-in-differences (DID) specification, we find that the wages of unskilled workers in Korea have increased since its FTAs with more advanced countries, such as members of EU and the US, came into effect, while the effects on the wages of skilled workers are negative but not statistically significant. We also show that wage effects are heterogeneous across firms within unskilled and skilled worker groups, while the positive effects are statistically significant and largest for unskilled workers in medium-large sized firms. These findings are in line with both traditional and new-new trade models.     

The Politics of Inequality as Organised Spectacle: Why the Swiss Do Not Want to Tax the Rich

In 2015, Swiss voters had the opportunity to impose a tax on the super rich in a popular vote and thereby fund a redistributive policy. However, a large majority voted against its seemingly obvious self-interest and rejected the tax. We propose an explanation for this puzzling outcome, bridging the usually separate behavioralist and institutionalist perspectives on the politics of inequality. We start from the observation that political economy tends to neglect processes of preference formation. Theorising preferences as socially constructed, we show that interest groups played a major role in shaping the outcome of the vote. Business frames were multiplied through allied parties and the media and had a major impact on individual voting behaviour. In addition, we demonstrate that interest groups representing business interests derive the content of their communication from business’s structurally privileged position in the capitalist economy. Specifically, creating uncertainty about possible perverse effects of government policies on jobs and growth is a powerful tool to undermine popular support. Frames based on this structural power ultimately explain why the Swiss refrained from ‘soaking the rich.’     

Measuring lnequality in the Middle East 1990–2016: The World’s Most Unequal Region?

In this paper we combine household surveys, national accounts, income tax data and wealth data in order to estimate income concentration in the Middle East for the period 1990–2016. According to our benchmark series, the Middle East appears to be the most unequal region in the world, with a top decile income share as large as 64 percent, compared to 37 percent in Western Europe, 47 percent in the US and 55 percent in Brazil (see Alvaredo et al. 2018). This is due both to enormous inequality between countries (particularly between oil‐rich and population‐rich countries) and to large inequality within countries (which we probably under‐estimate, given the limited access to proper fiscal data). We stress the importance of increasing transparency on income and wealth in the Middle East, as well as the need to develop mechanisms of regional redistribution and investment.     

Evidence of a glass ceiling for arts and culture professionals in Korea

Using the five available waves of the Wage Structure Survey data, this study employs quantile decomposition to investigate the existence of a glass ceiling among Korean professionals. The decomposition results for all professional workers show an inverse U-shape, which implies no evidence of a glass ceiling. However, we find a monotonically increasing pattern for arts and culture professionals, indicating strong evidence of a glass ceiling on their labour market. This result implies that, as the wage quantile moves from lower to higher levels, female professionals in arts and culture jobs face significant barriers to career advancement. This analysis supports the recent assertion of UNESCO that gender equality in culture is not immune to inequalities and discrimination.     

Unemployment insurance benefits and income smoothing

Labor unemployment insurance reduces unemployment concerns. We argue that these benefits moderate incentives to smooth earnings to reduce employees’ concerns about unemployment risk. Using exogenous variations in unemployment insurance benefits, we find evidence consistent with this argument. We also find that the link between unemployment insurance benefits and income smoothing is stronger when there is higher unemployment risk and when the firm is likely to employ more low-wage workers, who find unemployment insurance benefits especially useful. Our paper contributes to the literature by showing that public policy decisions such as unemployment insurance have significant, albeit probably unintended, externalities on corporate financial reporting.     

The Great Recession,Austerity and Inequality: Lessons from Ireland

The advent of the Great Recession and the widespread adoption of fiscal austerity policies have heightened concern about inequality and its effects. We examine how the distribution of income in Ireland—a country which experienced one of the most severe economic contractions—has evolved over the years 2008 to 2013. Standard cross‐sectional analysis of the income distribution shows broad stability in the Gini coefficient and in decile shares, with one main exception: the share of the bottom decile fell sharply, with the largest fall in average incomes being for that group. Longitudinal analysis shows that the falls in the average income for the bottom decile were not due to decreasing income for those remaining in the bottom decile, but to falls in income from those initially located in higher deciles. The extent of redistribution through taxes and transfers increased strongly, as measured by the Reynolds‐Smolensky index, which rose from 0.20 before the onset of the crisis to 0.27 in 2013. Analysis indicates that about three‐quarters of this increased redistribution is due to automatic stabilisers and one‐quarter to discretionary policy changes.     

Will China's WTO accession worsen farm household incomes?

Many fear China's accession to the World Trade Organization (WTO) will impoverish its farmers via greater import competition in its agricultural markets. We explore that possibility bearing in mind that, even if producer prices of some (land-intensive) farm products fall, prices of other (labor-intensive) farm and nonfarm products could rise. New estimates, from the global, economy-wide numerical simulation model known as Global Trade Analysis Project (GTAP), of the likely changes in agricultural and other product prices as a result of WTO accession, are drawn on to examine empirically the real income implications of China's WTO accession. The results suggest farm–nonfarm income inequality may well rise within China but rural–urban income inequality need not. The article concludes with some policy suggestions for alleviating any pockets of farm household poverty that may emerge as a result of WTO accession.     

Regional economic performance in China1

This paper investigates convergence patterns among China's provinces using GDP data for the period 1952–97. We analyze convergence behaviour on the basis of Markov chains proposed by Quah (1993 ) and the generalized entropy decomposition proposed by Shorrocks (1980, 1984 ). Both sets of results show similar evidence of convergence within the pre‐defined geo‐economic sub‐regions, but no evidence is found of convergence between the sub‐regions. This finding has important policy implications for regional economic development in China. JEL classification: C33, E20, O47.     

Is the Optimal Labor Income Tax Progressive in a Unionized Economy?*

This paper concerns optimal nonlinear labor income taxation in an economy with union wage setting and endogenous hours of work. The purpose is to study the determinants of tax progression. We show that the optimal degree of progression of the labor income tax depends on the extent to which the government can influence the wage rate via tax policy as well as on its ability to redistribute income across individuals. In addition, the argument for progressive labor income taxation depends on whether hours of work are chosen by the employed themselves or the union.