Showing papers in "Review of Income and Wealth in 2001"
TL;DR: In this article, an original decomposition method based on micro-simulation techniques is proposed to study the mechanisms underlying the apparent stability of the income distribution in Taiwan, and it allows isolating the respective impact of changes in: (a) the earning structure; (b) labor-force participation behavior; and (c) the socio-demographic structure of the population.
Abstract: This paper studies the mechanisms underlying the apparent stability of the income distribution in Taiwan. An original decomposition method based on micro-simulation techniques is proposed. Applied to the distribution of income in Taiwan since 1979, it permits isolating the respective impact of changes in: (a) the earning structure; (b) labor-force participation behavior; and (c) the socio-demographic structure of the population. The stability of the distribution in Taiwan appears as the result of various structural forces which happened to offset each other. The small drop observed in the inequality of individual earnings resulted from the combination of unequalizing changes in the wage structure and the effects of changes in female labor-force participation as well as in the educational structure of the population. However, the same offsetting forces, together with changes in the composition of households, resulted in a small increase in the inequality of the distribution of equivalized household income.
214 citations
TL;DR: The authors used Yitzhaki's Gini decomposition to decompose total inequality between individuals in the world, by continents and regions, and found that Asia is the most heterogeneous continent; between-country inequality is much more important than inequality in incomes within countries.
Abstract: Using the national income/expenditure distribution data from 111 countries, we decompose total inequality between the individuals in the world, by continents and regions. We use Yitzhaki’s Gini decomposition which allows for an exact breakdown of the Gini. We find that Asia is the most heterogeneous continent; between-country inequality is much more important than inequality in incomes within countries. At the other extreme is Latin America where differences between the countries are small, but inequalities within the countries are large. Western Europe/North America is fairly homogeneous both in terms of countries’ mean incomes and income differences between individuals. If we divide the world population into three groups: the rich (those with incomes greater than Italy's mean income), the poor (those with incomes less than Western countries’ poverty line), and the middle class, we find that there are only 11 percent of people who are “world middle class”; 78 percent are poor, and 11 percent are rich.
183 citations
TL;DR: In this article, a unified framework for aggregating income types to create an income definition that enables researchers to make valid comparisons across nations is proposed. But it is difficult to quantify all elements of any new definition in a way that makes international comparisons easy.
Abstract: By marrying a “top-down” national income-based approach with a “bottom-up” microdata approach, and a national income accounting perspective with a theoretical perspective, this article attempts to provide a unified framework for aggregating income types to create an income definition that enables researchers to make valid comparisons across nations. An examination of several national household income surveys shows that it is next to impossible to quantify all elements of any new definition in a way that makes international comparisons easy. The framework nonetheless illuminates the differences in current practice and allows researchers to assess the effect of those differences on income distribution measures.
116 citations
TL;DR: In this paper, the authors present estimates of recent rates of non take-up of social assistance benefits and show that the probability that a rational individual takes up social assistance increases with the expected benefit amount and duration, and falls with application cost and stigma.
Abstract: In several countries social assistance dependence has been increasing since the 1980s. After surveying the theoretical and empirical take-up literature, this study presents estimates of recent rates of non take-up of social assistance benefits. Once methodological shortcomings of prior estimations are corrected, the results show that take-up has fallen recently and thus cannot explain the rising welfare receipt. Following theoretical predictions, the probability that a rational individual takes up social assistance increases with the expected benefit amount and duration, and falls with application cost and stigma. More than half of all households eligible for transfers under the German social assistance program did not claim their benefits.
102 citations
TL;DR: In this paper, the authors demonstrate that commonly occurring variations in expenditures definitions can give rise to marked differences in poverty rates where there are no real differences in well-being, and they show that one approach to calculating poverty lines, used with headcount measurement of poverty, can allow comparisons based on data with different definitions of consumption.
Abstract: Poverty rates calculated on the basis of household consumption expenditures are routinely compared across countries and time. The surveys which underlie these comparisons typically differ in the types of food and non-food expenditures included, often in ways which are easily overlooked by analysts. With several examples we demonstrate that these commonly occurring variations in expenditures definitions can give rise to marked differences in poverty rates where there are no real differences in well-being. We show that one approach to calculating poverty lines, used with headcount measurement of poverty, can allow comparisons based on data with different definitions of consumption. In addition to allowing comparative poverty analysis using existing survey data, the results suggest that poverty monitoring could be done effectively at lower cost by alternating detailed expenditures surveys with far more abbreviated surveys.
95 citations
TL;DR: In this article, the first two waves of the European Community Household Panel Survey (ECHPS) were used to construct a measure of relative deprivation and the overlap between the relative income poor and relatively deprived is examined.
Abstract: This paper focuses on the mismatch between income and deprivation measures of poverty. Using the first two waves of the European Community Household Panel Survey, a measure of relative deprivation is constructed and the overlap between the relative income poor and relatively deprived is examined. There is very limited overlap with the lowest relative income threshold. The overlap increases as the income threshold is raised, but it remains true that less than half those below the 60 percent relative income line are among the most deprived. Relative deprivation is shown to be related to the persistence of income poverty, but also to a range of other resource and need factors. Income and deprivation measures each contain information that can profitably be employed to enhance our understanding of poverty and a range of other social phenomena. This is illustrated by the manner in which both income poverty and relative deprivation are associated with self-reported difficulty making ends meet.
95 citations
TL;DR: In this article, a new decomposition method of within-and between-group components is proposed to characterize changes in the entire distribution, rather than focussing only on dispersion.
Abstract: The Lorenz criterion of preferable distributions fails to distinguish adequately between convergence to the global mean and clustering around local means. This concern has motivated independent work by Wolfson, and Esteban and Ray on the notion of polarization. In this paper I build on this recent work by providing a new method that characterizes changes in the entire distribution, rather than focussing only on dispersion. In particular, the approach proposed offers a new decomposition method of within- and between-group components that differs from the classical method of additively decomposable inequality indices. The new method can monitor which factors modified the entire distribution, where precisely on the distribution these factors had an effect, and what determined the variation in the level of social distance between groups or geographic areas. Summary statistics of the observed movements and of distance between and divergence among the estimated and the counterfactual distributions are provided as well as a new index of social distance. The new method is then applied to Italian data on income distribution between 1987 and 1995.
81 citations
TL;DR: In this paper, the authors proposed an aggregate measure of income inequality for the founding countries of the European monetary union and derived a measure for Euroland as a whole by exploiting information from two data sets: the European Community Household Panel and the Luxembourg Income Study.
Abstract: In this paper we propose an aggregate measure of income inequality for the founding countries of the European monetary union. Applying the methodology of the Theil index we are able to derive a measure for Euroland as a whole by exploiting information from two data sets: the European Community Household Panel and the Luxembourg Income Study. The property of additive decomposability allows us to determine each country's contribution as well as that of each demographic group to overall income inequality. In addition the impact of government transfers on this inequality measure is assessed. * This study has been (co-)funded by a grant from the European Commission, TMR Programme, Access to Large Scale Facilities and hosted by IRISS-C/I at CEPS/INSTEAD. We gratefully acknowledge comments from Irwin Collier, Waltraud Schelkle and Tim Smeeding and we thank the research team at CEPS/INSTEAD for their patient support. We also thank session participants at the ESPE 2000 conference and at the Vereinstagung 2000 for helpful comments.
76 citations
TL;DR: The authors surveys empirical studies in labor economics, economics of education and occupational psychology to assess the empirical strength of the links between these sets of variables, finding that cognitive and non-cognitive abilities are relevant for economic success but make a modest contribution.
Abstract: Starting out from a simple conceptual framework running from initial individual abilities to skills produced in school to the utilization of these skills in the labor market, this paper surveys empirical studies in labor economics, economics of education and occupational psychology to assess the empirical strength of the links between these sets of variables. Cognitive and non-cognitive abilities are relevant for economic success, but make a modest contribution. Occupational psychology is complementary to economics and supports the notion of interlocking heterogeneity of individuals and jobs.
69 citations
TL;DR: The authors proposed an iterative approach to the problem of choosing a reference population at the poverty line to measure the quality of the food basket, which is a methodological anchor that fixes the reference group.
Abstract: A standard method for calculating poverty lines (e.g. Ravallion, 1994) is not fully specified. The choice of the “reference population” for determining food baskets is left to the decision of the individual analyst. However, the poverty line can be quite sensitive to the real income of the reference group because the “quality” of the food basket—measured as the food expenditures per calorie—rises sharply with income. We propose that the reference group be centered on the poverty line. To address the obvious circularity problem in choosing a reference population at the poverty line to define the poverty line, we use an iterative approach. This iterative method provides a methodological anchor that fixes the reference group.
62 citations
TL;DR: In this paper, the authors provided the methodology and results of a database of inequality indices for the fifty provinces and seventeen regions of Spain on the basis of the Household Budget Surveys for the years 1973/74, 1980/81 and 1990/91.
Abstract: This paper provides the methodology and results of a database of inequality indices for the fifty provinces and seventeen regions of Spain on the basis of the Household Budget Surveys for the years 1973/74, 1980/81 and 1990/91. The inequality indicators considered are the indices of Gini, Theil (0), Theil (1) and Atkinson (1), as well as the distribution by deciles of the population. These indicators are drawn up for three variables: total income, total expenditure, and exclusively monetary expenditure. The variables are also expressed in terms of households, per capita and per capita equivalent. All are available on the Internet (http://www.ivie.es).
TL;DR: In this article, the authors developed a simulation method for measuring the impact of changes in the distributions of the main income sources on growth in family income inequality and found that changes in male earnings account for more than do changes in any other source of income.
Abstract: We develop a simulation method for measuring the impact of changes in the distributions of the main income sources on growth in family income inequality. We simulate the entire distribution of family income under the counterfactual, “What if the distribution of each source had not changed?” The simulation method allows us to evaluate the impact of changes at any point in the distribution as well as with multiple measures of inequality. We incorporate married-couple and single-person families, appropriately accounting for changes in the proportion married. We apply the simulation method to investigate the impact of changes in male earnings, female earnings, and capital income on the distribution of family income in the United States between 1969 and 1999. We find that changes in the distribution of male earnings account for more of the growth in family income inequality than do changes in any other source of income. Changes in the distribution of female earnings have reduced family income inequality.
TL;DR: The 1990-91 household expenditures distribution in Spain dominates, in the relative (rightist) Lorenz sense, the 1980-81 distribution, but the latter dominates the former in the absolute (leftist) sense.
Abstract: The 1990–91 household expenditures distribution in Spain dominates, in the relative (“rightist”) Lorenz sense, the 1980–81 distribution, but the latter dominates the former in the absolute (“leftist”) Lorenz sense. This situation constitutes a textbook case for intermediate or “centrist” notions of inequality and social welfare. This paper presents the first empirical application of this sort, using the intermediate inequality concept introduced in Del Rio and Ruiz-Castillo (2000). The data reveal that there is a decrease in household expenditures inequality for a relatively small set of centrist attitudes.
TL;DR: In this paper, the authors proposed an alternative estimator, obtained by approximating the Lorenz curve by a series of linear segments, which has less bias and lower mean squared error than the covariance estimator.
Abstract: The conventional formula for estimating the extended Gini coefficient is a covariance formula provided by Lerman and Yitzhaki (1989). We suggest an alternative estimator, obtained by approximating the Lorenz curve by a series of linear segments. In a Monte Carlo experiment designed to assess the relative bias and efficiency of the two estimators, we find that, when using grouped data with 20 or fewer groups, our new estimator has less bias and lower mean squared error than the covariance estimator. When individual observations are used, or the number of groups is 30 or more, there is little or no difference in the performance of the two estimators.
TL;DR: In this article, the authors present a review of the method of estimating the underground economy using the discrepancy approach, and present the new results of the authors which give an indication of the amount of the unreported activities already included in official national accounts statistics in the EU.
Abstract: Recent estimates of the size of the ‘‘underground economy’’ have used the so-called ‘‘demand for currency approach.’’ One of the assumptions made by these studies is that official statistics do not take into account the underground economy when estimating GDP. After setting some definitions, the paper presents a brief critical review of the method and results obtained for the European Union using this approach. It points out that the different concepts of unreported and unrecorded activities are incorrectly considered to be equivalent. The third section, after a review of the method of estimating the underground economy using the discrepancy approach, presents the new results of the authors which give an indication of the amount of the unreported activities already included in official national accounts statistics in the EU. The results of the discrepancy approach disprove the widespread belief that official statistics only include officially recorded transactions and reinforce the critical view on the results obtained with the currency-demand approach.
TL;DR: Both the System of Integrated Environment and Economic Accounting (SEEA) and the Environmental and Natural Resources Accounting Project (ENRAP) are efforts to expand conventional national economic accounts in order to better reflect interactions between the market economy and the natural environment as discussed by the authors.
Abstract: Both the System of Integrated Environment and Economic Accounting (SEEA) and the Environmental and Natural Resources Accounting Project (ENRAP) are efforts to expand conventional national economic accounts in order to better reflect interactions between the market economy and the natural environment. In order to maintain a close relationship to the System of National Accounts (SNA) accounting standards, SEEA adopts conventional definitions of productive sectors. However, SEEA fails to account for many valuable services of the natural environment and encourages the use of techniques that provide misleading and poor estimates of depreciation and damage to the environment. ENRAP addresses these deficiencies by explicitly recognizing that the natural environment is a productive economic sector. ENRAP encourages the use of imputation approaches that draw on techniques common in the environmental economics literature. These approaches are consistent with definitions of depreciation and environmental damage widely accepted in economic theory. The principles that underlie the ENRAP approach provide a basis for contrasting ENRAP and SEEA empirically. Using Philippine data, SEEA-type estimates are compared with those of ENRAP.
TL;DR: The concept of Self-Reliant poverty as mentioned in this paper is based on the ability of a family, using its own resources, to support a level of consumption in excess of needs, which is similar to the concept of capability poverty.
Abstract: In this paper we present a new concept of poverty, Self-Reliant poverty, which is based on the ability of a family, using its own resources, to support a level of consumption in excess of needs. This concept closely parallels the “capability poverty” measure that has been proposed by Amartya Sen. We use this measure to examine the trend and composition of the Self-Reliant poor population from 1975 to 1997. We find that Self-Reliant poverty has increased more rapidly over this period than has official poverty. Families considered to be the most vulnerable—those headed by minorities, single women with children, and individuals with low levels of education—have the highest levels of Self-Reliant poverty. However, these groups have also experienced the smallest increases in poverty. Conversely, families largely thought to be economically secure—those headed by whites, married men with children, and highly educated individuals—have the lowest levels of Self-Reliant poverty, but have experienced the largest increases in poverty. We also find that the Self-Reliant poor is increasingly composed of vulnerable groups relative to the composition of the official poor. The labor market, demographic, and policy sources of the divergent trends in Self-Reliant and official poverty, and of the gender, race and family structure changes in poverty rates are explored.
TL;DR: In this article, the authors consider the use of data on weight and height of children to assess living standards and public policy, contrasting them with monetized measures of welfare based on household incomes or expenditures.
Abstract: The paper considers the case for the use of data on weight and height of children to assess living standards and public policy, contrasting them with monetized measures of welfare based on household incomes or expenditures. Data on child anthropometry are then used from Uzbekistan, the most populous of the Central Asian republics of the former Soviet Union, to investigate rural-urban differences in living standards, the impact of kindergartens on nutritional status, and the targeting of means-tested social assistance. Conclusions are drawn for the use of information on child anthropometry in the design of public policy.
TL;DR: The second phase of the Russian Longitudinal Monitoring Survey (LMS) was used to investigate the changes in expenditure inequality and instability in Russia between the autumn of 1994 and the autumn 1998 as discussed by the authors.
Abstract: This paper uses the second phase of the Russian Longitudinal Monitoring Survey to investigate the changes in expenditure inequality and instability in Russia between the autumn of 1994 and the autumn of 1998. The expenditure distribution is stable in spite of the economic and political turmoil Russia is going through. However, that does not imply much stability. Households experienced considerable fluctuations in their expenditure, with over 60 percent of the population's expenditure either more than doubling or falling to less than half their previous levels. Only about 6 percent of all households experienced an expenditure shock of less than 10 percent. The inquiry in expenditure mobility suggests high levels of transitory variation in the expenditure and high levels of instability.
TL;DR: In this paper, the authors present evidence on household savings in urban regions of the Chinese provinces Sichuan and Liaoning, based on data from the State Statistical Bureau's Urban Household Survey for the late 1980s.
Abstract: This paper presents evidence on household savings in urban regions of the Chinese provinces Sichuan and Liaoning, based on data from the State Statistical Bureau's Urban Household Survey for the late 1980s. In this period the Chinese economy was subject to extensive reforms that resulted in rapid economic growth followed by extremely high inflation. The high inflation rates gave the households strong motives to switch from financial savings to purchase of consumer durables, which also appear to be consistent with the structure of the observed data. By providing empirical evidence on the relative importance of savings by lower, middle and upper income groups for single-child families and for all households, this study also discusses whether savings decisions depend on the level of household income. Single-child families are focused, not only because of their growing dominance in the current Chinese society, but also to control for the effect of demographic disparities.
TL;DR: In this paper, a portfolio choice model where the different dwellings are defined as assets is proposed and it is shown that investment decisions cannot separate investment decisions from housing consumption, and that risky assets demand should be greatly influenced by attitudes toward home property.
Abstract: The two-dimensional aspects of dwellings occupied by their owner, consumption and investment, make the analysis of households’ portfolio choice and the analysis of housing purchases more difficult. But it seems difficult to analyze portfolio decisions without taking account of owner-occupied housing that has an important effect on wealth composition over the life cycle. In this paper we estimated a portfolio choice model where the different dwellings are defined as assets and we showed that we cannot separate investment decisions from housing consumption. Especially, risky assets demand should be greatly influenced by attitudes toward home property.
TL;DR: In this article, the authors investigated the relative importance of changes in social safety net support and labor market in explaining the decline in the purchasing power of Russian households that occurred during the period 1994-96.
Abstract: This paper investigates the relative importance of changes in social safety net support and labor market in explaining the decline in the purchasing power of Russian households that occurred during the period 1994–96. Drawing on three cross-sections of the Russian Longitudinal Monitoring Survey, we find that labor market changes have been the main cause of the observed decline in cash consumption. Among these changes, reductions in the impact of the time spent in employment and increasing frequency of wage arrears are most important, more so than increases in open unemployment or the fall in real wages among workers who were fully paid. The contribution of falling state transfers to cash consumption is nonetheless substantial. We also find that the sources of the decline in household welfare vary substantially across quintiles in the distribution.
TL;DR: In this paper, the authors examined how the proportion of US saving that represents life-cycle accumulation changed over the last century and found that the fraction of lifetime income saved for retirement tripled between 1900 and 1990.
Abstract: This paper examines how the proportion of US saving that represents life-cycle accumulation changed over the last century. As individuals retire earlier and live longer than before, the expected length of male retirement has increased by more than six-fold since 1850. According to life-cycle models of saving, this means that the proportion of lifetime income saved for retirement should rise over time. I estimate that the fraction of lifetime income saved for retirement tripled between 1900 and 1990. In contrast to such an increase in the estimated retirement saving, the actual aggregate household saving rates exhibit a relatively stable long-term tendency during the 20th century. Based on this result, I argue that the relative contribution of the life-cycle saving to US wealth accumulation increased substantially, perhaps two to three times, over the last hundred years.
TL;DR: Fifty Years of Economic Measurement as discussed by the authors is a collection of contributions from the National Bureau of Economic Research (NBER) Conference on Research in Income and Wealth (RBOW).
Abstract: Fifty Years of Economic Measurement, edited by Ernst Berndt and Jack Triplett, commemorates 50 years of distinguished work at the National Bureau of Economic Research (NBER) Conference on Research in Income and Wealth.1 The contributions contained in the volume, which cover a range of empirical issues, are firmly based on the conceptual foundations of orthodox neoclassical economics and their implications for measurement. Our evaluation is from an alternative perspective, one which uses as its starting point the development of empirical work at the Cambridge Department of Applied Economics (DAE). The Cambridge tradition was, and is, sceptical of the relevance and explanatory power of much of neoclassical economics. It is a tradition which emphasises, rather than downplays, real world complexities and which stresses the conceptual and practical limitations of empirical analysis.
TL;DR: In this article, the authors measure the effects of changes in capital usage, and of the level of high-tech capital usage in particular, on skill change caused by employment shifts among detailed occupations within industries over the 1989-98 period.
Abstract: Proposed explanations of the role of microprocessor technology in the shifts toward relatively highly skilled workers that have occurred within industries since the mid 1970s have implications for the types of occupations that should be most affected by computerization. In this study, I measure the effects of changes in capital usage, and of the level of high-tech capital usage in particular, on skill change caused by employment shifts among detailed occupations within industries over the 1989–98 period. The study utilizes data collected by the Bureau of Labor Statistics Occupational Employment Statistics (OES) survey, which produces data on employment and wages for over 700 occupations in non-farm establishments, by industry. These data provide an unprecedented opportunity to determine the types of occupations and skills that are most affected by changes in capital and technology usage, by making it possible to measure skill change within relatively narrowly defined occupational groups.
TL;DR: The authors found that single female-headed families with children (SFHFwC) made significant and broad-based gains in their economic well-being from 1993 to 1999 and increased propensities of single mothers to leave welfare and enter the workforce, behavior consistent with incentives created by welfare reform measures, do not account for a major portion of these observed gains.
Abstract: Single female-headed families with children (SFHFwC) have historically been the primary recipients of federal public cash assistance payments in the United States. Recent welfare reform initiatives established work requirements and cumulative time limits on public cash assistance payments. Three findings in this paper have significant implications for the long-term efficacy of welfare reform initiatives. First, SFHFwC made significant and broad-based gains in their economic well-being from 1993 to 1999. Second, increased propensities of single mothers to leave welfare and enter the workforce from 1993 to 1999, behavior consistent with incentives created by welfare reform measures, do not account for a major portion of these observed gains. Third, improved area economic conditions and increased educational levels of single mothers account for a major share of gains in well-being.
TL;DR: O'Rourke and Williamson as mentioned in this paper reviewed a book called "Globalization and History" and found it to be a good introduction to the history of globalization and history, focusing on race relations.
Abstract: Book reviewed in this article:
K. O’Rourke and J. Williamson, Globalization and History
TL;DR: A review of The Asian Financial Crisis: Causes, Contagion and Consequences, edited by Pierre-Richard Agenor, Marcus Miller, David Vines and Axel Weber as mentioned in this paper.
Abstract: Review of The Asian Financial Crisis: Causes, Contagion and Consequences, edited by Pierre-Richard Agenor, Marcus Miller, David Vines and Axel Weber (1999), and The Indonesian Economy in Crisis: Causes, Consequences and Lessons by Hal Hill (1999).