Showing papers in "Review of Income and Wealth in 2009"
TL;DR: In this paper, the authors add intangible capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth.
Abstract: Published macroeconomic data traditionally exclude most intangible investment from measured GDP. This situation is beginning to change, but our estimates suggest that as much as $800 billion is still excluded from U.S. published data (as of 2003), and that this leads to the exclusion of more than $3 trillion of business intangible capital stock. To assess the importance of this omission, we add intangible capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth. The rate of change of output per worker increases more rapidly when intangibles are counted as capital, and capital deepening becomes the unambiguously dominant source of growth in labor productivity. The role of multifactor productivity is correspondingly diminished, and labor's income share is found to have decreased significantly over the last 50 years.
972 citations
TL;DR: In this paper, the effects of discreteness of the observed variables on principal component analysis (PCA) are reviewed and the statistical properties of the popular Filmer and Pritchett (2001) procedure are analyzed.
Abstract: The last several years have seen a growth in the number of publications in economics that use principal component analysis (PCA) in the area of welfare studies. This paper explores the ways discrete data can be incorporated into PCA. The effects of discreteness of the observed variables on the PCA are reviewed. The statistical properties of the popular Filmer and Pritchett (2001) procedure are analyzed. The concepts of polychoric and polyserial correlations are introduced with appropriate references to the existing literature demonstrating their statistical properties. A large simulation study is carried out to compare various implementations of discrete data PCA. The simulation results show that the currently used method of running PCA on a set of dummy variables as proposed by Filmer and Pritchett (2001) can be improved upon by using procedures appropriate for discrete data, such as retaining the ordinal variables without breaking them into a set of dummy variables or using polychoric correlations. An empirical example using Bangladesh 2000 Demographic and Health Survey data helps in explaining the differences between procedures.
712 citations
TL;DR: The authors investigate whether measurement issues might explain the U.K. macroeconomic performance appears unaffected: investment rates are flat, and productivity has slowed, and they investigate whether the standard National Accounts treatment of most spending on "knowledge" or "intangible" assets is as intermediate consumption.
Abstract: Despite the apparent importance of the "knowledge economy," U.K. macroeconomic performance appears unaffected: investment rates are flat, and productivity has slowed. We investigate whether measurement issues might account for this puzzle. The standard National Accounts treatment of most spending on "knowledge" or "intangible" assets is as intermediate consumption. Thus they do not count as either GDP or investment. We ask how treating such spending as investment affects some key macro variables, namely, market sector gross value added (MGVA), business investment, capital and labor shares, growth in labor and total factor productivity (TFP), and capital deepening. We find: (a) MGVA was understated by about 6 percent in 1970 and 13 percent in 2004; (b) instead of the business investment/MGVA ratio falling since 1970 it has been rising; (c) instead of the labor share being flat since 1970 it has been falling; (d) growth in labor productivity and capital deepening has been understated and growth in TFP overstated; and (e) TFP growth has not slowed since 1990 but has been accelerating.
213 citations
TL;DR: In this paper, a measure of residential segregation by income, the Centile Gap Index (CGI), based on income percentiles, was proposed to identify the impact of inequality on residential choice and found that a one standard deviation increase in income inequality raises residential income segregation by 0.4-0.9 standard deviations.
Abstract: American metropolitan areas have experienced rising residential segregation by income since 1970. One potential explanation for this change is growing income inequality. However, measures of residential sorting are typically mechanically related to the income distribution, making it difficult to identify the impact of inequality on residential choice. This paper presents a measure of residential segregation by income, the Centile Gap Index (CGI), which is based on income percentiles. Using the CGI, I find that a one standard deviation increase in income inequality raises residential income segregation by 0.4–0.9 standard deviations. Inequality at the top of the distribution is associated with more segregation of the rich, while inequality at the bottom and declines in labor demand for less-skilled men are associated with residential isolation of the poor. Inequality can fully explain the rise in income segregation between 1970 and 2000.
201 citations
TL;DR: In this paper, the authors measured the contribution of intangible capital to economic growth in Japan and found that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.1 percent.
Abstract: Following the approach of Corrado, Hulten, and Sichel (2005, 2006), we measure intangible investment and examine the contribution of intangible capital to economic growth in Japan. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.1 percent, which is lower than the ratio estimated for the U.S. in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the U.S. In addition, we find that, in stark contrast to the U.S., where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. Our conclusions regarding intangible investment in Japan remain largely unchanged even if, using data with respect to firm-specific resources, we take on-the-job training into account.
193 citations
TL;DR: This paper analyzed the distribution of market income in Germany in the period 1992 to 2003 on the basis of an integrated dataset that encompasses the whole spectrum of the population, from the very poor to the very rich.
Abstract: We analyze the distribution of market income in Germany in the period 1992 to 2003 on the basis of an integrated dataset that encompasses the whole spectrum of the population, from the very poor to the very rich. We find a modest increase of the Gini coefficient, a substantial drop of median income and a remarkable growth of the income share accruing to the economic elite, which we define as the richest 0.001 percent of persons in the population. While the elite mainly obtains its income from business and capital, the income share that it receives in the form of wage income has been increasing. We also show that the dramatic decline of market income in the bottom half of the distribution is very much mitigated by income transfers within private households and by governmental redistribution.
140 citations
TL;DR: In this article, the authors show that using P90/P10 does not completely obviate time-inconsistency problems, especially for household income inequality trends, when used with public use data.
Abstract: The March Current Population Survey (CPS) is the primary data source for estimation of levels and trends in labor earnings and income inequality in the USA. Time-inconsistency problems related to top coding in theses data have led many researchers to use the ratio of the 90th and 10th percentiles of these distributions (P90/P10) rather than a more traditional summary measure of inequality. With access to public use and restricted-access internal CPS data, and bounding methods, we show that using P90/P10 does not completely obviate time-inconsistency problems, especially for household income inequality trends. Using internal data, we create consistent cell mean values for all top-coded public use values that, when used with public use data, closely track inequality trends in labor earnings and household income using internal data. But estimates of longer-term inequality trends with these corrected data based on P90/P10 differ from those based on the Gini coefficient. The choice of inequality measure matters.
101 citations
TL;DR: In this article, the authors provide formulae for the generalized entropy class of inequality indices for GB2 distributions, thereby providing a full range of top-sensitive and bottom-sensitive measures.
Abstract: The Generalized Beta of the Second Kind (GB2) income distribution provides an excellent description of income distributions. However the degree of inequality implied by GB2 parameter estimates is typically summarized using the Gini coefficient only. This paper provides formulae for the Generalized Entropy class of inequality indices for GB2 distributions, thereby providing a full range of top-sensitive and bottom-sensitive measures. The usefulness of having a portfolio of distributionally-sensitive indices is demonstrated using GB2-based estimates of British income inequality in 1994/95 and 2004/05.
100 citations
TL;DR: In this article, the authors investigate the influence of aging and health shocks on a household's ownership of various assets and on the share of total assets held in each asset class, finding that households decrease their ownership of principal residences, vehicles, financial assets, businesses, and real estate as they age.
Abstract: We study how the portfolios of U.S. households evolve after retirement, using data from the Health and Retirement Study (HRS). In particular, we investigate the influence of aging and health shocks on a household's ownership of various assets and on the share of total assets held in each asset class. We find that households decrease their ownership of principal residences, vehicles, financial assets, businesses, and real estate as they age, while increasing the share of assets held in liquid assets and time deposits. We find that widowhood and other health shocks are associated with the same kinds of portfolio changes, and that the effect of shocks strengthens with time since the shock. Finally, we show that the effect of a shock is greatly magnified when households have physical or mental impairments. This suggests that factors other than standard risk and return considerations weigh heavily in many older households' portfolio decisions.
90 citations
TL;DR: In this paper, a satellite account where households are treated as production units is presented, which extends previous work that treats consumer durables as investment and that values nonmarket household production activities such as cooking, cleaning, and childcare.
Abstract: This paper presents a satellite account where households are treated as production units. It extends previous work that treats consumer durables as investment and that values nonmarket household production activities such as cooking, cleaning, and childcare. Services from consumer durables and government capital related to household production are also valued. In constructing the updated accounts, this paper incorporates new time use data from the American Time Use Survey (ATUS) and the harmonized time use data from the Multinational Time Use Study (MTUS). This paper also discusses and incorporates recommendations made by the U.S. National Academies panel on nonmarket accounts.
78 citations
TL;DR: Wang et al. as mentioned in this paper provided updated evidence on the participation rate, receipt amount, and anti-poverty effectiveness of minimum living standard assistance (MLSA) for China's urban poor.
Abstract: Since its inception 15 years ago, the Minimum Living Standard Assistance (MLSA) has served as a last resort for China's urban poor. Using national household survey data, this study provides updated evidence on the participation rate, receipt amount, and anti-poverty effectiveness of MLSA. Families eligible for MLSA make up 2.3 percent of the urban population, but only about half of them are actual beneficiaries. City MLSA generosity and household entitled benefit amount both positively correlate with participation rate and household receipt amount. MLSA lowers the poverty rate somewhat, but substantially reduces the poverty gap and severity for its eligible participants. Nevertheless, the poverty reduction role of MLSA is restricted by its partial coverage and delivery. Consequentially, poverty remains a serious problem for MLSA's target population. The anti-poverty effectiveness of MLSA can be strengthened by full coverage and delivery of benefits and by paying special attention to disadvantaged subgroups.
TL;DR: Zhang et al. as mentioned in this paper investigated poverty among ethnic minorities and the majority in rural China for the years 2000, 2001 and 2002, taking a dynamic view and using a large sample covering 22 provinces.
Abstract: Poverty among ethnic minorities and the majority in rural China for the years 2000, 2001 and 2002 is investigated taking a dynamic view and using a large sample covering 22 provinces. Based on the National Bureau of Statistics’ low income line, almost one-third of the ethnic minorities experienced poverty during the three years studied while the corresponding proportion among the ethnic majority was only about half as high. Still, by far most of the poor in rural China belong to the ethnic majority. The relatively high poverty rates for ethnic minorities in rural China are found to be due to higher rates of entry than for the majority, while differences in exit rates across ethnicities are few. To a large extent, ethnic poverty differences can be attributed to differences in location together with temporary and persistent poverty in rural China having a very clear spatial character. Poverty is concentrated to the western region and villages with low average income. Determinants of persistent and temporary poverty in rural China differ due to location as well as household characteristics.
TL;DR: In this article, a new class of pro-poorness measures is defined, to complement existing classes, with similarities and differences which are fully discussed, and all of these measures can be decomposed across income sources or components of consumption expenditure (depending on the application).
Abstract: Recent economic literature on pro-poor growth measurement is drawn together, using a common analytical framework which lends itself to some significant extensions. First, a new class of pro-poorness measures is defined, to complement existing classes, with similarities and differences which are fully discussed. Second, all of these measures of pro-poorness can be decomposed across income sources or components of consumption expenditure (depending on the application). This permits the analyst to “unbundle” a pattern of growth, revealing the contributions to overall pro-poorness of constituent parts. Third, all of these pro-poorness measures can be modified to measure pro-poorness at percentiles. An application to consumption expenditures in Indonesia in the 1990s reveals that the poverty reduction achieved remains far below what would have been achieved under distributional neutrality. This can be tracked back to changes in expenditure components.
TL;DR: In this article, the authors compared the differences in income mobility among four countries (Canada, United States, Great Britain and Germany) during the 1990s and early 2000s using a standardized dataset, and found that there exist diverse levels of income mobility across the four countries.
Abstract: Using a standardized dataset, this paper compares the differences in income mobility among four countries—Canada, the United States, Great Britain and Germany—during the 1990s and early 2000s. The results suggest that, in general, there exist diverse levels of income mobility across the four countries. Although the precise magnitudes of the differences are sensitive to the measurement method used, incomes in Britain are by far the most mobile. Our findings also reveal country-specific driving forces that underlie income mobility. The stabilizing effects of government transfers are most pronounced in Canada. In Germany, it is the progressive tax system that offsets earnings variations and results in smaller changes in longitudinal incomes. Moreover, we also discover that demographic factors provided only limited explanation of differences in income mobility.
TL;DR: In this paper, the authors estimate productivity growth for 33 industries covering the entire Chinese economy using a time series of input-output tables covering 1982-2000 and find a wide range of productivity performance at the industry level.
Abstract: We estimate productivity growth for 33 industries covering the entire Chinese economy using a time series of input–output tables covering 1982–2000. Capital input is measured using detailed investment data by asset and labor input uses demographic information from household surveys. We find a wide range of productivity performance at the industry level. We then show how these industry growth accounts may be consistently aggregated to deliver a decomposition of aggregate GDP growth. For the 1982–2000 period aggregate TFP growth was 2.5 percent per year; decelerating from a rapid rate in the early 1980s to negative growth during 1994–2000. The main source of growth during the 1982–2000 period was capital accumulation, with a small negative contribution from the reallocation of factors across industries.
TL;DR: In this article, the authors used the Survey of Consumer Finances (SCF) and industry data to create comparable estimates of aggregate credit card use based on household data from the survey.
Abstract: I create comparable estimates of aggregate credit card use based on household data from the Survey of Consumer Finances (SCF) and industry data. The two sources match up well on credit card charges and fairly well on account totals. But the SCF always yields much lower estimates of revolving debt. My estimated lower bound for the discrepancy in 2004 is ½ of the revolving credit card debt total implied by industry data. There is no obvious source for this remaining discrepancy and some evidence that the discrepancy has grown over time. Such growth is worrisome because it parallels substantial changes in credit card use and in the pool of credit card users, suggesting that the discrepancy could be driven by household underreporting that is correlated with unobserved heterogeneity. This correlation could confound inference on the relationship between credit card borrowing and outcomes of interest like household financial condition, consumption paths, and portfolio choice. Given this possibility it is critical to continue developing evidence on whether and why household surveys undercount credit card borrowing.
TL;DR: The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results as discussed by the authors, and the authors of this paper revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent.
Abstract: The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. The authors of this paper revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, they are able to investigate the relationship for eleven developed countries over the period 1921-2002. The authors find no consistent relationship between lagged top income shares and current savings rates, and their standard errors are small enough that they are able to reject more than modest effects in either direction. They view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates.
TL;DR: In this article, the role of the economist John Maynard Keynes as theoretician, compiler, supporter, and user of National Accounts in Britain is discussed, and the pioneering contributions made at the start of the 20th century by Alfred Flux, Arthur Bowley and Josiah Stamp, and later by Colin Clark are detailed.
Abstract: This history of National Accounts in Britain is done with two specific considerations in mind. First, the role of the economist John Maynard Keynes—as theoretician, compiler, supporter and user—is addressed. This role is substantial and has been greatly misunderstood or misrepresented by a large part of the literature. Second, the pioneering contributions made at the start of the 20th century by Alfred Flux, Arthur Bowley and Josiah Stamp, and later by Colin Clark, are detailed. The debates between these men mark the emergence of National Accounts as a serious discipline. Their work was supported by the earlier theoretical contributions of Alfred Marshall, and by practical developments, in particular the instigation of a Census of Production in 1907. Taken together, the two considerations tell a good part of the story of the emergence of National Accounting on the world stage.
TL;DR: The authors investigates the evolution of Sri Lanka's expenditure distribution in the period 1980-2002 and uses three decomposition methodologies (the Fields, the Shapley value decomposition, and Yun's unified method) to determine underlying causes.
Abstract: Sri Lanka liberalized its economy in 1977, paving the way for more rapid economic growth and higher rates of job creation. But tensions over distributional issues still plague the body politic. This paper investigates the evolution of Sri Lanka's expenditure distribution in the period 1980–2002 and uses three decomposition methodologies—the Fields, the Shapley value decomposition, and Yun's unified method—to determine underlying causes. The study finds that while average adjusted expenditure rose across strata, the rich experienced more rapid expenditure growth leading to greater inequality. Inequality change was driven by differential access to infrastructure, education, and occupation status. Demographic factors, including ethnicity, and spatial factors contributed very little. The study recommends policies that ensure more equitable access to income earning assets such as education and infrastructure services, and that contain the rise in inequality along sectoral, regional, and ethnic fault lines.
TL;DR: In this article, the authors make use of comparable datasets, estimate Mincer equations and perform Oaxaca-Blinder decompositions at the mean and at different points of the wage distribution.
Abstract: This paper is one of the first comprehensive attempts to compare earnings in urban China and India over the recent period. While both economies have grown considerably, we illustrate significant cross-country differences in wage growth since the late 1980s. For this purpose, we make use of comparable datasets, estimate Mincer equations and perform Oaxaca–Blinder decompositions at the mean and at different points of the wage distribution. The initial wage differential in favor of Indian workers, observed in the middle and upper part of the distribution, partly disappears over time. While the 1980s Indian premium is mainly due to higher returns to education and experience, a combination of price and endowment effects explains why Chinese wages have caught up, especially since the mid-1990s. The price effect is only partly explained by the observed convergence in returns to education; the endowment effect is driven by faster increase in education levels in China and significantly accentuates the reversal of the wage gap in favor of this country for the first half of the wage distribution.
TL;DR: This paper showed that China's move from a command to a market economy was less abrupt and more successful than that of 29 other economies making a similar transition and quantified the comparative performance of China.
Abstract: This article quantifies the comparative performance of China in several dimensions. Firstly, it shows that China's move from a command to a market economy was less abrupt and more successful than that of 29 other economies making a similar transition. Secondly, while official estimates show annual GDP growth of 9.6 percent in 1978-2003, this is reduced to 7.9 percent after adjustment for exaggeration of industrial performance and growth in non-material services. Thirdly, as the exchange rate understates China's achievement, a purchasing power parity (PPP) converter is necessary to measure comparative level of performance. Our PPP converter shows that China in 2005 was the world's second largest economy, with a GDP about 80 percent of the U.S. It is assumed that China will have overtaken the U.S. as the world's biggest economy before 2015. Until recently, the World Bank estimate of the PPP for China was close to that of Maddison, but the Bank's new estimate for 2005 shows Chinese GDP about half this level. The Bank's new estimates for China and other Asian countries are not plausible, and this paper advances several reasons for rejecting them. Finally, energy use per head of population is a good deal smaller than that of the U.S., and its total energy use for a much bigger population is likely to be somewhat smaller than that of the U.S. in 2030. However, heavy dependence on dirty coal means that it will have bigger carbon emissions than the U.S. This is a major problem as Beijing and other big cities already have severe pollution problems.
TL;DR: In this article, the authors apply the collective model to the analysis of intra-household inequality using self-reported income scales, starting from a collective model including household production, their key assumption is that the income level that household members report corresponds to their true income sharing.
Abstract: The paper applies the collective model to the analysis of intra-household inequality using self-reported income scales. Starting from a collective model including household production, our key assumption is that the income level that household members report corresponds to their true income sharing. Using Russian data (Rounds V to VIII of the Russian Longitudinal Monitoring Survey), we apply the results for couples who report the same level of income to identify the sharing rule for the whole sample. This method allows us to obtain not only the derivatives, but also the sharing rule itself. From simulations for an average couple with one child living in the Urals, we find that a full income share of 45% is allocated to the wife.
TL;DR: The authors showed that the lognormal distribution is not appropriate in most cases for the analysis of poverty: the magnitude of the elasticities is generally overestimated and the estimation of the relative impact of growth and redistribution on poverty alleviation is biased in favor of the growth objective.
Abstract: After decades of intensive research dedicated to efficient and flexible parametric statistical distributions, the lognormal distribution still enjoys, despite its empirical weaknesses, widespread popularity in the applied literature related to poverty and inequality analysis. In the present study, we emphasize the drawbacks of this choice for the calculation of the elasticities of poverty. For this purpose, we estimate the growth and inequality elasticities of poverty using 1,132 income distributions, and 15 rival assumptions on the shape of the income distributions. Our results confirm that the lognormal distribution is not appropriate in most cases for the analysis of poverty: the magnitude of the elasticities is generally overestimated and the estimation of the relative impact of growth and redistribution on poverty alleviation is biased in favor of the growth objective.
TL;DR: In this paper, the authors proposed techniques to test for whether growth has been pro-poor in Mexico and applied these procedures to Mexican household surveys for 1992, 1998, and 2004.
Abstract: This paper proposes techniques to test for whether growth has been pro-poor. We first review different definitions of pro-poorness and argue for the use of methods that can generate results that are robust over classes of pro-poor measures and ranges of poverty lines. We then provide statistical procedures that rely on the use of sample data to infer whether growth has been pro-poor in a population. We apply these procedures to Mexican household surveys for 1992, 1998, and 2004. We find strong normative and statistical evidence that Mexican growth has been absolutely anti-poor between 1992 and 1998, absolutely pro-poor between 1998 and 2004 and between 1992 and 2004, and relatively pro-poor between 1992 and 2004 and between 1998 and 2004. The relative assessment of the period between 1992 and 1998 is statistically too weak to lead to a robust evaluation of that period.
TL;DR: Wang et al. as discussed by the authors argue that more meaningful measures of regional disparities come from differences in regional poverty headcounts, and suggest that higher regional inequality and accompanying interregional migration indicate that inequality plays an important positive role in inducing economic actors voluntarily to move to more productive locations and activities as a mechanism for ensuring sustainable improvements in individual well-being.
Abstract: Dividing China into seven regions reveals rural income and consumption divergence for both 1980–2005 and 2000–05. But while real rural consumption growth averaged 7.7 percent over 1985–2005 in the eastern coastal region, it averaged 6.5 percent uniformly in the interior. In evaluating well-being, such rapid improvement in all regions arguably overshadows negative connotations of divergence. Twenty years of household survey data reveal dramatic increases in rural household savings, as rural consumption improved more slowly than income in some periods. This raises questions about the suitability of consumption as a basis for measuring well-being and its distribution. Increased savings appear to be transient, as some households save while others dissave to purchase durables and afford lumpy services like education and healthcare—supplies of which became more plentiful in the 1990s. The paper argues that more meaningful measures of regional disparities come from differences in regional poverty headcounts. It also suggests that higher regional inequality and accompanying interregional migration indicate that inequality plays an important positive role in inducing economic actors voluntarily to move to more productive locations and activities as a mechanism for ensuring sustainable improvements in individual well-being.
TL;DR: The authors provided a systematic and comprehensive account of the establishment, reform, and development of China's system of national accounts, focusing on important changes in concepts and methods in national accounting during China's transition from the Soviet-type Material Product System to the United Nations System of National Accounts.
Abstract: This paper provides a systematic and comprehensive account of the establishment, reform, and development of China's System of National Accounts, focusing on important changes in concepts and methods in national accounting during China's transition from the Soviet-type Material Product System to the United Nations System of National Accounts, as well as existing problems and challenges that must be faced in the further development of the system.
TL;DR: In this article, the authors used panel data on pensioners' subjective evaluations of their financial positions to construct equivalence scales for pensioners and found that a pensioner couple is estimated to require an income 44 percent higher than a comparable single pensioner to reach the same standard of living.
Abstract: This paper uses panel data on pensioners' subjective evaluations of their financial positions to construct equivalence scales for pensioners. A pensioner couple is estimated to require an income 44 percent higher than a comparable single pensioner to reach the same standard of living. This is significantly less than the equivalence scale value implied by the ratio of state pension rates, the McClements equivalence scale value, and the scale value derived from Engel curve estimation for food expenditure using the same data source. The estimated equivalence scale value is robust to variations in the definition of the pensioner sample, the measurement of income, and the econometric model used.
TL;DR: In this paper, the authors examined how personal disposable income is distributed across regions, countries and larger geographical areas in the EU25 and how this distribution changed during the second half of the 1990s, and assessed the statistical effect resulting from the enlargement of the European Union, and therefore the community of people for which inequality is measured.
Abstract: This study examines how personal disposable income is distributed across regions, countries and larger geographical areas in the EU25 and how this distribution changed during the second half of the 1990s. Moreover, it assesses the “statistical” effect resulting from the enlargement of the European Union, and therefore the community of people for which inequality is measured. A three-level spatial decomposition of the overall personal inequality in the EU reveals that a fifth of its amount is attributed to the east–west income gap and that intra-regional inequality accounts for three quarters. The study detects a convergence of both average national income levels and within-country personal income inequality. Inequality is rising primarily in the Scandinavian social-democratic welfare states and decreasing in the Mediterranean countries of the EU15. In Eastern Central Europe, the rapid growth of inequality which had been observable during the first years of transition has come to an end.
TL;DR: In this paper, the authors measure the evaluation of income inequality by European citizens, starting from the concept of a social welfare function defined on income distributions, they estimate the degree and nature of inequality aversion of Europeans.
Abstract: The purpose of this paper is to measure the evaluation of income inequality by European citizens. Starting from the concept of a social welfare function defined on income distributions the paper estimates the degree and nature of inequality aversion of Europeans. It uses subjective well-being (SWB) as an empirical measure of welfare and estimates how SWB is related to average income and measures of income inequality (from an appropriate class). The estimated relationship is used to determine those inequality measures which qualify as proper representations of people's inequality aversion.
TL;DR: In this paper, the authors examined the trend of average labor compensation (ALC), labor productivity (ALP), and unit labor cost (ULC) in 28 manufacturing industries across 29 provinces in China for 1995 and 2004.
Abstract: Using a newly constructed industry-by-region dataset based on China's two censuses, this paper examines the trend of average labor compensation (ALC), labor productivity (ALP) and unit labor cost (ULC) in 28 manufacturing industries across 29 provinces in China for 1995 and 2004. Findings show that at the aggregate level, ALP growth was generally faster than that of ALC and hence resulted in a significant decline in ULC for all regions in China. Furthermore, less developed regions exhibited stronger productivity growth relative to labor cost increase than more developed regions, thus leading to a convergence in ULC levels across provinces and regions over this period. Comparing individual industries, we observe a substantial variation in growth rates and convergence trends across regions. Logit regression analysis confirms that labor-intensive industries are more likely to converge in ALP, ALC and ULC, whereas capital/skill-intensive industries tended to diverge. This finding is further confirmed by estimating a convergence regression, which suggests that misallocation of resources due to market imperfections or institutional barriers is likely to be the main factor behind the divergence of ULC.