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This study explores the implications of rising markups for optimal Mirrleesian income and profit taxation. Using a stylized model with two individuals, the main forces shaping welfare-optimal policies are analytically characterized. Although a higher profit tax has redistributive benefits, it adversely affects market competition, leading to a greater equilibrium cost-of-living. Rising markups directly contribute to a decline in optimal marginal taxes on labor income. The optimal policy response to higher markups includes increasingly relying on the profit tax to fund redistribution. Declining optimal marginal income taxes assist the redistributive function of the profit tax via contributing to the expansion of profit tax base. This response alone considerably increases the equilibrium cost-of-living. Nevertheless, every individual in the economy becomes better off with the optimal policy, except for the top earners, for whom the profits represent a major income source. If it is not possible to tax profits optimally, i.e., due to profit shifting, increasing redistribution via income taxes is not optimal; every individual, except for the top earners, is worse off relative to the scenario with optimal profit taxation.

In this paper, we examine the influence of investment of corporate capital, which we capture through heterogeneous company information technology utilization, on labor demand and labor income share. We find that increased investment in information technology by enterprises is associated with a general decrease in the proportion of labor income and the demand for labor. We also find that if the market power of enterprises in the industry is greater, the increase in investment of enterprise information technology capital is even less conducive to the willingness of enterprises to hire workers. Our results have implications for guidance towards corporate (information technology) investment decision-making.

Using a unique randomized rental apartment lottery in Stockholm metropolitan statistical area, this paper analyses behavioral effects on individuals receiving a rent-controlled contract in the Swedish rent control program. The result shows that receiving a rent-controlled contract reduces the annual labor income by 13 to 20 percent and employment by 8 to 13 percent. To some extent, these effects can be explained by an increased propensity to enter higher education.(c) 2023 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http:// creativecommons.org/licenses/by/4.0/).

Recent monetary policy analyses show the profound implications of progressive taxation for monetary policy. This paper investigates how progressive taxation on labor income alters the effect of model uncertainty by introducing robust control. We analyze the effect by deriving closed form solutions and numerical simulations. We obtained the following results: (i) Higher progressivity decreases the effect of the model uncertainty on inflation rate, output gap, and interest rate. (ii) A sufficiently higher progressivity brings the economy into the determinate equilibrium even if stronger model uncertainty exists. According to these results, we conclude that progressive taxation on labor income is effective in mitigating the effects of the model uncertainty in terms of macroeconomic variance and equilibrium determinacy.

We study immigrant-native differences in long-term self-employment in Sweden combining population-wide register data and a unique survey targeting a large representative sample of the total population of long-term self-employment. Using the registers, we analyze the evolution of labor and capital incomes during the first 10 years following self-employment entry. We find that immigrant-native differences in labor income become smaller, whereas immigrant-native differences in capital income grow stronger, over the course of self-employment. These findings are robust to controlling for factors such as organizational form and type of industry. We use the survey data to gain further insights into immigrant-native differences among the long-term self-employed, and show that immigrant self-employed experience more problems and earn less, but work harder than native self-employed. They also have a less personal relation to their customers, do not enjoy their work as much as natives, and appear to have different perspectives on self-employment in general.

This paper develops a dynamic general equilibrium model with heterogeneous firms that face search complementarities in the formation of vendor contracts. Search complementarities amplify small differences in productivity among firms. Market concentration fosters monopsony power in the labor market, magnifying profits and further enhancing high-productivity firms' output share. Firms want to get bigger and hire more workers, in stark contrast with the classic monopsony model, where a firm aims to reduce the amount of labor it hires. The combination of search complementarities and monopsony power induces a strong ``Matthew effect'' that endogenously generates superstar firms out of uniform idiosyncratic productivity distributions. Reductions in search costs increase market concentration, lower the labor income share, and increase wage inequality

Macroeconomic models routinely abstract simultaneously from two features of the US federal tax code: the joint taxation of ordinary capital and labor income and the special taxation of preferential capital income. In this article, we argue that this abstraction omits a “portfolio-effect” mechanism where endogenous changes to the ordinary-preferential composition of households’ capital income influence individuals’ optimal labor and saving decisions through its impact on their effective marginal tax rates. We demonstrate the quantitative importance of this tax detail by simulating provisions from the recently enacted “Tax Cuts and Jobs Act” using a heterogeneous-agent overlapping generations framework calibrated to the US economy. Our findings imply that accounting for the detailed taxation of labor and capital income should be considered an important modeling feature for tax policy analysis.

The aim of this paper is twofold. Firstly, we present a model in which both income and income inequality are jointly determined in a counter-cyclical manner via self-fulfilling expectation. We argue that multiple equilibria can arise in the presence of inelastic labor demand, a minimum investment requirement, and imperfections in the credit market. In one equilibrium, the market wage and labor income are both low. Young agents who become entrepreneurs work harder and save more than young agents who become depositors. As a result, the equilibrium is characterized by low-income and high-income inequality. In another equilibrium, the market wage and labor income are both high. Young agents supply the same amount of labor and save the same. As a result, the equilibrium is characterized by high-income and low-income inequality. Secondly, we present different dynamic scenarios predicted by the model and analyze the role of self-fulfilling expectations. The paper ends by providing some policy recommendations on how the coordination of agents’ expectations about labor market conditions and how improvements in financial development may affect the long-run income and income inequality.

This study evaluates how the state of the economy, as measured by the rate of unemployment, influences the short-term effects of tax changes on output and employment. I examine the effects of narratively identified tax changes by adopting two alternative approaches to estimating state-dependent impulse response functions that have been widely used in the recent literature. Both approaches suggest that short-term effects of tax changes on output and employment are smaller during times of higher unemployment. I argue that increased labor market slack and tighter credit conditions in contractionary periods can reduce the responsiveness of labor supply to changes in labor income taxes, resulting in smaller effects on output from tax changes.

Using detailed data for U.S. homeowners, we document a negative, nonlinear relation between the loan-to-value ratio (LTV) of homeowners’ primary residence and their labor income. Consistent with high LTV individuals experiencing constrained mobility, we find stronger effects among subprime, liquidity- constrained individuals and those living in regions with limited alternative local employment opportunities and strict noncompete law enforcement. Though high LTV individuals are less likely to move across MSAs, they are more likely to change jobs without changing their residence. We find no effects among similar neighboring renters employed at the same firm and with a similar job tenure.

In their seminal work, Lettau, M., and S. Ludvigson, 2001, “Consumption, Aggregate Wealth, and Expected Stock Returns.” The Journal of Finance 56 (3): 815–49. https://doi.org/10.1111/0022-1082.00347, demonstrated that there exists a long-run relationship between consumption, asset holdings, and labor income. They denoted this relationship as cay and showed it to be quite successful in predicting the behavior of real stock returns. Their estimation procedure assumes that consumption, asset wealth, and labor income are first-order integrated (I(1), nonstationary) and that their linear combination forms a zero-order integrated (I(0), stationary) series. This paper proposes a more general framework in the estimation of the cay model by allowing both the series and the long-run equilibrium to be fractionally integrated. We use the recently developed Fractionally Cointegrated VAR (FCVAR) approach to estimate the cay model. Results show that: (i) the series are nonstationary but mean-reverting processes, (ii) there exists a long-run equilibrium between consumption, asset wealth, and labor income, (iii) this long-run relationship is a stationary fractionally integrated process, and (iv) the estimated cay using the FCVAR approach shows the same desirable forecasting properties as its predecessor.

The Argentinean real wage has suffered a profound deterioration since the mid-1970s. Simultaneously, there was a structural increase in women’s labor market participation. Consequently, looking at individual wages as indicators of the household’s reproduction conditions might be misleading. Here we put those two phenomena together under a new reading of Marx’s value of labor power concept within an understanding of the specificity of capital accumulation in Argentina. Transformations in the global organization of production led to a change in the concrete expression of the value of labor power, which is now divided into the wages of more than one household member. This expresses itself in the increased participation of women’s income in household income and the latter’s more favorable evolution compared to the individual one. JEL Classification: N36, B51, B54, J31

Coronavirus has been portrayed as the ‘great equalizer’. None seems immune to the virus and to the economic consequences of the lockdown measures imposed to contain its diffusion. We exploit novel data from two real-time surveys to study the early impact on the labor market of the lockdown in Italy—one of the two countries, with China, hit hard and early. We find that low-educated workers, blue collars, and low-income service workers were more likely to have stopped working both 3-week and 6-week after the lockdown. Low-educated workers were less likely to work from home. Blue collars worked more from their regular workplace, but not from home. Low-income service workers were instead less likely to work from the regular workplace. For both blue collars and low-income service workers, the monthly labor income dropped already in March. Some positive adjustments took place between the 3rd and the 6th week from the lockdown: the share of idle workers dropped, as the proportion of individuals working at home and from their regular workplace increased. However, these adjustments benefited mostly highly educated workers and white collars. Overall, low-income individuals faced worse labor market outcomes and suffered higher psychological costs. (JEL codes: J21, I24, and H12)

This paper studies the contribution of both labor and non-labor income in the growth in income inequality in the United States and large European economies. The paper first shows that the capital to labor income ratio disproportionately increased among high-earnings individuals, further contributing to the growth in overall income inequality. That said, the magnitude of this effect is modest, and the predominant driver of the growth in income inequality in recent decades is the growth in labor earnings inequality. Far more important than the distinction between total income and labor income, is the way in which educational factors account for the growth in US labor and capital income inequality. Growing income gaps among different education groups as well as composition effects linked to a growing fraction of highly educated workers have been driving these effects, with a noticeable role of occupational and locational factors for women. Findings for large European economies indicate that inequality has been growing fast in Germany, Italy, and the United Kingdom, though not in France. Capital income and education don’t play as much as a role in these countries as in the United States.

This study explores the welfare and distributional effects of fiscal volatility using a neoclassical stochastic growth model with incomplete markets. In our model, households face uninsurable idiosyncratic risks in their labor income and discount factor processes, and we allow aggregate uncertainty to arise from both productivity and government purchases shocks. We calibrate our model to key features of the U.S. economy, before eliminating government purchases shocks. We then evaluate the distributional consequences of the elimination of fiscal volatility and find that, in our baseline case, welfare gains increase with private wealth holdings.

Disasters can generate different economic effects in the short run in local economies. Our goal is to reveal how natural disasters reshaped labor markets in three countries that faced massive earthquakes in the past decade: Italy (2009 L’Aquila earthquake), Chile (2010 Concepcion earthquake-tsunami) and Ecuador (2016 earthquake in the coast of Manabi and Esmeraldas). These three countries present a mix of heterogeneity and homogeneity in observable characteristics of the individuals, socio-economic structure of the affected areas, institutional factors and macroeconomic characteristics, as well as the actions and budgets allocated by different governments for reconstruction and recovery in the affected areas. Using three short run labor surveys and different regression models (wage estimations and a double difference approach), we show an increase in labor income and worked hours (in average) in Ecuador for males and females, while in Italy we found an increase only in worked hours for females but not for males. In Chile no significant earthquake effects were found, neither in labor income, nor in worked hours. Our results suggest that the short run is critical to describe how regional labor markets will perform, differences and particularities of each country could be explained by institutional differences, economic trends, and how governments responded to their particular catastrophes.

This study develops and estimates a standard New-Keynesian DSGE model for the Ghanaian economy, for the analysis of the impacts of fiscal policy shocks on key macroeconomic variables. It also applies the model to examination of the effects of government spending, consumption tax, and labor income tax shocks on household consumption and working hours. The model features heterogeneous households of two types, financially excluded and financially included, and considers two labor markets: perfectly and monopolistically competitive labor markets. We use quarterly time series data from 1985Q1–2017Q4 to estimate the model’s parameters through Bayesian approach. Overall, we find that increased government spending has positive effects on consumption, output, employment and inflation while it turns to crowd-out consumption and to dampen the expansionary effect on output when wages are sticky. Our policy experiment results show that the presence of sticky wage dynamics in the economy requires large fraction (75%) of households who cannot participate in the financial markets in order to generate a rather short-lived positive consumption multiplier of government spending shock. At the disaggregated level, we find that positive consumption and labor income tax shocks decrease consumption by financially excluded households more than that by financially included ones. We also find that whereas financially included households decrease their working hours, financially excluded households increase their working hours in order to mitigate the negative effects of those shocks on their consumption.

Current literature on the effect of labor income on portfolio choice overlooks that workers face a risk of being forced to retire before their planned retirement age. Using data from the Health and Retirement Study, this paper finds that the forced retirement risk is both significant and highly correlated with stock market fluctuations. Using a life-cycle portfolio choice model, this paper shows that forced retirement risk makes labor income near retirement stock-like. Therefore, contrary to conventional wisdom, those who are still working but near retirement should have a lower share of risky assets in their financial portfolios than retirees do.

By presenting a two-sector DGE model, this paper investigates the relative misallocation coefficients for capital and labor within three industries in China from 1993 to 2018, then discusses the effect of factor misallocation and factor substitution elasticity on the labor income share. The following three conclusions were reached. (1) The overall labor income share reduced due to the industrialization before 2007, but after 2007 it increased by promoting the proportion of services. (2) Compared with the situation without barriers, the cross-industry factor misallocation reduced the proportion of labor in manufacturing by 44% during industrialization and in services by 5.05% during de-industrialization, respectively. (3) Eliminating the factor misallocation could raise the labor income share by 4.6% in industrialization, but it shows a weak effect during de-industrialization.

How eff ective is the minimum wage at raising nondurable household consumption through the redistribution of income towards poor workers? Using novel data on retail sales by county, I exploit variation in the minimum wage rates across states and over time to answer this question. I find that a 10% increase in the minimum wage increases sales by 1.1%. I argue that such a large eff ect is explained by positive spillovers benefi ting the bottom quarter of the labor income distribution. As expected, the expenditure response to minimum wage hikes is stronger in counties where the policy is more binding.

The U.S. housing market is heterogeneous in that house price dynamics vary greatly across regions. Depending on the location of the main residence, households are exposed to completely different housing market risk. This paper examines how geographic heterogeneity in housing market risk affects household portfolio allocations. Housing supply elasticity largely explains variation in housing market risk across regions. Where housing supply elasticity is low, households face higher housing market risk since house price growth rates are more volatile and more positively correlated with stock returns and labor income growth rates. Using the restricted version of the Health and Retirement Study (HRS) data with detailed geographic information, I find that households in areas with low housing supply elasticity tend to hold less stock in their portfolios. This tendency, however, weakens after retirement when labor income risk disappears.

I extend the canonical moral hazard model to allow the agent to face endogenous and non-contractible uncertainty. The agent works for the principal and simultaneously pursues private rewards. I establish conditions under which the first-order approach remains valid. The model adds to the literature on intrinsic versus extrinsic motivation. Specifically, to induce higher effort at work the contract may offer higher rewards but flatter incentives. The contract change makes the agent reevaluate his “work-life balance†. Larger employment rewards lessens the incentive to pursue private rewards. The greater reliance on labor income then necessitates weaker explicit incentives to induce high effort.

We explore empirically the determinants of labor shares focusing on the role of investment. We use a cross-country framework and consider up to 99 countries for the period 2004–2015. Our results reveal that the level of a country’s investment is a significant driving factor of the labor share of income. This evidence is in line with the predictions of neoclassical mechanisms for the role of investment in labor share. Among several other factors that we consider, as suggested by the extant empirical literature, we find strong evidence only for the degree of a country’s exposure to the international financial system, which is inversely related to the labor shares. Moreover, economic freedom amplifies the positive effect of gross fixed capital formation on labor income shares.

We study the optimal consumption-saving problem for consumers who are ambiguous about labor income shocks and have a preference for (absolute) wealth. It is shown that the preference for wealth interacts with the degree of ambiguity in non-trivial ways in determining the optimal consumption. The model predicts that ambiguity and preference for wealth can produce substitution or complementarity effects on consumption. In addition, we find that the interactions of ambiguity and desire for wealth generate different implications for MPCs. We then show that these interactions significantly influence the contribution of ambiguity to excess sensitivity of consumption growth and the contribution of preference for wealth to excess smoothness of consumption.

This study analyzes the interactions between per worker labor income (PWLI), labor productivity, real unit labor costs, and the relationship between relevant employee (IPCA) and employers (GDP deflators) prices, specifically focusing on Brazilian agrobusiness. For that purpose, labor productivities of the entire agrobusiness sector and its segments were calculated from 2004 through 2015. We found that the gap between agrobusiness sector deflators and the IPCA did not play a preponderant role to mitigate the effect of PWLI growth of 3.81% annually on real unit labor cost (CURT), which only increased 0.21% annually. In turn, CURT was contained by productivity gains, boosted mainly by agriculture. Without this productivity growth, CURT would have increased at 3.7% annually, thus making unviable the observed simultaneous gains for employers and employees in the Brazilian agrobusiness sector. The result for the primary agrobusiness segment should be highlighted. Even with an annual increase of 4.07% in PWLI, the 7.24% annual growth in productivity implied on an average annual reduction in CURT (-2.56%); without this significant productivity growth, the same increase in PWLI would have boosted CURT by 4.7% annually. Resumo Este estudo avalia, com foco no agronegócio, as interações entre a renda do trabalho por trabalhador (PWLI), a produtividade e os custos unitários reais do trabalho, bem como a relação entre os preços relevantes para empregados (IPCA) e empregadores (deflatores do PIB) no setor. Para isso, foi necessário calcular as produtividades do trabalho do agronegócio e seus segmentos para o período de 2004 a 2015. Verificou-se que o distanciamento entre deflator do PIB e IPCA não teve papel preponderante para mitigar o efeito do crescimento da PWLI, de 3,81% a.a., sobre o custo unitário real do trabalho (CURT), que aumentou apenas 0,21% a.a. O CURT foi contido por ganhos de produtividade no setor, impulsionados principalmente pela agropecuária. Sem esses aumentos de produtividade, o CURT teria aumentado 3,7% a.a., inviabilizando os ganhos simultâneos de empregadores e empregados do agronegócio. O resultado do segmento primário se destacou: mesmo com aumento de 4,07% a.a. na PWLI, o crescimento anual de 7,24% da produtividade implicou em redução média anual do CURT (2,56%); sem esse significativo crescimento da produtividade, o aumento da PWLI teria impulsionado o CURT, que teria crescido 4,7% a.a.

Minimum Wage Regulation (MWR) can raise wage rate, but its relation with labor income share is in controversy. We explore the influence of raising wage rate on labor income share and overwork in China. Panel data regressions are taken mainly based on China’s Industrial Enterprise Database and the International Labor Organization Database. Our findings show that raising wage rate can increase labor income share without leading to overwork. Factors that may significantly increase overwork are a higher proportion of male workers, a larger income gap and a lower per-capita income. We point out that the neoclassical explanation for labor income share is not persuasive. We support policies of raising wage rate and believe MWR is an effective measure to increase labor income share.

We consider optimal age‐dependent income taxation in a dynamic model where the labor‐leisure choice is the extensive margin, each household faces idiosyncratic shocks to labor productivity and a pecuniary cost to work, and there is no insurance market against the shocks. We show that the well‐known property of the optimal participation tax rate in the static model continues to hold in our dynamic economy, that is, the participation tax rates for some income groups with low consumption are likely negative. In dynamic models, the optimal participation tax rate depends on age and on labor income. Our numerical simulations suggest that a negative participation tax should be restricted to young households.

The paper studies the decline of the labor income share (LIS) in Mexico during the period 1990–2015. The decline is mostly explained by reductions within the economy’s major sectors (including manufacturing, tradables, and non-tradables) rather than by a recomposition of value added towards sectors with low labor shares. In contrast to agriculture—where LIS fell due to a shift of labor force from self-employment to wage-employment—in other major areas of the economy the fall in LIS is explained by reductions within the wage-employment sector. Econometric estimations indicate that parallel declines in the wage share and relative productivity of non-tradables and in the US manufacturing labor share all played a large role in the reduction of the manufacturing wage share in Mexico. More generally, the analysis suggests that the lagging productivity of the economy’s informal non-tradable sector—itself a reflection of the country’s low aggregate rate of economic growth—is a crucial factor in the fall of LIS in the formal sectors. The paper concludes by discussing possible explanations for the paradox of the slow rate of economic growth in Mexico despite the rise in the profit share.

The causes and consequences of the 1964–2016 swings in the U.S. labor income share/labor share (LS) are parsed through the lens of a structural model estimated on aggregate and LS series jointly. Where conventional models fall short, the present model yields a counter‐cyclical LS unconditionally and in response to demand and monetary policy shocks, as well as a small wage pro‐cyclicality, via moderate wage indexation. Shifts in automation, workers' market power, investment efficiency, and the relative price of investment account for 54%, 24%, 6%, and 4% of LS fluctuations, respectively. Automation shocks explain the lion's share of the post‐2007 cyclical LS tumble and 11% of output cycles, and generate a distinctive counter‐cyclical labor response. (JEL E32, E25, E52)

This work reviews recent developments in the literature analyzing precautionary saving. After a description of traditional precautionary saving theory, which considers labor income risk and interest rate risk, we present different research lines which introduce a wide range of extensions and generalizations of the classical model: the contemporaneous presence of multiple risks, changes in risks of different types, multiple variables affecting household utility, preferences non-featuring risk aversion and joint decisions on many choice variables. For each of these issues, we provide specific highlights which summarize the main results obtained in the literature. Lastly, we briefly discuss the analyzes beyond the classical model.

We examine the effect of policy uncertainty on household portfolio choice using the Korea Labor and Income Panel Study (KLIPS). Policy uncertainty significantly reduces the amount of risky assets in a household’s portfolio on both extensive and intensive margins. Individual heterogeneity is controlled using a risk-tolerance variable. Furthermore, we estimate heterogeneous effects of the policy uncertainty on portfolio choices of households across different levels of income volatility. It turns out that households with higher levels of labor income volatility tend to respond less to aggregate policy uncertainty.

The paper analyzes the lifetime utility maximization problem of an agent who chooses her saving and timing of retirement in the presence of labor income risk in a simple setting where a pure redistributive pension scheme is in place. In this context, a precautionary motive for retirement, which pushes old workers to replace an uncertain labor income with certain pension payments, and to retire early is identified. The conditions for precautionary retirement and saving to arise are then characterized and interpreted in two settings. In the first setting, utility only depends on income, and a sufficiently low level of absolute prudence is necessary for precautionary retirement. A sufficiently high level is necessary however for precautionary saving, which can coexist with precautionary retirement only for intermediate values of absolute prudence. In the second setting, agent utility also depends on leisure, and three conditions allow the precautionary motive for retirement and saving to jointly operate: prudence, an index of absolute prudence sufficiently low and cross-prudence in leisure.

An important part of the environmental contamination comes from the daily practices of the households, which has been partially ignored in the recent empirical literature. The objective of this research is to examine the green returns of labor income and human capital in a developing country, Ecuador. We use data from the National Institute of Statistics and Census (NISC) during 2010–2016 and panel data econometrics techniques. Our results show that labor income and human capital plays a relevant role in the environmental behavior of households in this country: both variables have a positive effect on the friendly environmental behavior of households. In addition, we found that the cantons 1 specialized in manufacturing have a poor environmental performance, while the cantons specializing in services do not have a clear pattern. We also don't find significant differences in the environmental behavior associated with the composition of the ethnic groups of each canton. Finally, natural geographic regions generate differences in the environmental behavior of households. One possible implication derived from this research is that those responsible for environmental policy can mitigate pollution by promoting educational programs with environmental content and encouraging improvements in the behavior of households using tax mechanisms.

A significant part of the revenue in the EU budget is raised via a GNI-based resource. The purpose of this paper is to use a stylized model of an economic federation to analyze how this way of raising funds to the central authority affects the labor income taxes implemented by the lower-level governments. This question is analyzed both when the federal fee is proportional to GNI and proportional to GDP. One key result is that if the government in a lower-level jurisdiction acts as a Nash follower vis-a-vis the other governments in the public sector, then there is an incentive to implement a higher tax on labor. Another is that if the lower-level government is able to exercise decentralized leadership vis-à-vis a federal government which is concerned with redistribution, then the incentive structure underlying the taxation of labor is independent of how the federal government collects its revenue.

This study estimated economic contribution of the global forest sector to national economies by calculating value added, employment, and labor income. Input-output models were developed for 58 countries using 2011 IMPLAN model and data to estimate the direct, indirect, and induced effects of the major forest subsectors. The jobs generated in domestic sectors by the forest sector through backward linkage exceeded the number of direct jobs in the forest sector itself. Total indirect and induced value added generated in other sectors by the forest sector also exceed the direct value added produced in the forest sector. Comparison of economic multipliers showed that the ripple effects varied by forest subsector and the wood-based processing subsectors generally had relative higher multiplier effects than the forestry and logging subsector. An econometric model was developed to estimate economic multipliers for 111 countries without IMPLAN data and the economic contribution of the forest sectors to their national economies was estimated based on the derived multipliers and national statistics on industry output. The global forest sector collectively directly employed more than 18.21 million people and supported more than 45.15 million jobs through direct, indirect and induced impacts. The global forest sector had a direct contribution of more than $539 billion and a total contribution of more than $1298 billion to the world GDP.

We show that the net corporate payout yield predicts both the stock market index and house prices and that the log home rent-price ratio predicts both house prices and labor income growth. We incorporate the predictability in a rich life-cycle model of household decisions involving consumption of both perishable goods and housing services, stochastic and unspanned labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. We find that households can significantly improve their welfare by optimally conditioning decisions on the predictors. For a modestly risk-averse agent with a 35-year working period and a 15-year retirement period, the present value of the higher average life-time consumption amounts to roughly $179,000 (assuming both an initial wealth and an initial annual income of $20,000), and the certainty equivalent gain is around 5.5% of total wealth (financial wealth plus human capital). Furthermore, every cohort of agents in our model would have benefited from applying predictor-conditional strategies along the realized time series over our 1960-2010 data period.

A life cycle model is developed to explain how and why life insurance demand of household participants varies and to further explore risk sharing effects within a household. The model includes endogenous labor supply and joint decisions of life insurance demand for men and women, and generates consumption with a sudden drop around retirement and hump-shaped wealth and life insurance. The results show that life insurance demand peaks earlier in single-parent households than married-couple households and that life insurance demand has an ambiguous relationship with mortality and wealth. The results suggest that gender disparity in life insurance demand is due to income gap. The results indicate that the effect of a spouse’s earnings on the other spouse’s demand for life insurance depends on the correlation of income between the spouses under mortality risk, and labor income risk diversification plays a role in this effect.

This paper analyzes the effect of women’s earnings on domestic violence in rural Colombia during the period 2009–2013. To this end, it builds an indicator of domestic violence against women at the ...

We estimate capital and labor income Pareto exponents across 475 country-year observations that span 52 countries over half a century (1967-2018). We document two stylized facts: (i) capital income is more unequally distributed than labor income in the tail; namely, the capital exponent (1-3, median 1.46) is smaller than labor (2-5, median 3.35), and (ii) capital and labor exponents are nearly uncorrelated. To explain these findings, we build an incomplete market model with job ladders and capital income risk that gives rise to a capital income Pareto exponent smaller than but nearly unrelated to the labor exponent. Our results suggest the importance of distinguishing income and wealth inequality.

This study considers the optimal consumption‐investment‐insurance problem incorporating housing decisions of a household when interest rates and labor income are stochastic. Under the complete market assumption, we derive the closed‐form solution of the optimal insurance demand, portfolio choice, and housing consumption. We calibrate the model using data from the financial market of Taiwan. We find that the insurer's pricing strategy has a significant impact on the household's consumption pattern. Specifically, additional loading in insurance premium allows the life‐cycle model to produce hump‐shaped consumptions of both perishable goods and housing. Loading also creates an unfair background risk to households. However, we only find a small portfolio risk reduction, because households optimally choose a large coverage to mitigate the mortality exposure. This suggests empirical background risk studies overestimate the risk reduction when insurance is available.

This study aims to better understand the causal links between health and labor income among middle-aged and older adults. Much of the literature on health and employment consists of studies using data on young or working-age adults for the United States and European countries. This study focuses on Korean middle-aged and older adults (ages 45 to 74 years) and uses dynamic panel data models. With 12 waves of the Korea Welfare Panel Study collected from 2006 to 2017, we consider the heterogeneity of the results across demographic and socioeconomic groups. The sample is stratified by gender, age, urban-rural areas, poverty status, and marital status. Health is measured through self-reported health status. For middle-aged and older Koreans, better health is found to contribute to higher labor income for both men and women, particularly among married couples, the poor, and individuals aged 55 to 64. Labor income appears to benefit men’s health only, mainly those aged 65 to 74.

We study quantitatively how uncertainty in expected stock return predictability affects life-cycle portfolio choice and wealth accumulation in the presence of undiversifiable labor income risk. Households filter information about future expected returns from observed predictors and realized stock returns. Therefore, optimal portfolio choice does not only depend on financial wealth and age, as in more traditional life-cycle models. Counterfactuals demonstrate the magnitude of portfolio demand changes that depend on perceptions about underlying expected returns. On average, life-cycle asset allocation becomes more conservative than models with either i.i.d. stock returns, or with clearer signals about expected stock returns.

We study the redistributive effects of monetary and fiscal policies in a limited-heterogeneity model. It features two types of households and two types of intermediate firms, with savers being employed exclusively by capital-intensive producers and spenders by labor-intensive producers. Following a monetary or a fiscal expansion, consumption inequality decreases temporary: policy shocks generate higher benefits for hand-to-mouth households through increases in their labor income, outweighing the direct savings–consumption substitution effects for the optimizing households. The reduction in consumption inequality is higher the more complementary sectoral intermediate goods are, that is when a more balanced composition of the two sectoral goods is required for final good production. As compared to a single-firm model, in our two-firm, two-household model the effects on relative consumption are attenuated; this suggests a potential overestimation of redistributive effects in homogeneous-firm models.

The media often cast foreign private equity firms as villains who gamble with local jobs. We use detailed registry data from Sweden to show that foreign buyouts have not affected workers' labor market outcomes. But domestic buyouts have. They have increased unemployment incidence by a fifth, duration by a third, and lowered labor income by seven percent.

This study investigated optimal labor income taxation in non-competitive labor markets. Necessary and sufficient conditions are provided for constrained efficient allocations that are implementable via taxes. Not all allocations that can be implemented in a competitive setting satisfy the necessary conditions for implementation. If an allocation that maximizes a utilitarian objective is implementable then almost all workers face negative marginal tax rates. If the planner’s objective is Rawlsian, implementation is always possible with a well-chosen unemployment benefit financed by taxes on profits.

Using the relation between the surprise component in labor statistics and an asset’s return on labor news announcement days, we derive a labor beta. By adding a labor news hedge portfolio which is long in high labor beta assets and short in low labor beta assets to the market portfolio, we obtain a labor news model. This model describes the cross-section of expected stock returns just as well as or even better than alternative multifactor models. The estimated premium for bearing labor income risk varies between three and five percentage points per annum.

We characterize the optimal default fund in a dened contribution (DC) pension plan. Using detailed data on individuals and their holdings inside and outside the pension system, we nd substantial heterogeneity among default investors in terms of labor income, nancial wealth, and stock market participation. We build a life-cycle consumption{ savings model incorporating a DC pension account and realistic investor heterogeneity. We examine the optimal asset allocation for dierent realized equity returns and investors and compare it with age-based investing. The optimal asset allocation leads to less inequality in pensions while it moderates the risks through active rebalancing.

Most empirical studies of the impact of labour income taxation on the labour supply behaviour of households use a unitary modelling approach. In this paper we empirically analyze income taxation and the choice of working hours by combining the collective approach for household behaviour and the discrete hours choice framework with fixed costs of work. We identify the sharing rule parameters with data on working hours of both the husband and the wife within a couple. Parameter estimates are used to evaluate various model outcomes, likethe wage elasticities of labour supply and the impacts of wage changes on the intrahousehold allocation of income. We also simulate the consequences of a policy change in the tax system.

We study a classical continuous-time consumption-investment problem of a power utility investor with deterministic labor income with the important feature that the consumption-investment process is...

A standard result in existing literature is that public goods are under-provided under tax competition (see Zodrow and Mieszkowski, 1986). This paper shows that introducing redistribution concerns changes the result. Capital mobility reduces income redistribution by increasing the efficiency costs of capital taxation. If public goods have positive distributional effects, providing more public goods counteracts the negative effects of capital mobility. Moreover, under the condition that labor income and capital income are positively correlated, less income redistribution through capital taxation can be compensated by stronger taxation of labor income. As a result, a higher level of public goods is desirable if capital mobility increases.