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PurposeAn important concern of economic policy analysis is how income taxes affect labor supply since this is crucial in assessing the efficiency costs of taxation and designing labor income taxation. The focus in the literature has been mostly to study the responses of high earners and women. The authors contribute to this literature by focusing more on how middle earners respond to financial incentives and whether the responses are different between men and women.Design/methodology/approachThe authors exploit substantial expansions in the level of individual income exempt from taxation and taxed at a lower marginal tax rate while the schedule of marginal tax rates remained the same. The authors adopt an empirical framework that is similar to Bosch and van der Klaauw (2012) and condition on the effects of other factors, such as inflows of foreign workers that may have affected the wages, participation and working hours of native males and females. The authors also conduct various sensitivity analyses to examine the robustness of the estimates.FindingsThe authors find robust evidence that the tax reforms increased the wages of medium and high educated married males and females significantly. They also had a positive impact on work participation that was more substantial for married women, especially the medium educated. The authors estimate significant positive own wage labor supply elasticities that are small and about the same for men and women when the authors condition on the labor outcome effects of inflows of EU and non-EU foreign workers, which changed the skill distribution of the economy and had a more significant impact on female labor outcomes. Smaller wage labor supply elasticities indicate lower disincentive effects and deadweight losses from the imposition of taxes and have implications on the design of optimal taxation of men and women.Originality/valuePrevious investigations of the labor supply responses of both men and women to a given policy change have been identified mostly by exploiting changes in joint income taxation and marginal tax rates. The authors exploit substantial expansions in the level of individual income exempt from taxation and taxed at a lower marginal tax rate while the schedule of marginal tax rates remained the same. The income effects of these reforms could be limited since the reduced marginal tax rates apply to only part of the income.

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 investigates the distributional consequences of monetary policy across generations. We use a life-cycle model with a rich asset structure as well as nominal and real rigidities, calibrated to the euro area using both macroeconomic aggregates and microeconomic evidence from the Household Finance and Consumption Survey. Life-cycle considerations allow to demonstrate the key role of maturing assets (in contrast to balance sheet holdings) for properly assessing the redistributive effects of monetary policy. The redistribution is mainly driven by nominal assets and labor income, less by real financial assets and housing. Overall, we find that a typical monetary policy easing redistributes welfare from older to younger generations, and decreases net worth inequality associated with life-cycle motives.

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 document explores the incidence of the minimum wage in Lithuania. The descriptive analysis exploits high-frequency data on monthly labor income coming from Social Security records between July 2013 and July 2020 to characterize (i) the evolution of the monthly minimum wage, (ii) the percentage of workers who earn the minimum wage, (iii) the bite of the minimum wage in the wage distribution, and (iv) the heterogeneity of the findings with respect to gender and age. The evidence shows that the minimum wage was raised 7 times with an average (real) increase of 7.3% and, on average, less than 10% of the workers earn at most the minimum wage but low-pay incidence is around 20%. In terms of the impact of the wage distribution, the minimum wage relative to the average wage in the economy fluctuates between 45 and 50 percent. Females and young workers exhibit a larger low-pay incidence and minimum wage bite.

This study aims to know in-depth the effectiveness of children's learning through the direct upbringing of parents in lieu of teachers in schools during the covid-19 pandemic era. Seeing the phenomenon that occurred when the covid-19 outbreak arrived in Indonesia where the pattern of people's lives has changed. It is characterized by the number of people who are lost to their jobs, shrinking the value of labor income, weakening the State economy, and face-to-face lessons that are matched by the pandemic so as to impose the active role of parents in lieu of teacher duties. This means that in addition to being a livelihood seeker for the sustainability of family life, a parent also acts as a teacher. This is the background of this research. This study took place in kelebuh village, Praya Tengah sub-district, Central Lombok regency. Next, this research type of field research (field research) with the method of analysis is inductive. While the approach used is an empirical approach based on the theory of effectiveness. The findings showed the success and effectiveness of parental function in the actualization of work from home. The success of the three parents in Kelebuh village gives an indication that efforts to maintain the existence of the family in the covid-19 period are realized and categorized as successful.

El propósito de este estudio es analizar la relación entre las diferencias salariales entre hombres y mujeres y la segregación ocupacional de género afecta a la misma, utilizando datos de clasificación ocupacional. Se examinan si existe una relación estadísticamente significativa entre el empleo y el tamaño de la parte inexplicable de la brecha salarial de género. La metodología se fundamenta con estimaciones que identifica las determinantes del ingreso laboral con el método de descomposición Oaxaca-Blinder (1973), mismo que permite examinar las diferencias en las brechas salariales de genero entre grupos ocupacionales, el análisis se basa en datos individuales de diez años (2010-2019) disponibles en Ecuador. Los resultados mencionan que no existe relación fuerte entre la segregación ocupacional y el tamaño de las diferencias inexplicables en los salarios. Las variables que explican este contraste son la edad, tipo título, título profesional, y estado civil. Las recomendaciones se basan en robustecer la participación y permanecía de las mujeres en el mercado laboral de igual forma mediante el cumplimiento de leyes y normativas existentes.

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.

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

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.

A prominent issue in current debates is the coincidence between growing within-country disparities in the labor income distribution and countries’ increasing exposure to globalization. This article contributes to such discussions by providing an overview of the main theoretical and empirical literature on the link between globalization and a component of income inequality: wage inequality. Specific attention is paid to the role of trade, in the form of exports and imports, and global value chains (GVCs). This review emphasizes that in-depth consideration of several intertwined mechanisms is necessary in order to accurately address trade-induced inequality concerns.JEL Classification: F11, F12, F14, F16, F66, J31

In this paper, I establish a numerical method to solve a generic consumption-portfolio choice problem with predictability in stock prices, house prices, and labor income. I generalize the SAMS method introduced by Bick et al. (Manag Sci 59:485–503, 2013) to state-dependent modifiers. I set up artificial markets to derive closed-form solutions for my life-cycle problem and transform the resulting consumption-portfolio strategies into feasible ones in the true market. To obtain transformed-feasible strategies that are close to the truly, unknown optimal strategies, I introduce state-dependent modifiers. I show that this generalization of the SAMS method reduces the welfare losses from over 10% to less than 2%.

We study the short-run impacts of labor income taxation in an aggregate economy of N>2 regions. The distinct regions demand workers. Each region is endowed with one unit of immobile capital. The aggregate economy also has one unit of labor that is mobile across the regions. All regions produce a final good with identical Cobb-Douglas production functions. The price of output is normalized to unity. We perform five tasks. First, we focus on the benchmark case in which no region taxes either capital or labor. We find the equilibrium wage, the allocation of workers across the regions, and the total income of labor and capital. Second, we study the impact of a tax τ on labor income in region 1 when the other N-1 regions do not tax labor income. We ascertain the after-tax return to labor in region 1, the equilibrium wage, and the allocation of labor across the regions. Third, we compute the total income of capital and labor and the tax revenue in region 1. Fourth, we discuss whether workers in region 1 are better off with a tax on labor income. Finally, we comment on the policy implications of our research.

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.

The concept of tax regulated by law should be collected from taxpayers in proportion to their ability to pay as a requirement of the principle of fairness in taxation. The importance of the ability of tax payment has been increasing in terms of tax burden in recent years. The tax burden is expressed as both individual and total tax burden. The personal tax burden is calculated by the ratio of taxes paid by individuals to their personal income. Countries and organizations such as OECD calculate the tax burden in more detail and specifically. In this study, a comprehensive analysis of the change of tax burden in OECD countries for the period 2000-2018 is carried out. Before analyzing, some basic information about main concepts such as labour income, tax burden, personal income tax are given. The percentage change in the process of the tax burden for household types during that period are shared through tables which are included with the datas from OECD database and its reports, and the findings related to them are evaluated.

Using administrative data on a random 50% of the Hungarian population, including individual-level information on incomes, healthcare spending, and mortality for the 2003-2011 period, we develop new evidence on the distribution of healthcare spending and mortality in Hungary by income and geography. By linking detailed administrative data on employment, income, and geographic location with measures of healthcare spending and mortality we are able to provide a more complete picture than the existing literature which has relied on survey data. We compute mean spending and 5-year and 8-year mortality measures by geography and income quantiles, and also present gender and age adjusted results. We document four patterns: (i) substantial geographic heterogeneity in healthcare spending; (ii) positive association between labor income and public healthcare spending; (iii) geographic variation in the strength of the association between labor income and healthcare spending; and (iv) negative association between labor income and mortality. In further exploratory analysis, we find no statistically significant correlation between simple county-level supply measures and healthcare spending. We argue that taken together, these patterns suggest that individuals with higher labor income are in better health but consume more healthcare because they have better access to services. Our work suggests new directions for research on the relationship between health inequalities and healthcare spending inequalities and the role of subtler barriers to healthcare access.

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.

It has been well recognized that population ageing could generate structural changes centered around the dwindling labor force, on one hand, and the expanding dependency on the generosity of the welfare state, on the other hand. Ageing-related welfare state policy entails both fiscal issues and migration issues. The paper employs a general-equilibrium model with a policy-making focus, to help understand the mechanism governing the provision of social benefits, labor income taxation, capital income taxation, migration curbs on low skilled and high skilled, driven by the ageing of the population. Greater generosity of the welfare state comes together with policy of a more liberal migration policy — incentive compatible with the interests of the majority voters.

The goal of this paper is to analyze remunerations by sex, to determine the gap and discrimination that exists in public entities as in the case of Customs of Chile. The structure of occupational estates and labor income is analyzed through the functional relationships of the Mincer equation. The results indicate that there are wage differences by sex in favor of men of the order of 42%, with professional and technical professionals presenting the greatest inequalities. In addition, married men have higher salaries than women for the same years of experience. These results contrast to the official publications in Chile for the public sector where the wage gap is 27.4%.

This paper estimates the individual impact of a worker’s job loss on his/her criminal activity. Using a matched employer–employee longitudinal data set on unemployment, crime, and taxes for all residents in Denmark, the paper builds each worker’s timeline of job separation, unemployment, and crime. The paper focuses on displaced workers: high-tenure workers who lose employment during a mass-layoff event at any point between 1990 and 1994 (inclusive). Controlling for municipality- and time-specific confounders identifies the individual impact separately from the aggregate impact of the unemployment rate on crime. Placebo tests display no evidence of trends in crime prior to worker separation. Using Denmark’s introduction of the Act on an Active Labor Market at the end of 1993, we estimate the impacts of activation and of a reduction in benefit duration on crime: crime is lower during active benefits than during passive benefits and spikes at the end of benefit eligibility. We use policy-induced shifts in the kink formula relating prior earnings to unemployment benefits to estimate the separate impacts of labor income and unemployment benefits on crime: the results suggest that unemployment benefits do not significantly offset the impact of labor income losses on crime.

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.

This paper focuses on the participation of China into global value chains. First, this paper measures the domestic value-added (DVA) of China’s exports during 2000–2014 based on the World Input–Output Database. The results confirm that the gap between the DVA and gross exports varies between countries and composite industries. Second, this paper uses a structural decomposition analysis to examine nine determinants that affect the change in DVA of China’s exports over time. Moreover, the result of the analysis of China is compared with those of Japan and the USA. Four notable facts are found. First, although the export share of high-technology manufacturing goods has risen significantly, the change in export structure failed to increase the DVA of China’s exports effectively. Second, the substitution of domestically produced intermediate inputs for imported intermediate inputs raised the DVA of China’s exports after the mid-2000s, while it decreased the DVA of Japan and the USA’s exports in most time. Third, the rise in DVA of China’s exports was accompanied by the substitution of labor income for capital income. However, the same result was absent in Japan and the USA. Finally, the increases in labor productivity and wage per person contributed greatly to the growth in DVA of China’s exports.

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.

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.

This study aims to explore the regional wages inequalities and its relationship with the development of tourism and amenities endowment. We estimate a spatial error model for 29 metropolitan agglomerations in Argentina during the period 2004–2015. Four indices of touristic amenities that interact with tourism employment—as a proxy for tourism development—in labor income inequality estimations are used. Results show that the labor income distribution depends on the natural resources endowment, as well as the development of tourism in the agglomerates. A more equal distribution of labor income is observed in the agglomerates that have a greater presence of water-based resources, while the relationship is inverse in agglomerates with a greater presence of land-based resources. Also, the tourism employment has an unequal effect on labor income. In conclusion, the study shows the relevance of including aspects of regional development and resource endowment in the analysis of income inequality.

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 review quantitative studies that empirically examine whether studying abroad influences graduates’ wages. After describing features of the existing studies, we assess existing evidence on the size of the wage effect of studying abroad. We then examine corresponding effect heterogeneities, before discussing mechanisms mediating the effect of studying abroad on wages. We conclude by highlighting directions for future research. In a nutshell, our review suggests that studying abroad has a moderate positive effect on graduates’ early career wages in various national and institutional settings. However, this effect tends to vary across groups of graduates, employment contexts, and types of stays abroad. An increased likelihood of employer change and of gaining access to large and multinational companies as well as improved access to high-wage labor markets abroad appear to be the empirically most relevant mechanisms mediating the effect of studying abroad on wages. Other assumed explanatory mechansims, such as improved language skills and a greater tendency to pursue further education, turn out to be less relevant. On balance, our review illustrates that the examined research field has made great progress in recent years. It also shows how research can be further advanced by a stronger degree of standardization of study designs, internationally comparative and longitudinal datasets, the analysis of further plausible mediating mechansism, and a focus on new research questions.

This paper scrutinizes the role of prolonged, expansionary monetary policy on the saving behavior of Japanese households, focusing on the dramatic change of the household savings rate since 1998, from high to low saving. The literature generally attributes this change to the country’s shift from high-growth to low-growth and its demographic change. This paper empirically examines changes in the incentives for saving and the ability to save connected to monetary policy. It finds that monetary policy had a significant impact on Japan’s household saving behavior via the interest rate channel but not the labor income channel. There is also evidence that rising government deficits come along with declining household saving and that rising wealth boosts saving.

How important is the planning horizon of households for the effects of fiscal plans? We address this question through the lens of a New-Keynesian model where households are boundedly rational and plan over a finite number of periods. We show that the planning horizon affects the medium-run cumulative multipliers significantly. Government spending cumulative multipliers increase with the horizon while labor tax cumulative multipliers drop, in absolute terms. In light of the recent debt crisis in the Euro Area, we look at spending cuts and labor income tax hikes. In line with the empirical literature, we find in our benchmark calibration that spending cuts are less recessionary than tax hikes. Looking at the interaction between the planning horizon and the persistence of the fiscal plans, we find that spending cuts become less recessionary while tax hikes more recessionary when the persistence of fiscal plans rise, and that this effect is amplified by shorter planning horizons. Introducing wage stickiness, we show that for very sticky wages, tax hikes become less recessionary than spending cuts, but that intermediate levels of wage stickiness have the opposite effect on fiscal multipliers when planning horizons are finite.

This paper investigates the dispersions in days worked and wages by adapting a novel semi-parametric specification that minimizes assumptions about life-cycle labor income dynamics. Data for Italy shows a substantial increase in income inequality after age 50 for males over the time span from 1985 to 2012, which is remarkably driven by the variations in days worked rather than wages. Results show that this increase is determined by permanent changes in the number of days worked. I also introduce an empirical strategy to decompose the cross-covariances of wages and working days to quantify the permanent and transitory responses of days worked to wage shocks. A one-percent increase in permanent wages increases the permanent days worked by 0.8% at the age of 28, while this increase is about 0.3% at the age of 55. Despite the strong reaction of days of work to wage shocks early in careers, the correlation coefficients are small, indicating that only a small share of variation in permanent days worked – which shapes the permanent income inequality – is explained by the changes in wages.

Does parental wealth inequality impact next generation labor income inequality? And does a tax on parental wealth affect the labor income distribution of the next generation? We tackle both questions empirically using detailed intergenerational data from Norway, focusing on effects on wages rather than capital income. Results suggest that a net wealth of NOK 1 million increases wages of the children by NOK 14,000. Children of wealthy parents also have a higher labor income mobility. The estimated hypothetical wage distribution without the wealth tax is more unequal. Moreover, suggestive evidence indicates parental wealth is associated with higher labor risk taking.

This study analyzes the effect of immigration on intergenerational income mobility of natives. I exploit a large quasi-natural policy experiment that led to variation across time and space in exposure to cross-border immigrants: The incremental removal of restrictions for cross-border immigrants in Switzerland in regions close to the border. The study draws from several administrative data covering the universe of labor income, family linkages, and census data. Results show that children from low-income parents experience a stronger decrease in labor income than children from high-income backgrounds. While children from the bottom quintile experience a 3 to 6 percent decrease in labor income, the effect for children from the top quintile is close to zero or slightly positive. Subsequently, intergenerational income mobility, measured as the rank difference between children from the lowest and the highest parent percentile, decreases by 1.5 percentile ranks or 12 percent in relative terms. The income of children from low-income backgrounds decreases more because they are more likely to learn occupations and to choose educational tracks which are more negatively affected by the immigrant influx. Also, there is no adaption in educational or occupational choices that could mitigate the negative labor income effect.

As part of the Colombian government's strategy to support the armed-conflict victims, a Graduation Program called "Transformando Mi Futuro" (Transforming my future) was implemented. Unlike other graduation programs, this one targets the urban population and has no assets transfers. To evaluate this program, a Results Evaluation (Before/After) approach was performed using the information collected before and after implementing the program. The main results show positive changes in well-being and a reduction in the gap between the actual perception of well-being and the expectations for two and five years, and positive changes in labor income and savings. These results suggest that the program contributed to improving the living conditions of participating households. However, heterogeneity analysis shows that impacts are differentiated according initial status of participants. This exercise is part of the set of evaluations carried out within the Platform for Evaluation and Learning of the Graduation Program in Latin America (http://www.plataformagraduacionla.info/).

Much attention has been given to rising wealth inequality in recent decades. However, understanding inequality requires an understanding of how wealth relates to the potential wealth an individual could accumulate and where this wealth comes from. Using administrative data from Norway, we create measures of potential wealth that abstract from differential consumption and spending behavior. We then examine how these measures relate to observed net wealth of individuals at a point in time and the role played by different sources of wealth in the distribution of potential wealth. We find that net wealth is a reasonable proxy for potential wealth, particularly in the tails of the distribution. Importantly, people in different parts of the potential wealth (or actual net wealth) distribution get their wealth from very different sources. Labor income is the most important determinant of wealth, except among the top 1%, where capital income and capital gains on financial assets become important. Inheritances and gifts are not an important determinant of wealth, even at the top of the wealth distribution. Finally, although inheritances are not important, parental wealth does influence child’s wealth; children of wealthy parents accumulate wealth from very different sources than children of less wealthy parents.

We develop a new factor content approach to study the impact of trade on inequality. Our analysis generalizes the theoretical results of Deardorff and Staiger (1988) and improves on past empirical implementations of these results. Combined with unique administrative data from Ecuador, our approach yields measures of individual-level exposure to exports and imports, for both capital and labor income, as well as estimates of the incidence of such exposure across the income distribution. We find that international trade raises earnings inequality in Ecuador, especially in the upper-half of the income distribution. However, the drop in inequality experienced by Ecuador over the last decade would have been less pronounced in the absence of trade.

Wang, D. and Li, J., 2020. Coastal haze pollution, economic and financial performance, and sustainable transformation in coastal cities. In: Wan, Z. (ed.), Coordinated Sustainable Development in Coastal Areas: Environment and Economy. Journal of Coastal Research, Special Issue No. 109, pp. 1–7. Coconut Creek (Florida), ISSN 0749-0208.In this paper, 76 coastal cities in China are selected as the research objects to analyze the relationship between coastal economic and financial performance and environmental quality. The empirical results show that the increase of per capita output value aggravates the overall pollution situation of the city, and when the financial pressure of the city increases, the overall pollution situation will slow down. Secondly, with the improvement of labor income, the requirements for the improvement of coastal environmental quality will increase and the effect of pollution control and environmental quality improvement will be achieved.

Inequality is increasingly a concern. Fiscal and structural policies are well-understood mitigators. However, less is known about the potential role of monetary policy. This paper investigates how inequality matters for monetary policy within a tractable Two-Agent New Keynesian model that captures important dimensions of inequality. We find some support for making inequality an explicit target for monetary policy, particularly if central banks follow standard Taylor rules.

Income inequality in Brazil is high and persistent, explained at least in part by low intergenerational income mobility. Despite the increasing female labor participation, most of the studies consider only father’s income to analyze intergenerational mobility. This chapter aims to analyze the role of mothers in intergenerational income mobility and the differences in mobility patterns between daughters and sons in Brazil. We use information from social mobility supplement of 2014 National Household Sample Survey to estimate intergenerational elasticity of labor income. The results show that the relation between mothers’ and children’s income is almost as high as that of fathers, especially for daughters. Mobility patterns’ analysis reveals no significant differences between daughters and sons. However, gender income inequalities are more pronounced for women from poor families. As returns to education are increasing, the educational advantage of female over male workers seems to offset gender gap for those of richer families. Moreover, the educational mobility between generations was higher for daughters than for sons. Despite that, daughters did not experience greater income mobility than sons. These results suggest that equalizing educational opportunities is important to promote intergenerational income mobility, although not sufficient. Nowadays, women in Brazil are more educated than men, but there exist social barriers to achieve equal payment for similar levels of schooling. Then, there is still room for gendered actions and policies related to improvements in labor market conditions to narrow the gender wage gap between men and women and between workers from richer and poorer families.

What are the distributional consequences of tariffs? We build a trade model with incomplete asset markets and households that are heterogeneous in their income, wealth, and labor skill. We increase tariffs by 5 percentage points and examine several budget-neutral fiscal policies for redistributing tariff revenue. Without redistribution, tariffs hurt all households, but higher tradables prices disproportionately harm the poor and the ensuing decline in the skill premium disproportionately harms the skilled. With redistribution, lowering the labor income tax leads to lower economic activity but higher average welfare relative to lowering the capital income tax; nevertheless, both policies reduce average welfare with retaliatory tariffs. Finally, when tariff revenue is rebated to households as lump-sum transfers, tariffs can be welfare improving even with full retaliation.

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.

Life cycle and insurance-type considerations dominate redistribution policy. Wage and fiscal burden implication dominate migration policy Ageing drive both migration and redistribution trends Fiscal prospects of ageing depend on two factors, in order to mitigate adverse macroeconomic impact of ageing. The first is the tendency towards for capital deepening; the second increased migration flows. In a macroeconomic framework the paper compares different policy regimes, directed at migration and redistribution issues: migration quotas, provision of social benefits, labor income and capital income taxation, - are all endogenously determined in a policy-optimizing framework. The analysis makes a three-way comparison: free-migration regime differentiated from restricted-migration regime, welfare-state regime distinguished from free-market regime, and low-income-majority regime assessed against high-income-majority regime.

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.