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Frank (2009) constructed a comprehensive panel of state-level income inequality measures using individual tax filing data from the Internal Revenue Service. Employing an array of cointegration exercises for the data, he reported a positive long-run relationship between income inequality and the real income per capita in the United States. This article questions the validity of his findings. First, we suggest a misspecification problem in his approach regarding the order of integration in the inequality index, which shows evidence of nonstationarity only for the post-1980 data. Second, we demonstrate that his findings are not reliable because the panel cointegration test he used requires cross-section independence, which is inappropriate for the U.S. state-level data. Employing panel tests that allow cross-section dependence, we find no evidence of cointegration between inequality and the real income. (JEL D31, 040), I. INTRODUCTION The unprecedented rise in U.S. income inequality since the early 1980s has been attracting the attention of researchers and policy makers over the past decades. One key question [...]

Byline: Bernhard Christoph (1) Keywords: Subjective well-being; Standard of living; Income Abstract: Among the surprising results of research on the relation between a person's material circumstances and his or her subjective well-being was the finding that this relationship appears to be rather weak (throughout this paper the terms '(general) life satisfaction', '(subjective) satisfaction', 'happiness' and 'subjective well-being' will be used interchangeably. The same applies to the terms 'material circumstances', 'material conditions', 'material situation' and 'material well-being'). However, more recently authors began to ask the question, whether this might at least in part be explained by the insufficiencies of income as an indicator for the material situation. Building on this idea, they have shown that the inclusion of alternative measures for the respondents' material situation--such as wealth measures in particular--reveals that the relationship between a person's material well-being and his or her subjective well-being might just be somewhat stronger than researchers thought before. The paper will follow this lead but will go beyond current research by first, systematically reviewing the various approaches available for measuring the material situation and second, by proposing the use of a so-called deprivation index, an alternative measure of material well-being, which is frequently used in the context of poverty research (compare e.g. Townsend in Poverty in the United Kingdom, Penguin Books, Harmondsworth, 1979 Hallerod in J Eur Soc Policy 5:111--129, 1995 Nolan and Whelan in J Eur Soc Policy 6:225--240, 1996). It will be argued, that such a deprivation based measure will perform better than indicators like income or wealth when analyzing the relationship between material conditions and subjective well-being. This hypothesis will be tested using three different German datasets. Based on this data it will be shown that in all cases deprivation measures perform better in explaining differences in subjective well-being than the alternatives. However, both types of measures seem to capture slightly different aspects of the material situation, a result which has also been found in the poverty literature cited above. Thus using a combination of both seems to be the best alternative. Author Affiliation: (1) Institute for Employment Research (IAB), Nuremberg, Germany Article History: Registration Date: 23/11/2009 Accepted Date: 22/11/2009 Online Date: 11/12/2009

A study to determine the impact of job displacements on earnings losses of workers in Connecticut from 1993 to 2004 is presented. The results show the difference from those found in study using data from Pennsylvania. The finding has settled the conflicting results of high-quality studies that used differing data sources to study earnings reductions after loss of employment.

Byline: M. J. J. Kunst (1), S. Bogaerts (2), T. Wilthagen (2), F. W. Winkel (2) Keywords: Violent victimisation; Income attainment Abstract: Violent victimisation may have many short-term psychological and physical outcomes. Occasionally, the negative aftermath of violence persists over time or induces other and more far-reaching consequences. Income attainment after victimisation is one of these outcomes. To date, previous studies have focussed on the income effects of violent victimisation during childhood and adolescence. Violence exposure during the early stages of the life course may frustrate processes of educational and occupational attainment and consequentially result in lower income levels. However, in addition or alternatively, many other and age-independent pathways between violent victimisation and income may be suggested. Prior studies appear to have paid little attention to this issue. Therefore, the purpose of the current study was to explore whether violent victimisation is associated with income levels several years after victimisation, irrespective of the age at which victimisation occurs. Victims of violence were recruited through the Dutch Victim Compensation Fund. To preliminary estimate the effect of violent victimisation on income, a comparable control group of non-victims was composed. The study sample contained 206 victims and 173 non-victims. Both bivariate correlational and multivariate statistical techniques suggested that violent victimisation is a significant predictor of income. Implications of the presented results were discussed with regard to future research and policy practice. Author Affiliation: (1) Faculty of Law, The International Victimology Institute Tilburg, Tilburg University, Building M, Room 901, P.O. Box 90153, 5000, LE Tilburg, The Netherlands (2) Faculty of Law, The International Victimology Institute Tilburg, Tilburg University, P.O. Box 90153, 5000, LE Tilburg, The Netherlands Article History: Registration Date: 09/02/2009 Received Date: 11/12/2008 Accepted Date: 07/02/2009 Online Date: 24/02/2009

SOI Projects and Contacts General Statistical Information: (202) 874-0410 Fax: (202) 874-0964 e-mail: sis@irs.gov Projects * Primary Analysts Frequency and Program Content Americans Living This periodic study is Abroad: conducted [...]

The authors investigated core self-evaluations and educational attainment as mediating mechanisms for the influence of appearance (physical attractiveness) and intelligence (general mental ability) on income and financial strain. The direct effects of core self-evaluations on financial strain, as well as the indirect effects through income, were also considered. Longitudinal data were obtained as part of a national study, the Harvard Study of Health and Life Quality, and proposed models were evaluated with structural equation modeling. Results supported a partially mediated model, such that general mental ability and physical attractiveness exhibited both direct and indirect effects on income, as mediated by educational attainment and core self-evaluations. Finally, income negatively predicted financial strain, whereas core self-evaluations had both a direct and an indirect (through income) negative effect on financial strain. Overall, the results suggest that looks (physical attractiveness), brains (intelligence), and personality (core self-evaluations) are all important to income and financial strain. Keywords: core self-evaluations, attractiveness, income, intelligence, general mental ability

The relationship between income and consumption inequality in the United States is examined. An imputation procedure based on food demand estimates is used to create a panel data on consumption. A disjuncture between income and consumption inequality is attributed to changes in income shocks persistence.

The long-term effects of the 1972 Munich Summer Olympic games on the region's economy are studied. Olympic games are seen to influence income and employment in the host city. Income in Olympic regions are seen to grow faster that in other regions.

The daily labor supply of New York City taxi drivers and the effects of a reference daily income level are studied. This reference level changes on a day-to-day basis and is often not met before the shifts of taxi drivers end.

A study was conducted to examine the impact of foreign aid and trade on income. Annual observations of more than 150 countries from 1975 to 2000 were used. Findings show that foreign aid and trade are strong determinants of gross domestic product per worker.

Researchers have attempted to explain the relationship between education and health by incorporating mediators--such as income--through which schooling affects health. Research has also shown that the education-health relationship varies across age and cohort. This article integrates these themes in an investigation of the role income plays in the changing relationship between education and health. Using data from the 1972-2001 National Health Interview Surveys, I find that the direct relationship between education and health is weakening across cohorts, while the indirect effect of education through income is strengthening across cohorts. Cohort change in this indirect effect is equally attributable to change in the relationships between education and income and between income and health. Life course differences in direct and indirect relationships vary in shape, suggesting that a substantive explanation--one that does not rely solely on selective mortality--is warranted. The results suggest that future research should continue to employ a life course framework.

This article argues that our understanding of income and poverty dynamics benefits from taking a life-cycle perspective. A person's age and family circumstances--the factors that shape their life cycle--affect the likelihood of experiencing key life events, such as partnership formation, having children, or retirement; this in turn affects their probability of experiencing rising, falling, or other income trajectories. Using ten waves of the British Household Panel Survey, we analyse the income trajectories of people at different stages in their lives in order to build a picture of income dynamics over the whole life cycle. We find that particular life events are closely associated with either rising or falling trajectories, but that there is considerable heterogeneity in income trajectories following these different events. Typically, individuals experiencing one of these life events are around twice as likely to experience a particular income trajectory, but most individuals will not follow the trajectory most commonly associated with that life event. This work improves our understanding of the financial impact of different life events and provides an indication of how effectively the welfare state cushions people against the potentially adverse impact of these events.

This paper derives a concept of aggregate real income for a competitive economy in general equilibrium consisting of heterogeneous infinitely lived people and relates it to current and future consumption possibilities. An important characteristic of our measure of income, which we call Real Income, is that deflation is carried out using a consumption deflator rather than any price index of output. We suggest that it may be inappropriate to regard capital gains as income. We also present a coherent treatment of the effects of changes to the terms of trade on Real Income and explain the implications of this for resource-exporting economies.

The relationships between age-specific suicide mortality rates and social life factors for all 47 Japanese prefectures in 1980, 1985, and 1990 were assessed by multiple regression analysis after factor analysis on 20 social life indicators. During this period, Japan experienced a secondary oil crisis in 1980-1983 and a bubble economy in 1986-1990. It was concluded that (1) low income was the major determinant which positively affected suicide mortality rate in middle-aged men during a previous 20-yr. period (1970-1990), (2) urbanization was negatively associated with male suicide mortality rates in most of the age classes in the 1980s, (3) unemployment was one of the major determinants of increased suicide mortality rate in middle-age men in the 1980s, and (4) unemployment was the major factor which was inversely associated with suicide mortality rate for elderly women from 1980 to 1990 in Japan.

To study the impact of income change--specifically rapid income growth--on diet behavior over time and by socioeconomic level, we used data from a prospective study of China begun in 1989 (followed up in 1991, 1993 and 1997). The subpopulation used in this study included 5783 subjects aged 20-45 years old from 3129 households. Dietary intakes were measured using a combination of the weighing method and three consecutive 24-h recalls. Detailed income and price data were collected, and predicted household per capita income was used in multivariate longitudinal random-effects models that described the consumption of several food groups and nutrients. Income elasticity was used to measure the changes for the effects of income over time on (a) the probability of consuming any food and (b) the quantity of food consumed. The structure of the Chinese diet is shifting away from high-carbohydrate foods toward high-fat, high-energy density foods. The variation in the income effects that we uncovered indicated that important changes in income effects took place between 1989 and 1997, with the changes varying considerably by socioeconomic status. These shifts in income effects indicate that increased income might have affected diets and body composition in a detrimental manner to health, with those in low-income groups having the largest increase in detrimental effects due to increased income. Extrapolating from our estimates, higher income levels in the future could lead to the reversal of the health improvements achieved in the last two decades, if diet-related noncommunicable diseases cannot be controlled. Keywords: Obesity; Income; Mortality; Dietary behavior; Random-effects; China

General Statistical information: (202) 874-0410 Fax: (202) 874-0964 e-mail: sis@irs.gov Planned Projects, Primary Analysts Frequency and Program Year * Content Americans Living This periodic study is Abroad: conducted every 5 [...]

We examine the relative importance of tax rates and macroeconomic fluctuations in explaining the share of national adjusted gross income (AGI) reported by the top 0.5% of all taxpayers. Results indicate that cutting the top income or capital gains tax rate would increase the top AGI share but not by enough to increase revenues. The preponderance of evidence suggests that the top AGI share is affected more by the capital gains tax rate than by the income tax rate but that real gross domestic product fluctuations have even larger effects. (JEL H24, E62), I. INTRODUCTION The effects of tax policy at various points in the income distribution have received increased attention from politicians and researchers in recent years. Both major presidential candidates in [...]

Abstract Kalecki's 1943 essay Political Aspects of Full Employment (PAFE) is widely recognised as a seminal essay in the theory of the political business cycle. The paper argues that PAFE [...]

Some believe that relatively lenient environmental standards give developing countries a comparative advantage in pollution-intensive goods. Thus, freer trade will harm their environment. This paper brings together the literature on openness and growth, and on the environmental Kuznet's curve, to demonstrate that the opposite may be true. A simultaneous-equations system is derived which incorporates multiple effects of trade liberalization on the environment. Estimation using pooled provincial data on Chinese water pollution, suggests that freer trade aggravates environmental damage via the terms of trade, but mitigates it via income growth. Simulations suggest that the net effect in China was beneficial. JEL Classification: F13, Q28, 019

Many applications involve a decomposition of the mean intergroup difference in a given variable into the portion attributable to differences in the distribution of one or more explanatory variables and that due to differences in the conditional expectation function. This article notes two interrelated reasons why the Blinder-Oaxaca (B-O) method--the approach most commonly used in the literature--may yield misleading results. We suggest a natural solution that both provides a more reliable answer to the original problem and affords a richer examination of the sources of intergroup differences in the variable of interest. The conventional application of the B-O method requires a parametric assumption about the form of the conditional expectation function. Furthermore, it often uses estimates based on that functional form to extrapolate outside the range of the observed explanatory variables. We show that misspecification of the conditional expectation function is likely to result in nontrivial errors in inferen ce regarding the portion attributable to differences in the distribution of explanatory variables, a problem compounded by the computation of conditional expectations outside the observed range of the conditioning variables. Here we propose a nonparametric alternative so the B-O method that reweights the empirical distribution of the outcome variable using weights that equalize the empirical distributions of the explanatory variable. We apply this method to the role of earnings in explaining the black-white wealth difference. The problems with the B-O method show up clearly in this application, because the function relating wealth to earnings is highly nonlinear (with a functional form unspecified by theory) and because the earnings distribution for blacks is shifted sharply to the left of that for whites. We argue that it is not possible so examine the hypothetical distribution of black wealth holdings conditional on the observed white earnings function. For the question that we can answer--the distribution of wealth for a synthetic sample of blacks and whites with comparable earnings--we find that two-thirds of the mean difference in wealth can appropriately be attributed to earnings. In addition, we fully characterize the distribution of white and black wealth conditional on earnings. KEY WORDS: Black-white wealth gap; Blinder-Oaxaca decomposition; Propensity score., 1. INTRODUCTION Recent research has found that, depending on the data source used, white households in the United States hold somewhere between five and ten times the net worth of [...]

Village cadres in China have become entrepreneurs. Their salaries brought the same income as farmer's income.

This paper reports estimates of the effects of JTPA training programs on the distribution of earnings. The estimation uses a new instrumental variable (IV) method that measures program impacts on quantiles. The quantile treatment effects (QTE) estimator reduces to quantile regression when selection for treatment is exogenously determined. QTE can be computed as the solution to a convex linear programming problem, although this requires first-step estimation of a nuisance function. We develop distribution theory for the case where the first step is estimated nonparametrically. For women, the empirical results show that the JTPA program had the largest proportional impact at low quantiles. Perhaps surprisingly, however, JTPA training raised the quantiles of earnings for men only in the upper half of the trainee earnings distribution. KEYWORDS: Quantile regression, treatment effects, dummy endogenous variables.

Evidence is found that multinational companies issue bonds in the countries where they will experience the best tax and income results.

The paper presents a general framework for the analysis of the evolution of personal income distribution following trade liberalization. The model allows many factors of production and the possibility of capital gains. In this framework, the short run evolution of inequality depends on the wage to wealth ratio, while changes in the interest rate determine the changes in long run inequality. The general framework is applied to the dynamic specific factors model of Eaton (Rev. Econ. Stud., VLIV (1987)). In this model, the land--labor ratio determines whether a country exports the land-using or the capital-using good in the long run. The type of the export good determines the effects of liberalization on inequality. In land (labor)-abundant countries, inequalities increase (decrease) along the dynamic path. The model provides an explanation for the differences between Latin American and Asian countries in their response to trade liberalization. Econometric analysis provides mixed results for these predictions, with the correct signs but non-significant coefficients for the coefficient on the interaction between openness and the land--labor ratio. JEL classification: F11; D31 Keywords: Income distribution; Trade; Openness; Natural resources

The authors examine various government farm polices as they effected farmers income and employment in the United Kingdom and in Northern Ireland.

This article examines the connection between welfare and marital stability by using data from the Manitoba Income Maintenance Experiment (MINCOME), a Canadian experiment aimed at testing the concept of guaranteed income. The authors find that marital splits were not encouraged by guaranteed income support, but rather supplied a stabilizing factor to marriages; they question the notion that welfare creates dependency, and assert that the program relieved financial stress from low-income families.

We study a dynamic version of Meltzer and Richard's median-voter model of the size of government. Taxes are proportional to total income, and they are redistributed as equal lump-sum transfers. Voting takes place periodically over time, and each consumer votes for the tax rate that maximizes his equilibrium utility. We calibrate the model to U.S. data. Key elements in the calibration are the income and wealth distribution and the parameters governing the leisure and consumption choices. The total size of transfers predicted by our political-economy model is quite close to the size of transfers in the data.

Research has been conducted on the low-income employment rate in different tiers of the United States during the post-war era. Results demonstrate that employment rate has varied throughout the urban hierarchy.

Studies have shown that poverty and income are powerful predictors of homicide and violent crime. We hypothesized that the effect of the growing gap between the rich and poor is mediated through an undermining of social cohesion, or social capital, and that decreased social capital is in turn associated with increased firearm homicide and violent crime. Social capital was measured by the weighted responses to two items from the U.S. General Social Survey: the per capita density of membership in voluntary groups in each state; and the level of social trust, as gauged by the proportion of residents in each' state who believed that 'most people would take advantage of you if they got the chance'. Age-standardized firearm homicide rates for the years 1987-1991 and firearm robbery and assault incidence rates for years 1991-1994 were obtained for each of the 50 U.S. states. Income inequality was strongly correlated with firearm violent crime (firearm homicide, r = 0.76) as well as the measures of social capital: per capita group membership (r = -0.40) and lack of social trust (r = 0.73). In turn, both social trust (firearm homicide, r = 0.83) and group membership (firearm homicide, r = -0.49) were associated with firearm violent crime. These relationships held when controlling for poverty and a proxy variable for access to firearms. The profound effects of income inequality and social capital, when controlling for other factors such as poverty and firearm availability, on firearm violent crime indicate that policies that address these broader, macro-social forces warrant serious consideration. Key words - social stratification, poverty, social capital, inequality, homicide, crime, firearms

Because Jewish ethnicity and religion do not necessarily coincide, the income advantage associated with Jewish identity can be separated into its ethnic and religious components. We estimate the impact of Jewish ethnicity and religion on household income in 1969 and 1989. In both years, ethnically Jewish households had a considerable income advantage over other non-Hispanic White households. This advantage appears to have persisted even among households without full-time workers. Mixed-ethnicity households (those with both Jewish-born and non-Jewish workers) had a conspicuous advantage in 1969 but not in 1989. While religion brought an additional income advantage to Reform, Conservative, and nondenominational Jews, Orthodoxy was associated with a relative disadvantage. Orthodox Judaism appears to impede economic attainment, perhaps by isolating its adherents from the social and economic networks established by the broader Jewish community.

The term structure of relative yield spreads between U.S. taxable and tax-exempt bonds is often discussed in economics and finance (Stiglitz, 1988; Van Horne, 1994). It is commonly recognized that [...]

This paper examines the relative burden of monopoly, measured as the (static) loss of consumers' surplus for different household income levels. Australian Household Expenditure Survey data are used to generate demand elasticities for 14 commodity groups and to obtain estimates of the relative welfare loss for households with different income levels. The welfare loss associated with monopoly power is found to be higher for low-income households (such as households that depend on government pensions and benefits for their principal source of income) compared with high-income households. The results provide an indication that, whatever the size of the absolute welfare loss arising from monopoly, there may be a substantial effect on the distribution of welfare.

A study a consumer behavior in Spain lends support for the assumption that changes in income will have a positive effect on consumption only when the income change is permanent rather than transient. Government policies such as provision of consumer tax breaks during low-consumption periods have negligible effects on consumption. Also, fluctuations in employment status do not affect consumption. The latter observation indicates that increase of leisure time does not necessarily hike consumption levels.

This paper focuses on one possible explanation for the empirical evidence of (a) income convergence among the world's poorest countries and among its wealthiest countries, and (b) income divergence among most of the remaining countries. The model incorporates the assumption of subsistence consumption into the neoclassical exogenous growth model, yielding outcomes that are consistent with the convergence-divergence empirical evidence. While subsistence consumption can lead to negative saving and disaccumulation of capital, it can also coincide with positive saving and accumulation of capital. The model predicts that the poorer the country, the lower its saving rate, a result that also appears to be borne out by the evidence provided here. JEL classification: E1; O1; O4 Keywords: Convergence; Growth; Subsistence consumption

This paper tests the joint rational expectations/permanent income hypothesis using a state-space/unobserved components model to specify anticipated and unanticipated elements of permanent, transitory, arid seasonal components of the income path [...]

Using the panel data from the 1983-1989 Survey of Consumer Finances, this research examines the shifts in households' income and debt quintiles and changes in respondents' attitudes toward credit. Households exhibited considerable income mobility during the 1980s, almost as much as during the more volatile decade of the 1970s previously reported by Duncan (1986). Except for a committed group of 'no debt' households, there was even more mobility in households' debt status, that is, a majority of households were in a different dent quintile in 1989 than in 1983. Respondents' attitudes toward debt also changed considerably with more respondents' becoming more negative toward credit than more positive. Trend analyses of American households' debt underestimate the extent and variability of such changes. (Reprinted by permission of the publisher.)