Intra-household inequality in transitional Russia

The paper proposes an original strategy for analyzing household sharing of income and satisfaction. Using two different subjective questions from the Russian data RLMS (Russia Longitudinal Monitoring Survey), we assume a correspondence between, first, the perception of income that household members report and their true income sharing, and, second, between their answer to a satisfaction question and their utility. We show that answers given by different members of the household bring pertinent information on income sharing and utility in the household. In particular, we find a significant effect of the female–male wage ratio in reported income perception and satisfaction differentials between household members. Our data covers the transition period (1994–2003) characterized by massive economic and social changes in Russia. We investigate the evolution of intra-household welfare distribution by exploiting the episode of the financial crisis of 1998 to distinguish two periods: pre- and post-crisis. Our empirical strategy consists of applying probit-type models allowing the parameters to change in a discrete manner between two periods and accounting for discrete unobserved heterogeneity.     

HOW DOES GLOBALIZATION AFFECT THE IMPLICIT TAX RATES ON LABOR INCOME,CAPITAL INCOME,AND CONSUMPTION IN THE EUROPEAN UNION?

This article analyzes the effects of globalization on implicit tax rates (ITRs) on labor income, capital income, and consumption in the EU15 and Central and Eastern European New Member States (CEE NMS). We find supportive evidence for an increase in the ITR on labor income in the EU15, but no effect on the ITR on capital income. There is evidence of convergence in terms of the ITR on consumption, as countries with higher than average ITR on consumption respond to globalization by decreasing their tax rates. There are important differences among the welfare regimes within the EU15. Social‐democratic countries have decreased the tax burden on capital, but increased that on labor due to globalization. Globalization exerts a pressure to increase taxes on labor income in the conservative and liberal regimes as well. Taxes on consumption decrease in response to globalization in the conservative and social‐democratic regimes. In the CEE NMS, there is no effect of globalization on the ITR on labor and capital income, but we find a negative impact on the ITR on consumption in the CEE NMS with higher than average ITR on consumption. (JEL H23, H24, H25, F19, F21)     

Financial satisfaction over the life course: The influence of assets and liabilities

Various studies have shown that financial satisfaction is, among other domains, an important determinant of overall individual well-being. Contrary to the common belief that financial satisfaction mainly depends on an individual’s income, evidence for the US indicates that life course financial satisfaction steadily increases from the thirties onwards, whereas life course income shows an inverted U-pattern with a peak at midlife. To judge from other studies in the US and Norway, this pattern for financial satisfaction is not unique. The aim of the present analysis is to explore the determinants of this life course financial satisfaction pattern, taking into account not only income but also the possible impact of assets and liabilities. The analysis suggests that while income has the expected positive relation, increasing financial satisfaction at older age can be partly explained by decreases in liabilities and increases in financial assets, and that assets and liabilities considered separately provide a better explanation than net wealth. In addition, reduction in the dependency burden at old age leads to increased financial satisfaction while the deterioration of health has a negative impact. The data are from the second and third waves of the US National Survey of Families and Households.     

On the welfare loss caused by inequality of opportunity

Based on the ethical principle of equality of opportunity, this paper presents a measure of the welfare loss that is caused by an unfair distribution of a particular outcome (income, health, education, etc). The key idea is that a fair society should produce outcomes that depend on individuals’ effort and not on their external circumstances such as gender, socioeconomic background, etc. We propose measuring inequality of opportunity as the welfare loss attributed to the outcome differences among individuals who exert a similar level of effort. Our results are in line with those aspects of fairness literature that give priority to the ex post compensation approach to equality of opportunity. Finally, we present an empirical application for the measurement of the welfare loss in the income distribution in Europe. We have observed a high degree of heterogeneity among European countries. The welfare loss due to inequality of opportunity ranges in those, from basically zero to almost one fifth of their potential welfare.     

Disability-policy models in European welfare regimes: comparing the distribution of social protection,labour-market integration and civil rights

This paper examines different models of disability policy in European welfare regimes on the basis of secondary data. OECD data measuring social protection and labour-market integration is complemented with an index which measures the outcomes of disability civil rights. Eurobarometer data is used to construct the index. The country modelling by cluster analysis indicates that an encompassing model of disability policy is mainly prevalent in Nordic countries. An activating and rehabilitating disability-policy model is predominant mainly in Central European countries, and there is evidence for a distinct Eastern European model characterized by relatively few guaranteed civil rights for disabled people. Furthermore, the Southern European model, which indicates a preference for social protection rather than activation and rehabilitation, includes countries which normally have diverse welfare traditions.     

Conspicuous consumption and satisfaction

Traditional tools of welfare economics identify the envy-related welfare loss from conspicuous consumption only under very strong assumptions. Measured income and life satisfaction offers an alternative for estimating such consumption externalities. The approach is developed in the context of luxury car consumption (Ferraris and Porsches) in Switzerland. Results from household panel data and fixed effects panel regressions suggest that the prevalence of luxury cars in the municipality of residence has a negative impact on own income satisfaction.     

CAPITAL CONTROLS,MONETARY POLICY,AND BALANCE SHEETS IN A SMALL OPEN ECONOMY

We develop a small open economy, New Keynesian model that incorporates a financial accelerator in combination with liability dollarization. Applying a Ramsey‐type analysis, we compare the welfare implications of an optimal monetary policy under flexible exchange rates and an optimal capital control policy under fixed exchange rates. In an economy without the financial accelerator, an optimal monetary policy under flexible exchange rates is superior to an optimal capital control policy under fixed exchange rates. In contrast, in an economy with the financial accelerator, an optimal capital control under fixed exchange rates yields higher welfare than an optimal monetary policy under flexible exchange rates.(JEL E44, E52, F32, F38, F41)     

The distribution of financial well-being and income within the household

In this paper we consider the issue of the intra-household distribution of welfare directly using a survey measure of self-perceived economic well-being. We develop a theoretical model of satisfaction within the household for couples. In the empirical analysis we find that husbands and wives often report different levels of financial satisfaction. The most important correlate of relative satisfaction within the household is found to be relative income. This is a direct confirmation of the previously implicit findings and is predicted by our theoretical model.

The effects of perceived locus of control and perceived income adequacy on satisfaction with financial status of rural households

The purpose of this study is to examine the relationships among selected socioeconomic variables — perceived locus of control, perceived income adequacy, and satisfaction with financial status. Results of the study indicate that age, household income, household net worth, perceived locus of control, and perceived income adequacy are significantly related to satisfaction with financial status. Household income and household net worth have indirect effects on satisfaction through perceived locus of control and perceived income adequacy. Perceived locus of control also has an indirect effect on satisfaction through perceived income adequacy. These findings suggest that counselors and educators should emphasize the importance of perceptions of income adequacy and control over financial aspect in their courses and programs.Journal Paper No. J-14499 of the Iowa Agriculture and Home Economics Experiment Station, Ames, Iowa. Project No. 2809.His research interests include consumer credit and family resource management. He received his Ph.D. from Iowa State University in 1993.Her research interests include family financial management and consumer bankruptcy. She received her Ph.D. from the University of Missouri.     

Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US

Following the report of the Stiglitz Commission, measuring and comparing well-being across countries has gained renewed interest. Yet, analyses that go beyond income and incorporate non-market dimensions of welfare most often rely on the assumption of identical preferences to avoid the difficulties related to interpersonal comparisons. In this paper, we suggest an international comparison based on individual welfare rankings that fully retain preference heterogeneity. Focusing on the consumption-leisure trade-off, we estimate discrete choice labor supply models using harmonized microdata for 11 European countries and the US. We retrieve preference heterogeneity within and across countries and analyze several welfare criteria which take into account that differences in income are partly due to differences in tastes. The resulting welfare rankings clearly depend on the normative treatment of preference heterogeneity with alternative metrics. We show that these differences can indeed be explained by estimated preference heterogeneity across countries—rather than demographic composition.     

Tax–benefit revealed social preferences

This paper inverts the usual logic of applied optimal income taxation. It starts from the observed distribution of income before and after redistribution and corresponding marginal tax rates. Under a set of simplifying assumptions, it is then possible to recover the social welfare function that would make the observed marginal tax rate schedule optimal. In this framework, the issue of the optimality of an existing tax–benefit system is transformed into the issue of the shape of the social welfare function associated with that system and whether it satisfies elementary properties. This method is applied to the French redistribution system with the interesting implication that the French redistribution authority may appear, under some plausible scenario concerning the size of the labor supply behavioral reactions, non Paretian (e.g. giving negative marginal social weights to the richest class of tax payers).     

Financial capability and psychological health

Financial capability is receiving increasing interest among policy makers, who wish to reduce problem debt and welfare dependency and increase savings and general skills. We examine whether financial capability has impacts on psychological health independent of income and financial resources more generally using a nationally representative survey. Data from the British Household Panel Survey 1991-2006 are used to construct a measure of financial capability, which we relate to respondents’ psychological health using the 12-item General Health Questionnaire. Estimates from within-group panel data models indicate that financial capability has significant and substantial effects on psychological health over and above those associated with income and material wellbeing more generally. For men, having low financial capability has an effect larger than that associated with being unemployed, while for women it is similar to that of being divorced. Furthermore having low financial capability exacerbates the psychological costs associated with unemployment and divorce, while high financial capability reduces these costs.     

Social class variation in risk: a comparative analysis of the dynamics of economic vulnerability1

A joint concern with multidimensionality and dynamics is a defining feature of the pervasive use of the terminology of social exclusion in the European Union. The notion of social exclusion focuses attention on economic vulnerability in the sense of exposure to risk and uncertainty. Sociological concern with these issues has been associated with the thesis that risk and uncertainty have become more pervasive and extend substantially beyond the working class. This paper combines features of recent approaches to statistical modelling of poverty dynamics and multidimensional deprivation in order to develop our understanding of the dynamics of economic vulnerability. An analysis involving nine countries and covering the first five waves of the European Community Household Panel shows that, across nations and time, it is possible to identify an economically vulnerable class. This class is characterized by heightened risk of falling below a critical resource level, exposure to material deprivation and experience of subjective economic stress. Cross‐national differentials in persistence of vulnerability are wider than in the case of income poverty and less affected by measurement error. Economic vulnerability profiles vary across welfare regimes in a manner broadly consistent with our expectations. Variation in the impact of social class within and across countries provides no support for the argument that its role in structuring such risk has become much less important. Our findings suggest that it is possible to accept the importance of the emergence of new forms of social risk and acknowledge the significance of efforts to develop welfare states policies involving a shift of opportunities and decision making on to individuals without accepting the ‘death of social class’ thesis.     

Maternal Functioning, Time, and Money: The World of Work and Welfare

Numerous studies have assessed families' employment and financial stability following welfare reform. Yet little research has addressed whether welfare and work transitions are linked with other changes in family functioning. Using a representative sample of approximately 2,000 low-income urban families from the Three-City Study, analyses assessed whether mothers' welfare and employment experiences over a two-year period following welfare reform were related to changes in family well-being. Lagged regression models controlling for family characteristics and earlier levels of functioning found that moving into employment and stable employment (of 30 hours or more per week) were linked to substantial increases in income and improvements in mothers' psychological well-being. Movements into employment also were associated with declines in financial strain and food insecurity. Sustained or initiated welfare receipt was related to relative declines in income, physical health, and psychological well-being, but also to improved access to medical care. In contrast, mothers' welfare and work experiences showed very limited relations to changes in the quality of parenting or of children's home environments. These patterns were similar for families with young children and those with adolescent children. Results suggest that parenting behaviors are more resistant to change than are maternal emotional and economic functioning.     

The contribution of social support to the material well‐being of low‐income families

We hypothesize that the social support available from low‐income networks serves primarily a coping function, rather than a leverage function. Social support and its relationship to material well‐being is assessed in a sample of 632 former and current welfare recipients. Respondents report higher levels of perceived emotional, instrumental, and informational support than perceived financial support, and received financial aid is particularly uncommon. Multivariate findings demonstrate that perceived support is unrelated to employment quality, but it reduces the likelihood of living in poverty and is associated with three different measures of coping. These findings generally support the contention that informal aid is important for the everyday survival of low‐income families, but is less able to assist with economic mobility.     

REDISTRIBUTING INCOMES: EX ANTE OR EX POST

The standard analyses of optimal income taxation assume that the distribution of gross wages in the economy is immutable depending as it does on the distribution of innate abilities. In this paper I assume that wage distribution is not fixed but that it can be varied, up to a point, by more or less precise measurement of workers' innate abilities. I demonstrate that complete knowledge of abilities is not desirable if income can only be distributed using a linear tax. I isolate those variables which favor the narrowing of wage inequality measured by the variance with the mean held constant. This section of the paper is related to the existing literature on the desirability of price randomization.
In the second part of the paper I consider the consequences of spreading wage distributions on the optimal tax rate. It is shown that those consequences are ambiguous and dependent on the form of the social welfare function.     

Economic hardship and depression across the life course: the impact of welfare state regimes

Previous research in the United States suggests that depression related to economic hardship decreases with age. We test whether this pattern can be generalized to other developed nations. Based on data from 23 countries in the European Social Survey (2006--2007), multilevel analyses show that the moderating role of age depends on the socio-political context. While the hardship--depression link is not significantly different across the life course in Nordic and Bismarckian regimes, the hardship--depression link increases with age in Southern and Eastern European countries and decreases with age in strength in Anglo-Saxon welfare states. Our findings suggest that welfare state regimes play a significant role in attenuating, boosting, or even reversing the health effects of social experiences such as economic hardship on aging. Health knowledge gained through research that ignores the socio-political context may be limited in terms of generalization.     

THE OPTIMAL TAXATION OF ASSET INCOME WHEN GOVERNMENT CONSUMPTION IS ENDOGENOUS: THEORY,ESTIMATION AND WELFARE

This paper derives the Ramsey optimal fiscal policy for taxing asset income in a model where government expenditure is a function of net output or the inputs that produce it. Extending work by Kenneth L. Judd, I demonstrate that the canonical result that the optimal tax on capital income is zero in the medium to long term is a special case of a more general model. Employing a vector error correction model to estimate the relationship between government consumption and net output or the factor inputs that generate it for the United States between 1948Q1 and 2015Q4, I demonstrate that this special case is empirically implausible, and show how a cointegrating vector can be used to determine the optimal tax schedule. I simulate a version of the model using the empirical estimates to measure the welfare implications of changing the tax rate on asset income, and contrast these results with those generated in a version of the model where government consumption is purely exogenous. The shifting pattern of welfare measurements confirms the theoretical results. I calculate that the prevailing effective tax rate on net asset income in the United States between 1970 and 2014 averaged 0.449. Hence abolishing the tax completely does generate welfare improvements, though only by the equivalent of between 1.103% and 1.616% permanent increase in consumption—well under half the implied welfare benefit when the endogeneity of the government consumption is ignored. The maximum welfare improvement from shifting part of the burden of tax from capital to labor is the equivalent of a permanent increase in consumption of between only 1.491% and 1.858%, and is attained when the tax rate on asset income is lowered to between 0.148 and 0.186. Allowing the tax rate to vary over time raises the maximum welfare benefit to 1.865%. All the results are very robust to a wide range of elasticities of labor supply. (JEL E62, H21, H50)     

A Remedy for All Sins? Introducing a Special Issue on Social Enterprises and Welfare Regimes in Europe

The paper serves as an introduction to a special issue discussing social enterprises historical development and functions against welfare regimes across six European countries (France, Germany, Italy, Poland, Scotland, Serbia). While discussing convergences and diversities among them, the introduction proposes a comparative analytical framework for understanding social enterprises and welfare state as contingent phenomena developed at different point in time, within a broader political-institutional framework regulating states-peoples’ relationships.