INCOME AND WEALTH CONCENTRATION IN SPAIN FROM A HISTORICAL AND FISCAL PERSPECTIVE

This paper presents series on top shares of income and wealth in Spain using personal income and wealth tax return statistics. Top income shares are highest in the 1930s, fall sharply during the first decade of the Franco dictatorship, then remain stable and low till the 1980s, and have increased since the mid 1990s. The top 0.01% income share in Spain estimated from income tax data is comparable to estimates for the United States and France over the period 1933–1971. Those findings, along with a careful analysis of all published tax statistics, suggest that income tax evasion and avoidance among top income earners in Spain was much less prevalent than previously thought. Wealth concentration has been about stable from 1982 to 2005 as surging real estate prices have benefited the middle class and compensated for a slight increase in financial wealth concentration in the 1990s. We use our wealth series and a simple model to analyze the effects of the wealth tax exemption of stocks for owners‐managers introduced in 1994. We show that the reform induced substantial shifting from the taxable to tax exempt status, hence creating efficiency costs. (JEL D31, H31, O15)     

LABOR‐ AND CAPITAL‐AUGMENTING TECHNICAL CHANGE

I analyze an economy in which firms can undertake both labor‐ and capital‐augmenting technological improvements. In the long run, the economy resembles the standard growth model with purely labor‐augmenting technical change, and the share of labor in GDP is constant. Along the transition path, however, there is capital‐augmenting technical change and factor shares change. Tax policy and changes in labor supply or savings typically change factor shares in the short run, but have no or little effect on the long‐run factor distribution of income. (JEL: O33, O14, O31, E25)     

The Dynamics of Inequality

The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tail of the long‐run income distributions, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are too slow relative to those observed in the data. We then suggest two parsimonious deviations from the canonical model that can explain such changes: “scale dependence” that may arise from changes in skill prices, and “type dependence,” that is, the presence of some “high‐growth types.” These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of “superstar” entrepreneurs or managers.     

THE WELL‐BEING OF THE ELDERLY AND WAGE ARREARS IN RUSSIA

About one‐third of households with elderly were not paid their wages during the mid‐1990s in Russia. Applying matching estimations to a nationally representative survey, the study shows that wage arrears had detrimental effects on the well‐being of the elderly in these families. Salaries in households with wage arrears dropped by almost two‐thirds, income fell by more than one‐third, and poverty doubled. Behavioral responses were only partly effective. The net revenue loss amounted to five‐sixths of the wage shock for men, and nine‐tenths of the wage shock for women. The elderly cut back on food expenses by reducing food purchases and adjusting their diet towards cheaper calories, economising on expenses equal to around one‐quarter of the wage reduction. Caloric and protein intakes dropped, although less than income, and the nutritional content of food consumption with regard to vitamins and minerals deteriorated. Wage arrears worsened male health more than female health, even though the decline in income was comparable. Functional limitations rose by 8% for men and 3% for women, and self‐rated health declined by 2.5% for men and 0.5% for women. Old‐age men with arrears were almost twice as likely to die before the next survey round, and functional limitations of surviving men rose by more than 10%. By contrast, there was no impact on the next round's health status of old‐age women. A rich data set is used to discount alternative explanations, including feedback from health to income, other economic factors, health service access, health behavior, and environmental conditions. (JEL: I12, I30, J14, J30)     

THE IMPACT OF INCOME SHOCKS ON HEALTH: EVIDENCE FROM COHORT DATA

We study the effect of permanent income innovations on health for a prime‐aged population. Using information on more than half a million individuals sampled over a 25‐year period in three different cross‐sectional surveys we aggregate data by date‐of‐birth cohort to construct a “synthetic cohort” data set with details of income, expenditure, socio‐demographic factors, health outcomes, and selected risk factors. We then exploit structural and arguably exogenous changes in cohort incomes over the 1980s and 1990s to uncover causal effects of permanent income shocks on health. We find that such income innovations have little effect on a wide range of health measures, but do lead to increases in mortality and risky health behaviour. (JEL: I10, D31)     

Do Lower Top Marginal Tax Rates Slow the Income Growth of Workers?

Top marginal tax rates are positively correlated with the pretax income growth of the bottom 90 per cent — those who are not subject to the top rates. To explain this correlation, this paper presents and tests a model in which executives can increase firm profitability by (i) increasing the firm's level of technology and (ii) decreasing labor costs. In the model, higher marginal tax rates may reduce pretax inequality by increasing the average income growth of workers. This hypothesis is tested by examining the effect of top marginal tax rates on (unobserved) relative bargaining power between labor and firms and, therefore, on the income growth of workers in the USA. Bargaining power, in both the theoretical and the empirical models, is proxied by private‐sector unionization and use of offshore labor resulting in higher imports.     

UNEMPLOYMENT INSURANCE IN WELFARE STATES: THE IMPACTS OF SOFT DURATION CONSTRAINTS

Abstract Based on a major reform of Norwegian unemployment insurance (UI), we examine the behavioral impacts of soft and hard UI duration constraints. A constraint is interpreted as hard if a claimant cannot rely on any form of income support after exhaustion, and as soft if UI is replaced by follow‐on benefits or participation in active labor market programs (ALMP). We find that both hard and soft constraints raise the job hazard significantly, with surprisingly similar spikes at UI exhaustion. Participation in ALMP raises the probability of eventually finding a job, but at the cost of lengthening the overall job‐search period.     

THE RIGHT AMOUNT OF TRUST

We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump‐shaped in a measure of intensity of trust beliefs. Our interpretation is that highly trusting individuals tend to assume too much social risk and to be cheated more often, ultimately performing less well than those with a belief close to the mean trustworthiness of the population. However, individuals with overly pessimistic beliefs avoid being cheated, but give up profitable opportunities, therefore underperforming. The cost of either too much or too little trust is comparable to the income lost by forgoing college. Our findings hold in large‐scale international survey data, as well as inside a country with high‐quality institutions, and are also supported by experimental findings. (JEL: A1, A12, D1, O15, Z1)     

POVERTY AND THE POLITICAL ECONOMY OF PUBLIC EDUCATION SPENDING: EVIDENCE FROM BRAZIL

A large body of literature has emphasized the elite capture of democratic institutions as the explanation for the low levels of spending on public education in many low‐income democracies. This paper provides an alternative to that longstanding hypothesis. Motivated by new cross‐country facts and evidence from Brazilian municipalities, we hypothesize that many democratic developing countries might invest less in public education spending because poor decisive voters prefer the government to allocate resources elsewhere. One possible explanation is that low‐income voters could instead favor redistributive programs that increase their incomes in the short run, such as cash transfers. To test for this possibility, we design and implement an experimental survey and an incentivized choice experiment in Brazil. The findings from both interventions support our hypothesis.     

Endogenous Ranking and Equilibrium Lorenz Curve Across (ex ante) Identical Countries

This paper proposes a symmetry‐breaking model of trade with a (large but) finite number of (ex ante) identical countries and a continuum of tradeable goods, which differ in their dependence on local differentiated producer services. Productivity differences across countries arise endogenously through free entry to the local service sector in each country. In any stable equilibrium, the countries sort themselves into specializing in different sets of tradeable goods, and a strict ranking of countries in per capita income, TFP, and the capital‐labor ratio emerges endogenously. Furthermore, the distribution of country shares, the Lorenz curve, is unique and analytically solvable in the limit, as the number of countries grows unbounded. Using this limit as an approximation allows us to study what determines the shape of distribution, to perform various comparative statics, and to evaluate the welfare effects of trade.     

ON THE WINNER‐TAKE‐ALL PRINCIPLE IN INNOVATION RACES

What is the optimal allocation of prizes in an innovation race? Should the winner take all, or is it preferable that the original inventor shares the market with subsequent independent duplicators? Some recent papers in law and economics have argued that the latter, more permissive solution is socially preferable under mild conditions. We re‐examine that issue, arguing that a permissive regime may turn the innovation race into a waiting game, reducing the power of incentives, and may invite socially wasteful duplicative R&D expenditures. In a model that accounts for these effects, the winner‐take‐all system turns out to be preferable in a broad set of circumstances, especially in highly innovative industries. (JEL: K11, L1, O34)     

Flood Risk Management: Exploring the Impacts of the Community Rating System Program on Poverty and Income Inequality

Flooding remains a major problem for the United States, causing numerous deaths and damaging countless properties. To reduce the impact of flooding on communities, the U.S. government established the Community Rating System (CRS) in 1990 to reduce flood damages by incentivizing communities to engage in flood risk management initiatives that surpass those required by the National Flood Insurance Program. In return, communities enjoy discounted flood insurance premiums. Despite the fact that the CRS raises concerns about the potential for unevenly distributed impacts across different income groups, no study has examined the equity implications of the CRS. This study thus investigates the possibility of unintended consequences of the CRS by answering the question: What is the effect of the CRS on poverty and income inequality? Understanding the impacts of the CRS on poverty and income inequality is useful in fully assessing the unintended consequences of the CRS. The study estimates four fixed‐effects regression models using a panel data set of neighborhood‐level observations from 1970 to 2010. The results indicate that median incomes are lower in CRS communities, but rise in floodplains. Also, the CRS attracts poor residents, but relocates them away from floodplains. Additionally, the CRS attracts top earners, including in floodplains. Finally, the CRS encourages income inequality, but discourages income inequality in floodplains. A better understanding of these unintended consequences of the CRS on poverty and income inequality can help to improve the design and performance of the CRS and, ultimately, increase community resilience to flood disasters.     

OPTIMAL AGING AND DEATH: UNDERSTANDING THE PRESTON CURVE

Does prosperity lead to greater longevity? If so, what is the strength of the income channel? To address these questions we develop a life cycle model in which households are subject to physiological aging. In modeling aging we draw on recent research in the fields of biology and medicine. The speed of the aging process, and thus the age of death, are endogenously determined by optimal health investments. A calibrated version of the model accounts well for the observed nonlinear cross‐country link between longevity and income, also known as the Preston curve.     

THE RISE OF THE EAST AND THE FAR EAST: GERMAN LABOR MARKETS AND TRADE INTEGRATION

We analyze the effects of the unprecedented rise in trade between Germany and “the East” (China and Eastern Europe) in the period 1988–2008 on German local labor markets. Using detailed administrative data, we exploit the cross‐regional variation in initial industry structures and use trade flows of other high‐income countries as instruments for regional import and export exposure. We find that the rise of the East in the world economy caused substantial job losses in German regions specialized in import‐competing industries, both in manufacturing and beyond. Regions specialized in export‐oriented industries, however, experienced even stronger employment gains and lower unemployment. In the aggregate, we estimate that this trade integration has caused some 442,000 additional jobs in the economy and contributed to retaining the manufacturing sector in Germany. This is almost exclusively driven by the rise of Eastern Europe, not by China. We also conduct an analysis at the individual worker level, and find that trade had a stabilizing overall effect on employment relationships.     

ETHNIC DIVERSITY AND THE SPREAD OF CIVIL WAR

This paper theoretically and empirically investigates the relationship between local‐level ethnic composition and the spread of conflict. Cross‐country literature on conflict finds that ethnic diversity, and ethnic polarization in particular, are associated with greater incidence of conflict. However, the question remains as to where within ethnically diverse countries conflict begins and where and how it spreads. To study this question, I present a model in which local ethnic groups' decision to attack depends on three key variables: ethnic population shares, ethnic groups' weapons ratio, and the share of co‐ethnic successes in the battles that took place in the previous period. The model generates three predictions: conflict starts in ethnically homogeneous areas and only later spreads to ethnically heterogeneous areas; neighbor co‐ethnics' success increases subsequent probability of winning and may lead to attack; and greater ethnic diversity is associated with costlier conflict. I find strong support for these predictions using detailed municipal‐level data on attacks and ethnic polarization during the initial spread of the Bosnian Civil War. Moreover, my conflict model is able to predict the sequence of actual conflict outcomes with reasonably high accuracy. (JEL: D39, D74, J15, R12)     

股权结构与公司业绩关系的行业特征--来自冶金、医药、机械与IT行业的实证证据

冶金与医药行业第一大股东提高了业绩,冶金行业业绩明显靠固定资产投资拉动.医药第二大至第三大持股与公司业绩显著负相关,但第二大至第三大股东抑制了第一大股东占用上市公司资金.机械行业业绩,第一大持股与其负相关,第二至第十大与其正相关.前十大股东中具有信托投资公司的上市公司,关联资金占用显著高.IT行业,业绩与生产性股东个数显著正相关,与固定资产投资负相关.业绩与股份法人类别的相关性符号是:国家股与境内发起法人股之和,冶金与医药,显著为正,机械行业为负;募集法人股,机械行业显著为正,冶金为负;流通股,冶金与医药为负,但IT为正.     

Unions and Income Inequality: A Heterogeneous Panel Co‐integration and Causality Analysis

Although a large body of research has examined the effects of unions on the wage distribution, surprisingly little attention has been devoted to the effects of unions on the distribution of income. This paper examines the long‐run relationship between unionization and income inequality for a sample of 20 countries. Using heterogeneous panel co‐integration and causality techniques, we find that (i) unions have, on average, a negative long‐run effect on income inequality, (ii) there is considerable heterogeneity in the effects of unionization on income inequality across countries (in 40 per cent of the cases the effect is positive) and (iii) long‐run causality runs in both directions, suggesting that, on average, an increase in unionization reduces income inequality and that, in turn, higher inequality leads to lower unionization rates.     

The Interaction between Income Support Programs

Employment insurance (EI) and social assistance (SA) represent two key income support programs in Canada. The structure of these programs is similar to those found in many countries where unemployed individuals may use a number of sources to fund job‐search activities and provide income support during periods of diminished employment income. In this paper, we examine the nature of the interaction between the programs and their overall impact on labor market outcomes. We use the 1997 Canadian Out of Employment Panel data set to examine behavior of a set of individuals following the loss of employment. Results indicate that reductions in the generosity of SA results in lower use of both income support programs. Conversely, if the generosity of the EI program is curtailed this reduces use of the EI program and leads to greater use of the SA program.     

THE POLITICAL ECONOMY OF REGULATION IN MARKETS WITH NAÏVE CONSUMERS

In a model of a competitive industry selling base goods and add‐ons, we investigate the conditions under which citizen‐consumers will support policies that eliminate behavioral inefficiencies induced by naïve consumers. Unregulated competitive markets have two effects: they produce deadweight losses, and they redistribute income away from biased consumers. Both unbiased and naïve consumers believe that they benefit from this redistribution (the naïve consumers are wrong), so support for efficiency‐improving regulation is limited. Extending our model to consumers with partial sophistication about their naïveté, we predict patterns of regulation consistent with the form and timing of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009.     

Income Pooling between Australian Young Adults and Their Parents

We test whether young adults who co‐reside with their parents derive influence over household‐level expenditure by earning income. We propose a new variant of the Engel curve consistent with the Quadratic Almost Ideal Demand System, which allows a simple test of income pooling. Our tests suggest that young adults and parents mostly pool their income — pooling is not rejected for 8 out of 12 expenditure categories. We are more likely to reject income pooling between young adults and their parents in those expenditure categories where the model fit is highest, so our results may be interpreted as an upper bound on income pooling. We also apply our tests to income pooling between husbands and wives and find that pooling holds for 9 out of 12 expenditure categories. We find the opposite relationship with fit — expenditure categories where fit is poor are those where we are most likely to reject income pooling.