Growth,Inequality and Poverty in Emerging and Transition Economies

This paper aims to explore the quality of economic growth in a sample of 50 emerging and transition economies (ETEs), which are countries experiencing a process of fast growth and institutional change. Economic growth during 1995–2006 is regressed against poverty, inequality and human development variables using OLS cross-country regression models. The main findings are that growth did not reduce poverty and income inequality worsened too. On the one hand, economic growth occurred despite the worsening of income inequality. However, this result does not identify a “U-shaped” Kuznets curve because even after a consistent period of growth, inequality did not decrease and it remained at higher levels. Only countries with higher education levels and public expenditure in strategic dimensions seem to escape from this trap. On the other hand, growth occurred at the expense of an important human development variable i.e., life expectancy, and of an important indicator of democracy, i.e., voice and accountability.     

Work hours and wage inequality: Evidence from the 2004 WERS

This paper uses the 2004 wave of the Workplace Employment Relations Survey to test whether work hours and wage inequality are positively correlated because of financial incentives associated with inequality. Workers may work longer hours in order to increase their expected income through performance pay or promotion, resulting in a positive correlation between inequality and work hours. Contrary to other work, it is found that the relationship between wage inequality and the occupation and firm level and work hours cannot be attributed to the effect of financial incentives. Demand constraints faced by workers explains the positive correlation between occupation inequality and work hours attributed to financial incentives by others.     

Income Inequality across Micro and Meso Geographic Scales in the Midwestern United States, 1979–20091

This article examines the spatial distribution of income inequality and the socioeconomic factors affecting it using spatial analysis techniques across 16,285 block groups, 5,050 tracts, and 618 counties in the western part of the North Central Region of the United States. Different geographic aggregations result in different inequality outcomes, suggesting spatial scale needs to be carefully considered in inequality research. Inequality is spatially clustered in suburban areas of larger metro areas and around Native American reservations in the Dakotas. Higher inequality is associated with better socioeconomic conditions, counter to the social inequality literature but consistent with the inequality growth literature. However, growing inequality is associated with worse socioeconomic outcomes. Results partially support the polarization thesis that declines in industrial sectors and growth in services has caused incomes to diverge. Higher and growing inequality is associated with both low‐skill and high‐skill services jobs. However, employment in agricultural and industrial sectors experiencing large losses over the past three decades is also linked to higher and growing inequality. This suggests a dual process where many former agricultural and industrial workers are now employed in other sectors at lower wages, while the remaining workers in these sectors earn higher and growing wages.     

Beyond Oaxaca–Blinder: Accounting for differences in household income distributions

This paper develops a method to decompose differences across distributions of household income, based on counterfactual distributions that ‘lie between’ the actually observed distributions. Our approach decomposes differences between any two income distributions (or functionals such as inequality or poverty measures) into shares due to price effects; occupational structure effects; and endowment effects. Comparing the household income distributions of the USA and Brazil in 1999, we find that most of Brazil’s excess inequality (of 13 Gini points) is accounted for by underlying inequalities in the distributions of education and of non-labor income, notably pensions (between four and six Gini points each). Steeper returns to education in Brazil also make an important contribution (of two to five points). Differences in occupational structure and in racial and demographic composition are much less important. An erratum to this article can be found at     

ECONOMIC RESTRUCTURING,THE EDUCATIONAL INCOME GAP,AND OVERALL INCOME INEQUALITY

An important consequence of the economic structure transformations of recent decades is increased income inequality. While an extensive literature has explored the relationship between economic restructuring and inequality, the unique contribution of this article is that it develops and tests a model that explores the mechanisms by which this process occurs. Specifically, the intervening role of the income gap between the well-educated and those with lower levels of education (the educational income gap) and other moderating factors are explored. The 5 percent Public Use Microdata Sample (PUMS) data from the 2000 Census of Population and Housing was used in the analysis. The data provided strong support for the model. It was found that economic structure and the moderating variables were strongly related to the educational income gap, which in turn was strongly related to overall income inequality. Generally, both the educational income gap and overall income inequality were greater in geographic areas with higher proportions of the labor force employed in services, and both were lower where greater proportions of the labor force were employed in goods-producing industries.     

Transitional compass: anti-capitalist pathways in the interstitial spaces of capitalism*

ABSTRACT

The focus of the special issue explores the forms of power used, engendered, and (re)produced to challenge structures of economic, social and political power that produce inequality as well as concrete empirical examples of movements, workers’ struggles, and initiatives in challenging inequality. The idea of ‘transitional compass’ looks beyond protest politics to what we call ‘generative’ politics that builds the alternatives in the interstitial spaces of capitalism. Resistance to power emerges through engendering counter-hegemonic projects that are intertwined with alternative everyday practices. To concretize the conceptual framing, we focus on the emancipatory possibilities of a universal basic income, the use of law in tackling inequality in health and education, creative initiatives to establish a people-centred food system, new forms of organizing by precarious workers, democratic possibilities in local state delivery, and reconceptualizing the good life by looking at issues of happiness and ecosocialism.     

Globalization,Producer Services and Income Inequality across US Metro Areas

We analyze globalization impacts on changes in income inequality, focusing on the top and bottom of the income distribution. Data are for all US metro areas from 1980 to 1990. Income polarization has risen. The international flow of labor polarizes earnings by depressing wages among low-income workers. Producer services increase earnings at the upper levels, but, in contrast to the main theories, are unrelated to polarization.     

The impact of unionization,right-to-work laws,and female labor force participation on earnings inequality across states

This study examines the effect of unionization, right-to-work laws, and participation of women in the labor force on income inequality. Two distinct models are developed using 1970 and 1980 census data on the 50 states in the U.S. First, an income inequality model is specified as a beta distribution of the second kind to estimate Gini measures of income inequality. Second, these Gini estimates are used in a simultaneous equations model. The 1970 results indicate that higher unionization rates decreased inequality while right-to-work laws increased inequality. In 1980, the measure of inequality was lower in states with higher female labor force participation. We thank an unknown referee and the editor for comments and criticisms that greatly improved the paper. The usual caveat applies.     

OCCUPATIONAL GROWTH AND THE EXPANSION OF EDUCATIONALLY-RELATED EARNING GAPS

I develop an argument that facilitates understanding of how occupational growth impinges on the relationship between education and earnings. Much of the literature focuses on workers employed at the ends of the occupational hierarchy, whereas my contribution applies to workers positioned all along the occupational hierarchy. I argue that an undersupply of affordable, suitable labor in expanding occupations encourages a division of labor among workers who vary in educational attainment. This division of labor, in turn, leads to greater educationally-related earnings inequality—even among workers who hold similar positions in the occupational hierarchy. Such a development can become pervasive because expanding occupations exist throughout the occupational hierarchy and because educational attainment among workers varies within most occupations. In declining occupations, a different set of conditions pervades, and these conditions facilitate employers' efforts to control their wage-bill by compressing educationally-related earning gaps. A hypothesis is derived from these arguments and tested on a nationally representative sample. The findings are consistent with the hypothesis, suggesting the arguments considered here help explain how the relationship between education and earnings is influenced by whether workers are employed in expanding or in declining occupations. Consequently, this research improves our understanding of how earnings inequality among individuals is linked to structural transformations in the economy.     

PIECE‐RATE CONTRACTS FOR OTHER‐REGARDING WORKERS

When workers are paid with piece rates, inequality arises naturally. We consider workers who care about income comparisons and are either status seeking or inequality averse. We identify circumstances under which inequality attitudes lead workers to exert more effort than they would otherwise, and also circumstances under which workers’ inequality attitudes lead firms to set lower piece rates than they would otherwise. The key behavioral assumption for both of these results to hold when workers are identical is behindness aversion, the property that changes in inequality matter more to the worker when he is behind than when he is ahead. (JEL D01, J33, M52)     

Is America coming apart? Socioeconomic segregation in neighborhoods,schools, workplaces,and social networks, 1970–2020

As income inequality in the United States has reached an all-time high, commentators from across the political spectrum warn about the social implications of these economic changes. America, they fear, is “coming apart” as the gap between the rich and poor grows into a fault line. This paper provides a comprehensive review of empirical scholarship in sociology, education, demography, and economics in order to address the question: How have five decades of growing economic inequality shaped America's social landscape? We find that growing levels of income inequality have been accompanied by increasing socioeconomic segregation across (1) friendship networks and romantic partners, (2) residential neighborhoods, (3) K-12 and university education, and (4) workplaces and the labor market. The trends documented in this review give substance to commentators' concerns: compared to the 1970s, rich and poor Americans today are less likely to know one another and to share the same social spaces. The United States is a nation divided.     

Contracts,Labor Supply and Income Targeting

In many professions and personal services, a firm offers a contract with either proportional revenue sharing of the worker’s output or a contract with 100% revenue accruing to the worker in exchange for a fixed (debt) payment. Contingent on the contract, the worker chooses the mechanism to achieve the desired level of productivity. A higher revenue split induces the worker to be more productive in output per hour resulting in a higher wage. The relevant price of effort is the after-split, after-tax wage controlled for after-tax household income. Incentives through a higher split raise productivity and the return to effort. The sample is 1,559 U.S. real estate sales professionals paid on contract splits in 2007 and choosing their hours and effort. The compensated labor supply elasticity is positive and between approximately zero and 0.3 suggesting the absence of income targeting for these workers on split and 100% revenue contracts. But the inclusion of contractual income split provisions in the model substantially increases the labor supply elasticity.     

Older workers’ employment in dynamic technology changes

Discrimination against older workers and the higher barriers for entrance to the workforce that these workers face are well documented in the literature. This situation becomes even worse when technological changes take place. In this paper the different responses of younger and older workers to those technological changes were analyzed, and it was revealed that older workers can be severely harmed when such changes occur. It was found that providing a subsidy for older workers could aid in reducing the unemployment among older workers, together with increasing growth of the economy and decreasing the inequality of income distribution.     

Income Inequality,Globalization, and the Welfare State: Evidence from 23 Industrial Countries, 1990–2009

The debate regarding the welfare state–weakening effect and the income inequality‐increasing effect of globalization remains a contentious issue among stratification scholars. For some, globalization increases income inequality, while for others, globalization has no, or a negligible, effect on income inequality. This study brings new evidence to bear on this debate by separately investigating effects of multiple indicators of globalization (international trade, foreign direct investment [FDI] and immigration), and of welfare state generosity (government social‐protection spending) on (1) income inequality before taxes and transfers and (2) income inequality after taxes and transfers, using data from 23 Organisation for Economic Co‐operation and Development (OECD) countries over 1990–2009. First, results show a positive effect of international trade, a negative effect of immigration, but no effect of FDI and government social‐protection spending on income inequality before taxes and transfers. Second, results show no effect of the globalization indicators but a negative effect of government social‐protection spending on income inequality after taxes and transfers. These findings suggest that (1) globalization has inequality‐increasing effects depending on measures of income inequality; (2) the welfare state, in many OECD countries, continues to shape income distribution; and (3) in contrast with the popular narrative, immigration may decrease income inequality.     

Income Inequality in Host Countries and Remittances: A Discussion of the Determinants of Portuguese Emigrants' Remittances

The evolution of income inequality in host countries affects the migrants working there. As a significant number of these migrants do not earn high incomes, this evolution tends to significantly affect migrants' abilities to send money back to their home countries. We test this hypothesis considering the evolution of income inequality in 59 countries with Portuguese emigrants through observations from 1996 to 2014. Using the system generalized method of moments (GMM) estimator, we found that an increase in income inequality leads to fewer remittances per emigrant. We also controlled income inequality with several determinants of remittances, including the real GDP per capita, unemployment rate, education skills, and the self‐employment rates of the host countries.     

Long-run effects of democracy on income inequality in Latin America

I address the link between democracy and inequality in Latin America, analyzing whether the degree of democracy that birth cohorts experience during the course of their formative years is related to labor income dispersion later, in adulthood. For this, I measure inequality at the cohort level by using pseudo-panel data built from household surveys for fifteen Latin American countries (from circa 1995 to circa 2011) and measure democracy as the discounted cumulative value of the degree of democracy during the cohort’s formative years. I find that cohorts that have higher discounted cumulative values of the degree of democracy show lower income inequality. However, the effect of democracy on income dispersion is driven by those cohorts that benefited from the surge of democracies that came to exist during the second half of the twentieth century. I also present suggestive evidence that education is one mechanism explaining these results.     

Equality of opportunity and the distribution of long-run income in Sweden

Equality of opportunity is an ethical goal with almost universal appeal. The interpretation taken here is that a society has achieved equality of opportunity if it is the case that what individuals accomplish, with respect to some desirable objective, is determined wholly by their choices and personal effort, rather than by circumstances beyond their control. We use data for Swedish men born between 1955 and 1967 for whom we measure the distribution of long-run income, as well as several important background circumstances, such as parental education and income, family structure and own IQ before adulthood. We address the question: in Sweden, given its present constellation of social policies and institutions, to what extent is existing income inequality due to circumstances, as opposed to ‘effort’? Our results suggest that several circumstances, importantly both parental income and own IQ, are important for long-run income inequality, but that variations in individual effort account for the most part of that inequality.     

A New Kuznetsian Dynamic: The Knowledge Economy and Income Inequality in the United States, 1917–2008

The rise of the knowledge economy resulted in higher levels of income inequality in the United States and forced many to question the Kuznets Inverted‐U hypothesis. However, this study argues that the establishment of a knowledge economy does not negate the importance of employment shifts for income inequality. Instead, the expansion of knowledge employment alters the major sectors that are responsible for the overall distribution of income. To this end, this article presents the key argument that the current service–knowledge transition impacts income inequality trends, of today, in a way that is similar to the agricultural–industrial transition, of the past. According to the autoregressive conditional heteroskedasticity regressions, the agricultural–industrial transition returns stronger associations with income inequality in the United States before 1950. The agricultural–industrial transition's impact diminishes thereafter as the service–knowledge transition shares a more robust association with income inequality after 1980.     

THE DYNAMICS OF ETHNIC INEQUALITIES: The Case of Israel

Three alternative trends of ethnic or racial inequality are formulated: diminishing inequality, rising inequality and stabilizing inequality. The last trend is hypothesized to hold for industrial ‘welfare states’ which lack both blatant discrimination against ethnic groups and systematic efforts to close the ethnic gaps.

A comprehensive study of inequalities in income, occupation, education and power between Oriental (non-European) and Ashkenazi (European) Jews in Israel has shown that the thesis of ‘stabilizing inequality’ fits Israel best. The various areas of Oriental-Ashkenazi inequality are conducive to conflict not only because of their persistence, but also for being appreciable and discrepant. It is concluded that more radical means are needed if greater ethnic equality is desired.     

Fringe Benefits and Inequality in the Labor Market

This study shows that when fringe benefits are accounted for, inequality increases at a point in time and grew faster from 1987 to 1994. Several alternative explanations of the observed discrepancies between wage inequality and compensation inequality are assessed. The evidence is that the disproportionately greater decline in income for less skilled workers is responsible for the greater decline in health insurance coverage, which in turn contributes to greater inequality growth when fringe benefits are accounted for.