The effect on inequality of changing one or two incomes

We examine the effect on inequality of increasing one income, and show that for two wide classes of indices a benchmark income level or position exists, dividing upper from lower incomes, such that if a lower income is raised, inequality falls, and if an upper income is raised, inequality rises. We provide a condition on the inequality orderings implicit in two inequality indices under which the one has a lower benchmark than the other for all unequal income distributions. We go on to examine the effect on the same indices of simultaneously increasing one income and decreasing another higher up the distribution, deriving results which quantify the extent of the ‘bucket leak’ which can be tolerated without negating the beneficial inequality effect of the transfer. Our results have implications for the inequality and poverty impacts of different income growth patterns, and of redistributive programmes, leaky or not, which are briefly discussed.     

METROPOLITAN STRUCTURE AND CRIMINAL VIOLENCE

This article re-examines the conclusions of an earlier paper (Blau and Blau. 1982);i.e., that racial inequality in metropolitan places increases criminal violence and is accountable for various factors to which this violence is often attributed, notably poverty, race, and the Southern subculture of violence. The replication confirms the basic original hypothesis that a Standard Metropolitan Statistical Area's (SMSA) racial inequality in socioeconomic status raises its rates of violent crime. This article also supports the earlier findings that rates of criminal violence are higher in larger SMSAs and in SMSAs with a great number of marital conflicts and disruptions (as indicated by the large proportion of divorced and separated), and that these rates are unrelated to an SMSA's poverty level once other conditions are controlled. However, when interaction effects and curvilinear relationships are taken into consideration, criminal violence is seen to depend considerably on an SMSA's racial composition and to be more prevalent in SMSAs with a largely Southern population than in others, which supports the thesis of a Southern subculture of violence.     

Income Inequality and Chronic Health Conditions: A Multilevel Analysis of the U.S. States

Recently, scholarly work has examined the effect of rising income inequality on health outcomes. However, this work is somewhat inconclusive. The mechanisms that could produce such an association are still being sorted out. Much of this work focuses on mortality outcomes with little attention to how this process operates for actual health conditions, including chronic health problems—arguably the main public health concerns of the developed world. In a series of multilevel binary logistic regression models using data from the 2005 and 2007 Behavioral Risk Factor Surveillance System, we examine the association between state-level income inequality, poverty, and social welfare measures on spending and policy to examine the association between these factors for three chronic health outcomes: diabetes, hypertension, and coronary heart disease. We find that income inequality is conditionally positively related only to the diagnosis of diabetes and hypertension, and only in 2007. However, absolute poverty is related to the outcome across all three dependent variables. Certain social welfare measures attenuate the effects of both income inequality and absolute poverty, suggesting that some policies reduce this association.     

Increasing health inequality in China: An empirical study with ordinal data

This paper employs a recently introduced method of income-health matrix to study health inequality in China. The method overcomes the problems associated with ordered self-reported health (SRH) responses when the conventional tools of inequality analysis are used. Applying the new method to the China Health and Nutrition Survey (CHNS) data, we find that over the study period of thirteen years, health inequality has increased by more than one hundred percent in spite of the multifold increase in average income. We conclude that the most likely explanations for the recent increase in China’s health inequality are: aging population, worsening income inequality and poverty, division between urban and rural, and environment deterioration.     

A general class of inequality elasticities of poverty

Many authors have recently emphasized the crucial role of income inequalities in the design of efficient policies aimed at reducing poverty. However, the link between variations in the degree of inequality and variations in poverty is not well documented. The literature, for instance, does not provide any satisfying tool for predicting how a small relative variation in the Gini index may be associated with a variation in the headcount index. In the present paper, we define a family of Lorenz curve transformations that can directly be interpreted in terms of relative variations of known inequality measures. Then, we extend Kakwani’s (Rev Income Wealth 39(2):121–139, 1993) methodology for the calculation of inequality elasticities of poverty. Improvements are threefold with respect to Kakwani’s work. First, our formulas are not confined to the sole Gini index. Secondly, they embrace the uncertainty and the complexity of the mechanical link between inequality and poverty. Third, using some flexible functional form, one can easily perform an accurate estimation of the point inequality elasticities of poverty corresponding to observed variations of a given income distribution. We also propose a simple measure that may be helpful to assess how “pro-poor” are inequality variations by comparing the observed elasticities with the set of theoretical elasticities that could be obtained from the initial income distribution.     

Distributive effects of benefits and taxes

In light of the growing federal deficit, pressure is mounting to cut federal spending. If the budget for social security programs is cut, who will suffer? This article presents the results of a study that investigated the degree to which taxes and public income transfers change the level of income, the degree of inequality in income distribution, and the poverty rates of various demographic groups. Major findings are that public income transfers are more powerful than taxes in equalizing the income distribution and that poverty reduction through non-means-tested transfer programs is more effective among elderly people, white people, and people in married-couple families, whereas poverty reduction through means-tested transfer programs is more effective among nonelderly people, black people, and people in female-headed families. Implications for social work practice are discussed.     

Income inequality games

The paper explores different applications of the Shapley value for either inequality or poverty measures. We first investigate the problem of source decomposition of inequality measures, the so-called additive income sources inequality games, based on the Shapley value, introduced by Chantreuil and Trannoy (1999) and Shorrocks (1999). We show that multiplicative inequality games provide dual results compared with Chantreuil and Trannoy’s ones. We also investigate the case of multiplicative poverty games for which indices are non additively decomposable in order to capture contributions of sub-indices, which are multiplicatively connected with, as in the Sen-Shorrocks-Thon poverty index. We finally show, in the case of additive poverty indices, that the Shapley value may be equivalent to traditional methods of decomposition such as subgroup consistency and additive decomposition.     

Survey nonresponse and the distribution of income

The paper examines the distributional implications of selective compliance in sample surveys, whereby households with different incomes are not equally likely to participate. Poverty and inequality measurement implications are discussed for monotonically decreasing and inverted-U compliance-income relationships. We demonstrate that the latent income effect on the probability of compliance can be estimated from information on response rates across geographic areas. On implementing the method on the Current Population Survey for the U.S. we find that the compliance probability falls monotonically as income rises. Correcting for nonresponse appreciably increases mean income and inequality, but has only a small impact on poverty incidence up to poverty lines common in the U.S. Martin Ravallion: Corresponding author.     

Income inequality and income segregation

This article investigates how the growth in income inequality from 1970 to 2000 affected patterns of income segregation along three dimensions: the spatial segregation of poverty and affluence, race-specific patterns of income segregation, and the geographic scale of income segregation. The evidence reveals a robust relationship between income inequality and income segregation, an effect that is larger for black families than for white families. In addition, income inequality affects income segregation primarily through its effect on the large-scale spatial segregation of affluence rather than by affecting the spatial segregation of poverty or by altering small-scale patterns of income segregation.     

Residence and Income Inequality: Effects on Mortality Among U.S. Counties

Abstract Despite lower average incomes, greater percentages living in poverty, lower levels of health insurance, less preventive health care, and poorer health status, nonmetropolitan residents have been found to experience lower mortality than their metropolitan counterparts. Several pathways through which residence influences mortality have been proposed. The objective of this study is to examine the effects of income inequality on residential differentials in mortality. Using data from the Compressed Mortality File for counties in the coterminous United States for 1990, we estimate weighted least squares models of total mortality for 3,067 counties, and separately for metropolitan and nonmetropolitan counties. Mortality is lower in nonmetropolitan counties than in metropolitan counties, once rates are standardized for age, sex, and race. Moreover, income inequality exerts stronger effects in nonmetro counties, an effect that persists when per capita income, median household size, and racial composition are controlled. The percentage of the population that is black exerts an independent effect on mortality in both metro and non‐metro counties.     

Wages of regular and irregular workers, the price of education, and income inequality

In this paper, we develop a model characterized by skill-biased technological change and increasing costs of education to investigate income inequality. Irregular workers cannot escape poverty by commencing investment in education because wage inequality between regular and irregular workers widens and the price of education increases with the average level of education. Moreover, if the productivity of elementary education is low relative to that of higher education, middle-income individuals are eventually unable to pursue higher education because the threshold for education expenditure rises with the price of education. Thus, income inequality may widen, even among regular workers.     

Charitable conservatism, poverty radicalism and inequality aversion

In his Presidential Address to the European Economic Association, Tony Atkinson introduced the idea of a “charitable conservatism” position in public policy, which “exhibits a degree of concern for the poor, but this is the limit of the redistributional concern and there is indifference with respect to transfers above the poverty line.” This contrasts with the perspective of poverty indices, which give zero weight to those above the poverty line, which we call “poverty radicalism,” and with standard “inequality aversion” where the weights decline smoothly as we move up the income scale. The object of this paper is, first, to clarify the interrelationships between charitable conservatism, poverty radicalism and inequality aversion. We do this by showing how the patterns of welfare weights to which each of these gives rise are related to each other. Secondly, we are concerned to demonstrate the implications of these different views for optimal income taxation. In terms of levels and patterns of marginal tax rates, we show that charitable conservatism and poverty radicalism are on a continuum, and by choice of low or high inequality aversion one can approximate either outcome fairly well.     

ACCOUNTING FOR URBAN CHINA'S RISING INCOME INEQUALITY: THE ROLES OF LABOR MARKET,HUMAN CAPITAL,AND MARRIAGE MARKET FACTORS

This paper analyzes China's rising family income inequality since the early 1990s when the urban labor market started its transformation from a centrally controlled to a market‐driven one. We document the trends in income inequality over the period of 1992–2009 using the Urban Household Survey data, and adopt the approach recently proposed by Eika et al. (2014) to decompose changes in income inequality. We find that labor market factors accounted for about three‐quarters of the overall increases in income inequality while falling marriage rate contributed the other quarter. Changes in human capital levels and marital assortativeness have not contributed to the rising inequality. (JEL D31, I26, J12)     

Addressing multiple dimensions of gender inequality: the experience of the BRAC Gender Quality Action Learning (GQAL) programme in Bangladesh

Recent analyses have highlighted that poverty reduction in Bangladesh has been accompanied by growing inequality in society, measured by household income. This article considers what the implications are for development actors who are concerned with empowering the poor in society, and who understand poverty from a gender and women's rights perspective. We draw on experience from BRAC's work to address these issues, focusing on the Gender Quality Action Learning (GQAL) programme. A focus on women's self-employment alone does not result in challenging the structures of patriarchal inequalities. Gender inequality and its link to economic inequality needs to be much more centrally positioned than it currently is in development discourse. Currently economic empowerment is widely seen as a potential route to gender equality, but the GQAL programme shows work to challenge gender inequality is necessary as an entry-point to ensure effective economic empowerment.     

Flat rate taxes and relative poverty measurement

We provide a systematic analysis of the impact of revenue-neutral changes to the parameters of a flat rate tax system on the level of relative poverty (where the poverty line is some fraction of either the mean or the median post-tax income level). We also perform a similar analysis for a negative income tax system. We find that the choice of poverty line type has important consequences in respect of how changes to the tax parameters affect the level of relative poverty. Our results are illustrated with a numerical simulation, in which we allow the pre-tax income distribution to be either given exogenously or determined endogenously.     

Measuring poverty and inequality in northern Canada

We provide the first direct comparisons of poverty and inequality in the North (i.e. Yukon, Northwest Territories, Nunavut) with elsewhere in Canada. We do so by first constructing a northern equivalence scale. Based on an Engel methodology, we estimate the extra income needed by families in the North to devote the same share to necessities as those in southern Canada. Using econometric techniques and public use microdata from the Survey of Household Spending, we find that cost of living is 1.46 times higher in the North. We use this scale to adjust the incomes of northern residents so that purchasing power is, for the purposes of our model, equal to that in the South. We subsequently measure poverty and inequality in northern versus southern Canada over the period 1997–2009. Our findings indicate that incidence of poverty is much higher in the North. For example, 31.1% of northern families with children are poor, compared with 9.9% in the South. Moreover, while approximately 10% of the southern population is represented in each income decile, 31.1% of northern families with children are in the bottom 10%. Only 3% have incomes that would place them among the richest 10% of Canadians.     

Reducing poverty and inequality through tax-benefit reform and the minimum wage: the UK as a case-study

Atkinson’s book Inequality: What Can Be Done? (Harvard University Press, 2015) sets out a range of concrete proposals aimed at reducing income inequality, which cover a very broad span but include major changes to the income tax and social transfers system and the minimum wage. These are framed with specific reference to the UK but have much broader relevance in demonstrating how substantial the impact on inequality of such measures could be. This paper assesses the first-round effects of these tax, transfer and minimum wage reforms on income inequality and poverty based on a microsimulation approach using EUROMOD. The reforms involve a significantly more progressive income tax structure, a major increase in the minimum wage to the level which is estimated to represent the ‘Living Wage’, and alternative routes to reforming social transfers – either to strengthen the social insurance element or to restructure the entire system as a Participation Income (a variant of Basic/Citizen’s Income). The results show how the first-round effects of either set of tax and transfer proposals would be to substantially reduce the extent of income inequality and relative income poverty and the paper draws out how the two approaches differ in their effects. The additional impact of raising the minimum wage to the Living Wage is modest, reflecting in particular the position of beneficiaries in the household income distribution and the offsetting effects on household income of the withdrawal of means-tested cash transfers.     

Improvements in children’s health: Does inequality matter?

The literature on the contributions to poverty reduction of average improvements in living standards vs. distributional changes uses only one measure of well-being – income or expenditure. Given that poverty is defined by deprivation over different dimensions, we explore the role of average improvements and distributional changes in children’s health and nutrition using the height of young children as our measure of well-being. Similar to the income literature, we find that shifts in the mean level of heights, not changes in distribution, account for most improvements in heights. Unlike the literature on income inequality, however, there is a positive association between improvements in average heights and reduced dispersion of those heights.     

Tracing out the effects of demographic changes on the income distribution

During the 1980s and 1990s fertility decisions varied significantly and not uniformly along the income distribution in Argentina. In this paper we study the effects of these demographic changes on income poverty and inequality by applying microeconometric decomposition techniques. In particular, we simulate the equivalized household income distribution that would emerge if individuals observed in a given base year had taken fertility decisions as they did in another different year. The results suggest that these demographic factors have contributed considerably to the changes in poverty and inequality experienced by Argentina since the 1980s.     

Household wealth and the measurement of economic well-being in the United States

We analyze the level and distribution of economic well-being in the United States during the 1980s and 1990s based on the standard measure of money income and a measure in which income from wealth is calculated as the sum of lifetime annuity from nonhome wealth and imputed rental-equivalent for owner-occupied homes. Over the 1982–2000 period, median well-being increases faster when these adjustments are made than when standard money income is used. This adjustment also widens the income gap between African-Americans and whites but increases the relative well-being of the elderly. Adding imputed rent and annuities from household wealth to household income considerably increases measured inequality and the share of income from wealth in inequality. However, both measures show about the same rise in inequality over the period. We also find an increasing share of wage and salary income in our expanded definition of income among the richest 1% over the period but do not find that the “working rich” have largely replaced rentiers at the top of the economic ladder.