Inequality,integration, and policy: issues and evidence from EMU

Simple theoretical arguments imply that while economic integration may or may not increase income inequality and volatility, it certainly makes it difficult for National governments to conduct independent fiscal policies and to enforce income redistribution schemes. Controlling for country-level income variation, available data suggest that Europe’s Economic and Monetary Union (EMU) was associated with a small but significant increase in disposable income inequality, and that this was in turn accounted for by less generous social policies.     

Redistribution and labour supply

This paper explores the effect of personal income taxes on redistribution when labour supply reactions are taken into consideration. The results indicate that the classical non-behavioural results on redistribution are not necessarily satisfied in a more general behavioural framework. In this respect, it is shown that the relevant transition to measure redistribution is not the transition from the initial post-tax to the final post-tax income distribution, but rather from the more precise initial pre-tax to the final post-tax income distribution. In addition, the necessary and sufficient conditions to ensure redistribution in this wider setting are postulated, which helps determine the behavioural bias under alternative tax and labour supply models. This shows that the functional specification of labour supply may also affect the results.     

The politics of pluriactivity in Britain

This paper examines the political context to policies promoting farm diversification in Britain, in an attempt to understand both the fundamental contradictions which lie within these policies and the particular emphasis placed upon on-farm diversification in Britain. The paper begins therefore with an analysis of the politics of British agriculture in the 1980s, and then focuses in detail on policies which promote farm diversification. Finally, the paper compares these policies with evidence of trends and characteristics of pluriactivity in Britain, and suggests three major contradictions between government policies and observed farm household behaviour. A majority of farm households see little need to diversify and have even less inclination to do so. Any redeployment of on-farm resources is most likely to occur on the sale or transfer of the farm, and is unlikely to offer a source of alternative income for poor farmers.     

VOTING FOR INCOME‐IMMISERIZING REDISTRIBUTION IN THE MELTZER–RICHARD MODEL

This paper argues that income received via redistributive transfers, unlike labor income, requires no direct sacrifice of leisure; this makes it attractive to many voters even if it leaves them poorer. This point is made within the classic Meltzer and Richard (1981) model wherein heterogeneous voters evaluate an income‐redistribution program that finances a lump‐sum transfer to all via a distorting income tax. The political‐equilibrium policy under majority rule is the tax most preferred, utility‐wise, by the median voter. Ironically, this voter, and many poorer voters, may support a redistribution policy that leaves them poorer in income terms but with higher utility. (JEL H2, E6, D72)     

Preferences for redistribution: an empirical analysis over 33 countries

People’s preferences for state intervention in social policies vary. A cross-section analysis on individual-level survey data is conducted here over 33 democracies to highlight the link between the economic position of agents and their specific demand for redistribution. Controlling for a number of factors usually found to affect individual preferences in the literature, this article focuses on the role played by the occupational status of individuals in shaping their preferences. Individual labour market position, as well as family income, is shown to outweigh all other factors shaping preferences for redistribution. The odds of a manager to oppose redistributive policies are increased by 40%, as compared to those of an office clerk, for instance. Moreover, individuals’ perception of personal mobility plays an important role: the odds of holding more positive attitudes towards redistribution are up by 32% for people who think they experienced a downward mobility within the last ten years. Evidence is also found for the fact that the political regime may have a long lasting effect on collective preferences: living in former-East Germany doubles the odds of holding positive attitudes towards redistribution, as compared to living in West Germany. Finally, the research presented here identifies which socio-political groups may be formed on the basis of their preferences for redistribution.     

“Beating the Odds” Versus “Changing the Odds”: Poverty,Resilience, and Family Policy

Mixed in with national data on declining poverty rates are other signs that poverty, economic hardship, and inequality continue unabated. This essay examines: (a) the scope of poverty and the growing disparity in income and wealth; (b) the consequences of poverty of adults and children; and (c) strategies for improving their resilience. It is suggested that resiliency will be enhanced more by keen attention to national economic policies than by focusing upon individual personality characteristics, family attributes, or even unique community features. Drawing on a public health analogy, a focus on prevention (through sound economic redistribution policies) could significantly strengthen families and improve their well‐being.     

Discontinuous transformations,Lorenz curves and transfer policies

This article reconsiders the effect of variable transformations on the redistribution of income. If the theorems hold for all income distributions, previously given conditions are both necessary and sufficient. Different versions of the conditions are compared and their equivalence are stated. It is proved that the continuity of the transformations can be implicitly included in the necessary and sufficient conditions. In general, continuity is a realistic restriction when the theory is applied to transfer problems. The effect of dropping the explicit continuity restriction on the transformations is analysed, since situations in which discontinuity can be assumed are also considered. The analyses have yielded the fundamental result that continuity is a necessary condition if income inequality persists or is reduced.     

Is It the Government’s Responsibility to Reduce Income Inequality? An Age-Period-Cohort Analysis of Public Opinion toward Redistributive Policy in the United States, 1978 to 2016

This study examines age, period, and cohort (APC) effects on changing opinions among the American public toward the federal government’s responsibility for income redistribution. More specifically, we use the hierarchical age–period–cohort (HAPC) model to analyze time periods and birth cohorts as contextual variables and age as an individual-level variable to address the identification problem inherent in APC analysis. Our results show that while cohort effects on public opinion toward redistributive policy exist, such effects are explained by individual-level compositional differences among cohorts, and while period effects are evident, particular trends in that regard are difficult to discern. What our results make abundantly clear, however, is the significant impact of age on opinions toward redistributive policy. As people age, they become significantly less supportive of federal redistribution policies, a relationship that is robust in the presence of cohort and period effects as well as a full range of controls. In the context of a rapidly aging population, the implication is that more conservative policy preferences linked to older age provide little reason to believe that mass support for government redistribution is in the offing.     

Welfare analysis and redistributive policies

Applied welfare analyses of redistributive systems nowadays benefit from powerful tax-benefit microsimulation programs combined with administrative data. Arguably, most of the distributional studies of that kind focus on social welfare defined as a function – typically inequality or poverty indices – of household equivalized income. In parallel, economic research has made considerable progress in the measurement of welfare along several dimensions. Distinct but related branches of the literature have attempted (i) to model different behavior (in a way that matter for incidence and redistribution of tax-benefit policies), (ii) to go beyond income, (iii) to better define and estimate equivalence scales, (iv) to open the household black box and measure welfare at the individual level. I suggest a general framework to critically review these streams of literatures and to discuss whether recent advances in each of these fields have been or could be readily operationalized in welfare analyses and policy simulations.     

Does philanthropy reduce inequality?

Wealthy individuals often voluntarily provide public goods that the poor also consume. We show that, rather than reducing it, such philanthropy may aggravate absolute inequality in welfare achievement, while leaving the change in relative inequality ambiguous. Additionally, philanthropic preferences may increase the effectiveness of policies to redistribute income, instead of weakening them. Our results thus suggest that philanthropy and direct redistribution may often be better viewed as complements, rather than substitutes, in the context of inequality reduction. In so doing, they also bring into question the general normative case for large tax deductions for charitable contributions.     

Minimal rights based solidarity

In a model where individuals with different levels of skills exert different levels of effort, we propose to use individuals’ minimal rights to divide an extra amount of income generated by a change in the skill profile. Priority is given to individuals with a positive minimal right which ensures that the way redistribution is performed depends on the total sum of income available in society. We characterize two families of minimal rights based Egalitarian mechanisms. One family guarantees each individual her claim when claims are feasible. The other family guarantees a non-negative income after redistribution for all individuals.     

Income tax schedule and redistribution in direct democracies – the Swiss case

This study examines redistribution policy through personal income taxes in Swiss cantons over the period 1995–2011. In a first step, redistribution measures are estimated with the help of exhaustive administrative data. Redistribution is decomposed into average tax rate and tax progression. In a second step, we investigate the impact of direct democratic institutions and their usage on tax policy and redistribution. The results suggest that the effect of direct democracy on income tax redistribution is a multilayered process. First, the theoretical availability of direct democracy tools does not seem to have the same impact as the effective use of them. Second, fiscal referendums may – in the short term –reduce redistribution through lower tax rates and lead to less tax progression. Third, an increasing number of ballots on initiatives leads to more tax progression and more redistribution in the long run. It seems that the short-term dampening effects of fiscal referendums on redistribution may be overridden in the long run by the expansive effect of popular initiatives.     

UNION POWER,COLLECTIVE BARGAINING,AND OPTIMAL MONETARY POLICY

We study Ramsey policies and optimal monetary policy rules in a dynamic New Keynesian model with unionized labor markets. Collective wage bargaining and unions' monopoly power amplify inefficient employment fluctuations. The optimal monetary policy must trade off between stabilizing inflation and reducing inefficient unemployment fluctuations induced by unions' monopoly power. In this context the monetary authority uses inflation as a tax on union rents and as a mean for indirect redistribution. Results are robust to the introduction of imperfect insurance on income shocks. The optimal monetary policy rule targets unemployment alongside inflation. (JEL E0, E4, E5, E6)     

OPTIMAL AGRICULTURAL POLICY: SMALL GAINS?

Agricultural subsidies distort the allocation of workers across sectors, and may keep too many workers in agriculture. We use a general equilibrium model with endogenous sector selection calibrated to the U.S. economy to assess the efficiency loss and redistribution effect of the current transfer system. Eliminating current subsidies has two main effects: (1) small efficiency gains (around 4% of agricultural output) and (2) a corresponding rise in the price of agricultural goods. We find high-productivity farmers to be the main beneficiaries of the existing policies, although some of the transfers generate a redistribution effect toward low-productivity agents, which extends beyond the agricultural sector. (JEL H21, H25, H30, J24, J31, J43)     

THE EFFECT OF DIRECT DEMOCRACY ON INCOME REDISTRIBUTION: EVIDENCE FOR SWITZERLAND

In political economics, the impact of institutions on income redistribution is mainly studied by comparing different forms of representative democracy. In this article, we analyze the influence of direct democratic institutions on redistribution first focusing on welfare and nonwelfare spending using yearly panel data for Swiss cantons. Then, we estimate a model, which explains the determinants of actually achieved redistribution measured by Gini coefficients. While our results indicate that less public funds are used to redistribute income, inequality is not reduced to a lesser extent in direct than in representative democracies for a given initial income distribution. (JEL D7, D78, I30, H75, H11)     

Attitude towards a redistribution of income

This article reports on some data from a pilot study which surveyed the attitude of the active male Flemish population towards a redistribution of income. A simple linear regression model based upon the average ratings of actual and fair incomes of twelve occupations is presented. The model allows to calculate for each subject how much redistribution he favors, the extent to which he wants to alter the income structure, and the reference point he uses to determine which incomes have to moderate and which have not to. Some results are presented and discussed. Subjects tend to favor some degree of income leveling, however without affecting the income structure.     

Empirics of the median voter: democracy, redistribution and the role of the middle class

This paper improves the empirical investigation on the effectiveness of the median voter theorem. Using high quality data, it is possible to directly observe individual net cash transfers in several countries and to investigate the effects of taxes and transfers on different social classes and in aggregate. This allows testing of both the “redistribution hypothesis” (more inequality leads to more redistribution in aggregate) and the “median voter hypothesis” (the middle class plays a special role in policy making). Results suggest acceptance of the former and reject on, or at least questioning, of the latter. Not only the gains from redistribution are negligible for the middle class, but also the link between income and redistribution is also lower for it than for any other class of income. Moreover, the strength of the median voter seems to fall over time. Finally, the amount of redistribution targeted to the middle class is lower in more asymmetric societies, a result that contrasts strongly with the median voter theorem.     

The Prospective Role of Economic Stakeholders in the Governance of Nonprofit Organizations

This article focuses on the nexus between the governance of U.S. nonprofit organizations and their ability to secure the resources necessary to effectively execute their missions. Different sources of nonprofit income are associated with alternative stakeholders. Viewing these constituencies as beneficiary groups, we consider how the particular mix of income sources influences the capacity of nonprofits to generate resources, especially if there is competition among stakeholder groups for control of the organization’s policies and practices. We then ask how nonprofit governance might be modified to improve the ability of the organization to generate resources through a regime of economic stakeholder governance.     

Targeted programs v the basic income guarantee: an examination of the efficiency costs of different forms of redistribution

A basic income guarantee is known to require a great deal of tax revenue per dollar of net transfer. Such revenue requirements can appear to be prohibitive, not only politically but also in terms of economic efficiency; and this impression can lead people to favor more targeted forms of redistribution in which there are eligibility requirements and means-testing and where the financing is entirely by non-recipients. A simple simulation is used in this article to show that, in the United States, a basic income guarantee is not necessarily a less efficient way of accomplishing redistributive goals and that it could well be more efficient. Two other important and related conclusions become apparent. First, a large proportion of the inefficiency is due to the behavioral response of the net donor population rather than to net recipient behavior. Second, the efficiency costs of these two types of redistributive programs are not proportional to their revenue requirements.