INEQUALITY AND GROWTH IN THE UNITED STATES: EVIDENCE FROM A NEW STATE-LEVEL PANEL OF INCOME INEQUALITY MEASURES

This paper introduces a new comprehensive panel of annual state-level income inequality measures spanning the postwar period 1945–2004. For many states, the share of income held by the top decile experienced a prolonged period of stability after World War II, followed by a substantial increase in inequality during the 1980s and 1990s. This paper also presents an examination of the long-run relationship between income inequality and economic growth. Our findings indicate that the long-run relationship between inequality and growth is positive in nature and driven principally by the concentration of income in the upper end of the income distribution. ( JEL D31, O40)     

INCOME INEQUALITY: THE CONSEQUENCES OF SKILL‐UPGRADING WHEN FIRMS HAVE HIERARCHICAL ORGANIZATIONAL STRUCTURES

During the last three decades, most developed countries have experienced increasing income inequality. Using Danish register data from 1992 to 2007 for all private‐sector employees, we confirm that income inequality has increased in Denmark. We also observe an increase in the relative employment of highly educated individuals, as well as differential income growth rates across employee subgroups where, in particular, managers experienced significant real income progression. We use an equilibrium search framework with on‐the‐job search to study the interplay between skill‐upgrading, management compensation, and income inequality. In this model we can determine the management and education premia. We can also show that when our model is exposed to skill‐upgrading, it is capable of producing income dynamics similar to those observed in the Danish income distribution. (JEL J3, J6, M5)     

A longitudinal evaluation of government-sponsored job skills training and basic employment services among U.S. baby boomers with economic disadvantages

Job skills training is a cost-effective strategy for improving employment among individuals who have low income and employment barriers, but few U.S. government-sponsored employment program participants have received such training. To better understand long-term gains from job skills training, this study compared employment and earnings trajectories between program participants who received job skills training and those who received basic services only. Using data from the National Longitudinal Survey of Youth 1979, we estimated 33-year employment and earnings trajectories among U.S. baby-boomer cohorts while accounting for baseline group heterogeneity using inverse propensity score weighting. We found increases in employment rates over the life course, especially among Black women. Job skills training also increased earnings by up to 69.6 % compared to basic services only. Despite the long-term gains in employment and earnings, job skills training participation is not sufficient to address gender as well as racial and ethnic gaps in full-time employment. Findings reinforce the importance of incorporating job skills training as an essential service element of government-sponsored employment programs to improve long-term labor market outcomes among Americans with economic disadvantages.     

Income inequality and self-reported values

What is the relationship between income inequality and the values people endorse? Using survey data from all thirty-four OECD countries over a period of almost thirty years, we investigate the following dimensions of value systems: work ethic, civism, obedience, honesty, altruism, and tolerance. In most cases, no robust relation to income inequality is detected. However, we find some evidence that larger income disparities are associated with a stronger work ethic. This suggests that income inequality might spur hard work not only through pecuniary incentives but also because it makes people attach a symbolic value to being laborious.     

Trade Liberalization and Child Labor: A Case Study of Pakistan

The boom in industrial sector has lead to many problems and child labor is no exception. This study explores the linkages between trade liberalization and child labor both in short and long-run. The results suggest that GDP per capita and income inequality increase the child labor in the long-run but these results disappear in short-run. The study also finds that income inequality has positive and significant impact on child labor. Our findings also support that trade openness along with trade sanctions (imposed by the developed countries) are associated with the reduction in child labor in Pakistan.     

Remittances and inequality: a dynamic migration model

We develop a model to study the effects of migration and remittances on inequality in the origin communities. While wealth inequality is shown to be monotonically reduced along the time-span, the short- and the long-run impacts on income inequality may be of opposite signs, suggesting that the dynamic relationship between migration/remittances and inequality may well be characterized by an inverse U-shaped pattern. This is consistent with the findings of the empirical literature, yet offers a different interpretation from the usually assumed migration network effects. With no need to endogenize migration costs through the role of migration networks, we generate the same results via intergenerational wealth accumulation.     

“Left Behind?” Financialization and Income Inequality Between the Affluent,Middle Class,and The Poor

There is increasing scholarly evidence that financialization has contributed to rising income inequality, especially by concentrating income among the affluent and rich. There is less empirical research examining who is losing out to the affluent. This paper fills this gap by examining how three measures of financialization (finance, insurance, and real estate or FIRE employment; credit expansion; and financial crises) affect upper-tail (measured as the ratio between the 90th and 50th income percentiles) and lower-tail (measured as the ratio between the 50th and 10th income percentiles) income inequality. Using concepts from economic sociology and the social stratification literature, I develop a perspective that links financialization to income inequality by creating more unequal market incomes while simultaneously reducing redistribution and social transfers. I analyze disposable household income data (after taxes and transfers) from the Luxembourg Income Study (LIS) and other public sources like the OECD from 16 affluent nations between the years 1981 and 2011, and I use an unbalanced panel design due to LIS data coverage. I find that the relative incomes of both the middle class and the poor are hurt by financialization (strongest evidence tied to FIRE employment); however, relative incomes of the poor are especially sensitive to financialization.     

The costs of sharing: wives' employment and husbands' mental health.

Although there is general concern about the psychological effects of gender stratification, we know relatively little about the particular aspects of inequality that affect men and women's mental health. This paper proposes that inequalities in power and demands associated with gender are particularly consequential for well-being. Previous analyses on married women support this perspective: wives' employment is positive for women's well-being to the extent that it increases their income relative to husbands and decreases their domestic demands, particularly through husbands sharing in domestic labor. The present analysis extends the test of this perspective to men by examining the effects of wives' employment on husbands' psychological well-being. Results show that insofar as it decreases husbands' relative income and increases their share of domestic labor, women's employment is negative for husbands' mental health.     

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.     

Inequality and growth: evidence from panel cointegration

This paper uses heterogeneous panel cointegration techniques to estimate the long-run effect of income inequality on per-capita income for 46 countries over the period 1970–1995. We find that inequality has a negative long-run effect on income, both for the sample as a whole and for important sub-groups within the sample (developed countries, developing countries, democracies, and non-democracies). The effect is economically important, with a magnitude about half as high as the magnitude of an increase in the investment share.     

Public policy and part-time employment

VI. Conclusions What are the policy implications of these findings? One thing is clear: Recently employers have avoided hiring full-time employees. With the dramatic slowing in the growth of full-time jobs has come a rise in the relative importance of part-time employment, particularly of the involuntary kind. The root cause of this phenomenon is suggested by the history of the past two decades, which contain periods of both extremely weak and very strong full-time job growth. The pattern is obvious: When there is strong full-time job growth, involuntary part-time work fades in importance. One other pattern is also evident: The periods of relatively weak full-time job growth and increasing importance of involuntary part-time employment are also times of growth in levels of income taxation and the volume of governmental regulation. By contrast, the period of very pronounced growth in full-time employment and reduced incidence of involuntary part-time work is characterized by lowered income tax rates and the relaxing of governmental regulations. From the policy standpoint, it appears that if involuntary part-time work is a problem, the most direct way to deal with it is to return to the economic policies of the 1981–1989 era that generated such remarkable overall job growth in the American economy.     

Global Centrality and Income Inequality in U.S. Metropolitan Areas: A Test of Two Hypotheses

This article provides a quantitative assessment of two global city hypotheses: Sassen’s polarization and Hamnett’s professionalization claims. We conduct our analysis by using a continuous measure of global city status developed by researchers at the Global and World Cities Research Network (GaWC) and examining its correlation with the Gini index of household income inequality with relevant controls across a large sample of U.S. metropolitan areas in 2008. We examine industrial employment distribution as a causal pathway by which global city formation may influence urban income structures, as per Sassen and Hamnett’s original hypotheses. Results show that global city status is consistently associated with higher levels of inequality, but neither theorist’s claims about causal mechanisms are supported. This begs the question: What explains the correlation? We suggest an alternative hypothesis relating global city status to the distribution of educational credentialing.     

Does income inequality contribute to credit cycles?

Recent literature presented arguments linking income inequality to the financial crash of 2007–2008. One proposed channel is expected to work through bank credit. I analyze the relationship between income inequality and bank credit in a panel cointegration framework and find that they have a long-run dependency relationship. Results show that income inequality contributed to the increase of bank credit in developed economies after the Second World War.     

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.     

An alternative test of Kuznets’ hypothesis

This paper uses a novel approach for testing Kuznets’ hypothesis. Following Kuznets’ original insights, we test for an inverted U relationship between employment outside agriculture and income inequality, instead of the traditional focus on GDP per capita and income inequality. Our results, obtained using panel and country by country regressions, do not support Kuznets’ hypothesis.     

Income expectations,rural-urban migration and employment in Africa

This article develops a theoretical framework explaining the influence of economic conditions on rural-urban migration in tropical Africa. The model explains the continued process of migration despite high levels of urban unemployment. A lengthy discussion is devoted to short-, intermediate-, and long-term policies for relieving the urban unemployment problem. It is argued that efforts must be made to reduce the differences between the expectation of urban income and real rural income. No one single policy will slow rural-to-urban migration. The author suggests policies that would eliminate factor-price distortions, restrain urban wages, redirect development toward concentrated and comprehensive programs of rural development, resettle and repatriate unemployed urban migrants, and establish capital-goods industries. The capital-goods industries would develop labor-intensive technologies for agriculture and industry. The theoretical model assumes that migrants make decisions about moving on the basis of an expected income and the expectation of an urban job. It is argued that the urban-rural income differences and the probability of securing an urban job determine the rate and extent of rural-urban migration in Africa. If the migrant has a low probability of finding regular wage employment in the short term, but expects the probability to increase over time, the migrant would make a rational decision to migrate. Policies that operate solely on urban labor demand are considered unlikely to reduce urban unemployment. This model better estimates the shadow prices of rural labor.     

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.     

Skilled craftswomen or cheap labour? Craft-based NGO projects as an alternative to female urban migration in northern Thailand

This article presents a craft-based nongovernmental organization (NGO) project designed as an alternative to female urban migration in northern Thailand. ThaiCraft works with over 60 community-based artisan groups including members of minority and refugee groups. Activities include supporting community groups in their move toward self-reliance, coordination of producers' activities for ensuring fair payment, and maximizing marketing opportunities to increase producers' income. One of the project?s aims is to form dynamic educational partnerships among producers, volunteers, and the public through the provision of training. Still, it is doubtful whether craft-based NGOs and other organizations can constitute a viable long-term alternative to urban migration. No proposed solution can respond to all issues associated with the emigration of rural Thai women for employment; however, the recognition of women's skills and knowledge is of importance to the fight against gender inequality in development.     

Minimum wages and the wessels effect in a monopsony model

The Wessels model suggests that firms respond to increases in the minimum wage rate by decreasing the level of fringe benefits — an action which produces an inefficiency effect that lowers workers’ utility and the supply of labor. Standard models of monopsony, however, argue that wage floors prevent the exercise of market power and increase employment. I show that wage floors, even with fringe benefit curtailment, may increase employment by lowering the marginal expense of labor. Employee utility and employment will rise somewhat but not as much had the firm acted competitively in setting both wages and fringes.