Assessing income support where no national minimum income scheme exists. Is it possible to apply the model family method to the Italian case?

This article focuses on the application of a specific comparative methodology, the model family method (MFM), in measuring the income derived from minimum income schemes. The application of the MFM to the analysis of this policy field shows several criticalities such as the difficulty to analyze countries in which no national scheme exists, and in which both the intra-national variations and the discretionary power of street-level bureaucrats are significant. Stemming from the application of the MFM to the Italian case in the framework of an international project, the article analyzes whether and how this method can be developed also in said countries. In particular, it shows that, in order to do so, specific methodological choices and assumptions are necessary, built on a mixed research strategy aimed at complementing the data collected from institutional sources with in-depth interviews with social workers and the use of the vignettes technique.     

On the underestimation of migration’s income and poverty impact

In estimating the impact of migration on income and poverty, most existing studies have overlooked the fact that migration changes the size of the household. The ‘corrected’ impact that accounts for changes in household size is presented analytically and is estimated on the basis of data from nationally representative household surveys in Albania and Ghana. The analysis considers three poverty measures and four groups of migrant households: those with internal, international, internal and international, and internal and/or international migrants. The ratio of the corrected to the uncorrected impact on per capita income for Ghana (Albania) averages from 2.7 to 4.5 (2.5–3.8), and the ratio for the poverty impact averages from 2.6 to 4.4 (2.1–6.4). Thus, abstracting from changes in household size may result in a substantial underestimate of the impact of migration on income and poverty.

"A 20% income increase for everyone?": The effect of relative increases in income on perceived income inequality

Most research on income inequality implicitly assumes that a fixed percentage increase in income across all income levels does not alter income inequality. In contrast with this assumption, we show that relative increases in income lead to increased perceptions of inequality, even when buying power is held constant. In a second experiment, we extended these findings using a fictitious currency, thereby eliminating effects of using a familiar currency. In study 3, we demonstrate that feelings of envy and fairness are affected by a fixed percentage income increase.     

Self-rated health and mortality: does the relationship extend to a low income setting?

Although a relationship between poor self-reported health status and excess mortality risk has been well-established for industrialized countries, almost no research considers developing countries. We use data from Indonesia to show that in a low-income setting, as in more advantaged parts of the world, individuals who perceive their health to be poor are significantly more likely to die in subsequent follow-up periods than their counterparts who view their health as good. This result characterizes both men and women, holds for multiple time periods, and remains after inclusion of measures of nutritional status, physical functioning, symptoms of poor physical health and depression, and hypertension. We also consider the correlates of self-rated health. Symptoms and physical functioning are strong predictors of reporting poor rather than good health, but neither these indicators nor other covariates we consider distinguish between reports of excellent rather than good health.     

Does foreign bank entry contribute to financial development? Examining the role of income thresholds

This article examines the relationship between foreign bank entry and financial development in a panel framework covering 57 emerging market and developing economies (EMDEs) between 1995 and 2009. Using various measures of financial sector deepening, the article also explores the degree to which the relationship between foreign bank entry and financial sector depth varies by different income thresholds of the EMDEs. The empirical findings suggest that while foreign banks have a direct positive impact in furthering financial depth, the marginal effects of foreign bank entry diminish over time with greater levels of economic development. In other words, the impact of foreign bank entry tends to diminish as the per capita income of the country rises.     

Veblen’s theory of the leisure class revisited: implications for optimal income taxation

Several previous studies have demonstrated the importance of relative consumption comparisons for public policy. Yet, almost all of them have ignored the role of leisure for status comparisons. Inspired by Veblen (The theory of the leisure class. Macmillan, New York, 1899), this paper assumes that people care about their relative consumption and that leisure has a displaying role in making relative consumption more visible, based on a two-type model of optimal income taxation. While increased importance of relative consumption typically implies higher marginal income tax rates, in line with previous research, the effect of leisure-induced consumption visibility is to make the income tax more regressive in terms of ability.     

The Public Sector and income distribution in South Africa during the period 1970–82

This study considers the impact of fiscal and monetary policy on the distribution of income in South Africa. It analyses expenditure using two approaches: (1) the general approach which considers the extent of programmes having a relatively high distributive contact in favour of the poor and (2) the direct money‐flow approach which assumes that expenditure benefits those who receive it as their income. Although neither approach is perfect, it can be concluded that the general composition of expenditure has favoured the poor. It is also argued that the tax system is partly progressive and partly regressive and that it has become more regressive, although remaining in balance progressive. Monetary policy during the 1970s, however, has had definite regressive income distribution effects.     

Why do spouses hide income?

This paper proposes a simplified model of intrahousehold decision making where cooperative and noncooperative behavior are not mutually exclusive. Individuals choose the optimal share of income they wish to devote towards cooperation, where income is pooled and allocated collectively, and towards noncooperation, where income is allocated independently. Using the example of joint saving as an area of household cooperation, this model shows how limited autonomy and bargaining power can interact to create incentives for individuals to hide income. This result provides theoretical support for the call to collect survey data separately from individuals rather than from household representatives.     

Can faster income growth reduce well-being?

In his book Luxury Fever: Why Money Fails to Satisfy in an Era of Excess (1999) economist Robert Frank describes a number of significant trends in the U.S., and to a lesser extent in other industrial economies, since the late 1970s: rapidly rising incomes, for those at the upper end of the income scale, increasing hours of work, and increased consumerism (share of consumption of ‘status goods’). We demonstrate that the first development can parsimoniously account for the latter two. Our novel specification of the utility function simultaneously incorporates a relative-consumption effect for status goods and non-homotheticity of preferences between status and non-status goods, and we also allow for endogenous labour–leisure choice. It is possible that well-being has declined, notwithstanding the faster income growth, or at least not risen pari passu with the growth in earnings. Comparisons are made with other studies, and policy implications briefly discussed.

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Does income inequality harm health? New cross-national evidence

The provocative hypothesis that income inequality harms population health has sparked a large body of research, some of which has reported strong associations between income inequality and population health. Cross-national evidence is frequently cited in support of this important hypothesis, but the hypothesis remains controversial, and the cross-national work has been criticized for several methodological shortcomings. This study replicates previous work using a larger sample (692 observations from 115 countries over the 1947-1996 period), a wider range of statistical controls, and fixed-effects models that address heterogeneity bias. The relationship between health and inequality shrinks when controls are included. In fixed-effects models that capture unmeasured heterogeneity, the association between income inequality and health disappears. The null findings hold for two measures of income inequality: the Gini coefficient and the share of income received by the poorest quintile of the population. Analysis of a sample of wealthy countries also fails to support the hypothesis.     

Comment on ‘the economic marginality of ethnic minorities: An analysis of ethnic income inequality in Singapore’

This note comments on the article concerning income disparity among the major ethnic groups in Singapore, entitled ‘The Economic Marginality of Ethnic Minorities: An Analysis of Ethnic Income Inequality in Singapore’. 1 1?William Lee, ‘The Economic Marginality of Ethnic Minorities: An Analysis of Ethnic Income Inequality in Singapore’, Asian Ethnicity, vol. 5, no. 1 (February 2004). View all notes The article was written by William Lee of Lingnan University in Hong Kong and appeared in the February 2004 issue of Asian Ethnicity, vol. 5, no. 1. The authors of this comment work in the Ministry of Trade and Industry (MTI), Singapore.     

Immigrant groups’ income inequality within and across Italian regions

The relationship between Italian regional income inequality and the phenomenon of migration is still under current debate. Policymakers and researchers worry about the process of assimilation of the new entrants, in a country where regional disparities are strong. We provide evidence that regional income disparities apply to groups of immigrants as well as of nationals, but the most important source of inequality rests on within-immigrant group/within-region, especially for those households with the presence of women and very young children. However, if bottom incomes were to grow, inequality would not diminish, with the exception of married individuals living in the North, for no other characteristic is correlated to inequality according to the Atkinson bottom sensitive index. We show that the uneven economic development across regions then influences the distribution of immigration both in sociodemographic and economic terms.     

Health and income poverty in Ireland, 2003�C2006

Recent advances in the measurement of bi-dimensional poverty are applied to a measure of poverty which incorporates income and health poverty. The correlation between income and poverty is examined using the Receiver Operating Characteristics curve. Following from this uni-dimensional and bi-dimensional poverty indices are calculated for Ireland for the years 2003–2006. Income poverty shows a fall over the period while health poverty falls and then rises. Bi-dimensional poverty generally moves in line with the individual indices depending upon the relative weight for each dimension. The results are generally not sensitive to the degree of poverty aversion or the substitutability between the different dimensions of poverty.     

Why do families actually pool their income? Evidence from Denmark

This paper analyzes income-pooling by using a unique Danish data set that includes questions on income pooling among 1,696 couples. The analyses show that most Danish households use some kind of income pooling and that the proportion of income pooled varies considerably according to individual characteristics (age, education, occupation, past partners, upbringing) and household characteristics (household income, duration of marriage, location of residence and the existence of public goods, including children). However, when all variables are evaluated in a common model, the duration of marriage and the existence of children predominantly affect the likelihood of income pooling.

Are income poverty and perceptions of financial difficulties dynamically interrelated?

An individual’s economic ill fare can be assessed both objectively, looking at one’s income with reference to a poverty line, or subjectively, on the basis of the individual’s perceived experience of financial difficulties. Although these are distinct perspectives, income poverty and perceptions of financial difficulties are likely to be interrelated. Low income (especially if it persists) is likely to negatively affect perceptions of financial difficulties and, as recently suggested by the behavioural economics literature, (past) subjective sentiment may in return influence individual’s income generating ability and poverty status. The aim of this paper is to determine the extent of these dynamic cross-effects between both processes. Using Luxembourg survey data, our main result highlights the existence of a feedback effect from past perceived financial difficulties on current income poverty suggesting that subjective perceptions can have objective effects on an individual’s behaviour and outcomes.     

Tightening income documentation in a means-tested program: who stays away?

Programs using means tests to identify low-income households face a trade-off between promoting access and ensuring program integrity. The authors use a comparison-district design to estimate the effects of a pilot program to improve the accuracy of the process of certifying students for free or reduced-price meals in the National School Lunch Program. This pilot program required households to provide income documentation with their applications for these benefits. Requiring income documentation did not reduce the proportion of ineligible households getting free or reduced-price meals. Furthermore, this requirement did reduce access to the program among eligible households.     

Growth with equity: income inequality in Vietnam, 2002–14

We use the 2002 through 2014 Vietnam Household Living Standards Surveys to construct comparable measures of household income and estimates of income inequality over this high-growth period. We focus on two questions: How have benefits from growth been distributed; and do changes in the structure of the economy map into changes in inequality? We explore dimensions in which inequality may vary, notably urban versus rural, and by ethnic status. We also decompose inequality by income source to highlight key factors underlying the relatively low levels of inequality during this period. We find that agricultural opportunities played an important role in dampening inequality, but more important has been the steady development of wage-labor markets in both urban and rural areas. An important caveat to the generally rosy picture we paint is the deteriorating position of ethnic minorities. Finally, we draw comparisons with China and document key differences in their growth-inequality experiences.     

Can 401(k) accumulations generate significant income for future retirees?

This Issue Brief develops a model that project the proportion of an individual's preretirement income that might be replaced by 401(k) plan accumulations at retirement, under several different projected scenarios. The 401(k) participant behaviors in the model are based on the year-end 2000 database collected by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) in their collaborative effort known as the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. The most significant factor affecting projected replacement rates at retirement is having access to a 401(k) plan. Projected replacement rates from 401(k) accumulations at retirement are reduced significantly when participants are not offered a 401(k) plan in all portions of their careers. Most 401(k) participants tend to have contributions in any given year. Thus, projecting that participants always have contributions (their own and/or employer contributions) every year raises projected replacement rates, but not by much compared with the importance of being offered a plan to begin with. The model simulations show that participant activities such as taking loans, taking preretirement withdrawals, or cashing out account balances at job change reduce projected 401(k) accumulations and thus replacement rates at age 65. Because loans are forecast to be paid back to the account in full, their effect on replacement rates at retirement in the model is the smallest. Even if equity returns in the future are projected to replicate the worst 50-year segment in the Standard & Poor's (S&P) 500 history (1929 to 1978), 401(k) accumulations are still projected to replace significant proportions of projected preretirement income. Another projection scenario forecasts participants experiencing a simulated three-year bear market (negative equity returns) either early in their careers, near the middle of their careers, or at the end of their careers. Forecasts of the effects of bear markets on 401(k) balances show that a bear market in equities is projected to have the largest effect the closer it occurs to age 65 (retirement), even though older participants typically have diversified their portfolios away from equities. A three-year bear market for those early in their careers would reduce median replacement rates from 401(k) accumulations by an estimated 2.9-3.7 percentage points, compared with 13.4-17.7 percentage points for those immediately before retirement. Similarly, a simulated three-year bull market (positive equity returns) is projected to have a larger positive effect on projected account balances and replacement rates the closer it occurs to retirement.     

How do labour laws affect unemployment and the labour share of national income? The experience of six OECD countries, 1970–2010

Using longitudinal data on labour law in France, Germany, Japan, Sweden, the United Kingdom and the United States over the period 1970–2010, the authors estimate the impact of labour regulation on unemployment and the labour share of national income. Their dynamic panel data analysis distinguishes between the short‐run and long‐run effects of regulatory change. They find that worker‐protective labour laws in general have no consistent relationship to unemployment but are positively correlated with labour's share of national income. Laws specifically relating to working time and employee representation are found to have beneficial effects on both efficiency and distribution thus proxied.