in search of smoking guns what makes income inequality vary over time in different countries we investigate the forces affecting the distribution of income by analyzing an unbalanced panel of information for 16 industrialized countries for the years 1966 through 1994 income inequality is measured with the gini coefficient of equivalent disposable income individuals are the unit of analysis the statistical analysis uses panel methods the results suggest that many factors affect the development of income inequality some factors are strictly economic a decreased industrial sector generally fosters inequality and some support is found for the view that increased trade of manufactured goods from developing countries is also a factor other forces are outside a strictly defined market sphere low inequality is found when a large proportion of the labor force belongs to a trade union and also when there is a large public sector in addition demographic circumstances are important since the proportion of the population under age 15 has a positive effect on inequality we find however no association between the unemployment rate and inequality

cyclical and political influences on the size distribution of income in the us 1959 1989 the quesion of whether the size distribution of income is subject to cyclical fluctuations in unemployment and inflation has been investigated in several studies in these studies however the fact that unemployment inflation and distribution may be influenced intentionally by policy makers is ignored in order to investigate whether any political influence on the size distribution of income actually exists a model is formulated in which the distribution not only depends on unemployment and inflation but also on a variable representing the political process the model is tested using time series data pertaining to the case of the us in the period 1958 to 1989 the results indicate that inequality tends to be negatively influenced by democratic administrations

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

a direct test of the lemons model the market for used pickup trucks of the implications of models of markets with asymmetric information in the seminal paper on markets with asymmetric information george akerlof 1970 pointed out two possible outcomes that may occur where sellers have better information about the quality of products than do buyers one possibility is that bad products will drive out good products if buyers cannot distinguish quality until after the purchase has been made there will be no incentive for sellers to provide good quality products and the average quality in the market will decline in the case of cars an often cited example of this phenomenon owners who discover that they have a lemon will attempt to sell it in the used car market to an unsuspecting buyer the owner of a creampuff will not sell his car since it is indistinguishable from a lemon to buyers and must therefore sell for the price of a car of average quality the effect of quality uncertainty is to reduce the volume of transactions in the used car market below the socially optimal level a second possibility suggested by akerlof is that institutions may develop to counteract the effects of quality uncertainty warranties and brand names can be used to give the buyer some assurance of quality these institutions may prevent good products from being driven from the market but they will

unemployment and income distribution time series evidence from sweden for a long time swedish politicians have been devoted to keeping unemployment at low levels the main reason for this devotion is probably the belief that higher unemployment increases inequality of income and welfare this is a reasonable belief since unemployment risks are highest among people with low earnings capacity even when they have a job by means of micro data it is easy to verify a marked low income profile of unemployment further the swedish unemployment insurance system replaces only about 70 per cent of foregone income and quite many unemployed do not qualify for any benefits see bjorklund and holmlund 1991 increases in unemployment however are associated with many changes in the economy with complex consequences for the personal distribution of income in addition to the income losses suffered by those who become unemployed higher unemployment also affects the factor shares of income the profit share typically declines during recessions and because upper income groups receive a relatively high proportion of their income from capital income a countervailing mechanism is involved changes in unemployment also affect inflation which in turn might influence the personal distribution of income the distributional effects of inflation are an open question this note makes an investigation into the relationship between unemployment and the personal distribution of income using swedish time series data the method was first used on u s data by blinder and

are lemons really hot potatoes abstract we model the hazard rate for car ownership spells our model allows us to distinguish among different types of adverse selection effects by observing the type of unobserved heterogeneity across owners of the same car our empirical results strongly suggest that there is a lemons effect because there is significant unobserved heterogeneity however they also suggest that the lemons effect is caused by the first owner rather than the manufacturer had the manufacturer created the lemon the unobserved heterogeneity would be positively correlated over all owners of a given car instead we observe a negative correlation between the unobserved heterogeneity term for the first owner and the unobserved heterogeneity term for subsequent owners

the role of structural change in european regional productivity growth o leary e and webber d j the role of structural change in european regional productivity growth regional studies recent literature suggests that inter sectoral structural change has a negligible impact on aggregate productivity growth through the application of dynamic shift share methods this paper presents a re examination of this perspective using data for 181 european regions from 1980 to 2007 results suggest that the effect of the inter sectoral component is far from negligible and is substantially stronger for those regions towards the higher deciles of the distribution moreover its effects appear to be particularly growth enhancing when the region is either high and improving or low and deteriorating these results rehabilitate the importance of structural change for growth and convergence

testing for convergence across the greek regions siriopoulos c and asteriou d 1998 testing for convergence across the greek regions reg studies 32 537 546 during the last five years few issues have proved more controversial in empirical economics than the so called convergence hypothesis this paper examines the issue of convergence across greek regions following the theoretical basis of the neoclassical model of economic growth our empirical results support the popular view prevailing in greece about the existence of dualism across the southern and northern regions of greece a possible explanation for this may be the lack of experience that poor countries like greece have in comparison with the rich ones rich countries have the combined ability to educate themselves as they grow rich and the endogenous ability to accumulate the knowledge upon which these efforts are made the same argument can be also used as an explanation for regional differences the fact that poor regions do not have previous experience and knowledge for efficient i

opening a can of worms the pitfalls of time series regression analyses of income inequality this paper argues that time series regression analysis is of only very limited use for understanding the determinants of income inequality the argument is based on a combination of results from the time series econometrics literature and several characteristics of inequality itself principally nonstationarity of the data in most inequality regression models and the weak theoretical foundations underlying the models a sample of postwar us data is used to illustrate the problems involved

taxation and the earnings of husbands and wives evidence from sweden i examine the response of husbands and wives earnings to a tax reform in which husbands and wives tax rates changed independently allowing me to examine the effect of both spouses incentives on each spouse s behavior i analyze the large swedish tax reform of 1990 1991 and find that in response to a compensated fall in one spouse s tax rate each spouse s earnings rise i compare these results to those of simplified econometric models used in the typical setting in which independent variation in each spouse s tax rate is unavailable i find that standard econometric specifications may produce substantially biased estimates

structural unemployment cyclical unemployment and income inequality this is the first study that decomposes unemployment into its structural and cyclical components and investigates their impact on income distribution controlling for the influence of inflation increases in structural unemployment have a substantial aggravating impact on income inequality inflation has a progressive impact which is due to the unexpected component the study demonstrates that previous work failed to take into account the stochastic trend behavior of the variables consequently specifications used by previous research cannot predict the behavior of income shares after 1983 whereas the specification used by this paper generates accurate forecasts the results also indicate that a sustained gnp growth is not necessarily associated with an improvement in income inequality because sustained gnp growth can coexist with increased structural unemployment

adverse selection in the used car market evidence from purchase and repair patterns in the consumer expenditure survey we analyze adverse selection in the used car market using a new approach that considers a car as an assemblage of parts some with symmetric information and others with asymmetric information using data from the consumer expenditure survey and consumer reports we examine turnover and repair patterns we find evidence of adverse selection due to the conditions of the transmission engine and during colder months air conditioning and sorting due to the conditions of the vehicle body and during warmer months air conditioning our quantification exercises indicate that adverse selection may have a meaningful effect on trade volume and quality in the secondhand market

an ss model with adverse selection we present a model of the market for a used durable in which agents face fixed costs of adjustment the magnitude of which depends on the degree of adverse selection in the secondary market we find that unlike typical models the ss bands in our model contract as the variance of the shock increases we also analyze a dynamic version of the model in which agents are allowed to make decisions that are conditional on the age of the durable we find that as the durable ages the lemons problem tends to decline in importance and the ss bands contract

fly by night firms and the market for product reviews this paper presents a model that permits third party information provision in a market characterized by information asymmetries and reputation formation the model is used to examine how the market for information provision affects prices and supply in the primary market they find that decreasing the cost of providing and using information 1 increases rather than decreases the margins received by reputable service firms 2 decreases the price of new untested service firms so reputation is more costly to build and 3 leads to more high quality firms and less fly by night firms copyright 1989 by blackwell publishing ltd

quality differentials and prices are cherries lemons in g a akerlof s market for lemons goods of differential qualities sell under the same standard if no price differentials exist then the low quality goods drive out the high quality goods in cherry markets heterogeneous lots of cherries sell within the same market standard at the time of sale buyers know only the market standard since different qualities sell under the same standard the potential for lemons exists if buyers cannot identify different qualities the authors theoretical and empirical models suggest seller characteristics signal quality to buyers and buyers pay premiums to firms with these characteristics thus cherries are not lemons copyright 1991 by blackwell publishing ltd

measuring the effects of socio economic variables on the income distribution an application to the east german transition process this paper develops a discrete variant of the semiparametric methodology of dinardo fortin and lemieux 1996 dfl to measure the effects of socio economic variables on the income distribution although the proposed method is also based on the calculation of hypothetical income distributions by reweighting the original population it is much easier to implement the framework is applied to examine the distributional effects of rising unemployment decreasing female labor market participation and widening income structure in east germany following the reunification with west germany in 1990 the empirical results suggest that both these tendencies contributed considerably to the recent increase in income inequality in east germany

testing for convergence of the eu regional economies i introduction variations in the economic performance of different regions of the european union have become a matter of increasing concern for policymakers in recent years 1 this paper is however less concerned with the details of the european union s regional policy than with attempting to assess the degree to which economic convergence has occurred across its regions the question of economic convergence has been rather surprisingly a neglected and under researched topic in economics although there has been something of an upsurge of interest following baumol s work on the convergence of oecd economies baumol 1986 the more rigorous analyses of convergence have tended to focus on monetary phenomena and look at the national rather than regional level e g the work of haldane and hall 1991 and hall et al 1992 on nominal exchange rate and inflation convergence in the european union barro and sala i martin s 1991 study of u s and european regions is an exception to this while their paper offers interesting insights into convergence it is forced to rely for its empirical analysis on a number of disparate data sets and to use a number of alternative proxies for variables such as industrial composition in different time frames as explanatory variables in contrast we employ a consistent data base to both re examine and update the findings of barro and sala i martin and to extend the analysis to embrace a wider set of variables that are often thought to have an influence on the convergence process in particular the calculations offered by barro and sala i martin relate to a period before the creation of stronger monetary ties between some union members that have changed the long standing nature of national regional policy instruments in particular the quasi fixing of exchange rates reduces the ability of countries to stimulate their national economies and depressed regions by currency depreciations ii approaches to studying economic convergence general methods for examining convergence include using such indicators as changes in the coefficient of variation of the dispersion of regional performance over time sometimes called sigma convergence 2 table i provides coefficients of variation for regional household gdp at level one regional aggregation within the european union for the period 1977 to 1990 and the ratios of top to bottom deciles 3 the changing coefficients provide general guidelines for example relating to the implications for regional income disparities as successive enlargements have brought more peripheral regions into the union commission of the european communities 1988 but offer little beyond this the major difficulty with these types of measures is that they can be subject to outliers hence convergence or nonconvergence may be excessively influenced by an outlying region further it is not possible or at least very difficult to consider any causes of change through time the data set used in this study is cross section data across the level one regions of the european union for 1975 1981 and 1988 this data set differs from that employed in the earlier work by barro and sala i martin 1991 in three main ways first it is a consistent set with all measures of output per head coming from eurostat and based upon gross domestic product gdp per head at market prices in purchasing power parities standard second it is based on official european union level one administrative regions rather than the mixed system of regions employed by barro and sala i martin this means that for the whole sample period we have three cross sections of annual data on fifty one regions across nine countries consisting of the uk eleven regions west germany eleven regions france eight regions the netherlands four regions belgium four regions and denmark luxembourg and ireland each of which is a single region in contrast barro and sala i martin used data on seventy three european community regions but across only seven countries

sterling s relationship with the dollar and the deutschemark 1976 89 this paper evaluates the linkages between bilateral exchange rates using a time varying parameter model which can be estimated using the kalman filter the technique solves many of the statistical problems which arise when ordinary least squares is used to estimate currency correlation applying the technique to the dollar sterling dm sterling and dm dollar bilateral exchange rates the results suggest a market weakening strengthening of sterling s relationship with the dollar dm since the mid 1970s additionally these currency linkages are shown to have undergone a number of regime shifts suggesting that the timing of the weakening of the dollar sterling relationship is different to that proposed by previous studies copyright 1991 by royal economic society

intertemporal and interprovincial variations in income inequality spain 1973 1991 goerlich f j and mas m 2002 intertemporal and interprovincial variations in income inequality spain 1973 1991 reg studies 36 1005 1015 the paper presents the main findings on personal income distribution for the spanish provinces over the period 1973 91 the information comes from the three structural household budget surveys and has been elaborated by the authors on a homogeneous base available at http www ivie es it starts by reviewing the information provided by some dispersion statistics including kernel density functions applied to the provincial gini indices and lorenz percentiles it goes on to test making use of an anova model two propositions related with intertemporal and interprovincial variations in inequality the penultimate section before the conclusions deals with the estimation of convergence equations in inequality

warranties as a signal of quality in this paper we demonstrate through an example that in oligopolistic markets it is only in special cases that warranties can serve as signals of quality warranties are perfect signals only in cases in which the intrinsic attributes of products are neither too clustered nor too widely spaced otherwise multiple separating equilibria arise and the informational content of warranties is limited

poverty in eastern europe in the years of crisis 1978 to 1987 poland hungary and yugoslavia eastern europe experienced an economic crisis between 1978 and 1987 declining income led to substantial increases in poverty rates in poland and yugoslavia while poverty in hungary remained at about the same level as before the crisis in all three countries urban poverty increased as the economic condition of state sector workers deteriorated to a much greater extent than that of agricultural and mixed households the increased poverty was entirely explained by declining income because the overall income distribution did not change or in some cases improved

a more efficient estimate of the effects of macroeconomic activity on the distribution of income the effects of unemployment and inflation on quintile shares of family income in the united states are estimated by means of generalized least squares inflation is found to have a significant progressive impact on the distribution of income the results also lend support to earlier findings regarding the regressive effects of unemployment copyright 1994 by mit press

income inequality income composition and macroeconomic trends israel 1979 93 the paper offers several explanations for income inequality trends in israel during 1979 93 two types of analysis are employed decomposition of the gini coefficient by income source and population sub group and time series regression on macroeconomic variables it is found that the slight increase in inequality over the period is a result of opposing forces and that the major difference between the inflation 1979 84 and stabilization 1985 93 periods is in the inequality reducing effect of direct taxes increasing in the first period while declining in the second unemployment had a regressive impact whereas inflation acted as a progressive tax in the first period but not in the second

differences in gdp per head in gb counties some suggested explanations this paper examines the evidence concerning the convergence of gross domestic product gdp per head across gb counties during 1977 1995 in general the evidence rejects the hypothesis of convergence although there is some evidence of a north south divide with convergence in the north in the 1990s cross section results suggest that variation in gdp per head may be related to different economic activity rates and some aspects of industrial structure