economics of leadership and hierarchy this paper explores leadership within hierarchical organizations for each hierarchy i consider a dynamic signaling game in which each player observes only the actions of his direct superiors before choosing his action at the top of the hierarchy are the leaders who learn the state from nature the hierarchy controls the flow of information and the timing of the game and determines the equilibrium output and welfare i show that the welfare optimal hierarchy is the chain because it maximizes the incentive of players to lead by example for their subordinates the chain remains optimal even in the presence of verifiable or unverifiable costly information acquisition by the leaders

is economic growth good for the poor tracking low incomes using general means in this paper we propose the use of an alternative methodology to track low incomes based on atkinson s 1970 family of equally distributed equivalent income functions which are called general means here we provide a new characterization of general means that justifies their use in this context our method of evaluating the effects of growth on poor incomes is based on a comparison of growth rates for two standards of living the ordinary mean and a bottom sensitive general mean the motivating question is to what extent is growth in the ordinary mean accompanied by growth in the general mean a key indicator in this approach is the growth elasticity of the general mean or the percentage change in the general mean over the percentage change in the usual mean our empirical analysis estimates this growth elasticity for a data set containing 144 household surveys from 20 countries over the last quarter century among other results we find that the growth elasticity of bottom sensitive general means is positive but significantly smaller than one this suggests that the incomes of the poor do not grow one for one with increases in average income

can foreign aid reduce income inequality and poverty this paper s goal is to examine the effect of foreign aid on income inequality and poverty reduction for the period 1971 2002 since simple cross country regressions cannot be taken as true time series findings we focus on dynamic panel data techniques which allow accounting for potential simultaneity and heterogeneity problems we find some weak evidence that foreign aid is conducive to the improvement of the distribution of income when the quality of institutions is taken into account however this result is not robust this finding is consistent with recent empirical research on aid ineffectiveness in achieving economic growth or promoting democratic institutions

costly communication and incentives this paper discusses the introduction of incentive considerations in a model of costly communication it starts from a simplified version of a team theoretic model due to dessein and santos 2003 which relates the design of an organization to its adaptiveness to environmental uncertainty incentives are introduced in this setting following an approach developed by dewatripont and tirole 2005 doing so enriches the analysis by allowing for the coexistence of various forms of communication in particular cheap talk versus costly communication 2006 by the european economic association

a decomposition analysis of the trend in uk income inequality post war britain has experienced a number of dramatic demographic and social changes that have undoubtedly influenced the distribution of income there has been a rise in the number of pensioners whose incomes are relatively low a considerable increase in the number of young and old households living on their own and a remarkable expansion in the proportion of working wives the potential importance of these structural changes suggests that their impact on the income distribution needs to be examined systematically before any attempt can be made to interpret the observed trend in overall income inequality adequately the method usually adopted for this purpose attempts to create a comparable time series of distributions based on the structural characteristics pertaining in one particular year for example if we wished to investigate the effect of shifts in the age structure of the population this approach would disaggregate the distribution in one year tl and estimate what the distribution would have been like if the age structure had been the same as that observed in some other year to on the assumption that other distributional characteristics such as ageincome differentials and inequality within age groups remain invariant to this demographic change the comparison between the actual distribution at t1 and the constructed distribution at t1 with to s age structure is taken to indicate the impact of changes in the age structure over the period concerned this comparison can be presented in terms of quantile shares summary measures of inequality or the entire lorenz curves this approach known as shift share analysis or standardising the inequality series see semple i975 love and wolfson i976 dinwiddy and reed i977 royal commission i977 rowley and henderson i978 macleod and horner i980 is perfectly adequate for simple and straightforward structural changes when several changes are occurring simultaneously however it becomes difficult to identify the contribution of the individual factors and to assess their relative importance to the overall trend in inequality furthermore the combined impact of several structural influences will not in general sum up to the inequality change requiring explanation the purpose of this paper is to propose an alternative method of analysing

eldercare hours work hours and perceived filial obligations in this paper we take a fresh look at the magnitude of the trade off between caring informally for a parent and paid work we adopt a simultaneous approach with a primary focus on how hours of car

the transition to the knowledge economy labor market institutions and income inequality in advanced democracies the transition from fordism to the knowledge economy in the world s advanced democracies was underpinned by the revolution in information and communications technology ict the introduction and rapid diffusion of ict pushed up wages for college educated workers with complementary skills and allowed top managers and ceos to reap greater rewards for their own talents despite these common pressures income inequality did not rise to the same extent everywhere income in the anglo saxon countries remains particularly unequally distributed to shed new light on this puzzle the authors carry out a panel data analysis of eighteen oecd countries between 1970 and 2007 their analysis stands apart from the existing empirical literature by taking a comparative perspective the article examines the extent to which the relationship between the knowledge economy and income inequality is influenced by national labor market institutions the authors find that the expansion of knowledge employment is positively associated with both the 90 10 wage ratio and the income share of the top 1 percent but that these effects are mitigated by the presence of strong labor market institutions such as coordinated wage bargaining strict employment protection legislation high union density and high collective bargaining coverage the authors provide robust evidence against the argument that industrial relations systems are no longer important safeguards of wage solidarity in the knowledge economy

o brother where art thou the effects of having a sibling on geographic mobility and labour market outcomes in most industrialized countries more people than ever are having to cope with the burden of caring for elderly parents this paper formulates a model to explain how parental care responsibilities and family structure interact in affecting children s mobility characteristics a key insight we obtain is that the mobility of young adults crucially depends on the presence of a sibling our explanation is mainly but not exclusively based on a sibling power effect siblings compete in location and employment decisions so as to direct parental care decisions at later stages towards their preferred outcome only children are not exposed to this kind of competition this causes an equilibrium in which siblings not only exhibit higher mobility than only children but also have better labor market outcomes using data from the german socio economic panel study soep and from the american national survey of families and households nsfh we find strong evidence that confirms these patterns the implications of our results are then discussed in the context of current population trends in europe and the united states

human capital inequality and economic growth some new evidence this paper provides new measures of human capital inequality for a broad panel of countries taking attainment levels from barro and lee 2001 we compute gini coefficients and the distribution of education by quintiles for 108 countries over five year intervals from 1960 to 2000 using this new cross country data on human capital inequality two main conclusions are obtained first most countries in the world have tended to reduce the inequality in human capital distribution second human capital inequality measures provide more robust results than income inequality measures in the estimation of standard growth and investment equations

banking development socioeconomic structure and income inequality abstract using rich unique data from the italian local credit markets provinces this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link exploiting the italian historical banking regulation to instrument for the local presence of bank branches we find that local banking development mitigates income inequality however the finance inequality nexus manifests itself only in relatively advanced areas when we study the structural channels of influence we uncover evidence that banking development can reduce inequality by affecting geographical mobility and urbanization while it has modest effects through the development of material infrastructures and human capital

a distributional theory of government growth this article presents a closed form solution for time consistent taxation and public spending in a dynamic game between government and median voter extending meltzer and richard s static analysis of government size the article offers a theory of growth of government at low stages of economic development the median voter identified as a relatively poor worker prefers to have no or only small redistributive taxation in order to foster savings through this channel he expects improvements of his labor productivity and wage at higher stages of development however when capital is relatively abundant and prospects of further labor productivity gains through capital accumulation are smaller the incentive to tax and redistribute income rises yet in line with previous work on growth and infrastructure spending the median voter prefers a constant share of productive public spending at all times hence government growth is solely driven by an expanding welfare state

real time decentralized information processing as a model of organizations with boundedly rational agents this paper studies the properties of real time decentralized information processing as a model of human information processing in organizations real time decentralized processingwhich models the computation of decision rules in a temporal decision problem by members of an organization captures both the cost of computation in terms of the members time and the constraints imposed by computational delay on the use of recent information unlike a batch processing model it has no single measure of delay because decisions are computed from data of heterogeneous lags furthermore decentralization does not unambiguously reduce delay because processing a message precludes processing current data 1 real time decentralized information processing

costly and bounded rationality in individual and team decision making the savage paradigm of rational decision making under uncertainty has become the dominant model of human behavior in mainstream economics and game theory however under the rubric of bounded rationality this model has been criticized as inadequate form both normative and descriptive viewpoints this paper sketches the historical roots and some current development of this movement distinguishing between attempts to extend the savage paradigm costly rationality and the need for more radical departures truly bounded rationality copyright 2000 by oxford university press

endogenous trade policy through majority voting an empirical investigation abstract the median voter approach to trade policy determination within a heckscher ohlin framework as in mayer am econ rev 74 5 1984 970 predicts that an increase in inequality holding constant the economy s overall relative endowments raises trade barriers in capital abundant economies and lowers them in capital scarce economies we find support for this prediction using cross country data on inequality capital abundance and diverse measures of protection we perform certain robustness checks that include controlling for the effects of political rights and schooling as well as using alternative datasets on factor endowments

coordination and delay in hierarchies this article studies hierarchical organizations where concerns for fast execution are important and employees must be coordinated to avoid wasteful duplications of effort simple conditions are provided for the time spent on coordinating subordinates to be increasing and the span of control to be decreasing as one goes up the hierarchy with equalities holding if delay is all that matters when returns to specialization are substantial the span of control also tends to widen and the hierarchy to flatten as urgency increases the model suggests that concerns for fast execution may be key in explaining recent trends toward decentralization and delayering in firms

managerial leverage is limited by the extent of the market hierarchies specialization and the utilization of lawyers human capital abstract this paper examines the role of hierarchies in the organization of human capital intensive production we develop an equilibrium model of hierarchical organization and provide empirical evidence based on confidential data on thousands of law offices the equilibrium assignment of individuals to hierarchical positions varies with the degree of field specialization which increases as the extent of the market increases as individuals knowledge becomes narrower but deeper managerial leverage the number of workers per manager optimally increases to exploit this depth consistent with our model the share of lawyers who work in hierarchies and the ratio of associates to partners increase as market size increases and lawyers field specialize other results provide evidence against alternative interpretations that emphasize unobserved differences in the distribution of demand or firm size effects and lend additional support to the view that in legal services hierarchies help exploit increasing re

team theory garbage cans and real organizations some history and prospects of economic research on decision making in organizations this essay attempts to articulate and advance a long term agenda for organizational economics the essay begins with a general discussion of four specific items on this agenda and then moves to a more specific discussion of decision making in organizations beginning with two polar opposite conceptions team theory and garbage cans and then describing several recent economic models part of the rationale for writing this essay is that this agenda has both substantive and methodological commonalities with the work of james march copyright 2003 oxford university press

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

urban biased policies and rising income inequality in china since the start of economic reforms in 1978 china has experienced the largest increase in income inequality of all countries for which comparable data are available according to the world bank 1997 china s gini coefficient increased from 28 2 in 1981 to 38 8 in 1995 based on official survey data another study that used internationally standard definitions for incomes estimated china s gini ratio at 38 2 in 1988 and 45 2 in 1995 a level that already surpassed many developing economies in asia azizur khan and carl riskin 1998 are these income inequality changes the consequence of institutional reforms that replaced egalitarian rewards with work incentives employment contracts and labor mobility this paper uses household survey data collected by china s state statistical bureau ssb to investigate the sources and causes of this rising inequality by analyzing gini ratios and generalized entropy measures i decompose the overall inequality into three sectoral components i inequality within rural areas ii inequality within urban areas and iii sectoral disparity the data indicate that increases in rural urban income differentials have been the driving factor behind the rising overall inequality in china i argue that urbanbiased policies and institutions including labor mobility restrictions welfare systems and financial policies of inflation subsidies and investment credits to the urban sector are responsible for the long term rural urban divide and the recent increases in disparity

the decentralization of information processing in the presence of interactions we propose a model of organizational decision making in which information processing is decentralized our model incorporates two features of many actual organizations aggregation entails a loss of useful information and the decision problems of different agents interact we assume that an organization forms a portfolio of risky assets following a hierarchical procedure agents decision rules and the organization s hierarchical structure are derived endogenously typically in the optimal hierarchical structure all agents have one subordinate and returns to ability are at least as high at the bottom as at the top however these results can be reversed in the presence of returns to specialization

inequality and development evidence from semiparametric estimation with panel data abstract evidences from nonparametric and semiparametric unbalanced panel data models with fixed effects show that kuznet s inverted u relationship is confirmed when economic development reaches a threshold the model tests justify semiparametric specification the integrated net contribution of control variables to inequality reduction is significant

global inequality and international trade the paper analyses the effect of widespread trade liberalisation on global income inequality the analysis of the trend in global inequality during 1981 97 presented in the first part of the paper shows that the apparent growth of income inequality among countries conceals a process of convergence some developing countries achieved significantly faster economic growth than the advanced industrialised countries and though small in number they actually account for a majority of the population of the developing world thus international inequality i e the inequality of distribution of per capita incomes among the world s population in fact declined even though the inter country income inequality increased the analysis in the second part of the paper shows i that while improved trade performance did have a stimulating effect on growth performance of countries trade liberalisation had extremely varied effects on trade performance across countries and ii that the distribution of benefits and costs of trade liberalisation across countries has been such as to reduce international inequality without affecting inter country inequality copyright 2004 oxford university press

natural resource booms and inequality theory and evidence we develop a theory in the context of a two sector growth model in which learning by doing drives growth to explain the time path of income inequality following natural resource booms in resource rich countries under the condition of a relatively unskilled labor intensive non traded sector inequality falls immediately after a boom and then increases steadily over time until the initial impact of the boom disappears using data for 90 countries between 1965 and 1999 we find evidence in support of the theory especially for oil and mineral booms we also find that uncertainty about future commodity prices increases long run inequality

on the design of hierarchies coordination versus specialization we consider an economy that has to decide how assets are to be used agents have ideas but these ideas conflict we suppose that decision making authority is determined by hierarchy each asset ha

a reexamination of the strategic bequest motive this paper investigates the strength of the empirical evidence of the strategic bequest hypothesis proposed by bernheim shleifer and summers 1985 at issue is whether bequests are primarily motivated by a desire to influnce the behavior of potential beneficiaries alternatively bequests may be motivated by altruism or risk aversion in the presence of incomplete annuity and health insurnace markets e g tomes 1981 hurd 1989

intergenerational household formation female labor supply and informal caregiving a bargaining approach children s provision of in kind services to their elderly parents informal caregiving represents an important form of economic transfers to the elderly in this paper we develop and estimate a joint model of informal caregiving and labor force participation decisions of adult daughters who have a frail elderly parent in a broader framework of intergenerational household formation parent and daughter agree to a nash bargaining rule as the solution to the household formation and intrahousehold decision making process however rather than severed relationships the threat point is given by a noncooperative equilibrium defined in terms of voluntary contributions toward a public good the parental well being maximum likelihood parameter estimates derived from the simultaneous multiequation endogenous switching model are generally consistent with expectations our results indicate that competing demands on daughters time reduce both coresidence and informal caregiving we also find that intergenerational coresidence is an important mode of assistance to elderly persons a simulation based on the estimated parameters suggests that public programs designed to meet the long term care needs of elderly persons by subsidizing formal home care services may have substantial effects on intergenerational living and care arrangement decisions

institutional traps and economic growth this article s point of departure is that low quality institutions concentration of political power and material wealth and underdevelopment are persistent over time its analytical model views an equal distribution of political power as a commitment device to enhance institutional quality thereby promoting growth the politically powerful coalition contemplates relinquishing of its power through democratization weighing this advantageous consequence against the limit on own appropriative ability that it entails the possibility of two developmental paths is exhibited with concentration of political and economic power low quality institutions and slow growth and a more equal distribution of political and economic resources high quality institutions and faster growth

why are household incomes more unequally distributed in china than in russia harmonised microdata show a gini coefficient for per capita total income of 45 3 in china 2002 and 33 6 in russia 2003 a much larger urban to rural income gap in combination with a much smaller proportion of people living in urban areas in china are important reasons for this cross country difference in inequality wage is a more non equalising income source in china than in russia while russian public transfers reduce income inequality chinese public transfers increase income inequality cross country differences in the process of transition are also found to be significant a relatively large non agriculture self employment sector is non equalising in rural china but is also narrowing the urban to rural income gap in contrast to the many cross country differences revealed we report income inequality among urban residents in china and in urban russia to be very similar copyright the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

a unified approach to estimating and testing income distributions with grouped data we propose a unified approach that is flexibly applicable to various types of grouped data for estimating and testing parametric income distributions to simplify the use of our approach we also provide a parametric bootstrap method and show its asymptotic validity we also compare this approach with existing methods for grouped income data and assess their finite sample performance by a monte carlo simulation for empirical demonstrations we apply our approach to recovering china s income consumption distributions from a sequence of income consumption share tables and the u s income distributions from a combination of income shares and sample quantiles supplementary materials for this article are available online

education economic growth and measured income inequality in this paper education simultaneously affects growth and income inequality more education does not necessarily decrease inequality when the latter is assessed by the lorenz dominance criterion increases in education first increase and then decrease growth as well as income inequality when measured by the gini coefficient there is no clear functional relationship between growth and measured income inequality the model identifies regimes of this relationship which depend crucially on the production and schooling technology conventional growth regressions with human capital and inequality as regressors may miss the richness of the underlying nonlinearities but viewed as approximations may still provide important information on the nonlinear relationship between growth and education

semiparametric bayesian inference of the kuznets hypothesis abstract in contrast to the parametric quadratic specification used for examining the kuznets hypothesis this study relies on the semiparametric bayesian inference of the partially linear regression to re assess the validity of an inverted u shape of the kuznets curve the simple framework permits us to perform estimation and model comparison in a unified way empirical results using cross sectional data on 75 countries indicate that there exists an approximately inverted hence asymmetric relation between inequality and per capita gdp moreover judged by the bayes factor overwhelming evidence is found in favor of our semiparametric specification finally robustness check using alternative measure of inequality and pool data confirms our findings

sibling rivalry and strategic parental transfers this paper develops a noncooperative nash model in which two siblings compete for their parents financial transfers treating sibling rivalry as a rent seeking contest and using a tullock skaperdas contest success function we derive the conditions under which more financial resources are transferred to the sibling with lower earnings we find that parental transfers are compensatory and that the family as an institution serves as an income equalizer within a sequential game framework we characterize the endogeneity of parental transfers and link it to parents income altruism and children s supply of merit goods e g parent child companionship or child services we show that merit goods are subject to a moral hazard problem from the parents perspective

when is growth pro poor evidence from a panel of countries abstract growth is pro poor if the poverty measure of interest falls according to this definition there are three potential sources of pro poor growth a a high growth rate of average incomes b a high sensitivity of poverty to growth in average incomes and c a poverty reducing pattern of growth in relative incomes i empirically decompose changes in poverty in a sample of developing countries during the 1980s and 1990s into these three components in the medium to long run most of the variation in changes in poverty can be attributed to growth in average incomes suggesting that policies and institutions that promote broad based growth should be central to the pro poor growth agenda most of the remainder of the variation in changes in poverty is due to poverty reducing patterns of growth in relative incomes rather than differences in the sensitivity of poverty to growth in average incomes cross country evidence provides relatively little guidance as to the policies and institutions that promote these other sources of pro poor growth

can the world cut poverty in half how policy reform and effective aid can meet international development goals abstract poverty in the developing world will decline by about one half by 2015 if the trends of the 1990s persist most of this poverty reduction will occur in asia however while poverty will decline only slightly in africa effective aid could make a contribution to greater poverty reduction in lagging regions even more potent would be significant policy reform in these countries we develop a model of efficient aid in which flows respond to policy improvements that create a better environment for poverty reduction and effective aid we investigate scenarios of policy reform and efficient aid that point the way to how the world can cut poverty in half in every major region

limited information capacity as a source of inertia abstract we derive optimal time dependent adjustment rules from shannon s 1948 information theory in a continuous time lq prediction problem with a costly rate of information acquisition processing the optimal prediction evolves smoothly but jumps at an optimally chosen frequency when fresh information accrues a more volatile and persistent target raises the information rate required to maintain a sampling frequency this cost effect moderates and may even reverse the benefit effect on the value of information so optimal inertia is unresponsive to and nonmonotonic in the predictability of the environment conventional models with a fixed cost per observation imply no such cost effect so inertia rises quickly in the predictability of the environment

mixups in the warehouse centralized and decentralized multi plant firms lynn hunnicutt i introduction all firms receive information and use it to make decisions multi plant firms receive information at scattered locations and must choose how this knowledge will flow and how decisions will be made the firm might have a single decision maker which i call centralization or it might allow each location to make decisions based on any information available to them a situation i call decentralization this article considers issues affecting the choice between one and several decision makers first through a simple model of a multi plant firm and then through two case studies that illustrate many of the model s conclusions the model assumes and the case studies show that a single decision maker often has trouble handling all information available from widely scattered locations mixups shipping the wrong bundle to an outlet are an unavoidable consequence of having a single boss 1 when the firm has more than one decision maker mixups are avoided but overhead costs are larger one of the model s key results which is confirmed by the case studies is that the centralized firm often standardizes as a way to simplify the problem it faces that is it ships similar and less than optimal bundles to all outlets even though resizing or reforming bundles could increase the profitability of any one outlet there is a large literature in which delay and its minimization is the driving force behind organizational form radner 1993 van zandt and radner 1995 and van zandt 1999 analyze the time required to process a batch of information under different organizational structures bolton and dewatripont 1994 extend radner 1993 by explicitly including both processing and communication delay and differentiating between the two types the firm minimizes delay when agents specialize in processing particular types of information specialization also occurs in the model of geanakoplos and milgrom 1991 in which the firm may dictate which bits of information managers attend to the firm s problem then is to coordinate the different bits of information its managers hold communication delay is at issue in marschak and reichelstein 1998 who relate organizational structure to the size of communication costs and message complexity the issue of time to transmit information is also considered in govindarajan 1986 who notes that communication delay in a rapidly changing environment or in a firm where coordination is crucial may favor centralization a key assumption of these models is that no worker below the top of the hierarchy is empowered to act without direction from above a second function of organizational form is to prevent the firm from undertaking substandard projects sah and stiglitz 1986 1991 show that when overall project quality is low hierarchy is preferred as it is more profitable when individual managers hold potential projects to high standards this work was extended by koh 1992 who showed that the firm minimizes its costs if managers undertaking the first review of a project reject it when they work in a hierarchy and accept it when they work in a polyarchy thus managers working in a hierarchy should have a higher standard for acceptance than those working a polyarchy sali 1991 describes managerial ability as also affecting the choice of organizational form since a single manager s influence is larger in a centralized organization than under decentralization when the manager is not able centralization may lead to markedly lower profits than a decentralized firm would achieve discovery and implementation of optimal policies may also be affected by the organization s structure a single location may search for the optimal policy to be implemented everywhere centralization or all units may search and may or may not adopt policies selected by others decentralization better policies are discovered when the organization employs multiple searchers and or when the single searcher becomes more sophisticated

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

does aid affect inequality we show that there was a negative correlation between pro poor aid and inequality in the period before the mid 2000s this article provides an explanation for this observed relationship using pane

growth inequality and poverty looking beyond averages the evidence is compelling that the poor in developing countries do typically share in the gains from rising aggregate affluence and in the losses from aggregate contraction but how much do poor people share in growth do they gain more in some settings than others do some gain while others lose does pro poor growth mean more or less aggregate growth recent theories and evidence suggest some answers but deeper microeconomic empirical work is needed on growth and distributed change only then will we have a firm basis for identifying the specific policies and programs needed to complement and possibly modify growth oriented policies

corporate downsizing to rebuild team spirit how costly voting can foster cooperation we propose a new mechanism to achieve coordination through voting for which we discuss a number of real life applications among them the mechanism provides for a new theory for downsizing in organizations a crisis may lead to a decrease in the willingness to cooperate in an organization and therefore to a bad equilibrium a consensual downsizing episode may signal credibly that survivors are willing to cooperate and thus it may be optimal and efficiency enhancing for the individuals remaining in the organization as the empirical evidence suggests a variation of the same mechanism leads to efficient upsizing jel c70 d70 m50

true world income distribution 1988 and 1993 first calculation based on household surveys alone the paper derives world income or expenditure distribution of individuals for two years 1988 and 1993 it is the first paper to calculate world distribution for individuals based entirely on household survey data from 91 countries and adjusted for differences in purchasing power parity between the countries measured by the gini index inequality increased from an already very high 63 in 1988 to 66 in 1993 the increase was driven more by rising differences in mean incomes between the countries than by rising inequalities within countries the most important contributors were rising urban rural differences in china and slow growth of rural incomes in south asia compared to several large developed market economies

growth elasticity of poverty direct estimates from recent data using recent poverty data for developing countries elasticity of 2 poverty headcount with respect to the growth of gross domestic product gdp per capita is directly calculated for the 1990s and the 2000s the global estimate is around 0 84 which is much smaller in absolute magnitude than what some highly influential studies have reported or used for the poverty dense south asia region the elasticity is of the order of 0 22 which is a dramatic contrast from the previous estimates for india where the number of poor people is by far the largest of any country and where the poverty rate is higher than even in sub saharan africa ssa the elasticity is of the order of 0 13 which is an even bigger contrast from earlier studies policymakers and researchers are urged to keep these estimates in mind while judging the likely effect of income growth on poverty and to discount poverty reduction claims based on higher elasticity estimates that have been reported or used in many influential studies i

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

macroeconomic performance and poverty in brazil abstract drawing on brazilian time series data this study finds an inelastic link between poverty and wages over the macroeconomic cycle that is devoid of the asymmetric effects that characterise the phenomenon s response to changes in the rate of unemployment deepening of structural reforms in the second half of the 1990s had no effect on the aforementioned relationships which also varied little by regional level of development finally the connection between poverty and long term income changes was more elastic suggesting an association between the economy s recent disappointing performance in alleviating poverty and its lacklustre growth record over the past two decades

elderly care and intrafamily resource allocation when children migrate this paper considers the intrafamily allocation of elderly care in the context of international migration where migrant children may be able to provide financial assistance to their parents but are unable to offer physical care to investigate sibling interaction i estimate best response functions for individual physical and financial contributions as a function of siblings contributions after addressing the endogeneity of siblings contributions and selection into migration i find evidence that siblings financial contributions function as strategic complements while time contributions operate as strategic substitutes this suggests that contributions may be based on both strategic bequest and public good motivations

the supply of children s time to disabled elderly parents i introduction in recent years economists have become increasingly interested in intergenerational transfers of both time and money 1 such transfers may be motivated by altruism or exchange models of altruism assume that a person s utility depends on the consumption or utility of other family members and her own consumption for example children may supply unpaid informal care to aging parents because their utility increases when their parents are happier one of the most striking predictions of models of altruism is that public subsidies tend to crowd out transfers by altruistic individuals especially if the subsidy is financed by taxing the altruistic individual becker 1974 in exchange models there is typically altruism but one family member such as a parent can induce a relative such as a child or kid 2 to provide more services or money than the relative would normally provide by threatening to withhold a bequest to the extent that this is so one would plausibly expect more care and attention to be provided to wealthy parents when there is more than one kid more care should be provided because the threat of disinheritance is more credible when there is competition between kids for bequests in a well known article bernheim shleifer and summers 1985 hereafter referred to as bss found empirical support for the strategic bequest motive based on an observed positive relationship between children s visits and telephone calls to elderly parents per child as the measure of attention and bequeathable wealth per child as the measure of the financial motivation for providing such attention one might expect this result to extend to decisions about direct provision of help informal care that kids may provide to parents the marginal benefit of such care is plausibly greater than the benefit derived from a visit or telephone call in a recent article however we found no evidence that the strategic bequest motive is an important determinant of the amount of informal care kids provide or a related decision whether or not to place the parent in a nursing home sloan hoerger and picone 1996 we focused on the distinction between cognitively aware parents who can threaten to disinherit their kids and cognitively unaware parents who cannot disinherit and examined whether this distinction had any effect on the probability that the parent entered a nursing home or on amounts of formal and informal care received if the parent remained in the community any strategic effects were swamped by the greater marginal benefit of care to the parent when the parent was cognitively unaware moreover among the cognitively aware richer parents actually received less informal care contrary to the strategic model s predictions unfortunately in past research on intergenerational transfers of time and money it was not possible to control for the wealth wage and other characteristics of kids to the extent that kid s wealth and wage were positively correlated with parent s wealth which was observed the parameter estimates on parent s wealth may be negatively biased although parent s wealth and kid s wealth and wage rates are plausibly positively correlated they have opposite effects on the supply of kid s time according to the strategic bequest model that is potential bequests from a parent may be less attractive to rich kids and therefore induce less care we test the strategic bequest model using information on elderly parents and their children from two linked surveys the 1989 national long term care survey nltcs for elderly individuals and the survey of informal caregivers sic for a subsample of the elderly s children using these data we can include explicit measures of kid s wealth and wage rates thereby avoiding the possible bias introduced by a correlation between parent s and kid s wealth and wages also the data sets provide information on several pertinent health cognitive and functional status variables which are not typically observed in surveys of financial status

why has economic growth been more pro poor in some states of india than others abstract we use 20 household surveys for india s 15 major states spanning 1960 1994 to study how the sectoral composition of economic growth and initial conditions interact to influence how much growth reduced consumption poverty the elasticities of measured poverty to farm yields and development spending did not differ significantly across states but the elasticities of poverty to urban and rural non farm output varied appreciably and the differences were quantitatively important to the overall rate of poverty reduction states with higher elasticities did not experience higher rates of non farm growth the non farm growth process was more pro poor in states with initially higher literacy higher farm productivity higher rural living standards relative to urban areas lower landlessness and lower infant mortality

the assessment the twentieth century achievements failures lessons the past century saw unprecedented rises in life expectancy and living standards it also witnessed major structural changes the rise of big government and two globalizations yet the century s economic history was marred by policy and market failures resulting in a massive world wide depression frequent financial crises particularly in the developing world and several inflation spurts central planning set back development for one third of the world s population transition to the market economy was at best slow in some instances disastrous income distribution within countries changed little while productivity convergence between rich and poor economies was virtually absent policy making learnt some lessons from the 1930s experience particularly in the areas of macroeconomic management international cooperation and free trade dogmatic recipes however were often resorted to at home aided and abetted by the pretensions of the economics profession

does liberte egalite a survey of the empirical links between democracy and inequality with some evidence on the transition economies the effect of the distribution of political rights on income inequality has been studied both theoretically and empirically the authors review the existing literature and in particular the available empirical evidence the literature suggests that formal exclusion from the political process through restrictions on the voting franchise appears to have caused a high degree of economic inequality and democratization in the form of franchise expansion has typically led to an expansion in redistribution at least in the small sample of episodes studied in a less pronounced way albeit more emphatically compared with the ambiguous results of earlier research recent evidence indicates an inverse relationship between other measures of democracy based on civil liberties and political rights and inequality the transition experience of eastern european countries however seems to some extent go against these conclusions this opens possible new vistas for research namely the need to incorporate the length of democratic experience and the role played by ideology and social values

the trend behavior of alternative income inequality measures in the united states from 1947 1990 and the structural break this article tests the hypothesis that the time series process of income inequality has experienced a structural break the timing of the structural break is treated as an unknown parameter to be estimated from the data because it is not possible to associate a single episodic policy event with the break year and to avoid bias in favor of a unit root hypothesis if the break was near the selected year for several measures of income inequality a segmented trend model is more appropriate to account for the fundamentals affecting the behavior of income inequality as opposed to a stochastic trend model

does microfinance reduce income inequality this study addresses the question whether participation of the poor in microfinance contributes to reducing a country s level of income inequality using data from 70 developing countries we show that higher levels of microfinance participation are indeed associated with a reduction of the income gap between rich and poor people we also show however that the effects of microfinance on reducing income inequality are relatively small the results of this study add to the discussion on the impact of microfinance on poverty by showing that although access to microfinance does seem to improve the relative income position of the poor this improvement is modest which is probably because the use of microfinance is generally small as compared to the size of the economy of the countries in our sample microfinance should therefore not be seen as a panacea for bringing down income inequality in a significant way

the firm as a communication network this paper analyzes how organizations can minimize costs of processing and communicating information communication is costly because it takes time for an agent to absorb new information sent by others agents can reduce this time by specializing in the processing of particular types of information when these returns to specialization outweigh costs of communication it is efficient for several agents to collaborate within a firm it is shown that efficient networks involve centralization that individuals delegate tasks to subordinates only if they are overloaded and that the number of transits to the top tends to be equalized across individual information items

a new database on human capital stock in developing and industrial countries sources methodology and results abstract the paper describes the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years 1960 1987 the series are built from enrollment data using the perpetual inventory method adjusted for mortality estimates are corrected for grade repetition among school goers and country specific drop out rates for primary and secondary students enrollment data series used start as far back as 1930 for most countries and even earlier for others this reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory

four formal izable theories of the firm in this essay i define and compare elemental versions of four theories of the firm these elemental theories are distilled from important contributions by hart holmstrom klein williamson and others although these contributions have been widely cited and much discussed i have found it difficult to understand the commonalities distinctions and potential combinations of these seemingly familiar contributions in this essay therefore i attempt to clarify these issues in three steps i begin with informal summaries of the theories then turn to simple but formal statements of each elemental theory and finally nest the four elemental theories in an integrative framework

organizational structure and product choice in knowledge intensive firms this paper formulates a model in which a firm simultaneously chooses its organizational structure and product position the firm s production is knowledge intensive requiring employees to solve problems a vertical hierarchy in which workers refer unsolved problems to managers facilitates the acquisition and leveraging of managers superior knowledge i show that a larger span of control is complementary to the provision of high value products moreover this complementarity is sustained when employees acquire sufficient knowledge and is further strengthened when the firm enhances its capability of communicating knowledge the model yields testable implications concerning 1 the fit between a firm s product position and span of control 2 the effect of information technology on product innovations and skill biased organizational changes and 3 the heterogeneity in hierarchical structure and human resource management in professional service firms this paper was accepted by bruno cassiman business strategy

china s income distribution 1985 2001 we employ a new method to estimate china s income distribution using publicly available interval summary statistics we examine rural urban and overall income distributions from 1985 to 2001 we show how the distributions change directly and we examine trends in inequality using an intertemporal decomposition of aggregate inequality we determine that increases in inequality within rural and urban sectors and the growing rural urban income gap have been equally responsible for the growth in overall inequality over the last two decades however the rural urban gap has played an increasingly important role in recent years we also show that the urban consumption inequality rose considerably

motives for private income transfers private income transfers are becoming increasingly recognized as a key aspect of the u s economy the majority of private income transfers occur inter vivos i e between living persons but very little is known about this type of transfer behavior this paper tests alternative hypotheses concerning motivation for inter vivos transfers two motives are considered altruism and exchange evidence presented here casts doubt on the altruistic model of transfer behavior observed patterns for inter vivos transfers are more consistent with exchange related motives this finding has important implications for the effects of public transfer programs on the distribution of economic well being

linkages between pro poor growth social programmes and labour market the recent brazilian experience summary this paper analyzes the relationship between growth patterns poverty and inequality in brazil during its globalization process focusing on the role played by the labor market and social programs methodologically the paper makes two contributions to the literature one is the proposal of a new measure of pro poor growth which links growth rates in mean income and in income inequality the other contribution is a decomposition methodology that explores linkages between three dimensions growth patterns labor market performances and social policies the proposed methodologies are then applied to the brazilian national household survey covering the period 1995 2004

bequests sibling rivalry and rent seeking we examine bequest sharing rules where sibling rivalry creates wasteful competition for intergenerational transfers we show that equal division of bequests minimizes rent seeking expenditures by siblings while primogeniture maximizes rent seeking costs our results lend theoretical support to the empirical findings of equal bequests without appeal to complex models of the parent child relationship

measurement error bias in estimates of income and income growth among the poor analytical results and a correction formula abstract in any population income growth among the poor may be higher or lower than overall income growth estimates of income growth among the poor are almost always based on household surveys but income and expenditure data in those surveys are almost always measured with error this article uses the assumption that income follows a lognormal distribution to demonstrate that such measurement error can lead to biased estimates of the mean income of the poor and the growth of that mean income over time in particular when both income and the measurement error are lognormally distributed i measurement error leads to underestimation of the mean income among the poor at any point in time ii increases decreases in measurement error over time for a given level of inequality lead to underestimation overestimation of income growth among the poor and iii increases decreases in inequality over time for a given level of measurement error lead to overestimation underestimation of income growt

the prodigal son does the younger brother always care for his parents in old age studies have shown that the older sibling often chooses to live away from his elderly parents intending to free ride on the care provided by the younger child in the presented model we incorporate income effects and depict a different pattern frequently observed in eastern countries that is the older sibling lives near his or her parents and takes care of them in old age by generalizing the existing model we show three cases of elderly parents being looked after by 1 the older sibling 2 the younger sibling and 3 both siblings depending on the relative magnitude of the income effect and the strategic incentive for one sibling to free ride on the other our study also investigates the effect of changes in relative income on the level of total care received by parents

channels and policy debate in the globalization inequality poverty nexus the process of globalization has led to a much greater integration of the world economy the flows of trade capital labour technology and information across national borders have accelerated since the 1980s and created an environment conducive to faster economic growth and transmission of knowledge it is evident that the forces of globalization provide a strong potential for a major reduction in poverty in the developing world however for a number of reasons brought out in this chapter the positive impact of globalization on poverty alleviation worldwide has not been as substantial as one might have expected in this chapter we explore structural factors and policies within the world economy and national economies that impede the full transmission of the benefits of the various channels of globalization to poverty reduction

hierarchies of processors with endogenous capacity abstract capacity is defined as the number of information items a processor can handle in a given time this note studies the properties of a hierarchy of processors in which the capacities of processors are choice variables the hierarchy must pay each processor it decides to employ a wage which is an increasing function of the processor s capacity it is shown that efficient hierarchies tend to be characterized by three simple properties i within any given level capacity is uniform ii across levels the higher the level the higher the capacity and iii no skip level reporting occurs journal of economic literatureclassification numbers d21 j31 l23

who gains from non collusive corruption non collusive corruption i e corruption that imposes an additional burden on business activity is particularly widespread in low income countries we build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption we find that credit market imperfections by generating rents for the incumbent entrepreneurs create strong incentives for corrupt behavior by state officials however non collusive corruption not only redistributes income from non officials towards officials but also within the group of potential entrepreneurs if borrowing is limited bribes prevent poorer but talented individuals from starting a business but this is likely to benefit those who may enter anyway the cost of capital is lower and there is less competition on the goods markets

factor shares and savings in endogenous growth in models of steady investment driven growth an individual s propensity to save depends on how much of his income is drawn from accumulated factors of production capital rather than from nonaccumulated factors when agents are heterogeneous in this respect growth oriented policies have distributional consequences and in the absence of lump sum redistribution their implementation faces political constraints if the median voter is capital poor relative to the economy s representative agent political interactions tend to slow down growth when policy acts on capital s income share and tend to accelerate it when investment subsidies are the policy instrument of choice copyright 1993 by american economic association

electoral systems and income inequality abstract the goal of this paper is to determine if electoral systems and inequality are linked using high quality data lis database and simple panel methods we show that when the degree of proportionality of a system increases inequality decreases

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

inequality and growth in the united states is there asymmetric response at the state level a previous study that tried to assess the impact of economic growth on income inequality in the u s used state level data and an ardl panel model to conclude that economic growth worsens income in

inequality and institutions abstract this paper presents theory and evidence on the relationship between inequality and institutional quality we exhibit a model in which the two may dynamically reinforce each other and set to test this relationship with a broad array of institutional measures the double causality between institutional strength and a more equal distribution of income is empirically established using dynamic panel and linear feedback analysis

external sector and income inequality in interdependent economies using a dynamic panel data approach abstract by using a panel of countries for 1960 1995 we show that the intensity of capital controls the exchange rate the type of exports and the volume of trade appear to affect the long run distribution of income

the simultaneous evolution of growth and inequality research on inequality and growth can be divided into two strands one deriving from kuznets and lewis has tried to identify a mechanistic relationship between growth or level of income and inequality the other has tried to find causal explanations of growth and inequality treating each independently in this paper we draw from both strands to test whether growth and inequality are the joint outcomes of other variables and processes we find that simultaneous examination of growth and inequality yields significantly different results and has different consequences for policy from previous independent studies the empirical literature on growth and inequality can be divided into two broad strands one following the pioneering work of kuznets and lewis is motivated by the pessimistic conjecture that the process of growth and development somehow requires increasing inequality at least in the early stages this has led to many efforts to identify a mechanical relationship between the level of development and inequality anand and kanbur 1993 or to determine whether faster growth requires higher or lower inequality the second strand has sought to identify the causal factors influencing the evolution of growth and inequality independently this research has looked either at growth for example barro and sala i martin 1995 or at inequality li et al 1997 but has not tried to identify those factors that might simultaneously influence both growth and inequality 2 thus the literature that looks simultaneously at growth and inequality descending most notably from kuznets 1955 relates them in a mechanistic manner that ignores or minimises the role of other causal factors including policy while the literature that incorporates other causal factors including policies looks independently at growth and inequality neither approach is particularly convincing from a theoretical standpoint the evolution of growth and inequality must surely be the outcome of similar processes in addition neither approach is particularly useful for the policy maker who needs to balance the impact of policies on both growth and distribution in this paper we investigate whether growth and inequality are simultaneously determined and if so whether or not they are subject to

explaining international and intertemporal variations in income inequality this paper explores the propositions that income inequality is relatively stable within countries and that it varies significantly among countries a new and expanded data set provides broad support for both propositions drawing on a political economy and capital market imperfection arguments to explain the intertemporal and international variation in inequality the empirical analysis shows that the predicted variables associated with the first argument a measure of civil liberties and the initial level of secondary schooling and the second argument a measure of financial depth and the initial distribution of land are indeed important determinants of inequality this paper explores two propositions regarding income inequality they are first income inequality is relatively stable within countries and second it varies significantly across countries to illustrate note that the gini coefficient in india remained almost constant for forty years 1951 92 with mean 32 6 and standard deviation 2 0 2 in contrast the variation in gini coefficients across countries is large 61 9 in honduras in 1968 compared with 17 8 in bulgaria in 1976 if substantiated these propositions have potentially significant implications for poverty the significance of the first is obvious barring any fundamental socio political change poverty reduction will depend crucially on the rate of economic growth given this the significance of the second is that in inegalitarian economies the poor will enjoy a smaller share of any national increment in income than in more egalitarian ones drawing on a new and expanded data set on inequality deininger and squire 1996a the first of the paper s three sections conducts standard statistical tests of the two propositions the sample comprises 573 observations on the most common measure of inequality the gini coefficient for 49 developed and developing countries covering the period 1947 94 the results broadly confirm our two propositions specifically analysis of variance anova shows that about 90 of the total variance in the gini coefficients

dynamics of income distribution in this paper we have obtained closed form solutions in cass koopmans growth models with heterogeneous agents the relationship between the form of the production function and the dynamics of income distribution is made explicit we then use this relationship to determine what production structure is simultaneously consistent with facts on growth and income inequality our empirical findings give support to models with decreasing returns in the reproducible factor jel classification d3 o1 o4 dans ce memoire les auteurs obtiennent des solutions pour des modeles de croissance a la cass koopmans dans le cas ou les agents sont heterogenes on explicite la relation entre la forme de la fonction de production et la dynamique de la repartition des revenus on utilise alors cette relation pour determiner quelle structure de production est arrimee aux faits connus a la fois quant a la croissance economique et a la repartition des revenus les resultats empiriques supportent les modeles ou les rendements sur les acteurs de production reproductibles sont decroissants

did we lose the war on poverty was the war on poverty a failure or a success official u s poverty statistics based on household income imply that the war on poverty ended in failure according to the bureau of the census the proportion of the u s population below the poverty level of income reached a minimum of 11 1 percent in 1973 this ratio rebounded to 15 2 percent in 1983 and has fluctuated within a narrow range since then giving rise to the widespread impression that the elimination of poverty is difficult or even impossible 1 however poverty estimates based on household consumption imply that the war on poverty was a success jorgenson and slesnick 1989 showed that the proportion of the u s population below the poverty level of consumption fell to 10 9 percent in 1973 only slightly below the poverty incidence as measured by income in that year the poverty ratio for consumption declined further reaching 6 8 percent in 1983 slesnick 1993 presents estimates of poverty ratios incorporating consumption data from the consumer expenditure survey conducted by the bureau of labor statistics the poverty rate for consumption fell to 9 7 percent in 1973 and reached a low of 8 7 percent in 1978 before rising to 12 0 percent in 1980 the consumptionbased poverty rate then declined to a new low of 8 3 percent in 1986 ending at 8 4 percent in 1989 calibrating consumption to levels reported in the u s national income and product accounts slesnick obtained a poverty rate of 4 1 percent in 1978 and a postwar low in 1989 of only 2 2 percent 2 1 the persistence of poverty as reflected in the official statistics is discussed by sawhill 1988 2 slesnick 1993 presented a detailed decomposition of the differences between estimates of poverty rates based on consumption and the official estimates based on income neither measures of consumption from the consumer expenditure survey nor measures of income used by the bureau of the census include in kind transfers slesnick 1996 discussed the effects of these transfers on measures of poverty

geography of the family we study the residential choice of siblings who are altruistic towards their parents the firstborn child s location choice influences the behavior of the second born child and can shift some of the burden of providing care for the parents from one child to the other these strategic considerations lead to an equilibrium location pattern with firstborn children locating further away from their parents than second born children we also analyze the location choices empirically using german data these data confirm our theoretical predictions jel h41 j10

risk bearing and the theory of income distribution this paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality unlike previous work our approach takes explicit account of the reason for market incompleteness in modeling agents behaviour in particular the amount of risk borne is endogenous using a model of growth with altruism in which agents are risk averse and there is moral hazard we show that lineage wealth follows a markov process which converges globally to an ergodic distribution this also represents the long run population distribution of wealth we discuss the role of particular assumptions such as availability of production loans and unboundedness of utility in yielding the qualitative properties of the distribution of wealth the choice of occupation and the prevention of poverty traps