welfare benefits and unemployment in affluent democracies the moderating role of the institutional insider outsider divide the effect of generous welfare benefits on unemployment is highly contested the dominant perspective contends that benefits provide disincentive to work whereas others portray benefits as job sea

the effects of fiscal policies when incomes are uncertain a contradiction to ricardian equivalence this paper shows that when future earnings are uncertain the substitution of deficit fin ance for tax finance or the introduction of an unfunded social secur ity program can raise consumption even if all bequests reflect inter generational altruism an operative bequest motive therefore need not imply ricardian equivalence this conclusion follows from the result derived in the paper that the uncertainty of future income makes t he existence of a future bequest uncertain to the prospective donor copyright 1988 by american economic association

corporatism and unemployment in the 1980s and 1990s a number of studies have found an association between corporatist institutions and low unemployment in the 1970s and or 1980s three gaps in our understanding of corporatism s labor market effects are addressed here 1 which of the two principal forms of corporatism corporatist wage setting or union participation in economic policymaking or both generates these effects 2 what are the causal mechanisms 3 did these effects continue in the 1990s in the face of globalization restrictive monetary policy growing dissension within labor movements and related developments the impact of corporatism across 16 affluent oecd countries in the 1980s and 1990s is assessed using pooled time series cross section analysis the results suggest that wage coordination was conducive to low unemployment in the 1980s because it fostered moderation in labor costs spurred faster economic growth and encouraged governments to more aggressively pursue policies to reduce unemployment in the 1990s this effect disappeared largely because unemployment outcomes in low wage coordination countries improved rather than because unemployment outcomes in high wage coordination countries deteriorated union participation in economic policymaking was associated with low unemployment throughout the two decades conditional on the presence of leftist government union participation appears to have had this effect mainly via government policy

information inequality and mass polarization ideology in advanced democracies growing polarization in the american congress is closely related to rising income inequality yet there has been no corresponding polarization of the u s electorate and across advanced democracies mass polarization is negatively related to income inequality to explain this puzzle we propose a comparative political economy model of mass polarization in which the same institutional factors that generate income inequality also undermine political information we explain why more voters then place themselves in the ideological center hence generating a negative correlation between mass polarization and inequality we confirm these conjectures on individual level data for 20 democracies and we then show that democracies cluster into two types one with high inequality low mass polarization and polarized and right shifted elites e g the united states and the other with low inequality and high mass polarization with left shifted elites e g sweden this division reflects long standing difference

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

left parties poor voters and electoral participation in advanced industrial societies although income inequality is an important normative issue for students of democratic politics little is known about its effects on citizens electoral participation the authors develop a formal

equal pay by gender and by nationality a comparative analysis of switzerland s unequal equal pay policy regimes across time what explains the adoption of two different policies on equal pay by gender epg and by nationality epn in switzerland and why is the liberal litigation based equal pay policy regime set up by the gender equality act of 1996 much less effective than the neocorporatist accompanying measures to the bilateral european union switzerland agreement on free movement of persons adopted in 1999 to ensure equal pay for workers of different national origins the formation of two different policy regimes cannot be explained by different levels of political will equally different varieties of capitalism cannot explain the setup of the two different equal pay policy regimes within the very same country instead our qualitative comparative analysis across time suggests that the differences can be best explained by a particular constellation of attributes namely the use of different policy frames that is anti discrimination in the epg and unfair competition in the epn case and the different setting of interest politics epitomised by the opposite stances adopted by switzerland s employer associations in the two cases

the effect of social security on the steady state distribution of consumption abstract abel has shown that the introduction of a fully funded social security ss would decrease the variances of the steady state distribution of young period and old period consumptions eckstein et al have shown that a perfect ss would increase the steady state expected utility of consumptions we intend to give a caveat on their positive results by showing that the assumptions from which the above propositions are derived have some unrealistic implications and that by replacing these assumptions with more reasonable ones we may obtain very different results the only positive conclusion we are certain of is that a marginal ss insurance in the no insurance situation can always reduce the steady state coefficient of variation of both young and old period consumption distributions

the distribution of wealth with imperfect altruism abstract in this paper we study the distribution of wealth in an economy with infinitely lived families individual generations of each family may or may not be altruistic this is represented as a preference shock which follows a first order markov process within each family a feature representingimperfect altruism altruistic individuals care about the welfare of their children and are likely to leave bequests selfish ones do not this results in a non trivial distribution of wealth among families at any point in time we study an economy with a risk free linear production technology and show that a stationary distribution of wealth exists this distribution is discrete and approximates the pareto distribution under additional restrictions we also characterize conditions on the production technology which yields perpetual growth with increasing inequality journal of economic literatureclassification numbers d31 d91 e21

gendering the varieties of capitalism a study of occupational segregation by sex in advanced industrial societies this article explores the unintended gendered consequences of employment protection and vocational training systems it develops a micrologic of skill investment by workers and employers to identify the mechanism by which specific skills become disadvantageous for women the central claim of the article is that institutions that encourage male investment in specific skills exacerbate occupational sex segregation the article finds that coordinated market economies because of their robust institutional protection of male skill investments are generally more sex segregating than are liberal market economies the empirical section provides cross sectional analyses of advanced industrial countries

inequality and the politics of social policy implementation gender age and chile s 2004 health reforms summary regarding scholarship on the political determinants of inequality little attention has been paid to policy implementation we examine the 2004 chilean health reforms that sought to regulate private insurers and measure their effects on gender and age inequality we find that reforms intended to decrease these inequalities largely failed analysis of this failure demonstrates the importance of the politics of implementation when reforms threaten profits private providers may act to undermine reforms in the implementation process given the widespread emergence of private providers in social policy systems understanding their stakes in implementation is key to more effective equality enhancing reforms

decomposing intergenerational income elasticity the gender differentiated contribution of capital transmission in rural philippines summary using longitudinal data from rural philippines we decompose intergenerational income elasticity ige into five distinct pathways intergenerational transmissions of health education land and spouse education capital plus residual correlation in productivity intergenerational human capital transmissions from mothers are stronger than those from fathers maternal education is the parental capital most strongly associated with ige while naive ige estimates are indistinguishable for sons and daughters the pathways that generate these results differ strikingly for sons ige is entirely explained by parent to child capital transmission by contrast strong income correlation exists between daughters and parents even after controlling for parent and child capital endowments

distributional effects of public education in an economy with public pensions we study how the allocation of government expenditures between two major outlays education and pay as you go social security affects human capital distribution in an economy with heterogeneous agents we consider an overlapping generations economy where the government maintains both programs and allocates tax revenues to finance them in our model human capital is one of the factors of production it is itself produced as a combined result of public inputs and private inputs parents decisions to invest time and material resources in education of their children are motivated by altruism heterogeneous in its strength across the population which leads to heterogeneity of incomes we investigate the effect of an increase in public funding for education on the human capital distribution we show that in this framework contrary to some earlier results increased spending on public education may lead to higher inequality our results depend crucially on the interaction of education funding with the social security budget and on the elasticity of substitution in the learning technology

educational inequality and intergenerational mobility in latin america a new database abstract the causes and consequences of the intergenerational persistence of inequality are a topic of great interest among various fields in economics however until now issues of data availability have restricted a broader and cross national perspective on the topic based on rich sets of harmonized household survey data we contribute to filling this gap by computing time series for several indexes of relative and absolute intergenerational education mobility for 18 latin american countries over 50 years and making them publicly available we find that intergenerational mobility is on average rising in latin america this pattern seems to be driven by the high upward mobility of children from low educated families at the same time there is substantial immobility at the top of the distribution significant cross country differences are observed and are associated with income inequality poverty economic growth public educational expenditures and assortative mating

pride and prejudice using ethnic sounding names and inter ethnic marriages to identify labour market discrimination labour markets discriminate against workers with particular ethnic sounding names we use non random sorting into interethnic marriage and salient differences between sephardic and ashkenazi surnames to evaluate the causal impact of sephardic affiliation on wages using the 1995 israeli census we estimate the effect of a sephardic sounding surname on wages we first compare the wages of israeli jewish males born to sephardic fathers and ashkenazi mothers sa who are more likely to carry a sephardic surname with the wages of israeli jewish males born to ashkenazi fathers and sephardic mothers as we find that israeli labor markets discriminate based on perceived ethnicity sa workers earn significantly less than their as counterparts we then exploit the custom of women to adopt their husbands surnames to disentangle actual ethnicity from the ethnicity perceived by the market consistent with ethnic discrimination based on surnames we find that it is father in law s ethnicity rather than father s ethnicity that shapes female wage rates finally we find that labor markets discriminate based on surname only when those names provide additional information about ethnicity when ethnicity can be discerned from skin tone surnames do not provide additional explanatory power with respect to wages

comment on kotlikoff shoven and spivak in the absence of perfect annuity markets individual consumers generally undertake precautionary saving to provide resources for their future consumption in the event that they live longer than expected kotlikoff shoven and spivak in this issue hereafter kss have provided us with a well conceived and well executed study of the effects of various annuity arrangements on individual and aggregate saving in the presence of lifetime uncertainty each of these authors has had a long standing interest in this area and their current paper reflects their accumulated expertise their results indicate that a potentially sizable fraction of u s household wealth represents precautionary saving resulting from the absence of perfect annuity markets the strategy of the kss paper is to develop simple models of individual saving behavior on the basis of utility maximization and then to aggregate the behavior of individuals both intraand intertemporally by comparing the results of models that differ in the specification of bequest motives and opportunities for creating annuities kss provide insights about the effects of various annuity arrangements on saving and capital accumulation although the models are all conceptually simple analytic solutions cannot be obtained in many cases therefore kss provide numerical solutions to their models in addition because the models are conceptually

wage structure as implicit insurance on human capital in developed versus underdeveloped countries abstract this paper explores the role of wage structure as implicit insurance on human capital it illustrates how smaller wage differentials in the developed world can be welfare enhancing by acting as implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier in other words with smaller wage differentials the students in a developed country are insured against poor educational outcomes through the existence of well paid alternative employments which are not present in the economy of a less developed country this result arises as multiple equilibria in a general equilibrium model when there are no insurance markets for human capital

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

union strength neoliberalism and inequality contingent political analyses of u s income differences since 1950 do historically contingent political accounts help explain the growth in family income inequality in the united states we use time series regressions based on 60 years to detect such relationships

when equal opportunity is not enough training costs and intergenerational inequality this paper develops an individual optimization model with persistent intergenerational immobility its key feature is that training costs are negatively correlated with family background leading to differences in privately optimal training levels across population groups heterogeneity of innate abilities is shown to reduce but not eliminate the importance of family backgrounds conversely wage thresholds which result from indivisibilities in the production or training functions or noncompetitive elements in the economy such as segmented labor markets increase the scope for inequality in the steady state

distribution and redistribution the shadow of the nineteenth century the authors present an alternative to power resource theory as an approach to the study of distribution and redistribution while they agree that partisanship and union power are important they argue that both are endogenous to more fundamental differences in the organization of capitalist democracies specifically center left governments result from pr consensus political systems as opposed to majoritarian systems while strong unions have their origins in coordinated as opposed to liberal capitalism these differences in political representation and in the organization of production developed jointly in the early twentieth century and explain the cross national pattern of distribution and redistribution the clusters have their origins in two distinct political economic conditions in the second half of the nineteenth century one in which locally coordinated economies were coupled with strong guild traditions and heavy investment in cospecific assets and one in which market based economies were coupled with liberal states and more mobile assets

wage inequality and varieties of capitalism this article draws on a new data set that enables the authors to compare the distribution of income from employment across oecd countries specifically the article conducts a pooled cross sectional time series analysis of the determinants of wage inequality in sixteen countries from 1973 to 1995 the analysis shows that varieties of capitalism matter the authors find that the qualities that distinguish social market economies from liberal market economies shape the way political and institutional variables influence wage inequality of particular interest to political scientists is the finding that the wage distributive effects of government partisanship are contingent on institutional context union density emerges in the analysis as the single most important factor influencing wage inequality in both institutional contexts

solidaristic unionism and support for redistribution in contemporary europe using data from the european social survey 2002 14 this article explores the effect of union membership on support for redistribution the authors hypothesize that the wage bargaining practices of unions promote egalitarian distributive norms which lead union members to support redistribution and that this effect is strongest among high wage workers consistent with the authors expectations the empirical analysis shows that the solidarity effect of union membership is strongest when unions encompass a very large share of the labor force or primarily organize low wage workers the authors also show that low wage workers have become a significantly less important union constituency in many european countries over the time period covered by the analysis

do affluent countries face an incomes jobs tradeoff according to an influential view in the united states pay for less skilledworkers is lowand government benefits are stingy but this facilitates the creation of newjobs and encourages such individuals to take those jobs inmuch of westerneurope relative pay levels are higher for those at the bottom and benefits are more generous but this is said to discourage job creation and job seeking this article offers a comparative assessment of this trade off viewbased on pooled timeseries cross section analyses of 14 countries in the 1980s and 1990s the findings suggest that greater pay equality and a higher replacement rate do reduce employment growth in lowproductivity private sector service industries and in the economy as a whole however these effects are relatively weak the results point to a variety of viable options for countries wishing to maintain or move toward a desirable combination of jobs and equality

new evidence on the ricardian equivalence theorem a multicointegration approach this paper derives major theoretical constructs which underlie richardian equivalence and using multicointegration methodology empirically tests whether they bear out results indicate that government spending and revenues are cointegrated however the cointegrating scalar is less than one therefore in order for government to obey its intertemporal budget constraint debt and government revenue must be multicointegrated they are not additional evidence indicates that saving and debt may be weakly cointegrated the findings suggest that failure of richardian equivalence may be due to public rather than private sector failure

time matters postindustrialization new social risks and welfare state adaptation in advanced industrial democracies western welfare states were built during the postwar years with one key objective to protect family male breadwinners against the consequences of losing their ability to extract an income from

capital accumulation and annuities in an adverse selection economy this paper suggests that adverse selection problems in competitive annuity markets can generate quantity constrained equilibria in which some agents whose length of lifetime is uncertain find it advantageous to accumulate capital privately this occurs despite the higher rates of return on annuities the welfare properties of these allocations are analyzed it is shown that the level of capital accumulation is excessive in a paretian sense policies that eliminate this inefficiency are discussed copyright 1987 by university of chicago press

distribution and growth in models of imperfect capital markets abstract a full analysis of the distribution of income should include both the inequality in income between different generations of the same family what is usually called intergenerational ocial mobility and the inequality in income between different families in the same generation becker tomes 1979 p 1154

estate taxation with intended and accidental bequests abstract in this paper we examine the properties of the optimal estate tax in the presence of a complete set of tax instruments available to the social planner we allow for both types of bequest motives namely altruistic and accidental we examine the case for estate taxation which seems to be the strongest but not impeccable with accidental bequests in general the estate tax is highly sensitive to the relative importance of the two bequest motives

mapping the institutional capital of high tech firms a fuzzy set analysis of capitalist variety and export performance we examine how institutional configurations not single institutions provide companies with institutional capital building on the varieties of capitalism approach it is argued that competitive advantage in high tech industries with radical innovation may be supported by combinations of certain institutional conditions lax employment protection weak collective bargaining coverage extensive university training little occupational training and a large stock market furthermore multinational enterprises engage in institutional arbitrage they allocate their activities so as to benefit from available institutional capital these hypotheses are tested on country level data for 19 oecd economies in the period 1990 to 2003 a fuzzy set qualitative comparative analysis yields several interesting findings a high share of university graduates and a large stock market are complementary institutions leading to strong export performance in high tech employment protection is neither conducive nor harmful to export performance in high tech a high volume of cross border mergers and acquisitions as a form of institutional arbitrage leading to knowledge flows acts as a functional equivalent to institutions that support knowledge production in the home economy implications of these findings for theory policy and the analysis of firm level behavior are developed

culture meaning and institutions executive rationale in germany and japan this paper contributes rare primary empirical evidence to one of the major research questions in the social sciences today namely the linkage between national cultures and institutional structures of national business systems drawing on the work of redding we explore the thinking or rationale of senior executives of leading german and japanese firms about the ideal structure of the economy we find considerable variation in rationale across the two countries and in comparison with the shape of the business system of the united states our study has implications for our understanding of the meaning of economic activity in different countries and of the evolutionary trajectories of national business systems

disentangling patterns of economic technological and innovative specialization of western economies an assessment of the varieties of capitalism theory on comparative institutional advantages it is one of the central arguments of the varieties of capitalism voc literature that national institutions determine comparative advantage while liberal market economies lmes are said to offer comparative institutional advantages to firms that specialize in high tech sectors based on radical innovation coordinated market economies cmes offer advantages to firms specializing in medium high tech sectors characterized by incremental innovation several studies have tested these claims and arrived at contradictory results about specialization in line with institutional advantages we argue that undifferentiated conceptualizations of the notion of specialization contribute to these inconclusive results based on the insights of the innovation literature on comparative advantage we therefore disentangle the concepts of 1 economic specialization 2 technological specialization and 3 innovative specialization our analyses of panel data on exports and patents show that the voc theory is rather weak in explaining patterns of economic specialization but can account for technological specialization furthermore the voc literature can hardly explain patterns of innovative specialization

government partisanship labor organization and macroeconomic performance governments of the left and right have distinct partisan economic policies and objectives that they would prefer to pursue their propensity to do so however is constrained by their desire for reelection we argue that the ability of governments to further their partisan interests and preside over reelectable macroeconomic outcomes simultaneously is dependent on the organization of the domestic economy particularly the labor movement we hypothesize that there are two different paths to desirable macroeconomic performance in countries with densely and centrally organized labor movements leftist governments can promote economic growth and reduce inflation and unemployment conversely in countries with weak labor movements rightist governments can pursue their partisan preferred macroeconomic strategies and achieve similarly beneficial macroeconomic outcomes performance will be poorer in other cases these hypotheses are supported by analysis of pooled annual time series data for 16 advanced industrial democracies between 1967 and 1984

stochastic convergence amongst mexican states carrion i silvestre j l and german soto v 2007 stochastic convergence amongst mexican states regional studies 41 531 541 the paper investigates the convergence process experienced by the mexican states in the period 1940 2001 the analysis indicates that misleading conclusions can be obtained if the presence of structural breaks is not taken into account when testing for the presence of stochastic convergence thus after allowing for structural breaks evidence in favour of convergence in terms of real per capita gdp is found using both unit root and co integration tests empirical evidence shows that economic convergence has changed over time with mixed effects although changes were toward convergence in the majority of cases consistent with stochastic convergence carrion i silvestre j l et german soto v 2007 la convergence stochastique parmi les etats au mexique regional studies 41 531 541 cet article cherche a examiner le processus de convergence aux etats mexicains entre 1940 et

uncertainty and optimal social security systems this paper examines the annuity aspect of social security within the framework of an overlapping generations model the duration of life is assumed to be uncertain under a fully funded system demand for social security is determined by each generation so as to maximize expected lifetime utility taking into account the welfare of future generations under a pay as you go system with intergenerational transfers demand for retirement benefits by the working population takes into account taxes paid by descendants it is shown that the two modes of finance are equivalent in terms of all real aggregates effects of changes in expected lifetime and in the birth rate are analyzed starting at the optimal level a compulsory balanced increase in social security taxes and benefits is shown to increase short run savings

a theory of intergenerational mobility we study the link between market forces cross sectional inequality and intergenerational mobility emphasizing complementarities in the production of human capital we show that wealthy parents i

the desegregating effect of school tracking this paper makes the following point detracking schools that is preventing them from allocating students to classes according to their ability may lead to an increase in income residential segregation it does so in a simple model where households care about the school peer group of their children if ability and income are positively correlated tracking implies that some high income households face the choice of either living in the areas where most of the other high income households live and having their child assigned to the low track or instead living in lower income neighbourhoods where their child would be in the high track under mild conditions tracking leads to an equilibrium with partial income desegregation where perfect income segregation would be the only stable outcome without tracking

regional resilience in italy a very long run analysis cellini r and torrisi g regional resilience in italy a very long run analysis regional studies resilience is a concept referring to the manner in which systems react to and recover from shocks according to several recent analyses resilience can explain different regional economic performances however this study indicates that this explanation is quite unconvincing when applied to the italian regions in the very long run 1890 2009 only few shocks emerge to have specific impact effects differing across regions while the recovery experience is ever spatially homogeneous hence it is difficult to discern genuine differences in regional resilience this evidence can be interpreted as a reason why the regional differences in italy are huge and persistent

comparing capitalisms understanding institutional diversity and its implications for international business this paper examines the role of institutional analysis within the field of international business ib studies within ib institutions matter but the view of institutions tends to be thin utilizing summary indicators rather than detailed description and thus approaches institutions as unidimensional variables that impact on particular facets of business activity this paper argues that ib research would be usefully advanced by greater attention to comparing the topography of institutional landscapes and understanding their diversity a number of alternative case based approaches are outlined that draw on a growing comparative capitalisms literature in sociology and political science the paper develops a number of empirical examples to show the utility and limits of these approaches for ib scholars

wage setting measures a survey and assessment wage setting has been one of the most heavily studied institutions in the field of comparative political economy over the past two decades and quantitative measures of wage setting arrangements have played a major role in this research yet the proliferation of such measures in recent years presents researchers with a sizable array from which to choose in addition some scholars are rather skeptical about the validity and or reliability of these measures this article offers a survey and assessment of fifteen wage setting measures it attempts to answer questions about 1 how these indicators differ from one another in conceptualization and measurement strategy 2 which are the most valid and reliable 3 the strengths and weaknesses of measures of wage centralization versus those of wage coordination 4 particular countries or time periods for which there are noteworthy discrepancies in scoring 5 how sensitive empirical findings are to the choice of wage setting measure

politics and inequality in latin america and the caribbean this article presents the first pooled time series analysis of the impact that politics and policy have on inequality in latin america and the caribbean the authors build on models consisting of sociological and economic variables adding the strength of the democratic tradition long term legislative partisan political power distribution and social spending to explain variation in inequality they analyze an unbalanced pooled time series data set for income distribution in 18 latin american and caribbean countries from 1970 to 2000 they show that the political variables add explanatory power a strong record of democracy and a left leaning legislative partisan balance are associated with lower levels of inequality as are social security and welfare spending under democratic regimes thus they replicate some and modify other well established findings from studies of organization for economic cooperation and development oecd countries in the very different context of latin america and the caribbean

the limit of equality projects public sector expansion sectoral conflicts and income inequality in postindustrial economies in this study we investigate how structural economic changes constrain an equality project the public sector expansion strategy first we describe a three stage process in which a growing produc

the distribution of wealth and welfare in the presence of incomplete annuity markets this paper examines the implications of the absence of complete annuity markets on the distribution of wealth and welfare of agents whose saving decisions are obtained under uncertainty regarding the length of their life the absence of annuities is shown to yield a unique nondegenerate intragenerational distribution of wealth which is fully characterized this characterization is then used to evaluate the pareto desirability of an annuity system alternative welfare criteria that can be used when the proposed change has differential impacts on the initial state of subsequent generations are considered

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

inequality social insurance and redistribution is the political support for welfare policy higher or lower in less egalitarian societies we answer the question using a model of welfare policy as publicly financed insurance that pays benefits in a redistributive manner when voters have both redistributive and insurance motives for supporting welfare spending the effect of inequality depends on how benefits are targeted greater inequality increases support for welfare expenditures when benefits are targeted to the employed but decreases support when benefits are targeted to those without earnings with endogenous targeting support for benefits to those without earnings declines as inequality increases whereas support for aggregate spending is a v shaped function of inequality statistical analysis of welfare expenditures in advanced industrial societies provides support for key empirical implications of the model

capital accumulation and uncertain lifetimes with adverse selection this paper examines the implications of adverse selection in the private annuity market for the pricing of private annuities and the consequent effects on constrption and bequest behavior with privately known heterogeneous mortality probabilities adverse selection causes the rate of return on private annuities to be less than the actuarially fair rate based on population average mortality however a fully funded social security system with compulsory participation can offer an implied rate of return equal to the actuarially fair rate based on population average mortality thus since social security offers a higher rate of return than private annuities consumers cannot completely offset the effects of social security by transacting in the private annuity market using an overlapping generations model with uncertain lifetimes we demonstrate that the introduction of actuarially fair social security reduces the steady state rate of return on annuities and raises the steady state levels of average bequests and average consumption of the young the steady state national capital stock rises or falls according to the strength of the bequest motive this abstract was borrowed from another version of this item

uncertain lifetimes and the welfare enhancing properties of annuity markets and social security this paper explores the implications of social security programs and annuity markets through which agents who are characterized by different distributions of length of lifetime share deathrelated risks when annuity markets operate a non discriminatory social security program affects only the intragenerational allocation of resources in the absence of private information regarding individual survival probabilities such a program will lead to a non optimal intragenerational allocation of resources however the presence of adverse selection considerations gives rise to a pareto improving role for a mandatory non discriminatory social security program

exploring the impact of trade and investment on income inequality a cross national sectoral analysis of the developed countries this article explores the relationship between international integration and domestic inequality in the developed countries in the mid 1980s and early 1990s the analysis examines two major modes of integration trade and direct investment disaggregating each by economic sector and distinguishing between imports and exports and inbound and outbound flows and stocks in measuring income inequality extensive use is made of micro data sets that have recently become available through the luxembourg income study lis which provides much more detailed and comparable data on income inequality than has heretofore been the case in particular lis data can be aggregated at the level of economic sector and permit the comparison of pre and post government income the study finds few significant relationships between either trade or investment and sectoral income distribution the overall conclusion is that economic globalization is not a critically important factor in explaining recent trends in income inequa

institutions partisanship and inequality in the long run it has been widely suggested by political scientists and economists based on empirical evidence for the period since 1970 that the institution of centralized wage bargaining and the presence of a government of the left are associated with lower levels of income inequality the authors make use of new data on top income shares as well as long run series on wage inequality to examine the effects of partisanship and wage bargaining over a much longer time period nearly the entire twentieth century their empirical results provide little support for the idea that either of these two factors is correlated with income inequality over this period they then show that a closer look at the introduction of centralized wage bargaining in individual countries during the middle part of the twentieth century reveals that in countries that moved to centralize wage bargaining income inequality had already been trending downward well before the institutional change that the move to centralized bargaining did not alter this trend and that these changes in income inequality were also observed in countries that did not adopt centralized wage bargaining at this time the results suggest that there were alternative institutional paths to reduced income inequality during most of the twentieth century this raises the possibility that either structural economic changes or commonly shared economic and political events such as world wars and economic crises may ultimately be more important for understanding the evolution of income inequality than are the institutional or partisan characteristics commonly considered to be decisive by political scientists

intergenerational transfers production and income distribution abstract we consider an overlapping generations economy where the aggregative production process uses physical capital and human capital intergenerational transfers from parents to their children are motivated by altruism we distinguish between two types of transfers investment of parents in the education of their offspring and capital transfer the gift bequest motive we show that the intensity of each type of altruism and hence the composition of the two types of transfers affect significantly the equilibrium output and the intragenerational income distributions comparing competitive equilibria from the same initial distributions of capital transfers and human capital we derive a the economy with the higher education inclined altruism attains lower output and more equal intragenerational income distributions if either the production function s elasticity of substitution is not large or the altruism is weak b for more bequest inclined altruism the effects are usually reversed c under public provision of education higher bequest inclined altruism results in lower output and less equal distribution of income in all dates

cross sectional regressions and the empirics of economic growth abstract this paper provides a short survey of the recent empirical growth literature based on cross sectional analysis unlike some other analysts i argue that this literature has uncovered interesting findings that should direct theoretical research in the future

an upper bound for wealth distribution in a model of accidental bequests abstract an explicit upper bound is calculated for wealth distribution in a model of overlapping generations with uncertain lifetimes and an imperfect annuities market

union wage practices and wage dispersion within establishments this study analyzes establishment level data primarily to examine the effect of unionism on the wage structure within establishments the major finding is that within establishment dispersion of wages is significantly narrower in unionized than in nonunionized establishments a pattern the author attributes in large part to unions wage practices such as single rate or automatic progression modes of wage payment as opposed to merit reviews and individual wage determination the data also show that dispersion in average wages is narrower among organized plants but by more modest amounts than the within establishment differential overall the evidence suggests a major role for explicit union wage policies in explaining the dispersion of wages within firms and in the economy as a whole

wage setting institutions and pay inequality in advanced industrial societies the distribution of pay differs significantly across countries and over time among advanced industrial societies in this paper institutional and political determinants of pay inequality are studied in sixteen countries from 1980 to 1992 the most important factor in explaining pay dispersion is the level of wage setting i e whether wages are set at the level of the individual the plant the industry or the entire private sector the impact of centralization is the same whether centralization occurs via collective bargaining or via government involvement in private sector wage setting the concentration of unions and the share of the labor force covered by collective bargaining agreements also matter after controlling for wage setting institutions other variables such as the governing coalition the size of government international openness and the supply of highly educated workers have little impact economic political and norm based explanations for the association of centralization with egalitarian outcomes are discussed

long run growth and human capital this paper analyzes long term growth in a closed economy with human as well as physical capital the human capital corresponds to general education private utility maximization determines each child s schooling costs of educating a given individual are convex although self sustaining growth is not possible steady states with per capita output growing faster than the underlying rate of technological progress do emerge and the magnitude of some comparative static results is increased section 3 attempts to pin down the degree of growth rate amplification implied in practice concluding with estimates of 30 50 percent

the effects of annuities bequests and aging in an overlapping generations model of endogenous growth we examine the effects of introducing actuarially fair annuity markets into an overlapping generations model of endogenous growth the complete annuitisation of agents wealth is not in general dynamically optimal the degree of annuitisation that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay as you go social security tax rate the government has an incentive to restrict the availability of actuarially fair annuities contracts and can often move the economy from a pay as you go to a fully funded social security system via voluntary contributions to a government sponsored actuarially fair pension today accompanied by reductions in social security taxes tomorrow

partisan politics and public finance changes in public spending in the industrialized democracies 1955 1989 this paper evaluates the role that partisan politics plays in altering public spending levels the analysis covers over three decades of data on the developments of the public sectors in 16 oecd countries the results of the analysis lend firm support to the partisan politics model of special note is the distinction between the electorate and the government ideological preferences and the dominant role that the former plays the results also suggest contrary to conventional wisdom that partisan political influences have not been eliminated with the tightening of linkages to the international economy

introduction to development theory abstractthisarticle introduces the symposium on economic development theory 2007 elsevier inc all rights reserved jel classi cation o11 o12keywords development economics development economics a subject that studies institutions growth inequality and povertyin the developing world is a large lively and exciting area of research the objective of thissymposium is to put together some contributions in economic theory with a distinct focus ondevelopment questions much of early development economics as typi ed in the work of paul rosenstein rodan arthurlewis ragnarnurkse tiborscitovsky allynyoung gunnarmyrdal harveyleibenstein alberthirschman amartyasenandothers wastheoretical thoughnotnecessarilyinthesenseofformalmodel building theseauthorsallfelttheneedtobringnewconceptsintoeconomictheory ideas that would capture the essential features of underdevelopment and provide explanationsof the development process existing economic theory with its focus on competitive markets depersonalized exchange steady technical progress and balanced growth simply did not seemrightwhenmatchedwiththegroundrealitiesofunderdevelopment fragmented imperfect orjustplain missing markets highly personalized transactions in credit insurance or agrarian tenancy ambiguousornonexistentpropertyrights andwidespreadevidenceofpovertytrapsandhistoricallock ins a fair bit of modern economic theory was born in some of these early development writings young s article 40 on increasing returns was perhaps the rst systematic study of noncon vexities in economic growth rosenstein rodan s celebrated paper 32 on post war interven tion in europe provided a conceptual foundation for modern thinking on coordination failures

differences and changes in wage structures preface introduction and summary richard b freeman lawrence f katz 1 a comparison of changes in the structure of wages in four oecd countries lawrence f katz gary w loveman david g blanchflower 2 international differences in executive and managerial compensation john m abowd michael l bognanno 3 the gender earnings gap some international evidence francine d blau lawrence m kahn 4 international wage curves david g blanchflower andrew j oswald 5 the changing structure of male earnings in britain 1974 1988 john schmitt 6 real wages employment and wage dispersion in u s and australian labor markets robert g gregory francis vella 7 labor markets and economic growth lessons from korea s industrialization 1970 1990 dae il kim robert h topel 8 wage differentials in italy market forces institutions and inflation christopher l erickson andrea c ichino 9 the swedish wage structure the rise and fall of solidarity wage policy per anders edin bertil holmlund 10 getting together and breaking apart the decline of centralized collective bargaining richard b freeman robert s gibbons 11 earnings inequality in germany katharine g abraham susan n houseman 12 a comparative analysis of east and west german labor markets before and after unification alan b krueger jorn steffen pischke contributors author index subject index

regional convergence and common stochastic long run trends a re examination of the us regional data the paper utilizes modern econometric techniques organized around i 1 and cointegration analysis to examine the number of common stochastic long run trends in regional incomes and assess the hypothesis of regional convergence for the us over the period 1929 1997 time series evidence is conflicting but tends to indicate the presence of too many common stochastic long run trends thus providing no support for the convergence hypothesis l article emploie des techniques econometriques recentes basees sur des analyses i 1 et cointegree afin d examiner le nombre de tendances communes stochastiques a long terme des revenus regionaux et d evaluer l hypothese qui avance la notion de la convergence regionale aux etats unis sur la periode qui va de 1929 a 1997 des preuves presentees en serie temporelle s averent contradictoires mais semblent indiquer la presence d un nombre trop eleve de tendances communes stochastiques a long terme ce qui ne vient pas a l appui de l hypothese qui avance la notion de conv

precautionary saving and accidental bequests this paper presents a simple general equilibrium model of precautionary saving and accidental bequests this model is used to analyze the implications of individual lifetime uncertainty for aggregate consumption and capital accumulation a precautionary demand for saving arises because an individual consumer does not know in advance the date at which he will die and he wants to avoid low levels of consumption in the event that he lives longer than expected an implication of this precautionary saving is that when death does occur the consumer is generally holding some wealth which is then passed on to his heirs in the form of an accidental bequest even if all consumers have the same ex ante mortality probabilities there will be some intracohort variation in the date of death consequently there will be a nondegenerate distribution of bequests left by consumers in a cohort this nondegenerate distribution of bequests left by one generation induces variation in the distributions of wealth consumption and bequests of subsequent generations the importance of bequests in aggregate saving has been established by laurence kotlikoff and lawrence summers 1981 who reported that 80 percent of u s household wealth is inherited wealth one interpretation of this finding is that the simple life cycle model without bequest motives is an inadequate description of saving behavior in the united states but the model i present demonstrates that accidental bequests by selfish consumers can account for a potentially sizeable fraction of aggregate wealth although some part of bequests especially by the wealthy undoubtedly results from an explicit bequest motive accidental bequests also play a role in the intergenerational transfer of wealth as well as in the intragenerational variation in wealth in order to focus on the role of accidental bequests i purposely exclude a bequest motive from the specification of the utility function the effects of lifetime uncertainty on individual consumption behavior were first examined formally in a seminal paper by menachem yaari 1965 yaari s model provided the basic framework for virtually all subsequent work on uncertain lifetimes including well known papers by nils hakansson 1969 stanley fischer 1973 robert barro and james friedman 1977 david levhari and leonard mirman 1977 and kotlikoff and avia spivak 1981 however all of these papers focused on the consumption decision of an individual and ignored the effect of accidental bequests on the behavior of the recipients of these accidental bequests 2 as will be shown at various points in this paper changes in the economic environment can have effects on aggregate behavior which differ sharply from the effects on individual behavior because of the endogenous adjustment of bequests the effects of department of economics harvard university cambridge ma 02138 this paper is a revised version of bequests and social security with uncertain lifetimes nber working paper no 1372 june 1984 i thank olivier blanchard john burbidge christopher cavanagh robert clower stanley fischer benjamin friedman elhanan helpman mervyn king nobuhiro kiyotaki laurence kotlikoff robert mcdonald james pesando julio rotemberg lawrence summers lars svensson mark watson and jeffrey wolcowitz for valuable conversations and correspondence i also thank the participants in seminars at boston university columbia university cornell university federal reserve board harvard university university of iowa mit university of minnesota university of montreal national bureau of economic research north carolina state university the wharton school and yale university and two anonymous referees for their helpful comments i also thank the national science foundation for financial support 1 in the presence of perfect annuity and life insurance markets there may or may not be bequests depending on the presence or absence of a bequest motive but there would be no accidental bequests 2 kotlikoff and spivak focus on the role of the family in providing an incomplete annuities market but stop short of a full scale overlapping generations model in which the distribution of bequests is determined endogenously

a theory of trickle down growth and development this paper develops a model of growth and income inequalities in the presence of imperfect capital markets and it analyses the trickle down effect of capital accumulation moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities three main conclusions are obtained from this model first when the rate of capital accumulation is sufficiently high the economy converges to a unique invariant wealth distribution second even though the trickle down mechanism can lead to a unique steady state distribution under laissez faire there is room for government intervention in particular redistribution of wealth from rich lenders to poor and middle class borrowers improves the production efficiency of the economy both because it brings about greater equality of opportunity and also because it accelerates the trickle down process third the process of capital accumulation initially has the effect of widening inequalities but in later stages it reduces them in other words this model can generate a kuznets curve

informational diversity over time and the optimality of monetary equilibria abstract the temporal realizations of a random state variable in an overlapping generations model create an informational diversity between members of different generations and require a reexamination of the optimality that competitive equilibria might display in such an environment using an optimality criterion that reflects this informational diversity we prove the optimality of competitive equilibrium in a model with a fixed stock of fiat money a single spot market and good endowments that follow a markov process the need for an optimality criterion that incorporates informational diversity is further motivated by studying the same model with the operation of complete contingent commodities markets

economic globalization domestic politics and income inequality in the developed countries a cross national study this article assesses the impact of economic globalization and domestic political factors on income inequality and state redistribution in the developed countries over the past two decades using household level data from the luxembourg income study that are more detailed accurate and cross nationally comparable than those used in previous empirical work it examines three major modes of international integration trade direct foreign investment and international financial flows as well as four domestic political variables the partisan balance of national cabinets electoral turnout union density and the centralization of wage setting institutions the study finds only scattered relationships between global integration and income distribution or redistribution but reasonably strong positive relationships between several domestic political variables and an egalitarian distribution of income and or extensive state redistribution these findings are consistent with a growing number of studies that emphasize the resilience of domestic political factors in the face of economic globalization

revisiting the role of labor worker solidarity employer opposition and the development of old age pensions in the netherlands and the united kingdom the purpose of this article is to emphasize the importance of the organizational blueprint of labor unions for welfare state outcomes as a result of the tendency of scholars to view labor as a homogenous and disadvantaged class the existing literature has paid little attention to this many scholars have simply taken labor union support for welfare state development for granted and consequently have focused only on labor union strength this article argues rather that labor union support for welfare state development cannot be taken for granted it shows that labor unions support or oppose welfare state development depending on their organizational blueprint this new approach highlights the importance of the labor union movement s organizational structure as opposed to its organizational strength for welfare state outcomes the article also explores how the organizational structure of the labor union movement shapes the stance of employer interest groups toward welfare state development the empirical findings are based on a comparison of british and dutch postwar old age pension development

early and late human capital investments borrowing constraints and the family we develop a dynastic human capital investment framework to study the importance of family borrowing constraints and uninsured labor market risk as well as the process of intergenerational ability

determinants of relative poverty in advanced capitalist democracies using relative poverty measures based on micro level data from the luxembourg income study in conjunction with pooled time series data for 14 advanced capitalist democracies between 1970 and 1997 the authors analyze separately the rate of pretax transfer poverty and the reduction in poverty achieved by systems of taxes and transfers socioeconomic factors including de industrialization and unemployment largely explain pre tax transfer poverty rates of the working age population in these advanced capitalist democracies the extent of redistribution measured as poverty reduction via taxes and transfers is explained directly by welfare state generosity and constitutional structure number of veto points and the strength of the political left both in unions and in government

an existence theorem on the stationary state of income distribution and population growth through a utility maximizing process individuals derive their optimal fertility and bequest decisions both as functions of their initial socioeconomic backgrounds the combination of these two decisions form a multi type galton watson process under weak assumptions it is proved that the economy will converge to a unique stationary state which implies both a constant population growth rate and a time invariant income distribution as such this paper extends the becker willis static micro level fertility demand model to a dynamic macro level population growth model alternatively our model can be viewed as a generalization of laitners stochastic income theory where no differential fertility is allowed excerpt

left government policy and corporatism explaining the influence of partisanship on inequality the author argues that to understand the relationship between partisan government and equality two fundamental things need to be done separate the effects of partisanship on policy and of policy on the economy and assess the influence of government partisanship once the mediating role of corporatism is accounted for the main goal of this article is to explore the relationship between government partisanship policy and inequality at the lower half of the wage distribution the analysis is motivated by a puzzling finding in previous work the absence of government partisanship effects on earnings inequality the author focuses on the role of three different policies government employment the generosity of the welfare state and minimum wages the results show that government employment is a most significant determinant of inequality although it is affected by left government only when corporatism is low they also demonstrate that welfare state generosity does not affect inequality and in turn is not associated with left government finally they reveal that the effect of government partisanship on minimum wages and of minimum wages on inequality is completely conditional on the levels of corporatism these effects are only present when corporatism is low the author explains why specific policies do or do not affect earnings inequality and also why corporatism mitigates or magnifies the influence of government partisanship by explicitly exploring the determinants of policy and earnings inequality the article represents an important contribution to our understanding of how governments can promote redistribution

earnings inequality and welfare spending a disaggregated analysis the welfare state is generally viewed as either providing redistribution from rich to poor or as providing publicly financed insurance both views are incomplete welfare policies provide both insurance and redistribution in varying amounts depending on the design of the policy the authors explore the political consequences of the mix of redistribution and insurance in the context of studying the impact of income inequality on expenditures in different categories of welfare spending in advanced industrial societies from 1980 to 1995 they find that spending on pensions health care family benefits poverty alleviation and housing subsidies is largely uncorrelated with income inequality but that spending on income replacement programs such as unemployment insurance sickness pay occupational illness and disability are significantly higher in countries with more egalitarian income distributions they show that this pattern is exactly what a theory of political support for redistributive social insurance programs would predict

labour market institutions and the personal distribution of income in the oecd we examine what determines differences across countries and over time in the distribution of personal incomes in the oecd we first model the wage determination process and show that unemployment the labour share and the wage differential are all functions of labour market institutions next we show that in a model economy with only four types of agents capitalists skilled and unskilled workers and unemployed the gini coefficient of personal incomes can be expressed as a function of the above three variables labour market institutions hence affect income inequality though the sign of their impact is ambiguous stronger unions and or a more generous unemployment benefit tend to reduce inequality through reduced wage differentials a higher labour share and also higher unemployment we then use a panel of oecd countries for the period 1970 96 to examine these effects we find first that the labour share remains an important aspect of overall inequality patterns and second that stronger unions and a more generous unemployment benefit tend to reduce income inequality high capital labour ratios also emerge as a strong equalising factor which has in part offset the impact of increasing wage inequality on the us distribution of personal incomes

regional growth and convergence evidence from the united states tsionas e g 2000 regional growth and convergence evidence from the united states reg studies 34 231 238 the paper considers regional convergence in the us both g and convergence tests indicate that in the period 1977 96 regional incomes do not converge yet kernel density estimates of the distribution show some variation in the tail characteristics of the distribution using finite normal mixtures to examine time invariance of the distribution in a more formal way the paper concludes that the distribution of the logarithms of regional income has indeed shown very little time variation the distribution of income percentages shows some mobility there is a structural break in mixing probabilities mixing means and variances but the mobility is not strong enough to imply a radical change in the co movement patterns of regional means tsionas e g 2000 la croissance et la convergence regionales des preuves provenant des etats unis reg studies 34 231 238 cet article cherche a etudie

are regional incomes in the usa converging a non linear perspective christopoulos d k and tsionas e g 2007 are regional incomes in the usa converging a non linear perspective regional studies 41 525 530 this article deviates from the current practice of regional convergence by allowing output convergence to follow a non linear process in this scenario all standard linear unit root tests have low power thus frequently leading to misguided conclusions in light of this a unit root test based on a non linear model is adopted which tests the null hypothesis of a unit root against a non linear alternative the findings overwhelmingly support the tendency of us regions to converge over time christopoulos d k et tsionas e g 2007 les revenus regionaux aux etats unis est ce qu ils convergent un point de vue non lineaire regional studies 41 525 530 l article s ecarte de la pratique actuelle de la convergence regionale en permettant a la convergence du rendement de suivre un processus non lineaire dans ce cas ci tout test lineaire standard de la racine unit

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