assessing the effects of wives earnings on family income inequality we argue that the effect of wives earnings can be assessed meaningfully only by comparing the observed distribution of income with a reference distribution the components of the standard decomposition of the gini coefficient have no implicit reference distribution and therefore should not be interpreted as a measure of the effect of an income source on inequality we suggest several intuitive counterfactual reference distributions and illustrate their use with 1979 and 1989 u s data we conclude that wives earnings reduced inequality in that the income distribution would have been less equal in their absence alternative measures of the impact have mixed results

impact of internal in migration on income inequality in receiving areas a district level study of south africa abstractthe impact of internal migration on regional income inequality of the receiving areas has hitherto gone largely unstudied this dearth of literature is especially surprising because income inequality and in migration into urban centres of growth are two issues that many developing economies are faced with and tackling these issues effectively involves understanding the interactions between these two related phenomena this study is therefore a first attempt to analyse the impact of internal in migration on receiving areas and is placed in the context of south africa based on a conceptual analysis the study argues that in migration into the formal sector of the receiving areas will in general reduce inequality while in migration into the informal or unemployed sector increases inequality using individual panel data the study further tests empirically at the district level the impact of in migration and finds that rising urban inequality in urban areas can be attributed at least in part to rural

emigration to south africa s mines this paper presents a simultaneous econometric model of both the determinants of international migration to the south african mines and of some of the economic consequences for each of the labor supplying countries not only are the short run effects of labor withdrawal on traditional crop cultivation and the domestic wage labor markets considered but also the long term effects of savings from mine earnings invested in crops and cattle in the home countries the experiences of botswana lesotho malawi mozambique and the south african homelands are compared it is shown that emigration to the south african mines has reduced crop production in the subsistence sectors of botswana lesotho malawi and the south african homelands in the short run but the results also suggest that earnings of migrants have enhanced both crop productivity and cattle accumulation in the longer run except in lesotho excerpt

evidence of financial leverage clienteles estimates of the marginal ordinary tax rates of investors obtained from responses to a survey about their incomes were found to be only slightly negatively correlated with the debt ratios of the firms whose stock they held klm s failure to observe a strong negative correlation raises doubts concerning the existence of financial leverage clienteles the purpose of our study is to provide new evidence concerning financial leverage clienteles based on a different estimator of tax rates of shareholders the evidence indicates that personal tax rates tend to be highly negatively correlated with financial leverage providing support for the existence of financial leverage clienteles in the following section we discuss the miller and klm models of financial leverage clienteles section ii contains a description of the procedures used for estimating personal tax rates and a description of the data used to test the hypothesis of leverage clienteles results and implications of the tests are presented in section iii and section iv contains the summary

microeconomic determinants of income inequality in rural pakistan abstract inequality matters for poverty reduction however it is often unclear what policy could do to change the distribution of income as to date there is little quantitative evidence about the household characteristics that determine the level of income inequality and its changes over time this paper sets out to identify these determinants by adapting a regression based inequality decomposition technique and applying it to panel data from rural pakistan land ownership is key to explaining the level of inequality but not its changes in contrast higher education drives changes but not the level of inequality household location affects both reflecting growing differences in market access across regions

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

reranking and pro poor growth decompositions for china and vietnam abstract reranking in the move from one income distribution to another makes it impossible to infer from changes in lorenz and generalised lorenz curves how income growth among those toward the bottom of the initial income distribution compares to that among those toward the top and whether there has been income growth among those who were initially poor decompositions allowing for reranking indicate that economic growth in china and vietnam has been better for households who were initially poor than changes in the lorenz and generalised lorenz curve and poverty growth curve would suggest

distributional consequences of globalisation empirical evidence from panel data abstract this paper investigates the impact of globalisation on cross country inequality using a large panel dataset the findings reveal that location and capital are the main determinants of inequality trade intensity and foreign direct investment make only a small contribution approximately 4 the relative contributions of trade and foreign direct investment to inequality have changed little over time and have certainly not increased at the same rate as the rise in global trade and investment activity hence globalisation does not emerge as a significant factor in driving cross country inequality differences emerge when countries are grouped by relative income but the main findings persist

optimal inflation with corporate taxation and financial constraints abstract how does inflation affect the investment decisions of financially constrained firms in the presence of corporate taxation inflation interacts with corporate taxation via the deductibility of i capital expenditures and ii interest payments on debt through the first channel inflation increases firms taxable profits and further distorts their investment decisions through the second expected inflation affects the effective real interest rate and stimulates investment when debt is collateralized the second effect dominates therefore present a tax advantage to debt financing positive long run inflation enhances welfare by mitigating or even eliminating the investment distortion

income distribution factor endowments and trade openness abstract this paper studies the empirical links among factor endowments trade and personal income distribution by using panel data we show that land and capital intensive countries have a less equal income distribution while skill intensive countries have a more equal income distribution we also show that the effects of trade openness on inequality depend on factor endowments in a way consistent with several recent case studies but not with the simple hecksher ohlin framework our results are robust to the division of the sample according to level of income the inclusion of different regressors the use of different measures of trade openness and of relative factor abundance and tests for possible problems of endogeneity

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

banks firms and the relative pricing of tax exempt and taxable bonds abstract the traditional analysis of the relative pricing of tax exempt and taxable debt is a habitat theory of the term structure of interest rates in the traditional analysis the preferences of investors for particular maturities of debt lead to unique pricing relations at every point on the yield curve which are indicative of investor marginal tax brackets recent work by fama 1977 suggests that banks are potential arbitrageurs across tax exempt and taxable bond markets which force a particular equilibrium on the pricing of short term bonds miller 1977 suggests that the choice of debt or equity financing by firms in the aggregate forces a similar equilibrium on the pricing of all tax exempt and taxable bonds this paper exploits the institution of regulation q and its effects on the banking system to bring evidence to bear on the predictions of these three models

miller s equilibrium shareholder leverage clienteles and optimal capital structure the purpose of this paper is twofold first we examine the individual portfolio decisions when income from stocks and bonds is taxed at different rates second a rationale for the existence of risky debt in the presence of leverage related costs and differential personal income taxation is provided previous studies on capital structure with differential personal income taxation have ignored either the portfolio risk consideration and or the possibility of losing personal and corporate interest tax shields due to insufficient taxable earnings e g 8 2 3 14 13 6 7 1 9 19 20 21 23 in section i of this paper both the portfolio risk consideration and the possibility of losing personal and corporate interest tax shields are explicitly introduced this enables us to provide a rationale for the shareholder leverage clientele phenomenon within a mean variance framework we also demonstrate a non corner solution for the optimal corporate capital structure in a tax environment similar to that of miller s debt and taxes 14 in sections ii and iii of this paper miller s world is further modified to include risky debt and the attendant costs we re examine and synthesize recent studies on the theory of optimal capital structure which have appeared since the publication of debt and taxes e g 4 6 7 13 19 20

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

the levered p e ratio a vast literature examines the role of debt in corporate valuation but most of these works proceed from the vantage point of corporate finance i e ascertaining the effects of adding debt to a previously unlevered company the investment analyst however confronts an already levered company with already levered return parameters the analyst s challenge is to estimate the stock s theoretical value by inferring the company s underlying structure of returns this shift in vantage point leads to results about the effect of leverage that are surprisingly different from the results of studies from the corporate finance angle whereas corporate finance studies find only a moderate effect of leverage when viewed from the analyst s perspective a company s value has such a high degree of sensitivity to the leverage ratio that it can significantly alter the theoretical p e valuation moreover from the analyst s vantage point leverage always moves the p e toward a lower value than that obtained from the sta

the puzzle of financial leverage clienteles empirically it appears that common stock of publicly traded corporations with high debt ratios tends to be held by investors with relatively low marginal taxes while the stock in companies with little debt is held by investors in high tax brackets a number of authors have argued that in an equilibrium similar to the one described by miller 8 these clienteles should exist we argue that standard portfolio theory does not imply financial leverage clienteles for publicly traded firms we explain the empirical relationship between investor tax rates and leverage ratios by the existence of dividend clienteles and a positive relationship between dividend yield and leverage ratios

taxation portfolio choice and debt equity ratios a general equilibrium model this paper explores the portfolio behavior of investors differing with respect to both tax rates and risk aversion emphasizing the role of constraints on individual and firm behavior in ensuring the existence of and characterizing portfolio equilibrium under certain conditions on the securities available in the market which also are necessary for shareholders to be unanimous in supporting firm value maximization investors will be segmented by tax rate into two groups one specialized in equity and the other in debt though the relative wealths of the two groups determine the aggregate debt equity ratio each firm will be indifferent to its financial policy

trade openness and economic growth a cross country empirical investigation abstract this paper demonstrates that trade liberalization does not have a simple and straightforward relationship with growth using a large number of openness measures for a cross section of countries over the last three decades we use two groups of trade openness measures the regression results for numerous trade intensity ratios are mostly consistent with the existing literature however contrary to the conventional view on the growth effects of trade barriers our estimation results show that trade barriers are positively and in most specifications significantly associated with growth especially for developing countries and they are consistent with the findings of theoretical growth and development literature

the impact of rural urban migration on subjective well being in south africa abstractthis paper quantifies the short to medium term impact of rural urban migration on an individual s subjective well being in south africa between 2008 and 2012 we work through different econometric specifications using instrumental variables to control for endogeneity caused by shock induced self selection and propensity score matching to control for migration self selection bias we find that rural urban migration leads to a decrease in subjective well being by 8 3 per cent we suspect that the decreased well being is a result of false expectations and changing relative groups used to peg aspirations as well as the emotional cost of being away from family and a home environment

stockholder tax rates and firm attributes abstract this paper develops a rigorous theoretical model to assess when investor clienteles may be empirically identified using ex dividend day data and what firm attributes these clienteles should respond to it then presents empirical results for the period 1963 1977 suggesting that 1 tax based investor clienteles do exist and are reasonably stable over time and 2 these clienteles are strongly influenced by the dividend price ratio but insignificantly by direct measures of risk and other firm characteristics

educational homogamy positive assortative mating and income inequality in south africa an unconditional quantile regression analysis apart from being the first attempt at investigating the impact of education based homogamy and positive assortative mating on income inequality in a developing country context with very high levels

immigration and inequality immigration is often viewed as a proximate cause of the rising wage gap between highand low skilled workers nevertheless there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect and over the precise magnitudes involved this paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality focusing on evidence from cross city comparisons in the u s while some researchers have claimed that a cross city research design is inherently flawed i argue that the evidence from cross city comparisons is remarkably consistent with recent findings based on aggregate time series data in particular cross city and aggregate time series comparisons provide support for three key conclusions 1 workers with below high school education are perfect substitutes for those with a high school education 2 high school equivalent and college equivalent workers are imperfect substitutes with an elasticity of substitution on the order of 2 3 within education groups immigrants and natives are imperfect substitutes together these results imply that the average impacts of recent immigrant inflows on the relative wages of u s natives are small the effects on overall wage inequality including natives and immigrants are larger reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives even so immigration accounts for a small share 5 of the increase in u s wage inequality between 1980 and 2000