Starting from January 1, 2008, Journal of Economic Inequality has become the official journal of ECINEQ.
Introduction March 2021 Issue
Frank Cowell, Cecilia García-Peñalosa
Introduction to special issue, Pages 3-11
Sustainable development goals and the study of economic inequality
This paper is an introduction to a special issue of the Journal of Economic Inequality which contains a selection of articles published in the Journal which bring economic perspectives and methods to bear on dimensions of inequality highlighted in the Sustainable Development Goals. The papers show that the study of economic inequality has much to contribute to the global policy discourse which is underpinned by the SDGs.
Original Paper, Pages 13-43
Accounting for differences in income inequality across countries: tax-benefit policy, labour market structure, returns and demographics
Denisa M. Sologon, Philippe Van Kerm, Jinjing Li, Chatal O’Donoghue
This paper presents a framework for studying international differences in the distribution of household income. Integrating micro-econometric and micro-simulation approaches in a decomposition analysis, it quantifies the role of tax-benefit systems, employment and occupational structures, labour and financial market returns, and demographic composition in accounting for differences in income inequality across countries. Building upon EUROMOD (the European tax-benefit calculator) and its harmonised datasets, the model is portable and can be implemented for cross-country comparisons between any participating country. An application to the UK and Ireland—two countries that have much in common while displaying different levels of inequality—shows that differences in tax-benefit rules between the two countries account for over one third of the observed difference in disposable household income inequality. Demographic differences play negligible roles. The Irish tax-benefit system is more redistributive than UK’s due to a higher tax progressivity and higher average transfer rates. These are largely attributable to policy parameter differences, but also to differences in pre-tax, pre-transfer income distributions.
Original Paper, Pages 45-72
Sibling correlation in risk attitudes: evidence from Burkina Faso
Mohammed H. Sepahvand, Roujman Shahbazian
This study uses sibling correlation to provide novel descriptive evidence of parental and household characteristics on three different risk domains collected in a nationally representative survey from Burkina Faso. The sibling correlations are between 0.51 and 0.83. The correlations are higher in the general risk domain compared to risk taking in financial matters and traffic. Moreover, the sibling correlation is higher for sisters than brothers. We also explore which factors might drive these correlations; parents’ risk attitudes appears to play a role in explaining these correlations, whereas socioeconomic outcomes, family structure, parental health and residential zone seems to have only a limited contribution. We also find that gender seems to be important in explaining the variation in sibling correlations. Mother’s appear to have a stronger contribution on daughters than their sons correlation, whereas father’s help to explain their sons correlation.
Original Paper, Pages 73-95
Parental time restrictions and the cost of children: insights from a survey among mothers
Melanie Borah, Andreas Knabe, Kevin Pahlke
An important aspect when analyzing economic inequality between households with children is time. At given monetary incomes, the material well-being of families may be very different depending on how much time parents have at their disposal. In this paper, we provide estimates of the subjectively perceived cost of children depending on the extent of parental time restrictions. Building on a study by Koulovatianos, Schröder and Schmidt (J. Bus. Econ. Stat. 27:42–51, 2009) that introduces a novel way of using subjective income evaluation data for such estimations, we conduct a refined version of the underlying survey, focusing on young women with children in Germany. Our study confirms that the perceived monetary cost of children is substantial and increases with parental nonmarket time restrictions. The experienced loss in material living standards associated with supplying time to the labor market is sizeable for families with children.
Original Paper, Pages 97-114
The nexus between perceptions of inequality and preferences for redistribution
Roberto Iacono, Marco Ranaldi
This paper shows that perceptions of inequality are a key factor in the formation of preferences for redistribution and thereby in the determination of the equilibrium redistribution level. We build on the novel stylized facts provided by the survey experimental literature on perceptions of income inequality, highlighting that agents incorrectly estimate the shape of the income distribution because of limited information. Agents with income above the mean believe they are poorer than they actually are, and agents with income below the mean believe themselves to be richer. We revisit the standard framework on the political economy of redistribution and extend it in two ways. First, we introduce a more general two-sided inequality aversion. Second, we incorporate perceptions of income inequality, modeled by assuming that agents form expectations on the income level of the richest and the poorest in society. We show analytically that the equilibrium redistribution level is crucially determined by the interplay between the information treatment correcting the bias in perceptions of inequality and fairness considerations specified by the degree of inequality aversion. By doing this, we add (biased) perceptions of inequality to the list of potential factors explaining why, notwithstanding high inequality, an increase in the desire for redistribution has not been observed in many countries.
Original Paper, Pages 115-137
Individual attitudes toward government’s role in redistributiong income in the United States: analysis by ideological subgroups
Ernest M. Zampelli, Steven T. Yen
This paper tests whether effects of individual characteristics on redistributive preferences are constant across ideological subgroups. Using data from the U.S. General Social Surveys, we estimate ordered probit models for a full pooled sample, and liberal, moderate, and conservative subsamples. Wide cleavages in redistributive attitudes between liberals and conservatives, and between Democrats and Republicans are observed. Substantial gaps between Democrats and Republicans persist within ideological subgroups. Attitudinal differences across social classes exist for conservatives and moderates, but not liberals. Among moderates and conservatives, blacks are more likely than whites to support government redistribution. No black-white gap is observed among liberals. Though conservative women are more likely than conservative men to support major government involvement in redistribution, no gender gap emerges for liberals or moderates. Full sample results suggest that education has no discernible impact on redistributive attitudes, but subsample results strongly suggest that a college degree reinforces ideological effects.
Original Paper, Pages 139-162
A multidimensional approach to measuring the middle-class
María Edo, Walter Sosa Escudero, Marcela Svarc
Middle class studies have gained relevance in the economic literature. Nevertheless, a profound lack of agreement on conceptual and methodological issues for its identification remains. Furthermore, it has mostly relied on only one dimension: income. In this paper we present a new multidimensional approach for identifying the middle class based on multivariate quantiles. Moreover, this approach allows for a more general assessment of welfare given that it allows for identifying other groups -the poor and the upper class- overcoming existing strategies. We provide an empirical application for the case of Argentina in the 2004-2014 period.
Original Paper, Pages 163-183
Elasticity determinants of inequality-reducing income taxation
Oriol Carbonell-Nicolau, Humberto Llavador
The link between income inequality and progressive taxation has long been considered a fundamental normative foundation for income tax progressivity. This paper furnishes necessary and sufficient conditions on primitives, in terms of the elasticity of income with respect to ability, under which various subclasses of progressive taxes are inequality reducing. The distributional effects of progressive income taxation are decomposed into two conditions on the wage elasticity of income, the tax rate effect and the subsidy effect, each capturing different aspects of the transition between before-tax and after-tax income distributions. The results confer a degree of useful flexibility to the theory, in that they allow the analyst to expand the universe of consumer preferences by suitably restricting the set of marginal-rate progressive taxes. As an illustration of the results’ practical implications, we provide a precise characterization of the subclass of (progressive) taxes that are inequality reducing for the constant elasticity of substitution (CES) and the quasi-linear utility functions.
Original Paper, Pages 185-212
Normative measures of tax progressivity: an international comparison
María Edo, Walter Sosa Escudero, Marcela Svarc
The relevance of tax progressivity measures to policymaking depends on whether they help assess the extent to which taxation leads to social welfare gains or losses. The social welfare implications of progressivity measures have yet to be explored adequately in the literature. This paper helps to fill this gap by proposing a social welfare function framework to derive measures of tax progressivity and explore their normative properties. Using the social welfare framework, the paper derives the Kakwani index from Sen’s social welfare function as well as a new class of progressivity measures that incorporate a distributional judgment parameter capturing inequality aversion. The paper also discusses the social welfare implications of the Suits measure of tax progressivity and develops a new measure of tax progressivity derived from the Bonferroni social welfare function. The paper derives both relative and absolute measures of tax progressivity from the social welfare function framework. The methodology developed in the paper is applied to make international comparisons of tax progressivity in 32 developed countries. The paper calculates the magnitude of welfare gains and losses due to taxation and the required social rates of return of public investments for governments to break even. This paper finds that the governments in some countries have to generate high social rates of return from their public investments to compensate for losses of social welfare from taxation. It concludes that optimizing social welfare requires designing a progressive tax system, minimizing the administrative costs of collecting taxes, and maximizing the social rates of return by efficiently investing tax revenues.