Inequality treatment effects

This paper presents semiparametric estimators for treatment effects parameters when selection to treatment is based on observable characteristics. The parameters of interest in this paper are those that capture summarized distributional effects of the treatment. In particular, the focus is on the impact of the treatment calculated by differences in inequality measures of the potential outcomes of receiving and not receiving the treatment. These differences are called here inequality treatment effects. The estimation procedure involves a first non-parametric step in which the probability of receiving treatment given covariates, the propensity-score, is estimated. Using the reweighting method to estimate parameters of the marginal distribution of potential outcomes, in the second step weighted sample versions of inequality measures are.computed. Calculations of semiparametric effciency bounds for inequality treatment effects parameters are presented. Root-N consistency, asymptotic normality, and the achievement of the semiparametric efficiency bound are shown for the semiparametric estimators proposed. A Monte Carlo exercise is performed to investigate the behavior in finite samples of the estimator derived in the paper.

"Desesperança de vida: homicídio em Minas Gerais , Rio de Janeiro e São Paulo: 1981 a 1997"

This paper studies the male homicide rate and its relation to economic variables in the states of Minas Gerais, São Paulo e Rio de Janeiro between 1981 and 1997. The novelty of our approach is the construction of homicide rates specific for each age between 15 and 40 years old. The economic variables' coefficients are significant1y different from zero for the population between 15 and 19 years old. As expected, an increase in real wage and a decrease in inequality reduce the rate of homicide. Surprisingly, a decrease in the unemployment rate seems to increase the rate ofhomicide. Most coefficients, however, converge to zero as a generation gets older, becoming non-significant for the population aged 20 years old or more. We also identify an inertia component in the homicide rate: generations with higher homicide rates when young also tend to have higher homicide rates over the remain of their life cycle. Therefore, if economic variables induce a high rate of homicide among young people in a certain year, this high rate tend to persist over the generation life cycle independent1y of the economy later behavior. Regressions are performed using a reformulation of the standard Logit model that incorporates a lagged dependent variable.

The firm size wage premium : a quantile analysis

Empirical evidence shows that larger firms pay higher wages than smaller ones. This wage premium is called the firm size wage effect. The firm size effect on wages may be attributed to many factors, as differentials on productivity, efficiency wage, to prevent union formation, or rent sharing. The present study uses quantile regression to investigate the finn size wage effect. By offering insight into who benefits from the wage premi um, quantile regression helps eliminate and refine possible explanations. Estimated results are consistent with the hypothesis that the higher wages paid by large firms can be explained by the difference in monitoring costs that large firms face. Results also suggest that more highly skilled workers are more often found at larger firms .

Regulation and wage adjustment patterns : non parametric evidence from longitudinal data

This paper gives a first step toward a methodology to quantify the influences of regulation on short-run earnings dynamics. It also provides evidence on the patterns of wage adjustment adopted during the recent high inflationary experience in Brazil.The large variety of official wage indexation rules adopted in Brazil during the recent years combined with the availability of monthly surveys on labor markets makes the Brazilian case a good laboratory to test how regulation affects earnings dynamics. In particular, the combination of large sample sizes with the possibility of following the same worker through short periods of time allows to estimate the cross-sectional distribution of longitudinal statistics based on observed earnings (e.g., monthly and annual rates of change).The empirical strategy adopted here is to compare the distributions of longitudinal statistics extracted from actual earnings data with simulations generated from minimum adjustment requirements imposed by the Brazilian Wage Law. The analysis provides statistics on how binding were wage regulation schemes. The visual analysis of the distribution of wage adjustments proves useful to highlight stylized facts that may guide future empirical work.

From public to private : the performance of former public workers in the Brazilian labor market

This paper analyzes the placement in the private sector of a subset of Brazilian public-sector employees. This group left public employment in the mid-1990’s through a voluntary severance program. This paper contrasts their earnings before and after quitting the public sector, and compares both sets of wages to public and private sector earnings for similar workers. We find that participants in this voluntary severance program suffered a significant reduction in average earnings wage and an increase in earnings dispersion. We test whether the reduction in average earnings and the increase in earnings dispersion is the expected outcome once one controls for observed characteristics, by means of counterfactual simulations. Several methods of controlling for observed characteristics (parametric and non-parametrically) are used for robustness. The results indicate that this group of workers was paid at levels below what would be expected given their embodied observable characteristics.

Earnings dynamics and inequality in Venezuela: 1995-1997

In this paper, we decompose the variance of logarithmic monthly earnings of prime age males into its permanent and transitory components, using a five-wave rotating panel from the Venezuelan “Encuesta de Hogares por Muestreo” from 1995 to 1997. As far as we know, this is the first time a variance components model is estimated for a developing country. We test several specifications and find that an error component model with individual random effects and first order serially correlated errors fits the data well. In the simplest model, around 22% of earnings variance is explained by the variance of permanent component, 77% by purely stochastic variation and the remaining 1% by serial correlation. These results contrast with studies from industrial countries where the permanent component is predominant. The permanent component is usually interpreted as the results of productivity characteristics of individuals whereas the transitory component is due to stochastic perturbations such as job and/or price instability, among others. Our findings may be due to the timing of the panel when occurred precisely during macroeconomic turmoil resulting from a severe financial crisis. The findings suggest that earnings instability is an important source of inequality in a region characterized by high inequality and macroeconomic instability.

Investment-specific technological change and the Brazilian macroeconomy

We studied the effects of changes in banking spreads on distributions of income, wealth and consumption as well as the welfare of the economy. This analysis was based on a model of heterogeneous agents with incomplete markets and occupational choice, in which the informality of firms and workers is a relevant transmission channel. The main finding is that reductions in spreads for firms increase the proportion of entrepreneurs and formal workers in the economy, thereby decreasing the size of the informal sector. The effects on inequality, however, are ambiguous and depend on wage dynamics and government transfers. Reductions in spreads for individuals lead to a reduction in inequality indicators at the expense of consumption and aggregate welfare. By calibrating the model to Brazil for the 2003-2012 period, it is possible to find results in line with the recent drop in informality and the wage gap between formal and informal workers.

Wealth composition, endogenous fertility and the dynamics of income inequality

This paper analyzes how differences in the composition of wealth between human and physical capital among families affect fertility choices. These in tum influence the dynamics of wealth and income inequality across generations through a tradeoffbetween quantity and quality of children. Wealth composition affects fertility because physical capital has only a wealth effect on number of children, whereas human capital increases the time cost of child-rearing in addition to the wealth effect. I construct a model combining endogenous fertility with borrowing constraints in human capital investments, in which weaIth composition is determined endogenously. The model is calibrated to the PNAD, a Brazilian household survey, and the main findings of the paper can be summarized as follows. First, the model implies that the crosssection relationship between fertility and wealth typically displays a U-shaped pattem, reflecting differences in wealth composition between poor and rich families. Also, the quantity-quality tradeoff implies a concave cross-section relationship between investments per child and wealth. Second, as the economy develops and families overcome their bOlTowing constraints, the negative effect of weaIth on fertility becomes smaller, and persistence of inequality declines accordingly. The empirical evidence presented in this paper is consistent with both implications .

On impatience, education, returns, and inequality

In this paper we investiga te the impact of initial wealth anel impatience heterogeneities, as wcll as differential access to financia! markets on povcrty anel inequality, anel cvaluate some mechanisms that could be used to alleviate situations in which these two issues are alarming. To address our qucstion we develop a dynamic stochastic general cquilibrium modo! of educational anel savings choicc with heterogeneous agents, where individuais differ in their initial wealth anel in their discount factor. We find that, in the long run, more patient households tend to be wealthier anel more educated. However, our baseline model is not able to give as much skewness to our income distribution as it is rcquircd. We then propose a novel returns structure based on empírica! observation of heterogeneous returns to different portfolios. This modification solves our previous problem, evidencing the importance of the changes made in explaining the existing levels of inequality. Finally, we introducc two kinds of cash transfers programs- one in which receiving thc benefit is conditional on educating the household's youngster (CCTS) anel one frec of conditionalities (CTS) - in order to evaluate the impact of these programs on the variables of concern1 Wc fine! that both policies have similar qualitativo rcsults. Quantitatively, howcvcr, the CCTS outperforms its unconclitional version in all fielcls analyzecl, revealing itself to be a preferable policy.

Life Cycle Models, Heterogeneity of Initial Assets,and Wealth Inequality

Life cycle general equilibrium models with heterogeneous agents have a very hard time reproducing the American wealth distribution. A common assumption made in this literature is that all young adults enter the economy with no initial assets. In this article, we relax this assumption – not supported by the data - and evaluate the ability of an otherwise standard life cycle model to account for the U.S. wealth inequality. The new feature of the model is that agents enter the economy with assets drawn from an initial distribution of assets, which is estimated using a non-parametric method applied to data from the Survey of Consumer Finances. We found that heterogeneity with respect to initial wealth is key for this class of models to replicate the data. According to our results, American inequality can be explained almost entirely by the fact that some individuals are lucky enough to be born into wealth, while others are born with few or no assets.

The economics of wage-led recovery: analysis and policy recommendations

The financial crisis and Great Recession have been followed by a jobs shortage crisis that most forecasts predict will persist for years given current policies. This paper argues for a wage-led recovery and growth program which is the only way to remedy the deep causes of the crisis and escape the jobs crisis. Such a program is the polar opposite of the current policy orthodoxy, showing how much is at stake. Winning the argument for wage-led recovery will require winning the war of ideas about economics that has its roots going back to Keynes’ challenge of classical macroeconomics in the 1920s and 1930s. That will involve showing how the financial crisis and Great Recession were the ultimate result of three decades of neoliberal policy, which produced wage stagnation by severing the wage productivity growth link and made asset price inflation and debt the engine of demand growth in place of wages; showing how wage-led policy resolves the current problem of global demand shortage without pricing out labor; and developing a detailed set of policy proposals that flow from these understandings. The essence of a wage-led policy approach is to rebuild the link between wages and productivity growth, combined with expansionary macroeconomic policy that fills the current demand shortfall so as to push the economy on to a recovery path. Both sets of measures are necessary. Expansionary macro policy (i.e. fiscal stimulus and easy monetary policy) without rebuilding the wage mechanism will not produce sustainable recovery and may end in fiscal crisis. Rebuilding the wage mechanism without expansionary macro policy is likely to leave the economy stuck in the orbit of stagnation.