Prelims

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MOBILITY AND INEQUALITY TRENDS

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RESEARCH ON ECONOMIC INEQUALITY - VOLUME 30

MOBILITY AND INEQUALITY TRENDS

EDITED BY

SANGHAMITRA BANDYOPADHYAY

Queen Mary University of London, UK

And

JUAN GABRIEL RODRÍGUEZ

Universidad Complutense de Madrid, Spain

United Kingdom – North America – Japan – India – Malaysia – China

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Emerald Publishing Limited

Howard House, Wagon Lane, Bingley BD16 1WA, UK

First edition 2023

Editorial matter and selection © 2023 Sanghamitra Bandyopadhyay and Juan Gabriel Rodríguez.

Individual chapters © 2023 The authors.

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British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN: 978-1-80382-902-9 (Print)

ISBN: 978-1-80382-901-2 (Online)

ISBN: 978-1-80382-903-6 (Epub)

ISSN: 1049-2585 (Series)

Contents

List of Contributors

Introduction

Research on Economic Inequality: Mobility and Inequality Trends comprises nine papers that present novel measurement methods and new empirics about inequality, mobility and poverty. The articles in this volume reflect the research that has occupied recent literature on the measurement of inequality and poverty in light of the current unprecedented global shock caused by COVID-19.

The volume begins the discussion with an analysis of trends in income inequality in recent decades around the world. In Chapter 1, Petra Sauer, Narasimha D. Rao and Shonali Pachauri raise the question of what mechanisms underlie the contrasting trends observed in income inequality around the globe. To address this research question, they examine a global sample of 73 countries between 1981 and 2010. Their findings indicate the existence of a small set of systematic factors across the global sample of countries. Declining labour income shares and increasing imports in high-income countries contribute significantly to increasing income inequality, while taxation and imports in low-income countries exert countervailing effects. Their study reveals the region-specific effects of technological change, financial globalisation, domestic financial deepening and public social spending. However, they find no systematic evidence of the equalising effect of education in high- and low-income countries.

In the second chapter, Gordon Anderson provides a thoughtful contribution on the crucial distinction between ‘good’ inequality and ‘bad’ inequality. The author proposes that measured inequality is a combination of both ‘bad’ inequality, that is, detrimental to society, and beneficial and ‘good’ inequality. Some inequalities are socially acceptable to all and necessary for optimal resource allocation and thus beneficial to society. These are thus constituent of ‘good’ inequality. The author explores the distinction between these two types of inequalities by addressing human resources, gender and immigrant status-based personal income differences in twenty-first-century Canada. The paper finds that categorising human resource-based differences as efficiency promoting ‘good’ inequalities and gender and immigrant status-based differences as discriminatory and ‘bad’ reveals that under all proposed measures, while aggregate and ‘good’ inequality grew over the sample period, ‘bad’ inequality diminished, reinforcing the case for inequality measures that are ‘Fit-For-Purpose’.

In Chapter 3, Rafael Carranza focuses on inequality of opportunity, a type of inequality that can be considered within the scheme proposed in the previous chapter as bad. If parental income is the only childhood circumstance, the intergenerational elasticity (IGE) can be interpreted as a measure of inequality of opportunity (IOp). However, parental income is one of many potential circumstances that can shape IOp. The author develops a model to decompose the interaction between childhood circumstances, parental income and offspring income. Using the Panel Study of Income Dynamics (PSID) for the United States, he finds that childhood circumstances account for 55% of the IGE for individual earnings and 53% for family income, with parental education explaining over a third of those shares. Furthermore, the IGE misses a large part of the influence of circumstances: only 45% of the influence of parental education on the offspring’s income goes through parental income (36% for earnings).

In Chapter 4, the authors Amaia Palencia-Esteban and Pedro Salas-Rojo undertake an empirical study of the relationship between life satisfaction and intergenerational mobility in Spain. The authors employ machine learning techniques in an innovative fashion to overcome traditional data limitations to estimate intergenerational income mobility. Thereafter, they use different econometric approaches to observe the relationship between life satisfaction and intergenerational mobility in Spain. Strikingly, the authors find that the relationship between the two entities is statistically not significant. They observe that variables, such as enjoying good health, higher income levels and marriage, are positively associated with life satisfaction. Overall, personal well-being in Spain is found to be more strongly related to material factors than to the amount of intergenerational mobility.

In Chapter 5, Ivica Urban reviews the indicators of social welfare that can be obtained by using the average income of the economy and the Gini coefficient, presenting new indicators of this type. This author argues for the use of intermediate views of inequality and for complementing country inequality rankings with those based on social welfare. To defend his approach, he conducts an empirical analysis for 36 European countries in 2018, using the data on the Gini index and the mean income available in the Eurostat database.

In Chapter 6, using an innovative approach, John A. Bishop, Juan Gabriel Rodríguez and Lester A. Zeager devise the basis for focusing on different facets of income mobility. They take the four classes of mobility measures identified in the literature, positional, directional, mobility as an equaliser of long-run earnings and earnings risk (or flux), and present the advantages of using a multifaceted approach, emphasising the importance of being careful to match the measure used with the concept of interest. They use an empirical application to illustrate the advantages of the multifaceted approach they propose, comparing earnings mobility in the United States and Germany using multiple mobility indices from each of the four classes for three 10-year panels. Their careful analysis illustrates that because of large differences in the German and US labour markets and in other social institutions that influence labour market outcomes, each country dominates in one facet of mobility but not in the others.

In Chapter 7, Joseph Deutsch, Pundarik Mukhopadhaya, Jacques Silber and Jing Yang undertake an intensive exploration of income inequality in China using novel methods. They focus on disparities between- and within-urban locals and rural migrants between 2002 and 2013, using data from the China Household Income Project (CHIP). Their results reveal that inequality (as measured by the Gini) among migrants increased by almost 18% and that of locals by 16%. In addition, they estimate mincerian earning functions and find the important role of education, occupation and type of job contract in explaining within-group inequality. The authors use the recentred influence function (RIF) and find that short-term contracts, length of employment, in-system ownership, marriage and skill have inequality-enhancing effects for migrants. In addition, the type of contract explains much of the disparities between migrants and urban locals.

In Chapter 8, Nuria Badenes Plá and Borja Gambau investigate the effects of the new policy measure ‘Minimum Vital Income’ (MVI) introduced by the Spanish government to combat the increase in poverty caused by the COVID-19 crisis. The authors test its effectiveness in light of the existing policy guaranteeing a minimum income (Regional Minimum Income (RMI) schemes). Using EUROMOD, they simulate the distributional effects of the introduction of the MVI and find that its introduction would decrease poverty in three dimensions: incidence, intensity and inequality among the poor. Moreover, the negative effects of the elimination of the RMI are offset by the positive effects of the introduction of the MVI in most regions.

In Chapter 9, Xingyuan Yao investigates the impact of the COVID-19 pandemic on economic stimulus policies. Using standard difference-in-differences (DID) and continuous variable DID methods with data from 156 economies, his empirical results show that deaths have a greater impact on economic stimulus policies than confirmed cases and that the cumulative effect is more influential on economic stimulus than the short-term effect. Among additional determinants, the level of economic development is robustly positively correlated with the intensity of economic stimulus, while medical condition is negatively correlated. Population density and the proportion of ageing population are positively correlated with the intensity of fiscal policies. Heterogeneity tests show that while economic policies are more frequently used in developed economies, in developing countries, restrictive measures can substitute for economic stimulus. The results show that the impact of the pandemic may have increased economic inequality to some extent due to the impact of policy capabilities, requiring international coordination and assistance to low- and middle-income countries.