Growth with Equity

This study assesses which of the many suggestions for change in policy - whether in the realm of tax incentives, education, or research and development policy - are likely to counter the distressing slowdown in the growth rates of productivity and average real wages and the disturbing rise in wage and income inequality.

<p>This dissertation investigates the role tax and transfer policy changes played in the evolution of New Zealand disposable income inequality between 1988 and 2013. Across five papers, the key changes in tax and transfer policies are identified, the labour supply response of individuals to the changes are estimated, and the impact of these changes on the income distribution is quantified. Overall, nearly 40% of the increase in income inequality during this period is attributable to changes in the tax-transfer system. The tax and transfer payment changes investigated in this dissertation cover the gradual flattening of the tax scale over the 1980/90s, the reduction in benefit payments following the 1991 Mother of All Budgets, the introduction of Working for Families in 2005, and the erosion of transfer payments relative to the average wage throughout the period. Given these changes, the efficacy of the tax transfer system for meeting vertical and horizontal equity goals is evaluated using data from the Household Economic Survey (HES). The redistributive effect of tax-transfer policy fell from 22.6 Gini points to 18.2 Gini points between 1988/91 and 2011/13, with a corresponding decline in the amount of vertical equity in the tax-transfer system. Between the same periods the degree of horizontal inequity rose,although this was predominantly the result of greater targeting in the tax-transfer system. The adjustment in the structure of the tax-transfer system not only leads to a change in tax liabilities and transfer payments, but also generates a behavioural change by individuals with regards to the number of hours they would be willing to work. Preference parameter estimates over hours of work and income are generated for individuals in the sample, with imputed wages estimated for those who are out of work. A tax-transfer microsimulation model, that utilises wage and preference parameter estimates, is then used to construct counterfactual scenarios where the tax-transfer system of a given year is applied to the population of other years. For example, the tax-transfer system of 1988-1991 is applied to the population in 2010-2013 in order to create a scenario representing what the disposable income distribution in 2010-2013 would look like with the 1988-1991 tax-transfer system. Estimates from this process suggest that nearly 40% of the increase in disposable income inequality between the 1988/91 and 2010/13 periods was due to the change in payments and labour supply behaviour associated with tax-transfer policy adjustments. Other potential drivers of income inequality change were investigated by reweighting the HES data of one period to more closely represent the population of another period. Although shifts in the share of individuals in part time work also generated an increase in income inequality, the lift in higher educational attainment over this period is estimated to have reduced income inequality more sharply (by nearly 22%). The shift in the age distribution towards prime-aged work was not associated with any change in the aggregate income inequality measure.</p>

<p>This dissertation investigates the role tax and transfer policy changes played in the evolution of New Zealand disposable income inequality between 1988 and 2013. Across five papers, the key changes in tax and transfer policies are identified, the labour supply response of individuals to the changes are estimated, and the impact of these changes on the income distribution is quantified. Overall, nearly 40% of the increase in income inequality during this period is attributable to changes in the tax-transfer system. The tax and transfer payment changes investigated in this dissertation cover the gradual flattening of the tax scale over the 1980/90s, the reduction in benefit payments following the 1991 Mother of All Budgets, the introduction of Working for Families in 2005, and the erosion of transfer payments relative to the average wage throughout the period. Given these changes, the efficacy of the tax transfer system for meeting vertical and horizontal equity goals is evaluated using data from the Household Economic Survey (HES). The redistributive effect of tax-transfer policy fell from 22.6 Gini points to 18.2 Gini points between 1988/91 and 2011/13, with a corresponding decline in the amount of vertical equity in the tax-transfer system. Between the same periods the degree of horizontal inequity rose,although this was predominantly the result of greater targeting in the tax-transfer system. The adjustment in the structure of the tax-transfer system not only leads to a change in tax liabilities and transfer payments, but also generates a behavioural change by individuals with regards to the number of hours they would be willing to work. Preference parameter estimates over hours of work and income are generated for individuals in the sample, with imputed wages estimated for those who are out of work. A tax-transfer microsimulation model, that utilises wage and preference parameter estimates, is then used to construct counterfactual scenarios where the tax-transfer system of a given year is applied to the population of other years. For example, the tax-transfer system of 1988-1991 is applied to the population in 2010-2013 in order to create a scenario representing what the disposable income distribution in 2010-2013 would look like with the 1988-1991 tax-transfer system. Estimates from this process suggest that nearly 40% of the increase in disposable income inequality between the 1988/91 and 2010/13 periods was due to the change in payments and labour supply behaviour associated with tax-transfer policy adjustments. Other potential drivers of income inequality change were investigated by reweighting the HES data of one period to more closely represent the population of another period. Although shifts in the share of individuals in part time work also generated an increase in income inequality, the lift in higher educational attainment over this period is estimated to have reduced income inequality more sharply (by nearly 22%). The shift in the age distribution towards prime-aged work was not associated with any change in the aggregate income inequality measure.</p>

Editors’ Introduction

Competition, Technological Change and Productivity Gains: The Contribution of Information Technologies

This paper addresses the empirical relationship between the level of competition and the rate of productivity growth across thirty sectors of the French production system during the period 1978-2015. It shows that there exists an optimal level of competition for each sector that is defined by the mark-up that maximizes the growth rate of labor productivity. The persistence of nonoptimal mark-ups in French sectors is associated with a 0.4% loss in aggregate average annual labor productivity growth during the period (1.86%). Hence, long-term productivity growth could have reached 2.25% if mark-ups had been at their optimal level. There is a strong significant positive correlation between the optimal mark-up and the rate of Hicks-neutral technical progress in each sector. This finding implies that sectors with high technical progress require higher mark-ups to maximize their rate of labor productivity growth. Overall, the aggregate economy would benefit from a decrease in the gap between nonoptimal and optimal mark-ups, as such an alignment would foster productivity growth.

Analysis of Empirical Research on the Factors Influencing the Change of Income Inequality

Does firm innovation improve aggregate industry productivity? Evidence from Chinese manufacturing firms

Title of dissertation: ESSAYS ON THE ECONOMETRIC ANALYSIS OF U.S. AGRICULTURE Shinsuke Uchida, Doctor of Philosophy, 2014 Dissertation directed by: Professor Erik Lichtenberg Department of Agricultural and Resource Economics This dissertation consists of three essays empirically investigating three important aspects of the U.S. agriculture: conservation, subsidy, and productivity. Each essay is conducted with the U.S. Census of Agriculture micro file data. Availability of cross-sectional and time variations of detailed individual farm production and demographic characteristics allows for uncovering heterogeneous relationships between farm production decisions and the corresponding aspects of U.S. agriculture. The first essay examines an adverse effect of a cropland retirement policy. A cropland retirement policy contributes to the reduction of environmental externalities from agricultural production such as soil erosion, nutrient runoff and loss of wildlife habitat. On the other hand, participant’s potential adverse behavior could undermine the environmental benefits of the policy. Several sources of such an unintended effect, known as “slippage”, have been conceptually identified, but their empirical evidence has been scarce. This article tests one source of slippage caused by in-farm land substitution from noncropland to cropland as a result of farmland retirement in the U.S. Conservation Reserve Program (CRP). The causal relationship of CRP participation and subsequent slippage through in-farm land substitution is identified by employing farm fixed effects, time-varying county fixed effects, and selection-on-observables. These could eliminate effects of unobservables that are potentially correlated with both the program participation and subsequent farmland reallocation decisions. Overall, slippage seems evident and fairly robust among specifications. It is found that an average program participant converts 14% of noncropland to cropping activities after enrollment. Results further show that participants with a larger share of uncropped land contribute more to slippage, indicating that farms with the excess capacity of conversion are more flexible in the land allocation decision and thus likely to give rise to slippage. This suggests that additional restrictions on the rest of land use for participants and/or introduction of penalty points reflecting the share of noncropland in the current auction mechanism can hinder such a backward incentive offsetting the program benefits. The second essay examines the distortionary effects of agricultural policy on farm productivity by examining the response of U.S. tobacco farmers’ productivity to the quota buyout of 2004. We focus on the impact of distortionary policy, i.e., the tobacco quota, by decomposing aggregate productivity growth into the contribution of farm-level productivity growth and the contribution of reallocation of resources among tobacco growers. We find that the aggregate productivity of Kentucky tobacco farms grew 44% between 2002 and 2007. The elimination of quota rental costs and reallocation of resources, including entry and exit, accounted for most of the post-buyout productivity growth. It is also noted that the aggregate productivity of Kentucky tobacco farms vary across farm characteristics and locations. This highlights the importance of using highly disaggregated data to uncover the sources of aggregate productivity growth. The third essay examines the relationship between farm size and productivity growth. In the past several decades, crop production in the U.S. has shifted to larger farms. During the same period, crop productivity has fairly improved. While these two events seem clearly associated, no studies have fully uncovered the link between them. Using farm-level longitudinal data from the Censuses of Agriculture from 1987-2007 enables us to decompose the contributions of aggregate productivity growth (APG) by farm size, but also by farm entry/exit and by technology/reallocation. We have three main findings. First, productivity growth is clearly non-uniform among farm sizes. Between 1987 and 2007, virtually all of the aggregate productivity growth of crop farms came from farms with annual sales of more than $500,000. These farms account for only 8% of U.S. crop farms. A closer look at the APG contributions to productivity growth from surviving farms confirms the findings for all crop farms: the productivity of mid-size farms has barely increased, and the productivity of smaller farms has fallen. Finally, the relative importance of technical efficiency growth and resource reallocation varies over time. Technical efficiency growth seems to be a larger source of APG for large farms between 1987 and 1997, whereas reallocation across all sales classes contributes more to APG between 1997 and 2007. Overall, our finding provides the concrete evidence that farm consolidation has been strongly associated with the productivity growth of U.S. crop farms. Our finding that resource reallocation through farm consolidation is nontrivial for the APG of crop farms highlights the usefulness of farm-level panel data for studying structural changes and APG. ESSAYS ON THE ECONOMETRIC ANALYSIS OF U.S. AGRICULTURE

Aggregate productivity growth in the U.S. has slowed down since the 2000s. We quantify the importance of differential productivity growth across occupations and across industries, and the rise of computers since the 1980s, for the productivity slowdown. Complementarity across occupations and industries in production shrinks the relative size of those with high productivity growth, reducing their contributions toward aggregate productivity growth, resulting in its slowdown. We find that such a force, especially the shrinkage of occupations with above-average productivity growth through "routinization," was present since the 1980s. Through the end of the 1990s, this force was countervailed by the extraordinarily high productivity growth in the computer industry, of which output became an increasingly more important input in all industries ("computerization"). It was only when the computer industry's productivity growth slowed down in the 2000s that the negative effect of routinization on aggregate productivity became apparent. We also show that the decline in the labor income share can be attributed to computerization, which substitutes labor across all industries.

The structural analysis of the production block of the model for 2000-2021 is the second article in the series of publications presenting the results of the next estimation of the author’s econometric model. The analysis of the investment process in Russia showed its insufficient activity in comparison with the OECD and BRICS countries, which makes it difficult to reduce the gap in the living standards of Russian citizens in comparison with richer countries. Calculations of the fixed capital structure reflect its weak social orientation (low share of housing) relative to many countries. Sectoral and regional analysis showed a strong unevenness in growth of fixed capital by type of economic activity and subjects of the federation. So, in the period up to 2017, its main recipients were primarily metropolitan and oil-and-gas regions. The share of agriculture and manufacturing as well as education noticeably decreased in the employment structure, but it grew in trade and construction. The estimates indicated a gradual strengthening of the negative correlation between employment and labor productivity growth, which can be considered as one of the signs of a general decline in the efficiency of the economy. The authors calculated the growth of output, aggregate resources and aggregate productivity which demonstrated a strong unevenness in growth of these indicators by types of economic activity and regions of Russia. They reflected a general slowdown in the growth of aggregate productivity after 2016 and an increase in the negative correlation between its rate and the rate of resource allocation both by industry and region. This result reflects the inefficiency of resource allocation in the sectoral and regional structure of the Russian economy.

Entrepreneurship is a process, which tends to innovate, initiate, promote and prolong the Socio- economic activities that benefit the individuals as well as group of individuals of a county. Creation of venture generates in employment opportunities, growth of aggregate production, poverty reduction and productivity of resources. Development of a nation necessitates optimum labour participation of males andfemale as well. In context of Sri Lanka 90% of the entities are sole trade enterprises where 70% of the entities represent micro ventures. The ventures created through women entrepreneurs seem to be 25% and the active labour force of women encounters only 35% in Sri Lanka. It displays that, a few women tends to create ventures and to become as entrepreneurs. Therefore, the study focuses the significant factors that influence the female entrepreneurs in venture creation as the appreciation for their empowerment. Evaluating the most impressive factor, which supports venture creation, would be the major objective of the study. Negombo division has been used for the study through six different sectors where 60 micro ventures have sampled from 443 enterprises. Confirmatory factor analysis, structural model and chi square tests are used to testify the hypotheses through the factors such as entrepreneurial, self-efficacy, economic, and social network that imply both Internal and external factors on creation and existence of enterprises. Study identifies that entrepreneurial factors and economic factors are reflecting their positive relationship on growing trend of women entrepreneurship.

A dynamic model of wage increases and inflation in the United States

The impact of firm-level Covid rescue policies on productivity growth and reallocation

Public utilities are complex systems of supply that are an integral part of national and global infrastructures. To maximize the overall contribution of resources committed to these systems, it is imperative that an institutional arrangement be put in place that achieves a high degree of coordination between a capital-intensive supply network and complex and diverse patterns of customer usage. Effective coordination enhances the prospect that all of the inherent network economies (scale, scope, joint production, and pooled reserves) will be attained. There will also be major societal gains since these networks provide platforms for promoting growth in aggregate productivity and, as a consequence, increases in real income. Historically, coordination was achieved through a centralized system of governance in which the matching of demand and supply was entrusted either to public enterprises or to private monopolies that were subject to price and earnings regulation. This system worked remarkably well during the period 1946-1968, when few stresses were placed on the coordination function. A stable growth in demand, technological advance, and associated network economies combined to produce a rate of growth in total factor productivity for the utility sector that exceeded that of manufacturing or the economy as a whole. However, after 1968, a series of external shocks and cumulative evidence of poor management led to increased public dissatisfaction. In telecommunications, AT&T was criticized for failing to innovate and for failing to respond to new customer demands for greater flexibility in the provision and pricing of communications services. In response, it took draconian steps to crush new entrants (e.g.,