Intergenerational Inequality Research Articles

Persistent Privilege? Institutional Education Gaps during Vietnam's Economic Boom

A persistent public–private sector difference in returns to skills is one sign that Vietnam's transition from command to market economy remains incomplete. Matching this is a large gap in post‐compulsory education enrollments, favoring children from families with members employed by government or state enterprises. We compare that gap between 2004 and 2014, a decade during which Vietnam experienced a boom in private‐sector and foreign‐invested economic activity. Despite the boom, we find a persistent and widening enrollment gap between “state” and “non‐state” households, which are similar in other observable respects. This institutional gap is not the only basis for enrollment differences—the ethnicity gap has also widened, even as rural–urban disparities have diminished—but they may contribute to slow and unequal progress in overall educational attainment. Unless addressed, enrollment gaps are likely to worsen intergenerational inequality and may reduce long‐run economic growth.

The Politics of Aging: Age Difference in Welfare Issue Salience in Japan 1972–2016

This paper examines a factor affecting why the interests of the older electorate often prevail in politics in developed countries with aging populations, namely the difference in issue salience related to governmental programs for the elderly. Analysis of data collected with a national electoral survey in Japan conducted at every national election between 1972 and 2016 (28 surveys) revealed that elderly voters have been far more attentive—and more consistently attentive—to the welfare issue than the younger electorate when making voting choices. Moreover, the gap has grown in recent years as the population ages and the welfare program matures, probably due to policy feedback. This gap would enhance the influence of the elderly over the issue beyond their numbers and higher turnout, as discussed in previous studies. This result explains why welfare reform for the elderly has been very difficult, at least in Japan, despite (or, indeed, because of) considerable intergenerational inequality under the current system. At the same time, this result also shows that issue salience is not static but responds to media coverage, especially among young voters who would, otherwise, show less interest in the issue. In other words, lively public debate of the issue, covered by news media, can decrease the salience gap between the youth and the elderly.

Market competition and parental background wage premium: the role of human and relational capital

The literature on intergenerational inequality has not inquired so far the role that market competition can play in the intergenerational transmission process. In this article we assess this role from both an empirical and a theoretical perspective. From the empirical side, using a panel dataset on Italian workers, we find that the parental background wage premium significantly decreases when sector competition increases. This result is challenging and might signal that part of the intergenerational transmission of inequalities is related to non-productive abilities transmitted by parents – that we call relational capital – rewarded thanks to rents arising in non-competitive markets. However, parental background might hide both relational capital and unobservable abilities and we cannot exclude that some workers’ unobservable abilities are more rewarded in less competitive industries, even if further analyses run to deal with this issue lend support to the idea that relational capital plays a not negligible role. From the theoretical side, we propose a model – whose predictions are consistent with our findings – that sheds light on the crucial role played by the intergenerationally transmitted relational capital in rent-seeking activities by firms when markets are non-competitive.

Who bears the burden of universal health coverage? An assessment of alternative financing policies using an overlapping-generations general equilibrium model.

In their quest for universal health coverage (UHC), many developing countries use alternative financing strategies including general revenues to expand health coverage to the whole population. Unless a policy adjustment is undertaken, future generations may foot the bill of the UHC. This raises the important policy questions of who bears the burden of UHC and whether the UHC-fiscal stance is sustainable in the long term. These two questions are addressed using an overlapping generations model within a general equilibrium (OLG-CGE) framework applied to Palestine. We assess and compare alternative ways of financing the UHC-ridden deficit (viz. deferred-debt, current and phased-manner finance) and their implications on fiscal sustainability and intergenerational inequalities. The policy instruments examined include direct labour-income tax and indirect consumption taxes as well as health insurance contributions. Results show that in the absence of any policy adjustment, the implementation of UHC would explode the fiscal deficit and debt-GDP ratio. This indicates that the UHC-fiscal stance is rather unsustainable in the long term, thus, calling for a policy adjustment to service the UHC debt. Among the policies we examined, a current rather than deferred-debt finance through consumption taxation emerged to be preferred over other policies in terms of its implications for both fiscal sustainability and intergenerational inequality.

Intergenerational Earnings Persistence in Italy between Actual Father–Son Pairs Accounting for Lifecycle and Attenuation Bias

AbstractUsing a longitudinal dataset built merging administrative and survey data, we contribute to the literature on intergenerational inequality providing the first estimate of the intergenerational earnings elasticity (IGE) in Italy based on actual father–son pairs, taking into account issues related to measurement biases and comparing the size of the lifecycle bias when sons are selected by age or by potential experience (i.e. the number of years since the end of their studies). Our findings confirm that Italy is a low‐mobility country. In our baseline estimate, when sons are observed 6 years after the end of their studies, the IGE is approximately 0.41 and is robust to various measures of fathers’ lifetime earnings. However, our results might be downward biased by the young age of sons. To measure the lifecycle bias and correct IGE estimates, we run the ‘forward regression’ of yearly earnings on lifetime earnings on a sample of workers followed for 30 years. We find that selecting sons by potential experience rather than by age reduces the lifecycle bias at young ages and the ‘corrected’ IGE is 0.48. The picture of Italy as a low‐mobility country is also confirmed when we measure the intergenerational association through the rank–rank slope.

Environmental sustainability is not worth pursuing unless it is achieved for ethical reasons

This paper analytically characterizes the four main environmental sustainability paradigms (i.e., WS, weak sustainability; AG, a-growth; DG, de-growth; and SS, strong sustainability) by introducing uncertainty about future preferences for consumption and future technologies. SS represents an ethical approach because of its maximum aversion to inter-generational inequality of resources, whereas DG depicts preference changes, AG depicts technology changes, and WS represents the reference paradigm without accounting for preference or technology changes. By comparing the costs and benefits of these paradigms, solutions derived for the whole parameter domains based on data for a globally representative individual suggest that whenever environmental sustainability is pursued for welfare reasons within a utilitarian perspective (i.e., WS, AG, DG), it is not worth pursuing. In contrast, if environmental sustainability is achieved for ethical reasons within an egalitarian perspective (i.e., SS), it is worth pursuing, even with an increased world population. In terms of feasibility (i.e., whether there are realistic parameter values such that a given sustainability paradigm can achieve its goal), solutions are ranked ethics > preference > technology (i.e., SS > DG > AG), whereas WS is unfeasible. Thus, WS, AG, and DG are inconsistent sustainability paradigms, SS empirically solves the theoretical dispute on absolute rights, and environmental sustainability must be treated as an ethical issue. A conceptual discussion about environmental ethics and a statistical analysis based on panel data at a country level support the same insights. In terms of reliability (i.e., whether there are national policies or international agreements which can support a feasible sustainability paradigm), SS could be enforced by a global environmental agreement, supported by 66/55% of governments (i.e., top-down approach) and by 56/51% of citizens (i.e., bottom-up approach), in the most certain/uncertain scenarios, respectively.

Desigualdades generacionales y prácticas políticas en las juventudes migrantes paraguayas en Buenos Aires

El objetivo del artículo es analizar la migración paraguaya en Buenos Aires haciendo foco en las relaciones generacionales y su impacto sobre la construcción de agencia entre las juventudes migrantes. A partir de un enfoque etnográfico, abordamos las relaciones genealógicas, etarias y socio-políticas entre las distintas generaciones, tanto en el ámbito de la familia como en el de las organizaciones de migrantes. Así, vislumbramos la existencia de desigualdades inter generacionales que condicionan las prácticas políticas y la construcción de agencia en las y los jóvenes. Frente a ello, observamos la combinación de diversas estrategias y capitales que las juventudes desarrollan para disputar poder con la generación que las precede apelando a un “capital militante”. Por último, avanzamos en la construcción generacional que hacen las juventudes a través de sus propias organizaciones y desde la cual buscan legitimar su agencia política.

Intergenerational Inequality and the Contract Out Policy in Public Health Care

This study investigates the impact of a Japanese public health care reform—called the contract out policy—on intergenerational inequality and the probability of a surplus in medical saving accounts. First, I investigate the change in the lifetime net burdens for each generation and public health expenditures and conduct simulation analyses to consider the effects of contracting out public health insurance on intergenerational inequality using the generational accounting method. Next, I simulate the probability of a surplus in medical savings accounts using the transition probability of health care expenses based on individual health data, such as receipt data. According to the simulation results, the net lifetime burden on future generations after contracting out shows a 1% reduction compared to the base case, which is not implemented in public health care reform. In addition, the probability of medical savings accounts remaining in surplus, including cases of zero medical expenses, is 69.6%.

The urban-rural discrepancy of generational housing pathways: A new source of intergenerational inequality in urban China?

In China's past decades of marketization reforms, original urban dwellers and early settlers in the home ownership sector enjoyed a drastic improvement in living conditions and family wealth stored in properties. Despite their significant contribution to the urban economy, rural migrants benefited far less from the housing market growth. Institutional discrimination, such as duality in welfare state provisions due to hukou segregation is often seen as main the mechanism behind this urban-rural discrepancy. With three elaborated case studies of generational housing pathways from Chongqing, this paper contributes to the debate of urban-rural housing inequality from a longitudinal perspective, focusing on the role of intergenerational transfers of wealth. We find that the original hukou, the original place of living and the housing positions of the parents all have great influence on the younger generation's housing experiences. The gaps between the urban locals and the migrants in housing resulted from generational accumulations of unbalanced opportunities in accessing housing.

Short-Run and Long-Run Effects of Peers From Disrupted Families

I study the short-run and long-run effects of exposure to peers from disrupted families in adolescence, using the National Longitudinal Study of Adolescent to Adult Health (Add Health) data. I find that girls are mostly unaffected by peers from disrupted families, while boys exposed to more peers from disrupted families exhibit more school problems in adolescence, attend lower-quality post-secondary institutions, and exhibit higher arrest probabilities, less stable jobs and higher probabilities of suffering from financial stress as young adults. These results suggest negative effects on non-cognitive skills, but no effect on cognitive skills, measured by academic performance. The dramatic increase in family disruption should thus receive more attention, as the intergenerational mobility and inequality consequences could be larger than anticipated because of classroom spillovers.

Mobility Under the COVID-19 Pandemic: Asymmetric Effects Across Gender and Age

Lockdowns and voluntary social distancing led to significant reduction in people's mobility. Yet, there is scant evidence on the heterogeneous effects across segments of the population. Using unique mobility indicators based on anonymized and aggregate data provided by Vodafone for Italy, Portugal, and Spain, we find that lockdowns had a larger impact on the mobility of women and younger cohorts. Younger people also experienced a sharper drop in mobility in response to rising COVID-19 infections. Our findings, which are consistent across estimation methods and robust to a variety of tests, warn about a possible widening of gender and inter-generational inequality and provide important inputs for the formulation of targeted policies.

Discounting and Climate Policy

The social rate of discount is a crucial driver of the social cost of carbon (SCC), i.e. the expected present discounted value of marginal damages resulting from emitting one ton of carbon today. Policy makers should set carbon prices to the SCC using a carbon tax or a competitive permits market. The social discount rate is lower and the SCC higher if policy makers are more patient and if future generations are less affluent and policy makers care about intergenerational inequality. Uncertainty about the future rate of growth of the economy and emissions and the risk of macroeconomic disasters (tail risks) also depress the social discount rate and boost the SCC provided intergenerational inequality aversion is high. Various reasons (e.g. autocorrelation in the economic growth rate or the idea that a decreasing certainty-equivalent discount rate results from a discount rate with a distribution that is constant over time) are discussed for why the social discount rate is likely to decline over time. A declining social discount rate also emerges if account is taken from the relative price effects resulting from different growth rates for ecosystem services and of labour in efficiency units. The market- based asset pricing approach to carbon pricing is contrasted with a more ethical approach to policy making. Some suggestions for further research are offered.

Losers Amongst the Losers: The Welfare Effects of the Great Recession Across Cohorts

This paper studies the effect of deep recessions on intergenerational inequality by quantifying the welfare effects on households at different phases of the life cycle. Deep recessionary episodes are characterized by large declines in the prices of real and financial assets and in employment. The former levies high welfare costs on older households who own financial wealth, the latter determines labour income losses and destroys the human capital of younger cohorts, lowering their productivity. The paper extends previous analyses in the literature by including permanent labour income losses in an OLG model calibrated to match the Great Recession. The analysis shows that younger households lose more than double of all other living cohorts, as younger household become unemployed and experience a decline in their future income. The dynamics of households’ consumption and portfolio composition between 2007 and 2013 in the US are consistent with the predictions of the model. JEL Classification: E21, D31, D58, D63, D91

Croissance économique et pouvoir d’achat des ménages en France : les principales évolutions depuis 1960

[eng] In France, recent economic trends have rekindled the feeling of divergence between global economic growth and changes in purchasing power. Long series of national accounts help put this gap in perspective. More so than GDP, the most appropriate indicator for capturing changes in the living conditions of households is gross disposable income (GDI) per consumption unit. Several factors have combined to limit its rise since the 1960s and, despite its recent recovery, it has tended to stagnate over the last decade, as between the late 1970s and the 1980s. Overall, the picture over the past few decades is not one of a steadily rising standard of living. But national accounts do not support the hypothesis that it would have declined. Two factors may account for its perceived decline: consumption norms, that grow faster than consumption possibilities, and rising vertical or intergenerational inequalities. However, vertical inequalities have remained relatively stable and parity in living standards between workers and pensioners has been maintained as well. It will be more difficult to achieve such a parity in the future.

Expropriation with hukou change and labour market outcomes in China

We study the labour market outcomes of Chinese household members changing their registration status (hukou) from rural to urban as a result of land expropriation using panel data from the 2008–2010 Rural Urban Migration in China (RUMiC). While it is largely unclear the extent to which expropriation can be viewed as an event exogenous to individual and household choices, we deal with the potential selection bias of being expropriated by using the methodology proposed by Oster (2019). Gaining an urban hukou is found to improve the labour market outcomes of expropriated household heads and spouses relative to comparable rural stayers and rural-urban migrants. In particular, hukou-changers gain better access to permanent jobs in the public sector through formal search channels. We also find that expropriated parents invest substantially more in children's human capital as compared to rural parents, suggesting that leveling the hukou status among children can contribute to reducing intergenerational inequality.

Effects of education philanthropy on well-being of low-income and gifted students in China

In China, increasing income inequality has created excessive obstacles to the social mobility of low-income children. Private wealth may play a positive role in ameliorating inequality by way of investing in education philanthropy. Using an alumni survey from a high school in Guangdong, China, this paper utilizes human capital theory to examine the effects of education philanthropy on human capital accumulation and well-being for low-income and gifted students. The findings indicate that a well-designed education philanthropy program significantly increases well-being via human capital accumulation for these children and demonstrates potential to also reduce intergenerational inequality.

Determining the Social Cost of Carbon: Under Damage and Climate Sensitivity Uncertainty

This article quantifies the impact on optimal climate policy, of both damage elasticity and equilibrium climate sensitivity uncertainty, under separable preferences for risk and intergenerational inequality. The primary findings are as follows. (1) Such preferences can depress the social cost of carbon (SCC) when calibration aims at matching actual economic outcomes, countering the prevailing view that the SCC is greater with separable than with conventional entangled preferences. (2) Damage elasticity uncertainty has larger effects on climate policy than equilibrium climate sensitivity uncertainty, even under high impact tail risk of the latter. (3) Risk aversion decisively strengthens optimal climate policy under joint damage and climate sensitivity uncertainty, than with a single source of uncertainty alone. Indeed, failing to account for the interaction between damage and climate sensitivity uncertainty underestimates the cost of climate change by more than US dollars 1 trillion.

The real inequalities

Abstract Background The ‘greedy geezer’ and ‘poor elderly’ narratives both assume that the older population are homogeneous and that the experiences of older people are universal. This ignores the fact that there are significant health inequalities (i) amongst the older population and (ii) in terms of who gets to be ‘old’ (and for how long). Further, the focus on intergenerational inequality is a deliberate distraction from the far more significant health inequalities that exist in terms of gender, geography, ethnicity, socio-economic status etc across the whole population - regardless of age. Methods Health inequalities amongst the older population and inequalities in terms of who gets to be ‘old’ will be examined through health inequalities across the population by gender, geography, ethnicity, socio-economic status etc. Results Given, for example, that total intergenerational transfers incorporating private transfers are from the older to the younger, it is quite possible that if we reduce public intergenerational transfers (working age to older) then all we are doing is increasing inherited inequality. Conclusions Policy focused on ‘intergenerational equity’ and ‘intergenerational accounting’ will often exacerbate inequalities within generations, to the benefit of the wealthiest and the detriment of much of the population. Win-win solutions only emerge if there is a focus on addressing the many and more profound health inequalities that cross-cut generations.

Groundwater governance: Addressing core concepts and challenges

AbstractWith decreasing aquifer levels, increasing groundwater pollution, inequitable access, and generally poor management outcomes, better groundwater governance has been put forward as a recipe to address these challenges worldwide. Existing recommendations focus on improved legal frameworks, monitoring and control of access and abstraction through permits or formal rights. In addition, decentralized water management, enforcement of regulations, and supply‐side technological solutions are seen as cornerstone components of good groundwater governance systems. However, until now, these approaches have generally failed to reconcile the fundamental dynamics and properties of groundwater as a natural resource and of governance as a social and political phenomenon. This has caused a disregard for local to planetary boundaries, power dynamics, and intra‐ and intergenerational inequalities in access to benefits from groundwater. As the current general notion of good groundwater governance is limited, solutions put forward are also partial and do not encompass the wider challenges affecting groundwater governance, in effect replacing sustainable management goals and policy for governance as a process. This paper takes a particular look at the Middle East and North Africa and agricultural groundwater use for irrigation to constructively redefine groundwater governance and fully address the multilayered and multifaceted core challenges of groundwater governance. Equally, the paper puts forward a new conceptual thinking that will help support the effective development of governance‐based solutions to achieve sustainable, socially acceptable, resilient and equitable resource use.This article is categorized under: Engineering Water > Planning Water Human Water > Water Governance

Voting on Behalf of a Future Generation: A Laboratory Experiment

This paper investigates a new voting rule wherein some people are given extra votes to serve as proxies for future generations. We predict that this voting scheme affects the voting behavior of those who do not receive an extra vote (i.e., single-ballot voters) because they are less likely to become a pivot, while proxy voters are expected to behave in support of the future generation. To test this prediction, we compare three scenarios wherein single-ballot voters would cast a vote: (a) one-voter-one-vote scenario wherein all voters cast only a single ballot; (b) a standard proxy-voting scenario wherein other voters cast two ballots, and the second vote is to cast for the benefit of a future generation; and (c) a non-proxy-voting scenario wherein other voters cast two ballots with no explanation for the second vote. The result shows that single-ballot voters are less inclined to vote for the future-oriented option in (c) than in (a). This indicates the potential drawback of the new voting scheme. However, there is no difference in the single-ballot voters’ decision between (a) and (b), indicating that the explanation of the second ballot as the proxy is important for reducing the intergenerational inequality through this voting reform.