Joint Distribution Of Income Research Articles

Emission inequality: Comparing the roles of income and wealth in Belgium and the United Kingdom

Many studies have investigated the distribution of greenhouse gas emissions associated with household consumption, highlighting that richer households have a substantially larger carbon footprint than poorer households. While these studies have typically used income or household expenditures as a proxy of households’ living standards, the association between emissions and wealth has hardly been studied. Wealth is not just an important component of households’ material living standards, known to be imperfectly correlated with income and expenditures, but it is also a very relevant dimension for climate policies. For instance, affluent households have more scope to invest in reducing emissions (e.g. insulation of their homes). Therefore, in this paper, we compare the inequality of emissions over wealth groups as well as groups defined by other living standard concepts such as income, expenditure and the joint distribution of income and wealth to add a focus on wealth to the analysis of emission inequality. Our study focuses on Belgium and the United Kingdom, which differ considerably in their level of wealth inequality. Our results highlight that the social distribution of emissions varies between expenditures, income, wealth and the joint distribution of income and wealth, with per capita emissions being more strongly associated with the joint distribution of income and wealth than with income alone. We also show that a significant share of households has both low income and low wealth, and may thus be lacking the means to prepare for a carbon-neutral future. Although increasing wealth taxation could provide much-needed revenues for low carbon investments, our results suggest that it would have a lower direct impact on the level of emissions and emission inequality compared to increasing taxes on high incomes.

Vertical and horizontal equity of wealth taxes: An assessment from a joint income-wealth perspective

Despite an established theoretical literature on (optimal) wealth taxation, the empirical literature is still scarce. Previous studies usually focus on country case studies and a specific type of wealth tax in isolation. This paper analyses from a cross-country perspective the distributional effects of the mix of taxes on wealth, on capital income and on transfers of wealth. Moreover, we use the joint distribution of income and annuitised wealth as our analytical framework. To this end we combine data of the Eurosystem Household Finance and Consumption Survey with the tax-benefit microsimulation model EUROMOD, covering six countries: Belgium, Germany, France, Finland, Italy and Spain. Results indicate that existing wealth taxes do not contribute to vertical and horizontal equity: they are often progressive but do not achieve any significant redistribution due to the low revenues they generate and they imply a much lower burden on those deriving their living standard predominantly from wealth than on those who derive it mainly from income.

A Mixed Approach for Data Fusion of HBS and SILC

This paper presents an effective procedure for matching data from the Italian Household Budget Survey (HBS) and the Survey on Income and Living Conditions (SILC), carried out by the Italian National Statistical Institute. In recent years, there is an emerging consensus on the need for distributional measures of well-being as a joint function of income and consumption, that should be jointly explored for explaining the households’ economic conditions. However, the Italian National Statistical Institute does not maintain a unified database on income and expenditures for consumption. One of the most widespread approaches for fusing data is to use statistical matching techniques, which are based on the Conditional Independence Assumption. This assumption implies that the variables of interest are independent, given a set of common auxiliary variables with strong explicative power on income and consumption. Between the auxiliary variables, we also exploit suitable variables which are proxy of income, thus permitting to impute income on HBS, and proxy of consumption, thus permitting to impute consumption on SILC. The joint distribution of the proxies can be considered as a proxy of the joint distribution between income and consumption. Moreover, through the use of two synthetic measures, we reduce the dimensionality of the set of auxiliary variables, simultaneously preserving as much as possible of the available common information and the correlation structure between the auxiliaries and income, as observed in SILC, and between the auxiliaries and consumption, as observed in HBS. The contribution to the existing literature is various. In particular, we obtain a pooled sample with income and consumption, while previous attempts aimed at imputing only one of the two variables of interest in one survey. Second, the uncertainty deriving from the lack of information on the joint distribution of income and consumption is reduced with respect to previous works. Finally, the use of proxies, the high quality of the other auxiliary variables, as well as the particular mixed-mode matching procedure, permit to take advantage of all the available information reducing it to only two dimensions, so that the Conditional Independence can be considered a mild assumption. Keeping in mind that an effective matching for also imputing wealth, that is the third pillar of the households’ economic wellbeing, is yet to come, the joined dataset could permit several types of analyses on economic inequalities and fiscal policies.

Inheritance taxation and wealth effects on the labor supply of heirs

The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the-envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to the implied change in their distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state-of-the-art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 cents of labor income tax revenue (in net present value) through higher labor supply of (non-)heirs.

Joint Income-Wealth Inequality: An Application Using Administrative Tax Data

Using tax data from the Swiss canton of Lucerne, we study how measures of economic inequality change if they account for income and wealth rather than income alone. The joint distribution of income and wealth displays strong tail dependence at the top and a negative association for negative net wealth. Joint income-wealth, the sum of labor income and annuitized wealth, serves as a measure of combined inequality of income and wealth. Inequality measured using joint income-wealth is higher than measured using income alone. We refine existing annuitization techniques by introducing heterogeneous returns. A decomposition shows that the underlying marginal distributions of labor income and annuitized wealth account for most of joint income-wealth inequality, whereas their association matters only in the tails.

Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs

The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the-envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to the implied change in their distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state of the art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through higher labor supply of (non-)heirs.

Математическое моделирование экономической структуры общества на примере статистических данных по Пермскому краю

Monetary savings of the population are the subject of research of many specialists, since their detailed study in total with other various economic variables allows for a qualitative analysis of the current social and financial situation and make predictions. The definition of such an economic characteristic of society as the distribution of the population by money savings in practice is a very non-trivial task because of the lack of reliable information on the accumulation of citizens. Often, rather than a distributed value, a constant indicator is used – the average level of household savings. In the case when the savings are distributed according to the normal law in society (as in the developed countries), the replacement of the distributed quantity by a constant is possible to simplify the tasks. It is shown that Perm krai has bimodal structure of society savings, what essentially differs from the normal distribution law and therefore from the mathematical point of view it is unacceptable to replace one with a constant value, but it is necessary to take it into account as a distributed one. This ensures the relevance of this study, whose goal is to identify and analyze the numerical characteristics of the economic structure of Perm krai. The main idea of the work is to apply the mathematical model of the accumulation spectrum of the society of D.S. Chernavskii for Perm krai, the numerical calculation of the model and the economic analysis of the obtained characteristics. Similar numerical calculations of the distribution of the population of Perm krai on savings based on official statistics have not been conducted previously. Methods of economic analysis, mathematical and computer modeling, methods of theories of ordinary differential equations, partial differential equations and stochastic differential equations, probability theory and mathematical statistics are applied. A numerical study of the mathematical model of Perm krai economic society structure was carried out, the most probable stationary levels of population savings in Perm krai were calculated, which approximately amounted to 10 and 63 subsistence minimums for 2016 year. Families seem to accumulate in the vicinity of these savings values, like elementary particles under Brownian motion (this is not a coincidence, since both processes are described by the stochastic differential Fokker-Planck equation in partial derivatives of the parabolic type). Stationary savings levels numerically characterize the consumption standards and the standard of living of a society and are formed on the basis of the value of the consumer basket. In future, it is planned to conduct research on the optimal control of the economic structure of society. Keywords the economic society structure, population distribution density by savings, stationary levels of savings, spectrum of the savings, savings in the Perm Region, economic groups of the population, social stratification, Fokker – Planck equation, money balance equation, mathematical model of D.S. Chernavskii.

Two multivariate generalized beta families

ABSTRACTA multivariate generalized beta distribution is introduced that extends the univariate generalized beta distribution and includes many multivariate distributions, such as the multivariate beta of the first and second kind, the generalized gamma, and the Burr and Dirichlet distributions as special and limiting cases. These interrelationships can be illustrated using a distributional family tree. The corresponding marginal distributions are univariate generalized beta distributions and their special cases. Selected expressions for the moments are reported, and an application to the joint distribution of income and wealth is presented. A simple transformation of the multivariate generalized beta distribution leads to what will be referred to as a multivariate exponential generalized beta distribution, which includes a multivariate form of the logistics and Burr distributions as special cases.

The double one percent: Identifying an elite and a super-elite using the joint distribution of income and net worth

Growing inequality has heightened awareness of those at the top of the income and wealth distributions, and researchers are beginning to acknowledge the need for a way to identify top households that simultaneously accounts for their income and net worth. We contribute to the literatures on top income and wealth households by introducing a measure of top status that includes a larger number of affluent households and that explicitly accounts for the interrelationship between income and wealth. Our innovation is to start with both income and wealth holders and to divide the top into three groups: those who are top income only, those who are top net worth only, and those who are at the top of both distributions (the double one percent). Our results show that the top three groups are unique financially and demographically in ways that inform understanding of inequality and the processes that lead to membership in top income and wealth positions. Perhaps most importantly, our results identify those who are merely elite and those who occupy even more exclusive, or super elite, positions at the top of both the income and wealth distributions.

Joint Distribution of Income and Wealth and the Tax Burdens of Korean Households

Joint Distribution of Income and Wealth and the Tax Burdens of Korean Households

Poverty in old age: evidence from Hong Kong

ABSTRACTThe Hong Kong population will age rapidly over the next three decades and the entailing problem of old-age poverty will put the Hong Kong government to test. While the government has been using a solely income-based measurement, the main purpose of this study is to assess poverty rates among Hong Kong's older population in terms of both income and consumption-based measurements by using both relative and absolute concepts of poverty. It also examines the association of socio-economic and household characteristics with elder poverty rates. A two-stage stratified sample design was adopted. A total of 4,306 older adults were personally interviewed in their homes, yielding a response rate of 66.2 per cent. This study contributes to the larger study on poverty in Hong Kong by revealing how income and consumption poverty rates may differ among older adults. Older adults who were both income and consumption poor were more likely to be female, widowed, living alone and to have received less than an elementary school-level education. They possessed very few assets and were most likely financially dependent on family support and welfare payments. To understand fully the economic wellbeing of older adults in Hong Kong, this study proposes that joint distribution of income and consumption poverty can better identify and explain the demographic characteristics of the poor older adults. Implications of the study are discussed based on the neo-liberalist approach that the Hong Kong government has taken in welfare provisions.

The Distribution Dynamics of Human Development in Mexico 1990–2010

Based on census data linked to household surveys, we analyze the univariate and joint distribution of income, health and education at the municipality level in Mexico from 1990 to 2010 using Gaussian mixture models. The univariate analysis finds an emergence of a low‐income cluster in 2000, which disappears again by 2010. Our trivariate estimation shows an education‐led human development convergence over time while dynamics are mainly affected by fluctuations in health and income. Changes in development clusters have a clear spatial pattern and are closely related to the relative size of the agricultural sector and the proportion of indigenous population groups.

A multidimensional analysis of poverty in China from 1991 to 2006

Abstract Most studies have reported non negligible improvements for China in terms of poverty during the last three decades. However, this result is potentially hampered by two limitations. First, it may be contingent to the specific choices made regarding the poverty line and the poverty indices used for the analysis. As a consequence, it may collapse if one uses alternative poverty lines or poverty measures. Second, it results from a focus on the sole monetary aspects of poverty. As income does not cover all facets of well-being and since the relationship between these two concepts are quite fuzzy, it may be worth using a broader view of well-being, hence opting for a multidimensional approach of poverty analysis. In the present paper, these two issues are addressed using multidimensional stochastic dominance procedures on the joint distribution of income, education and health in seven Chinese provinces.

The Demand for Income Tax Progressivity in the Growth Model

This paper examines the degree of income tax progressivity chosen through a simple majority vote in a model with savings. Households have permanent differences with respect to their labor productivity and their discount factors. The government has limited commitment to future policy, so voting is repeated every period. Because the model features mobility within the wealth distribution, the median voter is determined endogenously. In a numerical experiment, the model is initialized to the 1992 U.S. joint distribution of income and wealth as well as several statistics of the federal income tax distribution. Support for a high degree of progressivity is widespread. In the long run, households that vote for lower progressivity have high labor productivity and/or very high wealth. A movement towards greater progressivity increases aggregate capital and income, but it effects only a small decrease in long-run income and wealth inequality.

Health and income: A robust comparison of Canada and the US

Abstract This paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time. It is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques. The paper’s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes. We illustrate the approach by contrasting Canada and the US using comparable data. Canada dominates the US over the bottom part of the bi-dimensional distribution of health and income, though not generally over the uni-dimensional distributions of health or income. The paper also finds that welfare for both Canadians and Americans has not unambiguously improved during the last decade over the joint distribution of income and health, in spite of the fact that the uni-dimensional distributions of income have clearly improved during that period.

An Analysis of Welfare Changes in Zimbabwe*

Abstract: This paper presents a brief account of welfare changes in Zimbabwe along the income and education dimensions between 1995 and 2003. Using sequential dominance procedures, we find that education attainment substantially improved over time. However, these gains did not necessarily translate into poverty reduction, rather welfare over the joint distribution of income and education dramatically deteriorated. These results are robust for all education partitions, income thresholds and a broad class of welfare indices. A further inquiry into the factors underlying this apparent disconnection between education and income using decomposition techniques reveals that the increase in poverty incidence cannot be attributed to household characteristics but is reflective of the broader socio-economic trends prevailing at the time. The decline in economic growth contributed tremendously to the decline in welfare while inequality changes account for a small proportion.

Health and Income: A Robust Comparison of Canada and the US

This paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time. It is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques. The paper’s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes. We illustrate the approach by contrasting Canada and the US using comparable data. Canada dominates the US over the lower bi-dimensional welfare distribution of health and income, though not generally in terms of the uni-dimensional distribution of health or income. The paper also finds that welfare for both Canadians and Americans has not unambiguously improved during the last decade over the joint distribution of income and health, in spite of the fact that the uni-dimensional distributions of income have clearly improved during that period.

Testing exact aggregation in income and household characteristics: the effects of aggregation across goods

Exact aggregation in income and household characteristics are tested using Canadian cross-sectional microdata. Over 100 data sets of homogeneous households are used, making it possible to conduct a large number of independent hypothesis tests. Tests are also conducted to determine whether the homogeneous household groups can be grouped into more heterogeneous data sets. Six different kinds of demand systems are estimated to ensure the robustness of the results to separability/aggregation structure. Exact aggregation in income, family size, region of residence and housing tenure status are strongly rejected, but exact aggregation in age of head of household is not. Restrictions which would allow pooling of households of different sizes, regions and tenure status are also strongly rejected. The test results exhibit a little sensitivity to the expenditure aggregates used, but not to the extent that the results would be different. The results imply that aggregate demand functions which use time series data should include many statistics from the joint distribution of income and household characteristics. In addition, when using data at the micro-level, the amount of heterogeneity in households' behaviour is much greater than usually assumed. This calls for the use of much more homogeneous household groups in the estimation of demand models than are typically employed.

A Comprehensive Analysis of Inequality in the Size Distribution of Income for the United States, 1952-1981

Numerous studies have attempted to estimate inequality in the United States size distribution of income. One standard procedure has been to conjecture that a particular hypothetical statistical distribution function approximates the actual empirical income distribution and then to equate the statistics of the actual empirical income distribution to the parameters of the hypothetical distribution. Kakwani [7] offers a survey of this work. All of these studies have focused on the narrow total income aspect of analyzing comprehensive economic inequality. Some have questioned whether so much emphasis should be placed on income inequality, per se, since income is only one aspect of welfare. Franklin Fisher [5] long ago made this point, but only recently did researchers begin to utilize other available information in making welfare valuations. Since income received and expenditures made by consumers are not statistically independent, a more efficient method of measuring inequality in the marginal distribution of income is to derive the parameters of the marginal distribution of income from the estimated parameters of the joint distribution of income and expenditures. Maasoumi [9] and Jorgenson and Slesnick [6] recognized the importance of inequality in attributes such as schooling, expenditures, and the quality of life in constructing a comprehensive measure of inequality. They attempt to find a single measure that describes the inequality inherent in all the attributes. They did not, however, utilize information about the interdependence of these attributes to derive more efficient measures of the inequality in any particular attribute. This paper utilizes a joint distribution of components of income and commodity group expenditures to analyze inequality in the marginal distributions of various components of income. Estimation efficiency' is gained by recognition of the interdependence of the income