Labor Income Inequality Research Articles

La problemática conceptualización de la financiarización: diferenciando causas, consecuencias y la acción financiarizada de los actores económicos

La financiarización es un proceso de cambio estructural e incompleto en las economías contemporáneas. El crecimiento del sistema financiero en las últimas décadas ha estado acompañado por una relación cada vez más compleja entre los actores socioeconómicos y los mercados financieros. En este artículo analizamos las causas y consecuencias de la financiarización con respecto a: la erosión de la relación capital-trabajo; el aumento de la desigualdad del ingreso laboral; y la comercialización de la vida cotidiana y los derechos sociales. Revisamos las principales conceptualizaciones de la financiarización en varios sitios de investigación correspondientes a los principales actores económicos, es decir: corporaciones no financieras; el estado y los individuos; y su compleja relación con los mercados financieros. Nuestro objetivo principal es evaluar las contribuciones y limitaciones de los estudios de financiarización en estos espacios de investigación.

The exporter wage premium when firms and workers are heterogeneous

Abstract In this paper, we develop a new model of international trade, in which workers featuring higher innate abilities match with firms featuring higher innate productivities. This model allows us to quantify the effect of trade on labour income inequality when workers have heterogeneous abilities within the broad groups of skilled and unskilled workers. Self-selection of the most productive firms into exporting generates an exporter wage premium, and our framework with skilled and unskilled workers allows us to decompose this premium into its skill-specific components. We employ linked employer-employee data from Germany to structurally estimate the parameters of the model. These parameter estimates imply an average exporter wage premium of 6 percent, with exporting firms paying no wage premium at all to their unskilled workers, while the premium for skilled workers is 15 percent. Measured by the Theil index, moving the economy to autarky would reduce wage inequality within the group of skilled workers by 29 percent, and it would reduce overall labour income inequality by 8 percent.

Growing Income Inequality in the United States and Other Advanced Economies

This paper studies the contribution of both labor and non-labor income in the growth in income inequality in the United States and large European economies. The paper first shows that the capital to labor income ratio disproportionately increased among high-earnings individuals, further contributing to the growth in overall income inequality. That said, the magnitude of this effect is modest, and the predominant driver of the growth in income inequality in recent decades is the growth in labor earnings inequality. Far more important than the distinction between total income and labor income, is the way in which educational factors account for the growth in US labor and capital income inequality. Growing income gaps among different education groups as well as composition effects linked to a growing fraction of highly educated workers have been driving these effects, with a noticeable role of occupational and locational factors for women. Findings for large European economies indicate that inequality has been growing fast in Germany, Italy, and the United Kingdom, though not in France. Capital income and education don’t play as much as a role in these countries as in the United States.

The Distributional Consequences of Social Distancing on Poverty and Labour Income Inequality in Latin America and the Caribbean

This paper estimates the potential distributional consequences of the first phase of the COVID-19 lockdowns on poverty and labour income inequality in 20 Latin American and Caribbean (LAC) countries. We estimate the share of individuals that are potentially able to remain active under the lockdown by taking into account individuals' teleworking capacity but also whether their occupation is affected by legal workplace closures or mobility restrictions. Furthermore, we compare the shares under the formal (de jure) lockdown policies assuming perfect compliance with the shares under de facto lockdowns where there is some degree of non-compliance. We then estimate individuals' potential labour income losses and examine changes in poverty and labour income inequality. We find an increase in poverty and labour income inequality in most of the LAC countries due to social distancing; however, the observed changes are lower under de facto lockdowns, revealing the potential role of non-compliance as a coping strategy during the lockdowns. Social distancing measures have led to an increase in inequality both between and within countries. Lastly, we show that most of the dispersion in the labour income loss across countries is explained by the sectoral/occupational employment structure of the economies.

The labor share and income inequality: some empirical evidence for the period 1990-2015

PurposeThe purpose of this paper is to analyze empirically the relationship between the labor share and income inequality, as measured by the Gini coefficient and by the income shares for different quintiles, during the period 1990–2015 for 62 developed and developing countries.Design/methodology/approachThis study uses panel data techniques to analyze empirically the relationship between the labor share and income inequality.FindingsThis paper finds that a lower labor share is associated with a higher Gini coefficient. A lower labor share is found to be strongly associated with a smaller income share for the lowest two quintiles and larger income share for the highest quintile and weakly associated with a smaller income share for the third and fourth quintiles. Moreover, this paper finds that the lower the quintile, the stronger the impact of the labor share on the income share of the quintile.Social implicationsPolicymakers should take into account the evolution of the labor share. Public policies that improve labor market outcomes, such as those aimed to promote participation in the labor market and strengthen the human capital of low-income groups, seem necessary to prevent the rise in economic inequalities. Moreover, as the digital transformation of society progresses, policies to promote skill deepening may have an important role in reversing excessive inequalities.Originality/valueHow changes in the labor share are associated with changes in the Gini coefficient, and how this is driven by income shares for different quintiles, for a broad range of countries during the most recent period, has not been comprehensively studied using panel data techniques.

Organization of Production and Labor Income Inequality

This paper investigates how and why the organization of production (relative sizes of occupational groups, distribution of firm sizes), can be correlated with measures of income inequality (GINI, income in the top 1%) in market economies, where individuals with different skills make occupational choices as employees, solo self-employed, or entrepreneur-managers. We identify the parameters of the production technology, the organizational costs, and the distribution of skills in the population that jointly determine the size of occupational groups and the level of inequality in the distribution of income in the market equilibrium. The comparative static analysis reveals the contribution to income inequality of “market” and “organization”.

Labour migration and increasing inequality in Norway

This paper explores the contested relationship between migration and income inequality, using labour migration to Norway as a case. The enlargements of the European Union starting in 2004 were followed by an unprecedented increase in labour migration to Norway. In particular, many rural regions, previously unfamiliar with immigration, have experienced a large influx of labour migrants. In the same period, income inequality has increased. This paper uses register data on the municipality level from 2005–2016 to discuss (a) the direction of the relationship between labour migration and income inequality; (b) the degree to which labour migration affects inequality (in general and within the native population) compared to other immigrant groups; and (c) whether the effects are different in rural and urban municipalities. Findings show that labour migration from the ‘new’ European Union countries is followed by higher income inequality in Norway. No support is found for the reversed causal relationship that increasing inequality causes higher numbers of labour migrants. The effect of labour migration on overall inequality is considerable, but not as strong as the effect of refugees. However, as opposed to refugees, labour migration also affects income inequality within the native population, but this effect is only significant in rural areas.

Microdata for Macro Models: The Distributional Effects of Monetary Policy

In this paper we investigate the effect of standard and non-standard monetary policy implemented by the ECB on income inequality in Italy. We use for the first time the survey microdata on Income and Living Conditions (EU-SILC, Istat) in a repeated cross-section experiment to build measures of inequality and the distribution over time for incomes and subgroups of individuals. The identification strategy is based on surprises estimated in the EA-MPD database for the Euro Area. Using a battery of Local Projections, we evaluate the impact of monetary policy by comparing the performance of the impulse response functions of our inequality measures in different policy scenarios (pre and post-QE). The main findings show that an expansionary unconventional monetary policy shock compressed inequality of disposable and labor income more persistently than a conventional monetary shock. The financial channel has an equalizing effect favoring the less wealthy households mainly in the long-run. Overall, our evidence suggests that QE is associated with a decrease in Italian households inequality.

Is income inequality reflected in consumption inequality in Iran?

ABSTRACT This paper presents a descriptive analysis of the evolution of labor supply, income, and consumption inequality in Iran using the 2005–2015 waves of the survey of Household Expenditure and Income (HIES). We document that the sharp decline in income and consumption inequality after the Subsidy Reform in 2010 was accompanied by a slight but persistent rise in respective inequality measures. We find that not only the level of income inequality is higher than consumption inequality but also that the fluctuations in income inequality are larger than those of consumption inequality. Moreover, income and consumption inequalities among rural households are higher compared to urban families. Finally, we show that within-group inequality, the inequality due to circumstances, can explain a considerable portion of the divergence observed between income and consumption inequalities.

Corporate Hiring under COVID-19: Labor Market Concentration, Downskilling, and Income Inequality

Big data on job vacancy postings reveal multiple dimensions of the impact of Covid-19 on corporate hiring. Firms disproportionately cut hiring for high-skill jobs (within-firm downskilling). Financially-constrained firms scaled back high-skill hiring most, as did firms with workforces more adaptable to "working-from-home." Applying machine learning to job-ad texts, we show that firms have skewed hiring towards operationally-core positions. New positions take longer to fill, displaying greater flexibility regarding schedules, tasks, and requirements. Financing constraints amplify pandemic-induced changes to the nature of positions firms seek to fill, with constrained firms' new hires witnessing larger adjustments to job roles and employment arrangements.

Sector-Specific Shocks and the Expenditure Elasticity Channel During the COVID-19 Crisis

The COVID-19 economic crisis differs from past recessions in terms of the sectors and occupations that are being hit first. In this paper we propose a model with sectoral and occupational heterogeneity and non-homothetic preferences over sectors. That is, households' consumption bundles depend on income and they cut consumption on high income-elastic sectors when labor income falls. We first document that contact intensive occupations are concentrated in just a few, high-income-elasticity sectors. By contrast, production/manufacturing occupations are distributed widely across sectors. We then compare a COVID-19 type shock affecting service sectors first to a more ``standard recession affecting manufacturing in our model calibrated to match the U.S. economy. Our main result is that the increase in labor income inequality in the COVID-19 recession is one and a half times the increase in a normal recession due to the fact that contact intensive service workers are low income and work mainly in high income-elasticity sectors.

Expenditure Elasticity and Inequality Over the Business Cycle

I analyze a new channel through which real labor income inequality can vary over the business cycle arising from heterogeneity in the households exposure to different sectors in their consumption and labor choices. This heterogeneous exposure has two sources of origin both are empirically documented in this paper. First, low income households consume less from sectors with high expenditure elasticity and are therefore less exposed to fluctuations in their prices. Second, low income households tend to work more in service occupations that are used most intensely in sectors with high expenditure elasticity and are therefore more exposed to labor demand fluctuation in these sectors. While the mechanism is relevant to any shock that increases income, I focus my analysis on monetary policy shocks that are reliably identified using high frequency data. In my analysis I establish that as a response to a monetary policy shock the aggregate value added share of sectors with high expenditure elasticity increases. This implies an increase in: (1) the relative prices of goods or services in these sectors (2) the relative income share of employees in these sectors. Both effects result in an increase in the relative real wage of low income households that are less exposed to the increase in prices while more exposed to the increase in wages. I use a TANK model with non-homothetic preferences and sector heterogeneity to quantify the effects of this mechanism and evaluate how it has change over time with changes in sectoral and occupational composition.

UK and other advanced economies productivity and income inequality

ABSTRACT The focus of this contribution is on weak productivity growth, in the UK and other advanced economies, which has been slowing down ever since around 2000, and on increasing income inequality; both of which have been caused by a number of factors, including ‘secular stagnation’. Actually, recent evidence clearly suggests that labour productivity and income inequality have been closely and significantly related; this is so since there is a strong relationship between productivity, inequality, economic growth and real wages. Productivity growth is the key determinant of how demand can grow without inflation, thereby reducing inequality of income. The slowdown in productivity growth and increase in inequality have been in evidence in the UK and other advanced economies. Indeed, they have become more pronounced following the Global Financial Crisis. It is the case that although weak productivity growth and increased income inequality predate the Global Financial Crisis, and the Great Recession, they have clearly worsened following them.

Productivity and inequality in the UK: a political economy perspective

This contribution is based on the proposition that labour productivity and income inequality are closely and significantly related; this relies on the proposition that that there is a strong relationship between productivity, inequality, economic growth and real wages. Productivity growth is the key determinant of how demand can grow without inflation, thereby reducing inequality of income, wealth and opportunity. Indeed, productivity is a significant factor in terms of inequality. It is also the case that the slowdown in productivity growth and increase in inequality that have occurred over a number of years now has affected many advanced economies, as well as others, and has become more pronounced following the Global Financial Crisis. Although weak productivity growth and increase in inequality predate the Global Financial Crisis and the subsequent Great Recession, they have both been exacerbated following them. We deal with these problems from a political economy perspective, and from the point of view that emphasises the structure and power in an economic system. We focus on the UK relevant experience along with other countries.

Неравенство возможностей: роль пространственного фактора

The concept of equal opportunities was shaped on the back of western social philosophy at the end of the XX century as a result of the development of egalitarian theory of social justice. According to it, the determinants of individual achievements should be divided into two categories: ‘circumstances’, which individual has no control on, and ‘efforts’, which individuals should be responsible for. Our research deals with measuring opportunity inequality in the Russian Federation and its regions. The regions of the Russian Federation are well known to be very heterogeneous, consequently, the variation of their social and economic indicators is significant. As a result, the level of opportunity inequality may fluctuate significantly among the regions. Our research is designed to test the hypothesis. The analysis is based on the data from the survey ‘Survey of Income and Participation in Social Programs’ conducted by the Federal state statistics service of the Russian Federation. The estimation technique is parametric and based on the ex-ante definition of equality of opportunity. The mean logarithmic deviation is used as inequality index. According to our calculations, the contribution of opportunity inequality to the labor income inequality in Russia is approximately 30%. Spatial factors (region of residence and type of settlement) are responsible for nearly 70% of opportunity inequality. Absolute level of opportunity inequality varies widely among regions – from 0,0117 to 0,0547 in 2017. The contribution of opportunity inequality to inequality of labor income ranges from 7,24 to 27,35% in 2017 across regions. The growth of opportunity inequality is shown to be correlated with the decrease of the economic development rate and the increase of labor income inequality

Markups, Labor Market Inequality and the Nature of Work

We demonstrate the importance of distinguishing between the traditional use of labor for production, versus alternative uses of labor for overhead, marketing and other expansionary activities, for studying the distribution of both factor income and labor income. We use our framework to assess the impact of changes in markups on the overall labor share and on labor income inequality across occupations. We identify the production and expansionary content of different occupations from the co-movement of occupational income shares with markup-induced changes in the labor share. We find that around one-fifth of US labor income compensates expansionary activities, and that occupations with larger expansionary content have experienced the fastest wage and employment growth since 1980. Our framework can rationalize a counter-cyclical labor share in the presence of sticky prices and can be used to study the distributional effects of demand shocks, monetary policy and secular changes in competition.

Is Income Inequality Reflected in Consumption Inequality in Iran?

This paper presents a descriptive analysis of the evolution of labor supply, income, and consumption inequality in Iran using the 2005-2015 waves of the survey of Household Expenditure and Income (HIES). We document that the sharp decline in income and consumption inequality after the Subsidy Reform in 2010 was accompanied by a slight but persistent rise in respective inequality measures. We find that not only the levels of income inequality is higher than consumption inequality but also that the fluctuations in income inequality are larger than that of consumption inequality. Moreover, income and consumption inequalities among rural households are higher compared to urban families. Finally, we show that within-group inequality, the inequality due to circumstances, can explain a considerable portion of the divergence observed between income and consumption inequalities.

‘Grand challenge’ or ‘not an issue’? The discourses on income inequality of compensation managers and consultants

Within the broader debate on the increase of labor income inequality, social concerns have growingly focused on organizational practices. Among these, market-oriented compensation practices, with their extensive pay dispersion, are deemed crucial ‘inequality-generators’. Based on 49 interviews with Italian compensation managers and consultants, this article explores whether, in their talk, these actors align with (or detach from) inequality-increasing compensation practices, and which discourses they employ to justify their posture. By resorting to the discourses on meritocracy and market, the respondents fully supported dispersed market-based compensation structures, thus endorsing a motivation- (rather than legitimacy-) centered approach informed by a shareholder (rather than a stakeholder) perspective. In countering possible criticisms, they advanced two main discursive responses: ‘transparent communication’, i.e. communication intended to convince critics about the benefits of merit-based and market-based pay dispersion; and ‘populism’, i.e. a term used to discredit those critics that question any type of pay dispersion. Assuming a discursive approach, the paper adds an HRM perspective to the growing debate on the role of organizations in producing and re-producing income inequality, while critically showing that compensation managers and consultants fail as a resource for inequality reduction.

Inequality and government debt: Evidence from OECD panel data

This paper analyzes how government debt can be caused by changes in the income distribution. Unlike Azzimonti et al. (2014), I distinguish between income inequality induced by differences in labor productivity and income inequality induced by differences in capital income, utilizing the Luxembourg Income Study. Using data for OECD countries, an increase in labor income inequality leads to higher debt level whilst capital income inequality is negatively associated with debt.

Timely Indicators for Labour Income Inequality

In this paper I propose a methodology for obtaining timely indicators for labour income inequality using the Italian Labour Force Survey (ILFS), a database which collects detailed information not only on individuals’ labour market status, but also on their households and wages. I develop a framework to estimate household labour income and I use it to construct timely indicators of the labour income distribution, to be used as complements to the standard and richer information provided by the household income surveys, like the Survey on Household Income and Wealth (SHIW) and the EU Statistics on Income and Living Conditions (EU-SILC). I discuss the assumptions and measurement issues underlying the proposed methodology and show that the ILFS-based Gini index closely tracks those calculated on standard household income surveys. The proposed measure is then a tool for monitoring the evolution of labour income inequality following labour market adjustments.