Non-labor Income Research Articles

Impact of Uncertainty Shocks on Income and Wealth Inequality

AbstractWe analyze the distributional consequences of uncertainty shocks in the U.S. economy. While their impact on income inequality appears marginal when measured by a single statistic, there are important variations: inequality between the rich and middle‐income groups decreases, while inequality between the middle and poor‐income groups increases significantly. Additionally, uncertainty shocks increase labor income inequality through higher unemployment rates but simultaneously decrease nonlabor income inequality by reducing business and interest income. Uncertainty shocks reduce disposable income inequality, demonstrating the role of redistribution policy. Finally, they tend to reduce wealth inequality, mainly due to their adverse impact on financial asset prices, predominantly owned by wealthy households.

Reprint of: How do households respond to income shocks?

We use panel data from the Italian Survey of Household Income and Wealth from 1991 to 2016 to document what components of the household budget constraint change in response to shocks to household labor income, both over shorter and over longer horizons. Consumption and wealth responses are informative about the household consumption (or savings) function and thus about what class of consumption-savings model best describes the data. Empirically, we first show that shocks to labor income are associated with negligible changes in transfers and non-labor income components, modest changes in consumption expenditures, and large changes in wealth. To understand the wealth response we then split households into a sample that does not own business or real estate wealth, and a sample that does. For the first group, we find that consumption responses are more substantial (and increasing with the horizon of the income shock) and wealth responses are much smaller (and mildly increasing with the income shock horizon). Turning to theory, we argue that for this group, a simple extension of the standard permanent income hypothesis (PIH) consumption function that allows for partial insurance against even permanent income shocks explains the consumption and wealth responses well, both at short and long horizons. For the second group with business wealth or real estate wealth the standard framework cannot explain the large changes in wealth associated with income shocks. We conclude that models which include shocks to the value of household wealth are necessary to fully evaluate the sources and consequences of household resource risk.

The responsiveness of rural poverty to structural and rural transformations in Ethiopia

AbstractThis study investigates the effects of economic opportunities created by structural transformation, such as income from labor employment and income from nonlabor sources, on the incidence, depth, and severity of rural poverty using the 2018/2019 Ethiopian Socioeconomic Survey data. The effects of rural transformations in terms of nonfarm self‐employment and improved farming systems on poverty are also investigated. Ordinary least square, Probit, Instrumental Variable Probit model, and two stage least square estimation methods are used depending on the nature of outcome variables and the Wald test of exogeneity. The findings show that labor income (especially regular salaried income) and nonlabor income (especially remittance from international sources) are crucial in reducing the incidence of rural poverty. Improvements in crop and livestock practices, on the other hand, reduce the incidence as well as depth and severity of rural poverty. The findings suggest that more attention should be given to enhancing the modernization of crop and livestock sectors by expanding access to farm credit and improved extension systems, among other things.

Revealing the New Nexus in Urban Unemployment Dynamics: The Relationship between Institutional Variables and Long-Term Unemployment in Colombia

Abstract The aim of this study is to assess the impact of various institutional variables on the long-term unemployment rate (LAPU) in the Colombian urban labor market. Vector autoregressive models are estimated using microdata from the Great Integrated Household Survey (GEIH), which has national coverage. Monthly data were analyzed for the 13 major capital cities and their metropolitan areas, as well as for the group of 11 intermediate capital cities, resulting in a total of 24 main urban labor markets in Colombia. The dataset includes unionized individuals, individuals with verbal and written contracts, non-labor income, unemployed individuals with subsidies, and individuals receiving severance payments. The results indicate that the growth in the number of unionized employees and non-labor income contributes to increasing the persistence in the duration of unemployment in Colombia. A key finding is that a positive growth in the ratio – gap between individuals with written contracts versus verbal contracts reduces LAPU. This provides evidence of how reducing information asymmetries in the Colombian labor market can improve labor market outcomes and contribute to medium- and long-term social welfare in Colombian urban centers.

Socio-Economic Study of the Productive Role of Married Women in West Nusa Tenggara

This paper aims to analyze socio-economic factors (women's education, husband's education, wages, family income, non-labor income, household expenditure) that encourage the productive role (work participation) of married women in West Nusa Tenggara. The research was conducted using qualitative ethnomethodological methods by trying to explain the reality of the socio-economic dimension of the productive role of married women in West Nusa Tenggara. Data was obtained from married female informants who worked as key informants, while family members, and other related informants, as accompanying informants (as well as for validation tests). The results of the study show a social (non-economic) aspect, for those who are highly educated, they want to devote the knowledge they have obtained. However, in addition to these reasons, there are also women who choose to work because they feel subjective, such as bored with the routine of taking care of the house, or because of the assumption that by working, their association and status are better than just being housewives. The basic assumption of all married women who perform productive roles is as a source of additional income. From the economic aspect, the condition of low-income households (poor families) has a target level of income in line with the level of subsistence. That the productive role of married women will depend on the husband's ability to generate income compared to the income target. If the husband's income is below the income target, the wife will work more to achieve the subsistence needs. The findings of this study can be concluded that there are two major reasons why married women in West Nusa Tenggara to perform dual roles, namely because it is a "must" and because of a "desire".

Computational Modeling Interpretation Underlying Elevated Risk-Taking Propensity in the Dynamic Risky Investment Process of Non-Labor Income.

Money source influences risk-taking behaviors. Although studies consistently indicated that individuals demonstrate a higher propensity to make risky investments when utilizing non-labor income as opposed to labor income, explanations as to why non-labor income leads to continuously blowing money into risky investments are scarce. The current study leverages a computational modeling approach to compare the differences in the dynamic risk investment process among individuals endowed with income from different sources (ie, non-labor income vs labor income) to understand the shaping force of higher risk-taking propensity in individuals with non-labor income. A total of 103 participants were recruited and completed the Balloon Analogue Risk Task (BART) with an equal monetary endowment, either as a token for completion of survey questionnaires (representing labor income) or as a prize from a lucky draw game (representing non-labor income). We found that individuals endowed with non-labor income made more risky investments in BART compared to those with labor income. With computational modeling, we further identified two key differences in the dynamic risk investment processes between individuals endowed with labor and those with non-labor income. Specifically, individuals endowed with non-labor income had a higher preset expectation for risk-taking and displayed desensitization towards losses during risk investments, in contrast to individuals with labor income. This study contributed to a better understanding of the psychological mechanisms of why individuals make more risk-taking behaviors with non-labor income, namely higher preset expectations of risk-taking and desensitization towards losses. Future research could validate these findings across diverse samples with varying backgrounds and adopt different manipulations of labor and non-labor income to enhance the external validity of our study.

Global Perspectives on Fiscal Policy and Labor Income-Leisure Choices: Theoretical and Practical Insights

In macroeconomic literature, fiscal policy is considered a powerful tool to achieve sustainable development, full employment, and social well-being in developed and developing societies. For this, public authority uses expansionary and contractionary tax policies to achieve stable growth and employment environment for the stable labor market. This study theoretically and empirically investigates the problem of inference on income-leisure labor preference. Also, it considers the impact of tax and expenditure structure on labor choices regarding working hours under the assumption of neoclassical theory. We use quantile regression analysis to investigate the data set for worldwide, high, and low-income countries from 2000 to 2022, for the macro-level analysis based on the empirical investigation of 123 countries cross-section panel. The outcomes show that when the fiscal authorities impose a regressive form of taxes, it may hurt the labor wages and distribution of income-leisure preferences or the welfare of labor. Similarly, non-labor income hurts labor utility through a large volume of non-development expenditure. However, when the progressive form of taxes is imposed, it may improve the labor utility. At the same time, on the other side, when fiscal authority disburses the development expenditure, it may support the non-labor income through the provision of public goods and services. For practice, the empirical results of quantile regression show that government expenditure has a positive while tax hurts labor supply. Fiscal policy in low-income countries has provided an alternative outcome

Inverted U-shaped relationship between non-labor income and labor hours, with wage rates as the threshold variable

<p class="MsoNormal" style="text-align: justify;"><span lang="EN-US" style="font-size: 14pt; font-family: 'times new roman', times, serif;">Non-labor income is a crucial factor influencing time allocation, and prior studies have primarily concentrated on the linear association between non-labor income and labor hours. Utilizing micro-survey data from the CFPS in 2018 and 2020 and employing the panel threshold model, this paper empirically identifies a double threshold with the wage rate as the threshold variable. This finding reveals a non-linear relationship between non-labor income and labor hours. The two thresholds categorize the relationship into three intervals. In the first interval, non-labor income significantly promotes labor hours, while in the second and third intervals, non-labor income significantly decreases labor hours, exhibiting slightly varying degrees of influence. In general, the relationship between non-labor income and labor hours demonstrates an irregular inverted U-shaped pattern. Upon dividing the workers in the sample into three groups based on the two thresholds, it is observed that wage rates exhibit a positive correlation with non-labor income.</span></p>

Remittances, Nonlabor Income as a Source of Hysteresis in Unemployment in Colombia, 2010–2020

AbstractThis study seeks to determine the impact of remittances and nonlabor income on the duration of unemployment, and therefore on the hysteresis phenomenon in Colombia for the period between January 2010 and January 2021. The long-term unemployment rate in Colombia (LAPU) is calculated, and a vector autoregressive (VAR) model is subsequently estimated to evaluate the impact of remittances and nonlabor income on the LAPU. The results suggest that the increase in nonlabor income significantly affected LAPU in Colombia in the period analyzed. The growth of remittances instead turned out to positively and significantly impact LAPU only during the COVID-19 pandemic crisis. This suggests that remittances have become a fundamental income in times of crisis that allow for financing the search for work for a longer period of time, thus increasing the duration of unemployment and generating a hysteresis effect.

ANALISIS PENGARUH FAKTOR SOSIAL EKONOMI TERHADAP PARTISIPASI KERJA PENDUDUK LANJUT USIA DI KABUPATEN BADUNG

The high level of employment of the elderly population indicates that the contribution of the elderly to the economy is quite large, both to meet their own needs and to take care of family dependents. The purpose of this study was to analyze the effect of age, marital status, residence status, education, non-labor income, work dependents and health on the work participation of the elderly in Badung Regency. The collected data were then analyzed using descriptive analysis, multiple linear regression and the classical assumption test. The results showed that age, marital status, residence status, education, non-labor income, family dependents and health simultaneously affect the work participation of the elderly in Badung Regency. Age and non-labor income partially have a positive and significant effect on the work participation of the elderly in Badung Regency, while education, marital status, residence status partially have a negative effect on the work participation of the elderly in Badung Regency. Family dependents and health variables have no significant effect on the work participation of the elderly in Badung Regency. The implication of this research is in line with Borjas' theory of neoclassical capital of labor or leisure choice, namely the neoclassical capital of work life which concerns an individual's choice to work or enjoy leisure time, which can be expressed as individual satisfaction with consumption and leisure time enjoyment.
 keyword: Age, Marital Status, Residence Status, Education, Non Labor Income, Family

Semiparametric approach to estimation of marginal mean effects and marginal quantile effects

We consider a semiparametric generalized linear model and study estimation of both marginal mean effects and marginal quantile effects in this model. We propose an approximate maximum likelihood estimator, and rigorously establish the consistency, the asymptotic normality, and the semiparametric efficiency of our method in both the marginal mean effect and the marginal quantile effect estimation. Simulation studies are conducted to illustrate the finite sample performance, and we apply the new tool to analyze a Swiss non-labor income data and discover a new interesting predictor.

Early Warning of Poverty Returning against the Background of Rural Revitalization: A Case Study of Two Counties in Guangxi Province, China

China has achieved the goal of building a moderately prosperous society in a well-rounded way by 2020. At this stage, effectively dealing with poverty and not returning to it has become the bottom-line task of rural revitalization. The purpose of this study is to construct a poverty-return early warning and evaluation system for X and Y counties in Guangxi. Based on the field survey data of 150 households from the questionnaire survey in X County and Y County of Guangxi Province, an early warning evaluation system for returning to poverty in the two counties of Guangxi Province is constructed. The AHP analytic hierarchy process is used to evaluate the early warning of returning to poverty for farmers. The BP neural network algorithm is used to verify the rationality of the method; the overall poverty relief situation in the two counties is stable and the living conditions are good. The early warning results are as follows: One household in X County has a severe early warning, six households have a slight early warning, and sixty-four households have no early warning; in Y County, six households had severe early warning, six households had mild early warning, and sixty-seven households had no early warning. For farmers, serious early warnings are mainly caused by the lack of labor force and low annual per capita net income, as well as the lack of the main means of livelihood and capacity. The characteristics of mild early warnings for farmers are mainly that the proportion of non-labor income is relatively high, and the farmers lack the ability and way of long-term development. Different suggestions are put forward for farmers with different early-warning levels, focusing on improving their viability and development ability.

Pooling my personal account: Income responses to the payroll tax in China

Developing countries collect not only a far lower share of GDP in taxes, but also less payroll taxes than rich countries. This paper explores income responses to the payroll tax by evaluating the 2006 pension reform that subtracted 3 percentage points of employees' Defined Contribution account in China. First, our estimate of total income elasticity with respect to the pension rate is larger than 2, implying a lower optimal payroll tax rate than in rich countries. Second, we separate total income into labor and non-labor income, and show significant income shifting from labor to non-labor income. Third, we provide suggestive evidence that income responses to the pension reform are from evasion rather than real responses. We emphasize the necessity of administrative capacity for developing countries to extend the pension system. Remarkably, sharing the employer payroll tax with employees may be a self-enforcement mechanism, similar to the value-added tax, of the payroll tax.

Financial resilience of two‐worker households from a health perspective

AbstractThe COVID‐19 pandemic highlighted the significant impact of health conditions on household finance. Traditional measures of financial resilience ignored households' ability to adjust to labor income disruptions. We proposed a more comprehensive two‐tier measure of financial resilience by accounting for nonlabor income and spending adjustments in the face of income loss associated with health situations. Using this measure, we evaluated the financial resilience of two‐worker households with members having COVID‐19 health risk conditions and other mental and physical chronic diseases. Our findings showed that households with cancer patients were more financially resilient yet those having obese members were less financially resilient. Decomposition of the financial resilience measure revealed differences in financial resources allocation—households with cancer patients allocated more wealth to noncash financial assets, whereas households with obese members saved less and spent more. Our findings shed light on financial planning practices and public policies of emergency assistance.

Taxonomic analysis of income inequality in the EU countries

The problem of population economic inequality is an actual issue for all countries of the world, but the peculiarity of economic inequality in EU countries lies in the differentiation of non-labor incomes received from property ownership, and also in the uneven distribution of residential and commercial real estate. Therefore, the analysis of population economic inequality in the EU countries is an urgent scientific and practical task. The purpose of this study was to determine the degree of economic inequality and the optimal rate of population income differentiation in the EU countries, and to develop measures based on this to reduce the degree of property inequality in the countries of this region. To achieve the goal, the taxonomy method was used, as well as general scientific methods (dialectics, analysis, synthesis, induction, deduction). For the quantitative description of the obtained results, the Harrington factor-criterion scale was used, which made it possible to divide 27 EU countries into three groups (clusters): countries with a high degree of economic inequality (Bulgaria, Latvia, Lithuania); countries with an average degree of economic inequality (Austria, Belgium, Greece, Spain, Italy, Cyprus, Luxembourg, Germany, Poland, Portugal, Romania, Hungary, Croatia, Finland, France, Sweden); countries with a low degree of economic inequality (Denmark, Estonia, Ireland, Malta, the Netherlands, Slovakia, Slovenia, the Czech Republic). To reduce the population economic inequality in the countries of the third group, the following measures have been proposed: stimulation of domestic and foreign investments; ensuring a high return on financial assets at the state level; creating more favorable conditions for the development of industry and increasing the wages of workers at the industrial enterprises. The obtained results have scientific and practical value on how to improve the economic policy of the countries of Northern and Eastern Europe and can be used in further theoretical researches on problems of population economic inequality in the countries of this region and for the specification of applied measures to reduce economic inequality in Bulgaria, Latvia and Lithuania

Usability of the Indonesian Family Life Survey (IFLS) to Examine Recurrent Flooding and Household Food Access in Central Java, Indonesia

ObjectivesWe examine the utility and quality of IFLS – a longitudinal health and economic survey of Indonesian households – for studying the relationship between recurrent flooding and household diet-related food access. MethodsWe reviewed IFLS documentation and modules for availability, alignment, completeness, variety, continuity, and compatibility of information related to natural disasters and food access by considering the Data4Diets framework. Specifically, we examined household exposure to flood events and diet-related indicators. We conducted a crosswalk of modules and variables. We link flood monitoring data to IFLS to create a multilevel, longitudinal dataset for the current study. ResultsOver a 22-year span in1993-2015, the IFLS database provides information on 15,921 interviewed households including 1,949 from Central Java. IFLS was implemented in 5 waves: 1993,1997, 2000,2007, 2014 at a “kecamatan” (sub-district) spatial level of aggregation. Of the interviewed sample, 6,044 are “origin” households appearing in all waves and 9,877 are newly formed households containing a target member from a previous wave. The 15,185 (95%) households provided detailed information on sociodemographic characteristics, assets, economic shocks, farm and non-farm businesses, non-labor income, and household consumption and expenditures. The aggregated monthly consumption and expenditure data allow to derive the following food access indicators: food consumption score, household average dietary energy acquisition or consumption, household adequacy of fruit and vegetable consumption, household food expenditure share. Information pertaining to natural disasters was collected for waves 4 and 5, covering a 10-year time span. In Central Java, 828 (42%) origin and 1,121 (58%) offspring households allow to track food access outcomes over two decades. Flood monitoring data linked with IFLS is presented in dynamic maps. ConclusionsThe created dataset demonstrates how we can study the effects of climate changes on food security and nutrition. Our next step is to examine peak timing of poor household food access following flood events and explore the threshold effect among households with greater adaptive capacity. Funding SourcesNIFA, NSF.

Drawing a Line: Comparing the Estimation of Top Incomes between Tax Data and Household Survey Data

The paper uses the flexibility of household survey data to align their income categories and recipient units with the income categories and units found in data produced by tax authorities. Our analyses, based on a standardized definition of fiscal income, allow us to locate, for top-income groups, the sources of discrepancy. We find, using the cases of the United States, Germany, and France, that the results from survey-based and tax data correspond extremely well (in terms of total income, mean income, composition of income, and income shares) above the 90th percentile and up to the top 1% of the distribution. Information about income composition, available in the US, allows us to investigate the determinants of this gap in the US. About three-fourths of the tax/survey gap is due to differences in non-labor incomes, especially self-employment (business) income. The gap itself may be due to tax-induced re-classification of income from corporate to personal or/and to lower ability of surveys to capture top 1% incomes.

Money also is sunny in a retiree\u2019s world: financial incentives and work after retirement

This paper assesses the impact of financial incentives on working after retirement. The empirical analysis is based on a large administrative individual career data set that includes information about 2% of all German employees subject to social security or in marginal employment until age 67 and their employers in the period 1975–2014. We use the classical labor supply model and differentiate between the impact of (potential) labor and non-labor (pension entitlements) income. A Heckman-type two step selection model corrects for endogeneity. We show that labor income has a positive and non-labor income a negative impact on the decision to work after retirement. Especially individuals who can substantially increase their earnings in comparison to their pension entitlements accordingly have a higher probability to work. Men are more attracted by labor earnings incentives than women. Also individuals who work until retirement are easier attracted to work after retirement by higher labor income than those with gaps between employment exit and retirement. Our results allow the calculation of the impact of changes in taxes on labor and non-labor income and changes in earnings offers by employers on work after retirement for different demographic groups.

The determinant of hours of work (the empirical case for Indonesian old–age)

The increase in the population of old - age or elderly had become an inevitable thing for both developed and developing countries, Indonesia is one of them. With increasing life expectancy, getting healthier, and the desire to stay active; this encourages old – age individuals to carry out economic activities, one of them by working. This activity is not only to fulfill basic needs but also not all individuals of old – age receive pension social security. This paper aims to examine the determinants of the hours of work for old – age or elderly individuals in Indonesia. The paper findings, for old – age individuals who are under 75 years old, the factors influence the hours of work are economic factors (such as wages and non-labor income), the head of household status, marital status, education, urban rural, and industrial origin. However, the old – age individuals who are above 75 years old, these factors have no real influence. Activities carried out by this elderly group, both economic and non-economic, are more about efforts to maintain their routines so that they still feel healthy, they can meet many people, they do not depend on others, and become independent individuals. The suggestion, the government needs to pay attention to working hours and determine the proper industrial origin for elderly who still want to work; they should encourage the care programs for the elderly who come from their families, this is more beneficial for the elderly because it is expected to minimize the risk of illness and death. Furthermore, for old – age individuals who previously worked in the informal sector, the government needs to improve retirement security.

Формирование «общества потребления» в СССР: идеологический вызов для власти (1964–1982 гг.)

Introduction. In the 1960s, the formation of a consumer society began in the USSR. At the same time, the differences in living standard and quality of life between the segments of the population became more and more noticeable. These phenomena were in conflict with the Soviet ideology – the basis of the political system of the USSR. However, the problem of the consumer society formation in the USSR and the associated challenges to the Soviet system have not yet been sufficiently studied in historiography. Methods and materials. The methodological background of the research is based on the principles of scientific objectivity and historicism, as well as the general scientific and special methods typical for historical research. The research base includes both published and unpublished documents found by the author in the Russian State Archive of Contemporary History, the Russian State Archive of Socio-Political History and the Central State Archive of the City of Moscow. Analysis. The Soviet power tried to respond to the challenges of consumer society within the framework of the new political and ideological concept of Developed Socialism. One of the tasks of the country’s development at this stage was declared to be the achievement of a high standard of living in the country, as well as the widespread introduction of a system of material incentives. This policy has had a certain effect. However, the previous challenges for the Soviet system remained, and new problems arose. The wage growth outstripped the growth of labor productivity, and the commodity deficit became one of the main reasons for the decline in the effectiveness of the material incentive system. To solve the problems listed above, the authorities introduced innovations in policy: reducing the rate of income growth and the population’s desire to consume, increasing the role of moral incentives, fighting surplus money, and pursuing people for non-labor income. These innovations were in conflict with the policy aimed at increasing the welfare of the population. Results. Thus, the response of Soviet ideology to the challenges of the consumer society was to implement mutually exclusive measures. First, the authorities, while officially promoting a policy of increasing living standards, in practice sought to limit the growth of consumption. Second, material incentives to work and the rejection of equalization were introduced simultaneously with the censure of enrichment. In addition, the authorities failed to eradicate the negative manifestations of the consumer society for the Soviet ideology. In general, the inability of Soviet ideology to provide an adequate response to the challenges of consumer society was one of the manifestations of the ideological impasse in which the country was during the period under review. Problems related to the standard of living of the population became one of the time mines that undermined the Soviet system and led to its collapse.