Inequality and Poverty: Volume 14

This volume is the outgrowth of the first meeting of the Society for the Study of Economic Inequality (ECINEQ). The Society's aims are to “provide an international forum for all researchers interested in the study of economic inequality and related fields, bringing together the diversity of perspectives.”

In this paper we analyse the distinct effectiveness of demographic, labour market and welfare state transfers events in promoting exits from deprivation for childbearing households in Spain, a Southern European Country with high and persistent child poverty and a familial welfare regime. We undertake a thorough analysis of outflow rates and of the effect of events on them by household types using a detailed descriptive approach and a multivariate analysis to control for household heterogeneity. Our multivariate results imply that, in contrast with the descriptive analysis, the presence of children robustly reduces household's chances to step out of poverty. In turn, both methodologies show that the effectiveness of labour market events is consistently lower for childbearing households while their prevalence is particularly high. Also, both the prevalence and the effectiveness of events related to the beginning of state transfers are high for households without children.

Do people prefer a society with an extensive social welfare system with high taxes, or low taxes but lax redistributive policies? Although economists have for a long time investigated the trade-off mechanism between equity and efficiency, surprisingly little information is available about citizens' preferences over the distribution of income in a society. The aim of this paper is to address this shortcoming by identifying, in an empirical study using the World Values Survey, what shapes individuals' preferences for income equality in Spain. We present evidence that social capital is a key determinant to understanding preferences towards redistribution and equality.

This paper examines the gender differences of expenditure distribution within the last decade in Spain. In particular, the Lorenz dominance is tested using expenditure distributions as approximated by the Dagum model. The sensitivity of the results to some conceptual choices, such as the equivalence scale or the gender reference, is also analysed.

Social exclusion can be defined as a process leading to a state of multiple functioning deprivations. Cross-sectional headcount ratios of social exclusion may overstate the extent of the problem if most individuals do not remain in the same state in successive years. To address this issue, we need to focus on mobility. Therefore, the aim of this paper is to analyse changes in the individual levels of social exclusion focusing on the extent to which individuals change place in social exclusion distribution. We find that social exclusion is partially transitory and, therefore, we suggest a more restrictive definition of social exclusion.

This paper compares two alternative methods for measuring multidimensional poverty. This question has become extremely important in recent years, both in the scientific literature and in social policy. We propose to use latent class analysis to evaluate poverty in Spain. We make use of the “fuzzy set” approach, and compare the results achieved from these two methodologies.

This paper analyses the relative inequality of the personal income distribution in the EU15 and Member countries using the European Community Household Panel (1994–2001). We select well-known measures like the Gini and Atkinson indices and calculate the 95 percent confidence intervals. Whenever possible we identify unambiguous rankings; when this is not possible we explain the differences through their inequality sensitivity and normative meaning.

We find an important regional differences in income inequality when comparing Southern European countries with the Northern and Central European ones. In 2001, Southern Europe and the United Kingdom are the most unequal countries in spite of the fact that the majority of these countries enjoyed decreasing income inequality over the time period studied.

In the typical study comparing the evolution of economic inequality among different territorial units, an inequality indicator is chosen, and its value is calculated from sample data. Thus, the problem turns out to be the selection of the inequality indicator.

This paper shows that there is no need for a selection of a single inequality indicator. A whole set of inequality indicators are considered and calculated for the European Countries, using income data from European Community Household Panel (ECHP). The information they provide is then collapsed into a composite inequality indicator, through an adaptation of Principal Component Analysis (PCA). We analyze the conditions needed to make longitudinal comparisons possible. Results obtained with this composite indicator are used to compare and analyze the trends in economic inequality in the EU Countries.

In a period of political change in the European Union, when the European Constitution is in the centre of the debate, the social convergence among European Union countries is a crucial issue. However, the measurement of welfare, inequality and poverty and the comparisons among countries are issues of great controversy. One of the main reasons for this is that implicit or explicit value judgements have to be made, and it is not easy to determine which of these value judgements are the most appropriate ones. In this paper we apply inference-based stochastic dominance methods to study welfare, inequality and poverty in European Union countries in 2000, applying purchasing power parities from the OECD. There are two main advantages of the methods and data used in this work: on the one hand, the stochastic method uses explicit and widely, though not universally, accepted assumptions, and if this small number of assumptions is accepted, the welfare and poverty ranking that the method provides is unambiguous. On the other hand, the use of the European Community Household Panel permits the comparisons in welfare, inequality and poverty among different countries using harmonised data. In addition, the use of inference tests permits a more precise ranking.

This paper examines the Italian social policy instruments to contrast poverty among the elderly, focussing on the so-called social pension. Firstly, it analyses the institutional characteristics of the social pension, assessing its explicit and implicit design according to poverty indicators that are consistent with the official standards by the Italian Poverty Commission. The main conclusions are that the social pension acts as a limit to the poverty intensity rather than as a limit to the poverty incidence, and that in case of beneficiaries with a dependent spouse the pension includes an extra benefit that ensures the couple is receiving a minimum income above the poverty line. Secondly, the paper examines the ex-post performance of the social pension, by using data from the Bank of Italy Survey of Households Income and Wealth (BISHIW). In this analysis we take into consideration also individuals' and household's characteristics that are ignored by the law requisites for the access. Data point to some inefficiency in the selectivity of the system and to some ineffectiveness in contrasting poverty. For a social pensioner's household the econometric analysis shows that the probability of falling into poverty is higher, but only during economic downturns; that poverty on average is more widespread, although less intense; that poverty has more a cyclical than a persistent nature. Furthermore, there is evidence of a relevant role played by the interactions among household's and individuals' characteristics in determining the degree of exposure to poverty risks. An appropriate consideration of these aspects in the design of the tools directed at contrasting poverty seems vital in order to improve the effectiveness and the efficiency of the policy action.

The paper examines several measures of multidimensional inequality, analysing their properties and majorisation criteria. Moreover, it presents a new measure which generalises Bourguignon (1999) and includes Tsui measures (1999), while preserving the advantages of Maasoumi's method (1986) of explicitly acknowledging the role of parameters relevant to multivariate settings. Finally, an application to Argentine data is provided in order to illustrate the decisions involved in the process of applying these measures and the usefulness of having appropriate criteria when making those decisions.

This paper proposes a generalized approach to the issue of decomposing inequality by population subgroups. This generalization uses the concept of Shapley value decomposition and takes into account the fact that either the between or the within groups inequality may be considered as residual terms, that the population size of the subgroups may have an impact on inequality and finally that there are various ways of ranking the individuals when defining the Gini index of inequality. The paper presents an empirical illustration based on the 1998 Israeli Income Survey where the subgroups distinguished are the male- and female-headed households.

This paper develops criteria for an alternative concept of inequality dominance and shows how they relate to criteria for comparing relative poverty. The results warn inter alia against the use of some popular indices of inequality. They do, however, provide an ethical basis for the use of other popular indices of (restricted) inequality as potential relative poverty indices. The results also suggest an interesting extension of the Schutz coefficient as well as a use of Lorenz curves for the analysis of relative poverty and restricted inequality. A graphical illustration shows how the new criteria of restricted inequality dominance extend the ranking power of previously proposed inequality dominance criteria.

We use the Duclos, Makdissi and Wodon (2005) decomposition of programme dominance into targeting dominance and allocation dominance curves to identify poverty-reducing programme reforms. In particular we recognise the importance of considering more than one dimension when identifying poverty-reducing policy reforms. For this purpose, we use sequential stochastic dominance methods to analyse the poverty impact of policy programme reforms, particularly the case of income transfers and commodity taxation.

Following Ahmad and Stern (1984) a number of papers have been devoted to the analysis and the application of revenue-neutral and welfare-enhancing marginal commodity tax reforms. A recent stream of literature has investigated poverty-reducing commodity tax reforms using specific poverty measures. Here we derive the conditions under which a revenue-neutral marginal commodity tax reform increases the mean income of the poor and generates Lorenz-dominance of post-tax with respect to pre-tax distribution of equivalent income among the poor. These conditions are easy to interpret and not particularly difficult to apply.

The literature on household behavior contains hardly any empirical research on the within-household distributional effects of tax-benefit policies. We simulate this effect in the framework of a collective model of labor supply when shifting from a joint to an individual taxation system in France. We show that the net-of-tax relative earning potential of the wife is a significant determinant of intrahousehold negotiation but with very low elasticity. Consequently, the labor supply responses to the reform are essentially driven by the traditional substitution and income effects as in a unitary model. For some households only, the reform alters the intrahousehold distribution in a way that tends to change normative conclusions. A sensitivity analysis shows that the distributional effects captured by the collective model would be significant only for reforms both radical and of extended scope.

We examine individuals' distributional orderings in situations involving (a) comparisons of social welfare and (b) choice under uncertainty. There is a special focus on whether these orderings satisfy the principle of transfers (the principle of mean-preserving spreads). The results are compared with those of earlier work that was conducted in the context of inequality and of risk.

A questionnaire is used to assess the impact of race, current past and future family income, as well as political beliefs on the support for redistribution. Current income maximization predicts those with above average income oppose redistribution. However blacks support redistribution until income is well above average and whites oppose redistribution even if income is well below average. Those with incomes below average expect to move up and this prospect of upward mobility reduces support for redistribution. The rich are more likely to espouse arguments that protect their wealth. Most intriguingly, as blacks become richer, support for redistribution falls especially rapidly.