Inequality

I have worked extensively on inequality, both in income and consumption (and how the two are related). More recently, I have become involved into two initiatives to study recent developments in inequality in different dimensions of well being:

Some of recent papers on inequality and social mobility include:

Working Papers

The Persistence of Socio-Emotional Skills: Life Cycle and Intergenerational Evidence
with A. de Paula and A. Toppeta (September 2020, NBER Working Paper No. 27823)

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Abstract: This paper investigates the evolution of socio-emotional skills over the life cycle and across generations. We start by characterising the evolution of these skills in the first part of the life cycle. We then examine whether parents’ socio-emotional skills in early childhood rather than in adolescence are more predictive of their children’s socio-emotional skills. We exploit data from the 1970 British Cohort Study (BCS70) and focus on two dimensions of socio- emotional skills: internalizing and externalizing skills, linked respectively to the ability of focusing attention and engaging in interpersonal activities. When looking at the evolution of socio-emotional skills over the life cycle, we notice a considerable amount of persistence which leads to a rejection of the simple Markov dynamic models often used in the literature. The BCS70 contains data on the skills of three generations. Moreover, the skills for cohort members and their children are not observed at the same calendar time, but at similar ages. We establish that parents’ and children’s socio-emotional skills during early childhood are comparable and estimate intergenerational mobility in socio-emotional skills, examining the link between the parent’s socio-emotional skills at age 5, 10 and 16 and the child’s socio-emotional skills between ages 3 and 16. We show that the magnitudes of intergenerational persistence estimates are smaller than the magnitude of intergenerational persistence estimates in occupation and income found for the United Kingdom. Finally, we estimate multi-generational persistence in socio-emotional skills and find that the grandmother’s internalizing skill correlates with the grandchild’s socio-emotional skills even after controlling for parental skills.

Economic Resources, Mortality and Inequality
with T.H. Nielsen (March 2020, CEBI Working Paper 06/20, Economica R&R)

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Abstract: Using full-population register data from Denmark, this study shows that estimates of the economic gradient in mortality depends on the specific measure of economic resources used, where we investigate permanent income, annual income or financial and housing wealth. Our favorite measure is what we call ’Permanent income’, that is the average level of income over a long interval. We find that when using annual income or current wealth, the gradient is overestimated, unless one controls for a number of additional variables, such as education, civil status and initial health. In the last part of the paper, we compare the results from Denmark to results from the UK. Although the countries are very different in terms of inequality, the estimates of the gradient we find are very similar, suggesting that differential levels of resources (including information), rather than inequality itself, determine the gradient in survival and mortality.

Global Demographic Trends, Capital Mobility, Saving and Consumption in Latin America and Caribbean
with A. Bonfatti, S. Kitao, and G. Weber (May 2015, IDB Working Paper No. IDB-WP-586)

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Abstract: This paper studies the effect of demo graphic transitions on the economy of Latin America and the Caribbean (LAC). The paper builds a model of multi- regions of the world and derive s the path of macroeconomic variables includ ing aggregate output, capital, labor and the saving rate as economies face a rapid shift in demographics. The ti ming and the extent of the demo graphic transition di ffer across regions. The model is simulate d under both closed economy and open economy assumptions to quantify the roles pl ayed by factor mobility across regions in shaping capital accumulation and equilibrium factor prices.

Publications

Inequality in Socio-emotional Skills: A Cross-cohort Comparison
with R. Blundell, G. Conti, and G. Mason (November 2020, Journal of Public Economics)

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Abstract: We examine changes in inequality in socio-emotional skills very early in life in two British cohorts born 30 years apart. We construct comparable scales using two validated instruments for the measurement of child behaviour and identify two dimensions of socio-emotional skills: ‘internalising’ and ‘externalising’. Using recent methodological advances in factor analysis, we establish comparability in the inequality of these early skills across cohorts, but not in their average level. We document for the first time that inequality in socio-emotional skills has increased across cohorts, especially for boys and at the bottom of the distribution. We also formally decompose the sources of the increase in inequality and find that compositional changes explain half of the rise in inequality in externalising skills. On the other hand, the increase in inequality in internalising skills seems entirely driven by changes in returns to background characteristics. Lastly, we document that socio-emotional skills measured at an earlier age than in most of the existing literature are significant predictors of health and health behaviours. Our results show the importance of formally testing comparability of measurements to study skills differences across groups, and in general point to the role of inequalities in the early years for the accumulation of health and human capital across the life course.

Consumption and Wage Inequality in the US: The Dynamics of the Last Three Decades
with N. Amin-Smith (January 2020, Fiscal Studies)

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Abstract: In this paper, we look at the evolution of consumption and wage inequality from 1980 to 2016 in the US. We use data from the Consumer Expenditure Survey (CEX) and the Current Population Survey (CPS) to look at differences in consumption and wages across groups in the population defined by educational attainment of the household head and year-of-birth cohort. We show that the results obtained by Attanasio and Davis (1996) for non-durable consumption still hold in more recent decades. In addition to non-durable consumption and services, we look at inequality measured in terms of expenditure on and stock of vehicles. The advantages of looking at these measures are that information on cars is typically measured more accurately than other components of expenditure and consumers are more likely to react by adjusting their stock of vehicles on the basis of long-term expectations about their economic prospects.

Education Choices and Returns on the Labor and Marriage Markets: Evidence from Data on Subjective Expectations
with K.M. Kaufmann (August 2017, Journal of Economic Behavior & Organization)

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Abstract: In this paper we analyze the role of expected labor and marriage market returns as determinants of the college enrollment decisions of Mexican high school graduates. Moreover, we investigate whether the (relative) weights of these factors differ by gender. We use data on individuals’ expectations regarding future labor market outcomes which we directly elicited from the youths, and two different measures of marriage market returns. First, marriage market returns are proxied by the (net-)supply of potential partners in the youths’ local marriage markets. Second, we use data which elicits youths’ beliefs about their future spouse’s earnings conditional on their own education level. We find that labor market as well as marriage market returns are important determinants of the college enrollment decision. However, boys’ and girls’ preferences differ in terms of the relative role of the two determinants, in that the relative weight of labor market versus marriage market returns is larger for boys than for girls.

Consumption Inequality
with L. Pistaferri (Spring 2016, Journal of Economic Perspectives)

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Abstract: In this essay, we discuss the importance of consumption inequality in the debate concerning the measurement of disparities in economic well-being. We summarize the advantages and disadvantages of using consumption as opposed to income for measuring trends in economic well-being. We critically evaluate the available evidence on these trends, and in particular discuss how the literature has evolved in its assessment of whether consumption inequality has grown as much as or less than income inequality. We provide some novel evidence on three relatively unexplored themes: inequality in different spending components, inequality in leisure time, and intergenerational consumption mobility.

Subjective Expectations and Income Processes in Rural India
with B. Augsburg (April 2016, Economica)

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Abstract: This paper uses unique primary data on directly elicited individual subjective expectations to analyse and characterize the process that generates the income of poor, rural Indian households. We validate and use responses to subjective expectations questions and a parametric assumption to fit a household-specific probability distribution for future income. Combining computed moments from this distribution with data for actual current income, we specify and estimate a dynamic model of household income. We find that our households face a very persistent income process. Our paper is one of the first that uses subjective expectations data to model income processes.

Modelling Movements in Individual Consumption: A Time Series Analysis of Grouped Data
with M. Borella (October 2014, International Economic Review)

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Abstract: We characterize the time-series properties of group-level consumption, income, and interest rates using microdata. We relate the coefficients of moving average representations to structural parameters of theoretical models of consumption behavior. Using long time series of cross sections to construct synthetic panel data for the United Kingdom, we find that for high-educated individuals the Euler equation restrictions are not rejected, the elasticity of intertemporal substitution is higher than one, and there is evidence of “excess smoothness” of consumption. Low-educated individuals, conversely, exhibit excess sensitivity of consumption to past income, and the elasticity of intertemporal substitution is not statistically different from zero.

Education Choices and Returns to Schooling: Mothers’ and Youths’ Subjective Expectations and their Role by Gender
with K.M. Kaufmann (July 2014, Journal of Development Economics)

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Abstract: In this paper we investigate the role of expected returns to schooling and of perceived risks (of unemployment and earnings) as determinants of schooling decisions. Moreover, our data also allow us to analyze whether youths’ and/or mothers’ expectations predict schooling decisions, and whether this depends on the age and gender of the youth. In particular, we use Mexican data that contain labor market expectations of mothers and youths. We find that expected returns and risk perceptions are important determinants of schooling decisions, the latter in particular from the perspective of the mother. Boys’ expectations predict the decision to enter college, but not to enter high school. While girls’ own expectations do not predict either of the two educational decisions, mothers’ expectations are particularly strong predictors of their daughters’ decisions.

Consumption Inequality over the Last Half Century: Some Evidence Using the New PSID Consumption Measure
with L. Pistaferri (May 2014, American Economic Review)

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Abstract: This paper contributes to the debate regarding trends in consumption inequality in the United States. We present a new measure of consumption inequality based on the redesigned 1999–2011 PSID. We impute consumption to the families observed before 1999 using the more comprehensive consumption data available from 1999 onward. One advantage of this procedure is in sample verification of the quality of the imputation procedure; another is that it yields a long time series (1967–2010). Consumption inequality was stable in the 1970s, as was income inequality. It increased significantly after 1980. The Great Recession was associated with a decline in consumption inequality.

Work in Progress

Intergenerational Mobility in Socio-emotional Skills
with A. de Paula and A. Toppeta (in Progress)

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Abstract: Available soon.