Do taxes and transfers reduce gender income inequality? Evidence from eight European welfare states.

We examine how taxes and transfers affect the incomes of men and women. Using microsimulation and intra-household income splitting rules, we measure the differences in the level and composition of individual disposable income by gender in eight European countries covering various welfare regime types. We quantify the extent to which taxes and transfers can counterbalance the gender gap in earnings, as well as which policy instruments contribute most to reducing the gender income gap. We find that with the exception of old-age public pensions, all taxes and transfers significantly reduce gender income inequality but cannot compensate for high gender earnings gaps. Our findings suggest that gender income equality is more likely to be achieved by promoting the universal/dual breadwinner model, whereby women's labour force participation and wages are on a par with men. To achieve this, men will likely need to work less and care more.

Endogenous longevity and optimal tax progressivity.

We study the impact of endogenous longevity on optimal tax progressivity and inequality in an overlapping generations model with skill heterogeneity. Higher tax progressivity decreases both the longevity gap and net income inequality, but at the expense of lower average lifetime and income. We find that the welfare-maximizing income tax is less progressive in our model with endogenous longevity than in our model with exogenous longevity. In a highly stylized calibration of the US economy, we show that optimal tax progressivity is less than what prevails under the current US tax system. Our results are robust to the range of empirical labor supply elasticity and the assumptions of missing annuity markets and stochastic health. Our conclusion for the optimal progressivity of the US tax system can be altered by the adoption of a more egalitarian welfare function or by increases in prevailing levels of wage inequality.

Migration, remittances, and inequality: estimating the net effects of migration on income distribution.

"This paper examines the net effects of migration and remittances on income distribution. Potential home earnings of migrants are imputed, as are the earnings of non-migrants in migrant households, in order to construct no-migration counterfactuals to compare with the observed income distribution including remittances. The earnings functions used to impute migrant home earnings are estimated from observations on non-migrants in a selection-corrected estimation framework which incorporates migration choice and labor-force participation decisions. For a sample of households in Bluefields, Nicaragua, migration and remittances increase income inequality when compared with the no-migration counterfactual."

Why do rich countries prefer free trade over free migration? The role of the modern welfare state.

"According to traditional trade theory (Heckscher-Ohlin), free trade and free migration are equivalent measures of economic integration leading both to an equalization of factor prices. This prediction is in sharp opposition to the observed preference of rich countries for free trade over free migration. We provide an explanation for this inconsistency: the redistribution policies in the countries. Social welfare in countries with a relatively small number of low-skilled native workers is higher with free trade than with free migration due to redistribution of income towards immigrating workers."

Income redistribution and migration.

"This paper analyses redistribution policies that transfer income between owners of immobile factors of production and workers in a given region. The menu of income distribution possibilities attainable through tax/transfer policy in the presence of labour mobility is characterized. Simple general equilibrium analysis shows that migration can lead to Pareto-inferior outcomes in the destination region if immigrants are the beneficiaries of redistributive transfers. All residents of the destination region may gain, however, if transfer payments are also paid to workers in the source region so as to reduce the level of immigration." (SUMMARY IN FRE)

[International migration and income redistribution: a trade-theoretic analysis]. / Internationale Migration und Einkommensverteilung: eine auBenhandelstheoretische Analyse.

"We analyze the income-redistribution effects of international migration in the host and source country in a general equilibrium framework. The well-known result that marginal migration leaves the welfare of nonmigrants unaffected is discussed in more detail with regard to shifts in national income distributions. With endogenous goods' prices the consequences for the income distribution are in general ambiguous--we show possibilities for an estimation of their magnitude. As long as wage disparities determine the direction of migration it increases world efficiency. However, redistributive policies may generate migration towards the low-wage country." (SUMMARY IN ENG)

Income inequality and urban/rural migration.

"The purpose of this paper is to examine some of the consequences of [U.S.] migration trends from 1970-1980, focusing on the relationship of income inequality within a state with population shifts within and across states. Furthermore, we wish to determine if the movement of wealth and the changing employment opportunities [have] had any effect on the distribution of income within the four census regions and for urban and rural populations across all fifty states." Data are from the 1970 and 1980 censuses.

Inequalities in the distribution of pharmacists' wage-and-salary earnings: indicators and their development.

BACKGROUND: Disparities in wages and salaries can be viewed as the dispersion of a statistical distribution that responds to observed and unobserved characteristics, and reflects socioeconomic phenomena such as the interplay of supply and demand, availability of information, and efficiency of markets in their search for equilibrium. OBJECTIVES: The aim of this study was to explore the nature of inequality in the distribution of pharmacists' wage-and-salary earnings and establish the extent to which inequality primarily occurred because of variation between/among groups or within groups of pharmacists in several classifications of human-capital and job-related preference variables. METHODS: Data were collected through the use of a survey questionnaire mailed to registered pharmacists in South Florida, USA. Five indicators of inequality (the log earnings variance, the coefficient of variation, the lower median share, the 90-10 decile ratio, and the Gini coefficient) were estimated for eight human-capital classifications and eight job-related classifications. A one-way ANOVA model was applied to the groups in each classification to compare variation between/among versus within pharmacy groups. RESULTS: Pharmacists' wage-and-salary earnings were more evenly distributed than most income distributions discussed in the literature. They were more equitably distributed for full-time pharmacists than for all pharmacists in the data set. All five-inequality indicators behaved similarly. Notable differences were observed between/among groups within the gender, age group, marital status, number of children, academic degree, and type of primary pharmacy activity classifications. CONCLUSION: Inequalities in wages and salaries have been identified both between/among and within pharmacist groups in several classifications using five commonly accepted indicators.

The Calcutta metropolitan district.

PIP: 11 million residents in 1450 square kilometers make the Calcutta Metropolitan District the world's most densely packed metropolis and the world's 6th largest urban agglomeration. But even though Calcutta is India's largest city, it is growing at a much slower pace than other Indian cities. Its annual growth rate between 1971 and 1981 was 2.65%, well below the 3.8% growth rate for India's urban population as a whole. Even at this relatively slow growth rate, however, Calcutta's population will still grow to 11.7 million residents in 1990 and 15.9 million in 2000. Calcutta's failure to create urban jobs quickly enough to accommodate its vast population increase has led to widespread evidence of unemployment and extreme poverty. Many in Calcutta complain that the central goverment has thwarted development and international aid to Calcutta. Industrial stagnation has slowed the area's urbanization and rural-urban migration. As greater numbers of new job seekers enter the labor force and the dropout rate diminishes due to dramatic inprovement in health, relentless pressure is put on Calcutta's already strained economy. Calcutta's job seekers will be partly absorbed by the informal sector; one study estimates that 40-50% of Calcutta's labor force is employed in the informal sector. In 1971, 6% of Calcutta's work force was employed in agriculture, 40% in manufacturing, and 54% in services. 2/3 of the population make less than $35 a month, and about 10% are officially unemployed. Despite great improvements in public works, Calcutta's slums are still India's worst. Living standards have gone down compared to India as a whole. Most of the middle class has moved to the suburbs; what is left in the central core is the rich and the poor. However, despite widening income disparities, Calcutta is still a peaceful city--especially so at a time when India is marked with so much violence.^ieng

The effect of women's labor force participation on the distribution of income in the United States.

The effect of women's labor force participation on income distribution in the United States is reviewed. "Because the wives of highly paid men participate less in the labor force, the earnings of working wives make the distribution of pretax, money income more equal for families than it might otherwise be. Although there is considerable speculation that future developments in women's labor force participation may foster greater inequality, the empirical results are mixed." The factors that need to be considered in future research are outlined.

[Socioeconomic characteristics of the labor force in Brazil (1976-1981)]. / Caracteristicas socio-economicas da forca de trabalho no Brasil (1976-1981).

"This paper studies the main changes in the Brazilian labor force from 1976 to 1981. Several aspects concerning... Brazilian labor market dynamics, such as activity levels, employment, income distribution and social security, are examined. The paper takes into account the short-run effects of...economic policy on the Brazilian labor force." (summary in ENG)

[Migrations and economic and social change in Egypt]. / Migrations et transformations economiques et sociales en Egypte.

PIP: The inexistence in the Arab world of institutions to facilitate development led Egypt to adopt the infitah, a policy of economic opening which is not a voluntarist economic strategy but rather is intended to create a climate favorable to a more capitalistic orientation for individuals with access to petroleum income. Egypt's gross national product grew by 4.6%/year in the dozen years through 1965, but thereafter growth was sluggish or even negative. After 1967 the choices of the dominant economic classes were oriented toward liberalism, and the arrival of Sadat allowed this orientation to prevail even before the infitah. The various measures of the infitah were designed to promote investment, reactivate the private sector, and reorganize the public sector. Most of the specific projects approved through 1978 were in the tertiary sector, they did little to stimulate further development, and the total number of jobs created was relatively insignificant. The transformation of the Egyptian economy is due not so much to the infitah as to 4 other elements: oil, income from the Suez canal, tourism, and emigration. At present petroleum represents 30% of Egypt's exports, the Suez canal will probably bring in $1.5 billion annually in coming years, and tourism brought in $1 billion in 1984, but in terms of economic and social impact on the total population emigration is much more important. The number of emigrants increased from 100,000 in 1973 to over 3 million in 1984 and the extent of their remittances increased from $184 million in 1973 to nearly $4 billion at present. Serious shortages of skilled and unskilled labor have been created by the departure of 10-15% of the overall labor force and a higher proportion for some skilled professions. The number of workers in construction more than doubled from 1971-79, while 10% of the agricultural labor force departed. Agricultural wages increased by an average of 7.1% in these years as agricultural workers were attracted to the higher wages of construction. However, the actual levels of agricultural wages were very low at outset. Differences between Egyptian wages and those paid in the Gulf states became so significant that they disrupted the prevailing norms and hierarchies of remuneration. The development of migration thus represents an individual response to 2 types of problems: the incapacity of the Egyptian state to develop an economy that creates employment, and the development of methods to allow each Arab state to benefit from petroleum income. But the future course of migration to the Gulf states is not known, and whether the improvements already observed in the lives of rural Egyptians can be sustained over the long term is a vital question.^ieng

[The effects of manpower emigration on income distribution and consumption models in the Egyptian economy]. / Les effets de l'emigration de main-d'oeuvre sur la distribution des revenus et les modeles de consommation dans l'economie Egyptienne.

PIP: This work analyzes the effects of emigration from Egypt on the distribution of income and the consumption model of the Egyptian economy. The increasing role of remittances as a principal source of household income has disturbed the old division of income among socioeconomic groups. It is difficult to estimate the volume of remittances with any precision because of the variety of ways in which they can be made. Official statistics tend to underestimate their value by ignoring black market transactions, remittances of merchandise, and other forms. An estimate was made of the value of remittances in 1980 taking account of wage levels of 5 different types of workers in the principal employing countries, their average propensities to save, and the employment structure of migrants by socioprofessional groups. The average educational level of emigrants appears to have declined somewhat between 1972-78. Average monthly income for emigrants was estimated to range from 792 Egyptian pounds for technical and professional workers to 252 for unskilled workers and the propensity to save was estimated to range from 40% for technical and scientific workers to 15% for unskilled workers. The total income remitted in 1980 in millions of Egyptian pounds was estimated at 912 for 240,000 technical and scienfific workers, 739 for 360,000 intermediate level workers, 415 for 300,000 artisans and workers, 60 for 60,000 chauffeurs, and 109 for 240,000 unskilled workers. Although remittances have elevated the per capita income of the low income groups, their impact has been diminished by severe inflationary pressures which have led to a decline in living levels and a less complete satisfaction of basic needs. Salary levels of construction workers were 7-9 times higher in Egyptian pounds in 1977 in 3 countries of immigration than in Egypt, while they were 7-10 times higher in 4 countries for university professors. Remittances are used by families receiving them for subsistence or investment; lower income groups are more likely to use a large proportion for support and to buy locally produced goods, while higher income groups tend to save more and to purchase a larger proportion of imported goods. 1 of the significant effects of remittances is to orient individual consumption toward luxury consumer goods, which in turn entails a progressive substitution of imported for local goods and a growing disparity between the consumption of those who succeed in migrating and those who don't. Remittances sent by low income emigrants for family support are the only mechanism with a stimulating effect on the demand for local goods of mediocre quality; all the other mechanisms stimulate the demand for high quality imported goods and services which have a negligible stimulating effect for the poorest segments of the population, rural or urban.^ieng

[The role of the state in the migration of workers and economic diversification in the countries of the Arab Peninsula]. / Le role de l'etat dans les migrations de travailleurs et la diversification economique des pays de la Peninsule Arabe.

PIP: This work argues that analyses of the contribution of foreign workers to economic diversification of the Gulf states should begin with a study of the structure of petroleum income and the social relations of each country. This hypothesis is in contrast to those which regard the labor market or the low activity rates of Gulf countries as the principle impetus for labor migrations in the Middle East. Although the labor importing countries differ in their degrees of development, size, existing infrastructure, agricultural development, and other key aspects, they have some important features in common. Recourse to foreign labor developed in all the countries during the early 1970s as a result of the increase in petroleum prices. Until the late 1960s, the petroleum producing countries had seen the bulk of the petroleum revenues go to the large oil companies and the consuming countries. The legitimacy of their governments rested on the support of the oil companies and on a system of internal alliances among clans in which the paramount clan redistributed the income receive from the petroleum companies. The redistributed value did not strictly speaking represent the profit but only a fraction of the world petroleum profit divided up by the oil companies. The structure of the state and the relations which attached it to the civil society continue to constitute an effective and durable block to mobilization of an internal labor force. The state, becaue of its relations to the oil companies, had no need of investments. The internal economies of gulf oil producing states were weakly diversified before the 1970s, the state was highly influential, capital as a particular aspect of wealth was poorly developed or undeveloped except in enclaves with foreign capital, internal consumption was largely imported, and no mechanism existed to break the ties of the individual clans or tribes with the state. After 1974 the large oil states undertook a sustained process of productive reallocation of surplus income whose forms depended on their possibilities of insertion in the world economy and their internal social structures. The goal was to transfer a significant fraction of income into capital. The network of alliances put into place by unproductive redistributions cannot be modified without compromising the stability of the state; recourse to foreign manpower in large part is an answer to the inability to disengage local labor. Immigration however appears to be limited by the fact that almost all tensions related to growth find expression in antagonism between nationals and foreign workers. Exportation of capital to the peripheral Arab states with large labor forces does not appear to be a satisfactory solution to the problems of massive labor importation and economic diversification.^ieng

The Thai Business Initiative in Rural Development (TBIRD): a new dimension in rural development.

PIP: The Population and Community Development Association (PDA) promotes family planning (FP) throughout Thailand through a community-based approach. The Thai government actively supports rural development. In 1986, 80% of Thailand's people who lived below the poverty line were in rural areas. The poverty line in rural areas is an annual per capita income of 3823 baht, or US $153; in urban areas, it is more. Since 1984, Thailand's gross domestic product (GDP) has increased by more than 50%. Per capita GDP has risen dramatically, also, with the success of FP efforts. This economic achievement, however, has not been shared by most of the Thai population. Incomes in the agriculture sector are far below those in the nonagricultural sector. The government and the nonprofit organizations, however, do not have skills. The corporate sector does have these skills. The Thailand Business Initiative in Rural Development (TBIRD) helps companies sponsor villages and aids them in developing business skills, whereupon income levels and local living standards are improved. Companies thus help in the employment transfer from agriculture to nonagriculture. There is a "one-company-one- village" formula. Company employees have the skills needed in the villages. They are directly involved. Since 1988, PDA has been working with companies in Thailand to help villages develop business skills. In Saraburi province, PDA and Volvo Swedish Motors have been aiding villagers to grow saplings and sell them to golf course and housing developers. In Ayutthaya Province, PDA and the same company are helping the residents with needlepoint and embroidery to supply a wedding dress manufacturing operation. These programs have succeeded. PDA wants to expand the program by September 1990, to include 50 companies. It is hoped that once the companies are comfortable with their relationship to the village, they will start associations with additional villages. PDA has established the "Ten Steps to Adopt a Village."^ieng