Gøsta Esping-Andersen and John Myles
This article focuses on the welfare state, which includes social protection, health, education and training, housing, and social services, but can also be conceived more broadly to include policies that affect earnings capacity and the structure of the labour market. It discusses the difficulties of capturing the impact of the welfare state on income inequality, given that one does not observe what the distribution would be in the absence of the welfare state or specific aspects of it. Theories of welfare state redistribution are reviewed, and the conventional categorization into welfare ‘regimes’ discussed. The empirical evidence about the extent and nature of redistribution by the welfare state is described, including noncash services as well as cash transfers, and the impact on poverty in particular is discussed. Economic inequality is also strongly affected by the political process, and vice versa.
Brian Nolan and Marx Ive
A large body of research on poverty in industrialized countries has been produced since poverty was ‘rediscovered’ in various rich countries in the 1960s and 1970s. This article provides an overview of the main approaches taken and the evidence produced by this research. It first discusses the way poverty is conceptualized and measured, followed by a review of the evidence about levels and trends in poverty measured in terms of low income. The types of person and household most at risk of poverty and the causal processes at work are then considered. The factors underpinning differences in poverty levels across OECD countries are explored, as is the relationship between poverty and economic inequality. The use of non-income information and the multidimensional nature of poverty and social exclusion are briefly discussed. Finally, some key issues for policy and for future research are highlighted.
John E. Roemer
During the last 40 years, political philosophers have made important advances in our understanding of why equality is valuable, and what kind of equality is important. This article summarizes the development of these ideas, in particular, the contributions of John Rawls, Amartya Sen, Ronald Dworkin, Robert Nozick, Richard Arneson, and G. A. Cohen. It shows how these ideas have filtered into economic thinking in the conceptualization of equality of opportunity. It concludes with a brief discussion of how these ideas might be extended to evaluate intergenerational and global distributions of income or welfare.
This article focuses on the importance of functional distribution in discussions of economic inequality. Section 2 reviews theoretical perspectives on functional distribution while Section 3 discusses measurement issues. The USA is used as a case study to show how levels and trends in factor shares may be affected by measurement choices. The preferred measure of labour's share shows a very shallow inverted U-shaped pattern, peaking in the late 1970s. In Section 4, the more pronounced rise and decline of labour's share in the post-war period observed in the OECD outside the USA is noted, and the influences behind the recent decline in labour's share are surveyed. Section 5 reports longer-term trends in labour's share from early in the 20th century calculated from national sources. The article concludes by drawing attention to the need for more research to uncover the causes of swings in factor shares and to establish the links between the functional and personal distribution of income.
This article assesses the changing economic status of women, the forces driving it, and its implications for inequality between women and men and among women. Section 2 reviews women's growing labour market participation and its changing occupational structure. Section 3 analyzes the extent and sources of the gender pay gap. Section 4 reviews two of the major drivers of recent economic change for women: the transformation of their educational status, and the impact of technology. Section 5 addresses the implications of women's rising employment and earnings for household inequality and their changing fertility patterns. Section 6 examines the contribution of the legal framework to reducing inequality. Section 7 concludes with pointers to areas for further research.
Andrea Brandolini and Timothy M. Smeeding
Many different variables can be used to evaluate the distribution of living standards in a society. These focal variables include monetary indicators, such as expenditure, income, and wealth, as well as non-monetary indicators like multidimensional measures of material standard of living, happiness and life satisfaction, functionings, and capabilities. This article takes income as the focal variable. Section 2 outlines the conceptual difference between consumption, current income, and permanent income, and then moves on to examine the nuances of the definition of income and the further methodological decisions that need to be taken to study income inequality. Section 3 deals with the empirics of income distribution in richer countries, covering both the evidence at the turn of the century and the evolution over the last thirty years of the inequality of market and disposable incomes, and the role of cash and non-cash redistribution. Section 4 concludes with suggestions for future research.
Francine D. Blau and Lawrence M. Kahn
This article documents and provides explanations for levels of and trends in earnings inequality, with a central focus on international differences in these outcomes. It concentrates on OECD countries, which are largely advanced industrialized nations, and typically have similar levels of labour productivity but often very different labour market institutions and changes in the supply of or demand for labour of various skill levels. As a result, one can use international differences to test hypotheses about the role of supply and demand and institutions in influencing levels and trends in earnings inequality. The article first provides an analytical framework for understanding earnings inequality in which labour earnings are distinguished from wage rates. It then places inequality of wage rates in a supply and demand framework, augmented by consideration of labour market institutions. Next, after providing some data on the extent of earnings and wage inequality across countries and over time, it discusses evidence on the determinants of differences and changes in earnings inequality.
Richard V. Burkhauser, Brian Nolan, and Kenneth A. Couch
This article discusses literature which uses panel data to measure the income patterns of individuals over their lifetimes, that is, intragenerational mobility. It begins with a detailed explanation of the most common methods used to calculate intragenerational mobility and the empirical problems of implementing these measures across countries. It goes on to describe the relationship between the data used in studies of mobility and the conceptual content of the research. It then reviews the major findings of empirical studies of intragenerational income mobility, pointing out for example that most studies find no clear relationship between greater cross-sectional inequality and greater intragenerational mobility, as is often casually assumed. The field is judged to be relatively underdeveloped in comparison to the cross-sectional inequality literature, due partly to the scarcity of the type of data required to study such mobility.
Scott Cunningham and Manisha Shah
This handbook explores the economics of prostitution and offers a working definition of prostitution that takes into account both remunerated professional sex work, as in the case of the Nevada brothels, and the more informal exchange of sex for money that occurs in both developing and developed countries. The discussion is organized into six parts: supply and demand, sex workers in developing countries, men who have sex with men, law and policy, history of prostitution law, and externalities related to sex markets (e.g., sexually transmitted infections and sexual exploitation). Topics range from economic theories and empirical analysis of sex markets to sexual and communication networks of Internet-mediated prostitution, to the spread of sexually transmitted infections and violence.
This chapter explores different aspects of information and transparency in the labor market. It begins by providing an overview of labor supply, labor demand, and labor remuneration and the reasons for the lack of transparency in the labor market. It then discusses the complications regarding transparency in the context of international migration, the conditions for migrant workers, and public policy. Finally, the chapter highlights serious problems that arise from a lack of transparency in the labor market.
Pablo Egaña and Alejandro Micco
This article is organized as follows. Section 2 shows the evolution of output and labor markets during the last decades in Latin America. Section 3 presents labor market reforms during this period. It provides some evidence that informality and inflation drove labor markets in the 1980s, reducing the urgency to reform them. In particular it shows how inflation, unions, and privatization worked to slow down the process of executing labor market reforms in LAC. The section then presents evidence of how labor markets reacted to Washington Consensus reforms: mainly an increase of informality in the economy. An important point in this section is to establish that the above conclusion was made based on the “insider and outsider” theory. Section 4 describes the vicious circle generated by highly regulated labor markets and informality.
Claudio Lucifora and Wiemer Salverda
This article focuses on the significance of low pay, investigating: who is low paid and why, and who is low paying and why? This elaborates on two important aspects: the determinants of being paid a wage towards the bottom of the earnings distribution, and the individual chances of remaining in the lower part, moving into or out of it, and up or down the distribution. Section 2 discusses the economic analysis of low pay. Section 3 presents definitions, measurement, and data issues. In Section 4, some stylized facts on low pay are presented and the main results from the empirical literature are critically reviewed. Section 5 contains a discussion of policy issues and suggestions for future research.
Douglas M. Walker
This chapter provides an overview of empirical research on the economic and social impacts of gambling. Issues examined include the effects of casino gambling on economic growth; the relationships among gambling industries and the implications of these relationships on net government tax revenue; the social costs of gambling; casinos and crime; casinos and political corruption; and problems with cost-benefit analysis applied to gambling.
Nolan McCarty and Jonas Pontusson
The literature on the politics of inequality and redistribution in advanced democracies has become very large in recent years. This article focuses on several areas where important new arguments are being put forward. It reviews recent work on the interaction of unions and employers, the role of political parties and electoral institutions, and the effects of racial and religious diversity. It also discusses the implications of recent work in behavioural economics and political science that helps us to understand cross-national variation in political responses to inequality. It highlights the distinctive contributions of several ‘schools’ of research, and identifies linkages across different analytical approaches.
Francisco H. G. Ferreira and Martin Ravallion
This article summarizes the recent evidence on global poverty and inequality, including both developed and developing countries. Section 1 discusses poverty and inequality data and presents evidence on levels and recent trends in poverty and inequality around the world. Section 2 turns to the issues involved in aggregating inequality indices across countries, in order to construct a meaningful measure of global inequality. Section 3 discusses the empirical relationship between economic growth, poverty, and inequality dynamics. Section 4 turns to the likely economic determinants of poverty and inequality changes. Section 5 offers some conclusions, and points to some promising research themes within this general topic.
W. Erwin Diewert
Governments either provide various goods and services at no cost or at highly subsidized prices. It is usually possible to measure the quantities of these government-sector outputs and inputs as well as input prices, but the problem is how to estimate the corresponding output prices. Once meaningful output prices have been estimated, the measurement of productivity growth using index numbers can proceed in the usual manner. This chapter suggests three possible general methods for measuring public-sector output prices and quantities. Specific measurement issues in the health and education sectors are discussed. Similar output and productivity measurement issues arise in the regulated sectors of an economy since regulated producers are forced to provide services at prices that are not equal to marginal or average unit costs. Finally, the problems associated with measuring capital services are discussed.
John E. Roemer
This article considers the possibility of attaining equality in principle. It begins by proposing the degree of equality that we can expect or hope to achieve in the foreseeable future. It defines the two grand strategies for achieving equality in the last century: socialism and social democracy. Markets are necessary in any complex society, and they perform both a coordination function and an incentive function. It is argued that an understanding of the relative importance of these functions is necessary in order to assess the degree to which economic equality can be achieved. The two most important institutions for achieving equality are redistributive taxation and the reduction in the variation of human capital through public education. The article discusses whether democracy can be expected to implement the kind of educational finance policies which would be necessary to eliminate dynastic variation in the distribution of human capital.
G. Immordino and F. F. Russo
The goal of this chapter is to propose a simple mathematical framework to study the effects of different prostitution policies on the total quantity of prostitution exchanged in a market equilibrium and on its price. We consider policies both within legal regimes that make prostitution illegal, focusing on enforcement and fines, and within regimes that make prostitution legal, focusing on taxation, entry restrictions and harm reduction. We also provide several historical and actual examples of such policies.
The development of social security systems in Latin America has been, both historically and by country, strongly influenced by different views of the role of government. This chapter reviews the history of social security in the Latin American region and the failure of market reforms to improve their performance, analysing their outreach in different specific contexts and providing a profile of the new generation of reforms. It ends with a series of recommendations, with particular reference to health care, retirement income, and unemployment benefits.
This article deals with the issue of how high incomes have been changing over long time periods for many rich countries. Section 2 discusses the basic methodology used for creating recent top incomes estimates, and issues that arise about comparability across countries. Section 3 presents time trends for both Anglo–Saxon and non-Anglo–Saxon countries. Section 4 assesses top income shares against the standard axioms of inequality, and presents empirical evidence on the relationship between top income shares and other commonly used measures of inequality, such as the Gini coefficient. Section 5 considers possible drivers of top incomes, including major events (such as world wars and depressions), superstar labour markets, changes in taxation, and political partisanship. Section 6 discusses research on outcomes that may be affected by top incomes, including health, economic growth, and national savings. The article concludes with a discussion of the many fruitful directions for research that remain in this rapidly growing field.