Economic Inequality – Econ 4626, sections 01 & 02

CU, January 2004

Ian Irvine, Economics, 208a.

Office Hours: Tues. 3:30-4:15; Wed 11:00-12:00

Objective and content: this course focuses upon economic inequality among individuals and households. It explores how inequality has evolved in the US in recent decades, and why. We also explore poverty both domestically and internationally and try to understand why some countries are more successful than others in reducing it. The implications of poverty and inequality on crime and incarceration are then examined.

There is no text for the course. Most of the recommended articles are available on the web. Where they are not, the instructor’s lecture notes will be posted on the course web site. The accompanying reading list details the main content. Students are not required to read all of these articles; they will be given weekly reading guidance.

While students are expected to have elementary mathematical abilities, this course does not require calculus or algebra. Instead the main work consists of reading and organizing ideas.

Assessment: there will be a mid-term exam on March 4, in class, that will account for 30% of the total grade. The final exam, worth 60% of the grade, will be on Tuesday, May 4, 1:30 – 4:00 pm for students in section 01, and on Monday, May 3, 4:30 - 7:00 pm for students in section 002. An essay, worth 10% of the grade, will be due on the last day of classes. Topics will be assigned in week three of class, and students will be asked to present the main findings from their essays in the final two weeks.

1 Measurement and current inequality

Lecture notes on measurement.

“Updated facts on the US distributions of earnings, income and wealth.” Federal Reserve Bank of Minneapolis Quarterly Review, Summer 2002. <www.minneapolisfed.org>

2 The recent past: the evolution of income and earnings inequality

Gottschalk, P. "inequality, income growth and mobility: the basic facts”. Journal of Economic Perspectives, Spring, 1997.

Education

Johnson, G. “Changes in earnings inequality: the role of demand shifts.” Journal of Economic Perspectives, Spring 1997, p41-54.

Burbidge, J., L. Magee & L. Robb. “The education premium in Canada and the United States.” Canadian Public Policy; Analyse de Politiques, June 2002.

Immigration

Topel, R. “Factor proportions and relative wages: the supply side determinants of wage inequality.” Journal of Economic Perspectives, Spring 1997, p55-74.

Trade or Technology?

Freeman, R. “Are your wages set in Beijing?” J of Econ Perspectives. 1995, 15-32.

Institutions

Fortin, N. & T. Lemieux. “Institutional changes and rising wage inequality: is there a linkage?” Journal of Economic Perspectives, Spring 1997.

Peoples, J. “Deregulation and the labor market.” J of Econ Perspectives, 1998, 111-131.

Polarization, mobility and decomposition

Wolfson, M. & B. Murphy. “New views on inequality trends in Canada and the United States.” Monthly Labor Review, April 1998, vol. 4, p3-20.

Decomposition: Lecture notes.

Comparisons with a neighbor

Lecture notes: based on Heisz, A., A. Jackson and G. Picot. “Distributional outcomes in Canada in the 1990s.” In Banting, Sharpe and Hilaire, editors, Review of Economic Performance and Social Progress, IRPP and CSLS, June 2001. <www.csls.ca>

Consumption and hours

Lecture notes based on D. Krueger and F. Perri: “Has inequality really increased?” NBER Working paper no. 9209, 2002.

The very top – worrisome problems

Lecture notes based on Saez, E. & M. Veall. “The evolution of high incomes in Canada, 1920-2000.” http://emlab.berkeley.edu/users/saez/index.html (shorter version).

3 Wealth and Savings

Atkinson, A. “The distribution of wealth and the individual lifecycle.” Oxford Economic Papers, 1971.

Wolff, E. “Recent trends in the size distribution of household wealth.” Journal of Economic Perspectives, vol. 12, Summer, 1998, p131-150.

Kennickell, A. "An examination of changes in the distribution of wealth from 1989 to 1998."

www.federalreserve.gov/pubs/oss/oss2/scfindex.html

Forbes 400 web site.

Federal Reserve Bank of Minneapolis reference in section 1 above.

4 Intergenerational transmissions of wealth and economic status

Kotlikoff, L. “Intergenerational transfers and saving.” Journal of Econ Perspectives, Spring 1988, p41-58.

Gale, W. & J. Scholz. "Intergenerational transfers and the accumulation of wealth.” Journal of Economic Perspectives, Fall, 1994, p145-160.

Solon, G. “Intergenerational income mobility in the US.” American Economic Review, 1992, 82(3), 393-408.

Corak, M. & J. Heisz. “Intergenerational earnings and income mobility of Canadian men.” Journal of Human Resources, 1998.

5 Poverty, Low Incomes and Welfare

5.1 Poverty

Measurement

Lecture notes.

The ‘facts’

Triest, R. “Has poverty gotten worse?” Journal of Economoc Perspectives, 1998, p97-114.

Osberg, L. and K. Xu. “International comparison of poverty intensity: Index decomposition and bootstrap inference,” Journal of Human Resources, Vol. 35, No. 1, 51-81, 2000.

Lecture notes based on Dickens, R. and D. Ellwood. “Whither poverty in Great Britain and the US? The determinants of changing poverty and whether work will work.” NBER, working paper no. 8253, April 2001.

Welfare and Welfare Reform

Ellwood, D. “Anti-poverty policy for families in the next century: from welfare to work – and worries.” Journal of Economic Perspectives, Winter 2000.

Blank, R. “Distinguished lecture on economics in government – fighting poverty: lessons from recent U.S. history”. Journal of Economic Perspectives, Spring, 2000.

Blank, R. “Evaluating welfare reform in the US.'' Journal of Economic Literature, 2002, 1105-66.

Lindbeck, A. “Hazardous welfare-state dynamics.” American Economic Review, 1995, 9-15.

Moffitt, R. “The temporary Assistance for Needy Families Program.'' NBER, 2001, working paper no. 8749

6 Crime, inequality and incarceration

Freeman, R. “Why do so many young American men commit crimes, and what might we do about It?” Journal of Economic Perspectives, Winter, 1996, 25-42.

DiIulio, J. “Help wanted: economists, crime and public policy.” Journal of Economic Perspectives, Winter, 1996, 3-24.

Kuziemko, I. and S. Levitt. “An empirical analysis of imprisoning drug offenders.” NBER working paper no. 8489, September, 2001.

7 Inequality and Poverty Worldwide

Bourguignon, F. & C. Morrisson. “Inequality among world citizens: 1820-1992” American Economic Review, September, 2002, 727-45.

Quah, D. “One Third of the world’s growth and inequality.” London School of Economics, April 2002.

Sala-I-Martin, X. “The world distribution of income.” Columbia University, April 2002.

Olsen, M. “Big bills left on the sidewalk: why some nations are rich and others poor.” Journal of Economic Perspectives, Spring 1996, 3-24.

Ravallion, M. et al. “Quantifying absolute poverty.” Review of Income and Wealth, 1991.

Sen, A. “Mortality as an indicator of economic success and failure.” Economic Journal, 1998, 1-26.

Johnson, D. “Population, food and knowledge.” American Economic Review, March 2000.

World Bank website. www.worldbank.org/poverty

Besley, T. & R. Burgess. “Halving global poverty.” Journal of Economic Perspectives, Summer 2003, 3-22.

Easterly, W. “Can foreign aid buy growth?” Journal of Economic Perspectives, Summer 2003, 23-48.

Aghion, P. Caroli and Garcia-Penalosa. “Inequality and economic growth: the perspective of the New Growth Theories.” Journal of Economic Literature, December, 1999.

9. Discrimination (time permitting)

Jaynes, G. “The labor market status of black Americans.” J of Econ Perspectives, Fall, 1990, p9-24.

O' Neill, J. “The role of human capital in earnings differences between black and white Men.” Journal of Economic Perspectives, Fall, 1990, p25-46.

Fuchs, V. “Women's quest for economic equality.” Journal of Econ Perspectives, 1989, p25-42.

Bergmann, B. “Does the market for women's labor need fixing?” Journal of Economic Perspectives, Winter, 1989, p43-60.