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National Income and Labor Income Markets

Robert J. Shiller

in Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks

For the purpose of hedging risks to standards of living, the logical place to look first would be to markets for claims on total income; but such markets do not exist, and they have apparently never ... More

For the purpose of hedging risks to standards of living, the logical place to look first would be to markets for claims on total income; but such markets do not exist, and they have apparently never even been proposed. By making it possible to hedge the capital value of a stream of aggregate income, markets in perpetual claims or perpetual futures, long‐term swap markets, or retail analogues of these would facilitate management of the kind of longer‐run income risk that really matters to individuals and organizations; nations or other groupings of people could also use such markets to insure themselves against the prospect of a declining standard of living or the prospect of relative poverty. By hedging such risks, these macro markets would allow the natural tendency for convergence of incomes to reduce inequality of incomes, and might make significant progress toward equalizing wealth across nations, regions, categories of people, and individuals. There could be markets for hedging the risk of fluctuations in aggregate income, national income, or aggregate labour income for each country (or even region) of the world, and these could be divided up in different ways—although since most people's income is labour income, creating markets for claims on total income means for the most part creating markets for claims on labour income. The different sections of the chapter consider possible hedging arrangements in perpetual claims or perpetual futures markets for national incomes (market structures and associated institutions), whether income markets should be in actual or full‐employment income, and various measurement issues associated with incomes (including uncertainty).Less

Charles Hilliard Feinstein 1932–2004

Avner Offer

in Proceedings of the British Academy, Volume 153 Biographical Memoirs of Fellows, VII

Charles Hilliard Feinstein (1932–2004), a Fellow of the British Academy, worked out the structure and size of the British economy from 1965 and back to mid-Victorian times. Beyond scholarship, his ... More

Charles Hilliard Feinstein (1932–2004), a Fellow of the British Academy, worked out the structure and size of the British economy from 1965 and back to mid-Victorian times. Beyond scholarship, his life subsumed a longer arc: the quest for an equitable South Africa in his youth, and its resumption in his final years. The economics that appealed to Feinstein were those of Karl Marx, and he submitted an honours dissertation on the labour theory of value. He was attracted to the University of Cambridge by the presence there of the Marxist economist Maurice Dobb, and the two remained close for years afterwards. In 1958, Feinstein took a research position in Cambridge's Department of Applied Economics, where he adapted national income series for immediate use. In 1963, he became an assistant university lecturer in economic history, and fellow and director of studies in economics at Clare College. Feinstein published a book entitled National Income towards the end of the heroic phase of historical national accounting.Less

Landownership Inequality and the Income Distribution Consequences of Economic Growth

Michael Carter

in Inequality Growth and Poverty in an Era of Liberalization and Globalization

Addresses the question of whether agrarian structure (land ownership inequality) can explain increasing income inequality. The second section begins the chapter with a conventional income inequality ... More

Addresses the question of whether agrarian structure (land ownership inequality) can explain increasing income inequality. The second section begins the chapter with a conventional income inequality accounting or Gini decomposition framework, which, among other things, provides a convenient vehicle to review the economic theory of the inverted‐U, the assumptions under which it could be expected to hold, and, by implication, the likely reasons for its failure to hold in the contemporary world. This framework also makes it clear that the direct explanatory power of land ownership inequality on income inequality should diminish with the reduction in the share of national income generated in the agricultural sector, and should thus be diminishing rapidly over time in those countries of Asia and Latin America where the weight of the agricultural sector in the overall economy has fallen off dramatically. The third section develops an econometric approach for answering this empirical question, in which flexible estimation methods based on random coefficients or mixed effects models are employed to test for the effect of agrarian structure on income inequality. The last section summarizes the chapter by considering the implications for policy both inside and outside the agricultural sector.Less

The Place of Financial Markets in the Economy

Hendrik S. Houthakker and Peter J. Williamson

in The Economics of Financial Markets

Some of the frameworks and concepts of macroeconomics are deployed to explore the place of financial markets in the US economy, and various important questions are introduced (such as how interest ... More

Some of the frameworks and concepts of macroeconomics are deployed to explore the place of financial markets in the US economy, and various important questions are introduced (such as how interest rates are determined) that are elaborated upon in later chapters. The first section of the chapter looks at real assets and financial claims – balance sheets for the US economy, the US international investment position, and distribution of financial assets. In the second section – A framework for macroeconomic analysis of flows – one of the main tools of analysis used is the National Income and Product Accounts (NIPA), which extend the accounting concepts developed in Ch. 1 to the economy as a whole; these accounts are combined with the Flow of Funds (FOF) accounts into a framework for describing supply and demand in the securities markets. The third section discusses the rate of interest. The framework presented in the second section is then used to discuss the effects of monetary and fiscal policy and of inflation, particularly on interest rates and securities prices.Less

Labour Market Institutions and Income Inequality: What are the New Insights after the Washington Consensus?

Rolph van der Hoeven and Catherine Saget

in Inequality Growth and Poverty in an Era of Liberalization and Globalization

Looks at some of the labour market outcomes of recent economic reforms. The extent to which labour market institutions affect the relationship between reform policies and income inequality remains ... More

Looks at some of the labour market outcomes of recent economic reforms. The extent to which labour market institutions affect the relationship between reform policies and income inequality remains controversial. Some see labour market institutions as a hindrance to more efficient development and growth, while others argue that without proper labour market institutions an economy cannot progress. Labour market policies, regulations, and institutions have at least three goals: improving allocative efficiency (matching supply and demand); improving dynamic efficiency (increasing the quality of the labour force); and improving or maintaining a sense of equity and social justice among labour force participants. These different goals inform the discussion throughout the chapter, which is organized as follows: after an introduction, the second section touches briefly on some theoretical aspects of labour markets and reform policies; the third reviews trends in labour market changes in terms of informalization of employment, wage shares in national income, and wage inequality; the fourth reviews some general trends in labour market policies that have typically been implemented under the Washington Consensus, namely, a decline in minimum wages, shifts in the bargaining power of unions, and a reduction in employment protection; the final section offers conclusions on whether or not labour market policies reduce income inequality.Less

The Measures That Rule

Scott O’Bryan

in The Growth Idea: Purpose and Prosperity in Postwar Japan

This chapter examines the significant changes that were at work within the discipline of economics around the world during the mid-twentieth century and how these new lines of theoretical and ... More

This chapter examines the significant changes that were at work within the discipline of economics around the world during the mid-twentieth century and how these new lines of theoretical and methodological inquiry affected Japanese social-scientific thought. More specifically, it considers the rise of a host of statistical epistemologies that formed the basis of the accounting conventions out of which was produced the statistic of Gross National Product (GNP). The chapter first provides an overview of the empirical revolution in twentieth-century economic knowledge, with particular emphasis on the macroeconomic measures of national income and GNP as the linchpins in the complex of statistics reshaping the discipline of economics after World War II. It then discusses the factors that propelled national accounting into the policy arenas of Japan and other industrial powers, along with the creation of a task force headed by Stuart A. Rice to guide reform of Japan’s statistical system. It also describes the emergence of macroeconomic statistics such as national income accounting as governing analytical tools within the new statistical infrastructure in postwar Japan.Less

Institutions for writing the economic history of the global

Jan Luiten Van Zanden

in Writing the History of the Global: Challenges for the Twenty-First Century

Global history needs to take advantage of new research methodologies of teamwork and collaboration. Historians and economic historians can work together to provide historical data sets covering the ... More

Global history needs to take advantage of new research methodologies of teamwork and collaboration. Historians and economic historians can work together to provide historical data sets covering the world. New evidence gathering and analysis through teams of historians pooling expertise can create new public goods for global history. Examples are provided by current collaborative projects on national income, prices, real wages, and labour relations. Historians working in such teams must make agreements over who owns the data, the division of labour and who leads the projects and publications.Less

What It’s All About: A Short Primer on GDP

Philipp Lepenies

in The Power of a Single Number: A Political History of GDP

Defines GDP and related concepts for non-specialists

The Frustrations of Colin Clark: England

Philipp Lepenies

in The Power of a Single Number: A Political History of GDP

Tells the story of how, during the Great Depression, another Englishman, Collin Clark, revives the old idea of William Petty, invents many of the methodological features of GDP-calculation, ... More

Tells the story of how, during the Great Depression, another Englishman, Collin Clark, revives the old idea of William Petty, invents many of the methodological features of GDP-calculation, calculates the number on his own and attempts to persuade British politicians that these national income statistics could be useful - yet, he fails in this attempt . However, his ideas are taken up by John Maynard Keynes who amends Clark's methodology to come up with his own calculation of national income during the war that suddenly proves useful to British politicians - yet the focus is on income for reasons of estimating the tax base.Less

Reducing child poverty in the European Union: the role of child benefits1

Herwig Immervoll, Holly Sutherland, and Klaas de Vos

in Child well-being, child poverty and child policy in modern nations (Revised 2nd Edition): What do we know?

This chapter examines the role of child benefits in protecting the children in Europe from financial poverty. It defines ‘child benefits’ as the regular cash payments that are made to parents or ... More

This chapter examines the role of child benefits in protecting the children in Europe from financial poverty. It defines ‘child benefits’ as the regular cash payments that are made to parents or other carers on behalf of the children who are dependent on them. The chapter establishes a scale of the problem using the household microdata for 15 countries to count the proportion of children living in households with incomes below the poverty line in Europe. It also attempts to assess the role of existing family benefits in preventing child poverty. The chapter ends with a section on the impacts of national child benefits on the national income distribution and estimates of poverty.Less

The final days: disability at the end of the welfare state, 1973–79

Jameel Hampton

in Disability and the Welfare State in Britain: Changes in Perception and Policy 1948-79

This chapter examines expectations for new statutory provision for disabled people including a national disability income amidst the collapse of the welfare state. Driven on by the power of Barbara ... More

This chapter examines expectations for new statutory provision for disabled people including a national disability income amidst the collapse of the welfare state. Driven on by the power of Barbara Castle as Secretary of State for Social Services and the feeling that the Wilson governments of the 1960s failed in creating adequate social welfare provision, Labour created four new cash benefits. These benefits seemed to have reversed the welfare state’s exclusion of disabled people. It was also in this period that provision in services under the Chronically Sick and Disabled Persons Act 1970 began to come under scrutiny from academics and the media. An assessment of the state of play on the ground in cash and services will serve as a benchmark for the overall record of the welfare state’s contribution to the welfare of disabled people.Less

The Health of Nations: The Contribution of Improved Health to Living Standards

William D. Nordhaus (ed.)

in Measuring the Gains from Medical Research: An Economic Approach

This chapter explores how measures of national income accounting might incorporate improvements in the health of a country's population. It discusses the theory of the measurement of national income, ... More

This chapter explores how measures of national income accounting might incorporate improvements in the health of a country's population. It discusses the theory of the measurement of national income, examines some of the shortcomings of traditional concepts, and proposes a new concept that can be used to incorporate improvements in health status in the U.S. The chapter argues that national income accounts would more accurately reflect changes in welfare if they properly measured the output of the health care sector.Less

Musical Chairs and Inescapable Mathematics

ROBERT V. DODGE

in Schelling's Game Theory: How to Make Decisions

The metaphor “musical chairs” encompasses a broad range of observations and behaviors in which the same patterns emerge in the aggregate regardless of how the individuals who comprise the aggregate ... More

The metaphor “musical chairs” encompasses a broad range of observations and behaviors in which the same patterns emerge in the aggregate regardless of how the individuals who comprise the aggregate behave. This happens as a result of inescapable mathematical relationships. This chapter is divided into sections. First, it looks at paired phenomena, which refers to things that occur together. It includes a population problem, with an explanation, plus a counter-intuitive puzzle from Schelling. The idea of “either, or” is another of the observations in this section. There may be only one of two equal options for certain outcomes, and to think otherwise can lead to difficulties. The concept of positions in a distribution describes statements that hold true regardless of changes in the individuals who comprise the populations being discussed. The Acceleration Principle is the final topic in the chapter. This describes the relationship between independent activities when one is the source of the other's growth. The chapter analyzes the rate of increase of the rate of production, rather than just the increase in the rate of production alone. Supplementing the chapter is “Politicians, Liars and Mathematical Puzzles,” by John Allen Paulos.Less

Income and Wealth Inequality: Evidence and Policy Implications

Emmanuel Saez

in United States Income, Wealth, Consumption, and Inequality

According to the author of this chapter, the first job of economists is to enlighten the debate on income and wealth inequality by providing transparent measures that the broad public can understand. ... More

According to the author of this chapter, the first job of economists is to enlighten the debate on income and wealth inequality by providing transparent measures that the broad public can understand. Once inequality is appropriately measured, we can then understand the drivers of inequality trends and the effects of public policy on inequality. Drawing on the author’s previously published works, this chapter presents evidence on US income and wealth inequality. It presents series for top income and wealth shares and for the distribution of economic growth by income groups. The author discusses the mechanisms behind the evolution of US income and wealth inequality from historical and comparative perspectives and analyzes the role of public policy and, in particular, taxation in the evolution of inequality.Less