Gary S. Fields

The Measurement of Income Mobility: An Introduction to the Literature

Evaluation of distributions of income on the basis of equality is one of the most extensively studied topics in the general field of welfare economics. There is thus an enormous body of work devoted exclusively to the problem of the measurement of welfare and income inequality experienced by a given society.2 However, the majority of these studies are conducted in static terms, where the so-called “snapshots” of the income distributions are taken as the primitives of the analysis. Nevertheless, static evaluations of income distributions can provide only an incomplete picture, for, in most instances, the social welfare would certainly depend on the dynamics of income distribution as well.3 This basic insight, along with the increased availability of longitudinal data sets, has led to a massive and rapidly expanding literature on the measurement of income mobility. This chapter surveys the highlights of this literature.

Measuring Movement of Incomes

We consider a small set of elementary properties for income movement measures, and show that there is essentially only one measure that satisfies all of these properties: the per capita aggregate change in log-incomes. We demonstrate next that this movement-mobility measure has a number of appealing descriptive and normative properties, and provide a formal generalization of our basic characterization theorem drawing from the related literature on poverty measurement. Finally, we present here an empirical application in which we show by using our new measure that there has been a broad-based increase in income movement in the United States between the 1970s and 1980s. Copyright 1999 by The London School of Economics and Political Science

Place-to-Place Migration: Some New Evidence

This paper presents new evidence on the determinants of place-to-place migration in the United States. For understanding the causes of differential migration rates into and out of labor markets knowledge of place-to-place migration functions is of interest for a number of reasons. Given a thorough understanding of gross place-to-place flows one can proceed to calculate net flows; the reverse of course is not possible. There are also other advantages of place-to-place studies: parallelism to micro-economic behavior opportunity to investigate specific origin-destination match-ups recognition of the number and location of alternative opportunities for persons residing in different origins and exploration of possible asymmetries. Following a large body of economic literature the analytical approach adopted regards migration as a form of human investment. Economic variables used in the empirical work exhibit effects in the hypothesized direction and explain up to two-thirds of the variance in intermetropolitan migration rates. However this high degree of explanatory power is achieved only for certain functional specifications involving particular independent variables. Thus the empirical results confirm the usefulness of the human investment approach to place-to-place migration but they show too that the economic factors used as explanatory variables must be carefully specified and measured. Section I of the paper sets out the model justifying the particular specifications used. Section II presents the empirical results. The economic variables included in the model that are found to be systematically related to migration rates are real income measures of turnover in the labor market and actual and average distance. Also significant in a number of the regressions are the amount and availability of non-work income specifically welfare and unemployment insurance benefits. When the functional specification permits the effects of origin and destination conditions to differ a persistent asymmetry is found whereby destination economic conditions exhibit the hypothesized effects more often than do origin conditions. Conclusions are found in section III. (excerpt)

Economic Determinants of the Optimal Retirement Age: An Empirical Investigation

In this paper we examine how the structures of earnings, Social Security, and pension benefits affect retirement behavior. We use an intertemporal model of labor supply, paying special attention to the institutional features of private pensions and Social Security benefits. This theoretical formulation produces comparative dynamic predictions and guides empirical modeling. Data from a new survey of workers and their income opportunities are used to implement the empirical model. On the basis of empirical retirement estimates, we conclude that (1) people with higher base wealth retire earlier, and (2) those who expect to gain more by postponing retirement retire later.

For Richer or for Poorer ? Evidence from Indonesia, South Africa, Spain, and Venezuela

We analyze household income dynamics using longitudinal data from Indonesia, South Africa (KwaZulu-Natal), Spain and Venezuela. In all four countries, households with the lowest reported base-year income experienced the largest absolute income gains. This result is robust to reasonable amounts of measurement error in two of the countries. In three of the four countries, households with the lowest predicted base-year income experienced gains at least as large as their wealthier counterparts. Thus, with one exception, the empirical importance of cumulative advantage, poverty traps, and skill-biased technical change was no greater than structural or macroeconomic changes that favored initially poor households in these four countries.

A Welfare Economic Approach to Growth and Distribution in the Dual Economy

I. Introduction, 325.—II. Absolute and relative approaches for evaluating growth and distribution, 326.—III. A general welfare approach for assessing dualistic development, 328.—IV. Welfare economic analysis of dualistic development: the general case, 334.—V. Welfare economic analysis of dualistic development: special cases, 337.—VI. Extensions of the methodology, 346.—VII. Conclusions and implications, 348.—VIII. Empirical significance, 351.

Household Income Dynamics: A Four-Country Story

In this article, we analyse the dynamics of household per capita incomes using longitudinal data from Indonesia, South Africa, Spain and Venezuela. We find that in all four countries reported initial income and job changes of the head are consistently the most important variables in accounting for income changes, overall and for initially poor households. We also find that changes in income are more important than changes in household size and that changes in labour earnings are more important than changes in other sources of household income.

Discontinuous Losses from Poverty, Generalized Pα Measures, and Optimal Transfers to the Poor

Abstract This paper examines the distributional properties of poverty measures which are discontinuous at the poverty line. It is shown that among all the additive poverty measures, only those measures with some discontinuous jump at the poverty line are such that it is optimal to allocate a given antipoverty budget either to the richest of the poor, or to the poorest of the poor, or to both. A special class of such poverty measures is an extension of the well-known P α , the properties of which are investigated.

Wage-setting institutions and economic growth

Abstract Wage-setting institutions in several Asian and Latin American economies are compared and contrasted. The Asian economies have relied more on market wage determination, whereas the Latin American economies have encouraged institutions which push wages in key sectors up above market-clearing levels. Market wage determination, combined with exportled growth, has resulted in rapidly rising real wages in the context of full employment in the Asian

Poverty Measures and Anti-Poverty Policy

This paper analyzes the optimal allocation of a given antipoverty budget consistent with various usual measures of poverty. It is shown that it is generally optimal to give all the budget either to the poorest or to the richest of the poor. It is only with the Sen index of poverty that it is sometimes optimal to combine both types of allocation. This property may be related to the normalization rule used in the derivation of that measure and sheds some new light on the axiomatics of poverty measurement.