Gustavo A. Marrero

Inequality of Opportunity in Europe

Using the EU‐SILC database, we estimate and compare the Inequality of Opportunity (IO) of 23 European countries in 2005. IO is estimated as the between‐type (ex‐ante) inequality component following the parametric procedure of Ferreira and Gignoux (2011), which allows for the inclusion of the large set of circumstances in the database. We also measure the degree of correlation between IO estimates and a set of past and contemporaneous economic factors related to the degree of development, labor market performance, investment in human capital, and social protection spending.

REVISITING THE OPTIMAL STATIONARY PUBLIC INVESTMENT POLICY IN ENDOGENOUS GROWTH ECONOMIES

One strand of the literature on endogenous growth concerns models in which pub- lic infrastructure a¤ects the private production process. A puzzle in this literature is that observed public investment-to-output ratios for developed economies tend to fall short of theoretical model-based optimal ratios. We reexamine the optimal choice of public investment in a more general and plausible framework, which allows for a gradual transition between di¤erent steady states, a lower depreciation rate for public capital than for private capital, an elasticity of intertemporal substitution that di¤ers from unity and the need to nance a non-trivial share of public services in output in each period. Given other fundamentals in the economy, we show that the optimal public investment-to-output ratio is smaller for low-growth economies, for economies populated by consumers with low preferences for substituting consumption intertem- porally and when public capital is durable. Moreover, for a calibrated economy, we show that a combination of these factors solves the public investment puzzle.

Growth and welfare: Distorting versus non-distorting taxes

Some concepts associated with the notion of public consumption could be considered as wasteful public expenditures, so that a firstbest analysis would set their level equal to zero every period. However, their ratio to output is significant and rather stable over time in actual economies. In an endogenous growth framework similar to Barro (1990), we analytically characterize the dependence of a second best public investment policy on wasteful public consumption. We compare two extreme tax systems: a distorting system and a nondistorting one. The presence of wasteful expenditures affect optimal public investment and the optimal public financing mechanism. Since private agents do not internalize the fact that by raising their capital accumulation they could be generating extra public investment and consumption, financing public expenditures through lump-sum taxes might lead to an excessive crowding-out impact on current consumption, which may sharply reduce welfare in the short-run as well as limit public capital accumulation and long-run growth. It turns out that this e?ect can be more damaging for growth and welfare than the disincentive created on private capital accumulation when taxing capital income.

Chapter 9 Inequality of Opportunity in the United States: Trends and Decomposition

Purpose – Our ultimate goal is to characterize three methodological issues. First, compare the relative performance of alternative estimation methods for long time series, second, estimate the degree of correlation between effort and circumstances, and, third, decompose total inequality into inequality of opportunity and inequality of effort according to an ideal tree. Methodology – We estimate parametrically and nonparametrically the ex-ante inequality of opportunity in the United States between 1969 and 2007. The degree of correlation between effort and circumstances is computed following the proposal in Bjorklund et al. (2011). In addition, we decompose total inequality based on an ideal tree with three levels of disaggregation by applying the natural decomposition of the squared coefficient of variation and the Nested Shapley value. Findings – We find significant differences between the nonparametric and parametric approaches. In particular, our results reveal that considering cross-effects between circumstances may be relevant. Moreover, the degree of correlation between effort and circumstances which has significantly increased over the period 1969 and 2007 in the United States, explains between 5% and 20% of total IO. In addition, race is the main circumstance during the 1970s and 1980s, accounting for more than 50% of the direct IO, while parental education take the lead in the last two decades. Originality – We modify the parametric specification by considering cross-effects between circumstances. We estimate the degree of correlation between effort and circumstances for long time series. We decompose total inequality according to a three-level hierarchical model.

An Active Public Investment Rule and the Downsizing Experience in the US: 1960-2000

We use a simple growth model with public capital to examine the evolution of the US macroeconomy and to discuss the implications of the public infrastructure decline for the productivity slowdown over the last four decades. The main difference of the model to other papers in the related literature is that public investment is actively managed as a non-linear function of the state of the economy, and is not a constant fraction of output in every period. The active management policy delivers transition dynamics that reproduce the public capital downsizing episode, but that accounts for only a minor fraction of the observed productivity slowdown. However, taking into consideration higher rates of returns to public capital or the reallocation of public resources from productive to unproductive expenditures, which is consistent with the US experience in the 70s and 80s, the model simulation accounts for most of the observed productivity slowdown.

Unequal Opportunity, Unequal Growth

This paper argues that inequality can be both good and bad for growth, depending on what inequality and whose growth. Unequal societies may be holding back one segment of the population while helping another. Similarly, high levels of income inequality may be due to a variety of different factors; some of these may be good while others may be bad for growth. The paper tests this hypothesis by “unpacking” both inequality and growth. Total inequality is decomposed into inequality of opportunity, due to observed factors that are beyond the individuals control, and residual inequality. Growth is measured at different steps of the income ladder to verify whether low, middle, and top income households fare differently in societies with high (low) levels of inequality. In an application to the United States covering 1960 to 2010, the paper finds that inequality of opportunity is particularly bad for growth of the poor. When inequality of opportunity is controlled for, the importance of total income inequality is dramatically reduced. These results are robust to different measures of inequality of opportunity and econometric methods.

Macroeconomic Determinants of Inequality of Opportunity in the United States: 1970–2009

Abstract Conventional wisdom predicts that changes in macroeconomic conditions significantly affect income inequality. In this paper, we hypothesize that the way in which macroeconomic conditions affect inequality depends on how these conditions influence the constituents of total inequality: inequality of opportunity (IO) and inequality of effort (IE). Using the PSID database for the United States (1970–2009), we first decompose total inequality into these components. Then, we specify a dynamic model that relates each inequality component to a set of macroeconomic factors. Apart from real GDP and inflation rates, the most widely used factors in the literature, we also consider outstanding consumer credits and public welfare and health care expenditures. We find that real GDP and outstanding credits have a negative and significant effect upon IO and IE, while inflation has a positive and significant effect only on IE, and welfare expenditures have a negative and significant effect only on IO.

Clubes de convergencia de países europeos en emisiones de CO2 derivadas del transporte en coche: el papel de la dieselización

La reduccion de las emisiones de C02 es uno de los mayores objetivos de la politica climatica de la Union Europea (UE). Uno de los mayores factores de contaminacion en Europa es el sector del transporte, especialmente el transporte rodado por carretera, responsable de una proporcion sustancial de las emisiones de CO2 debido a la combustion del petroleo. La contribucion de este estudio es doble. En primer lugar, se aplica una novedosa metodologia desarrollada por Phillips and Sul (2007) con el objetivo de examinar la existencia de clubes de convergencia en emisiones de CO2 por coche entre 13 paises de la UE durante el periodo temporal 1991 a 2011. En segundo lugar, se investiga la relacion entre tales clubes de convergencia en emisiones y algunas medidas de dieselizacion, en concreto, el stock de coches diesel sobre el total de la flota y el consumo de diesel sobre el total del combustible. La mayor eficiencia de los vehiculos diesel ha generado una politica fiscal favorable a este combustible, llevando a un intenso proceso de dieselizacion en Europa durante las ultimas decadas. No obstante, algunos estudios recientes (Gonzalez and Marrero, 2012; Rodriguez et al., 2015) han cuestionado el exito de estas politicas como herramientas de reduccion de las emisiones de CO2 en el sector de los coches. Este estudio pretende contribuir a este importante debate. DOI: http://dx.doi.org/10.4995/CIT2016.2016.3471

Road accidents and business cycles in Spain

This paper explores the causes behind the downturn in road accidents in Spain across the last decade. Possible causes are grouped into three categories: Institutional factors (a Penalty Point System, PPS, dating from 2006), technological factors (active safety and passive safety of vehicles), and macroeconomic factors (the Great recession starting in 2008, and an increase in fuel prices during the spring of 2008). The PPS has been blessed by incumbent authorities as responsible for the decline of road fatalities in Spain. Using cointegration techniques, the GDP growth rate, the fuel price, the PPS, and technological items embedded in motor vehicles appear to be statistically significantly related with accidents. Importantly, PPS is found to be significant in reducing fatal accidents. However, PPS is not significant for non-fatal accidents. In view of these results, we conclude that road accidents in Spain are very sensitive to the business cycle, and that the PPS influenced the severity (fatality) rather than the quantity of accidents in Spain. Importantly, technological items help explain a sizable fraction in accidents downturn, their effects dating back from the end of the nineties.