Macerata Lectures on European Economic Policy. Poverty and the EU: the New Decade

The EU is currently drawing up its agenda EU2020 for the next decade. In doing so, account must be taken of the successes and limitations of the Lisbon Agenda 2000-2009, notably the failure to achieve a decisive impact on the eradication of poverty and social exclusion. From the experience of the Lisbon Agenda, we learn that social policy and economic policy have to be designed together, in such a way that their actions are complementary rather than in conflict. If real progress is to be made in reducing poverty in Europe in the next decade, then it is essential that in the EU2020 Agenda social inclusion should receive the same prominence as the other EU objectives. It is therefore welcome that the Commission has proposed the setting of a poverty target, but this raises many issues. The paper focuses on two: the choice of target variable (risk of poverty or material deprivation) and the extent of ambition. Moreover, alongside the introduction of a social inclusion target(s) there has to be an agreed procedure for monitoring progress. Finally, in order to make real progress, the EU needs to take concrete policy initiatives. The proposal made here is that the EU begins with a Guaranteed Income for Children. Each Member State would be required to guarantee unconditionally to every child a basic income. This measure would significantly reduce child poverty, and would contribute positively to the achievement of other EU2020 objectives in the fields of education and employment.Social Policy,EU2020 Agenda,Poverty,Social Exclusion

EUROMOD and the Development of EU Social Policy

The purpose of this paper is to set EUROMOD - the EU-wide tax and benefit model - in the context of the development of EU social policy. It explores the relation between the rapidly evolving EU social inclusion process and investment in European social science infrastructure. In so doing, I look mainly to the future, but I would like to begin in Sections 1 and 2 with the historical background. It is only in this way that we can place in context the achievements of EU social policy and understand the need for further development. I then describe in Section 3 the main elements of the EU Social Inclusion process and the National Action Plans of Member States. A key role is played by the social indicators agreed at Laeken in 2001, which are the subject of Section 4. Looking to the future, the monitoring of performance by means of social indicators may lead to the setting of targets (Section 5). All of this relates to process and analysis, but substantive progress requires policy innovation and policy learning. In Section 6, I begin with the assessment of policy at the national level, arguing that there is a role for EUROMOD in analysing the policies of individual Member States on a consistent basis across the EU. The role is clearly crucial at the EU level (Section 7). The potential for policy assessment is demonstrated in Section 8 in the context of a "new intergenerational pact", and in terms of working back from possible targets in Section 9. The main lessons for policy analysis are summarised in Section 10.

The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century

Taxation data have been used to create long-run series for the distribution of top incomes in quite a number of countries. Most of these studies have focused on the national experience of individual countries, but we can also learn from cross-country comparisons. Comparative analysis is therefore the next stage in the research program. At the same time, we know from other fields that there are dangers in simply pooling all available time series, without regard to the specific nature of data and reality. In this paper, we therefore adopt an intermediate approach, taking five Anglo-Saxon countries that have relatively similar backgrounds and tax systems: Australia, Canada, New Zealand, the UK, and the US. The first part of the paper tackles the challenge of comparability of income-tax based estimates across countries and across time. The second part summarizes the evidence about top income shares. Across these five countries, the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 percent is highly correlated across Anglo-Saxon countries, more so than the share of the next 4 percent. The third part of the paper looks at the relationship between taxes and top income shares. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.inequality, taxation, Australia, Canada, New Zealand, United Kingdom, United States

Promise and Pitfalls in the Use of 'Secondary' Data-Sets: Income Inequality in OECD Countries

Secondary data-sets have come to play an increasing role in empirical economic research. This paper examines the major new secondary data-set assembled by Klaus Deininger and Lyn Squire (DS) at the World Bank. We concentrate on its coverage of the OECD countries. We have particularly in mind the user of income inequality statistics who does not wish to go back to the original data. In order to motivate the analysis, we first present two examples of the problems which may arise, showing how both cross-country comparisons and time-series analysis may depend sensitively on the choice of data. Section 3 of the paper sets the DS data-set in the historical context of earlier exercises in assembling comparative information on income inequality. In Section 4, we consider the methodological issues which arise in the use of income distribution data and their relation to the different sources of evidence. In Section 5, we discuss their implications for the comparison of income inequality across OECD countries, and the use of dummy variables to allow for definitional and data differences. Section 6 is concerned with changes in income inequality over time, and the establishment of consistent series for individual countries. The lessons to be drawn for use of secondary data-sets in the field of income distribution are summarised at the end of the paper.personal income distribution, secondary data-sets

A Parametric Framework for the Comparison of Methods of Very Robust Regression

There are several methods for obtaining very robust estimates of regression parameters that asymptotically resist 50% of outliers in the data. Differences in the behaviour of these algorithms depend on the distance between the regression data and the outliers. We introduce a parameter $\lambda$ that defines a parametric path in the space of models and enables us to study, in a systematic way, the properties of estimators as the groups of data move from being far apart to close together. We examine, as a function of $\lambda$, the variance and squared bias of five estimators and we also consider their power when used in the detection of outliers. This systematic approach provides tools for gaining knowledge and better understanding of the properties of robust estimators.Comment: Published in at http://dx.doi.org/10.1214/13-STS437 the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

On analysing the world distribution of income

This paper argues that consideration of world inequality should cause us to re-examine the key concepts underlying the welfare approach to the measurement of income inequality and the inter-relation between the measurement of inequality and the measurement of poverty. There are three reasons why we feel that a re-examination is necessary: (i) the extent of global income differences means that we cannot simply carry over the methods used at a national level; we need a more flexible measure; (ii) we have to reconcile measures of world inequality and world poverty; and (iii) we need to explore more fully the different ways in which measures may be relative or absolute. This leads us to propose a new measure, which (a) combines poverty and inequality, including provision for those who are concerned only with poverty, (b) incorporates different approaches to the measurement of inequality; and (c) allows the cost of inequality to be expressed in different ways. Applied to the world distribution for the period 1820-1992, the new measure provides different perspectives on the evolution of global inequality.global income inequality, absolute vs. relative inequality, poverty, world citizens

Wealth and inheritance in Britain from 1896 to the present

Personal wealth has grown since the 1970s twice as fast in real terms as national income. Has this rise in the wealth-income ratio led to a corresponding increase in the wealth being passed on from one generation to the next? Are we returning to the levels of inheritance found in the 19th century? The aim of this paper is to construct UK evidence on the extent of the transmission of wealth in the form of estates and gifts inter vivos. It takes a long-run view of inheritance, starting from 1896, when the modern Estate Duty was introduced, and exploits the extensive estate data published over the years. Construction of a long-run time series for more than a century is challenging, and there are important limitations. The resulting time-series demonstrates the major importance of inheritance in the UK before the First World War, when the total transmitted wealth represented some 20 per cent of net national income. In the inter-war period, the total was around 15 per cent, falling to some 10 per cent after the Second World War, and then falling further to below 5 per cent in the late 1970s. Since then, there has indeed been an upturn: a rise from 4.8 per cent in 1977 to 8.2 per cent in 2006. This increase was more or less in line with the increase in personal wealth, and has to be interpreted in the light of the changing net worth of the corporate and public sectors of the economy