Decomposing the Dynamics of Regional Earnings Disparities in Israel

The literature on regional growth convergence and economic disparities has tended to confound four interwoven measurement phenomena. i) mean reversion (so-called beta convergence) where richer regions move towards the average from above and poorer regions from below. ii) diminishing inequality (so called sigma convergence) where the horizontal or spatial distribution of income becomes more equal. iii) mobility, where the rank of a region in the overall distribution of income changes either upwards or downwards. iv) leveling, where the richer regions become poorer (leveling-down) or the poorer regions become richer (leveling-up). We use a new statistical methodology, which treats these four phenomena on an integrated basis. The methodology is applied to Israeli regional earnings and house price data. We find that whereas earnings are strongly sigma divergent during the 1990s, this trend is offset when regional cost of living differences are taken into consideration. In this event, regional housing markets induce convergence in similar measure to the divergence induced by regional labor earnings.

Regional Heterogenity and Conditional Convergence

This paper stresses the importance of accounting for regional heterogenity in the dynamic analysis of regional economic disparities. Studies of regional growth invariably presume regions are homogenous in that their socio-demographic composition is assumed to be broadly similar. We argue that any analysis of regional convergence needs to be tested conditionally, i.e. conditional upon the socio-demographic structure of the workers in the various regions. To this end, we estimate various measures of conditional regional earnings inequality using Israeli regional data for the period 1991-2002. Our results show that much of the regional earnings inequality may be accounted for by the conditioning variables. Both in measures of regional convergence and regional mobility, conditioning makes a large difference to the results accounting for up to half of the observed levels of inequality. Ignoring regional heterogeneity may therefore lead to serious over-estimation of the underlying level of regional inequality.

Job Vacancy Chains and Local Employment Creation; the Case of Supply-Side Restrictions

The job-chains model of local labor market change is a demand-driven analytic device for estimating the effects of new job creation. This paper explores the effects of restricting supply, i.e. limiting job access, on the model’s primary outcomes: vacancy chain multipliers, welfare effects and distributional impacts. Major sources of labor supply are the local unemployed, out of the labor force and in-migrants. Three simulations are reported relating to 1) restricting new jobs to current local residents (i.e. no in-migrants), 2) restricting new jobs to current residents in the first round of hiring only and 3) restricting hiring to local unemployed/out of labor force on the first round alone. The results are compared to the basic model that assumes no supply-side restrictions. In terms of chain length, welfare effects, distributional impacts and policy palatability, first round restrictions on in-migrants would seem to be the most plausible option. However, as an economic development strategy,well targeted demand-side initiatives would still seem to be preferable.

Measuring Regional Disparities in Small Countries

Though individual studies of regional disparity may deal with separate development measures - population growth, wages, welfare, regional productivity, etc. - the use of an integrated indicator is often essential, particularly if a comparative (cross-country) analysis is required. In order to measure the extent of disparities, various indices of inequality are commonly used. The goal of present study was to determine whether commonly used inequality measures (Gini, coefficient of variation, etc.) produce meaningful estimates when applied to small countries, thus making it possible to compare the results of analysis obtained for such countries with those obtained elsewhere. As we argue, a small country may differ from a country of larger size in three fundamental features. First, it is likely to have a relatively small number of regional divisions. Second, its regional divisions are likely to vary considerably in their population sizes. Lastly, regions of a small country may rapidly change their rank-order positions in the country-wide hierarchy, by changing their attributes (e.g., population and incomes). In contrast, in a large country such rank-order changes may be both less pronounced and slower-acting. In order to formalize these distinctions, we designed simple empirical tests, in which income and population distributions, presumably characteristic for small countries, were compared with a “reference” distribution, assumed to represent more accurately a country of a larger size. In the latter (reference) distribution, the population was distributed evenly across regional divisions and assumed to be static. In the first test, we checked whether the overall number of regions matters. In the second, we tested whether different inequality indices respond to differences in the regional distribution of population, viz., evenly spread population in the reference distribution vs. unevenly spread population in the test distribution. Finally, in the third test, we verified whether different inequality indices were sensitive to the sequence in which regions are introduced into the calculation. Somewhat surprisingly, none of the indices we tested appeared to pass all the tests, meaning that they may produce (at least in theory) misleading estimates if used for small countries. However, two population weighted indices – Williamson and Gini - appeared to exhibit only minor flaws and may thus be considered as more or less reliable regional inequality measures. Although further studies on the performance of different inequality indices may be needed to verify the generality of our observations, the present analysis clearly cautions against indiscriminate use of inequality indices for regional analysis and comparison.

Distinguishing regional from within-codon rate heterogeneity in DNA sequence alignments

We present an improved phylogenetic factorial hidden Markov model (FHMM) for detecting two types of mosaic structures in DNA sequence alignments, related to (1) recombination and (2) rate heterogeneity. The focus of the present work is on improving the modelling of the latter aspect. Earlier papers have modelled different degrees of rate heterogeneity with separate hidden states of the FHMM. This approach fails to appreciate the intrinsic difference between two types of rate heterogeneity: long-range regional effects, which are potentially related to differences in the selective pressure, and the short-term periodic patterns within the codons, which merely capture the signature of the genetic code. We propose an improved model that explicitly distinguishes between these two effects, and we assess its performance on a set of simulated DNA sequence alignments

Job vacancy chains in metropolitan labor markets

Metropolitan Labor markets are characterized by gross flows, much larger than the traditional net measures of employment change might suggest. Standard impact analyses of employment change tend to either ignore these flows or treat them as a matter of 'job churning'. But in a metropolitan area experiencing involuntary unemployment and underemployment, these flows may offer real opportunities for individuals to improve their employment positions. Such improvement occurs along 'job chains' in which a new vacancy opens a sequence of job changes allowing workers to move closer to their full employment wage. Not all chains are of the same length, nor does every chain produce the same welfare gain. This paper presents a model of job chaims which addresses chain length, welfare gains and distributional effects. The application of the model is illustrated using a hypothetical case of a new manufacturing firm in the Chicago metropolitan area. The job chains approach to estimating multiplier, efficiency and distributional effects associated with the firm, is compared with conventional impact analysis estimates. The conclusions discuss the implications of these estimates for the evaluation of local economic development projects.

Rate of adaptation in sexuals and asexuals: A solvable model of the Fisher-Muller effect

The adaptation of large asexual populations is hampered by the competition between independently arising beneficial mutations in different individuals, which is known as clonal interference. Fisher and Muller proposed that recombination provides an evolutionary advantage in large populations by alleviating this competition. Based on recent progress in quantifying the speed of adaptation in asexual populations undergoing clonal interference, we present a detailed analysis of the Fisher-Muller mechanism for a model genome consisting of two loci with an infinite number of beneficial alleles each and multiplicative fitness effects. We solve the infinite population dynamics exactly and show that, for a particular, natural mutation scheme, the speed of adaptation in sexuals is twice as large as in asexuals. Guided by the infinite population result and by previous work on asexual adaptation, we postulate an expression for the speed of adaptation in finite sexual populations that agrees with numerical simulations over a wide range of population sizes and recombination rates. The ratio of the sexual to asexual adaptation speed is a function of population size that increases in the clonal interference regime and approaches 2 for extremely large populations. The simulations also show that the imbalance between the numbers of accumulated mutations at the two loci is strongly suppressed even by a small amount of recombination. The generalization of the model to an arbitrary number $L$ of loci is briefly discussed. If each offspring samples the alleles at each locus from the gene pool of the whole population rather than from two parents, the ratio of the sexual to asexual adaptation speed is approximately equal to $L$ in large populations. A possible realization of this scenario is the reassortment of genetic material in RNA viruses with $L$ genomic segments.Comment: Title has been changed. Supporting Information (animation) can be found in the source file. 53 pages. 10 figures. To appear in Genetic