Nonlinear dynamics in welfare and the evolution of world inequality

The paper proposes a measure of countries' welfare based on individuals' lifetime utility and applies it to a large sample of countries in the period 1960-2000. Even though welfare inequality across countries appeared stable, the distribution dynamics points out the emergence of three clusters. Such tendencies to polarization shall strengthen in the future. In terms of the world population distribution, welfare inequality decreased as the result of the decline in inequality of both per capita GDP and life expectancy, but this downward trend should be reverted hereafter. Finally, a polarization pattern emerged, which is expected to further intensify in the future.distribution of welfare, nonparametric estimation, polarization, distribution dynamics, inequality

Crescita e distribuzione: un’interpretazione unitaria dei recenti contributi

Questo articolo analizza in una prospettiva unitaria i recenti contributi sul rapporto fra crescita e distribuzione. Lo scopo è di mostrare come l'attuale letteratura faccia sostanzialmente riferimento a due meccanismi di base: il primo di natura politico-economico e il secondo riconducibile all’incompletezza del mercato dei capitali. Le conclusioni dei due approcci sono valutate alla luce delle recenti analisi empiriche

Nonlinear Growth and the Productivity Slowdown

In this paper we study the productivity slowdown taking as a starting point the nonlinear shape of the growth path. We relate the slowdown to the evolution of the world income distribution in the periods before and after the oil shock of 1973 and show that: i) in both periods growth is nonlinear; ii) the productivity slowdown consists in a downward shift of the nonlinear growth path; iii) in both periods we observe a medium-run tendency to polarization, but the long-run distribution features convergence in the first period and polarization in the second. We provide theoretical and empirical arguments suggesting that the interaction between nonlinear growth and international technology spillovers can explain how a temporary shock may have permanent effects on world growth.

The Interrupted Power Law and The Size of Shadow Banking

Using public data (Forbes Global 2000) we show that the asset sizes for the largest global firms follow a Pareto distribution in an intermediate range, that is ``interrupted'' by a sharp cut-off in its upper tail, where it is totally dominated by financial firms. This flattening of the distribution contrasts with a large body of empirical literature which finds a Pareto distribution for firm sizes both across countries and over time. Pareto distributions are generally traced back to a mechanism of proportional random growth, based on a regime of constant returns to scale. This makes our findings of an ``interrupted'' Pareto distribution all the more puzzling, because we provide evidence that financial firms in our sample should operate in such a regime. We claim that the missing mass from the upper tail of the asset size distribution is a consequence of shadow banking activity and that it provides an (upper) estimate of the size of the shadow banking system. This estimate -- which we propose as a shadow banking index -- compares well with estimates of the Financial Stability Board until 2009, but it shows a sharper rise in shadow banking activity after 2010. Finally, we propose a proportional random growth model that reproduces the observed distribution, thereby providing a quantitative estimate of the intensity of shadow banking activity.Comment: 12 pages, 5 figures, 2 tables. To appear in Plos ONE 201

Long Run Growth and Income Distribution in an OLG Model with Strategic Job-Seeking and Credit Rationing

In the human capital literature, it is usually assumed that human capital is paid according to its marginal productivity. Nevertheless, in the real world labor compensation is linked to a fixed hierarchy due to the division and organization of labor. Access to privileged positions in the hierarchy depends on schooling credentials, which in turn are a function of individual learning abilities and of individual spending in education. People compete in education in order to achieve the best job positions: positional competition is like a rent-seeking activity, based on the different levels of credentials. In this paper, a simple OLG economy with two agents and two kinds of jobs is modeled, and the strategic solutions are analyzed. The model shows different outcomes depending on the hypotheses regarding the type of strategic interaction (sequential or simultaneous) and the characteristics of the capital market. In the sequential equilibrium, the presence of credit market imperfections and risk-aversion makes the asympthotic wealth distribution dependent on initial conditions (non ergodicity). In the simultaneous equilibrium, a non monotonic relationship between income inequality and long run growth is shown; in the long run, job allocation is mainly determined by the innate learning abilities and it is unrelated to the initial wealth distribution (ergodicity)

An Estimate of the Degree of Interconnectedness between European Regions: A Bayesian Model Averaging Approach.

This paper provides a methodology based on General Variance Decomposition and Bayesian Model Averaging to estimate the degree of economic interconnectedness across different regions, and applies such methodology to a sample of 199 European NUTS2 regions in the period 1980-2008. The estimated connectedness appears very heterogeneous and not symmetric. The idiosyncratic component is not very significant, as well as the common component. A clear pattern of core-periphery exists but not defined in geographical terms. The country component is not very significant, very heterogeneous across countries, and proportional to countries’ size. The degree of interconnectedness positively depends on the time horizon of the analysis. Finally, the comparison of the estimated connectedness matrix with two spatial matrices generally used in spatial econometrics (a firstorder contiguity and a distance-based matrix) reveals that both are far from representing the actual interconnectedness between European regions

Occupational Mobility across Generations: a Theoretical Model with an Application to Italy

This paper proposes a simple theoretical model to identify the main determinants of intergenerational occupational mobility with an ap- plication to Italian data. We assume that occupational mobility is described by a Markov matrix and that three factor affect the occu- pational choice of an individual: the income incentives of each occu- pation, the family background and the occupational structure. The empirical application of the proposed model to a sample of Italian families describes Italy as a less mobile country, and in partic- ular we show that occupational mobility decreases for children born between 1966 and 1976. This result is due to the worsening of oppor- tunities. The estimate of three synthetic indexes confirms the decease of mobility

Occupational Mobility: Theory and Estimation for Italy

This paper presents a model where intergenerational occupational mobility is the joint outcome of three main determinants: income incentives, equality of opportunity and changes in the composition of occupations. The model rationalizes the use of transition matrices to measure mobility, which allows for the identification of asymmetric mobility patterns and for the formulation of a specific mobility index for each determinant. Italian children born in 1940-1951 had a lower mobility with respect to those born after 1965. The steady mobility for children born after 1965, however, covers a lower structural mobility in favour of upper-middle classes and a higher downward mobility from upper-middle classes. Equality of opportunity was far from the perfection but steady for those born after 1965. Changes in income incentives instead played a major role, leading to a higher downward mobility from upper-middle classes and lower upward mobility from the lower class.Comment: 31 pages, 2 figure

How Reliable Are the Geographical Spatial Weights Matrices?

This paper shows how it is possible to estimate the interconnections between regions by a connectedness matrix recently proposed by Diebold and Yilmaz (2014), and discusses how the connectedness matrix is strictly related to the spatial weights matrix used in spatial econometrics. An empirical application using growth rate volatility of per capita GDP of 199 European NUTS2 regions (EU15) over the period 1981-2008 illustrates how our estimated connectedness matrix is not compatible with the most popular geographical weights matrices used in literature

Young people between education and the labour market during the COVID-19 pandemic in Italy

We analyse the distribution and the flows between different types of employment (self-employment, temporary, and permanent), unemployment, education, and other types of inactivity, with particular focus on the duration of the school-to-work transition (STWT). The aim is to assess the impact of the COVID-19 pandemic in Italy on the careers of individuals aged 15-34. We find that the pandemic worsened an already concerning situation of higher unemployment and inactivity rates and significantly longer STWT duration compared to other EU countries, particularly for females and residents in the South of Italy. In the midst of the pandemic, individuals aged 20-29 were less in (permanent and temporary) employment and more in the NLFET (Neither in the Labour Force nor in Education or Training) state, particularly females and non Italian citizens. We also provide evidence of an increased propensity to return to schooling, but most importantly of a substantial prolongation of the STWT duration towards permanent employment, mostly for males and non Italian citizens. Our contribution lies in providing a rigorous estimation and analysis of the impact of COVID-19 on the carriers of young individuals in Italy, which has not yet been explored in the literature.Comment: 16 pages, 4 figures, 3 table