“I Can Hear the Grass Grow”: The Anatomy of Distributive Changes in Argentina

We present a detailed description of the drastic changes in many aspects of the distribution of income in Argentina, complementing a recent study by Gasparini and Cruces (2009), who focus mostly on inequality. We use modern descriptive tools to provide a complete map of the changes in many aspects of the distribution of income, and stress the fact that other key measures changes dramatically along inequality. In particular, we focus on documenting the changes in inequality along those of poverty and the size of the middle class.

Implicit Rents from Own-Housing and Income Distribution: Econometric Estimates for Greater Buenos Aires

Most income studies do not take into account the implicit rent obtained by households who inhabit their own dwellings, a fact that introduces a potentially relevant bias in inequality, poverty, and welfare measures. In this paper we estimate these implicit rents for the Greater Buenos Aires area from information of Argentina’s National Household Expenditures Survey (ENGH) of 1996/7. Based on a sample of households that rent their dwellings, quantile regressions are used to estimate observed rents from a hedonic model. Estimated coefficients are applied to households that do not rent their houses or apartments in order to predict the implicit rent derived from living in an owned house. Estimated implicit rents are added to the standard notion of household income and various inequality measures are reestimated. We find that the consideration of these implicit rents reduces inequality due to an income elasticity of spending in housing less than one, and to the relatively large proportion of house owners in the lower strata of the income distribution.implicit rent, hedonic prices, quantile regression, housing, income distribution.

A note on a simple interpretation of the Gini coefficient

La mayoría de las discusiones intutivas sobre el coeficiente de Gini se basan en áreas de la curva de Lorenz, un concepto abstracto para muchos. Esta breve nota provee una justifación intuitiva del indice de Gini, en base a promedios simples de diferencias de ingresosFacultad de Ciencias Económica

A note on a simple interpretation of the Gini coefficient

La mayoría de las discusiones intutivas sobre el coeficiente de Gini se basan en áreas de la curva de Lorenz, un concepto abstracto para muchos. Esta breve nota provee una justifación intuitiva del indice de Gini, en base a promedios simples de diferencias de ingresosFacultad de Ciencias Económica

A note on a simple interpretation of the Gini coefficient

La mayoría de las discusiones intutivas sobre el coeficiente de Gini se basan en áreas de la curva de Lorenz, un concepto abstracto para muchos. Esta breve nota provee una justifación intuitiva del indice de Gini, en base a promedios simples de diferencias de ingresosFacultad de Ciencias Económica

Tests for Unbalanced Error Component Models Under Local Misspecication

This paper derives unbalanced versions of the tests statistics for ¯rst order serial correlation and random individual e®ects summarized in Sosa Escudero and Bera (2001), and updates their xttest1 routine. The derived tests statistics should be useful for applied researchers faced with the increasing availability of panel information where not every individual or country is observed for the full time span. Also, as it was the case of the previously available tests, the test statistics proposed here are based on the OLS residuals, and hence are computationally very simple.error components model, unbalanced panel data, testing, misspecification.

Sources of Income Persistence: Evidence from Rural El Salvador

This paper uses a unique panel dataset (1995-2001) of rural El Salvador to investigate the main sources of the persistence and variability of incomes. First we propose an econometric framework where a general dynamic panel model is validly reduced to a simple linear structure with a dynamic covariance structure, which augments considerably the number of degrees of freedom usually lost in the construction of instruments to estimate standard dynamic panel models. Then we investigate the extent to which families are continuously poor due to endowments (observed and unobserved) that yield low income potential or due to systematic income shocks that they are unable to smooth. We find that life-cycle incomes are largely explained by the relatively time-invariant productive characteristics of families and their members such as education, public goods and other assets. Observed income determinants account for about half of income persistence. Controlling for unobserved heterogeneity leaves little room for pure state dependence. Although of second order, high volatility and the inability to insure from shocks is a more important source of variation in incomes than in developed countries. Low income potential is the more likely source of poverty traps in Rural El Salvador. Many of the family endowments are manipulable by policy interventions, although many not in the short term.Income mobility, Poverty Traps, Panel Data, El Salvador

Test for the Error Component Model in the Presence of Local Misspecification

It is well known that most of the standard speci¯cation tests are not valid when the alternative hypothesis is misspeci¯ed. This is particularly true in the error component model, when one tests for either random e®ects or serial correlation without taking account of the presence of the other e®ect. In this paper we study the size and power of the standard Rao's score tests analytically and by simulation when the data is contaminated by local misspeci¯cation. These tests are adversely a®ected under misspeci¯cation. We suggest simple procedures to test for random e®ects (or serial correlation) in the presence of local serial correlation (or random e®ects), and these tests require ordinary least squares residuals only. Our Monte Carlo results demonstrate that the suggested tests have good ¯nite sample properties for local misspeci¯cation, and in some cases even for far distant misspeci¯cation. Our tests are also capable of detecting the right direction of the departure from the null hypothesis. We also provide some empirical illustrations to highlight the usefulness of our tests.

Individual Heterogeneity in the Returns to Schooling: Instrumental Variables Quantile Regression using Twins Data

Considerable effort has been exercised recently in estimating mean returns to education while carefully considering biases arising from unmeasured ability and measurement error. Some of this work has also attempted to determine whether there are variations from the “mean” return to education across the population with mixed results. In this paper, we use recent extensions of instrumental variables techniques to quantile regression on a sample of twins to estimate an entire family of returns to education at different quantiles of the conditional distribution of wages while addressing simultaneity and measurement error biases. We test whether there is individual heterogeneity in returns to education against the alternative that there is a constant return for all workers. Our estimated model provides evidence of two sources of heterogeneity in returns to schooling. First, there is evidence of a differential effect by which more able individuals become better educated because they face lower marginal costs of schooling. Second, once this endogeneity bias is accounted for, our results provide evidence of the existence of actual heterogeneity in market returns to education consistent with a non-trivial interaction between schooling and unobserved abilities in the generation of earnings. The evidence suggests that higher ability individuals (those further to the right in the conditional distribution of wages) have higher returns to schooling but that returns vary significantly only along the lower quantiles to middle quantiles. In our final approach, the resulting estimated returns are never lower than 9 percent and can be as high as 13 percent at the top of the conditional distribution of wages, thus providing rather tight bounds on the true return to schooling. Our findings have meaningful implications for the design of educational policies.

Implicit rents from own-housing and income distribution: econometric estimates for Greater Buenos Aires

La gran mayoría de los estudios del ingreso no toman en cuenta la renta implícita que obtienen los hogares que viven en una casa propia. Esta omisión puede introducir un potencial sesgo de gran magnitud en medidas de desigualdad, pobreza y bienestar. En este trabajo, se estima el valor de esta renta implícita para el Gran Buenos Aires utilizando información de la Encuesta Nacional de Gastos de los Hogares (ENGH) de 1996-97. En base a una muestra de hogares que alquilan sus viviendas, se estiman regresiones por cuantiles para estimar un modelo hedónico. Los coeficientes de esta regresión se aplican para estimar el valor que pagarían los hogares que no alquilan para predecir la renta implícita de cada hogar. Este valor se agrega a la noción estándar de ingreso familiar y se reestiman varias medidas de desigualdad. Se encuentra que la consideración de la renta implícita reduce la desigualdad dado que la elasticidad de gasto en vivienda es menor a uno, y por la proporción relativamente alta de propietarios en la cola inferior de la distribución.Most income studies do not take into account the implicit rent obtained by households who inhabit their own dwellings, a fact that introduces a potentially relevant bias in inequality, poverty, and welfare measures. In this paper we estimate these implicit rents for the Greater Buenos Aires area from information of Argentina?s National Household Expenditures Survey (ENGH) of 1996/7. Based on a sample of households that rent their dwellings, quantile regressions are used to estimate observed rents from a hedonic model. Estimated coefficients are applied to households that do not rent their houses or apartments in order to predict the implicit rent derived from living in an owned house. Estimated implicit rents are added to the standard notion of household income and various inequality measures are reestimated. We find that the consideration of these implicit rents reduces inequality due to an income elasticity of spending in housing less than one, and to the relatively large proportion of house owners in the lower strata of the income distribution.Trabajo publicado en el Journal of Income Distribution, 12 (1-2): 32-55.Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS