Income Mobility of Owners of Small Businesses when Boundaries between Occupations are Vague

Ownership of small businesses can facilitate upward mobility through the income hierarchy and help individuals maintain a place at the higher end of the income distribution hierarchy. This paper compares the positional stability of owners of small businesses with that of wage earners, arguing that describing the relative position of different occupations faces definitional challenges. For instance, the Norwegian dual income tax system encourages owners of small businesses to establish widely held firms, with themselves as employees, because it reduces the tax burden and increases post-tax income. Descriptions of income distribution mobility of different occupations are therefore in danger of being misleading if such occupational measurement problems are not taken into account. I discuss in this paper the income mobility of owners of small firms in Norway 1993–2003 by estimating income transition models for different definitions of occupational status. Business ownership facilitates upward mobility and helps owners maintain a place at the top of the income distribution scale, and wider definitions of what counts as a small business owner enhance these correlations. However, as the paper shows, business owners are more mobile than wage earners and therefore overrepresented at the lower and higher ends of the income distribution ranking, irrespective of definition.income mobility, dual income tax, income of owners of small businesses, random effects model

Parents' Desire to Make Equal Inter Vivos Transfers

This study argues that parents have a desire for dividing equally between their children, and that this motive applies to transfers of gifts inter vivos. We suggest that the equal division motive competes with traditional altruism: support to the child or the children with greatest needs. When parents are drawn between these two ambitions, the degree of income compensation should be stronger in one-child families and we expect the altruism motive to dominate the equal division desire at low levels of recipients’ income. We find support for both these hypotheses, when analysing Norwegian data for inter vivos transfers behaviour. The data include information about stated attitudes towards transfers among the parents, which also support the equal division motive.inter vivos gifts, equal divisions, altruism, sibling comparisons

Inequality Comparisons in a Multi-Period Framework: The Role of Alternative Welfare Metrics

This paper considers the use of alternative welfare metrics in evaluations of income inequality in a multi-period context. Using Norwegian longitudinal income data, it is found, as in many studies, that inequality is lower when each individual’s annual average income is used as welfare metric, compared with the use of a single-period accounting framework. However, this result does not necessarily hold when aversion to income fluctuations is introduced. Furthermore, when actual incomes are replaced by expected incomes (conditional on an initial period),using a model of income dynamics, higher values of inequality over longer periods are typically found, although comparisons depend on inequality and variability aversion parameters. The results are strongly influenced by the observed high degree of systematic regression towards the (geometric) mean, combined with a large extent of individual unexpected effects.income mobility; welfare evaluations; relative mobility process

Inequality Comparisons in a Multi-Period Framework: The Role of Alternative Welfare Metrics

This paper considers the use of alternative welfare metrics in evaluations of income inequality in a multi-period context. Using Norwegian longitudinal income data, it is found, as in many studies, that inequality is lower when each individual’s annual average income is used as welfare metric, compared with the use of a single-period accounting framework. However, this result does not necessarily hold when aversion to income fluctuations is introduced. Furthermore, when actual incomes are replaced by expected incomes (conditional on an initial period), using a model of income dynamics, higher values of inequality over longer periods are typically found, although comparisons depend on inequality and variability aversion parameters. The results are strongly influenced by the observed high degree of systematic regression towards the (geometric) mean, combined with a large extent of individual unexpected effects

Controlling for fixed effects in studies of income underreporting

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Controlling for fixed effects in studies of income underreporting

The expenditure method of Pissarides and Weber (1989) [Journal of Public Economics, 39 (1), 17- 32) shows how one backs out measure of income underreporting by the self-employed by using food consumption as trace of true income. In this paper we make a case for using panel data and fixed effects estimation in such analysis, instead of OLS estimation. The main argument is that fixed effects estimation addresses the problem of omitted variable bias in the identification. We demonstrate the use of panel data and fixed effects estimation by using large scale administrative register data on charitable donations, exploiting that the data can be turned into a panel dataset. The results suggest that the estimation technique matters – fixed effects estimates are smaller than OLS estimates

Theoretical and Practical Arguments for Modeling Labor Supply as a Choice among Latent Jobs

Models of labor supply derived from stochastic utility representations and discretized sets of feasible hours of work have gained popularity because they are more practical than the standard approaches based on marginal calculus. In this paper we argue that practicality is not the only feature that can be addressed by means of stochastic choice theory. This theory also offers a powerful framework for developing a more realistic model for labor supply choices, founded on individuals having preferences over jobs and facing restrictions on the choice of jobs and hours of work. We discuss and clarify how this modeling framework deviates from both the conventional discrete approach (Van Soest, 1995), as well as the standard textbook approach based on marginal calculus (Hausman, 1985). It is argued that a model based on job choice opens up for a more realistic representation of the choice environment, and consequently offers the possibility of conducting a richer set of simulations of alternative policies.labor supply, random utility models, tax reform

The distributional effects of tax-benefit policies : A reduced form approach with application to Finland

In this study we describe a procedure to account for behavioral effects in the evaluation of distributional effects of tax-benefit policy changes. Instead of applying a separate behavioral simulation module, we demonstrate how exogenously given behavioral estimates can be employed in the descriptions of distributional analysis. By employing elasticity estimates from relevant literature, behavioral effects on household incomes are assessed both on the intensive and the extensive margin. The method is demonstrated with the Finnish tax-benefit changes that came into force at the beginning of 2020

Grunnlag for vurdering av arbeidstilbudspotensialet i Norge på lang sikt

Rapporten gir en oversikt over forhold som bør være relevante når man skal utarbeide langsiktige fremskrivninger av arbeidsstyrken og sysselsettingen. Den er skrevet på oppdrag for Finansdepartementet som et grunnlag for de langsiktige fremskrivningene av norsk økonomi i Perspektivmeldingen 2013. I tråd med tradisjonell økonomisk teori, legger rapporten til grunn at det er arbeidstilbudet som betyr mest for den faktiske sysselsettingsutviklingen i et langsiktig tidsperspektiv. Endringer i arbeidstilbudet kan ha tre hovedkilder: 1) demografi, dvs. endringer i befolkningen som er i yrkesaktiv alder; 2) sammensetningseffekter, dvs. endringer i fordelingen av den yrkesaktive befolkningen på grupper som er vedvarende ulike når det gjelder gjennomsnittlig individuelt arbeidstilbud; 3) endringer i økonomiske og andre incentiver som påvirker det individuelle arbeidstilbudet. Rapporten konsentrerer seg om punktene 2 og 3. Langsiktige fremskrivninger vil nesten alltid ta utgangspunkt i historiske trender. Kan disse forlenges, eller er det noe vi i dag kjenner til som tilsier at de vil bli brutt? Et eksempel på et slikt brudd vil trolig være kvinnelig yrkesdeltaking hvor potensialet for videre tilnærming mellom kvinner og menn er i ferd med å bli uttømt. Kapittel 2 viser hovedlinjene i utviklingen fra 1930 til i dag i aggregerte tall for arbeidsstyrke, yrkesfrekvenser, sysselsatte personer og timeverk, samt gjennomsnittlig arbeidstid. En dekomponering gir et tallfestet bilde av at reduksjoner i arbeidstiden har betydd mer for den gjennomsnittlige arbeidsinnsatsen per person i yrkesaktiv alder enn vekst sysselsettingsandelen. Videre sammenlignes yrkesfrekvenser, sysselsettingsandeler og arbeidstid i Norge med tilsvarende størrelser i noen utvalgte OECD-land. En fullstendig gjennomgang av årsakene til den historiske utviklingen og til forskjeller mellom Norge og andre land, faller utenfor rammene for denne rapporten. For å vurdere potensielle sammensetningseffekter på det samlede arbeidstilbudet fremover, kreves kartlegging av hvordan dette varierer mellom ulike grupper. Kapittel 3 viser hvordan arbeidstilbudet i gruppene eldre, kvinner, småbarnsforeldre og ulike innvandrergrupper avviker fra samlede gjennomsnittstall. Også her sammenlignes avvikene over tid og mellom land. Unges overgang fra utdanning til arbeidsliv og eldres overgang fra arbeid til trygd belyses nærmere i kapittel 4. Kapittel 5 gir en generell oversikt over økonometriske analyser av hvordan arbeidstilbudet påvirkes av økonomiske incentiver. For menn ligger estimatene på ukompenserte lønnselastisiteter rundt 0,1. Responsen er fortsatt noe større for kvinner enn menn, særlig når de er gift. Kapittel 6 gjennomgår relativt detaljert hvordan man utarbeider langsiktige fremskrivninger av sysselsettingen i noen utenlandske miljøer som gjør dette relativt regelmessig. Kapittel 7 viser sysselsettingseffekter av endringer i inn- og utvandring og integreringen av innvandrere. Den sterke økningen i arbeidsinnvandringen etter 2004 gjør at dette er effekter som man trolig vil møte i enhver langsiktig sysselsettingsfremskrivning av norsk økonomi. Kapittel 8 oppsummerer rapporten, peker på kilder til kommende endringer i sysselsettingspotensialet, og gir noen anbefalinger for fremskrivninger av arbeidstilbudet

Barnehageforliket - effekter på arbeidstilbud og inntektsfordeling

Økonomiske analyser er tilgjengelige via www.ssb.noBarnehageforliket våren 2003 innebærer at fra 2005 skal foreldre maksimalt betale 1 500 kroner per måned for en barnehageplass, samtidig som at det skal være full behovsdekning. I denne artikkelen diskuteres effekter av denne reformen med hensyn til mødrenes tilbud av arbeidskraft og inntektsfordelingen blant familier med førskolebarn. Det anvendes en simuleringsmodell for familier med førskolebarn, der foreldrene velger barnepass og mødrenes arbeidstilbud simultant. Resultatene viser at den reduserte foreldrebetalingen øker mødrenes arbeidstilbud, men at økningen forsterkes dersom en makter å bygge nye barnehageplasser i takt med den økende etterspørselen. I artikkelen vises det også til at kostnadene ved reformen kan overvurderes dersom en ikke tar hensyn til økte skatteinntekter som følge av at mødrenes arbeidstilbud øker