WSF TWS: Inequality and Welfare States

NORFACE WSF Thematic Workshop – Inequality and Welfare States, 19 – 20 June 2017, University of Oslo

Workshop Program (pdf)

Report by the Organizers – “This workshop was very important especially for the younger scholars to get valuable input on their research”

Profile Picture Kalle Moene
Kalle Moene, Organizer
Profile Picture Alexander Cappelen
Alexander Cappelen,  Organizer

The Welfare State Futures research programme (WSF) organized a thematic workshop at the University of Oslo 19-20 June 2017 in collaboration with Prof. Kalle Moene (GIWeS) and Prof. Alexander Cappelen (FPRWS) of the Department of Economics at the Norwegian School of Economics (NHH).

The Workshop focused on issues of inequality and welfare states and consisted of five paper sessions, where researchers from various clusters presented 13 papers in total. In addition, there were hot and open discussions among the participants. 23 participants from five of the WSF projects registered for the workshop, and it was nice to see younger participants, researchers, post-docs, PhDs and Master students affiliated with the University of Oslo. Key topics of the workshop were:

  • implications of behavioral economics for the economics of welfare
  • fiscal compliance and personal responsibility
  • globalization, work and welfare
  • natural and lab experiments
  • behavior, institutions and inequalities

The purpose of the workshop was to bring together the project partners in Oslo to exchange and circulate ongoing research in the WSF projects and get feedback on work in progress. During the paper presentations there were productive discussions about the empirical and methodological basis for the research projects in question as well as the research questions and findings. This workshop was very important especially for the younger scholars to get valuable input on their research from the more experience colleagues.

Furthermore, the social setting of the workshop facilitated networking and closer collaboration between the participants by gathering together for a workshop dinner in the scenic surrounding of the Akershus fortress by the Oslo fjord.

Selection of Presented Papers

Eva Mörk, 4Is | Uppsala University | eva.mork (a)

Co-authors: Matz Dahlberg, Ulrika Vikman, and Ingeborg Wærnbaum (4Is)

Selection of a Sufficient Subset of Confounders: Using Register and Survey Data for Labour Market Program Evaluation

Profile Picture Eva Mörk
Eva Mörk

In this paper we suggest algorithms building on the work by Robins (1997) to test whether a pre-specified group of variables makes up a  sufficient subset when estimating ATE and ATT, given that the full set of variables fulfills the conditional independence assumption. Testing the algorithms in a simulation study, we find that they are successful already in relatively small samples and the resulting biases are never larger then when estimating the model with the full set of covariates. Using data from the Jobcenters in the city of Stockholm, we apply the algorithm to test whether variables from register data constitute a sufficient subset, or if survey data containing normally unobserved information on self-reported health and perceived labor market prospects contributes. More specifically, we investigate to what extent taking part in internship affects future social assistance recipient and earnings. We find that i) register data does make up a sufficient subset, and ii) internship causally reduces the amount of social assistance received and increases earnings, up to two years after participating in the program.

“I very much enjoyed meeting researchers from the other research networks and discussing potential future collaborations. Also, it was fascinating to learn more about the research projects going on within the program.”

Kaisa Kotakorpi, 4Is | University of Turku | kaisa.kotakorpi (a)

Co-authors: Tomer Blumkin and Tuomas Kosonen (4Is)

Complexity and Benefit Take-up: Empirical Evidence from the Finnish Homecare Allowance

4Is Kaisa Kotakorpi
Kaisa Kotakorpi

We analyse how the complexity of application procedures affects the take-up of benefits in a setting where complexity can be clearly measured, and the effects of complexity can be separated from other potential causes of non-take-up. We study take-up in the context of a benefit that is used by individuals from all socioeconomic groups, namely the municipal supplement to the child homecare allowance in Finland. We utilize individual-level data on mothers of young children together with municipal-level data on the application rules for the municipal supplement. Municipal level variation in the application procedures can be used to estimate the causal effect of complexity on take-up.

“The worskshop was very useful for getting to know other people’s research within the WSF programme and for receiving feedback on my own work. There was a very relaxed atmosphere and constructive discussions of the research projects presented and beyond.”

Stefan Hochguertel, 4Is | Uppsala University | s.hochguertel (a)

Household Wealth Mobility Before and During the Great Recession: Evidence from Tax Records

4Is Stefan Hochguertel
Stefan Hochguertel

We study households’ mobility through the distribution of total net worth based on administrative data from tax registers in the Netherlands. The data span a short, but very interesting recent period: we observe household wealth just before and into the Great Recession of 2008/09 and its aftermath. We observe the entire wealth distribution including the very top and the very bottom (negative net worth). We document the large observed wealth swings and their consequences for wealth mobility following the initial collapse and subsequent rebound of the stock market, and ensuing the rapid deflation of the debt-driven housing market bubble. Our estimation method allows us to show that in particular business owners and self-employed, and otherwise middle-aged and middle class households experienced especially large changes of net worth in this relatively brief episode.

“A very useful and interesting workshop that provided detailed insights into research done elsewhere, especially on issues of economic inequality. Whether there is direct opportunity to work with members from other teams, for instance, in Oslo, remains to be seen, there are no concrete plans at the moment, but I would like to know more about what people are doing exactly.”

Thomas de Haan, FPRWS | Norwegian School of Economics | thomas.dehaan (a)

Alexander Cappelen, FPRWS | Norwegian School of Economics | alexander.cappelen (a)

Bertil Tungodden, FPRWS | Norwegian School of Economics | bertil.tungodden (a)

Co-author: Caroline Bonn (FPRWS)

Fairness Preferences in the Face of Limited Information

Thomas de Haan
NHH Samfunnsøkonomi
Bertil Tungoden
Profile Picture Alexander Cappelen
Alexander Cappelen

In this project we investigate, theoretically and experimentally, the role of limited information about performance in a collective production task on redistributional preferences. In our study we focus both on distribution decisions by one of two matched workers, as well as distribution decisions made by a monetarily unaffected spectator. For both the setting with a stakeholder and a spectator redistribution decision, we will compare two situations. One, where decision makers have full information regarding what influence worker performance and what influence ‘random factor’ luck had in determining the workers’ contribution to the total income. Two, where decision makers have limited information regarding the worker’s actual performance. Building on the fairness preferences model from Cappelen et al. (2007, AER), we predict that stakeholders who are ex-ante pessimistic about other workers’ performance, should become less prone to redistribute in the face of limited information if they hold a meritocratic fairness ideal. In contrast meritocratic spectators are predicted to become more egalitarian in their redistribution choices when facing limited information. We report the results of a laboratory experiment conducted in Bergen in 2016 as well as recently in May 2017.

Alexander Cappelen, FPRWS | Norwegian School of Economics | alexander.cappelen (a)

Bertil Tungodden, FPRWS | Norwegian School of Economics | bertil.tungodden (a)

Co-author: Ingar Kyrkjebø Haaland (FPRWS)

Beliefs about Behavioral Responses to Taxation

Behavioral responses to taxation affect the trade-off society faces between implementing equality and efficiency. Several influential theoretical papers have used heterogeneity in beliefs about behavioral responses to taxation to explain variation in people’s support for redistribution of income in society. In this study, we use a purposefully simple task to elicit incentivized beliefs from a representative sample of the US population about how taxes affect people’s effort choices. The design allows us to assess the empirical validity of theoretical models suggesting a key role for beliefs about behavioral responses by investigating whether these beliefs are a good predictor of people’s support for redistributive policies. We find that while equality–efficiency preferences strongly predict individual support for redistributive policies in society, beliefs about behavioral responses are not a significant predictor of support for redistributive policies. The findings suggest that preference heterogeneity is more important than differences.

“This was a great workshop that brought together both political scientists and economists. I  presented a new study for the first time and got very useful feedback.” (Alexander Cappelen)

Jo Thori Lind, GIWeS | University of Oslo | j.t.lind (a)

Kalle Moene, GIWeS | University of Oslo | k.o.moene (a)

Co-author: Rolf Aaberge (GIWeS)

The Inequality of Equal Mating

Profile Picture Kalle Moene
Kalle Moene
GIWeS Jo Thori Lind
Jo Thori Lind

Assortative mating – marriage within own socio-economic group – has been a feature of almost all societies at all times. This implies that persons with high earnings potentials tend to marry others with high earnings potential. Compared to random mating, this exacerbates inequalities generated by unequal opportunities. We compare earnings inequalities in a panel of countries to the inequalities that would accrue if matching was either random or perfectly assortative. One surprising finding is that the mating induced inequality is particularly high in the Nordic countries. We go on to study the characteristic of countries where inequality is high relative to the one with random mating and show that this is higher the higher is female labor force participation.

“For my co-authors and me, the workshop was very useful. Several workshop participants had deep insights into the questions we study and could provide both encouraging and critical comments both during my presentation and in informal discussions afterwards. These are going to be useful when revising the paper. In general, the workshop was also useful with some very interesting papers and good opportunities to talk with old acquaintances as well as meeting new people.” (Jo Thori Lind)

Catia Montagna, GlobLabWS | University of Aberdeen | c.montagna (a)

Hassan Molana, GlobLabWS | University of Dundee | h.h.molana (a)

Reforming the Liberal Welfare State: International Shocks, Unemployment and Household Income Shares

GlobLabWS Catia Montagna
Catia Montagna
GlobLabWS Hassan Molana
Hassan Molana

The paper examines how reforms of a liberal welfare state system in the direction of flexicurity affect long-run unemployment and the response of the economy to international shocks. Such reforms imply reducing the flexibility of the labour market and increasing unemployment insurance and expenditure on active labour market policies. Contrary to conventional wisdom, and consistent with existing empirical stylised facts, higher employment protection and unemployment insurance are shown not to provide a greater buffer against adverse shocks. Instead, reforms towards flexicurity result in a higher volatility in unemployment and GDP in response to exogenous foreign shocks even if they result in lower long-term unemployment. However, the analysis shows that when greater income support for the unemployed and stronger firing restrictions are combined with active labour market policies that enhance job creation and employability (such as the training of the unemployed), reforms can reduce unemployment and increase the level of economic activity in the long-run. An implication of the analysis is that productivity enhancing policies can complement social protection in countering the effects of negative shocks, pointing to the importance of acknowledging the interdependencies between labour market, education, and industrial policies.

“Both myself and my co-author (Hassan Molana) found the workshop very useful and stimulating. The workshop was very well organised and worked very well. The sessions allowed generous time for presentations and fruitful discussions in a relaxed but engaging atmosphere. The span of papers was also very impressive; the workshop gave a good indication of the strands of research that are being developed within the Welfare State Future programme but also of the complementarities between different projects. I benefited greatly from the comments on my paper. Also, some useful conversations took place that I am hopeful will lead to some joint work with colleagues in another project.”