Income inequality
Which measures of income inequality do we have?
Lorenz curve
Gini coefficient
90-10 gap
50-10 gap
Income or consumption share of the richest or poorest 1%, 5% etc.
What are the consequences of rising inequality?
For productivity: inequality hampers innovation because human capital is not used efficiently
For social mobility: the great gastby curve -> the more unequal a society is, the more we can predict children's situation by their parent's one
Which factors drive rising income inequality?
Increasing returns to skills due to immigration, skill biased technological change and international trade
Decrease in LM institutions
Persistency in inequality: parental investments and higher opportunity neighbourhoods
Which factors determine people's decision to migrate?
Difference in opportunity (economic and non-economic)
Immigration cost (economic, emotional and practical)
migrant characteristics
How can we explain return migration?
Uncertainty -> the wage obtained in the foreign country is not as high as expected
Preference for the home country -> people maximize utility, not income
How does selection of migrants work according to Roy model?
Migrants will chose where to migrate according to the relative skill payoff
If skill return is higher at immigration country than at the home country, it is more likely that high skill workers move there (positive selection)
If skill return is lower at the inmigration country than at the home country, it is more likely that low skill workers move there (negative selection)
This is related to income inequality, since countries that relatively pay more skills tend to be more unequal
Why is there a migrant native pay gap?
Migrants are a selected group who systematicaly differs from the general population
Which is the early empirical strategy for estimating the migrant native pay gap? Which are the problems with it?
Include the impact of immigration country tenure in the Mincer equation (also squared)
Problems:
There is a selection effect because not succesful migrants leave
There is a cohort effect because the reasons driving migration can make the pay gaps differ
Which is the impact of migration on natives' wages?
SHORT RUN:
Depends on how natives and migrants skills relate:
-Substitutes: national wages and employment decrease, total employment increases
-Complements: national wages increase
There is immigration surplus: increase in national income, but it goes to capital owners
Redistribution of income from labour to capital
LONG RUN:
Capital can adjust, so depends on returns to scale. f there are constant returns to scale, wages return to the initial situation
Which are the empirical approaches to measure the impact of immigration?
National skill cell: uses variation in immigration inflows across education experience cells -> measures the impact on experienced vs. unexperienced workers
Pure spatial: uses variation in total immigration inflows in a region -> measures the total effect for a skill group in a region
Mixture: uses variation across education groups and regions -> it is the best approach to account for the effect in inequality
What is the impact of immigration for the receiver country and globally?
Receiver country: depends on the skills profile of the migrants
If they are high skilled, decrease in inequality and vice versa
Globally: decrease in inequality