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Abstract:
This paper presents a procedure for studying industrial performance and related issues such as changes in the wage structure. This procedure combines cluster analysis and discriminant analysis as a package, and applies this package to time series data. This enables us to organize industrial data into groups with similar wage or performance histories and then to extract summary time-series showing the main pattern of variation in performance between groups.

cluster, discriminant, time-series

Abstract:
This paper discusses two issues in the relationship between inequality and economic growth: the data and the econometrics. We first review the inequality data set of Deininger and Squire, which, we argue, fails to provide adequate or accurate longitudinal and cross-country coverage. We then introduce our own measures of the inequality of manufacturing pay, based on the UNIDO Industrial Statistics. In our view, these provide indicators of inequality that are more stable, more reliable, and more comparable across countries than those of Deininger and Squire. Turning to the relationship between inequality and development, we diagnose several common econometric problems in the literature, including measurement error, omitted variable bias, serial correlation in longitudinal data, and the possible persistence of lagged dependent variables. By taking steps to account for these problems, we seek more reliable inferences concerning the relationship between inequality, national income and economic growth. We find evidence that generally supports Kuznets' specification for industrializing countries: inequality tends to decline as per capita income increases. However, after 1981 two problems emerge. First, per capita GDP growth slows dramatically in most countries. Second, there is a worldwide trend toward rising inequality in our data, independent of GDP or its changes. The timing and geographic pattern of these increases suggest a link to the high real interest rates and global debt crisis of the period beginning in 1982.

Inequality, Economic Growth, Kuznets Hypothesis

Abstract:
In this paper we show that inequality and unemployment are related positively across the European continent, within countries, between countries and through time. This contradicts the often-repeated view that unemployment in Europe is attributable to rigid wage structures, high minimum wages and generous social welfare systems. In fact, countries that possess the low inequality such systems produce experience less unemployment than those that do not. Moreover, large inter-country inequalities across Europe aggravate the continental unemployment problem. There is no paradox in low American unemployment. It stems in part from that country's continent-wide programs of redistribution, including the Social Security System, the Earned Income Tax Credit, the federal minimum wage, and a uniform regime of monetary policy geared toward full employment, all of which reduce inter-regional inequality and all of which we recommend for adoption by the European Union.

Abstract:
For most of Latin America the 1970s were a decade of growth, though with political upheaval in Argentina and Chile. The 1980s were a disaster. The 1990s have seen economic reform, liberalization, a return to democracy and financial turmoil. This study attempts to explain the three decades as one piece, through an analysis of the evolution of earnings inequality from year to year in eight major Latin American countries and one Caribbean nation. We find that changes in earnings inequality are a sensitive indicator of slump, repression, political turmoil, civil war, natural disaster and -- on the positive side -- occasional periods of growth and stability in Latin America. Indeed almost the whole recent history of Latin America can be summarized in the movement of industrial inequality statistics.

Abstract:
Inequality has become perhaps the foremost preoccupation of modern empirical economics. Yet the conventional theoretical explanations of changing inequality rest on premises long ago demolished on logical grounds. This paper summarizes a Keynesian theory of income distribution. The theory integrates macroeconomic and distributive phenomena and so accounts for the empirical relationship between the changing shape of the distribution and major macroeconomic events.

Abstract:
We employ the UTIP data set on the evolution of earnings inequality in manufacturing in the global economy to illuminate two questions. First, do regional patterns of similarity in the movement of large macroeconomic aggregates, such as real GDP, imply underlying similarities of industrial structure, so that knowledge of one national economy in a GDP cluster can reasonably be assumed to convey useful information about the others? We show that this is not generally the case. Particularly, regional comovement of GDP in Asia, which is very strong, masks deep dissimilarities in underlying employment structures -- and, we argue, a range of potential sources of transmissible financial crisis. Second, what are the consequences of crisis for inequality? We show that crises typically generate increases in inequality, but more so in less developed countries, and more so in regions that are more liberal in their policy regimes.

Abstract:
This paper provides a summary of information in the UTIP data set on the evolution of industrial earnings inequality in the global economy. At present the data set covers 66 countries, with annual observations going back to 1972 in most cases and to 1963 in many. Our measure of changing inequality, based on the group-wise decomposition of the Theil statistic across industrial categories, appears to be a sensitive barometer of political and economic conditions in many countries, and the percentage change in this index appears to be meaningfully comparable across countries. We also measure and detect regional patterns of similarity in the movement of inequality through time.

Abstract:
Impressed by the sweeping implications of the mind-body problem, the German philosopher Arthur Schopenauer referred to that famous conundrum as the Weltknoten, the "World Knot." Economic history is more prosaic. Yet the economic experience of the United States between World War I and the end of World War II did generate one problem with nearly so sweeping repercussions in its field: the behavior of wages. This period spans the slump following World War I, the Roaring Twenties, the Great Depression, the New Deal and World War II--times of turmoil encompassing every form of economic, technological, political and social change. Studies of wage determination during this time can therefore illuminate many competing hypotheses, perhaps more effectively than studies of the more tranquil post-war period. Such inquiries also have intriguing implications for other fields, including history, political science, and even international relations.

Yet systematic assessments of the relevant empirical evidence are rare; previous studies tend to be monographic. The earliest can be traced back to the thirties, when data collected by the Federal government (and studies by Paul Douglas) became widely available. This wave crested between the end of the World War II and the late fifties. A second and very recent wave followed the decay of the original post-war American wage system. In line with the focus of much recent research on inequality, it emphasizes work-force characteristics, technological change, and the acquisitions of skills.

This paper uses industrial wage data and a systemic of unconventional selection of methods to examine changes in the inter-industry structure of wages between 1920 and 1947.

Abstract:
Year-to-year economy-wide measures of income distribution, such as the Gini coefficient, are rarely available for long periods except in a few developed countries, and as a result few analyses of year-to-year changes in inequality exist. But wage and earnings data by industrial sectors are readily available for many countries over long time frames. This paper proposes the application of the between-group component of the Theil index to data on wages, earnings and employment by industrial classification, in order to measure the evolution of wage or earnings inequality through time. We provide formal criteria under which such a between-group Theil statistic can reasonably be assumed to give results that also track the (unobserved) evolution of inequality within industries. While the evolution of inequality in manufacturing earnings cannot be taken as per se indicating the larger movements of inequality in household incomes, including those outside the manufacturing sector, we argue on theoretical grounds that the two will rarely move in opposite directions. We conclude with an empirical application to the case of Brazil, an important developing country for which economy-wide Gini coefficients are scarce, but for which a between-industries Theil statistic may be computed on a monthly basis as far back as 1976.

Abstract:
This paper discusses the implications of the decomposition property of the Theil index in sequences of nested and hierarchic grouping structures, formalizing general results applicable to a generic sequence of grouping structures. A specific application to data on wages and employment by industrial classification to measure the evolution of wage inequality through time will be explored, analyzing the links between Theil indexes computed at different levels of n-digit SIC codes. A dynamic analysis shows the extent to which a between group Theil statistic tracks the evolution of inequality within industries, and estimations are provided as to the amount of information gained by using ever more disaggregated grouping structures to assess the dynamics of overall inequality. The empirical illustration provides a monthly time-series for industrial earnings inequality in the US is computed at 2, 3 and 4-digit SIC codes from January of 1947 to March of 1999.

Abstract:
Using a VAR model of the American economy from 1984 to 2003, we find that, contrary to official claims, the Federal Reserve does not target inflation or react to "inflation signals." Rather, the Fed reacts to the very "real" signal sent by unemployment, in a way that suggests that a baseless fear of full employment is a principal force behind monetary policy. Tests of variations in the workings of a Taylor Rule, using dummy variable regressions, on data going back to 1969 suggest that after 1983 the Federal Reserve largely ceased reacting to inflation or high unemployment, but continued to react when unemployment fell "too low." Further, we find that monetary policy (measured by the yield curve) has significant causal impact on pay inequality - a domain where the Fed refuses responsibility. Finally, we test whether Federal Reserve policy has exhibited a pattern of partisan bias in presidential election years, with results that suggest the presence of such bias, after controlling for the effects of inflation and unemployment.

Personal Income, Wage Level, Wage Differentials, Price Level, Inflation, Deflation, Term Structure of Interest Rates

Abstract:
This paper presents an analysis of the evolution of industrial wages in a selection of OECD countries, using data drawn from the Structural Analysis Database and a sequence of techniques that apply cluster and discriminant analysis to time-series of wage change by industry. The principal finding is that a small number of well defined groups of industries usually exist, whose cross-group differences account for almost all inter-industry wage variation. While the specific structure of groups varies according to patterns of natural resources, comparative advantage and trade union organization within each country, the between-group variation across time usually reflects the movement of macroeconomic variables, some of them internal and other external, such as inflation and exchange rates. In other words, individual countries appear to be able to control their internal institutional structures, perhaps best understood as pattern bargains, wage contours, or industrial sectors distinguished by type and degree of exposure to international trade. But they do not exercise internal control over the evolution of wage differentials across these groups, except insofar as they can manipulate the macro conditions to which the groups are differentially sensitive.

Abstract:
This preliminary report asks whether there exist systematic relationships between changes in economic inequality and levels of state violence in countries around the world. The question is, of course, quite natural. Entire lexicons exist that describe economic relationships in terms that evoke violence; such words and phrases as exploitation, dependency, unequal exchange and class struggle are but prominent examples. And the case histories of war, revolution, state terrorism and coups d are certainly loaded with analyses of what seem transparently to be efforts either to rectify gross inequalities, or else to impose them.

Yet from the standpoint of an empiricist, interested mainly in the search for patterns in data, substantial obstacles stand in the way of definite observations. There is first of all the difficulty that reliable measures of change in economic inequality, measures that are both consistent and consistently available, have not existed. Second, there is the problem of arriving at a consistent categorization of types of violence, so that one may predict the effect of each type on economic inequality and vice versa. Third, there is the problem of developing consistent and comparable data across countries and through time on levels and types of violence.

Abstract:
In recent work one of us has presented measurements of the evolution of inequality in the U.S. manufacturing sector, from 1920 to 1992. This paper updates and revises those estimates, using a monthly data set for wages and employment of production workers in 18 sectors, for which continuous data are available back to January, 1947. The main findings of the previous study are confirmed: there is a close connection between the dispersion of hourly wage rates and unemployment. But the previous series erred in bridging a gap in the data between 1947 and 1958 by assuming that inequality in manufacturing in that period tracked the movement of a Gini coefficient for household incomes, which was fairly stable during this time. In fact, in the 1950s manufacturing wage rate inequality rose sharply, reaching the extreme levels of the 1930s. An implication is that inequality in manufacturing hourly wage rates in the late 1970s and 1980s, previously thought to be lower than during the Great Depression, was in fact much higher. The new series also shows that wage rate inequality began declining again in 1994, and has now fallen to just below the peaks of the inter-war period. The data are current to the end of 1998.

Abstract:
This paper focuses on two questions. First, how did inequality in the industrial wage structure of Brazil evolve from 1985 to 1995? Second, what is the relationship between these dynamics and economic policy? We display the evolution of wage inequality in Brazil and relate this evolution to changing macroeconomic conditions. Our analysis suggests that there is a strong relation between rising inequality and the restructuring of the Brazilian economy that occurred in the middle 1980?s.

Abstract:
My concern is with pay. It is with the distribution of pay, with the economic and social relationship between the well-paid and the poorly paid, between the working prosperous and the working poor. Since the early 1980 inequality of pay has risen sharply, both within nations and between them. Everyone knows this. The issue that divides the economics profession is: why?

Abstract:
Most people agree that human activities are consistent with physical laws. One may naturally think that sensible economic theories can be derived from physical laws and evolutionary principles. This is indeed the case. In this paper, we present a newly developed production theory of economics from biophysical principles. The theory is a compact analytical model that provides, in our view, a much more realistic understanding of economic (as well as social and biological) phenomena than the neoclassical theory of production.

biophysical economics, production theory, fixed cost, variable cost, return

Abstract:
The deficiencies of the Deininger and Squire data set on household income inequality are well known to include sparse coverage, problematic measurements, and the combination of diverse data types into a single data set. Yet many studies have relied on this data due to the lack of available alternatives. In this paper we show how the UTIP-UNIDO measures of manufacturing pay inequality can be used, with other information, to estimate measures of household income inequality. We take advantage of the systematic relationship between the UTIP-UNIDO estimates and those of Deininger and Squire. The residuals from this exercise provide a map to problematic observations in the Deininger and Squire data, and the estimated coefficients provide a way to construct a new panel data set of estimated household income inequality. This new data set provides comparable and consistent measurements across space and through time.

Abstract:
High employment in America stems not from flexible wages, but from institutions that foster high effective demand, especially in health care, higher education, housing, and the spending of retirees. These institutions combine public and private revenue sources so as to establish soft budget constraints; the net effect is to displace deficit spending from the public to the private sector a Keynesian Devolution that in the late 1990s drove demand to full employment levels even though public deficits disappeared.

Abstract:
Industrial data are used to derive estimates of the pattern of change in wage inequality in Mexico and Brazil. Using the group decomposition of Theil's T-statistic, the paper presents monthly changes in the dispersion of industrial wages for Brazil (1976 through 1995) and for Mexico (1968 through 1998). Both countries show increases in wage dispersion over time, and a strong negative correlation is found with the rate of real economic growth. Other things equal, the later Brazilian heterodox stabilization plans seem to have reduced inequality in the short run.

Abstract:
We use industrial data to derive estimates of the pattern of change in wage inequality in Mexico and Brazil. Using the group-wise decomposition of Theil's T statistic we present monthly series of measurements of change in the dispersion of industrial wages for Brazil (1976 through 1995) and for Mexico (1968 through 1995). Both countries show increases in wage dispersion over time, and we find a strong negative correlation with the rate of real economic growth, suggesting that real per capita income growth is an important determinant of movements in inequality. Heterodox stabilization plans apparently reduce inequality in the short-run.

Abstract:
The concept of a labor market, responding to familiar underpinnings of supply and demand, completely colors thought on the relationship between employment, wages, and inflation, according to James K. Galbraith. However, he asserts, wages are determined not by such market forces, but by what he calls the job structure--a complex set of status and pay relationships involving individual qualifications, job characteristics, and industry patterns. What is the meaning of the job structure for policy? Notions of natural rates of unemployment and inflationary barriers to full employment fade away. Supply-side measures can no longer been seen as adequate to deal with problems of unemployment and inequality. Questions of distribution of income and adjustment of the wage structure are returned to the political context. The active pursuit of full employment is returned to the list of respectable, and essential, policy goals.

Abstract:
In this working paper James K. Galbraith, professor of economics at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin, rejects the analytical construct within which many economists currently operate; that is, the construct in which in the extreme macroeconomic behavior is identical to the behavior reflected in microeconomic demand and supply curves. He rejects it on the theoretical and practical grounds that microeconomic categories (supply, demand, price, and quantities) "have little bearing on important policy questions." The markets that have a bearing on policy are either asset markets (for which the rules are dramatically different from those for flow markets) or are not really markets at all but, rather, a set of deeply structural social relations. According to such thinking, microeconomic issues become secondary in the policy arena and macroeconomic policy tools--spending, taxes, incomes policies, and interest rates--take the fore.