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The Measurement of Income Distribution Dynamics when Demographics are correlated with Income

  • Denis Cogneau

    ()

    (DIAL, IRD, Paris)

  • Michael Grimm

    ()

    (University of Göttingen, Department of Economics, DIW and DIAL)

The purpose of our paper is to derive instructive analytics on how to account for differentials in demographic variables, and in particular mortality, when performing welfare comparisons over time. The idea is to “correct” in various ways estimated income distribution measures for “sample selection” due to differential mortality. We implement our approach empirically using three waves (1993, 1997 and 2000) of the Indonesian Family Life Surveys (IFLS). We distinguish the direct effect of mortality, i.e. individuals who die are withdrawn from the population and no longer contribute to monetary welfare, from the indirect effect, i.e. the impact on survivors pertaining to the same household of dead individuals, who may experience a decrease or an increase in monetary welfare. For the case of Indonesia, we show that the direct and indirect effects of mortality on the income distribution have opposite signs, but have the same order of magnitude. We also show that the effect of other demographic changes, like changes in the structure of fertility, migration, and educational attainment, dominate the effects of mortality, whether direct or indirect. However, we find that none of these demographic developments are large enough to explain a significant part of the change in income distribution, whether the pre-crisis period (1993-1997) or the post-crisis period (1997-2000) are considered. _________________________________ L’objectif de ce papier est de proposer des instruments analytiques permettant de prendre en compte les différentiels relatifs aux variables démographiques, en particulier la mortalité, lorsqu’on effectue des comparaisons de pauvreté au cours du temps. L’idée de base consiste à « corriger » les estimations de la distribution du revenu de la sélection liée à la mortalité différentielle. Nous mettons en oeuvre notre approche sur les trois vagues (1993, 1997 et 2000) de l’Indonesian Family Life Survey (IFLS). Nous distinguons l’effet direct de la mortalité, à savoir la disparition des individus décédés de la population de calcul du bien-être monétaire, de l’effet indirect, à savoir l’impact sur les survivants appartenant au même ménage qu’un individu décédé. Dans le cas de l’Indonésie, nous montrons que les effets directs et indirects de la mortalité sur la distribution du revenu ont des signes opposés mais environ le même ordre de grandeur. Nous montrons aussi que l’effet des autres changements démographiques (comme ceux de la structure de la fécondité, de la migration ou de l’éducation), dominent les effets de la mortalité qu’ils soient directs ou indirects. Cependant, nous trouvons enfin qu’aucun de ces changements démographiques n’est assez important pour expliquer une part significative du mouvement de la distribution du revenu, que l’on regarde la période précédant la crise économique (1993-97) ou la période suivante (1997-2000).

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File URL: http://www.dial.ird.fr/media/ird-sites-d-unites-de-recherche/dial/documents/publications/doc_travail/2004/2004-12
File Function: First version, 2004
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Paper provided by DIAL (Développement, Institutions et Mondialisation) in its series Working Papers with number DT/2004/12.

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Length: 38 pages
Date of creation: Dec 2004
Date of revision: Dec 2004
Handle: RePEc:dia:wpaper:dt200412
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  1. Blackorby, Charles & Bossert, Walter & Donaldson, David, 1995. "Intertemporal Population Ethics: Critical-Level Utilitarian Principles," Econometrica, Econometric Society, vol. 63(6), pages 1303-20, November.
  2. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
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  4. Kanbur, Ravi & Mukherjee, Diganta, 2003. "Premature Mortality And Poverty Measurement," Working Papers 127197, Cornell University, Department of Applied Economics and Management.
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  8. Ronald Oaxaca, 1971. "Male-Female Wage Differentials in Urban Labor Markets," Working Papers 396, Princeton University, Department of Economics, Industrial Relations Section..
  9. Sergio Firpo, 2004. "Efficient Semiparametric Estimation of Quantile Treatment Effects," Econometric Society 2004 North American Summer Meetings 605, Econometric Society.
  10. Chu, C Y Cyrus & Koo, Hui-Wen, 1990. "Intergenerational Income-Group Mobility and Differential Fertility," American Economic Review, American Economic Association, vol. 80(5), pages 1125-38, December.
  11. Blackorby, Charles & Donaldson, David, 1984. "Social criteria for evaluating population change," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 13-33, November.
  12. Alberto Abadie & Joshua D. Angrist & Guido W. Imbens, 1998. "Instrumental Variables Estimation of Quantile Treatment Effects," NBER Technical Working Papers 0229, National Bureau of Economic Research, Inc.
  13. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
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