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FRIHUMSAM-Fri prosj.st. hum og sam

New approaches to measuring inequality: From household decisions to global comparisons

Alternative title: Ulikhet under lupen: Fra husholdningers valg til globale målinger

Awarded: NOK 5.1 mill.

The debate about income inequality has gained momentum internationally. Thomas Piketty's book Capital in the twenty-first century, a best-selling book which discusses economic inequality in a historical setting, has received a great amount of both appraisal and critique, and in many ways vitalized the discussion about economic inequality. But even before this book was published, the discussion about existing economic systems and distributional effects were hot topics in the public debate, purged by recent developments such as the financial crisis, the tremendous growth of China, and world-wide initiatives to promote gender equality and female empowerment, such as the targeted transfer programs from the World Bank. In order to guide policy, we first need trustworthy measures of the existing inequality, and second, we need to know how people think about inequalities and how problematic they appear to be, and third, we need to know which policies are effective in decreasing inequality and which are not. This project will deal with all these three needs through extending the way we measure economic inequality, use novel ways to pin down what people find to be acceptable inequalities and implement new ways of evaluating distributional policies. The project leader has (together with co-authors) published the paper on matching in the marriage market in Journal of Human Resources. Another paper on decision making in the household has been presented at many universities and conferences and is now published in Economic Journal. This last paper was discussed by Markus Goldstein in Development Impact, 3/6/2019. A related paper was in 2018 published by the Journal of Development Effectiveness i 2018 (by Almås, Attanasio, Jalan, Oteiza and Vigneri). The paper on preferences differences and more specifically fairness preferences, across countries has been published in Journal of Political Economy, one of the top five journals in economics. The results have been presented at the Norwegian government's conference on inequality this past August in Oslo, with the prime minister, finance minister, culture minister and education minister present. It has also been presented several places and the results have been reported in The Guardian, The Atlantic, DN, and Harvard Business Review. Further, two papers on poverty and inequality in India have been accepted for publication; one is published in the Scandinavian Journal of Economics whereas the other is published in World Development. One paper on trends of poverty and inequality in China has been published in Review of Economic Dynamics. One of the papers on the last topic of the project on price indexes and comparisons across countries has been published in Journal of International Money and Finance. The project leader held three keynote presentations at conferences in relation to the project.

Prosjektet har vært viktig for karriæreutvikling til både prosjektleder (Ingvild Almås) og postdoktorstipendiat, Vincent Somville. Almås fikk gjennom prosjektet både tid og midler til å gjennomføre forskningsprosjektet på ulikhet. Mange av disse har blitt publisert i ledende tidsskrifter og hun fikk i prosjektperioden opprykk til Professor ved Norges Handelshøyskole. Somville har som ansatt i prosjektet publisert 5 artikler (AEJ applied, World Development (2), EDCC and Magma) og 1 bokkapittel (Oxford University Press). Han har to artikler som med Revise and Resubmit status fra tidsskrift (Economic Journal and Social Science and Medicine) og 6 andre paper som enten er sendt inn til vurdering eller sendes inn snarlig.

The traditional approach to measuring economic inequality consists of selecting a measure of real income and representing its distribution using the Lorenz curve or a summary scalar index, such as the Gini. Real income is typically constructed by adjusting nominal income for purchasing power. The agenda for this project is to extend the traditional approach in three directions. First, new ways of measuring the allocation of resources within households are investigated. It is often the case - particularly in relatively poor countries - that information on nominal income is only available at the household level. Even if individual income is available, it may not reflect individual purchasing power as income pooling takes place within households. An appraisal of resource allocation within households (between adults and also children), is therefore needed. This project designs and applies new ways of identifying those, and studies the effect of targeted transfers, based on the matching of data from laboratory experiments, field experiments, and micro data on income and expenditures. Second, this project acknowledges that people's preferences may deviate from a norm of perfect equality. Many people hold a norm that is different from the egalitarian norm which is inherent in standard inequality measurement. The project will study the development of such norms and how beliefs about the sources of inequality, e.g. whether gender differences are caused by biology, affect preferences for equalizing policies. Third, the issue of price adjustment, which has stymied the measurement of global inequality, is addressed. Standard adjustments are not consistent with observed behavior: they ignore differences in consumer baskets due to non-homothetic and heterogeneous preferences, and some also ignore substitution as a response to relative price changes. New methods based on micro data and observed consumer behavior are applied to address these shortcomings.

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FRIHUMSAM-Fri prosj.st. hum og sam