Markus P A Schneider | University of Denver (original) (raw)

Papers by Markus P A Schneider

The persistent correlations between income and mortality, and inequality and mortality in the US ... more The persistent correlations between income and mortality, and inequality and mortality in the US is well established. It has been demonstrated with various empirical models at different levels of analysis. However, there is no consensus on the relevant confounding factors or even the functional specification of the income-inequality-health relationship across the literature. We interpret this as significant model uncertainty when it comes to the correct specification of the implied econometric model and provide a systematic approach to address it. Using BMA, we conduct a meta-analysis to determine the best model for explaining cross-sectional variations in mortality at the county level. The results provide a best set of confounding factors and emphasize the importance of controlling for unobserved State-specific factors. Furthermore, we uncover a robust non-linear income-inequality-mortality relationship that challenges typical assumptions in the literature.

In this paper, I investigate whether the Gini coefficient is the appropriate measure of inequalit... more In this paper, I investigate whether the Gini coefficient is the appropriate measure of inequality to capture the changes in the US earnings distribution over the past two decades. Comparing the trends in a variety of inequality measures that differ in their sensitivity to changes in different parts of a distribution shows that the particular changes in the distribution of earnings in the US from 1991 to 2009 are under-represented by changes in the Gini. Growing inequality was almost exclusively driven by a greater share of earnings accruing to the very upper tail of the earnings distribution over these two decades. While the Gini increased only modestly, another measure of inequality that is more sensitive to changes in the upper tail of the distribution - the half coefficient of variation squared - shows a significant and substantial increase in inequality. For this period, the half coefficient of variation squared offers a much more appropriate measure of inequality because it is more sensitive to where the relevant changes in the earnings distribution were occurring. All inequality measures used in this study were calculated by fitting a Dagum distribution to the earnings data and calculating each measure from the fitted pdf. Other authors have shown that this method can produce a time-consistent series for inequality measures that helps correct for top-coding and changes in top-coding procedures.

In this paper, an intuitive application of informational entropy is used to assess how well a dis... more In this paper, an intuitive application of informational entropy is used to assess how well a distribu- tional model uses the information in the data. The approach was modeled on E. T. Jayness treatment of Wolf's dice data, but applied to the distribution of wage and salary income in the U.S. based on CPS data. The motivation of the study was to answer a graphical analysis by physicists that resulted in the claim that earned income was exponentially distributed. The analysis shows that the distribution of earned income of neither all respondents to the ASEC nor of respondents who are likely to file individual tax returns (akin to the subpopulation used by the physicists) is exponential. However, the study finds that a mixture of an exponential and log-normal distribution may fit the earned income data. The economic implications of these distributional models are explored in the paper.

This dissertation contributes to two areas in economics: the understanding of the distribution of... more This dissertation contributes to two areas in economics: the understanding of the distribution of earned income and to Bayesian analysis of distributional data. Recently, physicists claimed that the distribution of earned income is exponential (see Yakovenko, 2009). The first chapter explores the perspective that the economy is a statistical mechanical system and the implication for labor market outcomes is considered critically. The robustness of the empirical results that lead to the physicists' claims, the significance of the exponential distribution in statistical mechanics, and the case for a conservation law in economics are discussed. The conclusion reached is that physicists' conception of the economy is too narrow even within their chosen framework, but that their overall approach is insightful. The dual labor market theory of segmented labor markets is invoked to understand why the observed distribution may be a mixture of distributional components, corresponding to different generating mechanisms described in Reich et al. (1973). The application of informational entropy in chapter II connects this work to Bayesian analysis and maximum entropy econometrics. The analysis follows E. T. Jaynes's treatment of Wolf's dice data, but is applied to the distribution of earned income based on CPS data. The results are calibrated to account for rounded survey responses using a simple simulation, and answer the graphical analyses by physicists. The results indicate that neither the income distribution of all respondents nor of the subpopulation used by physicists appears to be exponential. The empirics do support the claim that a mixture with exponential and log-normal distributional components ts the data. In the final chapter, a log-linear model is used to fit the exponential to the earned income distribution. Separating the CPS data by gender and marital status reveals that the exponential is only an appropriate model for a limited number of subpopulations, namely the never married and women. The estimated parameter for never-married men's incomes is significantly different from the parameter estimated for never-married women, implying that either the combined distribution is not exponential or that the individual distributions are not exponential. However, it substantiates the existence of a persistent gender income gap among the never-married. References: Reich, M., D. M. Gordon, and R. C. Edwards (1973). A Theory of Labor Market Segmentation. Quarterly Journal of Economics 63, 359-365. Yakovenko, V. M. (2009). Econophysics, Statistical Mechanics Approach to. In R. A. Meyers (Ed.), Encyclopedia of Complexity and System Science. Springer.

Published by Markus P A Schneider

SSRN Electronic Journal, 2000

Angus Deaton, recipient of the 2015 Sveriges Riksbank Prize in Economic Sciences in Memory of Alf... more Angus Deaton, recipient of the 2015 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, is broadly recognized as an outstanding applied economist who is well deserving of the prize. He has made a myriad of important contributions—alone and with renowned co-authors—across many fields. In this review of his work, I argue that it is his methodological consistency and focus on the two-way connection between empirics and theory, together with his attention to detail of how things are measured, that support his recognition by his peers. Informed by a career of doing careful econometric work using household surveys—especially on consumption, development, well-being and health—in his popular writing, Deaton chooses to focus on the importance of institutions, history and other disciplines.

We present two Gini-like inequality indices that provide a more nuanced picture of how the profil... more We present two Gini-like inequality indices that provide a more nuanced picture of how the profile of inequality changed across European countries since 2005. We use these indices to analyze the distributional changes that can be attributed to the push for austerity. We estimate the JV-indices for 24 european countries over 9 years, and then use this panel to analyze the distributional effects of the fiscal consolidation policies Europe endured after the 2008 crisis. We find that austerity increased income inequality in Eurozone countries, but reduced income inequality in countries that do not use the euro as their currency. We uncover a significant new relationship between austerity policies and the tails of the income distribution, further suggesting that in the Eurozone these policies on average amount to a redistribution from the bottom to the top.

We use IRS Adjusted Gross Income (AGI) data to estimate two Gini-like indices representing inequa... more We use IRS Adjusted Gross Income (AGI) data to estimate two Gini-like indices representing inequality at the bottom and the top of the income distribution for the US (1921-2012), in addition to the overall Gini index. Our findings can be summarized as follows. First, we find that the increase in the Gini from the mid 1940’s to the late 1970’s seems to be mostly explained by an increase in inequality at the bottom of the income distribution which more than offset the decrease in inequality at the top. The implication is that middle incomes gained relative to high incomes but especially relative to low incomes. Conversely, it is rising inequality at the top that appears to drive the rise in the Gini since 1981. Second, inequality at the top of the income distribution follows a U-shaped trajectory over time, similarly the pattern followed by the share of top incomes documented by Piketty and Saez (2003, 2006); Atkinson, Piketty, and Saez (2011). Third, the welfare effects of the different forces behind an increasing Gini can be evaluated in light of the Lorenz dominance criterion by Atkinson (1970): both top–driven and bottom–driven increases in the Gini are not necessarily associated with strict Lorenz dominance by previous income distributions, that is associated with lower welfare in an absolute sense. However, it can be argued that, in a relative sense and after taking into account average growth rates over the two periods, the top–driven increase in inequality since 1981 has likely been welfare–reducing.

The persistent correlations between income and mortality, and inequality and mortality in the US ... more The persistent correlations between income and mortality, and inequality and mortality in the US is well established. It has been demonstrated with various empirical models at differ- ent levels of analysis. However, there is no consensus on the relevant confounding factors or even the functional specification of the income-inequality-mortality relationship across the literature. We interpret this as significant model uncertainty when it comes to the correct specification of the implied econometric model and provide a systematic approach to address it. Using BMA, we conduct a large-scale analysis considering millions of models to deter- mine a model-averaged inequality effect explaining cross-sectional variations in mortality at the county level. The results also suggest a best set of confounding factors and empha- size the importance of controlling for unobserved State-specific factors. Furthermore, we uncover a robust nonlinear income-inequality-mortality relationship that challenges typical assumptions in the literature.

This paper revisits the fitting of parametric distributions to earned income data. In line with ... more This paper revisits the fitting of parametric distributions to earned income data. In line with Camilo Dagum's dictum that candidate distribution should not only be chosen for fit, but that economic content should also play a role, a new candidate is proposed. The fit of a simple finite mixture performs as well or better than the widely used generalized beta of the second kind (GB2) and is argued to be easier to interpret economically. Specifically, the good fit is taken as evidence for a finite number of distinct labor market segments with qualitatively different generating mechanism. It is speculated that this could be reconciled with either modern search-and-match models in which agent and / or firm heterogeneity can lead to multiple equilibria, or an older theory of labor market segmentation. Regardless, the use of the mixture model addresses one of the central weaknesses of testing the older theory of dual labor markets empirically. The approach taken in this paper is also motivated by the work of E. T. Jaynes, the father of maximum entropy approaches to statistical inference and related to the recent work by physicists on the distribution of income.

This paper offers a two-pronged critique of the empirical investigation of the income distributio... more This paper offers a two-pronged critique of the empirical investigation of the income distribution performed by physicists over the past decade. Their finding rely on the graphical analysis of the observed distribution of normalized incomes. Two central observations lead to the conclusion that the majority of incomes are exponentially distributed, but neither each individual piece of evidence nor their concurrent observation robustly proves that the thermal and superthermal mixture fits the observed distribution of incomes better than reasonable alternatives. A formal analysis using popular measures of fit shows that while an exponential distribution with a power-law tail provides a better fit of the IRS income data than the log-normal distribution (often assumed by economists), the thermal and superthermal mixture's fit can be improved upon further by adding a log-normal component. The economic implications of the thermal and superthermal distribution of incomes, and the expanded mixture are explored in the paper.

This paper makes three distinct contributions: it presents a novel modification to an established... more This paper makes three distinct contributions: it presents a novel modification to an established methodology for assessing inequality using the CPS ASEC data, it illustrates how valuable a multi-metric inequality analysis is by reconciling some open questions regarding the trend in inequality and the role of the composition of income along the distribution, and it provides a baseline assessment of the trend in earnings inequality for four distinct groups of income earners. The evolution of earnings inequality from 1995 to 2010 is compared to increasing inequality in total income as documented by Thomas Piketty and Emmanuel Saez to show that earnings inequality has followed a qualitatively similar, though less extreme trend. In the process, the disconnect between the trend in the Gini coefficient and inequality assessed via the share of income going to the top 1\% of income earners is reconciled through the use of several alternative inequality indices. Finally, the evolution of the earnings distribution for black women, black men, white women, and white men are considered separately, which shows that there are important differences in the experience of inequality. The main findings are that only white men have experienced changes in within-group earnings inequality that parallel the changes in inequality seen in the overall distribution. By contrast, black income earners have seen no notable increase in within-group inequality by any measure, suggesting that they may rightly perceive growing inequality as primarily a between-group phenomena.

Development, trade and CGE by Markus P A Schneider

SCEPA Working Papers, 2007

If you experience problems downloading a file, check if you have the proper application to view i... more If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. ...

The explosion over the past ten years of US imports of information technology (IT) and IT-enabled... more The explosion over the past ten years of US imports of information technology (IT) and IT-enabled services has been a clear boon to the economies of India, China, Singapore, the Philippines and a number of other developing countries.

*William Milberg is Associate Professor of Economics at The New School for Social Research and a ... more *William Milberg is Associate Professor of Economics at The New School for Social Research and a Faculty Research Fellow at the Schwartz Center for Economic Policy Analysis. Melissa Mahoney, Markus Schneider, and Rudi von Arnim are Research Associates at the Schwartz Center for Economic Policy Analysis. Correspondence for the authors can be sent to MilbergW@newschool.edu.

SSRN Electronic Journal, 2000

The persistent correlations between income and mortality, and inequality and mortality in the US ... more The persistent correlations between income and mortality, and inequality and mortality in the US is well established. It has been demonstrated with various empirical models at differ- ent levels of analysis. However, there is no consensus on the relevant confounding factors or even the functional specification of the income-inequality-mortality relationship across the literature. We interpret this as significant model uncertainty when it comes to the correct specification of the implied econometric model and provide a systematic approach to address it. Using BMA, we conduct a large-scale analysis considering millions of models to deter- mine a model-averaged inequality effect explaining cross-sectional variations in mortality at the county level. The results also suggest a best set of confounding factors and empha- size the importance of controlling for unobserved State-specific factors. Furthermore, we uncover a robust nonlinear income-inequality-mortality relationship that challenges typical assumptions in the literature.

SCEPA Working Papers, 2007