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Income distribution, participation and social policy

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Alessandra Casarico
Associate Professor of Public Economics
Department for Institutional Analysis and Public Management
Bocconi University
Via Gobbi 5, 20136 Milan, Italy

Bocconi University

The key theme addresses three main research questions:

1. The determinants of inequality
Over the past two decades a large literature has sought to understand the evolution of wage inequality in OECD countries (see among many others Gottschalk and Smeeding, 1997). Following the approach suggested by Fields (2003), there has recently been an increasing interest in assessing the determinants of inequality by applying regression based methods. Although the methodology is still under development, these methods should allow one to disentangle the role of individual and household characteristics on the wage distribution. Some recent application of these methods shows that, along with education, gender is the main determinant of inequality in most OECD countries. We intend to pursue further research on this issue.

2) Alternative measures of the distribution of well-being across individuals
We want to focus on social exclusion. The definition of the concept of social exclusion has been very much debated in the social sciences literature and among policy makers. Social exclusion is linked to both poverty and inequality but it is not the same as either. It is a dynamic concept, in that an individual can become socially excluded if his condition worsens over time. It is a relative concept in that an individual can be socially excluded only in comparison with a particular social group at a given place and time. It is a multidimensional concept that includes economic, social and political aspects of life. Different measures of the phenomenon have been proposed in the literature. Two contributions--Chakravarty and D'Ambrosio (2006) and Bossert, D'Ambrosio and Peragine (2007)--follow the axiomatic approach. The majority of the other papers (see, among others, Tsakloglou and Papadopoulos, 2002, Whelan, Layte and Maître, 1999, Layte, Maître, Nolan and Whelan, 2001), on the other hand, apply a method similar to what is standard in the literature on income poverty. We plan further work on the development of alternative measures of social exclusion and at applying them from a gender perspective (what a woman needs in order to be included in the society she lives in may differ from what a man needs). This is an unexplored area in the literature.

3) The effects of social policies on inequality and social exclusion
We want to focus on the two dimensions mentioned above of education and gender.

Human capital is produced over a lifetime not just by genetic heritage but also by families, schools and work environments. While most of the attention is devoted to public education as a way to provide equality of opportunities and reduce inequality, we intend to concentrate on the early stages of human capital formation where child care provided within or outside the family plays a key role. What are the relative advantages of early interventions via child care and later interventions via schooling? What is the potentially different impact they have on growth and inequality? Should the State provide direct support to child care via the service supply or indirect support via the tax system?

Still related to the previous point, notice that the distribution of care activities and market production is different across men and women and across countries. What determines these differences? Are institutions relevant in determining gender and cross-country gaps? The research would consider analysing the different institutions for gender equality across EU or OECD countries and studying possible interventions to reduce gender inequality, including policies to allow better work-life balance, such as taxes, allowances, leave provisions.

Relevance to future of European societies
The increase in female labour market participation and the reduction of social exclusion are at the heart of the Lisbon strategy agreed upon during the European Council of March 2000. The identification of policies which can help achieving these objectives is therefore particularly relevant and the experience of some countries can teach others. Notice that the increase in the supply of child care services can not only support maternal employment but it also has an impact on the early stages of human capital development. Services of high quality both reduce inequality and they sustain human capital accumulation, helping the EU to fulfil the objective of being a knowledge-based society.
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