ECON 486/686, Topics in Economic Development              T. Gindling

Measuring and Explaining Income Inequality                     Office: 820 Admininstration

Spring, 2003                                                                           (410)455-3629

UMBC                                                                                    Office Hours: Mon. 6-7,

                                                                                                Wed. and Fri. 10-11, and by appointment.

                                                                                                http://research.umbc.edu/~tgindlin

 

Description:

This course is broadly divided into two parts, each roughly one-half of the course.  In the first half of the course we will learn how to use different measures of income inequality, as well as the advantages and disadvantages of each measure.  In problem sets, you will apply these measures to data from the United States and Costa Rica.    In the second half of the course, we will critically examine the literature on the causes of changing income inequality in the United States and Latin America.

 

Readings:

For the first part of the course, the primary text is:

Frank Cowell, 2000, Measuring Inequality: Third Edition, London School of Economics, May.  This book is available as a PDF file at http://darp.lse.ac.uk/papersdb/measuringinequality2.pdf. (It is a big file, about 200 pages of text.)  As far as I have been able to find out, this book is not yet available in a paper copy.

 

In the second part of the course, an important text will be:

Inter-American Development Bank, 1998, 1998-1999 Report on Economic and Social Progress in Latin America: Facing up to Inequality in Latin America, Washington.  This will be available in the bookstore, or you can download it as a PDF file from http://www.iadb.org/res/index.cfm?fuseaction=Publications.View&pub_id=B-1998-1999.

Other readings are listed below.  Most of these additional readings can be found in academic journals available in the library, others will be available directly from me.

 

 

Grading:

The grade for undergraduates will be based on seven graded problem sets and two exams.  Graduate students will also be required to write a paper. I recommend that this paper examine some aspect of income inequality in the United States or Costa Rica, but I am open to other suggestions.  The specific topic must be approved by me.

 

Undergraduates:                                                                    Graduate Students:

Take-home mid-term exam       35%                                         Take-home mid-term exam       25%    

Cumulative final exam   35%                                                     Cumulative final exam               25%

Problem Sets                            30%                                         Problem sets                             25%

                                                                                                Paper                                       25%

                                                                 READING LIST

 

I. INTRODUCTION--WHAT DO WE MEAN BY INEQUALITY? (January 27)

 

Cowell, Chapter 1 (pages 1-7 and 10-13) and Chapter 5 (pages91-99).

 

II. WORKING WITH DATA (January 27, February 3 and February 10)

The 1987 and 1998 U.S. March Supplement to the Current Population Survey, and the 1987 and 1998 Costa Rican Household Surveys for Multiple Purposes.

 

U.S. Census Bureau, 2002, Money Income in the United States, 2001 (Current Population Reports, Consumer Income), Appendix A (Definitions and Explanations) and Appendix B (Time Series Estimates of Income) and Appendix E (Source and Accuracy of Estimates).  Available in PDF format a thttp://www.census.gov/hhes/www/income.html. 

 

Gindling, T. H., 2000, AThe Costa Rican Household Surveys for Multiple Purposes,@ the University of Maryland Baltimore County, September.

 

 

III. MEASURES OF  INEQUALITY (February 10-February 24)

 

Cowell, Chapter 2 and Chapter 3 (pages 35-54).

 

 

IV. CHOOSING AN INEQUALITY MEASURE (February 24-March 3)

 

            Cowell, Chapter 3 (pages 54-67) and Chapter 5 (pp. 99-111, 115-120, 126-132).

 

Deininger, Klaus and Lyn Squire, 1996, “A New Data Set Measuring Income Inequality,” The World Bank Economic Review, Vol. 10, No. 3, pp. 565-591

 

            POVCAL from the World Bank

 

V. INEQUALITY BY INCOME SOURCE AND THE DISTRIBUTION OF WEALTH (March 10).

 

Shorrocks, Anthony, 1982, AInequality Decomposition by Factor Components,@ Econometrica, January.

 

            Cowell, Appendix (p. 152).

 

Wolff, Edward, 1998, ARecent Trends in the Size Distribution of Household Wealth,@ Journal of Economic Perspectives, Volume 12, No. 3, (pages 131-150).

 

VI.  EARNINGS REGRESSIONS (March 17)

 

 Fields, Gary S., 2002, "Accounting for Income Inequality and its Change: A New Method, With Application to the Distribution of Earnings in the United States," Research in Labor Economics (forthcoming).  Available at http://www.ilr.cornell.edu/academics/faculty/publications.html?teac_id=93&staff_id=gsf2&disptype=sel.

 

 

 

MID-TERM EXAM DUE MARCH 31

 

 

VII. THE DECOMPOSITION OF EARNINGS INEQUALITY BY PERSONAL CHARACTERISTICS (April 7).

 

            Cowell, Appendix, pages 147-148.

 

Fields, Gary S., 2002, "Accounting for Income Inequality and its Change: A New Method, With Application to the Distribution of Earnings in the United States," Research in Labor Economics (forthcoming). 

 

Yun, Myeong-Su, 2002, "Earnings Inequality in the United States, 1961-1999: Comparing Earnings Inequality Using Earnings Equations," Tulane University, September.

 

Gottschalk, Peter, 1997, AInequality, Income Growth, and Mobility: The Basic Facts,@ Journal of Economic Perspectives, Vol. 11, No. 2, pages 21-40.

 

Gindling, T. H. and Juan Diego Trejos, 2003, "Accounting for Changing Earnings Inequality in the Final Quarter of the 20th Century in Costa Rica," March.

 

Inter-American Development Bank, 1998, Preface, Introduction, Chapter 1 and Chapter 2.

             

                                                                                                           

VIII. STRUCTURAL ADJUSTMENT, TRADE LIBERALIZATION AND AGLOBALIZATION@ IN DEVELOPING COUNTRIES (April 14).

 

Williamson, John, 1990,  AWhat Washington Means by Policy Reform,@ Chapter 2 in Latin American Adjustment, How Much has Happened?, Institute for International Economics, Washington, 7-20.

 

 Iglesias, Enrique, 1998, "From Adjustment Policies to Structural Reforms," in Harry Costin and Hector Vanolli, eds. Economic Reform in Latin America, The Dryden Press, Philadelphia, 59-73.

 

Gindling, T.H., 1998, AStructural Adjustment in Costa Rica,@ University of Maryland Baltimore County, September.

 

IX. REVIEW OF THE LITERATURE ON THE CAUSES OF CHANGING INEQUALITY IN THE UNITED STATES AND LATIN AMERICA (April 21-April 28).

 

Autor, David and Lawrence Katz, 1999, AChanges in the Wage Structure and Earnings Inequality,@ Chapter 26 in O. Ashenfelter and D. Card, eds., Handbook of Labor Economics, Vol. 3A, North-Holland, pages 1504-1514, 1517-1548.

 

Kline, William, 1996, Trade and Income Distribution, Institute for International Economics, Washington, D.C., pages 35-46.

 

Gindling, T. H. and Juan Diego Trejos, 2003, "A Quarter Century of Inequality in Costa Rica," February.

 

Inter-American Development Bank, 1998, Chapter 4 and Chapter 5 (Introduction).

 

Guillard, Marie-Claire, 2001, "Why Has U.S. Income Inequality Stopped Increasing Since the Mid-1990s?" M. A. in Economic Policy Analysis Final Paper, UMBC.

 

 

X. MEASURING POVERTY (May 5)

 

U. N. Economic Commission for Latin America and the Caribbean, 2000, Social Panorama of Latin America 1999-2000, Santiago, Chile, November, Chapter 1 (pages 35-57).

 

 

XI. DISTRIBUTION OF WORLD INCOME (May 22)

 

Sala-I-Martin, Xavier, 2002, "The Disturbing "Rise" of Global Income Inequality," National Bureau of Economic Research (NBER) Working Paper No. W8904,  April.