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Real Gross Domestic Income, Relative Prices and Economic Performance Across the OECD

Real Gross Domestic Income, Relative Prices and Economic Performance Across the OECD

Relative prices however, also affect real income growth. Depending on how the relative prices of exports and imports change, the volume of goods and services that an economy can purchase may differ from its volume of production. An economy may improve its labour productivity (raising the efficiency with which it produces goods and services), but if it produces goods for export whose prices are falling relative to the imported goods it purchases, that economy may not see much of an increase in its standard of living, as measured by the purchasing power of its income. After 2002, the importance increased greatly of taking these factors into account to understand the outcomes of international income comparisons or changes in economic aggregates, such as consumption or imports.
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The Relative Income Hypothesis: A comparison of methods

The Relative Income Hypothesis: A comparison of methods

The relative income hypothesis was proposed by Duesenberry (1949) to explain savings behaviour in the US. The hypothesis, which states that individual utility depends both on own income and on income relative to that of others, did not attract a lot of empirical attention until two separate later developments. Firstly, Kahneman and Tversky (1979) provided a theoretical justification for the importance of comparison effects by explaining that changes from a reference point mattered for decisions, not absolute states of wealth. One possible reference point was the income of a comparison group of ‘others’. Secondly, the rise of ‘happiness economics’ began to persuade economists that self-reported measures of well- being could be used as reliable proxies for individual utility (see for example Clark and Oswald, 1994) 1 .
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Life Satisfaction and Relative Income: Perceptions and Evidence

Life Satisfaction and Relative Income: Perceptions and Evidence

Using a unique dataset we study both the actual and self-perceived relationship between subjective well-being and income comparisons against a wide range of potential comparison groups, enabling us to investigate a broader range of questions than in previous studies. In questions inserted into a 2008 module of the German-Socio Economic Panel Study we ask subjects to report (a) how their income compares to various groups, such a co-workers, friends, and neighbours, and (b) how important these income comparisons are to them. We find substantial gender differences, with income comparisons being much better predictors of subjective well-being in men than in women. Generic (same-gender) comparisons are the most important, followed by within profession comparisons. Once generic and within- profession comparisons are controlled for, income relative to neighbours has a negative coefficient, implying that living in a high-income neighbourhood increases happiness. The perceived importance of income comparisons is found to be uncorrelated with its actual relationship to subjective well-being, suggesting that people are unconscious of its real impact. Subjects who judge comparisons to be important are, however, significantly less happy than subjects who see income comparisons as unimportant. Finally, the marginal effect of relative income on subjective well-being does not depend on whether a subject is below or above the reference group income.
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Keeping up with the Joneses by finding a better paid job   The effect of relative income on job mobility

Keeping up with the Joneses by finding a better paid job The effect of relative income on job mobility

Finally, Table 4 shows the descriptive statistics of our relative income indicators for the restricted sample. For all three variables, both range and standard variation are now slightly smaller than in the full sample, as some very high income earners have been excluded because they are older than 40. The exclusion of mostly high income earners also explains why the mean of SAL_REL_NEIGHB and SAL_REL_COLL is now smaller than one: the average income of people in the same region and the same firm includes workers of all ages, but in the restricted sample only young workers (below 41) are included. Their income is, on average, lower than that of workers above 40 years of age. SAL_REL_SIMIGROUP is the worker’s income relative to a group of “similar” workers, which we defined along three characteristics: age, education, and firm tenure. It ranges from 0.13 (for a worker who earns 13% of what people in the “similar” group earn on average) to 309.72 (for a worker who earns 309 times as much). The variable SAL_REL_SIMIGROUP cannot be computed in the full sample because detailed information on education is available only for workers who are less than 41 years old. This was in fact our main reason for working with a restricted sample, and it explains why SAL_REL_SIMIGROUP appears in Table 4 but not in Table 2.
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Relative Permanent Income and Consumption: A Synthesis of Keynes, Duesenberry, Friedman, and Modigliani and Brumbergh. Abstract

Relative Permanent Income and Consumption: A Synthesis of Keynes, Duesenberry, Friedman, and Modigliani and Brumbergh. Abstract

The key innovations are the specification of the utility function to include relative consumption and relative wealth as arguments. The inclusion of relative consumption captures the “keeping up with the Joneses” effect, while the inclusion of relative wealth represents the accumulation motive (Palley, 1993) that captures the desire for power. Consumption is a normal good so that the absolute level of consumption increases with income. Relative consumption is an inferior good so that relative consumption decreases with income. Thus, the rich have a higher absolute level of consumption than the poor, but their relative consumption level declines. Finally, relative wealth is a luxury good (income elasticity > 1) so that the accumulation of wealth increases strongly with income. The implication of such a specification is that as a household moves up the relative income ladder the absolute level of consumption spending increases, but the marginal propensity to save also increases in order to satisfy the accumulation motive.
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Keeping up with the Joneses by finding a better-paid job - The effect of relative income on job mobility

Keeping up with the Joneses by finding a better-paid job - The effect of relative income on job mobility

Finally, Table 4 shows the descriptive statistics of our relative income indicators for the restricted sample. For all three variables, both range and standard variation are now slightly smaller than in the full sample, as some very high income earners have been excluded because they are older than 40. The exclusion of mostly high income earners also explains why the mean of SAL_REL_NEIGHB and SAL_REL_COLL is now smaller than one: the average income of people in the same region and the same firm includes workers of all ages, but in the restricted sample only young workers (below 41) are included. Their income is, on average, lower than that of workers above 40 years of age. SAL_REL_SIMIGROUP is the worker’s income relative to a group of “similar” workers, which we defined along three characteristics: age, education, and firm tenure. It ranges from 0.13 (for a worker who earns 13% of what people in the “similar” group earn on average) to 309.72 (for a worker who earns 309 times as much). The variable SAL_REL_SIMIGROUP cannot be computed in the full sample because detailed information on education is available only for workers who are less than 41 years old. This was in fact our main reason for working with a restricted sample, and it explains why SAL_REL_SIMIGROUP appears in Table 4 but not in Table 2.
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Relative Income Growth and Convergence. CEPS EU-Turkey Working Papers No. 8, 1 August 2004

Relative Income Growth and Convergence. CEPS EU-Turkey Working Papers No. 8, 1 August 2004

has found that within a country, or a large common market, different regions tend to converge, ceteris paribus, to the average at a rate that is commonly estimated between 1 and 3% per annum. (The typical convergence growth equation is: growth = β*(relative level of GDP per capita at beginning of period) plus other factors.) This result implies that full convergence might take a generation or two, but since this is also the time horizon one has to consider when discussing Turkey’s integration into the EU it might be interesting to consider what the standard convergence equation would imply for the case of Turkey. Table 11 below shows the result using a convergence parameter at the higher end of the range found in the literature, i.e. a speed of convergence of 3% per annum. Starting with the 2004 values already listed in Table 11 below this leads to the finding that Turkey could basically double its relative position before the end of the next decade, with its GDP per capita at PPP rising from about 25% to over 50% of the EU-15 average.
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Relative Contribution of Child Labour to Household Farm and Non Farm Income in Ghana: Simulation with Child's Education

Relative Contribution of Child Labour to Household Farm and Non Farm Income in Ghana: Simulation with Child's Education

First of all, after these child labourers spend time at school they do not go to the farm, but rather engage in non-farm economic activities for the household that yield returns. In Ghana and many other SSA countries, farming is done from morning till late afternoon when farmers are preparing to return to the household. Perhaps parents diversify their income portfolios having these children in mind based on returns from their services. Some children also go out of their way to engage in other jobs outside the home to add to household income. In this wise, it should also be pointed out that they are likely to be engaged in non-farm related activities because time after school makes it difficult to go working on any farm. The second reason is that most farms are very far from home and thus becomes a disincentive to ask a child to go to the farm after school. In this case, non-farm activities make parents non-altruistic towards children since they consider these children as assets in the income-diversification process. Again, child labour acts as a push factor when parents add on non-farm activities as a risk-coping strategy.
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How Low-Income Households Allocate Their Food Budget Relative to the Cost of the Thrifty Food Plan

How Low-Income Households Allocate Their Food Budget Relative to the Cost of the Thrifty Food Plan

In addition, typical low-income households may need to reallocate their food-at-home dollars across the four major food subgroups of this study to obtain expenditure levels in accord with the TFP benchmark. While these four food groups accounted for approximately 92 percent of the total TFP purchases, table 6 indicates that low-income households spent approxi- mately 71 percent of their food-at-home budget on items in these groups. Our household data show that these households are allocating more than the TFP share of their food-at-home budget to miscellaneous prepared foods (12 percent), nonalcoholic beverages (9 percent), and sugar and sweets and fats and oils (8 percent), in addition to their food-away-from-home purchases. This mirrors the habits of higher income Americans, who also value conven- ience and taste appeal. However, like food away from home, miscellaneous food costs include marketing services that may save time, but are more costly, and the foods themselves may be less healthy.
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Why is Relative Income Poverty so High in Ireland?  ESRI Policy Series No  53  September 2004

Why is Relative Income Poverty so High in Ireland? ESRI Policy Series No 53 September 2004

A ggregate measures indicate that social expenditure forms a lower proportion of national income in Ireland than in a number of countries with poverty rates among the lowest in the EU. More detailed comparisons of eligibility conditions for social insurance schemes and payment rates for social insurance and social assistance schemes suggest that for many welfare schemes, Irish payment rates are lower, relative to average earnings, than in Denmark and, to a lesser extent, the Netherlands. In order to investigate the role which such policy differences play in explaining differences in relative income poverty we constructed a “Danish-style” policy which had the following key features. First, payment rates for schemes were set so that they represented the same proportion of Irish earnings as the 1998 Danish scheme rates in proportion to average Danish earnings. Second, eligibility for contributory old age and illness/disability schemes was widened to reflect the fact that in Denmark eligibility depended not on contributions but on the proportion of the labour market career spent as a resident in Denmark. Results from this analysis indicated that differences in social security policy could account for a substantial proportion of the difference in poverty rates between Ireland and Denmark. This does not mean, however, that there is a simple transition from the Irish welfare system to a Danish-style one, requiring only changes in welfare payment rates and eligibility conditions. Each system is embedded in a wider social setting, and a successful transition to a Danish-style system, if that were the goal, could depend also on accompanying changes in terms
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Comparing the relative volume with the relative inradius and the relative width

Comparing the relative volume with the relative inradius and the relative width

In this section we replace the inradius by another geometric functional, the minimal width, which for the sake of simplicity we will call the width, and we are going to compare the ratio between the relative volume and the nth-power of the minimum relative width of a subset of an open bounded convex set.

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The Role of Productivity Growth and Farmers' Income Protection Policies in the Decline of Relative Farm Prices in the United States

The Role of Productivity Growth and Farmers' Income Protection Policies in the Decline of Relative Farm Prices in the United States

The motivation for increased direct payments in 1973 was to lower price supports to restore competitiveness in the world market (Knutson, Penn, and Flinchbaugh, 1998). That was the time when farmers and government came to the realization that they are becoming more and more dependent on the world market in order to sell their products. There have been several mechanisms of direct payments since 1973. The target price mechanism was the first to separate price support from income support, i.e., target prices support only income. A target price is the level of returns per unit of commodity on certain acreage guaranteed to farmers who participate in farm programs. Target prices provide for direct payments to producers of the difference between the target price and the average market price whenever the average market price for a specified time period falls below the target price. The difference between the target price and the average market price is called a deficiency payment (Gardner, 1992). Target prices have been established for all major food grains, feed grains, and cotton as a means of supporting farm income.
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A Permanent Income Version of the Relative Income Hypothesis

A Permanent Income Version of the Relative Income Hypothesis

micro-theoretic foundations. On the empirical side, Clark and Oswald (1996), using a sample of 5,000 British workers, find that workers’ reported satisfaction levels are inversely related to their comparison wage rates, supporting the hypothesis of positional externalities. Neu- mark and Postlewaite (1998) propose a model of relative income to rationalize the striking rise in the employment of married women in the U.S. during the past century. Using a sample of married sisters, they find that married women are 16 to 25 percent more likely to work outside the home if their sisters’ husbands earn more than their own husbands. Bowles and Park (2005), using data from ten OECD economies, find a strong positive correlation between average working hours and the share of consumption of the richest members of society. They interpret this result as indicative of strong emulation motives. Ravina (2007) estimates an Euler equation derived under interdependent preferences. Her results are con- sistent with preference specifications that place around one third of the weight on relative consumption. Finally, Frank (1985, 2000, 2007) provides a wealth of anecdotal evidence on the eects of positional externalities on individual behavior. On the theoretical side, there is a large literature that explores the eects of preference interdependence for asset pricing (Abel (1990), Gali (1994)), for short-run macroeconomic stabilization policy (Ljungqvist and Uhlig (2000)), for the interaction between saving and growth (Carroll, et al. (1997, 2000)), for capital accumulation (Fisher and Hof (2000), Alvarez-Cuadrado, et al. (2004), Liu and Turnovsky (2005)), and for labor supply choices (Alvarez-Cuadrado (2007)). Finally, a grow- ing body of experimental literature (Solnick and Hemenway (1998), Johansson-Stenman, et al. (2002), and Alpizar, et al. (2005)) highlights the importance of relative rather than absolute payos for economic choices.
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Education and Maori Relative Income Levels over Time: The Mediating Effect of Occupation, Industry, Hours of Work and Locality

Education and Maori Relative Income Levels over Time: The Mediating Effect of Occupation, Industry, Hours of Work and Locality

While the expected sign for ‘hours of work’ is positive, the effects of ‘locality of residence’ and ‘marital status’ are a-priori not entirely clear, and examining their effect is of interest, in particular across ethnic groups. In addition, ‘urban’ living is expected to have a positive coefficient if ‘urban’ job and employment opportunities are greater than when living in ‘rural’ or ‘semi-urban’ areas, but the extent of it may very well vary for the Maori population. Finally, there is wide empirical evidence of a positive relationship for males between being married and income, which is likely to represent mainly supply side effects.
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Absolute rather than relative income is a better socioeconomic predictor of chronic obstructive pulmonary disease in Swedish adults

Absolute rather than relative income is a better socioeconomic predictor of chronic obstructive pulmonary disease in Swedish adults

Our aim was to contribute to the question of whether material or psychosocial mechanisms best explain income- related inequalities in COPD risk. It could be argued that OR and DA for absolute income reflect the effects of psychosocial stress and not of material deprivation. The impaired health observed in the poorest groups could be because poor people compare themselves with the rich people, which leads to chronic stress, higher cortisol levels, and increased general susceptibility to diseases, in- cluding COPD. Wilkinson and Picket (2006), for example, argue that it is relative socioeconomic differences between broader groups, such as nations, rather than between neighbourhoods that cause psychosocial stress. Since the psychosocial stress is presumably present across all soci- etal strata, we would have expected a difference in inci- dence between people with similar absolute incomes but different relative incomes if the incidence of COPD would have depended on the psychosocial comparison. As an al- ternative to our main analysis including absolute and rela- tive income in the same model, we performed analyses of the association of SES and COPD in separate models within the five strata of absolute income quintiles. How- ever, relative income did not show a consistent gradient within any of the absolute income quintiles.
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Estimation of relative intensity and relative finality of fBm

Estimation of relative intensity and relative finality of fBm

This notebook is based on the one called fBmShiftTransformation10b.nb, which was in turn based on animate/animate3.nb. Section 1 includes basic definitions, Section 2 defines a function which estimates exit probability, for a process with a given down-crossing, by simulation. Section 3 then estimates the last exit density, which is carried out in detail for the cases H=0.75, 0.5, 0.85, and 0.35. Relative finality is found by fitting to the simulations, and this is then used to estimate the last exit density.

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Poverty reduction efforts in Nigeria 1996 – 2004: a micro level analysis of the relative importance of income growth and redistribution

Poverty reduction efforts in Nigeria 1996 – 2004: a micro level analysis of the relative importance of income growth and redistribution

Where q is the number of individuals classified as poor (that is, for whom y i  z ), and  is a non negative parameter reflecting the weight placed on the depth of poverty. In descriptive terms, P is the headcount index, which gives the proportion 0 of the population whose incomes fall below the poverty line z. P is the poverty gap 1 index, measures the average income shortfall in meeting the poverty line. The squared poverty gap index P 2 is the sum of the proportionate poverty gaps weighted by themselves, and is thus more sensitive to the income changes of poorer individuals. For this study we used the absolute poverty line computed by the National Bureau for statistics estimated at N30128 per capita per annum or N82.54 per capita per day. To assess the character of growth over the period, that is, if growth was pro-poor or anti-poor the growth incidence curve was employed which plots the annual growth rate in each percentile p ranging from 0 to 1 of the distribution of per capita expenditure.
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Multivariate Granger Causality and the Dynamic Relationship between Health Care Spending, Income and Relative Price of Health Care in Malaysia

Multivariate Granger Causality and the Dynamic Relationship between Health Care Spending, Income and Relative Price of Health Care in Malaysia

On the other hand, economic growth can also improve the health-state of population through purchase of medical care (input for health capital), but this relationship is in concave form because health is deemed as a capital thus subject to the assumption of diminishing marginal return (Grossman, 1972). From the microeconomic view point, when individualʼs income is low (poor), his/her demand for medical care tend to be low. As a result, the marginal rate of return for his/her to invest in health via medical care is high because low income individual tends to be in the unhealthy state compared to the rich, thus a small increase of income will indirectly improve his/her health state due to increase of demand for medical care. However, once individual reaches a very healthy and wealthy state, an additional income will not make this individual healthier, but stagnant. As a matter of fact, this concave relationship is further supported by Preston (1975) study with macroeconomic dataset. He found that among the poor countries, increase in per capita income are strongly associated with increases in health state proxied by life expectancy, but this relationship is weak or even disappear when the countries approached a very high level of per capita income. Therefore, people in poor countries are usually less healthy compared to their rich counterparts, and the relationship between healthand economic growthvaries depending on the level of development.
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The relative price and relative productivity channels for aggregate fluctuations

The relative price and relative productivity channels for aggregate fluctuations

The numerical solution method for the models and their dynamic impulse responses is a general- ization of the log-linearization procedure of King, Plosser, and Rebelo (1987, 1988). As discussed in the text, a complete log-linearization of the model is suspect when applied to equations at the sectoral level, because the relative importance of shocks at the is plausibly an order of magnitude larger than at the aggregate level—10 or even 20% as compared to 1 or 2%. Only when these shocks have had a chance to die down is a linearization appropriate. Given the structure of ad- justment costs or adjustment lags in the model and a candidate shock, it is typically possible to determine a set number of periods k after which a linearization procedure is likely to produce a good approximation to the equations of the model. The system’s equations for periods t + k and beyond can then be linearized exactly as in the King, Plosser, and Rebelo framework. For example, taking k = 1, we would guess hypothetical values for all the time t variables of the system, require that they satisfy all the time t constraints of the model nonlinearly, trace out the implied values of time t + 1 state variables that result, and then solve the model linearly from period t + 1 forward, given these “initial” time t + 1 state variables. The accuracy of the initial guess is determined by the optimality conditions for the costate variables that must be satisfied on the boundary between periods t and t + 1; if these conditions are not satisfied, another guess is made and the solution procedure iterated until an equilibrium is found. Solving the model for
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Absolute income is a better predictor of coverage by skilled birth attendance than relative wealth quintiles in a multicountry analysis: comparison of 100 low  and middle income countries

Absolute income is a better predictor of coverage by skilled birth attendance than relative wealth quintiles in a multicountry analysis: comparison of 100 low and middle income countries

Given the difficulties presented above, direct estimates of incomes and poverty are generally not available in health surveys conducted in LMICs, and most studies have focused their attention on the relative socioeco- nomic position (SEP) of the household using the wealth index [3]. Wealth indices are usually calculated through principal component analysis of variables related to household infrastructure and asset ownership such as television, cars, bicycle, access to clean water, landhold- ings, among others [2, 3, 7]. Different from income, the variables needed to produce these indices are easy and reliable to collect, and the index is simple to compute. They have helped to increase the prominence of health inequalities on the global health agenda [8–11]. Al- though there have been attempts to calculate universal wealth indices for cross-country comparisons [12], most published analyses rely on asset indices for assessing relative SEP within a survey, in contrast to income which has an absolute value and can therefore be com- pared across as well as within surveys [3].
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