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WHAT DOES THE OECD ALPHABET SOUP SAY? WOUT ULTEE UNIVERSITY OF HAIFA NOVEMBER 18, 2012 PowerPoint Presentation
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WHAT DOES THE OECD ALPHABET SOUP SAY? WOUT ULTEE UNIVERSITY OF HAIFA NOVEMBER 18, 2012 . THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT WAS FOUNDED IN 1961 IT WAS THE FOLLOW-UP TO THE AGENCY RESPONSIBLE FOR THE DISTRIBUTION AND SURVEILLANCE OF THE MARSHALL AID.

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slide1

WHAT DOES THE OECD ALPHABET SOUP SAY?

WOUT ULTEE

UNIVERSITY OF HAIFA

NOVEMBER 18, 2012

slide2

THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT

WAS FOUNDED IN 1961

IT WAS THE FOLLOW-UP TO THE AGENCY RESPONSIBLE FOR THE DISTRIBUTION AND

SURVEILLANCE OF THE MARSHALL AID

THE MEMBER STATES AT FIRST WERE THE

RICH WESTERN COUNTRIES OF THE WORLD

NOT LONG AGO ISRAEL BECAME A MEMBER

slide3

THE OECD DID NOT HAVE ANY FORMAL

RESPONSIBILITIES

IT BECAME SOMETHING LIKE A THINK TANK

AND IT AT FIRST TESTED THEORIES

OF RIGHT-WING US ECONOMISTS

SOMETIMES IT STILL DOES SO

slide4

UNEMPLOYMENT RATES AND LONG TERM UNEMPLOYMENT RATES ARE HIGHER IN THE EUROPEAN COUNTRIES THAN IN THE USA

BECAUSE UNEMPLOYMENT BENEFITS LAST LONGER IN THE EUROPEAN COUNTRIES

BUT DID THE UNEMPLOYMENT RATE IN SOME EUROPEAN COUNTRY MAINLY RISE BECAUSE UNEMPLOYMENT BENEFITS BECAME EXTENDED?

MONEY FOR RETRAINING OF UNEMPLOYED

PERSONS LOWERS UNEMPLOYMENT RATES

MONEY FOR RETRAINING PERSONS ABOVE THE AGE OF 50 YEARS DOES SO?

slide5

WHY IS NOT THE WHOLE WORLD LIKE THE USA? QUESTIONS

VERSUS

WHY ARE THERE DIFFERENCES BETWEEN EUROPEAN COUNTRIES? QUESTIONS

slide6

THE OECD WAS PROBABLY THE FIRST INTERNATIONAL ORGANIZATION TO PUBLISH FOR ITS MEMBER COUNTRIES TIME SERIES FOR

GROSS DOMESTIC PRODUCT PER CAPITA IN

CONSTANT DOLLARS

THE OECD WAS CRITICIZED FOR THIS BECAUSE

MONEY DOES NOT BUY HAPPINESS

AND BECAUSE VARIOUS STATE MEASURES LIKE SCHOOLS AND HOSPITALS CONTRIBUTE TO THE LEVEL OF LIVING

slide7

IN THE 1980S THE UN (UNITED NATIONS) STARTED

PUBLISHING THE HUMAN DEVELOPMENT INDEX

THIS INDEX WEIGHS FOR COUNTRIES MEASURES FOR PER CAPITA GDP WITH MEASURES FOR EDUCATION, SCHOOLING, HOSPITALS, PIPED WATER ETC

THE RANKING OF THE COUNTRIES DOES NOT DIFFER MUCH

BUT CUBA IS MUCH HIGHER

slide8

THE OECD AND THE ILO (INTERNATIONAL LABOR ORGANIZATION) PUBLISHED TIME SERIES ON THE PERCENT OF NATIONAL INCOME GOING TO SOCIAL SECURITY EXPENDITURES

THIS MEASURE WAS HEAVILY CRITICIZED BY THE SWEDISH SCHOOL ON WELFARE STATE RESEARCH RUN BY AT FIRST

WALTER KORPI AND LATER JOACHIM PALME

EXPENDITURES ON UNEMPLOYMENT BENEFITS IN A COUNTRY MAY RISE, NOT BECAUSE UNEMPLOYMENT BENEIFTS BECOME MORE GENEROUS

BUT BECAUSE THE UNEMPLOYMENT RATE ROSE WHILE INDIVIDUAL UMEPLOYMENT BENEFITS WENT DOWN

THE SWEDISH SCHOOL CAME UP WITH SUCH INDIVIDUAL MEASURES FOR THE OECD COUNTRIES

slide9

THE BEST CRITICISM OF MEASURES LIKE GROSS DOMESTIC PRODUCT PER CAPITA

IS THAT IT PERTAINS TO AN AVERAGE INHABITANT OF A COUNTRY

BUT THAT THE DISPERSION AROUND THE MEAN IS NEGLECTED

IT MAY WELL BE THE CASE THAT A COUNTRY

WITH A HIGHER PER CAPITA GDP

HAS A HIGHER PERCENTAGE OF INHABITANTS BELOW SOME LOW INCOME LEVEL

slide10

THE INTERNATIONAL ORGANIZATION DOING THE MOST AT FIRST FOR MAKING MEASURES ON INCOME INEQUALITY AND POVERTY RATES AVAILABLE WAS THE WORLD BANK

LATER THE OECD CAUGHT ON

POVERTY RATES ARE RATHER ARBITRARY

YET THE RANKING OF COUNTRIES AFTER POVERTY RATES PROBABLY IS NOT AFFECTED BY DECISIONS ABOUT WHERE EXACTLY TO PLACE THE POVERTY LINE

slide11

THE TWO PRIME MEASURES FOR INCOME INEQUALITY ARE THE GINI AND THE QUINTILE RATIO

THE GINI RUNS FROM ZERO TO 1, WITH ZERO STANDING FOR FULL EQUALITY AND 1 FOR ONE UNIT GETTING ALL THE INCOME

THE QUINTILE RATIO DIVIDES THE INCOME SHARE OF THE RICHEST 20% BY THE INCOME SHARE OF THE POOREST 20% OF UNITS

slide12

INCOME INEQUALITY USUALLY IS NOT MEASURED AT THE INDIVIDUAL LEVEL (A LOT OF INDIVIDUALS DO NOT HAVE INCOME)

BUT AT THE LEVEL OF HOUSEHOLDS, TAKING THE INCOME OF ALL HOUSEHOLD MEMBERS INTO ACCOUNT, EVEN IF THAT IS NILL

SO, IF BOTH THE HUSBAND AND THE WIFE WORK, THEIR INCOMES ARE ADDED UP

TO DETERMINE THE INCOME OF A HOUSEHOLD MEMBER, ALSO THE NUMBER OF NON-WORKING CHILDREN IS TAKEN INTO ACCOUNT (A CHILD OFTEN IS TAKEN FOR 0,4 ADULTS)

slide13

INCOME INEQUALITY PER HOUSEHOLD MEMBER USUALLY IS NOT MEASURED AS TAXABLE (PRE-TAX) INCOME

BUT AS POST-TAX (DISPOSABLE )INCOME PER HOUSEHOLD MEMBER

slide14

SINCE THE 1980S THE STATISTICAL OFFICES OF MOST OF THE RICH COUNTRIES IN THE WORLD

ON A YEARLY BASIS PRODUCE DIGITAL FILES FOR THE INCOME OF THE HOUSEHOLDS IN THEIR COUNTRY

THIS OFTEN IS DONE FROM TAX REGISTERS, BUT

SOMETIMES SURVEY DATA ARE USED

LIS (THE LUXEMBURG INCOME STUDY) WAS THE FIRST UNIVERSITY INSTITUTE TO USE THESE FILES AND PRODUCE COMPARABLE INCOME INEQUALITY

DATA FOR RICH COUNTRIES

IN SOME COUNTRIES INTEREST ON MORTGAGES ARE DEDUCTED FROM TAXABLE INCOME, IN OTHERS NOT

LIS AND NOW THE OECD DEAL WITH SUCH MATTERS

slide15

IN ONE OF ITS RECENT STUDIES THE OECD SHOWED THAT, MEASURED BY GINIS AND QUINTILE RATIOS, INCOME INEQUALITY ROSE IN MOST OF THE OECD COUNTRIES BETWEEN

1985 AND 2005

ACCORDING TO THE OECD, THE RISE WAS PARTICULARLY STRONG IN THE

UNITED STATES AND THE UNITED KINGDOM

ACCORDING TO THE OECD, INCOME INEQUALITY ROSE A BIT IN THE NETHERLANDS AND MORE IN ISRAEL

slide16

WHY DID INCOME INEQUALITY RISE IN MOST OECD COUNTRIES?

THE OECD TESTED IN ONE OF ITS REPORTS EXPLANATIONS INVOKING DEMOGRAPHIC CHANGE

IF RETIRED PEOPLE HAVE LOWER INCOME, AND IF THE RETIRED INCREASE AS A PERCENTAGE OF THE POPPULATION, INCOME INEQUALITY WILL INCREASE

WITHOUT ANY OF THE DEMOGRAHIC GROUPS OF A COUNTRY’S POPULATION HAVING A CHANGE IN INCOME

slide17

THE MOST INTERESTING DEMOGRAPHIC EXPLANATION INVOKES INCREASED FEMALE

LABOR FORCE PARTICIPATION AND WAS PROPOSED BY THE SOCIOLOGIST GOSTA ESPING-ANDERSEN

IF MARRIED WOMEN WITH A HIGHER LEVEL OF EDUCATION ARE LESS LIKELY TO QUIT THEIR JOB WHEN GIVING BIRTH TO A CHILD THAN MARRIED WOMEN WITH A LOWER LEVEL OF EDUCATION

HOUSEHOLD INCOME INEQUALITY WILL RISE

AND IT WILL RISE EVEN MORE IF WOMEN WITH A HIGHER LEVEL OF EDUCATION ARE MARRIED TO MEN WITH A HIGHER LEVEL OF EDUCATION (EDUCATIONAL HOMOGAMY)

slide18

HOWEVER, ALL THESE DEMOGRAPHIC EXPLANATIONS TAKEN TOGETHER DO NOT FULLY EXPLAIN THE RISE IN

INCOME INEQUALITY

WAGE DIFFERENTIALS HAVE BECAME LARGER

NOT ONLY WAGE DIFFERENTIAL BETWEEN PERSONS WITH A HIGHER AND A LOWER LEVEL OF EDUCATION

BUT ALSO WAGE DIFFERENTIALS BETWEEN ECONOMIC SECTORS

SUCH AS FINANCE PLUS BANKING VERSUS ALL OTHER SECTORS

WHAT ARE THE WAGE DIFFERENTIALS IN ISRAEL BETWEEN THE HIGH TECH SECTOR AND THE OTHER SECTORS?

slide19

THE MOST COMMON THEORY IN SOCIOLOGY EXPLAINING INCOME INEQUALITIES BETWEEN COUNTRIES IS GERHARD LENSKI’S SOCIAL-DEMOCRACY HYPOTHESIS:

IN COUNTRIES GOVERNED FOR A LONGER TIME BY SOCIAL DEMOCRATIC GOVERNMENTS

INCOME INEQUALITIES, EVEN AFTER TAKING PROGRESSIVE TAXATION INTO ACCOUNT, ARE SMALLER THAN IN COUNTIRES GOVERNED FOR A LONGER TIME BY CONSERVATIVE

GOVERNMENTS

DOES THE OECD ADDRESS THIS EXPLANATION? NOT REALLY!

slide20

THERE IS ONE THEORY DOWNPLAYING THE FINDING THAT INCOME INEQUALITY, OF ALL THE RICH

COUNTRIES, IS LARGEST IN THE USA

THE USA MAY HAVE LARGE INCOME INEQUALITIES, BUT IT ALSO HAS A LOT OF INCOME MOBILITY

INDEED, THE USA-INEQUALITIES PROVIDE THE INHABITANTS OF THE USA WITH THE

MOTIVATION TO CLIMB UP IN INCOME

DOES THE OECD ADDRESS THIS RIGHT-WING EXPLANATION? YES!

slide21

SINCE A BOOK BY WERNER SOMBART FROM 1906

IT IS A COMMON THEORY THAT THE USA HAS MORE SOCIAL MOBILITY THAN EUROPEAN COUNTRIES

PARTICULARLY FATHER-SON OCCUPATIONAL MOBILITY

THE SOCIOLOGIST SAYMOUR MARTIN LIPSET REPEATED THIS THEORY IN A BOOK IN 1959, AND EVER SINCE

slide22

HOWEVER, LIPSET FOUND IN 1959 THAT MOBILITY RATES ARE

PRETTY MUCH THE SAME IN INDUSTRIAL COUNTRIES

IN 1978 JOHN GOLDTHORPE FROM BRITAIN AND ROBERT HAUSER FROM THE USA TOOK SOMBART’S THESIS NOT TO BE ABOUT ABSOLUTE MOBILITY RATES,

BUT ABOUT RELATIVE MOBILITY CHANCES

slide23

RECENT DATA OF SOCIOLOGISTS SHOW THAT RELATIVE MOBILITY CHANCES ARE HIGHEST IN THE SCANDINAVIAN COUNTRIES AND QUITE LOW IN THE USA

HOWEVER, SOCIOLOGISTS MEASURE MOBILITY WITHIN A SYSTEM OF CLASSES OR ALONG AN OCCUPATIONAL PRESTIGE SCALE

ECONOMISTS LIKE TO STUDY INCOME MOBILITY

slide24

THE FIRST STUDIES ON FATHER-SON INCOME MOBILITY FOR UNREPRESENTATIVE SAMPLES FOR THE USA FOUND CORRELATIONS OF AT MOST 0.2 FOR FATHER’S YEARLY INCOME AND SON’S YEARLY INCOME SOME DECADES LATER

THIS WAS MUCH LOWER THAN THE CORRELATION OF AT LEAST 0.4 THAT SOCIOLOGISTS FOUND WITH RANDOM SAMPLES BETWEEN

THE OCCUPATIONAL PRESTIGE OF FATHERS AND SONS

slide25

LATER STUDIES BY ECONOMISTS ON INCOME MOBILITY COMPUTED THE CORRELATION BETWEEN FATHER’S INCOME AVERAGED OVER THREE YEARS AND SON’S INCOME AVERAGED OVER

THREE YEARS

THEN THE CORRELATION ROSE TO ABOUT 0.4

THE SOCIOLOGISTS HAD COME UP WITH THE RIGHT VALUE

OCCUPATIONAL PRESTIGE STANDS FOR LONG-RUN INCOME

slide26

THIS IS THE OECD RESULT ON INCOME INEQUALITY AND

INCOME MOBILITY

FORGET THE RIGHT PART OF THE FIGURE

HIGHER INCOME INEQUALITY GOES TOGETHER WITH LESS INCOME MOBILITY

slide29

OF LATE, THE OECD HAS BEEN MAKING THE HEADLINES WITH PISA

PISA = THE PROGRAM FOR INTERNATIONAL

STUDENT ASSESSMENT

FOR PISA, LARGE NUMBERS OF STUDENTS AGED 15 YEARS FROM THE OECD MEMBER COUNTRIES MAKE STANDARDIZED TESTS ON LANGUAGE COMPREHENSION AND MATHEMATICS

PISA ALSO COLLECTS DATA ON THE SCHOOLS OF THESE STUDENTS, ON THEIR TEACHERS, AND ON THEIR PARENTS

slide30

THE RANKINGS OF COUNTRIES AFTER THE SCORES OF THEIR STUDENTS TEND TO CAUSE POLITICAL UPROARS IN SEVERAL COUNTIRES

FOR INSTANCE, GERMANY WAS SHOCKED TWO YEARS AGO ABOUT ITS LOW RANKINGS

THE HIGH RANKING OF FINLAND BELIED THE HYPOTHESIS THAT IF TEACHER’S PAY IS HIGHER, STUDENT’S SCORES ARE HIGHER TOO

FINNISH TEACHERS ARE NOT PAID A LOT

slide31

PISA’S BOSS ANDREAS SCHLEICHER ANSWER TO A QUESTION OF A JOURNALIST IN THE INTERNATIONAL HERALD TRIBUNE OF

NOVEMBER 12, 2012

Q: I WANT TO ASK YOU ABOUT A RESULT OF YOURS ON CLASS SIZE

A: IT IS CLEAR THAT IF EVERYTHING ELSE IS EQUAL, A SMALLER CLASS IS BETTER THAN A LARGER CLASS. BUT THAT IS NOT THE RIGHT QUESTION. THE RIGHT QUESTION IS: IF YOU HAVE ONE DOLLAR EXTRA TO SPEND, DO YOU PUT IT INTO A SMALLER CLASS, A BETTER TEACHER, MORE LEARNING TIME? WHAT OUR RESEARCH VERY CLEARLY SHOWS IS THAT IF YOU HAVE TO MAKE A CHOICE BETWEEN A GREAT TEACHER AND A SMALL CLASS, CHOOSE THE GREATER TEACHER.

slide32

STUDIES LIKE PISA, STUDIES COLLECTING SCORES FOR STUDENTS, CHARACTERISTICS THEIR PARENTS, THE SIZE OF THE CLASS THEY ATTEND, THE FINANCING OF THEIR SCHOOL,

WERE UNDERTAKEN IN THE USA IN THE 1960S

ACCORDING TO HAUSER, THEIR MODEL IS NOT

TO BE FOLLOWED, WHILE PISA DOES

HAUSER SAID SO AT SENATE HEARINGS

HE REPEATED THIS AT THE MEETING OF THE RESEARCH COMMITTEE ON SOCIAL STRATIIFICATION AND MOBILITY IN YALE IN 2009

slide33

HAUSER’S ARGUMENT IS THAT PISA IS CROSS-SECTIONAL

WHILE DYNAMIC DATA ON THE SAME STUDENT ARE NEEDED

A STUDENT THAT MOVED FROM A BAD SCHOOL TO A GOOD ONE IS TREATED IN THE CROSS SECTIONAL ANALYSIS AS A STUDENT WHO HAS ATTENDED ALL HIS LIFE THIS SCHOOL

BUT EXPOSURE TO FIVE YEARS OF A BAD SCHOOL IS NOT WASHED OUT BY ONE YEAR AT A GOOD SCHOOL

SCHOOL EFFECTS SHOW UP GRADUALLY: THEY ARE WEAK IN THE FIRST YEAR, AND BECOME STRONGER LATER

PISA’S STUDENTS ARE ALL IN THE SAME CLASS AND OF THE SAME AGE

slide34

TO PARAPHRASE SCHLEICHER:

IF YOU AS A RESEARCH SOCIOLOGIST HAVE ONE DOLLAR EXTRA TO SPEND

WOULD YOU SPEND IT ON REPEATING CROSS SECTIONAL RESEARCH FOR OTHER STUDENTS

OR WOULD YOU SPEND IT ON RESEARCH FON THE SAME STUDENTS SOME YEARS LATER?

ACCORDING TO METHODOLOGY TEXTBOOKS THE ANSWER IS CLEAR: FOLLOW BEGINNING STUDENTS THROUGH THEIR EDUCATIONAL CAREER

slide37

THIS IS THE MAIN DIAGONAL OF A MOBILITY TABLE

A CURIOUS READER WOULD ALSO LIKE TO SEE THE OFF-DIAGONAL CELLS

slide38

MEN FROM THE BOTTOM FIFTH HAVE FOUR STEPS TO TAKE TO THE HIGHEST FIFTH, MEN FROM THE MIDDLE FIFTH TWO STEPS

THERE IS LESS MOBILITY OF FOUR STEPS THAN OF TWO STEPS IN BOTH COUNTRIES

IS THIS ENLIGHTENING?

MOBILITY OF FOUR STEPS IS LESS COMMON IN THE USA

THAN IN DENMARK

slide39

HOW ABOUT MOBILITY OF ONE STEP UP AND ONE STEP DOWN?

IS IT POSSIBLE FOR A PERSON IN THE TOP QUINTILE TO GO ONE STEP UP?

IS IT POSSIBLE FOR A PERSON IN THE BOTTOM QUINTILE TO GO ONE STEP DOWN?

slide40

OECD, EDUCATION AT A GLANCE 2012, PAGE 104

CHART 6.1

PROPORTION OF 20-34 YEAR OLD STUDENTS IN HIGHER EDUCATION WHOSE PARENTS HAVE LOW LEVELS OF EDUCATION

PROPORTION OF PARENTS WITH LOW LEVELS OF

EDUCATION IN THE TOTAL POPULATION

THE ODDS OF BEING A STUDENT IN HIGHER EDUCATION IF PARENTS HAVE LOW LEVELS OF EDUCATION

slide41

WHAT ARE ODDS?

COMPUTE ODDS RATIOS!