WELFARE INEQUALITY AND DEMOGRAPHIC DIVIDEND IN EAST JAVA: THE OVERLAPPING GENERATIONS (OLG) MODEL APPROACH
DOI:
https://doi.org/10.53572/ejavec.v2i1.12Keywords:
Inequality, Demography, Overlapping Generations Model, General Method of MomemyAbstract
The issue of demography into an important discussion caused can affect economic growth and inequality in East Java Inequality in east Java showed an increase.
Unequal distribution of income is a source of high inequality in East Java. This study aims to show the effectiveness of demographic changes can affect inequality in East Java with the approach of Overlapping Generations (OLG) model. The data used in this research is time series data in the first quarter of 2010- the fourth quarter 2015. Analyzer used in this research is Generalized Method of Moments (GMM). The results of this study show that demographic changes in East Java have the potential to increase inequality. The number of productive age populations with non-productive causes of high inequality. Consumption rate and the number of the productive workforces also become one of the sources of inequality. Therefore, the Settlement of inequality coupled with demographic changes in East Java needs the role of government through targeted social protection programs and infrastructure improvements. In addition, the need for land-based policies, opportunity-based policies, human resource capacity building policies, job matching.
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Baxter, M. (1989). Money and market incompleteness in overlaping generations model. Journal of Monetary Economics, 69-91.
Bengtsson, E., & Waldenström, D. (2017). Capital shares and income inequality: Evidence from the long run.
Bleichrodt, H., & Doorslaer, E. v. (2006). A welfare economics foundation for health inequality measurement. Journal of Health Economics, 945–957.
Blundell, R., & Etheridge, B. (2010). Consumption, income and earnings inequality in Britain. Review of Economic Dynamics, 76-102.
Bruce, N. and Turnovsky, S. J. (2013) ‘Social security, growth, and welfare in overlapping generations economies with or without annuities’, Journal of
Public Economics. Elsevier B.V., 101(1), pp. 12–24. doi: 10.1016/j.jpubeco.2013.02.007.
Cazzavillan, G., & Pintus, P. (2007). Dynamic inefficiency in an overlapping generations economy with production. Journal of Economic Theory, 754 – 759.
Cingano, F. (2014). Trends in Income Inequality and its Impact on Economic Growth. OECD Social, Employment and Migration Working Papers No. 163, 1-65.
Crossley dan Browning. (2001). The Life Cycle Model of Consumption and Saving. The Instituted Of Fiscal Policy
Dávila, J., & Leroux, M.-L. (2015). Efficiency in overlapping generations economies with longevity choices and fair annuities. Journal of Macroeconomics, 363-383.
De Nardi, M., & Fella, G. (2017). Saving and wealth inequality. Review of Economic Dynamics, 1-48.
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Eskander, S. M. S. U. and Barbier, E. B. (2017) ‘Tenure Security, Human Capital and Soil Conservation in an Overlapping Generation Rural Economy’, Ecological
Economics. Elsevier B.V., 135, pp. 176–185. doi: 10.1016/j.ecolecon.2017.01.015.
Gan, Z., & Lau, S.-H. P. (2010). Demographic structure and overlapping generations: A simpler proof with more general conditions. Journal of Mathematical
Economics, 311-319.
Gomis-Porqueras, P., & Haro, A. (2003). Global dynamics in macroeconomics: an overlapping generations example. Journal of Economic Dynamics & Control,
1941-1959.
Guerin, B. (2013). How Europe’s changing population will impact on income inequality. RAND EUROPE, 1-47.
Geanakoplos, J. D. and Polemarchakis, H. M. (1992) ‘Overlapping Generations’, IV(1), pp. 1–16. doi: 10.1007/978-3-642-32967-8_4.
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Hiraguchi, R. (2012). Multiple equilibrium in the overlapping generations model revisited. Economics Letters, 70-72.
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Liu, S. and Hu, A. (2013) ‘Demographic change and economic growth: Theory and evidence from China’, Economic Modelling. Elsevier B.V., 35, pp. 71–77. doi:
10.1016/j.econmod.2013.06.041.
Marini, G. (2007) ‘Existence, uniqueness and stability of equilibria in an OLG model with persistent inherited habits’, University of York. doi: 10.1007/s00199-003-
0360-9.
Maia, A. G., & Sakamoto, C. (2014). The Relation Between Demographic Changes, Poverty and Inequality: The Case of Brazil. the IARIW 33rd General Conference
(paper presented), 1-20.
Maroto, M., & Pettinicchio, D. (2014). Disability, structural inequality, and work: The influence ofoccupational segregation on earnings for people withdifferent
disabilities. Research in Social Stratification and Mobility, 76-92.
McCallum, B. T. (1983). The role of overlopping-generations models in monetary economics. Carnegie-rochester conference series on public policy, 9-44.
McLanahan, S., & Percheski, C. (2008). Family Structure and the Reproduction of Inequalities. Reproduction of Inequalities, 1-25.
Mello, L. d., & Tingson, E. R. (2003). Income inequality and redistributive goverment spending. IMF Working Paper, 1-26.
Meyer, B. D., & Sullivan, J. X. (2017). CONSUMPTION AND INCOME INEQUALITY IN THE U.S. SINCE THE 1960S. NBER Working Paper, 1-72.
Miyashita, T. (2000). Adjusment cost and overlapping generations model. Econ. J of Hokaido Univ., 57-65.
Miyazawa, K. (2006). Growth and inequality: a demographic explanation. J Popul Econ, 559-5578.
Modigliani, F. (1986) ‘Life cycle, individual thrift, and the wealth of nations.’, American Economic Review, 76(3), pp. 297–313. doi: 10.1126/science.234.4777.704.
Modigliani, F. (1988) ‘The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth’, Journal of Economic Perspectives, 2(2), pp. 15–
40. doi: 10.1257/jep.2.2.15.
Modigliani, F. (1998) An economists’ Manifesto on unemployment in the European Union, Journal of Income Distribution. doi: 10.1016/S0926-6437(99)00006-2.
Peck, J. (1987). Non-connectedness of the set of equilibrium money prices: the overlapping-generations economy . Journal of economic theory, 355-363.
Piketty, T. (2014) Capital in the Twenty- First Century. London: The Belknap Press of Harvard University Pres.
Pop, I. A., Ingen, E. v., & Oorschot, W. v. (2013). Inequality, Wealth and Health: Is Decreasing Income Inequality the Key to Create Healthier Societies? Soc Indic
Res, 1025-1043.
Romer, C. and Rommer, D. (1998) ‘Monetary policy and the well being of the poor’, Federal Reserve Bank of Kansas City, Proceedings, pp. 159–201. doi:
10.3386/w6793.
Seegmuller, T., & Verche`re, A. (2004). Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies. Economics
Letters, 363-369.
Schoonbroodt, A. and Tertilt, M. (2014) ‘Property rights and efficiency in OLG models with endogenous fertility’, Journal of Economic Theory. Elsevier Inc., 150(1),
pp. 551–582. doi: 10.1016/j.jet.2013.09.016.
Schwartz, J. (2006) ‘The demographic challenge’, Afrique contemporaine, (161), pp. 43–56.
Shi, L., & Suen, R. M. (2014). Asset bubbles in an overlapping generations model with endogenous labor supply. Economics Letters, 164-167.
Shin, I. (2012). Income inequality and economic growth. Economic Modelling, 2049-2057.
Song, Z. (2011). The dynamics of inequality and social security in general equilibrium. Review of Economic Dynamics, 613-635.
Suandi et al. (2014) ‘Hubungan Karakteristik Kependudukan Dengan Kesejahteraan Keluarga Di Provinsi Jambi’, PIRAMIDA, X(2), pp. 71–77.
Taylor, M. P. and Branson, E. T. (2004) ‘Asymmetric arbitrage and default premiums between the US and Russian financial markets’, IMF Staff Papers, 51(2), pp.
257–275.
Todaro, M. (1980) Internal Migration in Developing Countries: A Survey, Population and Economic Change in Developing Countries. Available at:http://ideas.repec.org/h/nbr/nberch/9668.html%5Cnhttp://www.nber.org/chapters/c9668.
Tyrowicz, J. and Makarski, K. (2015) ‘Inequalities in an OLG economy with heterogeneity within cohorts and pension systems’, Working Paper University
of Warsaw, 2015(16).
Wicaksono, E., Amir, H., & Nugroho, A. (2017). The sources of income inequality in Indonesia: a regression-based inequality decomposition. ADBI Working Paper
Series, 1-16.Wongboonsin, K., & Phiromswad, P. (2017). Searching for empirical linkages between demographic structure and economic growth. Economic Modelling, 364-379.
Wu, X., & Li, J. (2017). Income Inequality, Economic Growth, and Subjective Wellbeing: Evidence from China. Research in Social Stratification and Mobility, 1-41.
Yamada, T. (2012). Income risk,macroeconomic and demographic change, and economic inequality in Japan. Journal of Economic Dynamics & Control, 63-84.
Zhu, T. (2008). An overlapping-generations model with search. Journal of Economic Theory, 318-331.
PAPER NO. 3200, 1-35.
Anderson, E., D’Orey, M. A., Duvendack, M., & Esposito, L. (2016). DOES GOVERNMENT SPENDING AFFECT INCOME INEQUALITY? A META-REGRESSION
ANALYSIS. Journal of Economic Surveys, 1-27.
Antràs, P., de Gortari, A. and Itskhoki, O. (2017) ‘Globalization, inequality and welfare’, Journal of International Economics. Elsevier B.V., 108, pp. 387–412.
doi: 10.1016/j.jinteco.2017.07.009.
Balasko, Y., & Shell, K. (1980). The overlapping-generations model, I: the case of pure exchange without money. Journal of Economic Theory, 281-306.
Baranzini. (2005). Modigliani’s Life Cycle Theory of Saving Fifty Yaers Later. BNL Quartely Review. Vol 8, No. 233-234.
Barros, R. P. de, G., F. H. and Ferreira, José R. Molinas Vega, J. S. C. with (2009) Measuring Inequality of Opportunities in Latin America and the Caribbean.
Washington DC: The International Bank for Reconstruction and Development / The World Bank.
Baten, J. (2016). Title: Economics, Human Biology and Inequality: a review of “puzzles” and recent contributions from a Deatonian perspective. Economics
and Human Biology, 1-24.
Baxter, M. (1989). Money and market incompleteness in overlaping generations model. Journal of Monetary Economics, 69-91.
Bengtsson, E., & Waldenström, D. (2017). Capital shares and income inequality: Evidence from the long run.
Bleichrodt, H., & Doorslaer, E. v. (2006). A welfare economics foundation for health inequality measurement. Journal of Health Economics, 945–957.
Blundell, R., & Etheridge, B. (2010). Consumption, income and earnings inequality in Britain. Review of Economic Dynamics, 76-102.
Bruce, N. and Turnovsky, S. J. (2013) ‘Social security, growth, and welfare in overlapping generations economies with or without annuities’, Journal of
Public Economics. Elsevier B.V., 101(1), pp. 12–24. doi: 10.1016/j.jpubeco.2013.02.007.
Cazzavillan, G., & Pintus, P. (2007). Dynamic inefficiency in an overlapping generations economy with production. Journal of Economic Theory, 754 – 759.
Cingano, F. (2014). Trends in Income Inequality and its Impact on Economic Growth. OECD Social, Employment and Migration Working Papers No. 163, 1-65.
Crossley dan Browning. (2001). The Life Cycle Model of Consumption and Saving. The Instituted Of Fiscal Policy
Dávila, J., & Leroux, M.-L. (2015). Efficiency in overlapping generations economies with longevity choices and fair annuities. Journal of Macroeconomics, 363-383.
De Nardi, M., & Fella, G. (2017). Saving and wealth inequality. Review of Economic Dynamics, 1-48.
Ehrlich, P. R. and Ehrlich, A. H. (2009) ‘The Population Bomb Revisited’, The electronic Journal of Sustainable Development, 1(3), pp. 63–71. doi: 10.1007/978-3-319-
19884-2.
Eskander, S. M. S. U. and Barbier, E. B. (2017) ‘Tenure Security, Human Capital and Soil Conservation in an Overlapping Generation Rural Economy’, Ecological
Economics. Elsevier B.V., 135, pp. 176–185. doi: 10.1016/j.ecolecon.2017.01.015.
Gan, Z., & Lau, S.-H. P. (2010). Demographic structure and overlapping generations: A simpler proof with more general conditions. Journal of Mathematical
Economics, 311-319.
Gomis-Porqueras, P., & Haro, A. (2003). Global dynamics in macroeconomics: an overlapping generations example. Journal of Economic Dynamics & Control,
1941-1959.
Guerin, B. (2013). How Europe’s changing population will impact on income inequality. RAND EUROPE, 1-47.
Geanakoplos, J. D. and Polemarchakis, H. M. (1992) ‘Overlapping Generations’, IV(1), pp. 1–16. doi: 10.1007/978-3-642-32967-8_4.
Groth, C. (2003) . On Diamond ’ s OLG model’, Advanced Macroeconomics, Note 1, pp. 1–21.
Handa, J. (2009). Monetary Economics. London and New York: Routledge.
Heijdra, B. (2009). Foundation of modern macroeconomics. Oxford University Press.
Hiraguchi, R. (2012). Multiple equilibrium in the overlapping generations model revisited. Economics Letters, 70-72.
Kennedy, T., Smyth, R., Valadkhani, A., & Chen, G. (2017). Does income inequality hinder economic growth? New evidence using Australian taxation statistics.
Economic Modelling, 1-10.
Kochan, T. A., & Riordan, C. A. (2015). Employment relations and growing income inequality: Causes and potential options for its reversal. 1-44.Lee, C. (2005). Rising family income inequality in the united states, 1968-2000: impacts of changing labor supply, wages, and family structure. NBER WORKING PAPER SERIES, 1-36.
Liu, S. and Hu, A. (2013) ‘Demographic change and economic growth: Theory and evidence from China’, Economic Modelling. Elsevier B.V., 35, pp. 71–77. doi:
10.1016/j.econmod.2013.06.041.
Marini, G. (2007) ‘Existence, uniqueness and stability of equilibria in an OLG model with persistent inherited habits’, University of York. doi: 10.1007/s00199-003-
0360-9.
Maia, A. G., & Sakamoto, C. (2014). The Relation Between Demographic Changes, Poverty and Inequality: The Case of Brazil. the IARIW 33rd General Conference
(paper presented), 1-20.
Maroto, M., & Pettinicchio, D. (2014). Disability, structural inequality, and work: The influence ofoccupational segregation on earnings for people withdifferent
disabilities. Research in Social Stratification and Mobility, 76-92.
McCallum, B. T. (1983). The role of overlopping-generations models in monetary economics. Carnegie-rochester conference series on public policy, 9-44.
McLanahan, S., & Percheski, C. (2008). Family Structure and the Reproduction of Inequalities. Reproduction of Inequalities, 1-25.
Mello, L. d., & Tingson, E. R. (2003). Income inequality and redistributive goverment spending. IMF Working Paper, 1-26.
Meyer, B. D., & Sullivan, J. X. (2017). CONSUMPTION AND INCOME INEQUALITY IN THE U.S. SINCE THE 1960S. NBER Working Paper, 1-72.
Miyashita, T. (2000). Adjusment cost and overlapping generations model. Econ. J of Hokaido Univ., 57-65.
Miyazawa, K. (2006). Growth and inequality: a demographic explanation. J Popul Econ, 559-5578.
Modigliani, F. (1986) ‘Life cycle, individual thrift, and the wealth of nations.’, American Economic Review, 76(3), pp. 297–313. doi: 10.1126/science.234.4777.704.
Modigliani, F. (1988) ‘The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth’, Journal of Economic Perspectives, 2(2), pp. 15–
40. doi: 10.1257/jep.2.2.15.
Modigliani, F. (1998) An economists’ Manifesto on unemployment in the European Union, Journal of Income Distribution. doi: 10.1016/S0926-6437(99)00006-2.
Peck, J. (1987). Non-connectedness of the set of equilibrium money prices: the overlapping-generations economy . Journal of economic theory, 355-363.
Piketty, T. (2014) Capital in the Twenty- First Century. London: The Belknap Press of Harvard University Pres.
Pop, I. A., Ingen, E. v., & Oorschot, W. v. (2013). Inequality, Wealth and Health: Is Decreasing Income Inequality the Key to Create Healthier Societies? Soc Indic
Res, 1025-1043.
Romer, C. and Rommer, D. (1998) ‘Monetary policy and the well being of the poor’, Federal Reserve Bank of Kansas City, Proceedings, pp. 159–201. doi:
10.3386/w6793.
Seegmuller, T., & Verche`re, A. (2004). Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies. Economics
Letters, 363-369.
Schoonbroodt, A. and Tertilt, M. (2014) ‘Property rights and efficiency in OLG models with endogenous fertility’, Journal of Economic Theory. Elsevier Inc., 150(1),
pp. 551–582. doi: 10.1016/j.jet.2013.09.016.
Schwartz, J. (2006) ‘The demographic challenge’, Afrique contemporaine, (161), pp. 43–56.
Shi, L., & Suen, R. M. (2014). Asset bubbles in an overlapping generations model with endogenous labor supply. Economics Letters, 164-167.
Shin, I. (2012). Income inequality and economic growth. Economic Modelling, 2049-2057.
Song, Z. (2011). The dynamics of inequality and social security in general equilibrium. Review of Economic Dynamics, 613-635.
Suandi et al. (2014) ‘Hubungan Karakteristik Kependudukan Dengan Kesejahteraan Keluarga Di Provinsi Jambi’, PIRAMIDA, X(2), pp. 71–77.
Taylor, M. P. and Branson, E. T. (2004) ‘Asymmetric arbitrage and default premiums between the US and Russian financial markets’, IMF Staff Papers, 51(2), pp.
257–275.
Todaro, M. (1980) Internal Migration in Developing Countries: A Survey, Population and Economic Change in Developing Countries. Available at:http://ideas.repec.org/h/nbr/nberch/9668.html%5Cnhttp://www.nber.org/chapters/c9668.
Tyrowicz, J. and Makarski, K. (2015) ‘Inequalities in an OLG economy with heterogeneity within cohorts and pension systems’, Working Paper University
of Warsaw, 2015(16).
Wicaksono, E., Amir, H., & Nugroho, A. (2017). The sources of income inequality in Indonesia: a regression-based inequality decomposition. ADBI Working Paper
Series, 1-16.Wongboonsin, K., & Phiromswad, P. (2017). Searching for empirical linkages between demographic structure and economic growth. Economic Modelling, 364-379.
Wu, X., & Li, J. (2017). Income Inequality, Economic Growth, and Subjective Wellbeing: Evidence from China. Research in Social Stratification and Mobility, 1-41.
Yamada, T. (2012). Income risk,macroeconomic and demographic change, and economic inequality in Japan. Journal of Economic Dynamics & Control, 63-84.
Zhu, T. (2008). An overlapping-generations model with search. Journal of Economic Theory, 318-331.
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Published
2018-03-30
How to Cite
Badara Shofi Dana, & Ati Musaiyaroh. (2018). WELFARE INEQUALITY AND DEMOGRAPHIC DIVIDEND IN EAST JAVA: THE OVERLAPPING GENERATIONS (OLG) MODEL APPROACH. East Java Economic Journal, 2(1), 42–60. https://doi.org/10.53572/ejavec.v2i1.12
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