nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2006‒06‒24
five papers chosen by
Fabio Sabatini
Universita degli Studi di Roma, La Sapienza

  1. Remittances and the Brain Drain By Riccardo Faini
  2. Technological Progress and Worker Productivity at Different Ages By John Laitner; Dmitriy Stolyarov
  3. Social Disadvantage and Education Experiences By Stephen Machin
  4. Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany By Frank M. Fossen; Viktor Steiner
  5. Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey By Marco Caliendo; Frank M. Fossen; Alexander S. Kritikos

  1. By: Riccardo Faini (University of Rome Tor Vergata, LdA, CEPR and IZA Bonn)
    Abstract: In most destination countries, immigration policies are increasingly tilted toward the most skilled individuals. Whether this shift hurts economic prospects in sending countries, as argued by the traditional brain drain literature, is somewhat controversial. The most recent literature has focused on the link between skilled out-migration and educational achievements. In this paper, we emphasize a different channel. It is often argued that skilled migrants raise economic welfare at home thanks to a relatively larger flow of remittances. Skilled migrants typically earn relatively more and, ceteris paribus, will therefore remit more. However, they are also likely to spend a longer span of time abroad and also are more likely to reunite with their close family in the host country. Both factors should be associated with a relatively smaller flow of remittances from skilled migrants. Hence, the sign of the impact of the brain drain on total remittances is an empirical question. We first develop a simple model showing that skilled migrants may have indeed a lower propensity to remit home out of a given flow of earnings abroad. We then derive an empirical equation of remittances and estimate it on a large panel of developing countries. As a measure of the brain drain, we use the dataset by Docquier and Marfouk (2004) that in turn builds on the pioneering work of Carrington and Detragiache (2004). We find considerable evidence that the brain drain is associated with a smaller flow of remittances.
    Keywords: remittances, migration, brain drain
    JEL: F02 F22
    Date: 2006–06
  2. By: John Laitner (University of Michigan); Dmitriy Stolyarov (University of Michigan)
    Abstract: Economists have long thought of technological progress as a primary determinant of rising living standards over time. One might think of technological progress as increasing the “effectiveness” of labor, thereby raising the amount of output that each unit of labor can produce. The purpose of this paper is to ask whether, as an empirical matter, technological progress increases the productivity of workers evenly, or whether it augments the effectiveness of young workers the most. As low birthrates and increases in longevity lead to an “aging” of the population, the productivity of older workers relative to younger workers is likely to become an ever more important issue. Analyzing data from the decennial Censuses and annual data from the Current Population Survey, this paper draws three tentative conclusions. First, we find that the “aging” of the U.S. work force seems more likely to increase aggregate productivity – by raising the proportion of laborers with sizable accumulations of human capital from experience – than to decrease it – by slowing the adoption rate for innovations. Our preliminary estimates imply that the latter effect is of modest magnitude. Second, since our preliminary estimates point to “general” rather than “specific” technological progress, each household faces a problem of having to predict the course of technological progress over its life span. This means that households face more risk than otherwise, and it complicates the specification of the life-cycle model that analysts should employ. Third, when we disaggregate across education groups, the groups show quite unequal benefits from technological progress after 1980, and this may lead to further challenges in modeling household behavior.
    Date: 2005–12
  3. By: Stephen Machin
    Abstract: This paper discusses how social disadvantage affects the learning experiences of households with fewer economic resources, at each stage of the individuals' life-course, and on some of the "social" effects of such learning. It argues that while education can be an escalator out of social disadvantage — leading to better job prospects for youths facing greater risks of poverty and reducing the prevalence of income poverty in adult age — educational failure can reinforce it: a significant minority of students in several OECD countries do not even complete compulsory education; students' test scores in lower secondary education are strongly shaped by family characteristics; and the expansion of university education has most often benefited households with better educated parents. Far from "equalising" opportunities, education can be a powerful driver of social selection. When returns to education increase over time, this may lead to greater inter-generational persistence of poverty and less equality of opportunities. Ce document présente une analyse de la relation entre désavantage social et parcours éducatifs des individus issus d’un milieu familial défavorisé à chaque étape de leur vie, et décrit certaines des conséquences de ces parcours pour la société dans son ensemble. Une conclusion générale est que si la formation peut servir d’ascenseur social –– en offrant de meilleures perspectives d’emploi aux jeunes les plus menacés de dénuement et en réduisant la prévalence de la pauvreté économique à l’âge adulte –– l’échec scolaire peut en revanche renforcer le désavantage social : dans plusieurs pays de l’OCDE, une minorité importante d’élèves n’arrive même pas au terme de l’enseignement obligatoire ; dans le premier cycle du secondaire, les résultats des élèves aux tests dépendent beaucoup des caractéristiques de la famille ; et le développement des études universitaires a le plus souvent profité aux ménages dont les parents étaient relativement mieux instruits. Loin d’ « égaliser » les chances, l’éducation peut être un puissant moteur de sélection sociale. Dans un contexte où le rendement de la formation augmente avec le temps, cette dynamique pourrait conduire à une persistance de la pauvreté de génération en génération plus accentuée ainsi qu'une diminution de l’égalité des chances.
    JEL: I21 I28 I38
    Date: 2006–02–17
  4. By: Frank M. Fossen (DIW Berlin); Viktor Steiner (Free University of Berlin, DIW Berlin and IZA Bonn)
    Abstract: Entrepreneurial activity is often regarded as an engine for economic growth and job creation. Through tax policy, governments possess a potential lever to influence the decisions of economic agents to start and close small businesses. In Germany, the top marginal income tax rates were reduced exclusively for entrepreneurs in 1994 and 1999/2000. These tax reforms provided two naturally defined control groups that enable us to exploit the legislation changes as "natural experiments". First, the tax rate reductions did not apply to freelance professionals (Freiberufler), and second, entrepreneurs with earnings below a certain threshold were not affected. Using data from two different sources, the SOEP and the Mikrozensus (LFS), we analyse the effect of the tax cuts on transitions into and out of selfemployment and on the rate of self-employment. We apply a "difference-in-difference-indifference" estimation technique within a discrete time hazard rate model. The results indicate that the decrease in tax rates did not have a significant effect on the self-employment decision.
    Keywords: taxation, entrepreneurship, natural experiment, difference-in-difference-indifference estimation
    JEL: H24 H25 J23
    Date: 2006–06
  5. By: Marco Caliendo (DIW Berlin, IAB Nuremberg and IZA Bonn); Frank M. Fossen (DIW Berlin); Alexander S. Kritikos (European University Viadrina, Frankfurt (Oder), GfA and IAB Nuremberg)
    Abstract: The influence of risk aversion on the decision to become self-employed is a much discussed topic in the entrepreneurial literature. Conventional wisdom asserts that the role model of an entrepreneur requires to make risky decisions in uncertain environments and hence that more risk-averse individuals are less likely to become an entrepreneur. Empirical tests of this assumption are scarce however, mainly because reliable measures for risk-aversion are not available. We base our analysis on the most recent waves of the German Socio-Economic Panel (SOEP) which allow us to use experimentally-validated measures of risk attitudes. Most importantly and in contrast to previous research, we are able to examine whether the decision of starting a business is influenced by objectively measurable risk attitudes at the time when this decision is made. Our results show that in general individuals with lower risk aversion are more likely to become self-employed. Sensitivity analysis reveals, however, that this is true only for people coming out of regular employment, whereas for individuals coming out of unemployment or inactivity risk attitudes do not seem to play a role in the decision process.
    Keywords: risk attitudes, entrepreneurship, self-employment
    JEL: D81 J23 M13
    Date: 2006–06

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