|
on Labour Economics |
| By: | Landais, Camille; Spinnewijn, Johannes |
| Abstract: | In the absence of unemployment insurance (UI) choices, the standard approach to estimating the value of UI is to infer it from the observed consumption response to job loss in combination with some assumption on preferences. Exploiting the unique data and policy context in Sweden, we propose two alternative approaches, which we implement and compare to the standard consumption-based approach on the exact same sample of workers. Our empirical analysis reveals that the drop in consumption expenditures upon job loss is relatively small (~ 13 percent), but that the marginal propensity to consume (MPC), estimated using variation in local government transfers, is 30 - 40 percent higher when unemployed than when employed. This wedge in MPCs, the focus of our first approach, reveals a high relative price of smoothing consumption, which confirms direct evidence on the limited consumption smoothing means available during unemployment. The estimated relative price provides a lower-bound on the value of UI, which turns out to be substantially higher than the consumption-based estimate under standard preference assumptions. Exploiting the UI choices embedded in the Swedish UI system, we also propose a Revealed-Preference approach, which confirms that the average value of UI is large in our setting, but also reveals substantial dispersion in the value of UI, above and beyond the variation in consumption drops. |
| Keywords: | Consumption Smoothing; MPC; Revealed Preference; Unemployment insurance |
| JEL: | H20 J64 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13624&r=all |
| By: | Faccini, Renato; Melosi, Leonardo |
| Abstract: | In a dynamic general equilibrium model with a job ladder, inflation rises when most workers are employed in high-productivity jobs because in this case, poaching leads to wage increases that are not backed by changes in productivity. The model predicts that the post-Great Recession drop in the job-to-job flow rate has significantly slowed the pace at which the U.S. labor market turns low-productivity jobs into high-productivity ones. As a result, inflation has fallen below trend for an entire decade, despite the marked decline in the unemployment rate. The impaired process of reallocation over the job ladder accounts for a one-percentage-point reduction in U.S. labor productivity relative to trend, contributing to explain the stagnant productivity of the current economic recovery. |
| Keywords: | Cyclical Misallocation; Job Ladder; labor productivity; Phillips curve |
| JEL: | C78 E24 E31 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13628&r=all |
| By: | Matteo Gomellini; Cormac Ó Gráda |
| Abstract: | Emigrants from Italy and Ireland contributed disproportionately to the Age of Mass Migration. That their departure improved the living standards of those they left behind is hardly in doubt. Nevertheless, a voluminous literature on the selectivity of migrant flows— both from sending and receiving country perspectives—has given rise to claims that migration generates both ‘brain drains’ and ‘brain gains’. On the one hand, positive or negative selection among emigrants may affect the level of human capital in sending countries. On the other hand, the prospect of emigration and return migration may both spur investment in schooling in source countries. This essay describes the history of emigration from Italy and Ireland during the Age of Mass Migration from these perspectives. |
| Keywords: | Migration; Brain Drain; Brain Gain; Human Capital; Italy; Ireland |
| JEL: | F22 J61 N33 O15 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:10197/9681&r=all |
| By: | Philipp Ager; Leah Platt Boustan; Katherine Eriksson |
| Abstract: | The nullification of slave-based wealth after the US Civil War (1861-65) was one of the largest episodes of wealth compression in history. We document that white southern households with more slave assets lost substantially more wealth by 1870 relative to households with otherwise similar pre-War wealth levels. Yet, the sons of these slaveholders recovered in income and wealth proxies by 1880, in part by shifting into white collar positions and marrying into higher status families. Their pattern of recovery is most consistent with the importance of social networks in facilitating employment opportunities and access to credit. |
| JEL: | J62 N11 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25700&r=all |
| By: | Andrew Shephard (Department of Economics, University of Pennsylvania) |
| Abstract: | We present a general discrete choice framework for analyzing household formation and dissolution decisions in an equilibrium limited-commitment collective framework that allows for marriage both within and across birth cohorts. Using Panel Study of Income Dynamics and American Community Survey data, we apply our framework to empirically implement a time allocation model with labor market earnings risk, human capital accumulation, home production activities, fertility, and both within- and across-cohort marital matching. Our model replicates the bivariate marriage distribution by age, and explains some of the most salient life-cycle patterns of marriage, divorce, remarriage, and time allocation behavior. We use our estimated model to quantify the impact of the significant reduction in the gender wage gap since the 1980s on marriage outcomes. |
| Keywords: | Marriage, divorce, collective household models, life-cycle, search and matching, intrahousehold allocation, structural estimation |
| JEL: | C78 D13 D83 J12 J16 J22 J24 J31 |
| Date: | 2019–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:19-003&r=all |
| By: | Joseph E. Aldy |
| Abstract: | Economists have long employed hedonic wage analysis to estimate income-fatality risk trade-offs, but some scholars have raised concerns about systematic measurement error and omitted variable bias in the empirical applications of this model. Recent studies have employed panel methods to remove time-invariant individual-specific characteristics that could induce bias in estimation. In an analogous manner, this paper proposes to exploit assortative matching on risk attitudes within married couples to control for worker characteristics that are unobserved to the econometrician. I develop and implement a modified hedonic wage estimator based on a within-coupled differenced wage equation for full-time working married couples with the Current Population Survey Merged Outgoing Rotation Group over 1996-2002. The key assumption builds on the findings in the assortative matching literature that individuals often marry those who have common traits across many dimensions, including those that may influence worker wages and are correlated with observed occupational fatality risks. This estimator identifies the compensating differential for occupation fatality risk by using within-couple differencing to remove unobserved determinants of risk attitudes and risk-mitigation ability, on which couples match, from the error term. I find that the value of statistical life (VSL) varies from $9 to $13 million (2016$). The within-couple differenced VSL estimates are stable and more robust to variation in specification of the hedonic wage model than conventional, cross-sectional hedonic wage models. I also find that the value of statistical life takes an inverted-U shape with respect to age. |
| JEL: | J12 J17 J31 Q51 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25708&r=all |
| By: | Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School) |
| Abstract: | A dynamic stochastic unified growth model is estimated from English economy data for almost a millennium. At the core of the (seven) overlapping generations, rational expectations structure is household choice about target number and quality of children. The trends of births, deaths, population and, the real wage, are closely matched by the estimated model. In the 19th century English fertility transition, the model shows how the generalized child price relative to the child quality price rose. The rising opportunity cost of education was as decisive for the transition as the parental shift to child quality. |
| Keywords: | Economic Development, Demography, Unified Growth, Overlapping Generations, English Economy |
| JEL: | O11 J11 N13 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2019/8&r=all |
| By: | Pineli, Andre (Henley Business School, University of Reading); Narula, Rajneesh (Henley Business School, University of Reading); Belderbos, Rene (UNU-MERIT, Maastricht University and KU Leuven) |
| Abstract: | Economic development can be defined as a process in which output growth is accompanied by qualitative changes in the structures of production and employment. Can FDI affect this process? This paper looks for answers in two ways. First, it reviews the extant knowledge about the relationship between MNE activity and economic development in developing countries. Core theoretical and conceptual issues are presented and the key findings of both microeconomic (FDI linkages and spillovers) and macroeconomic (FDI-growth nexus) empirical studies are discussed. The main message of both streams of literature is that FDI has the potential to catalyse development, but actual outcomes are contingent on several factors, such as the absorptive capacity of domestic firms and the level of development of local financial markets. Second, the paper addresses the relationship between FDI and structural change more directly, in a cross-country context, using a two-step estimation approach that is consistent with both theoretical arguments and previous empirical findings which suggest that the FDI-development nexus is highly country-specific. The results confirm such heterogeneity and suggest that the interaction between the sectoral concentration of FDI and the development stage of the country plays a role in determining the development impact of FDI. |
| Keywords: | foreign direct investment, multinational enterprises, developing countries, economic development, structural change |
| JEL: | D62 F23 L16 O11 O14 O19 O24 |
| Date: | 2019–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2019004&r=all |
| By: | Anna Aizer; Paul J. Devereux; Kjell G. Salvanes |
| Abstract: | Women who give birth as teens have worse subsequent educational and labor market outcomes than women who have first births at older ages. However, previous research has attributed much of these effects to selection rather than a causal effect of teen childbearing. Despite this, there are still reasons to believe that children of teen mothers may do worse as their mothers may be less mature, have fewer financial resources when the child is young, and may partner with fathers of lower quality. Using Norwegian register data, we compare outcomes of children of sisters who have first births at different ages. Our evidence suggests that the causal effect of being a child of a teen mother is much smaller than that implied by the cross-sectional differences but that there are still significant long-term, adverse consequences, especially for children born to the youngest teen mothers. Unlike previous research, we have information on fathers and find that negative selection of fathers of children born to teen mothers plays an important role in producing inferior child outcomes. These effects are particularly large for mothers from higher socio-economic groups. |
| Keywords: | Teen pregnancy; Intergenerational mobility; Family fixed effects |
| JEL: | J12 J13 I31 I32 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:10197/9689&r=all |
| By: | Gorman, Emma; Harmon, Colm; Mendolia, Silvia; Staneva, Anita; Walker, Ian |
| Abstract: | We use rich data on a cohort of English adolescents to analyse the long-term effects of experiencing bullying victimisation in junior high school. The data contain selfreports of five types of bullying and their frequency, for three waves of the data, when the pupils were aged 13 to 16 years. Using a variety of estimation strategies - least squares, matching, inverse probability weighting, and instrumental variables - we assess the effects of bullying victimisation on short- and long-term outcomes, including educational achievements, earnings, and mental ill-health at age 25 years. We handle potential measurement error in the child self-reports of bullying type and frequency by instrumenting with corresponding parental cross-reports. Using a detailed longitudinal survey linked to administrative data, we control for many of the determinants of bullying victimisation and child outcomes identified in previous literature, paired with comprehensive sensitivity analyses to assess the potential role of unobserved variables. The pattern of results strongly suggests that there are important long run effects on victims - stronger than correlation analysis would otherwise suggest. In particular, we find that both type of bullying and its intensity matters for long run outcomes. |
| Keywords: | bullying; victimization; long term outcomes |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2019-05&r=all |
| By: | Böhm, M.; Siegel, Christian |
| Abstract: | We argue that rising supply of experience not only reduces experienced workers’ relative wages but also their relative labor market participation. From a theoretical model we derive predictions which we quasi-experimentally investigate, using variation across U.S. local labor markets (LLMs) over the last decades and instrumenting experience supply by the LLMs’ age structures a decade earlier. We find that aging substantially reduces experienced workers’ relative wages and employment rates, and also their labor market participation rates. Our results imply that the effect of demographic change on labor markets might be more severe than previously recognized, as it reaches beyond wages. |
| Keywords: | demographic change, employment of experienced workers, return to experience |
| JEL: | J11 J21 J31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umaror:2019001&r=all |
| By: | Bruno Decreuse (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Guillaume Wilemme (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE) |
| Abstract: | A recent strand of papers use sharp regression discontinuity designs (RDD) based on age discontinuity to study the impacts of minimum income and unemployment insurance benefit extension policies. This design challenges job search theory, which predicts that such RDD estimates are biased. Owing to market frictions, people below the age threshold account for future eligibility to the policy. This progressively affects their search outcomes as they get closer to entitlement. Comparing them to eligible people leads to biased estimates because both groups of workers are actually treated. We provide a nonstationary job search model and quantify the theoretical biases on the datasets used in the literature. Our results suggest that the employment impact of minimum income policies are (significantly) under-estimated, whereas the impacts of benefit extensions on nonemployment duration are (not significantly) over-estimated. |
| Keywords: | RDD, age discontinuity, nonstationary job search theory |
| JEL: | C41 H3 J21 J64 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1911&r=all |
| By: | Kristine Wika Haraldsen; Ragnar Nymoen; Victoria Sparrman (Statistics Norway) |
| Abstract: | The average employment rate for the OECD countries was close to 63 percent in the period 2000-2015 but there is considerable variation within and between countries. We find that a dynamic model for employment, derived from a multiple equation macro model with institutional and population variables, can explain much of the development. The estimated models capture the dynamics well and they imply interpretable estimates of the normal employment rate level, conditional on the state of the institutional variables in 2015. The estimated normal employment rate is 2 percentage points higher when shocks are included in the model, implying that shocks have persistent effects. Regulations of the labour market are important for the effect of shocks. Regulated labour markets amplify positive shocks while negative shocks are dampened compared to less regulated labour markets. In the estimation of the models, we use standard panel data estimators, as well as a version of the within-group estimator which is robust to structural breaks in the means. Empirically we find that some of the estimated coefficients of the institutional variables are robust with respect to the breaks, while others are not. We find that the interaction effect between benefit replacement ratio and benefit duration is robust, and that is can significantly affect the employment rate. This result implies that changes in replacement ratios (or duration) may be expected to have larger impacts in countries where duration (or replacement ratio) is long compared to countries characterized by short duration (or replacement ratio). |
| Keywords: | Employment share; Labor market institutions; Macro shocks; Panel data model |
| JEL: | E21 E22 E24 E25 J08 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:901&r=all |
| By: | Mohana Mondal (University of Waikato); Michael P. Cameron (University of Waikato); Jacques Poot (University of Waikato) |
| Abstract: | Auckland, the largest city of New Zealand, is one of the most diverse cities in the world, with more than 40 percent of its population born abroad, more than 200 ethnicities represented and 160 languages spoken. In this paper, we measure residential sorting of individuals in Auckland by their cultural (ethnicity) and economic (age, income, education, occupation) characteristics for the years 1991-2013. We use entropy-based measures of residential sorting as our preferred measure, and find that individuals exhibit the greatest residential sorting by ethnicity, compared with sorting by economic characteristics. We also observe that ethnic sorting declined between 1991 and 2013, for broad ethnic groups, but that sorting within the broad ethnic groups has increased. At the broad occupational groups level, sorting has also declined between 1991 and 2013, but the contribution to sorting of within-broad-group occupations has increased. We also observe that the semi-rural fringes of the city are less diverse than the central urban area. |
| Keywords: | residential sorting; cultural sorting; economic sorting; segregation; entropy measures; cultural diversity; economic diversity |
| JEL: | J15 R21 R23 |
| Date: | 2019–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:19/03&r=all |
| By: | Emily Nix; Martin Eckhoff Andresen (Statistics Norway) |
| Abstract: | Women experience significant reductions in labor market income following the birth of children, while their male partners experience no such income drops. This “relative child penalty” has been well documented and accounts for a significant amount of the gender income gap. In this paper we do two things. First, we use a simple household model to better understand the potential mechanisms driving the child penalty, which include gender norms around child care, female preferences for child care, efficient specialization within households, and the biological cost of giving birth. The model, combined with the estimated child penalties for heterosexual and same sex couples, suggests that the child penalty experienced by women in heterosexual couples is primarily explained by female preferences for child care and gender norms, with a smaller contribution due to the biological costs of giving birth. Second, we provide causal estimates on the impact of two family policies aimed at reducing the relative child penalty: paternity leave and subsidized early child care. Our precise and robust regression discontinuity results show no significant impact of paternity leave use on the relative child penalty. Early subsidized care seems to have more promise as a policy tool for affecting child penalties, as we find a 25% reduction in child penalties per year of child care use from a large Norwegian reform that expanded access to child care. |
| Keywords: | Gender wage gap; labor supply; child penalty; paternity leave; child care; same sex couples; event study; regression discontinuity; instrumental variables |
| JEL: | I21 J13 J22 J71 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:902&r=all |
| By: | Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Many EU countries are currently undergoing major demographic changes, particularly in terms of shrinking total and working-age populations and population ageing. If this trend is to continue, the functioning of the labour market is at risk as labour shortages are increasingly more likely to emerge which will subsequently imperil further economic growth and catching-up across the EU. This report addresses the likely labour-market consequences of observable demographic trends in the EU. It applies a simple trend-based model which uses observable trends of the past 15 years of the working-age population and the activity rate – which together determine the evolution of the supply of labour – as well as of labour productivity and GDP growth – which together determine the evolution of the demand for labour – to simulate likely scenarios for the future development of labour supply and demand until 2050. Projected future trends in both labour supply and demand are then used to establish whether and – if so – in what year adverse past demographic developments are likely to kick in and begin jeopardising further growth. Different simulation exercises demonstrate that in some EU countries – particularly countries in Central and Eastern Europe – labour supply-side constraints would already materialise in the mid-2020s, which calls for quick policy action to address and ideally avert the imminent demographic collapse. |
| Keywords: | demographic change, labour supply constraints, labour shortages, growth |
| JEL: | J11 J21 J23 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:439&r=all |