New Economics Papers
on Central and South America
Issue of 2006‒01‒24
eight papers chosen by

  1. The Public Pay Gap in Britain: Small Differences That (Don't?) Matter By Fabien Postel-Vinay; Hélène Turon
  2. Separating uncertainty from heterogeneity in life cycle earnings By Cunha, Flavio; Heckman, James; Navarro, Salvador
  3. Inequality and Trust: Some Inequalities are More Harmful than Others By Gustavsson, Magnus; Jordahl, Henrik
  4. Does Educational Tracking Affect Performance and Inequality? Differences-in-Differences Evidence across Countries By Eric A. Hanushek; Ludger Woessmann
  5. The Scots May Be Brave But They Are Neither Healthy Nor Happy By David Bell; David G. Blanchflower
  6. The Economics of Dual Job Holding: A Job Portfolio Model of Labor Supply By Francesco Renna; Ronald L. Oaxaca
  7. Work Experience as a Source of Specification Error in Earnings Models: Implications for Gender Wage Decompositions By Tracy L. Regan; Ronald L. Oaxaca
  8. Minimum Wage Effects in a Developing Country By Sara Lemos

  1. By: Fabien Postel-Vinay; Hélène Turon
    Abstract: The existing literature on inequality between private and public sectors focuses on cross-section differences in earnings levels. A more general way of looking at inequality between sectors is to recognize that forward-looking agents will care about income and job mobility too. We show that these are substantially different between the two sectors. Using data from the BHPS, we estimate a model of income and employment dynamics over seven years. We allow for unobserved heterogeneity in the propensity to be unemployed or employed in either job sector and in terms of the income process. We then combine the results into lifetime values of jobs in either sector and carry out a cross-section comparative analysis of these values. We have four main findings. First focusing on cross-sector differences in terms of the income process only, we detect a positive average public premium both in income flows and in the present discounted sum of future income flows. Second, we argue that income inequality is lower but more persistent in the public sector, as most of the observed relative cross-sectional income compression in the public sector is due to a lower variance of the transitory component of income. Third, when taking job mobility into account, the lifetime public premium is essentially zero for workers that we categorize as ``high-employability'' individuals, suggesting that the UK labor market is sufficiently mobile to ensure a rapid allocation of workers into their ``natural'' sector. Fourth, we find some evidence of job queuing for public sector jobs among ``low-employability'' workers.
    Keywords: Income Dynamics, Job Mobility, Public-Private Inequality, Selection Effects
    JEL: J45 J31 J62
    Date: 2005–05
  2. By: Cunha, Flavio (University of Chicago); Heckman, James (University of Chicago); Navarro, Salvador (University of Chicago)
    Abstract: This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60 % of variability in returns to schooling is forecastable. This has important implications for using measured variability to price risk and predict college attendance.
    Keywords: earnings; unforecastable; forecastable
    JEL: C33 D84 I21
    Date: 2004–12–10
  3. By: Gustavsson, Magnus (Department of Economics); Jordahl, Henrik (Department of Economics)
    Abstract: We present new evidence on the influence of income inequality on generalized trust. Using individual panel data from Swedish counties together with an instrumental variable strategy we find that differences in disposable income, and especially differences among people in the bottom half of the income distribution, are associated with lower trust. The relationship between income inequality and trust is particularly strong for people with a strong aversion against income differentials. We also find that the proportion of people born in a foreign country is negatively associated with trust.
    Keywords: trust; social capital; inequality
    JEL: C23 D31 Z13
    Date: 2006–01–17
  4. By: Eric A. Hanushek (Hoover Institution, Stanford University, CESifo and NBER); Ludger Woessmann (Ifo Institute, University of Munich, CESifo and IZA Bonn)
    Abstract: Even though some countries track students into differing-ability schools by age 10, others keep their entire secondary-school system comprehensive. To estimate the effects of such institutional differences in the face of country heterogeneity, we employ an international differences-in-differences approach. We identify tracking effects by comparing differences in outcome between primary and secondary school across tracked and non-tracked systems. Six international student assessments provide eight pairs of achievement contrasts for between 18 and 26 cross-country comparisons. The results suggest that early tracking increases educational inequality. While less clear, there is also a tendency for early tracking to reduce mean performance. Therefore, there does not appear to be any equity-efficiency trade-off.
    Keywords: tracking, streaming, ability grouping, selectivity, comprehensive school system, educational performance, inequality, international student achievement test, TIMSS, PISA, PIRLS
    JEL: I2
    Date: 2005–12
  5. By: David Bell (University of Stirling); David G. Blanchflower (Dartmouth College, NBER and IZA Bonn)
    Abstract: On almost all measures of physical health, Scots fare worse than residents of any other region of the UK and often worse than the rest of Europe. Deaths from chronic liver disease and lung cancer are particularly prevalent in Scotland. The self-assessed wellbeing of Scots is lower than that of the English or Welsh, even after taking into account any differences in characteristics. Scots also suffer from higher levels of self-assessed depression or phobia, accidental death and suicide than those in other parts of Great Britain. This result is particularly driven by outcomes in Strathclyde and is consistent with the high scores for other measures of social deprivation in this area. On average, indicators of social capital in Scotland are no worse than in England or Wales. Detailed analysis within Scotland, however, shows that social capital indicators for the Strathclyde area are relatively low. We argue that these problems need to be directly targeted as they seem unlikely to be fixed by more indirect policies aimed at raising economic growth.
    Keywords: wellbeing, happiness, suicide, depression
    JEL: J4
    Date: 2005–12
  6. By: Francesco Renna (University of Akron); Ronald L. Oaxaca (University of Arizona and IZA Bonn)
    Abstract: In this paper we develop a job portfolio model of dual job holding based on a Stone-Geary utility function. We derive the associated Slutsky equation components. Because the job portfolio model applies only to unconstrained dual jobholders, we separate individuals who moonlight because of an hours constraint from dual jobholders who work on two job for reasons different from an hours constraint. Income and wage elasticities are estimated for workers without hours constraints using data from the May 1991 supplement to the Current Population Survey. Our study finds that the income and compensated wage elasticities are much larger for labor supply to job 2 compared with job 1.
    Keywords: dual job, labor supply, Stone-Geary
    Date: 2006–01
  7. By: Tracy L. Regan (University of Miami); Ronald L. Oaxaca (University of Arizona and IZA Bonn)
    Abstract: We address the bias from using potential vs. actual experience in earnings models. Statistical tests reject the classical errors-in-variable framework. The nature of the measurement error is best viewed as a model misspecification problem. We correct for this by modeling actual experience as a stochastic regressor and predicting experience using the NLSY79 and the PSID. Predicted experience measures are applied to the IPUMS. Our results suggest that potential experience biases the effects of schooling and the rates of return to labor market experience. Using such a measure in earnings models underestimates the explained portion of the male-female wage gap.
    Keywords: experience, specification error, decomposition, gender
    JEL: C81 J24 J31
    Date: 2006–01
  8. By: Sara Lemos
    Abstract: The available minimum wage literature, which is mostly based on US evidence, is not very useful for analyzing developing countries, where the minimum wage affects many more workers and labor institutions and law enforcement differ in important ways. The main contribution of this paper is to present new empirical evidence on minimum wage effects for a key developing country, Brazil. Using a monthly household survey panel from 1982 to 2000 we find evidence of a strong wage compression effect for both the formal and informal sectors. Furthermore, we find no evidence of adverse employment effects in either sector.
    Keywords: minimum wage; labor costs; employment; informal sector; Brazil
    JEL: J38
    Date: 2006–01

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