nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2004‒12‒20
seven papers chosen by
Maximo Rossi
Universidad de la República

  1. Are There Gender and Country of Origin Differences in Immigrant Labor Market Outcomes across European Destinations? By Adsera, Alicia; Chiswick, Barry R.
  2. Multidimensional Generalized Gini Indices By Thibault Gajdos; John A. Weymark
  3. Prescription Drugs, Medical Care, and Health Outcomes: A Model of Elderly Health By Zhou Yang; Donna B. Gilleskie; Edward C. Norton
  4. The (Unexpected) Structure of "Rents" on the French and British Labour Markets By Clark, Andrew E.; Senik, Claudia
  5. The Economic Theory of Illegal Goods: The Case of Drugs By Gary S. Becker; Kevin M. Murphy; Michael Grossman
  6. Separating Uncertainty from Heterogeneity in Life Cycle Earnings By Cunha, Flavio; Heckman, James; Navarro, Salvador
  7. Culutral Biases in Economic Exchange By Luigi Guiso; Paola Sapienza; Luigi Zingales

  1. By: Adsera, Alicia (University of Illinois at Chicago, University of Chicago and IZA Bonn); Chiswick, Barry R. (University of Illinois at Chicago and IZA Bonn)
    Abstract: The paper uses the 1994-2000 waves of the European Community Household Panel to conduct a systematic analysis of the earnings of immigrants as compared to native workers, in particular to test whether there is any systematic variation in the labor market performance of immigrants across gender related to duration in the destination, schooling, age at immigration, country of origin, or country of destination. We find a significant negative effect of immigrant status on individual earnings of around 40% at the time of arrival in the pooled sample, although the difference is somewhat smaller for women. Those differences, however, vary greatly across countries with migrants in Germany and Portugal faring best relative to natives, and those in Sweden, Denmark, Luxembourg or Spain the worst, particularly among non-EU born migrants. Gender differences are more important among those born outside the European Union, with women doing relatively better than men. Among men, those from Asia, Latin-America and Eastern Europe receive the lowest earnings. Latin- American and Eastern European women are at the bottom of the women’s distribution. Earnings increase with duration in the destination and the foreign born "catch-up" to the native born, others variables being the same, at around 18 years in the destination among both men and women. Education matters more for women in terms of explaining earnings, whereas language skills are relatively more important for men.
    Keywords: immigrants, earnings, gender, countries of birth and destination, language
    JEL: J1 J61 F22
    Date: 2004–12
  2. By: Thibault Gajdos (CNRS-CREST); John A. Weymark (Department of Economics, Vanderbilt University)
    Abstract: The axioms used to characterize the generalized Gini social evaluation orderings for one-dimensional distributions are extended to the multidimensional attributes case. A social evaluation ordering is shown to have a two-stage aggregation representation if these axioms and a separability assumption are satisfied. In the first stage, the distributions of each attribute are aggregated using generalized Gini social evaluation functions. The functional form of the second-stage aggregator depends on the number of attributes and on which version of a comonotonic additivity axiom is used. The implications of these results for the corresponding multidimensional indices of relative and absolute inequality are also considered.
    Keywords: Generalized Gini, multidimensional inequality
    JEL: D63
    Date: 2003–05
  3. By: Zhou Yang; Donna B. Gilleskie; Edward C. Norton
    Abstract: There is much debate about whether the Medicare Prescription Drug Bill %u2013 the greatest expansion of Medicare benefits since its creation in 1965 %u2013 will improve the health of elderly Americans, and how much it will cost. We model how insurance affects medical care utilization, and subsequently, health outcomes over time in a dynamic model with correlated errors. Longitudinal individual-level data from the 1992-1998 Medicare Current Beneficiary Survey provide estimates of these effects. Simulations over five years show that expanding prescription drug coverage would increase drug expenditures by between 12% and 17%. However, other health care expenditures would only increase slightly, and the mortality rate would improve.
    JEL: I12 I18 H5
    Date: 2004–12
  4. By: Clark, Andrew E. (CNRS, DELTA-Fédération Jourdan and IZA Bonn); Senik, Claudia (Université Paris IV and DELTA-Fédération Jourdan)
    Abstract: This paper considers the allocation of labour on the French and British markets, using objective wage and subjective satisfaction data. We show that, in some sectors, workers enjoy both higher wages and higher job satisfaction. We argue that this reflects labour market wage rents. Perhaps surprisingly, wage rents are typical of the British public sector and permanent contracts, but not of their French counterparts. In France, such rents are found in full-time, rather than part-time jobs. Hence, the data provide little support for the usual a priori that the French labour market is structured along insider-outsider model lines, whereby wage rents are captured by the insiders of the public sector to the detriment of the private sector. However, they do suggest that part-time employment is involuntary to a far greater extent in France than in Great Britain.
    Keywords: job satisfaction, wages, self-employment, public sector, permanent, full-time, rents
    JEL: C30 J28 J31 J41 M51
    Date: 2004–12
  5. By: Gary S. Becker; Kevin M. Murphy; Michael Grossman
    Abstract: This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.
    JEL: D00 D11 D60 I11 I18
    Date: 2004–12
  6. By: Cunha, Flavio (University of Chicago); Heckman, James (University of Chicago, American Bar Foundation, University College London and IZA Bonn); 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: uncertainty, lifecycle earnings, schooling, heterogeneity, counterfactuals
    JEL: C33 D84 I21
    Date: 2004–12
  7. By: Luigi Guiso; Paola Sapienza; Luigi Zingales
    Abstract: How much do cultural biases affect economic exchange? We try to answer this question by using the relative trust European citizens have for citizens of other countries. First, we document that this trust is affected not only by objective characteristics of the country being trusted, but also by cultural aspects such as religion, a history of conflicts, and genetic similarities. We then find that lower relative levels of trust toward citizens of a country lead to less trade with that country, less portfolio investment, and less direct investment in that country, even after controlling for the objective characteristics of that country. This effect is stronger for good that are more trust intensive and doubles or triples when trust is instrumented with its cultural determinants. We conclude that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.
    JEL: G0 G3 F1
    Date: 2004–12

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