nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2005‒01‒09
six papers chosen by
Maximo Rossi
Universidad de la República

  1. A Theory of Vacancies By Farm, Ante
  2. The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike? By Constant, Amelie; Zimmermann, Klaus F.
  3. Skill Policies for Scotland By Heckman, James J.; Masterov, Dimitriy V.
  4. Poverty, Inequality, and Growth in Urban China, 1986-2000 By Meng, Xin; Gregory, Robert; Wang, Youjuan
  5. Labor Market Discrimination and Racial Differences in Premarket Factors By Carneiro, Pedro; Heckman, James J.; Masterov, Dimitriy V.
  6. Social Isolation and Inequality By Andrew Postlewaite; Dan Silverman

  1. By: Farm, Ante (Swedish Institute for Social Research, Stockholm University)
    Abstract: This paper is, firstly, a reappraisal of the matching function, arguing that the proper specification of the relation between hirings (H), vacancies (V), and unemployment is the duration function, which shows how average recruitment times as measured by V/H depend on unemployment and other relevant variables. Secondly, indirect effects of longer recruitment times on employment through higher recruitment costs are studied by extending previous models to include both price formation and the distinction between vacancy costs and hiring costs. Thirdly, direct effects of longer recruitment times on employment through more unfilled jobs are explored and illustrated with data from Sweden since 2000 from a new business survey, which measures not only job vacancies but also unfilled jobs.
    Keywords: Vacancies; hirings; matching function; friction
    JEL: J63 J64
    Date: 2004–12–30
  2. By: Constant, Amelie (IZA Bonn); Zimmermann, Klaus F. (IZA Bonn, University of Bonn and DIW Berlin)
    Abstract: This paper uses a state of the art three-stage technique to identify the characteristics of the self-employed immigrant and native men in Germany and to understand their underlying drive into self-employment. Employing data from the German Socioeconomic Panel 2000 release we find that self-employment is not significantly affected by exposure to Germany or by human capital. But this choice has a very strong intergenerational link and it is also related to homeownership and financial worries. While individuals are strongly pulled into selfemployment if it offers higher earnings, immigrants are additionally pushed into selfemployment when they feel discriminated. Married immigrants are more likely to go into selfemployment, but less likely when they have young children. Immigrants living with foreign passports in ethnic households are more likely self-employed than native Germans. The earnings of self-employed men increase with exposure to Germany, hours worked and occupational prestige; they decrease with high regional unemployment to vacancies ratios. Everything else equal, the earnings of self-employed Germans are not much different from the earnings of the self-employed immigrants, including those who have become German citizens. However, immigrants suffer a strong earnings penalty if they feel discriminated against while they receive a premium if they are German educated.
    Keywords: entrepreneurship, self-employment, occupational choice, immigrants, wage differentials
    JEL: J23 M13 J24 J61 J31
    Date: 2004–12
  3. By: Heckman, James J. (University of Chicago, American Bar Foundation, University College London and IZA Bonn); Masterov, Dimitriy V. (University of Chicago)
    Abstract: This paper argues that skill formation is a life-cycle process and develops the implications of this insight for Scottish social policy. Families are major producers of skills, and a successful policy needs to promote effective families and to supplement failing ones. We present evidence that early disadvantages produce severe later disadvantages that are hard to remedy. We also show that cognitive ability is not the only determinant of education, labor market outcomes and pathological behavior like crime. Abilities differ in their malleability over the life-cycle, with noncognitive skills being more malleable at later ages. This has important implications for the design of policy. The gaps in skills and abilities open up early, and schooling merely widens them. Additional university tuition subsidies or improvements in school quality are not warranted by Scottish evidence. Company-sponsored job training yields a higher return for the most able and so this form of investment will exacerbate the gaps it is intended to close. For the same reason, public job training is not likely to help adult workers whose skills are rendered obsolete by skill-biased technological change. Targeted early interventions, however, have proven to be very effective in compensating for the effect of neglect.
    Keywords: Scotland, education, training, family, policy
    JEL: J31 I21 I22 I28
    Date: 2004–12
  4. By: Meng, Xin (Australian National University); Gregory, Robert (Australian National University and IZA Bonn); Wang, Youjuan (Chinese State Statistical Bureau)
    Abstract: Although urban China has experienced spectacular income growth over the last two decades, increases in inequality, reduction in social welfare provision, deregulation of grain prices, and increases in income uncertainty in the 1990s have increased urban poverty. Using a large repeated cross-section household survey data from 1986 to 2000, this study maps out the change in income, inequality, and poverty over the 15 year period and investigates the determinants of poverty. It is found that the increase in the poverty rate in the 1990s is associated with the increase in the relative food price, and the need to spend on education, housing and medical care which were previously paid by the state. In addition, the increase in the saving rate of the poor due to an increase in income uncertainty contributes significantly to the increase in poverty measured in terms of expenditure. Even though income growth reduces poverty, the radical reform measures implemented in the 1990s have sufficiently offset this gain that urban poverty is higher in 2000 than in 1986.
    Keywords: poverty, income growth, inequality, China
    JEL: I31 D31 O40 O15
    Date: 2005–01
  5. By: Carneiro, Pedro (University College London, Institute for Fiscal Studies and IZA Bonn); Heckman, James J. (University of Chicago, American Bar Foundation, University College London and IZA Bonn); Masterov, Dimitriy V. (University of Chicago)
    Abstract: We investigate the relative significance of differences in cognitive skills and discrimination in explaining racial/ethnic wage gaps. We show that cognitive test scores taken prior to entering the labor market are influenced by schooling. Adjusting the scores for racial/ethnic differences in education at the time the test is taken reduces their role in accounting for the wage gaps. We also consider evidence on parental and child expectations about education and on stereotype-threat effects. We find both factors to be implausible alternative explanations for the gaps we observe. We argue that policies need to address the sources of early skill gaps and to seek to influence the more malleable behavioral abilities in addition to their cognitive counterparts. Such policies are far more likely to be effective in promoting racial and ethnic equality for most groups than are additional civil rights and affirmative action policies targeted at the workplace.
    Keywords: ability, test scores, gaps, education
    JEL: J31
    Date: 2005–01
  6. By: Andrew Postlewaite (Department of Economics, University of Pennsylvania); Dan Silverman (Department of Economics, University of Michigan)
    Abstract: There is an increasing interest in the concept of social exclusion and the related concept of social isolation and their potential role in understanding inequality. We examine the degree to which voluntary separation from social activities during adolescence affects adult wages. It is well-known that participation in high school athletic programs leads to higher adult wages. We present empirical evidence that this premium is not primarily due to selection on predetermined characteristics valued in the labor market.
    Keywords: Decision making; Bayesian; Behavioral Economics
    JEL: D81
    Date: 2004–02–01

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