nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2005‒02‒27
eight papers chosen by
Maximo Rossi
Universidad de la República

  1. Separating uncertainty from heterogeneity in life cycle earnings By Cunha, Flavio; Heckman, James; Navarro, Salvador
  2. School choice and segregation: evidence from an admission reform By Söderström, Martin; Uusitalo, Roope
  3. Income inequality and self-rated health status: Evidence from the European Community Household Panel By Hildebrand, Vincent; Van Kerm, Philippe
  4. People People: Social Capital and the Labor-Market Outcomes of Underrepresented Groups By Borghans, Lex; ter Weel, Bas; Weinberg, Bruce A.
  5. Why So Unhappy? The Effects of Unionisation on Job Satisfaction By Bryson, Alex; Cappellari, Lorenzo; Lucifora, Claudio
  6. Elderly Households and Housing Wealth: Do They Use It or Lose It? By Lina Walker
  7. Lessons from the Technology of Skill Formation By James J. Heckman
  8. The Market for Teacher Quality By Eric A. Hanushek; John F. Kain; Daniel M. O'Brien; Steven G. Rivkin

  1. 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
  2. By: Söderström, Martin (Uppsala University); Uusitalo, Roope (Labour Institute for Economic Research)
    Abstract: This paper studies the effects of school choice on segregation. We analyze the effect of a reform in Stockholm that changed the admission system of public upper secondary schools. Before the year 2000, students had priority to the school situated closest to where they lived, but from the fall of 2000 and onwards, admission is based on grades only. We show that the distribution of students over schools changed dramatically as a response to extending school choice. As expected, the new admission policy increased segregation by ability. However, segregation by family background, as well as, segregation between immigrants and natives also increased significantly.
    Keywords: School choice; segregation
    JEL: I21 I28 J24
    Date: 2005–01–28
  3. By: Hildebrand, Vincent (Department of Economics, Glendon College, York University, Canada and CEPS/INSTEAD, G.-D. Luxembourg); Van Kerm, Philippe (CEPS/INSTEAD, G.-D. Luxembourg)
    Abstract: We examine the effect of income inequality on individual self-rated health status in a pooled sample of 10 member states of the European Union using longitudinal data from the European Community Household Panel (ECHP) survey. Taking advantage of the longitudinal and cross-national nature of our data, and carefully modelling the self-reported health information, we avoid several of the pitfalls suffered by earlier studies on this topic. We calculate income inequality indices measured at two standard levels of geography (NUTS-0 and NUTS-1) and find consistent evidence that income inequality is negatively related to self-rated health status in the European Union for both men and women. However, despite its statistical significance, the magnitude of the impact of inequality on health is small.
    Keywords: Self-rated health; Income inequality; European Union; Panel data
    Date: 2005–01
  4. By: Borghans, Lex (ROA, Maastricht University and IZA Bonn); ter Weel, Bas (MERIT, Maastricht University and IZA Bonn); Weinberg, Bruce A. (Ohio State University and IZA Bonn)
    Abstract: Despite indications that interpersonal interactions are important for understanding individual labor-market outcomes and have become more important over the last decades, there is little analysis by economists. This paper shows that interpersonal interactions are important determinants of labor-market outcomes, including occupations and wages. We show that technological and organizational changes have increased the importance of interpersonal interactions in the workplace. We particularly focus on how the increased importance of interpersonal interactions has affected the labor-market outcomes of underrepresented groups. We show that the acceleration in the rate of increase in the importance of interpersonal interactions between the late 1970s and early 1990s can help explain why women’s wages increased more rapidly, while the wages of blacks grew more slowly over these years relative to earlier years.
    Keywords: interpersonal interactions, wage level and structure, economics of minorities and races and gender, social capital
    JEL: J16 J21 J24 J31
    Date: 2005–02
  5. By: Bryson, Alex (Policy Studies Institute and CEP); Cappellari, Lorenzo (Catholic University of Milan, CESifo and IZA Bonn); Lucifora, Claudio (Catholic University of Milan and IZA Bonn)
    Abstract: We use linked employer-employee data to investigate the job satisfaction effect of unionisation in Britain. We depart from previous studies by developing a model that simultaneously controls for the endogeneity of union membership and union recognition. We show that a negative association between membership and satisfaction only emerges where there is a union recognised for bargaining, and that such an effect vanishes when the simultaneous selection into membership and recognition is taken into account. We also show that ignoring endogenous recognition would lead to conclude that membership has a positive effect on satisfaction. Our estimates indicate that the unobserved factors that lead to sorting across workplaces are negatively related to the ones determining membership and positively related with those generating satisfaction, a result that we interpret as being consistent with the existence of queues for union jobs.
    Keywords: job satisfaction, union membership, union recognition, endogeneity
    JEL: J28 J51
    Date: 2005–02
  6. By: Lina Walker (Unversity of Michigan)
    Abstract: Over 80 percent of households in their 50s are homeowners and housing wealth accounts for over half of total household wealth for most of these homeowners. The evidence in the literature on whether the elderly are consuming their housing wealth has been mixed. Because home sales are infrequent and a high proportion of the elderly continue to own in old age, it appears that the elderly are not consuming housing wealth. There are, however, indications that housing wealth may be a form of self-insurance and that housing wealth is consumed, albeit at very old ages. To date, however, the evidence to support that hypothesis has been weak. This paper examines whether predictors of housing sales are consistent with the insurance story by looking at the extent to which indicators of changes in economic status and access to alternate insurance explain housing sales. The paper also examines the extent to which changes in health status predict housing sales. The results of the probit appear to indicate that, by and large, housing sales in old age for single households is mostly driven by worsening health. Widowhood has a large effect on increasing the probability of selling the house and the effect is larger if the husband is the surviving spouse. There are indications that poor married homeowners are consuming housing wealth and also indications that married households are responding to Medicaid tax incentives. This evidence seems to suggest that, at least among married households, housing decisions are financially motivated; however, the evidence does not by itself validate the insurance story.
    Date: 2004–01
  7. By: James J. Heckman
    Abstract: This paper discusses recent advances in our understanding of differences in human abilities and skills, their sources, and their evolution over the lifecycle.
    JEL: J24 J31 I20
    Date: 2005–02
  8. By: Eric A. Hanushek; John F. Kain; Daniel M. O'Brien; Steven G. Rivkin
    Abstract: Much of education policy focuses on improving teacher quality, but most policies lack strong research support. We use student achievement gains to estimate teacher value-added, our measure of teacher quality. The analysis reveals substantial variation in the quality of instruction, most of which occurs within rather than between schools. Although teacher quality appears to be unrelated to advanced degrees or certification, experience does matter -- but only in the first year of teaching. We also find that good teachers tend to be effective with all student ability levels but that there is a positive value of matching students and teachers by race. In the second part of the analysis, we show that teachers staying in our sample of urban schools tend to be as good as or better than those who exit. Thus, the main cost of large turnover is the introduction of more first year teachers. Finally, there is little or no evidence that districts that offer higher salaries and have better working conditions attract the higher quality teachers among those who depart the central city district. The overall results have a variety of direct policy implications for the design of school accountability and the compensation of teachers.
    JEL: I2 J4 H4
    Date: 2005–02

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