2005-07-18 papers

on Unemployment, Inequality and Poverty

Issue of 2005‒07‒18
two papers chosen by

Health Status and Labour Force Status of Older Working-Age Australian Men By Lixin Cai; Guyonne Kalb
The Wage Curve Reloaded By David G. Blanchflower; Andrew J. Oswald

Health Status and Labour Force Status of Older Working-Age Australian Men

By:	Lixin Cai (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Guyonne Kalb (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
Abstract:	The trend of declining labour force participation by older working-age men, combined with an ageing population, has led many industrialised nations to develop policies encouraging older male workers to remain in the labour force. A better understanding of how an individual’s health influences the labour force participation decision among this group of workers would facilitate the development of effective policies. The current research uses the Household, Income and Labour Dynamics in Australia (HILDA) survey to investigate the issue. The longitudinal nature of the three-wave HILDA data, which are currently available, allows for a better control for unobserved heterogeneity than was possible with earlier data. Therefore, more efficient estimates of the direct health effects on labour force participation can be obtained than in a cross-sectional analysis. Unobserved factors are likely to affect both health and labour force status, therefore we estimate a model that takes the correlation between the two error terms in the health and labour force status equations into account. The results show that controlling for unobserved heterogeneity and the correlation between the two equations is important. That is, the estimated variances of the unobserved heterogeneity terms are significantly different from zero in both equations and the two error terms are correlated. Any restriction on the correlation between the two equations appears to lead to underestimation of the direct health effects.
Date:	2005–07
URL:	http://d.repec.org/n?u=RePEc:iae:iaewps:wp2005n09&r=ltv

The Wage Curve Reloaded

By:	David G. Blanchflower (Dartmouth College, NBER and IZA Bonn); Andrew J. Oswald (University of Warwick and IZA Bonn)
Abstract:	This paper provides evidence for the existence of a wage curve - a micro-econometric association between the level of pay and the local unemployment rate - in modern U.S. data. Consistent with recent evidence from more than 40 other countries, the wage curve in the United States has a long-run elasticity of approximately -0.1. In line with the paper’s theoretical framework: (i) wages are higher in states with more generous unemployment benefits, (ii) the perceived probability of job-finding is lower in states with higher unemployment, and (iii) employees are less happy in states that have higher unemployment. We conclude that it is reasonable to view the wage curve as an empirical law of economics.
Keywords:	wages, unemployment, wage curves
JEL:	J3 E2
Date:	2005–07
URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp1665&r=ltv

General information on the NEP project can be found at https://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.

NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.