nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2005‒09‒29
ten papers chosen by
Maximo Rossi
Universidad de la República

  1. Identifying the Socioeconomic Determinants of Crime in Spanish Provinces By Paolo Buonanno and Daniel Montolio
  2. Fertility: The Role of Culture and Family Experience By Fernández, Raquel; Fogli, Alessandra
  3. Peer Effects and Social Networks in Education and Crime By Calvó-Armengol, Antoni; Patacchini, Eleonora; Zenou, Yves
  4. Wage Theories for the Swedish Labour Market By Lundborg, Per
  5. Can Africa Reduce Poverty by Half by 2015? The Case for a Pro-Poor Growth Strategy By Bigsten, Arne; Shimeles, Abebe
  6. The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis By Solomon W. Polachek; Jun (Jeff) Xiang
  7. Native Internal Migration and the Labor Market Impact of Immigration By George J. Borjas
  8. The Divergence of Human Capital Levels Across Cities By Christopher R. Berry; Edward L. Glaeser
  9. Trends in U.S. Wage Inequality: Re-Assessing the Revisionists By David H. Autor; Lawrence F. Katz; Melissa S. Kearney
  10. Rising Wage Inequality: The Role of Composition and Prices By David H. Autor; Lawrence F. Katz; Melissa S. Kearney

  1. By: Paolo Buonanno and Daniel Montolio (Universitat de Barcelona)
    Abstract: In this paper we study, having as theoretical reference the economic model of crime (Becker, 1968; Ehrlich, 1973), which are the socioeconomic and demographic determinants of crime in Spain paying attention on the role of provincial peculiarities. We estimate a crime equation using a panel dataset of Spanish provinces (NUTS3) for the period 1993 to 1999 employing the GMM-system estimator. Empirical results suggest that lagged crime rate and clear-up rate are positively correlated to all typologies of crime rate considered. Property crimes are better explained by socioeconomic variables (GDP per capita, GDP growth rate and percentage of population with high school and university degree), while demographic factors reveal important and significant influences, in particular for crimes against the person. These results are obtained using an instrumental variable approach that takes advantage of the dynamic properties of our dataset to control for both measurement errors in crime data and joint endogeneity of the explanatory variables.
    Keywords: Crime, Socioeconomic factors, Panel Data.
    JEL: I2 J24 K42
    Date: 2005
  2. By: Fernández, Raquel; Fogli, Alessandra
    Abstract: This paper attempts to disentangle the direct effects of experience from those of culture in determining fertility. We use the GSS to examine the fertility of women born in the US but from different ethnic backgrounds. We take lagged values of the total fertility rate in woman’s country of ancestry as the cultural proxy and use the woman’s number of siblings capture her direct family experience. We find that both variables are significant determinants of fertility, even after controlling for several individual and family-level characteristics.
    Keywords: cultural transmission; family; fertility; immigrants
    JEL: J13 J16 Z10
    Date: 2005–09
  3. By: Calvó-Armengol, Antoni; Patacchini, Eleonora; Zenou, Yves
    Abstract: This paper studies whether structural properties of friendship networks affect individual outcomes in education and crime. We first develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to her Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual but puts less weight on her distant friends. Using a very detailed dataset of adolescent friendship networks, we show that, after controlling for observable individual characteristics and unobservable network specific factors, the individual's position in a network (as measured by her Bonacich centrality) is a key determinant of her level of activity. A standard deviation increase in the Bonacich centrality increases the level of individual delinquency by 45% of one standard deviation and the pupil school performance by 34% of one standard deviation.
    Keywords: centrality measure; delinquency; network structure; peer influence; school performance
    JEL: A14 I21 K42
    Date: 2005–09
  4. By: Lundborg, Per (Trade Union Institute for Economic Research)
    Abstract: This paper reviews the empirical literature on tests of different wage theories of relevance in particular to the Swedish labour market. The empirical results are confronted with the institutional changes in the Sweden during the last twenty years. Not much empirical support can be found for the competitive model, the shirking model or the insider-outsider model. The fair wage version of efficiency wage setting receives support, however. Efficiency wage setting appears to have become more important also for Sweden as a consequence of decentralisation of wage bargaining giving scope for firms to differentiate wages. Due to the obvious institutional importance, bargaining models of wage formation continues to play an important role for Swedish wage setting. Bargaining models combined with fair wage setting appear to capture much of present day wage setting in Sweden.
    Keywords: Efficiency wages; trade union models
    JEL: J31 J51 J53
    Date: 2005–09–23
  5. By: Bigsten, Arne (Department of Economics, School of Economics and Commercial Law, Göteborg University); Shimeles, Abebe (Department of Economics, School of Economics and Commercial Law, Göteborg University)
    Abstract: This study uses simulations to explore the possibility of halving the percentage of people living in extreme poverty in Africa by 2015. A pro-poor growth-scenario and a constant-inequality scenario are compared. It is shown that initial levels of inequality and mean per capita income determine the cumulative growth and inequalityreduction required to achieve the target. The trade-off between growth and inequality varies greatly among countries and their policy-choices are thus quite different. In some cases small changes in income-distribution can have a large effect on poverty, while in others a strong focus on growth is the only viable option. <p>
    Keywords: Poverty; pro-poor growth; millennium development goals; Africa
    JEL: I32 O15
    Date: 2005–08–23
  6. By: Solomon W. Polachek (State University of New York at Binghamton and IZA Bonn); Jun (Jeff) Xiang (State University of New York at Binghamton)
    Abstract: In this paper, we define a tractable procedure to measure worker incomplete information in the labor market. The procedure, which makes use of earnings distribution skewness, is based on econometric frontier estimation techniques, and is consistent with search theory. We apply the technique to eleven countries over various years, and find that incomplete information leads workers to receive on average about 30-35% less pay than they otherwise would have earned, had they information on what each firm paid. Generally married men and women suffer less from incomplete information than the widowed or divorced; and singles suffer the most. Women suffer more from incomplete information than men. Schooling and labor market experience reduce these losses, but institutions within a country can reduce them, as well. For example, we find that workers in countries that strongly support unemployment insurance (UI) receive wages closer to their potential, so that doubling UI decreases incomplete information and results in 5% higher wages. A more dense population reduces search costs leading to less incomplete information. A more industrial economy disseminates wage information better, so that workers exhibit less incomplete information and higher wages. Finally, we find that foreign worker inflows increase incomplete information, and at the same time reduce average wage levels, at least in the short-run.
    Keywords: incomplete information, earnings distribution, search, cross-country analysis, frontier estimation
    JEL: J3 J6
    Date: 2005–09
  7. By: George J. Borjas
    Abstract: This paper presents a theoretical and empirical study of how immigration influences the joint determination of the wage structure and internal migration behavior for native-born workers in local labor markets. Using data from the 1960-2000 decennial censuses, the study shows that immigration is associated with lower in-migration rates, higher out-migration rates, and a decline in the growth rate of the native workforce. The native migration response attenuates the measured impact of immigration on wages in a local labor market by 40 to 60 percent, depending on whether the labor market is defined at the state or metropolitan area level.
    JEL: J61 R23
    Date: 2005–09
  8. By: Christopher R. Berry; Edward L. Glaeser
    Abstract: Over the past 30 years, the share of adult populations with college degrees increased more in cities with higher initial schooling levels than in initially less educated places. This tendency appears to be driven by shifts in labor demand as there is an increasing wage premium for skilled people working in skilled cities. In this paper, we present a model where the clustering of skilled people in metropolitan areas is driven by the tendency of skilled entrepreneurs to innovate in ways that employ other skilled people and by the elasticity of housing supply.
    JEL: J0
    Date: 2005–09
  9. By: David H. Autor; Lawrence F. Katz; Melissa S. Kearney
    Abstract: A large literature documents a substantial rise in U.S. wage inequality and educational wage differentials over the past several decades and finds that these trends can be primarily accounted for by shifts in the supply of and demand for skills reinforced by the erosion of labor market institutions affecting the wages of low- and middle-wage workers. Drawing on an additional decade of data, a number of recent contributions reject this consensus to conclude that (1) the rise in wage inequality was an “episodic” event of the first-half of the 1980s rather than a “secular” phenomenon, (2) this rise was largely caused by a falling minimum wage rather than by supply and demand factors; and (3) rising residual wage inequality since the mid-1980s is explained by confounding effects of labor force composition rather than true increases in inequality within detailed demographic groups. We reexamine these claims using detailed data from the Current Population Survey and find only limited support. Although the growth of overall inequality in the U.S. slowed in the 1990s, upper tail inequality rose almost as rapidly during the 1990s as during the 1980s. A decomposition applied to the CPS data reveals large and persistent rise in within-group earnings inequality over the past several decades, controlling for changes in labor force composition. While changes in the minimum wage can potentially account for much of the movement in lower tail earnings inequality, strong time series correlations of the evolution of the real minimum wage and upper tail wage inequality raise questions concerning the causal interpretation of such relationships. We also find that changes in the college/high school wage premium appear to be well captured by standard models emphasizing rapid secular growth in the relative demand for skills and fluctuations in the rate of growth of the relative supply of college workers – though these models do not accurately predict the slowdown in the growth of the college/high-school gap during the 1990s. We conclude that these patterns are not adequately explained by either a ‘unicausal’ skill-biased technical change explanation or a revisionist hypothesis focused primarily on minimum wages and mechanical labor force compositional effects. We speculate that these puzzles can be partially reconciled by a modified version of the skill-biased technical change hypothesis that generates a polarization of skill demands.
    JEL: J3 D3 O3
    Date: 2005–09
  10. By: David H. Autor; Lawrence F. Katz; Melissa S. Kearney
    Abstract: During the early 1980s, earnings inequality in the U.S. labor market rose relatively uniformly throughout the wage distribution. But this uniformity gave way to a significant divergence starting in 1987, with upper-tail (90/50) inequality rising steadily and lower tail (50/10) inequality either flattening or compressing for the next 16 years (1987 to 2003). This paper applies and extends a quantile decomposition technique proposed by Machado and Mata (2005) to evaluate the role of changing labor force composition (in terms of education and experience) and changing labor market prices to the expansion and subsequent divergence of upper- and lower-tail inequality over the last three decades We show that the extended Machado-Mata quantile decomposition corrects shortcomings of the original Juhn-Murphy-Pierce (1993) full distribution accounting method and nests the kernel reweighting approach proposed by DiNardo, Fortin and Lemieux (1996). Our analysis reveals that shifts in labor force composition have positively impacted earnings inequality during the 1990s. But these compositional shifts have primarily operated on the lower half of the earnings distribution by muting a contemporaneous, countervailing lower-tail price compression. The steady rise of upper tail inequality since the late 1970s appears almost entirely explained by ongoing between-group price changes (particularly increasing wage differentials by education) and residual price changes.
    JEL: J3 D3 O3 C1
    Date: 2005–09

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