nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒04‒08
nine papers chosen by
Maximo Rossi
Universidad de la Republica

  1. A Model of Income Insurance and Social Norms By Assar Lindbeck; Mats Persson
  2. Job Security and Work Absence: Evidence from a Natural Experiment By Assar Lindbeck; Marten Palme; Mats Persson
  3. Competition and Well-Being By Brandts, Jordi; Riedl, Arno; van Winden, Frans A.A.M.
  4. Holdup in Oligopsonistic Labour Markets: A New Role for the Minimum Wage By Leo Kaas; Paul Madden
  5. Ugly Criminals By Naci Mocan; Erdal Tekin
  6. Learning from Other Economies: The Unique Institutional and Policy Experiments Down Under By Richard B. Freeman
  7. Swedish Family Policy, Fertility and Female Wages By Tomas Kögel
  8. Works Councils, Labor Productivity and Plant Heterogeneity: First Evidence from Quantile Regressions By Joachim Wagner; Thorsten Schank; Claus Schnabel; John T. Addison
  9. Beyond Gender Differences in U.S. Life Cycle Happiness By Enrico A. Macelli; Richard A. Easterlin

  1. By: Assar Lindbeck; Mats Persson
    Abstract: A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint” can make the individual abstain from fraud (“mimicking”). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willingness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.
    Keywords: moral hazard, sick pay insurance, labor supply, asymmetric information
    JEL: G22 H53 I38 J21
    Date: 2006
  2. By: Assar Lindbeck; Marten Palme; Mats Persson
    Abstract: We analyze the consequences for sickness absence of a selective softening of job security legislation for small firms in Sweden in 2001. According to our differences-in-difference estimates, aggregate absence in these firms fell by 0.2-0.3 days per year. This aggregate net figure hides important effects on different groups of employees. Workers remaining in the reform firms after the reform reduced their absence by about one day. People with a high absence record tended to leave reform firms, but these firms also became less reluctant to hire people with a record of high absence.
    Keywords: seniority rules, sick pay insurance, firing costs, moral hazard
    JEL: H53 I38 J22 J50 M51
    Date: 2006
  3. By: Brandts, Jordi; Riedl, Arno; van Winden, Frans A.A.M.
    Abstract: This paper experimentally studies the effects of competition in an environment where people's actions can not be contractually fixed. We find that, in comparison with no competition, the presence of competition does neither increase efficiency nor does it yield any gains in earnings for the short side of the exchange relation. Moreover, competition has a clearly negative impact on the disposition towards others and on the experienced well-being of those on the long side. Since subjective well-being improves only for those on the short side competition contributes to larger inequalities in experienced well-being. All in all competition does not show up as a positive force in our environment.
    Keywords: competition; emotions; happiness; laboratory experiment; market interaction; well-being
    JEL: A13 C92 D30 J50 M50
    Date: 2006–03
  4. By: Leo Kaas (University of Konstanz and IZA Bonn); Paul Madden (University of Manchester)
    Abstract: We consider a labour market model of oligopsonistic wage competition and show that there is a holdup problem although workers do not have any bargaining power. When a firm invests more, it pays a higher wage in order to attract workers from competitors. Because workers participate in the returns on investment while only firms bear the costs, investment is inefficiently low. A binding minimum wage can achieve the first-best level of investment, both in the short run for a given number of firms and in the long run when the number of firms is endogenous.
    Keywords: holdup, investment, minimum wage
    JEL: D43 J48
    Date: 2006–03
  5. By: Naci Mocan (University of Colorado at Denver and NBER); Erdal Tekin (Georgia State University, NBER and IZA Bonn)
    Abstract: Using data from three waves of Add Health we find that being very attractive reduces a young adult's (ages 18-26) propensity for criminal activity and being unattractive increases it for a number of crimes, ranging from burglary to selling drugs. A variety of tests demonstrate that this result is not because beauty is acting as a proxy for socio-economic status. Being very attractive is also positively associated adult vocabulary test scores, which suggests the possibility that beauty may have an impact on human capital formation. We demonstrate that, especially for females, holding constant current beauty, high school beauty (pre-labor market beauty) has a separate impact on crime, and that high school beauty is correlated with variables that gauge various aspects of high school experience, such as GPA, suspension or having being expelled from school, and problems with teachers. These results suggest two handicaps faced by unattractive individuals. First, a labor market penalty provides a direct incentive for unattractive individuals toward criminal activity. Second, the level of beauty in high school has an effect on criminal propensity 7-8 years later, which seems to be due to the impact of the level of beauty in high school on human capital formation, although this second avenue seems to be effective for females only.
    Keywords: beauty, crime, criminal, ugly, physical attractiveness
    JEL: I1 I2 K4 J2 J3
    Date: 2006–03
  6. By: Richard B. Freeman
    Abstract: This paper argues that detailed studies of particular economies, such as Bob Gregory’s work on Australia, are relevant to all of economics. The paper builds on the concept of a model species from biology to develop the notion of a model economy – one whose experiences illuminate fundamental economic issues; examines the criterion for an economy to serve as a model economy; and describes three areas – labour relations and the awards system of wage-setting, marketizing public services and growth through immigration and natural resources – where Australian experience provides insights into economic behaviour and the operation of markets broadly.
    Date: 2006–03
  7. By: Tomas Kögel (Dept of Economics, Loughborough University)
    Abstract: Recent demographic literature shows in Swedish micro-level data a positive effect of female wage income or female education on fertility. The literature explains this finding with Swedish family policies of high subsidies for bought-in child care and generous parental leave benefits that are calculated on the basis of a woman's prior wage income. Both policies would cause the substitution effect from an increase in female wages on fertility to be dominated by its income effect. This paper shows within an economic model that there are offsetting effects from Swedish family policy that cause the reduction in the magnitude of the substitution effect of female wages to be most likely rather small.
    Keywords: Fertility; family policy; gender equality.
    JEL: H31 H53 J13 J18
    Date: 2006–03
  8. By: Joachim Wagner (Institute of Economics, University of Lüneburg); Thorsten Schank (Chair of Labour and Regional Economics, Friedrich-Alexander-University Erlangen-Nuremberg); Claus Schnabel (Chair of Labour and Regional Economics, Friedrich-Alexander-University Erlangen-Nuremberg); John T. Addison (Department of Economics, University of South Carolina (US))
    Abstract: Using OLS and quantile regression methods and rich cross-section data sets for western and eastern Germany, this paper demonstrates that the impact of works council presence on labor productivity varies between manufacturing and services, between plants that are or are not covered by collective bargaining, and along the conditional distribution of labor productivity. No productivity effects of works councils are found for the service sector and in manufacturing plants not covered by collective bargaining. Besides demonstrating that it is important to look at evidence based on more than one data set, our empirical findings point to the efficacy of supplementing OLS with quantile regression estimates when investigating the behavior of heterogeneous plants.
    Keywords: Labor productivity, works councils, quantile regressions, heterogeneous firms
    JEL: J50
    Date: 2006–02–21
  9. By: Enrico A. Macelli; Richard A. Easterlin
    Abstract: An integration of methods and theories from economics, psychology, sociology and gerontology offers a more useful means for understanding gender differences in life-cycle happiness.

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