nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒07‒09
six papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Happiness and Loss Aversion: When Social Participation Dominates Comparision By Vendrik Maarten; Woltjer Geert
  2. Contributions of Zvi Griliches By James Heckman
  3. New Evidence on Gender Difference in Promotion Rates: An Empirical Analysis of a Sample of New Hires By Francine D. Blau; Jed DeVaro
  4. International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants%u2019 Exchange Rate Shocks By Dean Yang
  5. A Comparative Analysis of the Labor Market Impact of International Migration: Canada, Mexico, and the United States By Abdurrahman Aydemir; George J. Borjas
  6. Education and Health: Evaluating Theories and Evidence By David M. Cutler; Adriana Lleras-Muney

  1. By: Vendrik Maarten; Woltjer Geert (METEOR)
    Abstract: A central finding in happiness research is that a person’s income relative to the average income in her social reference group is more important for her life satisfaction than the absolute level of her income. This dependence of life satisfaction on relative income can be related to the reference dependence of the value function in Kahneman and Tversky’s (1979) prospect theory. In this paper we investigate whether the characteristics of the value function like concavity for gains, convexity for losses, and loss aversion apply to the dependence of life satisfaction on relative income. This is tested with a new measure for the reference income for a large German panel for the years 1984-2001. We find concavity of life satisfaction in positive relative income, but unexpectedly strongly significant concavity of life satisfaction in negative relative income as well. The latter result is shown to be robust to extreme distortions of the reported-life-satisfaction scale. It implies a rising marginal sensitivity of life satisfaction to more negative values of relative income, and hence loss aversion (in a wide sense). This may be explained in terms of increasing financial obstacles to social participation.
    Keywords: public economics ;
    Date: 2006
  2. By: James Heckman
    Abstract: This paper summarizes the major research contributions of Zvi Griliches.
    JEL: B31 D24 O33
    Date: 2006–06
  3. By: Francine D. Blau; Jed DeVaro
    Abstract: Using a large sample of establishments drawn from the Multi-City Study of Urban Inequality (MCSUI) employer survey, we study gender differences in promotion rates and in the wage gains attached to promotions. Several unique features of our data distinguish our analysis from the previous literature on this topic. First, we have information on the wage increases attached to promotions, and relatively few studies on gender differences have considered promotions and wage increases together. Second, our data include job-specific worker performance ratings, allowing us to control for performance and ability more precisely than through commonly-used skill indicators such as educational attainment or tenure. Third, in addition to standard information on occupation and industry, we have data on a number of other firm characteristics, enabling us to control for these variables while still relying on a broad, representative sample, as opposed to a single firm or a similarly narrowly-defined population. Our results indicate that women have lower probabilities of promotion and expected promotion than do men but that there is essentially no gender difference in wage growth with or without promotions.
    JEL: J1 J3 J7
    Date: 2006–06
  4. By: Dean Yang
    Abstract: Millions of households in developing countries receive financial support from family members working overseas. How do migrant earnings affect origin-household investments? This paper examines Philippine households’ responses to overseas members’ economic shocks. Overseas Filipinos work in dozens of foreign countries, which experienced sudden (and heterogeneous) changes in exchange rates due to the 1997 Asian financial crisis. Appreciation of a migrant’s currency against the Philippine peso leads to increases in household remittances received from overseas. The estimated elasticity of Philippine-peso remittances with respect to the Philippine/foreign exchange rate is 0.60. These positive income shocks lead to enhanced human capital accumulation and entrepreneurship in migrants’ origin households. Child schooling and educational expenditure rise, while child labor falls. In the area of entrepreneurship, households raise hours worked in self-employment, and become more likely to start relatively capital-intensive household enterprises.
    JEL: D13 F22 I2 I3 J22 J23 J24 O12 O15
    Date: 2006–06
  5. By: Abdurrahman Aydemir; George J. Borjas
    Abstract: Using data drawn from the Canadian, Mexican, and U.S. Censuses, we find a numerically comparable and statistically significant inverse relation between immigrant-induced shifts in labor supply and wages in each of the three countries: A 10 percent labor supply shift is associated with a 3 to 4 percent opposite-signed change in wages. Despite the similarity in the wage response, the impact of migration on the wage structure differs significantly across countries. International migration narrowed wage inequality in Canada; increased it in the United States; and reduced the relative wage of workers at the bottom of the skill distribution in Mexico.
    JEL: J31 J61
    Date: 2006–06
  6. By: David M. Cutler; Adriana Lleras-Muney
    Abstract: There is a large and persistent association between education and health. In this paper, we review what is known about this link. We first document the facts about the relationship between education and health. The education ‘gradient’ is found for both health behaviors and health status, though the former does not fully explain the latter. The effect of education increases with increasing years of education, with no evidence of a sheepskin effect. Nor are there differences between blacks and whites, or men and women. Gradients in behavior are biggest at young ages, and decline after age 50 or 60. We then consider differing reasons why education might be related to health. The obvious economic explanations – education is related to income or occupational choice – explain only a part of the education effect. We suggest that increasing levels of education lead to different thinking and decision-making patterns. The monetary value of the return to education in terms of health is perhaps half of the return to education on earnings, so policies that impact educational attainment could have a large effect on population health.
    JEL: I1 I2
    Date: 2006–07

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