nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒09‒23
twelve papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Equity and Equality By Jean-Yves Duclos
  2. Life Cycle Employment and Fertility Across Institutional Environments By Daniela Del Boca; Robert M. Sauer
  3. Earnings Losses of Displaced Workers: Evidence from a Matched Employer-Employee Data Set By Anabela Carneiro; Pedro Portugal
  4. Unemployment Dynamics among Migrants and Natives By Arne Uhlendorff; Klaus F. Zimmermann
  5. Human Capital and Ethnic Self-Identification of Migrants By Laura Zimmermann; Liliya Gataullina; Amelie Constant; Klaus F. Zimmermann
  6. The Earnings of American Jewish Men: Human Capital, Denomination and Religiosity By Barry R. Chiswick; Jidong Huang
  7. Statistical Discrimination in Labor Markets: An Experimental Analysis By David L. Dickinson; Ronald L. Oaxaca
  8. The Effect of Low-Wage Subsidies on Skills and Employment By Frank Oskamp; Dennis J. Snower
  9. Immigration and African-American Employment Opportunities: The Response of Wages, Employment, and Incarceration to Labor Supply Shocks By George J. Borjas; Jeffrey Grogger; Gordon H. Hanson
  10. A New Framework for the Analysis of Inequality By Flavio Cunha; James J. Heckman
  11. Ex Ante Evaluation of Social Programs By Petra E. Todd; Kenneth I. Wolpin
  12. Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective By Marika Karanassou; Hector Sala; Dennis J. Snower

  1. By: Jean-Yves Duclos (Université Laval, CIRPÉE and IZA Bonn)
    Abstract: Is horizontal equity (HE) the "most widely accepted principle of equity"? Or does it stand in "opposition to the advancement of human welfare"? This paper argues that the case for the HE principle is not as straightforward as is usually thought and that it requires advanced notions of justice and wellbeing. The most likely ethical basis for HE appears to combine a Rawlsian maximin principle and a view of well-being that allows for relative local comparison effects. The paper also explores some of the dimensions of equality and well-being along which the HE principle can be applied and presents a number of examples showing how HE considerations can provide an important input into policy analysis.
    Keywords: horizontal equity, vertical equity, redistribution, equality, social justice
    JEL: D31 D60 D63 I30
    Date: 2006–09
  2. By: Daniela Del Boca (University of Turin and IZA Bonn); Robert M. Sauer (University of Southampton and IZA Bonn)
    Abstract: In this paper, we formulate a dynamic utility maximization model of female labor force participation and fertility choices and estimate approximate decision rules using data on married women in Italy, Spain and France. The pattern of estimated state dependence effects across countries is consistent with aggregate patterns in part-time employment and child care availability, suggesting that labor market rigidities and lack of child care options are important sources of state dependence. Simulations of the model reveal that Italian and Spanish women would substantially increase their participation rates were they to face the French institutional environment.
    Keywords: female employment, fertility, child care, institutions, decision rules
    JEL: J2 J6 C3 D1
    Date: 2006–09
  3. By: Anabela Carneiro (Universidade do Porto and CETE); Pedro Portugal (Banco de Portugal, Universidade NOVA de Lisboa and IZA Bonn)
    Abstract: This paper examines the long-term earnings losses of displaced workers in Portugal, using a nationally representative longitudinal linked employer-employee data set. The results show that four years after displacement the earnings of displaced workers remain around 9% (women) to 12% (men) below their counterfactual expected levels. The post-displacement earnings losses are mainly associated with the loss of tenure within the firm and, to a lesser extent, to the loss of sector-specific features. Furthermore, workers who experienced a spell of nonemployment are the most affected by job displacement. Finally, this study points to the importance of controlling for employers' characteristics in this type of wages-dynamic analysis, since there are systematic differences in earnings between displaced and nondisplaced workers that stem from differences in firm characteristics. Ignoring them may confound the evaluation of the earnings losses.
    Keywords: displacement, earnings losses, firm-specific human capital
    JEL: J31 J63 J65
    Date: 2006–09
  4. By: Arne Uhlendorff (DIW Berlin, Free University of Berlin and IZA Bonn); Klaus F. Zimmermann (IZA Bonn, University of Bonn, DIW Berlin and Free University of Berlin)
    Abstract: Unemployment rates are often higher for migrants than for natives. This could result from longer periods of unemployment as well as from shorter periods of employment. This paper jointly examines male native-migrant differences in the duration of unemployment and subsequent employment using German panel data and bivariate discrete time hazard rate models. Compared to natives with the same observable and unobservable characteristics, unemployed migrants do not find less stable positions but they need more time to find these jobs. The probability of leaving unemployment also varies strongly between ethnicities, while first and second generation Turks are identified as the major problem group. Therefore, policy should concentrate on the job finding process of Turkish migrants to fight their disadvantages on the labor market.
    Keywords: unemployment duration, employment stability, bivariate hazard rate models, migration, ethnicity
    JEL: C41 J61 J64
    Date: 2006–09
  5. By: Laura Zimmermann (University of Oxford and IZA Bonn); Liliya Gataullina (IZA Bonn); Amelie Constant (IZA Bonn, Georgetown University and DIW Berlin); Klaus F. Zimmermann (IZA Bonn, University of Bonn, DIW Berlin and Free University of Berlin)
    Abstract: The paper investigates the role of human capital for migrants' ethnic ties towards their home and host countries. Pre-migration characteristics dominate ethnic self-identification. Human capital acquired in the host country does not affect the attachment to the receiving country.
    Keywords: ethnic self-identification, first-generation migrants, gender, ethnicity, human capital
    JEL: F22 J15 J16 J24 Z10
    Date: 2006–09
  6. By: Barry R. Chiswick (University of Illinois at Chicago and IZA Bonn); Jidong Huang (University of Illinois at Chicago)
    Abstract: This paper analyzes the determinants of the earnings of American Jewish men using the 2000/01 National Jewish Population Survey. Non-response to the question on earnings is analyzed. Earnings are related to conventional human capital variables, as well as Jewishspecific variables. Except for the size of place and region variables, the standard human capital variables have similar effects for Jews and the general population. Jewish day schooling as a youth enhances earnings. Earnings vary by denomination, with Conservative Jews earning the most. The effect on earnings of religiosity (measured by synagogue attendance) is not monotonic. Earnings are highest for those who attend only once a week.
    Keywords: earnings, Jews, religion, denomination
    JEL: J31 J15 Z12 C81
    Date: 2006–09
  7. By: David L. Dickinson (Appalachian State University); Ronald L. Oaxaca (University of Arizona and IZA Bonn)
    Abstract: Statistical discrimination occurs when distinctions between demographic groups are made on the basis of real or imagined statistical distinctions between the groups. While such discrimination is legal in some cases (e.g., insurance markets), it is illegal and/or controversial in others (e.g., racial profiling and gender-based labor market discrimination). “First-moment” statistical discrimination occurs when, for example, female workers are offered lower wages because females are perceived to be less productive, on average, than male workers. “Second-moment” discrimination would occur when risk-averse employers offer female workers lower wages based not on lower average productivity but on a higher variance in their productivity. This paper reports results from controlled laboratory experiments designed to study second-moment statistical discrimination in a labor market setting. Since decision-makers may not view risk in the same way as economists or statisticians (i.e., risk=variance of distribution), we also examine two possible alternative measures of risk: the support of the distribution, and the probability of earning less than the expected (maximum) profits for the employer. Our results indicate that individuals do respond to these alternative measures of risk, and employers made statistically discriminatory wage offers consistent with loss-aversion.
    Keywords: statistical discrimination, experiments, labor markets
    JEL: J31 J71 C92
    Date: 2006–09
  8. By: Frank Oskamp; Dennis J. Snower
    Abstract: We explore the far-reaching implications of low-wage subsidies on aggregate employment. Low-wage subsidies have three important effects. First, they promote employment of unskilled workers (who tend to be the ones who earn low wages). Second, by raising the payoff of unskilled work relative to skilled work, low-wage subsidies reduce the incentive to become skilled, so that there are more unskilled workers associated with a relatively low employment rate. Third, the government budget constraint has to be taken into account, which is supposed to cause an additional tax burden for the skilled workers. This amplifies the negative effect of low-wage subsidies on the incentive to acquire human capital. Thus, the first effect on the one hand and the second and third effect on the other hand pull in opposite directions in terms of employment. This paper presents a theoretical model of the labor market in which these effects can be analyzed. We then calibrate the model with respect to the German labor market to shed light on the relative strengths of these effects and thereby assess the degree to which low-wage subsidies encourage or discourage employment
    Keywords: low-wage subsidies; training incentives; employment; unemployment; skill acquisition
    JEL: I29 J21 J24 J31 J38
    Date: 2006–09
  9. By: George J. Borjas; Jeffrey Grogger; Gordon H. Hanson
    Abstract: The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, the incarceration rate of black men rose markedly. This paper examines the relation between immigration and these trends in black employment and incarceration. Using data drawn from the 1960-2000 U.S. Censuses, we find a strong correlation between immigration, black wages, black employment rates, and black incarceration rates. As immigrants disproportionately increased the supply of workers in a particular skill group, the wage of black workers in that group fell, the employment rate declined, and the incarceration rate rose. Our analysis suggests that a 10-percent immigrant-induced increase in the supply of a particular skill group reduced the black wage by 3.6 percent, lowered the employment rate of black men by 2.4 percentage points, and increased the incarceration rate of blacks by almost a full percentage point.
    JEL: J2 J3 J6 K42
    Date: 2006–09
  10. By: Flavio Cunha; James J. Heckman
    Abstract: This paper presents a new framework for analyzing inequality that moves beyond the anonymity postulate. We estimate the determinants of sectoral choice and the joint distributions of outcomes across sectors. We determine which components of realized earnings variability are due to uncertainty and which components are due to components of human diversity that are forcastable by agents. Using our tools, we can determine how policies shift persons across sectors and outcome distributions across sectors.
    JEL: D80 I30
    Date: 2006–09
  11. By: Petra E. Todd; Kenneth I. Wolpin
    Abstract: This paper discusses methods for evaluating the impacts of social programs prior to their implementation. Ex ante evaluation is useful for designing programs that achieve some optimality criteria, such as maximizing impact for a given cost. This paper illustrates through several examples the use of behavioral models in predicting the impacts of hypothetical programs. Among the programs considered are wage subsidy programs, conditional cash transfer programs, and income support programs. In some cases, the behavioral model justifies a completely nonparametric estimation strategy, even when there is no direct variation in the policy instrument. In other cases, stronger modeling and/or functional form assumptions are required to evaluate a program ex ante. We illustrate the application of ex ante evaluation methods using data from the PROGRESA school subsidy experiment in Mexico. We assess the effectiveness of the method by comparing ex ante predictions of program impacts to the impacts measured under the randomized experiment.
    Keywords: ex-ante evaluation, matching, evaluation methods, school subsidy programs
    JEL: J22 C21 H31
    Date: 2006–05–02
  12. By: Marika Karanassou (Queen Mary, University of London and IZA); Hector Sala (Universitat Autònoma de Barcelona and IZA); Dennis J. Snower (Institute for World Economics, CEPR and IZA)
    Abstract: The conventional wisdom that inflation and unemployment are unrelated in the long-run implies that these phenomena can be analysed by separate branches of economics. The macro literature tries to explain inflation dynamics and estimates the NAIRU. The labour macro literature tries to explain unemployment dynamics and determine the real economic factors that drive the natural rate of unemployment. We show that the orthodox view that the New Keynesian Phillips curve is vertical in the long-run and that it cannot generate substantial inflation persistence relies on the implausible assumption of a zero interest rate. In the light of these results, we argue that a holistic framework is needed to jointly explain the evolution of inflation and unemployment.
    Keywords: Natural rate of unemployment, NAIRU, New Keynesian Phillips Curve, Inflation-unemployment tradeoff, Inflation dynamics, Unemployment dynamics
    JEL: E24 E31
    Date: 2006–09

This nep-ltv issue is ©2006 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. 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.