nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒10‒07
six papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Social Interactions and Schooling Decisions By Rafael Lalive; Alejandra Cattaneo
  2. Increasing Longevity and Social Security Reforms By Torben Andersen
  3. Mind the Gap? Estimating the Effects of Postponing Higher Education By Bertil Holmlund; Qian Liu; Oskar Nordström Skans
  4. Reproduction of Social Capital: How Much and What Type of Social Capital Is Transmitted from Parents to Children? By Veselý, Arnošt
  5. Are Earnings Inequality and Mobility Overstated? The Impact of Non-Classical Measurement Error By Peter Gottschalk; Minh Huynh
  6. U.S. Earnings Mobility: Comparing Survey-Based and Administrative-Based Estimates By Lisa M. Dragoset; Gary S. Fields

  1. By: Rafael Lalive; Alejandra Cattaneo
    Abstract: The aim of this paper is to study whether schooling choices are affected by social interactions. Such social interactions may be important because children enjoy spending time with other children or parents learn from other parents about the ability of their children. Identification is based on a randomized intervention that grants a cash subsidy encouraging school attendance among a sub-group of eligible children within small rural villages in Mexico. Results indicate that (i) the eligible children tend to attend school more frequently, (ii) but also the ineligible children acquire more schooling when the subsidy is introduced in their local village, (iii) social interactions are economically important, and (iv) they may arise due to changes in parents’ perception of their children’s ability.
    Keywords: peer effects, schooling, field experiment, PROGRESA
    JEL: C93 I21 I28
    Date: 2006
  2. By: Torben Andersen
    Abstract: Increasing longevity causes an upward trend in the dependency ratio in many countries. This raises concerns about the financial sustainability of social security schemes, and reform initiatives and proposals abound. It is shown that a fundamental policy choice inevitably arises since a given social security system cannot be maintained by simply indexing retirement ages and benefits to longevity. The political reform process is analysed using the so-called legislative procedure. When longevity increases, the young generation contributes more, and the old generation faces lower benefits and a retirement age that increases more than proportionally to the increase in longevity.
    Keywords: longevity, social security, political economy
    JEL: D72 H55 J11 J14 J18
    Date: 2006
  3. By: Bertil Holmlund; Qian Liu; Oskar Nordström Skans
    Abstract: This paper estimates the effects on earnings of “gap years” between high school and university enrollment. The effect is estimated by means of standard earnings functions augmented to account for gap years and a rich set of control variables using administrative Swedish data. We find that postponement of higher education is associated with a persistent and non-trivial earnings penalty. The main source of the persistent penalty appears to be the loss of work experience after studies. The reduction of lifetime earnings associated with two years postponement of higher education amounts to 40-50 percent of annual earnings at age 40.
    Keywords: timing of education, schooling interruptions, returns to work experience
    JEL: I23 J24 J31
    Date: 2006
  4. By: Veselý, Arnošt (Institute of Sociology of the Academy of Sciences of the Czech Republic)
    Abstract: The article analyzes the extent of the transmission of social capital from parents to their children. Three measures of social capital are used: social trust, participation in social activities and useful social connections. The data from the longitudinal extension of the PISA collected in the Czech Republic in 2003 are used. First, bivariate correlations of three types of social capital are analyzed. Second, using logistic regression, four theoretical models (the social capital model, the family background model, the personality model and the contextual model) are tested. As dependent variables we use the social trust of fifteen-year-olds and their participation in four types of extra-curricular activities. The analysis reveals only a weak intergenerational transmission of the same social capital types (“intergenerational line-up”) and almost no intergenerational transmission of different social capital types (“intergenerational cross-over”). No theoretical model is particularly strong in explaining the social trust of children. The social trust of youths remains largely unexplained and is created irrespectively of family cultural and financial capital. Conversely, participation in extra-curricular activities is highly socially stratified. It is substantially better predicted by all theoretical models, though their effect is dependent upon the activity at stake. The author concludes that social capital is comprised of several different forms of capital, which are only distantly related. The finding that family background has a relatively weak impact on children’s social trust but a strong effect on their participation of extra-curricular activities has profound implications for public policy.
    Keywords: Social capital; social trust; political socialization; generations; the Czech Republic; youths
    JEL: A12 Z00 Z13
    Date: 2006–10–03
  5. By: Peter Gottschalk (Boston College and IZA Bonn); Minh Huynh (U.S. Social Security Administration)
    Abstract: Measures of inequality and mobility based on self-reported earnings reflect attributes of both the joint distribution of earnings across time and the joint distribution of measurement error and earnings. While classical measurement error would increase measures of inequality and mobility there is substantial evidence that measurement error in earnings is not classical. In this paper we present the analytical links between non-classical measurement error and measures of inequality and mobility. The empirical importance of non-classical measurement error is explored using the Survey of Income and Program Participation matched to tax records. We find that the effects of non-classical measurement error are large. However, these non-classical effects are largely offsetting when estimating mobility. As a result SIPP estimates of mobility are similar to estimates based on tax records, though SIPP estimates of inequality are smaller than estimates based on tax records.
    Keywords: measurement error, earnings mobility and inequality
    JEL: J30
    Date: 2006–09
  6. By: Lisa M. Dragoset (U.S. Census Bureau and Cornell University); Gary S. Fields (Cornell University)
    Abstract: Earnings mobility has been studied both at the macro level (how much of a certain kind of mobility is there in the economy?) and at the micro level (what are the correlates of change in income or position?). Many empirical mobility studies provide estimates of the amount of mobility in a country over time and the correlates of individual mobility within the income distribution. While measurement error is recognized as potentially important at both these levels, very little is known about the degree to which earnings mobility estimates are affected by measurement error. In this paper, we use a new dataset that contains individually reported total annual labor earnings from the Survey of Income and Program Participation (SIPP) linked to employer-reported total annual labor earnings from the Social Security Administration’s Detailed Earnings Record (DER; these are taken directly from Box 1 on theW-2 form and are not capped by FICA) to compare micro and macro earnings mobility estimates for the U.S. during the 1990s using the two different earnings measures. We ask how much difference it makes to mobility estimates to use administrative-based earnings rather than survey-based earnings, and we obtain two major findings. Qualitatively, we find that the results are similar but not identical when administrative-based earnings are used rather than survey-based earnings. Quantitatively, we find that magnitudes are often very different when administrative-based earnings are used rather than survey-based earnings. The administrative-based results are neither systematically larger nor systematically smaller than the survey-based ones.
    Keywords: earnings mobility, measurement error, macro mobility, micro mobility.
    JEL: J62 J69 D31
    Date: 2006

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