nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒11‒04
seven papers chosen by
Maximo Rossi
Universidad de la Republica

  1. The Persistence of Underdevelopment: Institutions, Human Capital or Constituencies By Rajan, Raghuram G; Zingales, Luigi
  2. Unemployment Dynamics among Migrants and Natives By Uhlendorff, Arne; Zimmermann, Klaus F
  3. What Has Mattered to Economics Since 1970 By Han Kim, E; Morse, Adair; Zingales, Luigi
  4. What Determines Immigrations' Impact? Comparing Two Global Centuries By Hatton, Timothy J.; Williamson, Jeffrey G
  5. Wage Differentials and Temporary Jobs in Italy By Matteo, PICCHIO
  6. Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market By David Card; Raj Chetty; Andrea Weber
  7. Statistical Discrimination in Labor Markets: An Experimental Analysis By David Dickinson; Ronald Oaxaca

  1. By: Rajan, Raghuram G; Zingales, Luigi
    Abstract: Why is underdevelopment so persistent? One explanation is that poor countries do not have institutions that can support growth. Because institutions (both good and bad) are persistent, underdevelopment is persistent. An alternative view is that underdevelopment comes from poor education. Neither explanation is fully satisfactory, the first because it does not explain why poor economic institutions persist even in fairly democratic but poor societies, and the second because it does not explain why poor education is so persistent. This paper tries to reconcile these two views by arguing that the underlying cause of underdevelopment is the initial distribution of factor endowments. Under certain circumstances, this leads to self-interested constituencies that, in equilibrium, perpetuate the status quo. In other words, poor education policy might well be the proximate cause of underdevelopment, but the deeper (and more long lasting cause) are the initial conditions (like the initial distribution of education) that determine political constituencies, their power, and their incentives. Though the initial conditions may well be a legacy of the colonial past, and may well create a perverse political equilibrium of stagnation, persistence does not require the presence of coercive political institutions. We present some suggestive empirical evidence. On the one hand, such an analysis offers hope that the destiny of societies is not preordained by the institutions they inherited through historical accident. On the other hand, it suggests we need to understand better how to alter factor endowments when societies may not have the internal will to do so.
    Keywords: human capital; institutions
    JEL: L10
    Date: 2006–10
  2. By: Uhlendorff, Arne; Zimmermann, Klaus F
    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 labour market.
    Keywords: bivariate hazard rate models; employment stability; ethnicity; migration; unemployment duration
    JEL: C41 J61 J64
    Date: 2006–10
  3. By: Han Kim, E; Morse, Adair; Zingales, Luigi
    Abstract: We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially.
    Keywords: citations; innovations in economics
    JEL: A11 B20 O33
    Date: 2006–10
  4. By: Hatton, Timothy J.; Williamson, Jeffrey G
    Abstract: This paper asks whether history can shed light on the modern debate about immigration's labour market impact in high wage economies. It examines the relationship between migration and capital flows in the age of mass migration before 1914, the so-called first global century. It then assesses the effects of immigration on wages and employment with and without international capital mobility in first global century and today, that is, the second global century. The paper then explores the links between these economic relationships and immigration policy. It concludes with an explanation for the apparent difference in immigration's impact in the two global centuries, and thus on policy.
    Keywords: capital mobility; history; immigration; labour market impact; policy
    JEL: F22 J1 O15
    Date: 2006–10
  5. By: Matteo, PICCHIO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: The focus of this paper is to analyse the wage effects of temporary jobs using the 2000 and 2002 waves of the Survey of Italian Households’ Income and Wealth (SHIW). Exploiting the short longitudinal dimension of the survey and taking into account of individual-and job-specific unobservable components result in an estimated wage penalty for temporary workers of around 12-13%. Furthermore, there is evidence of higher wage returns to seniority for temporary workers, generating a reduction in the wage gap by about 2.3 percentage points after one year of tenure.
    Keywords: Temporary employment, fixed-term, contracts, wage differential, returns to seniority, individual effects, firm effects
    JEL: C23 J31 M51
    Date: 2006–07–10
  6. By: David Card; Raj Chetty; Andrea Weber
    Abstract: This paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market. We estimate the "excess sensitivity" of job search behavior to cash-on-hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance (UI) benefits in Austria. Analyzing data for over one-half million job losers, we obtain three empirical results: (1) a lump-sum severance payment equal to two months of earnings reduces the job-finding rate by 8-12% on average; (2) an extension of the potential duration of UI benefits from 20 weeks to 30 weeks similarly lowers job-finding rates in the first 20 weeks of search by 5-9%; and (3) increases in the duration of search induced by the two programs have little or no effect on subsequent job match quality. Using a search theoretic model, we show that estimates of the relative effect of severance pay and extended benefits can be used to calibrate and test a wide set of intertemporal models. Our estimates of this ratio are inconsistent with the predictions of a standard permanent income model, as well as naive "rule of thumb" behavior. The representative job searcher in our data is 70% of the way between the permanent income benchmark and credit-constrained behavior in terms of sensitivity to cash-on-hand.
    JEL: D91 E6 H5 J6
    Date: 2006–10
  7. By: David Dickinson; Ronald Oaxaca
    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 occurs when risk averse employers offer female workers lower wages based not on lower average productivity but on a higher variance in their productivity. Empirical work on statistical discrimination is hampered by the difficulty of obtaining suitable data from naturally-occurring labor markets. 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 in our full sample (though differences between male and female employers can be noted). If one can transfer these results outside of the laboratory, they indicate that labor market discrimination based only on first moment discrimination is biased downward. The public policy implication is that efforts and legislation aimed at reducing discrimination of various sorts face an additional challenge in trying to identify and limit relatively hidden, but significant, forms of statistical discrimination.

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