nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2007‒01‒02
eleven papers chosen by
Maximo Rossi
Universidad de la Republica

  1. The Economic Lives of the Poor By Banerjee, Abhijit; Duflo, Esther
  2. Gender, Ethnic Identity and Work By Constant, Amelie; Gataullina, Liliya; Zimmermann, Klaus F
  3. Gender based prescriptions: evidence for altruism By Fernando Aguiar; Pablo Brañas-Garza; Ramón Cobo-Reyes; Natalia Jiménez; Luis M. Miller
  4. The Macroeconomics of the Labor Market: Three Fundamental Views By Marika Karanassou; Hector Sala; Dennis J. Snower
  5. Rural People’s Perception of Poverty in China By Bjorn Gustafsson; Ximing Yue
  6. Student Achievement and University Classes: Effects of Attendance, Size, Peers, and Teachers By Pedro Martins; Ian Walker
  7. Life Satisfaction and Economic Outcomes in Germany Pre- and Post-Unification By Richard A. Easterlin; Anke C. Zimmermann
  8. Selection Wages: An Example By Ekkehart Schlicht
  9. The Dynamic Effects of an Earnings Subsidy for Long-Term Welfare Recipients: Evidence from the SSP Applicant Experiment By David Card; Dean R. Hyslop
  10. Is Training More Frequent When the Wage Premium is Smaller?: Evidence from the European Community By Andrea Bassanini; Giorgio Brunello
  11. Consumption Commitments and Employment Contracts By Andrew Postlewaite; Larry Samuelson; Dan Silverman

  1. By: Banerjee, Abhijit; Duflo, Esther
    Abstract: This paper uses survey data from 13 countries to document the economic lives of the poor (those living on less than $2 dollar per day per capita at purchasing power parity) or the extremely poor (those living on less than $1 dollar per day). We describe their patterns of consumption and income generation as well as their access to markets and publicly provided infrastructure. The paper concludes with a discussion of some apparent anomalous choices.
    Keywords: consumption choices; development; poverty
    JEL: O10 O15 O16
    Date: 2006–12
  2. By: Constant, Amelie; Gataullina, Liliya; Zimmermann, Klaus F
    Abstract: The European Union’s strategy to raise employment is confronted with very low work participation among many minority ethnic groups, in particular among immigrants. This study examines the potential of immigrants’ identification with the home and host country ethnicity to explain that deficit. It introduces a two-dimensional understanding of ethnic identity, as a combination of commitments to the home and host cultures and societies, and links it to the labour market participation of immigrants. Using unique German survey data, the paper identifies marked gender differences in the effects of ethnic identification on the probability to work controlling for a number of other determinants. While ethnically assimilated immigrant men outperform those who are ethnically separated and marginalized, they are not different from those with openness to both cultures. Assimilated immigrant women do better than those separated and marginalized, but those who develop an attachment to both cultures clearly fare the best.
    Keywords: acculturation; ethnic identity; ethnicity; gender; immigrant assimilation; immigrant integration; work
    JEL: F22 J15 J16 Z10
    Date: 2006–12
  3. By: Fernando Aguiar (IESA/CSIC); Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Ramón Cobo-Reyes (Department of Economic Theory and Economic History, University of Granada.); Natalia Jiménez (Department of Economic Theory and Economic History, University of Granada.); Luis M. Miller (IESA/CSIC)
    Abstract: This paper analyzes the way in which men and women are expected to behave differently in an experimental situation. To do so, we concentrate on a single topic: altruism. Since the dictator game provides the most suitable design for studying altruism and generosity in the lab setting, we use a modified version to study the beliefs involved in the game. Our results are substantial: men and women are expected to behave differently and both believe that women are more generous. These two premises affect their behavior.
    Keywords: prescriptions, dictator game, beliefs, generosity, gender
    JEL: C91 D64 J16
    Date: 2006–12–14
  4. By: Marika Karanassou (Queen Mary, University of London and IZA Bonn); Hector Sala (Universitat Autònoma de Barcelona and IZA Bonn); Dennis J. Snower (Institute for World Economics, University of Kiel, CEPR and IZA Bonn)
    Abstract: We distinguish and assess three fundamental views of the labor market regarding the movements in unemployment: (i) the frictionless equilibrium view; (ii) the chain reaction theory, or prolonged adjustment view; and (iii) the hysteresis view. While the frictionless view implies a clear compartmentalization between the short and long run, the hysteresis view implies that all the short-run fluctuations automatically turn into long-run changes in the unemployment rate. We assert the problems faced by these conceptions in explaining the diversity of labor market experiences across the OECD labor markets. We argue that the prolonged adjustment view can overcome these problems since it implies that the short, medium, and long runs are interrelated, merging with one another along an intertemporal continuum.
    Keywords: unemployment, interactive labor market dynamics, interplay of lags and shocks, frictional growth, growth drivers
    JEL: E22 E24 J21 J30
    Date: 2006–12
  5. By: Bjorn Gustafsson (University of Göteborg and IZA Bonn); Ximing Yue (Renmin University of China)
    Abstract: Subjective Poverty Line methodology is applied to rural China 2002 using a sample from 22 provinces. Respondents were asked two questions: one on amount of food necessary and another on amount of cash necessary for their households. The respondent’s perception of how much cash is needed varies profoundly and positively by income in the county where the respondent lives. The findings provide an argument for increasing the official poverty line for China as average household income increases. Poverty in rural China is disproportionally concentrated to the western regions and to poor counties. Most of rural China’s poverty can be attributed to households living outside classified poor areas. People living in a household with many members, those with a household head with a short education, and children face higher poverty risks than other persons.
    Keywords: China, poverty, poverty line
    JEL: I32 O15 P36
    Date: 2006–12
  6. By: Pedro Martins (Queen Mary, University of London, CEG-IST Lisbon and IZA Bonn); Ian Walker (University of Warwick, Princeton University and IZA Bonn)
    Abstract: We examine the empirical determinants of student achievement in higher education, focusing our attention on its small-group teaching component (classes or seminars) and on the role of attendance, number of students per class, peers, and tutors. The empirical analysis is based on longitudinal administrative data from a major undergraduate program where students are allocated to class groups in a systematic way, but one which is plausibly uncorrelated with ability. Although, in simple specifications, we find positive returns to attendance and sizeable differences in the effectiveness of teaching assistants, most effects are not significant in specifications that include student fixed effects. We conclude that unobserved heterogeneity amongst students, even in an institution that imposes rigorous admission criteria and so has little observable heterogeneity, is apparently much more important than observable variation in inputs in explaining student outcomes.
    Keywords: education production functions, attendance, class size, peer effects
    JEL: I2 J2
    Date: 2006–12
  7. By: Richard A. Easterlin (University of Southern California and IZA Bonn); Anke C. Zimmermann (University of Southern California)
    Abstract: Throughout Germany real income has trended upward since 1991, but life satisfaction has risen in the East, fallen in the West, and been fairly stable for Germany as a whole. By 1997 the initial excess of West over East Germany was cut by over one-half; since then, the differential has changed very little, and even edged slightly upward. The post-unification decline in West Germany appears to be a break with the pattern in the seven years prior to unification and occurs among Germans, European foreigners, and Turkish foreigners. After 1997, Turkish foreigners, unlike the others, continue to decline in life satisfaction, and by 2004, their initial excess over East Germans largely disappears. The life satisfaction of postunification migrants from East Germany to the West is somewhat less than that of Germans and European foreigners in the West, but higher than that of Turkish foreigners and of Germans in East Germany. Migrants from the West to East Germany have life satisfaction about equal to that of Germans in that region. Trends and differences in overall life satisfaction are most systematically related to reports on satisfaction with income, next to the unemployment rate, and least of all, to absolute real income.
    Keywords: subjective well-being, domain satisfaction, German unification
    JEL: D60 I31 D1 O52
    Date: 2006–12
  8. By: Ekkehart Schlicht (University of Munich and IZA Bonn)
    Abstract: Offering higher wages may enable firms to attract more applicants and screen them more carefully. If firms compete in this way in the labor market, "selection wages" emerge. This note illustrates this wage-setting mechanism. Selection wages may engender unconventional results, such as a pre-tax wage compression induced by the introduction of a progressive wage tax.
    Keywords: wage formation, efficiency wage, incentive wage, mobility, job-specific pay, wage-tax
    JEL: J31 J41 J62 J63
    Date: 2006–12
  9. By: David Card; Dean R. Hyslop
    Abstract: In the SSP Applicant Experiment, a random sample of new welfare entrants was informed that if they remained on welfare for a year they would become eligible for a generous earnings subsidy. Those who satisfied the waiting period and then left welfare and began working full time within the following year were entitled to receive payments for up to 36 months whenever they were off welfare and working full time. A simple optimizing model suggests that the program rules created an unusual sequence of incentives to: (1) prolong the initial spell on welfare for at least 12 months to become eligible for the subsidy offer; (2) establish subsidy entitlement by finding full time work and leaving welfare in the 12 to 24 month period after initial entry; and (3) choose work over welfare during the three years that subsidies were available. Consistent with these implications, comparisons between the experimental treatment group and a randomly assigned control group show that the program increased welfare participation in the first year after initial entry and lowered it over the following 5 years. We develop an econometric model of welfare participation and program eligibility status that allows us to identify the behavioral effects associated with the program rules. We find important responses to all three incentives. We also find that the impact of the program persisted after subsidy payments ended, although the effect decayed over time.
    JEL: I38
    Date: 2006–12
  10. By: Andrea Bassanini; Giorgio Brunello
    Abstract: According to Becker [1964], when labour markets are perfectly competitive, general training is paid by the worker, who reaps all the benefits from the investment. Therefore, ceteris paribus, the greater the training wage premium, the greater the investment in general training. Using data from the European Community Household Panel, we compute a proxy of the training wage premium in clusters of homogeneous workers and find that smaller premia induce greater incidence of off-site training, which is likely to impart general skills. Our findings suggest that the Becker model provides insufficient guidance to understand empirical training patterns. Conversely, they are not inconsistent with theories of training in imperfectly competitive labour markets, in which firms may be willing to finance general training if the wage structure is compressed, that is, if the increase in productivity after training is greater than the increase in pay. <BR>Dans la théorie de Becker [1964], lorsque le marché du travail est en concurrence parfaite, seuls les salariéss investissent dans la formation générale, car ils sont les seuls à pouvoir s’approprier les retombées bénéfiques de la formation. Par conséquent, toutes choses égales par ailleurs, plus la prime salariale à la formation est élevée et plus l’investissement en formation est importante. Sur la base des données du Panel Communautaire des Ménages, nous calculons une proxy de la prime salariale à la formation pour des groupes homogènes de salariés et nous trouvons une relation inverse entre cette proxy et l’incidence de la formation hors site, qui concerne, selon toute vraisemblance, des compétences relativement générales. Nos résultats suggèrent que le modèle de Becker ne fournit pas une clé interprétative suffisante pour comprendre les tendances empiriques de la formation. Par contre, la distribution de la formation ne semble pas être en contradiction avec les théories de la formation qui prévoient que, lorsque le marché du travail est en concurrence imparfaite, les entreprises peuvent être disposées à investir en formation si l’augmentation de la productivité qui en découle est supérieure à l’augmentation du salaire.
    JEL: J24 J31 J41
    Date: 2006–12–05
  11. By: Andrew Postlewaite (Department of Economics, University of Pennsylvania); Larry Samuelson (Department of Economics, University of Wisconsin-Madison); Dan Silverman (Department of Economics, University of Michigan)
    Abstract: We examine an economy in which the cost of consuming some goods can be reduced by making commitments that reduce flexibility. We show that such consumption commitments can induce consumers with risk-neutral underlying utility functions to be risk averse over small variations in income, but sometimes to seek risk over large variations. As a result, optimal employment contracts will smooth wages conditional on being employed, but may incorporate a possibility of unemployment.
    Keywords: Unemployment, consumption commitments, optimal contracts
    JEL: D21 D31 D81
    Date: 2006–01–14

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