nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2007‒02‒17
ten papers chosen by
Maximo Rossi
University of the Republic

  1. Family Planning as an Investment in Development: Evaluation of a Program's Consequences in Matlab, Bangladesh By Shareen Joshi; T. Paul Schultz
  2. Trends in Hours and Economic Growth By L. Rachel Ngai; Christopher A. Pissarides
  3. Mortality and Immortality By Matthew D. Rablen; Andrew J. Oswald
  4. A New Framework for the Analysis of Inequality By Flavio Cunha; James Heckman
  5. Perspectives from the Happiness Literature and the Role of New Instruments for Policy Analysis By Bernard M.S. van Praag
  6. Minimum Wages and Employment By David Neumark; William Wascher
  7. Identity, Dignity and Taboos: Beliefs as Assets By Roland Bénabou; Jean Tirole
  8. Happiness and Domain Satisfaction: Theory and Evidence By Richard A. Easterlin; Onnicha Sawangfa
  9. Escaping the Unemployment Trap — The Case of East Germany By Christian Merkl; Dennis J. Snower

  1. By: Shareen Joshi (University of Chicago); T. Paul Schultz (Economic Growth Center, Yale University)
    Abstract: The paper analyzes 141 villages in Matlab, Bangladesh from 1974 to 1996, in which half the villages received from 1977 to 1996 a door-to-door outreach family planning and maternal-child health program. Village and individual data confirm a decline in fertility of about 15 percent in the program villages compared with the control villages by 1982, as others have noted, which persists until 1996. The consequences of the program on a series of long run family welfare outcomes are then estimated in addition to fertility: women’s health, earnings and household assets, use of preventive health inputs, and finally the inter-generational effects on the health and schooling of the woman’s children. Within two decades many of these indicators of the welfare of women and their children improve significantly in conjunction with the program-induced decline in fertility and child mortality. This suggests social returns to this reproductive health program in rural South Asia have many facets beyond fertility reduction, which do not appear to dissipate over two decades.
    Keywords: Fertility, Family Planning, Gender and Development, Program Evaluation, Bangladesh
    JEL: O12 J13 I12 J16
    Date: 2007–02
  2. By: L. Rachel Ngai (CEP, London School of Economics and CEPR); Christopher A. Pissarides (CEP, London School of Economics, CEPR and IZA)
    Abstract: We study long-run trends in market hours of work and employment shifts across economic sectors driven by uneven TFP growth in market and home production. We focus on the substitutions between market and home production and on the structural transformation between agriculture, manufacturing and services. The model can rationalize the observed falling or U-shaped pattern for aggregate hours, the complete marketization of agriculture and manufacturing, and the shift from agriculture to services without violating balanced aggregate growth. We find support for the model’s predictions in long-run US data.
    Keywords: hours of work, labour supply, structural transformation, home production, marketization, balanced growth
    JEL: J21 J22 O14 O41
    Date: 2007–01
  3. By: Matthew D. Rablen (University of Warwick); Andrew J. Oswald (University of Warwick and IZA)
    Abstract: It has been known for centuries that the rich and famous have longer lives than the poor and ordinary. Causality, however, remains trenchantly debated. The ideal experiment would be one in which status and money could somehow be dropped upon a sub-sample of individuals while those in a control group received neither. This paper attempts to formulate a test in that spirit. It collects 19th-century birth data on science Nobel Prize winners and nominees. Using a variety of corrections for potential biases, the paper concludes that winning the Nobel Prize, rather than merely being nominated, is associated with between 1 and 2 years of extra longevity. Greater wealth, as measured by the real value of the Prize, does not seem to affect lifespan.
    Keywords: longevity, status, health, wealth, mortality
    JEL: I12
    Date: 2007–01
  4. By: Flavio Cunha (University of Chicago); James Heckman (University of Chicago, American Bar Foundation, University College Dublin and IZA)
    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 forecastable by agents. Using our tools, we can determine how policies shift persons across sectors and outcome distributions across sectors.
    Keywords: inequality, anonymity postulate, uncertainty, policy evaluation
    JEL: I30 D80
    Date: 2007–01
  5. By: Bernard M.S. van Praag (SCHOLAR, University of Amsterdam, DIW Berlin, CESifo and IZA)
    Abstract: After having been ignored for a long time by economists, happiness is becoming an object of serious research in 21st century economics. In Section 2 we sketch the present status of happiness economics. In Section 3 we consider the practical applicability of happiness economics, retaining the assumption of ordinal individual utilities. In Section 4 we introduce a cardinal utility concept, which seems to us the natural consequence of the happiness economics methodology. In Section 5 we sketch how this approach can lead to a normative approach to policy problems that is admissible from a positivist point of view. Section 6 concludes.
    Keywords: happiness economics, subjective well-being, equivalence scales, economic policy
    JEL: B21 B41 D63 I31 I38
    Date: 2007–01
  6. By: David Neumark (University of California, Irvine, Public Policy Institute of California, NBER and IZA); William Wascher (Federal Reserve Board)
    Abstract: We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.
    Keywords: minimum wage, employment
    JEL: J23 J38
    Date: 2007–01
  7. By: Roland Bénabou (Princeton University, NBER, CEPR and IZA); Jean Tirole (Université de Toulouse and MIT)
    Abstract: We analyze social and economic phenomena involving beliefs which people value and invest in, for affective or functional reasons. Individuals are at times uncertain about their own "deep values" and infer them from their past choices, which then come to define "who they are". Identity investments increase when information is scarce or when a greater endowment of some asset (wealth, career, family, culture) raises the stakes on viewing it as valuable (escalating commitments). Taboos against transactions or the mere contemplation of tradeoffs arise to protect fragile beliefs about the "priceless" value of certain assets (life, freedom, love, faith) or things one "would never do". Whether such behaviors are welfareenhancing or reducing depends on whether beliefs are sought for a functional value (sense of direction, self-discipline) or for "mental consumption" motives (self-esteem, anticipatory feelings). Escalating commitments can thus lead to a "hedonic treadmill", and competing identities cause dysfunctional failures to invest in high-return activities (education, adapting to globalization, assimilation), or even the destruction of productive assets. In social interactions, norm violations elicit a forceful response (exclusion, harassment) when they threaten a strongly held identity, but further erode morale when it was initially weak. Concerns for pride, dignity or wishful thinking lead to the inefficient breakdown of Coasian bargaining even under symmetric information, as partners seek to self-enhance and shift blame by turning down "insultingly low" offers.
    Keywords: identity, self-serving beliefs, self-image, memory, wishful thinking, anticipatory utility, self control, hedonic treadmill, bargaining, taboos, religion
    JEL: D81 D91 Z13
    Date: 2007–01
  8. By: Richard A. Easterlin (University of Southern California and IZA); Onnicha Sawangfa (University of Southern California)
    Abstract: In the United States happiness, on average, varies positively with socio-economic status; is fairly constant over time; rises to midlife and then declines; and is lower among younger than older birth cohorts. These four patterns of mean happiness can be predicted rather closely from the mean satisfaction people report with each of four domains - finances, family life, work, and health. Even though the domain satisfaction patterns typically differ from each other and from that for happiness, they come together in a way that explains quite well the overall patterns of happiness. The importance of any given domain depends on the happiness relation under study (by socio-economic status, time, age or birth cohort), and no single domain is invariably the key to happiness.
    Keywords: happiness, domain satisfaction, subjective well-being
    JEL: I3 D60 D1 O51
    Date: 2007–01
  9. By: Christian Merkl; Dennis J. Snower
    Abstract: This paper addresses the question of why prolonged regional unemployment differentials tend to persist even after their proximate causes have been reversed (e.g., after wages in the high-unemployment regions have fallen relative to those in the low-unemployment regions). We suggest that the longer people are unemployed, the greater is the likelihood of falling into a low-productivity "trap," through the attrition of skills and work habits. We develop and calibrate a model along these lines for East Germany and examine the effectiveness of three employment policies in this context: (i) a weakening of workers’ position in wage negotiations due to a drop in the replacement rate or firing costs, leading to a fall in wages, (ii) hiring subsidies, and (iii) training subsidies. We show that the employment effects of these policies depend crucially on whether low-productivity traps are present.
    Keywords: labor markets; labor market traps; calibration; East Germany
    JEL: E24 J30 J31 J64
    Date: 2007–01
  10. By: Nanak Kakwani (International Poverty Centre); Hyun H. Son (International Poverty Centre)
    Abstract: This paper proposes a new “Pro-Poor Policy (PPP)” index, which measures the pro-poorness of government programmes, as well as basic service delivery in education, health and infrastructure. The index provides a means to assess the targeting efficiency of government programmes compared to perfect targeting. The paper also deals with the policy issue of how targeting efficiency of government programmes varies across various socioeconomic groups. To this effect, the paper develops two types of PPP indices by socioeconomic groups, which are within-group and total-group PPP indices. The within-group PPP index captures how well targeted a programme is within a group. On the other hand, if our objective is to maximize poverty reduction at the national level, the targeting efficiency of particular group should be judged on the basis of total-group PPP index. Using micro unit-record data on household surveys from Thailand, Russia, Vietnam, and 15 African countries, the paper evaluates a wide range of government programmes and basic services.
    Keywords: Targeting, Universal, Pro-Poor, Poverty
    JEL: C15 I32
    Date: 2005–05

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