nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2008‒03‒15
nine papers chosen by
Maximo Rossi
University of the Republic

  1. Earnings Functions and Rates of Return By Heckman, James J.; Lochner, Lance; Todd, Petra E.
  2. Occupational Attainment and Immigrant Economic Progress in Australia By Chiswick, Barry R.; Miller, Paul W.
  3. Sectoral Transformation, Turbulence, and Labor Market Dynamics in Germany By Bachmann, Ronald; Burda, Michael C.
  4. On the Curvature of the Reporting Function from Objective Reality to Subjective Feelings By Oswald, Andrew J.
  5. International Evidence on Well-being By Blanchflower, David G.
  6. Alternative Labor Market Policies to Increase Economic Self-Sufficiency: Mandating Higher Wages, Subsidizing Employment, and Raising Productivity By Neumark, David
  7. Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach By Addison, John T.; Centeno, Mário; Portugal, Pedro
  8. Preferences for Collective versus Individualised Wage Setting By Boeri, Tito; Burda, Michael C.
  9. Occupational and industrial segregation of female and male workers in Spain: An alternative approach By Coral del Río; Olga Alonso-Villar

  1. By: Heckman, James J. (University of Chicago); Lochner, Lance (University of Western Ontario); Todd, Petra E. (University of Pennsylvania)
    Abstract: The internal rate of return to schooling is a fundamental economic parameter that is often used to assess whether expenditure on education should be increased or decreased. This paper considers alternative approaches to estimating marginal internal rates of return for different schooling levels. We implement a general nonparametric approach to estimate marginal internal rates of return that take into account tuition costs, income taxes and nonlinearities in the earnings-schooling-experience relationship. The returns obtained by the more general method differ substantially from Mincer returns in levels and in their evolution over time. They indicate relatively larger returns to graduating from high school than from graduating from college, although both have been increasing over time.
    Keywords: schooling, marginal internal rate of return, nonparametric estimation
    JEL: C31
    Date: 2008–01
  2. By: Chiswick, Barry R. (University of Illinois at Chicago); Miller, Paul W. (University of Western Australia)
    Abstract: Using data from the 2001 Australian Census of Population and Housing, on adult men in full-time employment, this paper augments a conventional human capital earnings function with information on occupations. It also estimates models of occupational attainment. The results from both the earnings function and model of occupational attainment indicate that the limited international transferability of human capital skills results in immigrants entering into relatively low status occupations when they first enter the Australian labour market. Comparison with similar research for the US suggests that the different immigrant selection regimes (primarily family reunion in the US, skill-based immigration in Australia) do not impact on the negative association between occupational status and pre-immigration labour market experience.
    Keywords: earnings, occupation, immigrants
    JEL: J24 J31 J F22
    Date: 2008–01
  3. By: Bachmann, Ronald (RWI Essen); Burda, Michael C. (Humboldt University, Berlin)
    Abstract: This paper analyzes the interaction between structural change and labor market dynamics in West Germany, during a period in which industrial employment declined by more than 30% and service sector employment more than doubled. Using transition data on individual workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition “yield" at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from nonparticipation. While gross turnover is cyclically sensitive and strongly procyclical, net reallocation is countercyclical, meaning that recessions are associated with increased intensity of sectoral reallocation. Beyond this cyclical component, German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.
    Keywords: gross worker flows, sectoral and occupational mobility, turbulence
    JEL: J63 J64 J62
    Date: 2008–01
  4. By: Oswald, Andrew J. (University of Warwick)
    Abstract: I suggest the idea of a reporting function, r(.), from reality to feelings. The ‘happiness’ literature claims we have demonstrated diminishing marginal utility of income. I show not, and that knowing r(.)’s curvature is crucial. A quasi-experiment on heights is studied.
    Keywords: money, diminishing marginal utility, height, concavity
    JEL: I3 D1
    Date: 2008–02
  5. By: Blanchflower, David G. (Bank of England)
    Abstract: National Time Accounting is a way of measuring society's well-being, based on time use. Its explicit form is the U-index, for “unpleasant” or “undesirable”, which measures the proportion of time an individual spends in an unpleasant state. In this paper I review cross-country evidence on happiness and life satisfaction and consider whether these data will likely be replaced by the U-index. I find that first, that there are many similarities. According to both measures happiness is higher for the more educated, for married people, for those with higher income and for whites and lower for the unemployed; is U-shaped in age and un-trended over time in the USA although they are trended up in a number of EU countries and especially so in developing countries. Equivalent results are found using self-reported unhappiness data. Second, there is a large body of data on happiness that is unavailable on the U-index. For example, according to happiness research well-being across nations is lower the higher is the unemployment rate, the current inflation rate and the highest inflation rate in a person's adult life. Higher inequality also lowers happiness. Third, we know little about the predictive power of the U-index. Happiness and life satisfaction data seem able to forecast migration flows. Fourth, happy people are particularly optimistic about the future. Fifth, according to the happiness data the US ranks above France but the U-index suggests the reverse.
    Keywords: happiness, unhappiness, pain, life satisfaction
    JEL: J22
    Date: 2008–02
  6. By: Neumark, David (University of California, Irvine)
    Abstract: The principal means by which individuals and families achieve economic self-sufficiency is through labor market earnings. As a consequence, it is natural for policy makers to look to interventions that increase the ability of individuals and families to achieve an adequate standard of living from participating in the labor market – a goal that has become even more prominent in the post-welfare reform era in the United States. This paper discusses some key policies that are used or can be used to increase economic self-sufficiency by increasing earnings, including mandating higher wages, subsidizing work, and increasing skill formation. Specifically, it reviews evidence on some of the main policies currently in place in the United States, including minimum and living wages, the Earned Income Tax Credit, wage subsidies, and school-to-work programs. Finally, it considers alternative policies that have recently been proposed.
    Keywords: minimum wages, living wages, earned income tax credit, wage subsidies, school-to-work
    JEL: J18 J22 J23 J24
    Date: 2008–02
  7. By: Addison, John T. (University of South Carolina); Centeno, Mário (Banco de Portugal); Portugal, Pedro (Universidade Nova de Lisboa)
    Abstract: This paper exploits survey information on reservation wages and data on actual wages from the European Community Household Panel to deduce in the manner of Lancaster and Chesher (1983) additional parameters of a stylized structural search model; specifically, reservation wage and transition/duration elasticities. The informational requirements of this approach are minimal, thereby facilitating comparisons between countries. Further, its policy content is immediate insofar as the impact of unemployment benefit rules and measures increasing the arrival rate of job offers are concerned. These key elasticities are computed for the United Kingdom and eleven other European nations.
    Keywords: wage offer distributions, reservation wages, arrival rate of job offers, unemployment benefits, probability of reemployment, accepted wages
    JEL: J64 J65
    Date: 2008–02
  8. By: Boeri, Tito (Bocconi University, Milan); Burda, Michael C. (Humboldt University, Berlin)
    Abstract: Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This paper models wage rigidity and collective bargaining endogenously, when workers differ by observable skill and may adopt either individualized or collective wage bargaining. In the calibrated model, a substantial fraction of workers and firms as well as the median voter prefer collective bargaining to the decentralised regime. A fundamental distortion of the separation decision represented by employment protection (a firing tax) is necessary for such preferences to emerge. Endogenizing collective bargaining can significantly modify comparative statics effects of policy arising in a single-regime setting.
    Keywords: wage rigidity, employment protection, equilibrium unemployment
    JEL: J5 J6 D7
    Date: 2008–02
  9. By: Coral del Río (Universidade de Vigo); Olga Alonso-Villar (Universidade de Vigo)
    Abstract: This paper aims to analyze occupational and industrial segregation in the Spanish labor market by using the alternative tools proposed by Alonso-Villar and Del Río (2007), along with some new extensions put forward here. In particular, two decompositions of their segregation curves are proposed. The approach followed in this article allows measuring segregation of women and men separately, since the distribution of each group of workers across occupations and industries is compared with the distribution of total employment. To analyze industrial segregation, an aggregated classification of industries in four large groups (agriculture-fishing, industry, construction and services) and another by branches of activity are considered while to study occupational segregation, several partitions of individuals and of occupations are included.
    Keywords: Occupational and industrial segregation; Segregation curves; Gender
    JEL: J71 J16 D63
    Date: 2008

This nep-ltv issue is ©2008 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.