nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2009‒11‒27
twelve papers chosen by
Maximo Rossi
University of the Republic

  1. Universal Health Insurance Coverage: Progress and Issues. Twenty-first Annual Herbert Lourie Memorial Lecture on Health Policy. By Jonathan Gruber
  2. Institutions and Performance in European Labour Markets: Taking a Fresh Look at Evidence By Alfonso Arpaia; Gilles Mourre
  3. School Quality and Property Values: Re-examining the Boundary Approach By Paramita Dhar; Stephen L. Ross
  4. Sundays Are Blue: Aren’t They? The Day-of-the-Week Effect on Subjective Well-Being and Socio-Economic Status By Akay, Alpaslan; Martinsson, Peter
  5. The Trade-off between Fertility and Education: Evidence from before the Demographic Transition By Becker, Sascha O.; Cinnirella, Francesco; Woessmann, Ludger
  6. Catch Me If You Can: Education and Catch-up in the Industrial Revolution By Becker, Sascha O.; Hornung, Erik; Woessmann, Ludger
  7. Redistributive Politics and Market Efficiency: An Experimental Study By Jens Großer; Ernesto Reuben
  8. Labor Market Rigidities, Trade, and Unemployment By Helpman, Elhanan; Itskhoki, Oleg
  9. Dynamic Female Labor Supply By Eckstein, Zvi; Lifshitz, Osnat
  10. Markets for Reputation: Evidence on Quality and Quantity in Academe By Daniel S. Hamermesh; Gerard A. Pfann
  11. The Rate of Return to the High/Scope Perry Preschool Program By James J. Heckman; Seong Hyeok Moon; Rodrigo Pinto; Peter A. Savelyev; Adam Yavitz
  12. Forced to be Rich? Returns to Compulsory Schooling in Britain By Paul J. Devereux; Robert A. Hart

  1. By: Jonathan Gruber (Department of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)
    Abstract: Jonathan Gruber was a key architect of Massachusetts’ ambitious health reform effort, and in 2006 became an inaugural member of the Health Connector Board, the main implementing body for that effort. He delivered this lecture on October 2, 2009, and his references are to Congressional bills that were under consideration on that date. He laid out the universal coverage debate that’s gone on for a long time in the United States; described a new solution that he think they found for Massachusetts; described how the Massachusetts reform works; and how it can be extended nationally. Finally he spent time on the key issues that Congress is facing in fall 2009 trying to take this model to the national level.
    Keywords: health care reform, universal coverage, tax credits, minimum benefits, rationing, employer-sponsored insurance benefits, ESI, cost control, affordability, Massachusetts, employer responsibility, incremental universalism, individual mandate, shared responsibility, pooling, affordability, single payer, public option
    JEL: D14 H51 I11 I18 L33
    Date: 2009–11
  2. By: Alfonso Arpaia (European Commission, DG Economic and Financial Affairs (ECFIN) and IZA.); Gilles Mourre (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and European Commission, DG Economic and Financial Affairs (ECFIN).)
    Abstract: This paper presents a selective survey of the recent literature on labour market institutions and offers new empirical EU-based evidence on the impact of labour market reforms on employment and labour market adjustment. While the literature traditionally treats labour market institutions as exogenous, attention shifted recently towards understanding the underlying causes of specific institutional arrangements. As a consequence, the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels. While empirical evidence does no show a major change in terms of intensity of labour market reform after the setting of the Economic and Monetary Union and the creation of the euro, the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment.
    Keywords: labour market functioning; political economy; endogeneity; institutions; policy design
    JEL: J20 J50 J64 K31
    Date: 2009–11
  3. By: Paramita Dhar (University of Connecticut); Stephen L. Ross (University of Connecticut)
    Abstract: This paper examines the hypothesis that the strong reduction in the effect of school quality on housing prices from the inclusion of boundary fixed affects can be attributed to uncertainty associated with school assignment near attendance zone boundaries, rather than unobserved neighborhood attributes. We examine this hypothesis using repeated cross-sections of housing transactions near school district boundaries in Connecticut since these boundaries are primarily town boundaries and for the most part have not changed in many decades. However, once we control for the across boundary neighborhood quality differences that are likely to arise over time with permanent boundaries, we find fairly small effects of test scores on property values; findings that are very similar to the findings of traditional studies based on attendance zone boundaries.
    Keywords: School District Performance, Housing Price, District Boundaries, Boundary Uncertainty, Test Scores, Omitted Neighborhood Attributes.
    JEL: I2 R2 R5
    Date: 2009–11
  4. By: Akay, Alpaslan (IZA); Martinsson, Peter (University of Gothenburg)
    Abstract: This paper analyses whether individuals are influenced by the day of the week when reporting subjective well-being. By using a large panel data set and controlling for observed and unobserved individual characteristics, we find a large day-of the-week effect. Overall, we find a 'blue' Sunday effect with the lowest level of subjective well-being. The day-of-the-week effect differs with certain socio-economic and demographic factors such as employment, marital status and age. The paper concludes with recommendations for future analyses of subjective well-being data and design of data collections.
    Keywords: subjective well-being, day-of-the-week effect
    JEL: C23 D60 I31
    Date: 2009–11
  5. By: Becker, Sascha O. (University of Stirling); Cinnirella, Francesco (CESifo); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: The trade-off between child quantity and education is a crucial ingredient of unified growth models that explain the transition from Malthusian stagnation to modern growth. We present first evidence that such a trade-off indeed existed before the demographic transition, exploiting a unique census-based dataset of 334 Prussian counties in 1849. Estimating two separate instrumental-variable models that instrument education by landownership inequality and distance to Wittenberg and fertility by previous-generation fertility and sex-imbalance ratio, we find that causation between fertility and education runs both ways. Furthermore, education in 1849 predicts the fertility transition in 1880-1905.
    Keywords: schooling, fertility transition, unified growth theory, 19th-century Prussia
    JEL: I20 J13 N33
    Date: 2009–11
  6. By: Becker, Sascha O. (University of Stirling); Hornung, Erik (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Existing evidence, mostly from British textile industries, rejects the importance of formal education for the Industrial Revolution. We provide new evidence from Prussia, a technological follower, where early-19th-century institutional reforms created the conditions to adopt the exogenously emerging new technologies. Our unique school-enrollment and factory-employment database links 334 counties from pre-industrial 1816 to two industrial phases in 1849 and 1882. Controlling extensively for pre-industrial development, we use pre-industrial education as an instrument to identify variation in later education that is exogenous to industrialization itself. We find that basic education significantly accelerated non-textile industrialization in both phases of the Industrial Revolution.
    Keywords: human capital, industrialization, Prussian economic history
    JEL: N13 N33 I20 O14
    Date: 2009–11
  7. By: Jens Großer; Ernesto Reuben
    Abstract: We study the interaction between competitive markets that produce large but unequally distributed welfare gains and elections through which the poor majority can redistribute income away from the rich minority. In our simple laboratory democracy, subjects first earn their income by trading in a double auction market and thereafter vote on redistributive policies in two-candidate elections. In addition, in one of the treatments subjects can attempt to influence the candidates’ policy choices by transferring money to them. We observe very high levels of redistribution - even when transfers to candidates are possible - with little effect on market efficiency. Overall, the experimental results are explained by our equilibrium predictions.
    Date: 2009–11–12
  8. By: Helpman, Elhanan; Itskhoki, Oleg
    Abstract: We study a two-country two-sector model of international trade in which one sector produces homogeneous products while the other produces differentiated products. The differentiated-product industry has firm heterogeneity, monopolistic competition, search and matching in its labor market, and wage bargaining. Some of the workers searching for jobs end up being unemployed. Countries are similar except for frictions in their labor markets, which include efficiency of matching, cost of vacancies, firing costs, and unemployment benefits. We study the interaction of labor market rigidities and trade impediments in shaping welfare, trade flows, productivity, and unemployment. We show that both countries gain from trade but that the flexible country - which has lower labor market frictions - gains proportionately more. A flexible labor market confers comparative advantage; the flexible country exports differentiated products on net. A country benefits from lowering frictions in its labor market, but this harms the country’s trade partner. And the simultaneous proportional lowering of labor market frictions in both countries benefits both of them. The model generates rich patterns of unemployment. In particular, better labor market institutions do not ensure lower unemployment, and unemployment and welfare can both rise in response to a policy change or falling trade costs.
    Keywords: labor market frictions; productivity; trade; unemployment
    JEL: F12 F16 J64
    Date: 2009–10
  9. By: Eckstein, Zvi; Lifshitz, Osnat
    Abstract: The increase in female employment and participation rates is one of the most dramatic economic changes to have taken place during the last century. However, while the employment rate of married women more than doubled during the last fifty years, that of unmarried women remained almost constant. In order to empirically analyze these trends we divide the paper into two parts: In the first, we empirically estimate a traditional female dynamic labor supply model using an extended version of Eckstein and Wolpin (1989) in order to compare the various explanations in the literature for the observed trends. The main finding is that the rise in education levels accounts for about one-third of the increase in female employment while about 40 percent remains unexplained by observed household characteristics. We show that this unexplained portion can be empirically attributed to changes in preferences or the costs of childrearing and household maintenance. In the second part, we formulate and estimate a new framework for the couple intra-family game that is then used to analyze the household dynamic labor supply. We find that female labor supply may have increased significantly due to a change in the form of the household game.
    Keywords: Accounting; Dynamic Discrete Choice; Female Employment; Household Game
    JEL: E24 J2 J3
    Date: 2009–11
  10. By: Daniel S. Hamermesh; Gerard A. Pfann
    Abstract: We develop a theory of the market for individual reputation, an indicator of regard by one’s peers and others. The central questions are: 1) Does the quantity of exposures raise reputation independent of their quality? and 2) Assuming that overall quality matters for reputation, does the quality of an individual’s most important exposure have an extra effect on reputation? Using evidence for academic economists, we find that, conditional on its impact, the quantity of output has no or even a negative effect on each of a number of proxies for reputation, and very little evidence that a scholar’s most influential work provides any extra enhancement of reputation. Quality ranking matters more than absolute quality. Data on mobility and salaries show, on the contrary, substantial positive effects of quantity, independent of quality. We test various explanations for the differences between the determinants of reputation and salary.
    JEL: D83 J31 J44
    Date: 2009–11
  11. By: James J. Heckman (Department of Economics, University of Chicago); Seong Hyeok Moon (Department of Economics, University of Chicago); Rodrigo Pinto (Department of Economics, University of Chicago); Peter A. Savelyev (Department of Economics, University of Chicago); Adam Yavitz (Economic Research Center, University of Chicago)
    Abstract: This paper estimates the rate of return to the High/Scope Perry Preschool Program, an early intervention program targeted toward disadvantaged African-American youth. Estimates of the rate of return to the Perry program are widely cited to support the claim of substantial economic benefits from preschool education programs. Previous studies of the rate of return to this program ignore the compromises that occurred in the randomization protocol. They do not report standard errors. The rates of return estimated in this paper account for these factors. We conduct an extensive analysis of sensitivity to alternative plausible assumptions. Estimated social rates of return generally fall between 7–10 percent, with most estimates substantially lower than those previously reported in the literature. However, returns are generally statistically significantly different from zero for both males and females and are above the historical return on equity. Estimated benefit-to-cost ratios support this conclusion.
    Keywords: rate of return, cost-benefit analysis, standard errors, Perry Preschool Program, compromised randomization, early childhood intervention programs, deadweight costs
    JEL: D62 I22 I28
    Date: 2009–11–13
  12. By: Paul J. Devereux (School of Economics and Geary Institute UCD, CEPR and IZA); Robert A. Hart (Department of Economics, University of Stirling and IZA)
    Abstract: Do students benefit from compulsory schooling? In an important article, Oreopoulos (2006) studied the 1947 British compulsory schooling law change and found large returns to schooling of about 15% using the General Household Survey (GHS). Reanalysing this dataset, we find much smaller returns of about 3% on average with no evidence of any positive return for women and a return for men of 4-7%. Additionally, we utilize the New Earnings Survey Panel Data-set (NESPD) that has earnings information superior to that in the GHS and find similar estimates: zero returns for women and returns of 3 to 4% for men.
    Date: 2009–11–18

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