nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2011‒07‒02
thirteen papers chosen by
Maximo Rossi
University of the Republic

  1. Inequality and Employment Sensitivities to the Falling Labour Share By Marika Karanassou; Hector Sala
  2. The Portability of New Immigrants' Human Capital: Language, Education and Occupational Matching By Gustave Goldmann; Arthur Sweetman; Casey Warman
  3. Parental Leave and Mothers' Careers: The Relative Importance of Job Protection and Cash Benefits By Lalive, Rafael; Schlosser, Analia; Steinhauer, Andreas; Zweimüller, Josef
  4. Fat Chance! Obesity and the Transition from Unemployment to Employment By Caliendo, Marco; Lee, Wang-Sheng
  5. Searching for the Entrepreneurial Personality: New Evidence and Avenues for Further Research By Caliendo, Marco; Kritikos, Alexander S.
  6. The Happiness-Income Paradox Revisited By Easterlin, Richard A.; Angelescu McVey, Laura; Switek, Malgorzata; Sawangfa, Onnicha; Zweig, Jacqueline Smith
  7. A Flying Start? Maternity Leave Benefits and Long Run Outcomes of Children By Carneiro, Pedro; Loken, Katrine V.; Salvanes, Kjell G.
  8. Making services work : indicators, assessments, and benchmarking of the quality and governance of public service delivery in the human development sectors By Fiszbein, Ariel; Ringold, Dena; Rogers, F. Halsey
  9. Inequality Aversion and Voting on Redistribution By Wolfgang Höchtl; Rupert Sausgruber; Jean-Robert Tyran
  10. The Effect of Public Sector Employment on Women’s Labour Martket Outcomes By Anghel, Brindusa; de la Rica, Sara.; Dolado, Juan José
  11. Are Americans Really Less Happy With Their Incomes? By Arie Kapteyn; James P. Smith; Arthur van Soest
  12. Human Capital and Regional Development By Nicola Gennaioli; Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer
  13. Estimating the Return to College Selectivity over the Career Using Administrative Earnings Data By Stacy Dale; Alan B. Krueger

  1. By: Marika Karanassou (Queen Mary, University of London and IZA); Hector Sala (Universitat Autònoma de Barcelona and IZA)
    Abstract: This paper aims at identifying the labour share (wage-productivity gap) as a major factor in the evolution of inequality and employment. To this end, we use annual data for the US, UK and Sweden over the past forty years and estimate country-specific systems of labour demand and Gini coefficient equations. Further to the statistical significance of our models, we validate their economic significance through counterfactual simulations. In particular, we evaluate the contributions of the labour share to the trajectories of inequality and employment during specific time intervals in the post-1990 years. We find that during the nineties the cost of a one percent increase in employment was in the range of 0.7%-0.9% higher inequality in all three countries. However, in the 2000s, whereas the inequality-employment sensitivity ratio slightly fell in the US, it exceeded unity in the countries on the other side of the Atlantic. It obtained its highest value in the UK, where a 1% growth in employment was achieved at the expense of 1.3% worsening in income inequality. In the light of the significant influence of the time-varying labour share on the inequality and employment time paths documented in our sample, the evolution of the wage-productivity gap deserves the attention of policy makers.
    Keywords: Income inequality, Labour income share, Employment
    JEL: D30 E25 E24
    Date: 2011–06
  2. By: Gustave Goldmann (University of Ottawa); Arthur Sweetman (McMaster University); Casey Warman (Queen's University)
    Abstract: The implications of human capital portability -- including interactions between education, language skills and pre- and post-immigration occupational matching -- for earnings are explored for new immigrants to Canada. Given the importance of occupation-specific skills, as a precursor we also investigate occupational mobility and observe convergence toward the occupational skill distribution of the domestic population, although four years after landing immigrants remain less likely have a high skilled job. Immigrants who are able to match their source and host country occupations obtain higher earnings. However, surprisingly, neither matching nor language skills have any impact on the return to pre-immigration work experience, which is observed to be statistically significantly negative. Crucially, English language skills are found to have an appreciable direct impact on earnings, and to mediate the return to pre-immigration education but not labour market experience.
    Keywords: Immigration, human capital portability, occupation, education, language
    JEL: J24 J61 J62
    Date: 2011–06
  3. By: Lalive, Rafael (University of Lausanne); Schlosser, Analia (Tel Aviv University); Steinhauer, Andreas (University of Zurich); Zweimüller, Josef (University of Zurich)
    Abstract: Parental leave regulations in most OECD countries have two key policy instruments: job protection and cash benefits. This paper studies how mothers' return to work behavior and labor market outcomes are affected by alternative mixes of these key policy parameters. Exploiting a series of major parental leave policy changes in Austria, we find that longer cash benefits lead to a significant delay in return to work and that the magnitude of this effect depends on the relative length of job protection and cash benefits. However, despite their impact on time on leave, we do not find a significant effect on mothers' labor market outcomes in the medium run, neither of benefit duration nor of job-protection duration. To understand the relative importance (and interaction) of the two policy instruments in shaping mothers' return to work behavior, we set up a non-stationary job search model in which cash benefits and job protection determine decisions of when to return to work and whether or not to return to the pre-birth employer. Despite its lean structure, the model does surprisingly well in matching empirically observed return to work profiles. The simulation of alternative counterfactual regimes shows that a policy that combines both job protection and benefits payments succeeds to induce mothers to spend some time with the child after birth without jeopardizing their medium run labor market attachment.
    Keywords: parental leave, family and work obligations, return to work, labor supply, earnings, family earnings gap
    JEL: J13 J18 J22
    Date: 2011–06
  4. By: Caliendo, Marco (IZA); Lee, Wang-Sheng (RMIT University)
    Abstract: This paper focuses on estimating the magnitude of any potential weight discrimination by examining whether obese job applicants in Germany get treated or behave differently from non-obese applicants. Based on two waves of rich survey data from the IZA Evaluation dataset, which includes measures that control for education, demographic characteristics, labor market history, psychological factors and health, we estimate differences in job search behavior and labor market outcomes between obese/overweight and healthy weight individuals. Unlike other observational studies which are generally based on obese and non-obese individuals who might already be at different points in the job ladder (e.g., household surveys), in our data, individuals are newly unemployed and all start from the same point. The only subgroup we find in our data experiencing any possible form of labor market discrimination is obese women. Despite making more job applications and engaging more in job training programs, we find some indications that they experienced worse (or at best similar) employment outcomes than healthy weight women. Obese women who found a job also had significantly lower wages than healthy weight women.
    Keywords: obesity, discrimination, employment, labor demand
    JEL: I10 I12 J23 J70
    Date: 2011–06
  5. By: Caliendo, Marco (IZA); Kritikos, Alexander S. (DIW Berlin)
    Abstract: What makes the entrepreneurial personality is the key question we seek to answer in the special issue of the Journal of Economic Psychology on "Personality and Entrepreneurship". The contributions are clustered around questions regarding the linkage between personality, socio-economic factors and entrepreneurial development. Results further explain the gender puzzle, while, at the same time, it is clear that stereotypes of what makes the ideal entrepreneur must be revisited. This conclusion is based on new insights into the effects that variables, such as risk tolerance, trust and reciprocity, the value for autonomy and also external role models, have on entrepreneurial decision making. On a more general note, it is clear that more informative longitudinal data sets at the individual level are needed in order to find conclusive answers. In an ideal world researchers would have access to data that includes personality characteristics and psychological traits, motivational factors and cognitive skills. In this respect the research community needs to find new ways to collect these data and make them available for entrepreneurship research.
    Keywords: trust, entrepreneurship, personality characteristics, risk aversion, autonomy
    JEL: D81 J23 L26 M13
    Date: 2011–06
  6. By: Easterlin, Richard A. (University of Southern California); Angelescu McVey, Laura (University of Southern California); Switek, Malgorzata (University of Southern California); Sawangfa, Onnicha (University of Southern California); Zweig, Jacqueline Smith (University of Southern California)
    Abstract: The striking thing about the happiness-income paradox is that over the long-term – usually a period of 10 y or more – happiness does not increase as a country's income rises. Heretofore the evidence for this was limited to developed countries. This article presents evidence that the long term nil relationship between happiness and income holds also for a number of developing countries, the eastern European countries transitioning from socialism to capitalism, and an even wider sample of developed countries than previously studied. It also finds that in the short-term in all three groups of countries, happiness and income go together, i.e., happiness tends to fall in economic contractions and rise in expansions. Recent critiques of the paradox, claiming the time series relationship between happiness and income is positive, are the result either of a statistical artifact or a confusion of the short-term relationship with the long-term one.
    Keywords: Easterlin Paradox, life satisfaction, subjective well-being
    JEL: I31 O10 O5 D60
    Date: 2011–06
  7. By: Carneiro, Pedro (University College London); Loken, Katrine V. (University of Bergen); Salvanes, Kjell G. (Norwegian School of Economics and Business Administration)
    Abstract: We study the impact on children of increasing maternity leave benefits using a reform that increased paid and unpaid maternity leave in Norway in July 1977. Mothers giving birth before this date were eligible only for 12 weeks of unpaid leave, while those giving birth after were entitled to 4 months of paid leave and 12 months of unpaid leave. This increased time with the child led to a 2.7 percentage points decline in high school dropout and a 5% increase in wages at age 30. For mothers with low education we find a 5.2 percentage points decline in high school dropout and an 8% increase in wages at age 30. The effect is especially large for children of those mothers who, prior to the reform, would take very low levels of unpaid leave.
    Keywords: maternity leave, children's outcomes
    JEL: J13 J18
    Date: 2011–06
  8. By: Fiszbein, Ariel; Ringold, Dena; Rogers, F. Halsey
    Abstract: Improving governance is central to improving results in human development. It is clear that money is not enough: improved outcomes from service delivery require better governance, including mechanisms for holding service providers accountable and appropriate incentives for performance. There is therefore a growing demand for indicators to measure how and whether these processes work, and how they affect health and education results. This paper makes the case for measuring governance policies and performance, and the quality of service delivery in health and education. It develops a framework for selecting and measuring a set of indicators and proposes options, drawing from new and innovative measurement tools and approaches. The paper proposes the adoption of a more systematic approach that will both facilitate the work of health and education policymakers and allow for cross-country comparisons and benchmarking.
    Keywords: Health Monitoring&Evaluation,Governance Indicators,Public Sector Corruption&Anticorruption Measures,Poverty Monitoring&Analysis,Public Sector Expenditure Policy
    Date: 2011–06–01
  9. By: Wolfgang Höchtl (University of Innsbruck); Rupert Sausgruber (University of Innsbruck); Jean-Robert Tyran (University of Vienna)
    Abstract: Some people have a concern for a fair distribution of incomes while others do not. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair-minded voters are pivotal. Pivotality, in turn, depends on the structure of income classes. We experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric. Inequality aversion is more likely to matter if the “rich” are in majority. With a “poor” majority, we find that redistribution outcomes look as if all voters were exclusively motivated by self-interest.
    Keywords: redistribution; self interest; inequality aversion; median voter; experiment
    JEL: A13 C9 D72
    Date: 2011–06
  10. By: Anghel, Brindusa; de la Rica, Sara.; Dolado, Juan José
    Abstract: This paper addresses the role played by Public Sector (PS) employment across different OECD labour markets in explaining: (i) gender differences regarding choices to work in either PS or private sector, and (ii) subsequent changes in female labour market outcomes. To do so, we provide some empirical evidence about cross-country gender differences in choice of employment in the PS vs. the private sector, using the European Community Household Panel (ECHP), in the light of different theories on gender behaviour in the labour market. We also analyze the main determinants of the hourly wage gaps across these two sectors for males and females separately. Finally, we document the main stylized facts about labour market transitions by male and female workers among inactivity, unemployment, working in the PS and working in the private sector.
    Date: 2011–06
  11. By: Arie Kapteyn; James P. Smith; Arthur van Soest
    Abstract: Recent economic research on international comparisons of subjective well-being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper the authors concentrate on self-reported satisfaction with income in two countries: The Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. They find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes the distribution of satisfaction in the two countries is essentially identical. In addition, they find that the within-country cross-sectional effect of income on satisfaction- a key parameter in the recent debate in the economic literature- is significantly under-estimated especially in the US- when differences in response scales are not taken into account.
    Keywords: happiness, life satisfaction, vignettes, reporting bias
    JEL: I30 J30
    Date: 2011–05
  12. By: Nicola Gennaioli; Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer
    Abstract: We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 96 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and human capital externalities are essential for understanding the data.
    JEL: L26 O11 O43 O47 R11
    Date: 2011–06
  13. By: Stacy Dale; Alan B. Krueger
    Abstract: We estimate the monetary return to attending a highly selective college using the College and Beyond (C&B) Survey linked to Detailed Earnings Records from the Social Security Administration (SSA). This paper extends earlier work by Dale and Krueger (2002) that examined the relationship between the college that students attended in 1976 and the earnings they self-reported reported in 1995 on the C&B follow-up survey. In this analysis, we use administrative earnings data to estimate the return to various measures of college selectivity for a more recent cohort of students: those who entered college in 1989. We also estimate the return to college selectivity for the 1976 cohort of students, but over a longer time horizon (from 1983 through 2007) using administrative data. We find that the return to college selectivity is sizeable for both cohorts in regression models that control for variables commonly observed by researchers, such as student high school GPA and SAT scores. However, when we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero. There were notable exceptions for certain subgroups. For black and Hispanic students and for students who come from less-educated families (in terms of their parents’ education), the estimates of the return to college selectivity remain large, even in models that adjust for unobserved student characteristics.
    JEL: I21 J31
    Date: 2011–06

This nep-ltv issue is ©2011 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.