nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2013‒11‒02
eight papers chosen by
Maximo Rossi
University of the Republic

  1. What Predicts a Successful Life? A Life-Course Model of Well-Being By Andrew E. Clark; Francesca Cornaglia; Richard Layard; Nattavudh Powdthavee; James Vernoit
  2. Happy Peasants and Frustrated Achievers? Agency, Capabilities, and Subjective Well-Being By Carol Graham; Milena Nikolova
  3. Equality of Opportunity By John E. Roemer; Alain Trannoy
  4. Catastrophic Job destruction By Anabela Carneiro; Pedro Portugal; José Varejão
  5. Mothers, Friends and Gender Identity By Olivetti, Claudia; Patacchini, Eleonora; Zenou, Yves
  6. Educational Inequality and the Returns to Skills By Shelly Lundberg
  7. Laterborns Don't Give Up: The Effects of Birth Order on Earnings in Europe By Bertoni, Marco; Brunello, Giorgio
  8. U.S. versus Sweden: The Effect of Alternative In-Work Tax Credit Policies on Labour Supply of Single Mothers By Aaberge, Rolf; Flood, Lennart

  1. By: Andrew E. Clark; Francesca Cornaglia; Richard Layard; Nattavudh Powdthavee; James Vernoit
    Abstract: If policy-makers care about well-being, they need a recursive model of how adult life-satisfaction is predicted by childhood influences, acting both directly and (indirectly) through adult circumstances. We estimate such a model using the British Cohort Study (1970). The most powerful childhood predictor of adult life-satisfaction is the child's emotional health. Next comes the child's conduct. The least powerful predictor is the child's intellectual development. This has obvious implications for educational policy. Among adult circumstances, family income accounts for only 0.5% of the variance of life-satisfaction. Mental and physical health are much more important.
    Keywords: Well-being, Life-satisfaction, Intervention, Model, Life-course, Emotional health, Conduct, Intellectual performance, Success
    JEL: A12 D60 H00 I31
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1245&r=ltv
  2. By: Carol Graham (The Brookings Institution); Milena Nikolova (University of Maryland, College Park)
    Abstract: We explore the relationship between agency and hedonic and evaluative dimensions of well-being, using data from the Gallup World Poll. We posit that individuals emphasize one well-being dimension over the other, depending on their agency. We test four hypotheses including whether: (i) positive levels of well-being in one dimension coexist with negative ones in another; and (ii) individuals place a different value on agency depending on their positions in the well-being and income distributions. We find that: (i) agency is more important to the evaluative well-being of respondents with more means; (ii) negative levels of hedonic well-being coexist with positive levels of evaluative well-being as people acquire agency; and (iii) both income and agency are less important to well-being at highest levels of the well-being distribution. We hope to contribute insight into one of the most complex and important components of well-being, namely, people's capacity to pursue fulfilling lives.
    Keywords: agency, capabilities, subjective well-being
    JEL: I14 G18 O5
    Date: 2013–09
    URL: http://d.repec.org/n?u=RePEc:hka:wpaper:2013-013&r=ltv
  3. By: John E. Roemer (Dept. of Political Science, Yale University); Alain Trannoy (GREQAM-IDEP)
    Abstract: This forthcoming chapter in the Handbook of Income Distribution (eds., A. Atkinson and F. Bourguignon) summarizes the literature on equality of opportunity. We begin by reviewing the philosophical debate concerning equality since Rawls (sections 1 and 2), present economic algorithms for computing policies which equalize opportunities, or, more generally, ways of ordering social policies with respect to their efficacy in opportunity equalization (sections 3, 4 and 5), apply the approach to the conceptualization of economic development (section 6), discuss dynamic issues (section 7), give a preamble to a discussion of empirical work (section 8), provide evidence of population views from surveys and experiments concerning conceptions of equality (section 9), and a discuss measurement issues, summarizing the empirical literature on inequality of opportunity to date (section 10). We conclude with mention of some critiques of the equal-opportunity approach, and some predictions (section 11).
    Keywords: Equality of opportunity, Responsibility, Circumstances, Effort, Veil of ignorance
    JEL: D3 D6 D63 H1
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1921&r=ltv
  4. By: Anabela Carneiro; Pedro Portugal; José Varejão
    Abstract: In this article we study the resilience of the Portuguese labor market, in terms of job flows, employment and wage developments, in the context of the current recession. We single out the huge contribution of job destruction, especially due to the closing of existing firms, to the dramatic decline of total employment and increase of the unemployment rate. We also document the very large increase in the incidence of minimum wage earners and nominal wage freezes. We explore three different channels that may have amplified the employment response to the great recession: the credit channel, the wage rigidity channel, and the labor market segmentation channel. We uncover what we believe is convincing evidence that the severity of credit constraints played a significant role in the current job destruction process. Wage rigidity is seen to be associated with lower net job creation and higher failure rates of firms. Finally, labor market segmentation seems to have favored a stronger job destruction that was facilitated by an increasing number of temporary workers.
    JEL: E24 J23 J63
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:ptu:wpaper:w201314&r=ltv
  5. By: Olivetti, Claudia (Boston University); Patacchini, Eleonora (Sapienza University of Rome); Zenou, Yves (Stockholm University)
    Abstract: This paper explores a novel mechanism of gender identity formation. Specifically, we explore how the work behavior of a teenager's own mother, as well as that of her friends' mothers, affect her work decisions in adulthood. The first mechanism is commonly included in economic models. The second, which in social psychology is also emphasized as an important factor in gender identity formation, has so far been overlooked. Accordingly, our key theoretical innovation is how the utility function is modeled. It is assumed that an adult woman's work decisions are influenced by her own mother's choices as well as her friends' mothers' choices when she was a teenager, and the interaction between the two. The empirical salience of this behavioral model is tested using a network model specification together with the longitudinal structure of the AddHealth data set. We find that both intergenerational channels positively affect a woman's work hours in adulthood, but the cross effect is negative, indicating the existence of cultural substitutability. That is, the mother's role model effect is larger the more distant she is (in terms of working hours) from the friends' mothers.
    Keywords: intergenerational transmission, gender identity, labor force participation, social networks
    JEL: J22 Z13
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7704&r=ltv
  6. By: Shelly Lundberg (University of California, Santa Barbara)
    Abstract: Research and policy discussion about the diverging fortunes of children from advantaged and disadvantaged households have focused on the skill disparities between these children-how they might arise and how they might be remediated. Analysis of data from the National Longitudinal Study of Adolescent Health reveals another important mechanism in the determinants of educational attainment-differential returns to skills for children in different circumstances. Though the returns to cognitive ability are generally consistent across family background groups, personality traits have very different effects on educational attainment for young men and women with access to different levels of parental resources. These results are consistent with a model in which the provision of focused effort in school is complementary with parental inputs while openness, associated with imagination and exploration, is a substitute for information provision by educated parents and thus contributes to resilience in low-resource environments. In designing interventions to improve outcomes for disadvantaged children, we need to be cognizant of interactions between a child's skills and their circumstances.
    Keywords: Education, inequality, personality
    JEL: I24 J24
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:hka:wpaper:2013-017&r=ltv
  7. By: Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova)
    Abstract: While it is well known that birth order affects educational attainment, less is known about its effects on earnings. Using data from eleven European countries for males born between 1935 and 1956, we show that firstborns enjoy on average a 13.7 percent premium over laterborns in their wage at labour market entry. However, this advantage is short lived, and disappears by age 30, between 10 and 15 years after labour market entry. While firstborns start with a better match, partly because of their higher education, laterborns quickly catch up by switching earlier and more frequently to better paying jobs. We argue that a key factor driving our findings is that laterborns are more likely to engage in risky behaviours.
    Keywords: birth order, earnings, risk aversion, Europe
    JEL: D13 J12 J24
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7679&r=ltv
  8. By: Aaberge, Rolf (Statistics Norway); Flood, Lennart (University of Gothenburg)
    Abstract: An essential difference between the design of the Swedish and the US in-work tax credit systems relates to their functional forms. Where the US earned income tax credit (EITC) is phased out and favours low and medium earnings, the Swedish system is not phased out and offers 17 and 7 per cent tax credit for low and medium low incomes and a lump-sum tax deduction equal to approximately 2300 USD for medium and higher incomes. The purpose of this paper is to evaluate the efficiency and distributional effects of these two alternative tax credit designs. We pay particular attention to labour market exclusion; i.e. individuals within as well as outside the labour force are included in the analysis. To highlight the importance of the joint effects from the tax and the benefit systems it appears particular relevant to analyse the labour supply behaviour of single mothers. To this end, we estimate a structural random utility model of labour supply and welfare participation. The model accounts for heterogeneity in consumption-leisure preferences as well as for heterogeneity and constraints in job opportunities. The results of the evaluation show that the Swedish system without phase-out generates substantial larger labour supply responses than the US version of the tax credit. Due to increased labour supply and decline in welfare participation we find that the Swedish reform is self-financing for single mothers, whereas a 10 per cent deficit follows from the adapted EITC version used in this study. However, where income inequality rises modestly under the Swedish tax credit system, the US version with phase-out leads to a significant reduction in the income inequality.
    Keywords: labour supply, single mothers, in-work tax credit, social assistance, random utility model
    JEL: J22 I38
    Date: 2013–10
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7706&r=ltv

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