New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2014‒01‒24
nine papers chosen by

  1. Adaptation to Poverty in Long-Run Panel Data By Andrew E. Clark; Conchita D'ambrosio; Simone Ghislandi
  2. Returns to Skills around the World: Evidence from PIAAC By Hanushek, Eric A.; Schwerdt, Guido; Wiederhold, Simon; Woessmann, Ludger
  3. Eastern Partnership Migrants in Germany: Outcomes, Potentials and Challenges By Biavaschi, Costanza; Zimmermann, Klaus F.
  4. Social Insurance, Informality and Labor Markets: How to Protect Workers While Creating Good Jobs By Pagés, Carmen; Rigolini, Jamele; Robalino, David A.
  5. Growth in Within Graduate Wage Inequality: The Role of Subjects, Cognitive Skill Dispersion and Occupational Concentration By Joanne Lindley; Steven McIntosh
  6. Explaining Well-Being over the Life Cycle: A Look at Life Transitions during Young Adulthood By Switek, Malgorzata
  7. Home Sweet Home? Macroeconomic Conditions in Home Countries and the Well-Being of Migrants By Akay, Alpaslan; Bargain, Olivier; Zimmermann, Klaus F.
  8. Equality under Threat by the Talented: Evidence from Worker-Managed Firms By Burdín, Gabriel
  9. Youth Unemployment in Southern Europe By João Leão; Guida Nogueira

  1. By: Andrew E. Clark (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA)); Conchita D'ambrosio (Université du Luxembourg - Université du Luxembourg); Simone Ghislandi (Università commerciale Luigi Bocconi - Università commerciale Luigi Bocconi)
    Abstract: We consider the link between poverty and subjective well-being, and focus in particular on potential adaptation to poverty. We use panel data on almost 45,800 individuals living in Germany from 1992 to 2011 to show first that life satisfaction falls with both the incidence and intensity of contemporaneous poverty. We then reveal that there is little evidence of adaptation within a poverty spell: poverty starts bad and stays bad in terms of subjective well-being. We cannot identify any causes of poverty entry which are unambiguously associated with adaptation to poverty.
    Keywords: Income ; Poverty ; Subjective well-being ; SOEP
    Date: 2014–01
  2. By: Hanushek, Eric A. (Stanford University); Schwerdt, Guido (Ifo Institute for Economic Research); Wiederhold, Simon (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard-deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.
    Keywords: cognitive skills, education, labor market, earnings, international comparisons
    JEL: J31 I20
    Date: 2013–12
  3. By: Biavaschi, Costanza (IZA); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: Despite the ongoing dialogue on facilitating mobility between the European Union and the Eastern Partnership (EaP) countries, very little is known about the magnitude and characteristics of migration from these countries. We find that EaP migrants experience worse labor market outcomes than other migrant groups, but current and potential migrants hold qualifications in those areas were skill shortages are expected. Therefore, the monitoring and supervision of EaP integration will be consequential in order to understand how much of the current brain waste is driven by poor assessment of foreign qualifications, and to unleash the potential of migration for the German economy.
    Keywords: brain waste, eastern partnership countries, labor mobility, foreign qualifications
    JEL: J15 J24 J61 J62
    Date: 2013–12
  4. By: Pagés, Carmen (Inter-American Development Bank); Rigolini, Jamele (World Bank); Robalino, David A. (World Bank)
    Abstract: This paper provides an overview of the main findings of the book "Social Insurance and Labor Markets: How to Protect Workers While Creating New Jobs." The book conceptualizes and reviews the empirical evidence on the potential distortions that the social insurance system of a country can have on the supply and demand side of the labor market, and proposes options to address them. The overall message is that current Bismarckian systems are inadequate to extend coverage to the entire labor force of a country and that, at the same time, can affect the level and structure of employment – for instance, by promoting informality and reducing participation rates. These effects can be important enough to deserve consideration in policy discussion. In part, they are explained by a series of explicit and implicit taxes and subsidies that emerge as part of the design of health insurance, pensions, and unemployment benefits programs. Going forward, there a few general principles that countries can follow to expand coverage while reducing potential distortions in labor markets. First, giving more flexibility to individuals in the choice of the bundle of social insurance programs, the level of benefits, and the portfolio of investments (in the case of savings programs), while providing better information and incentives to enroll. Second, relying on explicit, integrated, and in some circumstances means-tested redistributive arrangements in order to better contribute to reduce poverty and inequality. Finally, from the point of view of labor markets, by aiming to reduce perceived tax-wedges. This could be done by better linking contributions to benefits, improving the quality of services, and financing redistributive arrangements through general revenues.
    Keywords: social insurance, pensions, informality, pay-roll taxes, redistribution, labor markets
    JEL: J3 J6 H2 H3 I3 D3
    Date: 2013–12
  5. By: Joanne Lindley (Department of Management, Faculty of Social Science and Public Policy, King’s College); Steven McIntosh (Department of Economics, The University of Sheffield)
    Abstract: UK graduate wage inequality has increased over the previous three decades. This paper demonstrates that most of the growth has occurred within degree subjects, with the largest occurring in non-STEM subjects. The paper therefore investigates two potential explanations. The first is the increase in the variance of childhood cognitive test scores amogst graduates in the same subject. This increase differs across subjects, and is again in the non-STEM subjects where the variance of test scores has increased the most, especially during the second period of rapid higher education expansion in the 1990s. The second potential explanation explored is the fall in the occupational concentration of subjects. Graduates of some subjects (like Medicine and Education) are highly concentrated into only a few jobs whereas others are much more widely dispersed. Generally, all subjects have become more widely dispersed across occupations over time, but some more so than others. The paper then shows that both of these factors have played a role in explaining growing graduate wage inequality within subjects, though the largest is by far from the widening in the variance of test scores. The path of graduate wage inequality would have been relatively flat without the accompanying increase in the variance of cognitive skills.
    Keywords: wage inequality; subject of degree; graduates
    JEL: J2 J24 J31
    Date: 2014
  6. By: Switek, Malgorzata (University of Southern California)
    Abstract: Early adulthood is a time of important transitions that shape the future of young adults. How do these transitions affect well-being, and to what degree can they account for the life satisfaction path followed during young adulthood? To answer these questions, longitudinal data from the Swedish Young Adult Panel Study are used for three cohorts interviewed in 1999, 2003, and 2009. Four age intervals covering ages 22 through 40 are constructed. The well-being changes and the main transitions undergone during each age interval are examined. Life satisfaction at ages 22 to 40 follows a slight inverse U-shape peaking around age 30/32 and declining thereafter. The common transition pattern during this time is represented by young adults ages 22 through 30/32 going mainly through partnership (marriage or cohabitation) formation, the school-to-work transition, and the early years of parenting. After age 30 parenting continues as an important life transition, and is joined by an increase in partnership dissolution. This set of transitions alone is found to account for the inverse U-shape of overall life satisfaction. Partnership formation, the school-to-work transition, and parenting younger children are all associated with increasing life satisfaction, mainly through their positive relationship with the financial, and family domains of well-being. After age 30, the monetary burdens, and strains on relationship with partner associated with parenting older children start to set in, and life satisfaction begins to decline.
    Keywords: life satisfaction, young adults, partnership formation, partnership dissolution, parenting, school-to-work transition
    JEL: A12 D60 I31 J10
    Date: 2013–12
  7. By: Akay, Alpaslan (University of Gothenburg); Bargain, Olivier (University of Aix-Marseille II); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: This paper examines whether the subjective well-being of migrants is responsive to fluctuations in macroeconomic conditions in their country of origin. Using the German Socio-Economic Panel for the years 1984 to 2009 and macroeconomic variables for 24 countries of origin, we exploit country-year variation for identification of the effect and panel data to control for migrants' observed and unobserved characteristics. We find strong (mild) evidence that migrants' well-being responds negatively (positively) to an increase in the GDP (unemployment rate) of their home country. That is, we originally demonstrate that migrants regard home countries as natural comparators and, thereby, suggest an original assessment of the migration's relative deprivation motive. We also show that migrants are positively affected by the performances of the German regions in which they live (a 'signal effect'). We demonstrate that both effects decline with years-since-migration and with the degree of assimilation in Germany, which is consistent with a switch of migrants' reference point from home countries to migration destinations. Results are robust to the inclusion of country-time trends, to control for remittances sent to relatives in home countries and to a correction for selection into return migration. We derive important implications for labor market and migration policies.
    Keywords: migrants, well-being, GDP, unemployment, relative concerns/deprivation
    JEL: C90 D63
    Date: 2013–12
  8. By: Burdín, Gabriel (IECON, Universidad de la República)
    Abstract: Are high-ability individuals more likely to quit egalitarian regimes? Does the threat of exit by talented individuals restrict the redistributive capacity of democratic organizations? This paper revisits that long-standing debate by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The study exploits two novel administrative data sources: a panel of Uruguayan workers employed in both worker-managed and conventional firms; and a linked employer–employee panel data set covering the population of Uruguayan worker-managed firms and their workers from January 1997 to April 2010. A key advantage of the data is that it enables one to exploit within-firm variation on wages to construct an ordinal measure of the worker ability type. The paper's four main findings are that (1) worker-managed firms redistribute in favor of low-wage workers; (2) in worker-managed firms, high-ability members are more likely than other members to exit; (3) the hazard ratio of high-ability members is lower for founding members and for those employed by worker-managed firms in which there is less pay compression; and (4) high-ability members are less likely to quit when labor market conditions in the capitalist sector are less attractive. This paper contributes to the study of the interplay between equality and incentives that permeates many debates in public finance, comparative economic systems, personnel and organizational economics.
    Keywords: labor managed firms, redistribution, compensation structure, job mobility
    JEL: H00 J54 J62 M52 P0
    Date: 2013–12
  9. By: João Leão (Office for Strategy and Studies (GEE), Portuguese Ministry of Economy; ISCTE- University Institute of Lisbon); Guida Nogueira (Office for Strategy and Studies (GEE), Portuguese Ministry of Economy)
    Abstract: The youth unemployment rate in Europe increased to very high levels after the great recession of 2008, reaching 23% in European Union and 45% in southern European countries. We examine the causes of the high youth unemployment rate which is consistently bigger than the overall unemployment rate. The empirical evidence shows that the youth unemployment rate depends crucially of the level of the overall unemployment rate and on the variation of the unemployment rate.
    Keywords: Keywords: Southern Europe, unemployment, youth unemployment.
    JEL: E24 J64 J13
    Date: 2013–12

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