nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2014‒06‒02
thirteen papers chosen by
Maximo Rossi
University of the Republic

  1. What Can Life Satisfaction Data Tell Us About Discrimination Against Sexual Minorities? A Structural Equation Model for Australia and the United Kingdom By Nattavudh Powdthavee; Mark Wooden
  2. Does grief transfer across generations? In-utero deaths and child outcomes By Black, Sandra; Devereux, Paul J.; Salvanes, Kjell G
  3. Cohort Size and Youth Employment Outcomes By Newhouse, David; Wolff, Claudia
  4. Individual and Societal Wisdom: Explaining the Paradox of Human Aging and High Well-Being By Jeste, Dilip V; Oswald, Andrew J
  5. Search, Flows, Job Creations and Destructions By Cahuc, Pierre
  6. Inequality and Effort: An Experiment on Competition Between Teams By Sean P. Hargreaves Heap; Abhijit Ramalingam; Siddharth Ramalingam; Brock V. Stoddard
  7. Exploring Trends in Labor Informality in Latin America, 1990-2010 By Leopoldo Tornarolli; Diego Battistón; Leonardo Gasparini; Pablo Gluzmann
  9. Private Notes on Gary Becker By Heckman, James J.
  10. Labor Market Policies and European Crises By Bertola, Giuseppe
  11. Intra-household Welfare By Pierre-Andre Chiappori; Costas Meghir
  12. When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times By David Cutler; Wei Huang; Adriana Lleras-Muney
  13. Intrahousehold Inequality By Pierre-Andre Chiappori; Costas Meghir

  1. By: Nattavudh Powdthavee; Mark Wooden
    Abstract: Very little is known about how the differential treatment of sexual minorities could influence subjective reports of overall well-being. This paper seeks to fill this gap. Data from two large surveys that provide nationally representative samples for two different countries - Australia (the HILDA Survey) and the UK (the UK Household Longitudinal Study) - are used to estimate a simultaneous equations model of life satisfaction. The model allows for self-reported sexual identity to influence a measure of life satisfaction both directly and indirectly through seven different channels: (i) income; (ii) employment; (iii) health (iv) partner relationships; (v) children; (vi) friendship networks; and (vii) education. Lesbian, gay and bisexual persons are found to be significantly less satisfied with their lives than otherwise comparable heterosexual persons. In both countries this is the result of a combination of direct and indirect effects.
    Keywords: Sexual orientation, sexual minorities, discrimination, life satisfaction, HILDA survey, UKHLS
    JEL: I31 J71
    Date: 2014–05
  2. By: Black, Sandra; Devereux, Paul J.; Salvanes, Kjell G
    Abstract: While much is now known about the effects of physical health shocks to pregnant women on the outcomes of the in-utero child, we know little about the effects of psychological stresses. One clear form of stress to the mother comes from the death of a parent. We examine the effects of the death of the mother’s parent during pregnancy on both the short-run and the long-run outcomes of the infant. Our primary specification involves using mother fixed effects—comparing the outcomes of two children with the same mother but where a parent of the mother died during one of the pregnancies—augmented with a control for whether there is a death around the time of the pregnancy in order to isolate true causal effects of a bereavement during pregnancy. We find small negative effects on birth outcomes, and these effects are bigger for boys than for girls. The effects on birth outcomes seems to be driven by deaths due to cardiovascular causes suggesting that sudden deaths are more difficult to deal with. However, we find no evidence of adverse effects on adult outcomes. The results are robust to alternative specifications.
    Keywords: fetal origins; Intergenerational Transmission
    JEL: J13
    Date: 2014–03
  3. By: Newhouse, David (World Bank); Wolff, Claudia (World Bank)
    Abstract: This paper utilizes a cross-country panel of 83 developing countries to examine how changes in cohort size are correlated with subsequent employment outcomes for workers at different ages. The results depend on countries' level of development. In low-income countries, young adults that are born into smaller cohorts are less likely to work, but school attendance remains unchanged. In middle-income countries, young adults in smaller cohorts are less likely to be unemployed and more likely to work outside of agriculture. Neither pattern can be discerned among older adults, although the estimates are imprecise. In sum, reductions in cohort size are associated with moderate improvements in employment outcomes for youth in middle-income countries, but there is scant evidence that these improvements persist into adulthood.
    Keywords: demographics, cohort size, youth employment, population
    JEL: O10 J11 J21
    Date: 2014–05
  4. By: Jeste, Dilip V (University of California, San Diego); Oswald, Andrew J (Department of Economics, University of Warwick)
    Abstract: Objective - Although human aging is characterized by loss of fertility and progressive decline in physical abilities, later life is associated with better psychological health and well-being. Furthermore, there has been an unprecedented increase in average lifespan over the past century without corresponding extensions of fertile and healthy age spans. We propose a possible explanation for these paradoxical phenomena. Method - We reviewed the relevant literature on aging, well-being, and wisdom. Results - An increase in specific components of individual wisdom in later life may make up for the loss of fertility as well as declining physical health. However, current data on the relationship between aging and individual wisdom are not consistent, and do not explain increased longevity in the general population during the past century. We propose that greater societal wisdom (including compassion) may account for the notable increase in average lifespan over the last century. Data in older adults with serious mental illnesses are limited, but suggest that many of them too experience improved psychosocial functioning, although their longevity has not yet increased, suggesting persistent stigma against mental illness and inadequate societal compassion. Conclusions - Research should focus on the reasons for discrepant findings related to age-associated changes in different components of individual wisdom; also, more work is needed on the construct of societal wisdom. Studies of wisdom and well-being are warranted in older people with serious mental illnesses, along with campaigns to enhance societal compassion for these disenfranchised individuals. Finally, effective interventions to enhance wisdom need to be developed and tested. Key words: Life-cycle happiness ; subjective well-being ; wisdom ; psychiatry ; U shape JEL classification: I31 ; D01 ; C18
    Date: 2014
  5. By: Cahuc, Pierre (Ecole Polytechnique, Paris)
    Abstract: This paper presents a short overview of dynamic models of labor markets with transaction costs. It shows that these models have deeply renewed the understanding of job search, job flows, job creations and destructions, unemployment and wage formation. It argues that this renewal provides a very useful toolkit for analyzing important economic policy issues such as the optimal level of unemployment benefits, the funding of unemployment insurance and the impact of employment protection legislation.
    Keywords: job search, job flows, workers flows, unemployment
    JEL: J6 J31 J38
    Date: 2014–05
  6. By: Sean P. Hargreaves Heap (University of East Anglia); Abhijit Ramalingam (University of East Anglia); Siddharth Ramalingam (Cambridge Associates); Brock V. Stoddard (Indiana University)
    Abstract: At least since Adam Smith, economists have recognized the beneficial effects of competition in markets. The possible positive influence of competition between teams on the free rider problem within teams is a more recent discovery. It is important because the free rider problem exists to some degree in most teams and because many outcomes in economic and social life depend on competition between teams. However, teams are rarely endowed equally and we do not know much about how such inequality affects the influence of competition on free riding. We address this question with an experiment. It is important not only because of the connections sketched above, but also because this is an overlooked aspect of how inequality impacts on society. We find that there is less free riding within teams when there is competition, that this is robust to moderate degrees of inequality but disappears when inequality is high.
    Date: 2013
  7. By: Leopoldo Tornarolli (CEDLAS, FCE - UNLP); Diego Battistón (CEDLAS, FCE - UNLP); Leonardo Gasparini (CEDLAS, FCE - UNLP); Pablo Gluzmann (CEDLAS, FCE - UNLP)
    Abstract: Labor informality is a pervasive characteristic of the labor markets in Latin America, and a central issue in the public policy debate. This paper discusses the concept of labor informality and implements alternative definitions using microdata from around 300 national household surveys in all Latin American countries. The analysis covers two decades: while labor informality, defined as lack of social protection related to employment, remained with few changes in the 1990s, there is a discernible downward pattern during the 2000s in most countries. These movements reveal a counter-cyclical behavior of labor informality, that may be linked to segmentation in the labor market.
    Date: 2014–05
  8. By: David Margolis (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Paris School of Economics - Université Paris I - Panthéon-Sorbonne, IZA - Institute for the Study of Labor, IZA - Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor) - Bonn Universität - University of Bonn)
    Abstract: The motivation for introducing statutory minimum wages in many developing countries is often threefold: poverty-reduction, social justice and growth. How well the policy succeeds in attaining these goals will depend on the national context and the numerous choices made when designing the policy. Institutional capacity in developing countries tends to be limited, so institutional arrangements must be adapted. Nevertheless, a statutory minimum wage appears to have the potential to help low- and middle-income countries advance toward the aforementioned development objectives, even in the face of weak enforcement capacity and pervasive informality.
    Keywords: Minimum wages; development; institutions; enforcement
    Date: 2013–11–01
  9. By: Heckman, James J. (University of Chicago)
    Abstract: This paper celebrates the life and contributions of Gary Becker (1930-2014).
    Keywords: human capital, human behavior, lifetime contributions, tribute
    JEL: B31 J24
    Date: 2014–05
  10. By: Bertola, Giuseppe
    Abstract: This paper studies theoretically and empirically why and how labor policies may reduce productivity and employment in order to stabilize labor incomes and redistribute resources. It proposes a specific stylized model where the tradeoffs facing labor policies are influenced by structural factors, inspects the empirical relevance of this mechanism in European data, and outlines the proposed theoretical perspective's implications for reform design in crisis-hit economies.
    Keywords: inequality; productivity; structural reforms
    JEL: D31 J0
    Date: 2013–10
  11. By: Pierre-Andre Chiappori (Columbia University); Costas Meghir (Cowles Foundation, Yale University)
    Abstract: In this paper we develop an approach to measuring inequality and poverty that recognizes the fact that individuals within households may have both different preferences and differential access to resources. We argue that a measure based on estimates of the sharing rule is inadequate as an approach that seeks to understand how welfare is distributed in the population because it ignores public good and the allocation of time to market work, leisure and household production. We develop a money metric measure of welfare that accounts for public goods (by using personalized prices) household production and for the allocation of time.
    Keywords: Family economics, Collective models, Labor supply, Income distribution, Home production
    JEL: D11 D12 D31 D63 H41 J12 J16 J22
    Date: 2014–05
  12. By: David Cutler; Wei Huang; Adriana Lleras-Muney
    Abstract: Using Eurobarometer data, we document large variation across European countries in education gradients in income, self-reported health, life satisfaction, obesity, smoking and drinking. While this variation has been documented previously, the reasons why the effect of education on income, health and health behaviors varies is not well understood. We build on previous literature documenting that cohorts graduating in bad times have lower wages and poorer health for many years after graduation, compared to those graduating in good times. We investigate whether more educated individuals suffer smaller income and health losses as a result of poor labor market conditions upon labor market entry. We confirm that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life. Further, education plays a protective role for these outcomes, especially when unemployment rates are high: the losses associated with poor labor market outcomes are substantially lower for more educated individuals. Variation in unemployment rates upon graduation can potentially explain a large fraction of the variance in gradients across different countries.
    JEL: I12 I20 J11
    Date: 2014–05
  13. By: Pierre-Andre Chiappori (Columbia University); Costas Meghir (Cowles Foundation, Yale University)
    Abstract: Studies of inequality often ignore resource allocation within the household. In doing so they miss an important element of the distribution of welfare that can vary dramatically depending on overall environmental and economic factors. Thus, measures of inequality that ignore intra household allocations are both incomplete and misleading. We discuss determinants of intra household allocation of resources and welfare. We show how the sharing rule, which characterizes the within household allocations, can be identified from data on household consumption and labor supply. We also argue that a measure based on estimates of the sharing rule is inadequate as an approach that seeks to understand how welfare is distributed in the population because it ignores public goods and the allocation of time to market work, leisure and household production. We discuss a money metric alternative, that fully characterizes the utility level reached by the agent. We then review the current literature on the estimation of the sharing rule based on a number of approaches, including the use of distribution factors as well as preference restrictions.
    Keywords: Family economics, Collective models, Labor supply, Income distribution, Home production
    JEL: D11 D12 D31 D63 H41 J12 J16 J22
    Date: 2014–05

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