nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2017‒07‒30
six papers chosen by
Maximo Rossi
Universidad de la República

  1. Going after the Addiction, Not the Addicted: The Impact of Drug Decriminalization in Portugal By Félix, Sónia; Portugal, Pedro; Tavares, Ana
  2. Identifying Agent's Information Sets: an Application to a Lifecycle Model of Schooling, Consumption and Labor Supply By Jin Zhou; Salvador Navarro
  3. The Unemployment Insurance Taxable Wage Base Mystery By Parsons, Donald O.
  4. The Effects of Provider Choice Policies on Workers' Compensation Costs By David Neumark; Bogdan Savych
  5. Understanding Cultural Persistence and Change By Paola Giuliano; Nathan Nunn
  6. The Value of Redistribution: Natural Resources and the Formation of Human Capital under Weak Institutions By Agüero, Jorge M.; Balcázar, Carlos Felipe; Maldonado, Stanislao; Nopo, Hugo R.

  1. By: Félix, Sónia (Banco de Portugal); Portugal, Pedro (Banco de Portugal); Tavares, Ana (Universidade Nova de Lisboa)
    Abstract: This paper investigates the impact of drug decriminalization in Portugal using the Synthetic Control Method. The applied econometric methodology compares Portuguese drug-related variables with the ones extracted from a convex combination of similar European countries. The results suggest that a policy change implemented in Portugal contributed to a decrease in the number of heroine and cocaine seizures, a decrease in the number of offenses and drug-related deaths, and a decrease in the number of clients entering treatment. Moreover, the policy change contributed to a reduction in the incidence of drug addicts among HIV individuals.
    Keywords: drug decriminalization policy, illicit drugs, synthetic control method
    JEL: C21 D04 K42
    Date: 2017–07
  2. By: Jin Zhou (University of Chicago); Salvador Navarro (University of Western Ontario)
    Abstract: We adapt the insight of Cunha, Heckman, and Navarro (2005) to develop a methodology that distinguishes information unknown to the econometrician but forecastable by the agent from information unknown to both, at each point in an agent's lifecycle. Predictable variability and uncertainty have dierent implications in terms of welfare, especially when markets are incomplete. We apply our procedure in the context of an incomplete markets lifecycle model of consumption, labor supply, and schooling decisions, when borrowing limits arise from repayment constraints. Using microdata on earnings, hours worked, schooling choices, and consumption of white males in the US, we infer the agent's information set. We then estimate the model using the identied agent's information set. We find that 52% and 56% of the variance of college and high school log wages respectively are predictable by the agent at the time schooling choices are made. When we complete the market, college attendance increases from 48% to 59%, about half of this increase is due to uncertainty, and the other half because of the borrowing limits. To illustrate the importance of assumptions about what is forecastable by the agent, we simulate a minimum wage insurance policy under dierent assumptions about the information available to the agents in the model. When we allow for asymmetric information between the insurance institution and the individual, adverse selection turns prots negative. Consumer welfare, however, increases by about 28% when we give individuals access to their estimated information set regardless of asymmetries.
    Date: 2017
  3. By: Parsons, Donald O. (George Washington University)
    Abstract: Unemployment insurance experts lament the low Federal taxable wage base (TWB), last increased to $7000 per worker in 1982. The Federal TWB sets only a system minimum and by 2014 all but two states had TWBs that exceeded the minimum, opening up state TWB choice for study. States do align TWB with state payroll earnings. Indeed TWB/WAGE ratios within states have been remarkably stable for decades, though the ratio varies dramatically across states. Critics seem especially concerned about the tax regressivity of low TWBs, but the hypothesis that more progressive states choose less regressive (higher) TWBs is flatly rejected by the data. Earlier UI analysts focused on employer insurance equity, and the resistance of low cost, high-wage (stable) employers to subsidizing high cost, low-wage (unstable) employers. These analysts provided convincing evidence that (i) employers believed this to be the key issue, and (ii) the TWB did redistribute the insurance premium burden in the hypothesized direction. Across states – wage levels constant – economies characterized by greater income inequality and a preponderance of large (low turnover) firms are associated with lower TWBs. Apparently critics were right to imagine a link between wages and the TWB, but ignored the fact that this matching could be done better across location.
    Keywords: unemployment insurance, taxable wage base, experience rating
    JEL: J65 J41 J33
    Date: 2017–07
  4. By: David Neumark; Bogdan Savych
    Abstract: We examine the effects of provider choice policies on workers’ compensation medical and indemnity costs. We find no difference in average medical costs between states where policies give employers control over the choice of provider and states where policies instead give workers the most control. But a richer distributional analysis indicates that developed medical costs for the costliest cases are higher in states where policies give workers more control over provider choice. We find similar evidence for indemnity costs, although the point estimates also indicate (statistically insignificantly) higher average costs where policy gives workers the most control over provider choice. Overall, the evidence suggests little relationship between provider choice policies and average medical or indemnity costs, but a higher incidence of high-cost cases when policies give workers more control of the choice of provider.
    JEL: H7 I18
    Date: 2017–07
  5. By: Paola Giuliano; Nathan Nunn
    Abstract: When does culture persist and when does it change? We examine a determinant that has been put forth in the anthropology literature: the variability of the environment from one generation to the next. A prediction, which emerges from a class of existing models from evolutionary anthropology, is that following the customs of the previous generation is relatively more beneficial in stable environments where the culture that has evolved up to the previous generation is more likely to be relevant for the subsequent generation. We test this hypothesis by measuring the variability of average temperature across 20-year generations from 500–1900. Looking across countries, ethnic groups, and the descendants of immigrants, we find that populations with ancestors who lived in environments with more stability from one generation to the next place a greater importance in maintaining tradition today. These populations also exhibit more persistence in their traditions over time.
    JEL: N10 Q54 Z1
    Date: 2017–07
  6. By: Agüero, Jorge M. (University of Connecticut); Balcázar, Carlos Felipe (World Bank); Maldonado, Stanislao (Universidad del Rosario); Nopo, Hugo R. (GRADE)
    Abstract: We exploit time and spatial variation generated by the commodities boom to measure the effect of natural resources on human capital formation in Peru, a country with low governance indicators. Combining test scores from over two million students and district-level administrative data on mining production and the redistribution of mining taxes to local governments, we find no effect from production. However, redistribution of mining taxes increases math test scores by 0.23 standard deviations. We identify the improvements in the quality of teachers and in school infrastructure, together with increases in adult employment and health outcomes of adults and children, as key mechanisms from the redistribution. Policy implications for the avoidance of the natural resource curse are discussed.
    Keywords: resource booms, academic achievement, intergovernmental transfers
    JEL: H7 H23 I25 O15 Q32
    Date: 2017–07

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