nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2018‒07‒23
six papers chosen by
Maximo Rossi
Universidad de la República

  1. Everybody's a Victim? Global Terror, Well-Being and Political Attitudes By Akay, Alpaslan; Bargain, Olivier; Elsayed, Ahmed
  2. Wages and employment: The role of occupational skills By Girsberger, Esther Mirjam; Rinawi, Miriam; Krapf, Matthias
  3. Validating the Collective Model of Household Consumption Using Direct Evidence on Sharing By Olivier Bargain; Guy Lacroix; Luca Tiberti
  4. Intergenerational Altruism and Transfers of Time and Money: A Life-cycle Perspective By Uta Bolt; Eric French; Jamie Hentall Maccuish; Cormac O’Dea
  5. What do self - reports of wellbeing say about life - cycle theory and policy? By Angus Deaton
  6. The Supply of Skill and Endogenous Technical Change: Evidence From a College Expansion Reform By Pedro Carneiro; Kai Liu; Kjell Salvanes

  1. By: Akay, Alpaslan (University of Gothenburg); Bargain, Olivier (University of Bordeaux); Elsayed, Ahmed (IZA)
    Abstract: Terror has become a global issue. Terror acts perpetuated by religious, nationalist or political groups around the globe can propagate distress rapidly through different channels and possibly change political attitudes. This paper suggests the first evaluation of the impact of global terror on human welfare. We combine panel datasets for Australia, Germany, Russia, Switzerland, the UK and the US. Individual well-being information for 750,000 individual x year observations, recorded on precise dates, is matched with daily information on the 70,000 terror events that took place worldwide during 1994–2013. High-frequency data and quasi-random terror shocks of varying intensity provide the conditions for robust inference, while external validity is guaranteed by the use of large representative samples. We find a significantly negative effect of global terror on well-being, with a money-metric cost of around 6%–17% of national income. Among diffusion channels, stock markets and economic anticipations play a minimal role, while traditional media filter the most salient events. The effect is greatly modulated by the physical, genetic or cultural proximity to the terror regions/victims. For a subset of countries, we also show that global terror has significantly increased the intention to vote for conservative parties. Heterogeneity analyses point to the mediating effect of risk perception: individuals who exhibit stronger emotional responses to terror – possibly more exposed to potential threats – are also more likely to experience a conservative shift.
    Keywords: global terror, subjective well-being, media, political attitudes
    JEL: C99 D60 D72 D74 I31
    Date: 2018–06
  2. By: Girsberger, Esther Mirjam; Rinawi, Miriam; Krapf, Matthias (University of Basel)
    Abstract: How skills acquired in vocational education and training (VET) affect wages and employment is not clear. We develop and estimate a search and matching model for workers with a VET degree. Workers differ in interpersonal, cognitive and manual skills, while firms require and value different combinations of these skills. Assuming that match productivity exhibits worker-job complementarity, we estimate how interpersonal, cognitive and manual skills map into job offers, unemployment and wages. We find that firms value cognitive skills on average almost twice as much as interpersonal and manual skills, and they prize complementarity in cognitive and interpersonal skills. The average return to VET skills in hourly wages is 9%, similar to the returns to schooling. Furthermore, VET appears to improve labour market opportunities through higher job arrival rate and lower job destruction. Workers thus have large benefits from acquiring a VET degree.
    Keywords: Occupational training; vocational education; labor market search; sorting; multidimensional skills
    JEL: E24 J33 J24 J64
    Date: 2018–06–08
  3. By: Olivier Bargain; Guy Lacroix; Luca Tiberti
    Abstract: Recent advances in the collective model literature suggest ways to estimate the complete allocation of resources within households, using assignable goods and assuming adult preference similarity across demographic groups (or across spouses). While it makes welfare analysis at the individual level possible, the predictive power of the model is unknown. We propose the first validation of this approach, exploiting a unique dataset from Bangladesh in which the detailed expenditure on private goods by each family member is collected. Individualized expenditure allows us to test the identifying assumptions and to derive 'observed' resource sharing within families, which can be compared to the resource allocation predicted by the model. Sharing between parents and children is well predicted on average while the model detects key aspects like the extent of pro-boy discrimination. Results overall depend on the identifying good: clothing provides the best fit compared to other goods as it best validates the preference-similarity assumption. The model leads to accurate measures of child and adult poverty, indicating the size and direction of the mistakes made when using the traditional approach based on per adult equivalent expenditure (i.e. ignoring within-household inequality). This assessment of existing approaches to measure individual inequality and poverty is crucial for both academic and policy circles and militates in favor of a systematic use of collective models for welfare analyses.
    Keywords: Collective Model, Engel Curves, Rothbarth Method, Sharing rule.
    JEL: D11 D12 I31 J12
    Date: 2018
  4. By: Uta Bolt (University College London and Institute for Fiscal Studies); Eric French (University College London and Institute for Fiscal Studies); Jamie Hentall Maccuish (University College London); Cormac O’Dea (Yale University and Institute for Fiscal Studies)
    Abstract: Parental investments in children can take one of three broad forms: (1) Time investments during childhood and adolescence that aid child development, and in particular cognitive ability; (2) educational investments that improve school quality and hence educational outcomes; (3) cash investments in the form of inter vivos transfers and bequests. We develop a dynastic model of household decision-making with intergenerational altruism that nests a child production function, incorporates all three of these types of investments, and allows us to quantify their relative importance and estimate the strength of intergenerational altruism. Using British cohort data that follows individuals from birth to retirement, we ?nd that around 40% of di?erences in average lifetime income by paternal education are explained by ability at age 7, around 40% by subsequent divergence in ability and di?erent educational outcomes, and around 20% by inter vivos transfers and bequests received so far.
    Date: 2018–04
  5. By: Angus Deaton (Princeton University and University of Southern California)
    Abstract: I respond to Atkinson's plea to revive welfare economics, and to considering alternative ethical frameworks when making policy recommendations. I examine a measure of self-reported evaluative wellbeing, the Cantril Ladder, and use data from Gallup to examine well-being over the life-cycle. I assess the validity of the measure, and show that it is hard to reconcile with familiar theories of intertemporal choice. I find a worldwide optimism about the future; in spite of repeated evidence to the contrary, people consistently but irrationally predict they will be better off five years from now. The gap between future and current wellbeing diminishes with age, and in rich countries, is negative among the elderly. I also use the measure to think about income transfers by age and sex. Policies that give priority those with low incomes favor the young and the old, while utilitarian policies favor the middle aged, and men over women.
    JEL: A20 D60
    Date: 2018–02
  6. By: Pedro Carneiro (University College London); Kai Liu (University of Cambridge); Kjell Salvanes (Norges Handelshøyskole)
    Abstract: We examine the labor market consequences of an exogenous increase in the supply of skilled labor in several cities in Norway, resulting from the construction of new colleges in the 1970s. We find that skilled wages increased as a response, suggesting that along with an increase in the supply there was also an increase in demand for skill. We also show that college openings led to an increase in the productivity of skilled labor and investments in R&D. Our findings are consistent with models of endogenous technical change where an abundance of skilled workers may encourage firms to adopt skill-complementary technologies, leading to an upward-sloping long-run demand for skill.
    Keywords: labor market outcomes, returns to skill, technical change
    JEL: J08 J30 J24 O00
    Date: 2018–07

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