nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2020‒07‒27
nine papers chosen by

  1. Treatment Effects and the Measurement of Skills in a Prototypical Home Visiting Program By James J. Heckman; Bei Liu; LU Mai; Jin Zhou
  2. The Rise of US Earnings Inequality: Does the Cycle Drive the Trend? By Jonathan Heathcote; Fabrizio Perri; Giovanni L. Violante
  3. Institutions, Opportunism and Prosocial Behavior: Some Experimental Evidence By Antonio Cabrales; Irma Clots-Figueras; Roberto Hernán-González; Praveen Kujal
  4. Actors in the Child Development Process By Del Boca, Daniela; Flinn, Christopher J; Verriest, Ewout; Wiswall, Matthew
  5. The cost of being too patient By Giuliano, Paola; Sapienza, Paola
  6. Who demands labour (de)regulation in the developing world? Insiderâ??outsider theory revisited By Kanbur, Ravi; López-Cariboni, Santiago; Ronconi, Lucas
  7. Economic preferences across generations and family clusters: A large-scale experiment By Chowdhury, Shyamal; Sutter, Matthias; Zimmermann, Klaus F.
  8. Universal Basic Income: A Dynamic Assessment By Diego Daruich; Raquel Fernández
  9. Marriage, Fertility, and Cultural Integration in Italy By Bisin, Alberto; Tura, Giulia

  1. By: James J. Heckman (The University of Chicago); Bei Liu (China Development Research Foundation); LU Mai (China Development Research Foundation); Jin Zhou (Columbia University)
    Abstract: This paper evaluates the causal impacts of an early childhood home visiting program for which treatment is randomly assigned. We estimate multivariate latent skill profiles for individual children and compare treatments and controls. We identify average treatment effects of skills on performance in a variety of tasks. The program substantially improves child language and cognitive, fine motor, and social-emotional skills development. Impacts are especially strong in the most disadvantaged communities. We go beyond reporting treatment effects as unweighted sums of item scores. Instead, we examine how the program affects the latent skills generating item scores and how the program affects the mapping between skills and item scores. We find that enhancements in latent skills explain at least 90% of conventional unweighted treatment effects on language and cognitive tasks. The program enhances some components of the function mapping latent skills into item scores. This can be interpreted as a measure of enhanced productivity in using given bundles of skills to perform tasks. This source explains at most 10% of the average estimated treatment effects.
    Keywords: experiment, scaling, mechanisms, home visiting, measurement
    JEL: J13 Z18
    Date: 2020–06
  2. By: Jonathan Heathcote; Fabrizio Perri; Giovanni L. Violante
    Abstract: We document that declining hours worked are the primary driver of widening inequality in the bottom half of the male labor earnings distribution in the United States over the past 52 years. This decline in hours is heavily concentrated in recessions: hours and earnings at the bottom fall sharply in recessions and do not fully recover in subsequent expansions. Motivated by this evidence, we build a structural model to explore the possibility that recessions cause persistent increases in inequality; that is, that the cycle drives the trend. The model features skill-biased technical change, which implies a trend decline in low-skill wages relative to the value of non-market activities. With this adverse trend in the background, recessions imply a potential double-whammy for low skilled men. This group is disproportionately likely to experience unemployment, which further reduces skills and potential earnings via a scarring effect. As unemployed low skilled men give up job search, recessions generate surges in non-participation. Because non-participation is highly persistent, earnings inequality remains elevated long after the recession ends.
    JEL: E24 E32 J24 J31 J64 J65
    Date: 2020–06
  3. By: Antonio Cabrales; Irma Clots-Figueras; Roberto Hernán-González; Praveen Kujal
    Abstract: Formal or informal institutions have long been adopted by societies to protect against opportunistic behavior. However, we know very little about how these institutions are chosen and their impact on behavior. We experimentally investigate the demand for different levels of institutions that provide low to high levels of insurance and its subsequent impact on prosocial behavior. We conduct a large-scale online experiment where we add the possibility of purchasing insurance to safeguard against low reciprocity to the standard trust game. We compare two different mechanisms, the private (purchase) and the social (voting) choice of institutions. Whether voted or purchased, we find that there is demand for institutions in low trustworthiness groups, while high trustworthiness groups always demand lower levels of institutions. Lower levels of institutions are demanded when those who can benefit from opportunistic behavior, i.e. low trustworthiness individuals, can also vote for them. Importantly, the presence of insurance crowds out civic spirit even when subjects can choose the no insurance option: trustworthiness when formal institutions are available is lower than in their absence.
    Keywords: institutions, trust, trustworthiness, voting, insurance
    JEL: C92 D02 D64
    Date: 2020
  4. By: Del Boca, Daniela; Flinn, Christopher J; Verriest, Ewout; Wiswall, Matthew
    Abstract: We construct and estimate a model of child development in which both the parents and children make investments in the child's skill development. In each period of the development process, partially altruistic parents act as the Stackelberg leader and the child the follower when setting her own study time. We then extend this non-cooperative form of interaction by allowing parents to offer incentives to the child to increase her study time, at some monitoring cost. We show that this incentive scheme, a kind of internal conditional cash transfer,produces efficient outcomes and, in general, increases the child's cognitive ability. In addition to heterogeneity in resources (wage offers and non-labor income),the model allows for heterogeneity in preferences both for parents and children,and in monitoring costs. Like their parents, children are forward-looking, but we allow children and parents to have different preferences and for children to have age-varying discount rates, becoming more "patient" as they age. Using detailed time diary information on the allocation of parent and child time linked to measures of child cognitive ability, we estimate several versions of the model. Using model estimates, we explore the impact of various government income transfer policies on child development. As in Del Boca et al. (2016), we find that the most effective set of policies are (external) conditional cash transfers, in which the household receives an income transfer given that the child's cognitive ability exceeds a prespecified threshold. We find that the possibility of households using internal conditional cash transfers greatly increases the cost effectiveness of external conditional cash transfer policies.
    Keywords: child development; Household Labor Supply; Time allocation
    JEL: D1 J13
    Date: 2019–12
  5. By: Giuliano, Paola; Sapienza, Paola
    Abstract: We study the cost of being too patient on happiness. We find that the relationship between patience and various measures of subjective well-being is hump-shaped: it exists an optimal amount of patience that maximizes happiness. Beyond this optimal level, higher levels of patience have a negative impact on well-being.
    Keywords: Happiness; Patience
    JEL: A10 D9 Z1
    Date: 2020–01
  6. By: Kanbur, Ravi; López-Cariboni, Santiago; Ronconi, Lucas
    Abstract: Contrary to the predictions of the insiderâ??outsider model, we show that the large majority of outsiders in developing countries support, rather than oppose, protective labour regulations. This evidence holds across countries in different regions, across different types of protective labour regulations (i.e. severance payment, minimum wages, working time), and for different categories of outsiders (i.e. unemployed workers and employees without access to legally mandated labour benefits). We revise the economic and political assumptions of the insiderâ??outsider model, discussing their empirical relevance in a developing country context.
    Keywords: Fairness; informal; Labour; monopsony; Segmentation
    JEL: J4 J8 O17
    Date: 2020–01
  7. By: Chowdhury, Shyamal (University of Sydney, IZA Bonn); Sutter, Matthias (Max Planck Institute for Research on Collective Goods Bonn, University of Cologne and University of Innsbruck); Zimmermann, Klaus F. (Maastricht University, UNU-MERIT and GLO)
    Abstract: Economic preferences are important for lifetime outcomes such as educational achievements, health status, or labour market success. We present a holistic view of how economic preferences are related within families. In an experiment with 544 families (and 1,999 individuals) from rural Bangladesh we find a large degree of intergenerational persistence of economic preferences. Both mothers’ and fathers’ risk, time and social preferences are significantly (and largely to the same degree) positively correlated with their children’s economic preferences, even when controlling for personality traits and socio-economic background data. We discuss possible transmission channels for these relationships within families and find indications that there is more than pure genetics at work. Moving beyond an individual level analysis, we are the first to classify a whole family into one of two clusters, with either relatively patient, risk-tolerant and pro-social members or relatively impatient, risk averse and spiteful members. Socio-economic background variables correlate with the cluster to which a family belongs to.
    Keywords: Economic preferences within families, intergenerational transmission of preferences, time preferences, risk preferences, social preferences, family clusters, socio-economic status, Bangladesh, experiment
    JEL: C90 D1 D90 D81 D64 J13 J24 J62
    Date: 2020–07–06
  8. By: Diego Daruich; Raquel Fernández
    Abstract: The idea of universal basic income (UBI)—a set income that is given to all without any conditions— is making an important comeback but there is no real evidence regarding its long-term consequences. This paper provides a very inexpensive evaluation of such a policy by studying its dynamic consequences in a general equilibrium model with imperfect capital markets and labor market shocks, in which households make decisions about education, savings, labor supply, and with intergenerational linkages via skill formation. The steady state of the model is estimated to match US household data. We find that a UBI policy that gives all households a yearly income equivalent to the poverty line level has very different welfare implications for those alive when the policy is introduced relative to future generations. While a majority of adults (primarily older non-college workers) would vote in favor of introducing UBI, all future generations (operating behind the veil of ignorance) would prefer to live in an economy without UBI. The expense of the latter leads to lower skill formation and education, requiring even higher tax rates over time. Modeling automation as an increased probability of being hit by an “out-of-work” shock, the model is also used to provide insights on how the benefits of UBI change as the environment becomes riskier. The results suggest that UBI may be a useful transitional policy to help current individuals whose skills are more likely to become obsolete and are unprepared for the increased risk, while, simultaneously, education policies may be implemented to increase the likelihood that future cohorts remain productive and employed.
    JEL: H24 H31 I38 J24
    Date: 2020–06
  9. By: Bisin, Alberto; Tura, Giulia
    Abstract: We study the cultural integration of immigrants, estimating a structural model of marital matching along ethnic dimensions, exploring in detail the role of fertility, and possibly divorce in the integration process. We exploit rich administrative demographic data on the universe of marriages formed in Italy, as well as birth and separation records from 1995 to 2012. We estimate strong preferences of ethnic minorities' towards socialization of children to their own identity, identifying marital selection and fertility choices as fundamental socialization mechanisms. The estimated cultural intolerance of Italians towards immigrant minorities is also substantial. Turning to long-run simulations, we nd that cultural intolerances, as well as fertility and homogamy rates, slow-down the cultural integration of some immigrant ethnic minorities, especially Latin America, East Asia and Sub-Saharan Africa. Nonetheless, 75% of immigrants integrate into the majoritarian culture over the period of a generation. Interestingly, we show by counterfactual analysis that a lower cultural intolerance of Italians towards minorities would lead to slower cultural integration by allowing immigrants a more widespread use of their own language rather than Italian in heterogamous marriages. Finally, we quantitatively assess the effects of large future immigration inflows.
    Keywords: cultural transmission; integration; Intermarriage; Marital Matching
    JEL: D1 J12 J13 J15
    Date: 2019–12

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