nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2020‒09‒14
eight papers chosen by
Maximo Rossi
Universidad de la República

  1. Self-selection in physical and mental health among older intra-European migrants By Constant, Amelie F.; Milewski, Nadja
  2. Labour Productivity during the Great Depression and the Great Recession in UK Engineering and Metal Manufacture By Hart, Robert A.
  3. Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry By Adamopoulou, Effrosyni; Villanueva, Ernesto
  4. The Persistence of Socio-Emotional Skills: Life Cycle and Intergenerational Evidence By Orazio Attanasio; Aureo de Paula; Alessandro Toppeta
  5. Institutions, opportunism and prosocial behavior: Some experimental evidence By Antonio Cabrales; Irma Clots-Figueras; Roberto Hernan Gonzalez; Praveen Kujal
  6. A Structural Analysis of Mental Health and Labor Market Trajectories By Jolivet, Grégory; Postel-Vinay, Fabien
  7. Culture and Student Achievement: The Intertwined Roles of Patience and Risk-Taking By Eric A. Hanushek; Lavinia Kinne; Philipp Lergetporer; Ludger Woessmann
  8. Does the Dream of Home Ownership Rest upon Biased Beliefs? A Test Based on Predicted and Realized Life Satisfaction By Odermatt, Reto; Stutzer, Alois

  1. By: Constant, Amelie F. (UNU-MERIT, Maastricht University, GLO, and Princeton University); Milewski, Nadja (University of Rostock, GLO)
    Abstract: The Healthy Immigrant Paradox found in the literature by comparing the health of immigrants to that of natives in the host country, may suffer from serious cultural biases. Our study evades such biases by utilizing a destination-origin framework, in which we compare the health of emigrants to that of their compatriots who stay in the country of origin. Isolating cultural effects can best gauge self-selection and host country effects on the health of emigrants with longer time abroad. We study both the physical and mental dimensions of health among European-born emigrants over 50, who originate from seven European countries and now live elsewhere in Europe. We use the Survey of Health, Ageing and Retirement in Europe and apply multi-level modeling. Regarding the physical health we find positive self-selection, beneficial adaptation effects, and effects from other observables for some but not all countries. With the notable exception of the German émigrés, we cannot confirm selection in mental health, while additional years abroad have only weak effects. Overall, living abroad has some favorable effects on the health of older emigrants. The economic similarity of countries and the free intra-European mobility mitigate the need for initial self-selection in health and facilitate the migration experience abroad.
    Keywords: panel data, physical health, mental health, older population, emigrants, multi-level models, Europe
    JEL: C23 F22 J11 J14 J15 J61 I12 I14 O15 O52
    Date: 2020–08–27
  2. By: Hart, Robert A. (University of Stirling)
    Abstract: This paper compares labour productivity during the Great Depression (GD) and the Great Recession (GR) in engineering, metal working and allied industries. Throughout, it distinguishes between output per worker and output per hour. From the peak-to-trough of the GD cycle, hourly labour productivity was countercyclical, remaining above its 1929 starting point. In the GR peak-to-trough period, hourly productivity was procyclical, falling below its 2007/08 starting point. While employment and average weekly hours reductions were much more pronounced in the GD compared to the GR, the GD recovery was both stronger and more sustained. The discussion of the different experiences in the two eras concentrates on employment and hours flexibility, the comparative lengths of weekly hours, the behaviour of real wages, and human capital aspects of labour inputs.
    Keywords: labour productivity, Great Depression, Great Recession
    JEL: E32 J23 J24
    Date: 2020–07
  3. By: Adamopoulou, Effrosyni (University of Mannheim); Villanueva, Ernesto (Bank of Spain)
    Abstract: In several OECD countries employer federations and unions fix skill-specific wage floors for all workers in an industry. One view of those "explicit" contracts argues that the prevailing wage structure reflects the labor market conditions back at the time when those contracts were bargained, with little space for renegotiation. An alternative view stresses that only workers close to the minima are affected by wage floors and that the wage structure reacts to current labor market conditions. We disentangle both models using a novel dataset that combines more than 1,000 signature dates and 15,000 wage floors set in the metalworking industry with labor market histories of metalworkers drawn from Social Security records in Italy and Spain. An increase in the contemporaneous local unemployment rate of 1 p.p. diminished contemporaneous mean wages by about 0.45 p.p. between 2005 and 2013 in both countries. Instead, a 1 p.p. higher unemployment rate back at the time of contract renewal reduced wages by 0.07 p.p., an impact driven by wages close to the negotiated wage floors. Even though the evidence for earlier periods is mixed in Italy, the results do not support the view that the wage structure reflects labor market conditions at the time of bargaining. The response of wages to local unemployment was driven by reductions in complements and employee churning, although the elasticity falls short of the prediction of an off-the-shelf bargaining model.
    Keywords: minimum wages, collective contracts, Social Security data, spot market, explicit contracts, wage cyclicality
    JEL: J31 J38 J52
    Date: 2020–07
  4. By: Orazio Attanasio; Aureo de Paula; Alessandro Toppeta
    Abstract: This paper investigates the evolution of socio-emotional skills over the life cycle and across generations. We start by characterising the evolution of these skills in the first part of the life cycle. We then examine whether parents’ socio-emotional skills in early childhood rather than in adolescence are more predictive of their children’s socio-emotional skills. We exploit data from the 1970 British Cohort Study (BCS70) and focus on two dimensions of socioemotional skills: internalizing and externalizing skills, linked respectively to the ability of focusing attention and engaging in interpersonal activities. When looking at the evolution of socio-emotional skills over the life cycle, we notice a considerable amount of persistence which leads to a rejection of the simple Markov dynamic models often used in the literature. The BCS70 contains data on the skills of three generations. Moreover, the skills for cohort members and their children are not observed at the same calendar time, but at similar ages. We establish that parents’ and children’s socio-emotional skills during early childhood are comparable and estimate intergenerational mobility in socio-emotional skills, examining the link between the parent’s socio-emotional skills at age 5, 10 and 16 and the child’s socio-emotional skills between ages 3 and 16. We show that the magnitudes of intergenerational persistence estimates are smaller than the magnitude of intergenerational persistence estimates in occupation and income found for the United Kingdom. Finally, we estimate multi-generational persistence in socio-emotional skills and find that the grandmother’s internalizing skill correlates with the grandchild’s socio-emotional skills even after controlling for parental skills.
    Keywords: Intergenerational Mobility, Inequality, Socio-emotional Skills, Spectral gap mobility index
    JEL: J62 D63 I21 J24
    Date: 2020–09–03
  5. By: Antonio Cabrales (Universidad Carlos III de Madrid); Irma Clots-Figueras (University of Kent); Roberto Hernan Gonzalez (Burgundy School of Business); Praveen Kujal (Middlesex University)
    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
    Date: 2020–09
  6. By: Jolivet, Grégory (University of Bristol); Postel-Vinay, Fabien (University College London)
    Abstract: We conduct a joint dynamic analysis of individual labor market and mental health outcomes. We allow for a two-way interaction between work and mental health. We model selection in and out of employment as well as between jobs on a labor market with search frictions, where we account for the level of exposure to stress in each job using data on occupational health contents. We estimate our model on British data from Understanding Society combined with information from O*NET. We produce structural estimates of health dynamics as a function of job characteristics and of the effects of health and of job stress content on labor market decisions. We use our model to quantify the effects of job loss or health shocks that can propagate over the life cycle through both health and work channels. We also estimate the (large) values workers attach to health, employment or non-stressful jobs. Lastly, we investigate the consequences of structural labor market changes by evaluating the impact on health, employment and inequality of changes in the distribution of job health contents.
    Keywords: mental health, job search, life cycle
    JEL: I12 I14 J62 J64
    Date: 2020–07
  7. By: Eric A. Hanushek; Lavinia Kinne; Philipp Lergetporer; Ludger Woessmann
    Abstract: Patience and risk-taking – two cultural traits that steer intertemporal decision-making – are fundamental to human capital investment decisions. To understand how they contribute to international differences in student achievement, we combine PISA tests with the Global Preference Survey. We find that opposing effects of patience (positive) and risk-taking (negative) together account for two-thirds of the cross-country variation in student achievement. In an identification strategy addressing unobserved residence-country features, we find similar results when assigning migrant students their country-of-origin cultural traits in models with residence-country fixed effects. Associations of culture with family and school inputs suggest that both may act as channels.
    JEL: I21 Z10
    Date: 2020–07
  8. By: Odermatt, Reto (University of Basel); Stutzer, Alois (University of Basel)
    Abstract: The belief that home ownership makes people happy is probably one of the most widespread intuitive theories of happiness. However, whether it is accurate is an open question. Based on individual panel data, we explore whether home buyers systematically overestimate the life satisfaction associated with living in their privately owned property. To identify potential prediction errors, we compare people's forecasts of their life satisfaction in five years' time with their current realizations. We find that, while moving into a purchased dwelling is associated with higher life satisfaction, people systematically overestimate the long-term satisfaction gain. The misprediction therein is driven by people who follow extrinsically-oriented life goals, highlighting biased beliefs regarding own preferences as a relevant mechanism in the prediction errors.
    Keywords: beliefs, home ownership, housing tenure, life goals, life satisfaction, projection bias, subjective well-being, intuitive theories of happiness, utility prediction
    JEL: D12 D83 D90 I31 R20
    Date: 2020–07

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