nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2021‒05‒03
twelve papers chosen by
Maximo Rossi
Universidad de la República

  1. The Pink Tide and Inequality in Latin America By Gérman Feierherd; Patricio Larroulet; Wei Long; Nora Lustig
  2. Culture and Student Achievement: The Intertwined Roles of Patience and Risk-Taking By Hanushek, Eric A.; Kinne, Lavinia; Lergetporer, Philipp; Woessmann, Ludger
  3. Unions Increase Job Satisfaction in the United States By Ben Artz; David G. Blanchflower; Alex Bryson
  4. Working Beyond the Normal Retirement Age in Urban China and Urban Russia By Gustafsson, Björn Anders; Nivorozhkina, Ludmila; Wan, Haiyuan
  5. Expecting Better? How Young People Form Their Earnings Expectations By Favara, Marta; Glewwe, Paul; Porter, Catherine; Sanchez, Alan
  6. Trends in Intergenerational Home Ownership and Wealth Transmission By Jo Blanden; Andrew Eyles; Stephen Machin
  7. Social Networks with Mismeasured Links By Arthur Lewbel; Xi Qu; Xun Tang
  8. Pandemic Policy and Life Satisfaction in Europe By Andrew E. Clark; Anthony Lepinteur
  9. Infant Health, Cognitive Performance and Earnings : Evidence from Inception of the Welfare State in Sweden By Bhalotra, Sonia; Martin Karlsson; Therese Nilsson; Schwarz, Nina
  10. Trade and Informality in the Presence of Labor Market Frictions and Regulations By Rafael Dix-Carneiro; Pinelopi Koujianou Goldberg; Costas Meghir; Gabriel Ulyssea
  11. The Separation and Reunification of Germany: Rethinking a Natural Experiment Interpretation of the Enduring Effects of Communism By Becker, Sascha O.; Mergele, Lukas; Woessmann, Ludger
  12. Beliefs About Racial Discrimination and Support for Pro-Black Policies By Haaland, Ingar; Roth, Christopher

  1. By: Gérman Feierherd; Patricio Larroulet; Wei Long; Nora Lustig (Stone Center for Latin American Studies, Department of Economics, Tulane University, Commitment to Equity Institute (CEQ).)
    Abstract: Latin American countries experienced a significant reduction in income inequality at the turn of the 21st century. From the early 2000s to around 2012, the average Gini coefficient fell from 0.514 to 0.476. The period of falling inequality coincided with leftist presidential candidates achieving electoral victories across the region: by 2009, ten of the seventeen countries had a leftist president – the so-called Pink Tide. We investigate whether there was a “leftist premium” on the decline in inequality and, if there was one, through which mechanisms. Using a range of econometric models, inequality measurements, and samples, we find evidence that leftist governments lowered income inequality faster than non-leftist regimes, increasing the income share captured by the first seven deciles at the expense of the top ten percent. Our analysis suggests that this reduction was achieved by increasing social pensions, minimum wages, and tax revenue.
    Keywords: income inequality, government ideology, Latin America, redistribution, direct transfers, minimum wage, taxation
    JEL: O1 D72 D63 I38 N36 H20
    Date: 2021–03
  2. By: Hanushek, Eric A. (Stanford University); Kinne, Lavinia (ifo Institute); Lergetporer, Philipp (ifo Institute); Woessmann, Ludger (LMU Munich & ifo Institute)
    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.
    Keywords: culture; patience; risk-taking; preferences; intertemporal decision-making; international student achievement; PISA;
    JEL: I21 Z10
    Date: 2020–07–08
  3. By: Ben Artz (University of Wisconsin, Oshkosh); David G. Blanchflower (Bruce V. Rauner Professor of Economics, Dartmouth College, Adam Smith Business School, University of Glasgow, NBER and Bloomberg); Alex Bryson (University College London. IZA, Bonn. NIESR, London)
    Abstract: In this paper we revisit the well-known negative association between union coverage and individuals’ job satisfaction in the United States, first identified over forty years ago. We find the association has flipped since the Great Recession such that union workers are now more satisfied than their non-union counterparts. We show this to be the case for younger and older workers in the National Longitudinal Surveys of 1979 and 1997. The change is apparent when we use the panel data to account for fixed differences in those who are and are not unionized, suggesting changes in worker sorting into union status are not the reason for the change. The absence of substantial change in the union wage gap, and the stability of results when conditioning on wages, both suggest the change is not associated with changes in unions’ wage bargaining. Instead, we find some diminution in unions’ ability to lower quit rates – albeit confined to older workers - which is suggestive of a decline in their effectiveness in operating as a ‘voice’ mechanism for unionized workers. We also present evidence suggestive of unions’ ability to minimize covered workers’ exposure to underemployment, a phenomenon that has negatively impacted non-union workers.
    Keywords: job satisfaction; union coverage; union wage gap; quits; underemployment; panel; NLSY
    JEL: J28 J50 J51
    Date: 2021–04–01
  4. By: Gustafsson, Björn Anders (University of Gothenburg); Nivorozhkina, Ludmila (Rostov State Economic University); Wan, Haiyuan (Beijing Normal University)
    Abstract: The incidence of working for earnings beyond the normal pension age of 55 for females and 60 for males in urban China and Russia is investigated using micro-data for 2002, 2013, and 2018. Estimated logit models show that, in both countries, the probability of working after normal retirement age is positively related to living with a spouse only, being healthy, and having a higher education level but is negatively associated with age, the scale of pension and, in urban China, being female. We find that seniors in urban Russia are more likely to work for earnings than their counterparts in China. Two possible reasons for this difference are ruled out: cross-country differences in health status and the age distribution among elderly people. We also show that working beyond the normal retirement age has a much stronger negative association with earnings in urban China than in urban Russia. This is consistent with the facts that the normal retirement age is strictly enforced in urban China and seniors attempting to work face intensive competition from younger migrant workers. We conclude that China can learn from Russia that it has a substantial potential for increasing employment among healthy people under 70.
    Keywords: retirement, older people, employment, China, Russia, labour market
    JEL: E24 J14 J J3 P52
    Date: 2021–04
  5. By: Favara, Marta (University of Oxford); Glewwe, Paul (University of Minnesota); Porter, Catherine (Lancaster University); Sanchez, Alan (Group for the Analysis od Development (GRADE))
    Abstract: Education choices are made based on the expected returns to schooling. If individuals are badly informed, they may make inefficient choices. We directly elicit young people's subjective expectations at the age of 14-15 about earnings under different educational scenarios and find these predict university enrolment by the age of 18-19. Females expect lower earnings than males, likely anticipating the reality of the labour market. Living in a poorer household, weaker numeric skills and lower self-efficacy are also associated with lower expected returns to education. Comparing expectations with the actual earnings from a nationally representative sample of individuals matched by sex, region and place of residence, we find that expectations for earnings upon completing secondary education closely match observed earnings, while there is a tendency to overestimate the returns to completing a university degree. These results hold for both males and females although with considerable variation across regions and population subgroups.
    Keywords: subjective expectations, earning realizations, Young Lives, Peru
    JEL: I2 J22 J24
    Date: 2021–04
  6. By: Jo Blanden (School of Economics, University of Surrey); Andrew Eyles (Department of Economics, University College London); Stephen Machin (Centre for Economic Performance, London School of Economics)
    Abstract: Prior research on trends in intergenerational mobility in economic status has focused chiefly on income and earnings. There is hardly any research on trends in intergenerational wealth transmission, at least in part because of the rarity of cross- generational data with wealth measures good enough for a cross-time analysis to be undertaken. In the intergenerational setting, housing tenure data is more widely available than good data on total wealth. This paper uses cross-time changes in intergenerational associations in home ownership to generate evidence on trends in intergenerational wealth mobility. Both home ownership and the value of main residence are shown to be strongly associated with wealth accumulation. The strength of the intergenerational link in home ownership in the UK has grown over time and, as parental home ownership displays a strong relationship with an individual's future wealth, this can be informative about trends in intergenerational wealth transmission. Taken together, the results indicate that intergenerational wealth transmission has strengthened over time in Britain.
    Keywords: Housing, intergenerational mobility, wealth, cohorts.
    JEL: R31 J11 D31 J62
    Date: 2021–04
  7. By: Arthur Lewbel (Boston College); Xi Qu (Shanghai Jiao Tong University); Xun Tang (Rice University)
    Abstract: We consider estimation of peer effects in social network models where some network links are incorrectly measured. We show that if the number of mismeasured links does not grow too quickly with the sample size, then standard instrumental variables estimators that ignore the measurement error remain consistent, and standard asymptotic inference methods remain valid. These results hold even when measurement errors in the links are correlated with regressors, or with the model errors. Monte Carlo simulations and real data experiments confirm our results in finite samples. These findings imply that researchers can ignore small amounts of measurement errors in networks.
    Keywords: Social networks, Peer e§ects, MisclassiÖed links, Missing links, Mismeasured network
    JEL: C31 C51
    Date: 2021–04–28
  8. By: Andrew E. Clark (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Anthony Lepinteur (University of Luxembourg [Luxembourg])
    Abstract: We use data from the COME-HERE longitudinal survey collected by the University of Luxembourg to assess the effects of the policy responses to the COVID-19 pandemic on life satisfaction in France, Germany, Italy, Spain and Sweden over the course of 2020. Policy responses are measured by the Stringency Index and the Economic Support Index from the Blavatnik School of Government. Stringency is systematically associated with lower life satisfaction, controlling for the intensity of the pandemic itself. This stringency effect is larger for women, those with weak ties to the labour market, and in richer households. The effect of the Economic Support is never statistically different from zero.
    Keywords: COVID-19,Life Satisfaction,Policy Stringency,Economic Support COVID-19,Economic Support.
    Date: 2021–04
  9. By: Bhalotra, Sonia (University of Essex & University of Warwick); Martin Karlsson (CINCH, University of Duisburg-Essen); Therese Nilsson (Lund University, Research Institute of Industrial Economics (IFN)); Schwarz, Nina (University of Duisburg-Essen)
    Abstract: We identify earnings impacts of exposure to an infant health intervention in Sweden, using individual linked administrative data to trace potential mechanisms. Leveraging quasi-random variation in eligibility, we estimate that exposure was associated with higher test scores in primary school for boys and girls. However only girls were more likely to score in the top quintile. Subsequent gains, in secondary schooling, employment, and earnings, are restricted to girls. We show that the differential gains for women accrued from both skills and opportunities, expansion of the welfare state having created unprecedented employment opportunities for women.
    Keywords: Infant health ; early life interventions ; cognitive skills ; education ; earnings ; occupational choice ; programme evaluation ; Sweden ; gender JEL Classification: I15 ; I18 ; H41
    Date: 2021
  10. By: Rafael Dix-Carneiro (Duke University and NBER); Pinelopi Koujianou Goldberg (Yale University); Costas Meghir (Yale University); Gabriel Ulyssea (University College of London)
    Abstract: We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show the following: 1) Trade openness unambiguously decreases informality in the tradable sector but has ambiguous effects on aggregate informality. 2) The productivity gains from trade are understated when the informal sector is omitted. 3) Trade openness results in large welfare gains even when informality is repressed. 4) Repressing informality increases productivity but at the expense of employment and welfare. 5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. 6) The informal sector works as an “unemployment buffer” but not a “welfare buffer” in the event of negative economic shocks.
    Keywords: Labor market effects of trade, Informality, Unemployment
    JEL: F14 F16 J46 O17
    Date: 2021–04
  11. By: Becker, Sascha O. (Monash University); Mergele, Lukas (ifo Institute); Woessmann, Ludger (LMU Munich & ifo Institute)
    Abstract: German separation in 1949 into a communist East and a capitalist West and their reunification in 1990 are commonly described as a natural experiment to study the enduring effects of communism. We show in three steps that the populations in East and West Germany were far from being randomly selected treatment and control groups. First, the later border is already visible in many socio-economic characteristics in pre-World War II data. Second, World War II and the subsequent occupying forces affected East and West differently. Third, a selective fifth of the population fled from East to West Germany before the building of the Wall in 1961. In light of our findings, we propose a more cautious interpretation of the extensive literature on the enduring effects of communist systems on economic outcomes, political preferences, cultural traits, and gender roles.
    Keywords: political systems; communism; preferences; culture; Germany;
    JEL: D72 H11 P26 P36 N44
    Date: 2020–03–09
  12. By: Haaland, Ingar (University of Bergen and CESifo); Roth, Christopher (University of Warwick, briq, CESifo, CEPR, and CAGE)
    Abstract: This paper provides representative evidence on beliefs about racial discrimination and examines whether information causally affects support for pro-black policies. Eliciting quantitative beliefs about the extent of hiring discrimination against blacks, we uncover large disagreement about the extent of racial discrimination with particularly pronounced partisan differences. An information treatment leads to a convergence in beliefs about racial discrimination but does not lead to a similar convergence in support of pro-black policies. The results demonstrate that while providing information can substantially reduce disagreement about the extent of racial discrimination, it is not sufficient to reduce disagreement about pro-black policies.
    Keywords: Racial Discrimination, Beliefs, Pro-Black Policies, Policy Preferences JEL Classification: C91, D83, J71, J15
    Date: 2021

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