nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2021‒07‒26
five papers chosen by
Maximo Rossi
Universidad de la República

  1. Randomization and Social Policy Evaluation Revisited By James Heckman
  2. The Dynastic Benefits of Early Childhood Education By García, Jorge Luis; Bennhoff, Frederik H.; Leaf, Duncan Ermini; Heckman, James J.
  3. The Lasting Effects of Early Childhood Education on Promoting the Skills and Social Mobility of Disadvantaged African Americans By Jorge Luis Garcia; James J. Heckman; Victor Ronda
  4. The Rise of China's Global Middle Class in International Perspective By Sicular, Terry; Yang, Xiuna; Gustafsson, Björn Anders
  5. Making it public: The effect of (private and public) wage proposals on efficiency and income distribution By Lara Ezquerra; Joaquin Gomez-Minambres; Natalia Jiminez; Praveen Kujal

  1. By: James Heckman (Institute for Fiscal Studies and University of Chicago)
    Abstract: This paper examines the case for randomized controlled trials in economics. I revisit my previous paper “Randomization and Social Policy Evaluation” and update its message. I present a brief summary of the history of randomization in economics. I identify two waves of enthusiasm for the method as “Two Awakenings” because of the near-religious zeal associated with each wave. The First Wave substantially contributed to the development of microeconometrics because of the ?awed nature of the experimental evidence. The Second Wave has improved experimental designs to avoid some of the technical statistical issues identified by econometricians in the wake of the First Wave. However, the deep conceptual issues about parameters estimated, and the economic interpretation and the policy relevance of the experimental results have not been addressed in the Second Wave.
    Date: 2020–02–10
  2. By: García, Jorge Luis (Clemson University); Bennhoff, Frederik H. (University of Chicago); Leaf, Duncan Ermini (University of Southern California); Heckman, James J. (University of Chicago)
    Abstract: This paper monetizes the life-cycle intragenerational and intergenerational benefits of the Perry Preschool Project, a pioneering high-quality early childhood education program implemented before Head Start that targeted disadvantaged African-Americans and was evaluated by a randomized trial. It has the longest follow-up of any experimentally evaluated early childhood education program. We follow participants into late midlife as well as their children into adulthood. Impacts on the original participants and their children generate substantial benefits. Access to life-cycle data enables us to evaluate the accuracy of widely used schemes to forecast life-cycle benefits from early-life test scores, which we find wanting.
    Keywords: cost-benefit analysis, dynastic benefits, early childhood education, intergenerational program evaluation, life-cycle benefits
    JEL: J13 I28 C93 H43
    Date: 2021–06
  3. By: Jorge Luis Garcia (Clemson University); James J. Heckman (The University of Chicago); Victor Ronda (Aarhus University)
    Abstract: This paper demonstrates multiple beneficial impacts of a program promoting intergenerational mobility for disadvantaged African-American children and their children. The program improves outcomes of the first-generation treatment group across the life cycle, which translates into better family environments for the second generation leading to positive intergenerational gains. There are long-lasting beneficial program effects on cognition through age 54, contradicting claims of fadeout that have dominated popular discussions of early childhood programs. Children of the first-generation treatment group have higher levels of education and employment, lower levels of criminal activity, and better health than children of the first-generation control group.
    Keywords: intergenerational mobility, racial inequality, social mobility
    JEL: J13 I28 C93 H43
    Date: 2021–07
  4. By: Sicular, Terry (University of Western Ontario); Yang, Xiuna (China Development Research Foundation); Gustafsson, Björn Anders (University of Gothenburg)
    Abstract: Defining the 'global middle class' as being neither poor nor rich in the developed world, we estimate the size of the global middle class in China and 33 other countries and analyze China's expanding middle class in international perspective. China's global middle class has grown rapidly and has been catching up with that in developed countries. By 2018 China's global middle class constituted 25 percent of China's population; in absolute size it was nearly double the size of the global middle class in the US and similar in size to that in Europe. Cross-country analysis of the relationship between the middle-class population share versus GDP per capita reveals an inverted-U pattern. China is not an outlier from the cross-country pattern, but the speed with which its middle-class has expanded is unusual. The only other countries with similarly large, rapid expansions of the middle class are transition economies.
    Keywords: China, middle class, income distribution, transition
    JEL: D31 O53 P3
    Date: 2021–07
  5. By: Lara Ezquerra (Universidad de las Islas Baleares, Spain); Joaquin Gomez-Minambres (Lafayette College, Department of Economics and Chapman University, Economic Science Institute.); Natalia Jiminez (Universidad Pablo Olavide, Spain); Praveen Kujal (Middlesex University)
    Abstract: The implications of (public or private) pre-play communication and information revelation in a labour relationship is not well understood. We address these implications theoretically and experimentally. In our baseline experiments, the employer offers a wage to the worker who may then accept or reject it. In the public and private treatment, workers, moving first, make a non-binding private or public wage proposal. Our theoretical model assumes that wage proposals convey information about a worker's minimum acceptable wage and are misreported with a certain probability. It predicts that, on average, wage proposals lead to higher wage offers and acceptance rates, with the highest wages under private proposals. While both, public and private, proposals increase efficiency over the baseline, private proposals generate higher worker incomes. Broad support for the theoretical predictions is found in the laboratory experiments. Our work has important implications for recent policies promoting public information on wage negotiations. We find that while wage proposals promote higher wages, efficiency, and income equality, public information on wage negotiations is likely to benefit firms more than workers.
    Keywords: wage negotiations, cheap talk, laboratory experiments, ultimatum game, wage proposals
    JEL: C90 C72 J31 M52
    Date: 2021

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