nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2021‒09‒20
twelve papers chosen by
Maximo Rossi
Universidad de la República

  1. Maternal depression and child human capital: A genetic instrumental-variable approach By Menta, Giorgia; Lepinteur, Anthony; Clark, Andrew E.; Ghislandi, Simone; D’Ambrosio, Conchita
  2. The Employment and Redistributive Effects of Reducing or Eliminating Minimum Wage Tip Credits By David Neumark; Maysen Yen
  3. Footsie, Yeah! Share Prices and Worker Wellbeing By Alex Bryson; Andrew E. Clark; Colin P. Green
  4. Between-Group Inequality May Decline despite a Rising Skill Premium By Aziz, Imran; Cortes, Guido Matias
  5. Pandemic Policy and Life Satisfaction in Europe By Clark, Andrew E; Lepinteur, Anthony
  6. The Great Gatsby Curve By Durlauf, Steven N.; Kourtellos, Andros; Tan, Chih Ming
  7. Intergenerational mobility in a recession: Evidence from Sweden By Nybok, Martin; Stuhler, Jan
  8. On the Benefits of Repaying By Francesca Caselli; Matilde Faralli; Paolo Manasse; Ugo Panizza
  9. Labor market experience and falling earnings inequality in Brazil: 1995–2012 By Ferreira, Francisco H G; Firpo, Sergio P; Messina, Julián
  10. The Great Transition: Kuznets Facts for Family-Economists By Jeremy Greenwood; Nezih Guner; Ricardo Marto
  11. Complementarity in Employee Participation Systems: International Evidence By Burdin, Gabriel; Kato, Takao
  12. Does economics make you selfish? By Daniele Girardi; Sai Madhurika Mamunuru; Simon D Halliday; Samuel Bowles

  1. By: Menta, Giorgia; Lepinteur, Anthony; Clark, Andrew E.; Ghislandi, Simone; D’Ambrosio, Conchita
    Abstract: We here address the causal relationship between maternal depression and child human capital using UK cohort data. We exploit the conditionally-exogenous variation in mothers’ genomes in an instrumental-variable approach, and describe the conditions under which mother’s genetic variants can be used as valid instruments. An additional episode of maternal depression between the child’s birth up to age nine reduces both their cognitive and non-cognitive skills by 20 to 45% of a SD throughout adolescence. Our results are robust to a battery of sensitivity tests addressing, among others, concerns about pleiotropy and the maternal transmission of genes to her child.
    Keywords: Mendelian Randomisation, Maternal Depression, Human Capital, Instrumental Variables, ALSPAC
    Date: 2021–09
  2. By: David Neumark; Maysen Yen
    Abstract: Recent policy debate on minimum wages has focused not only on raising the minimum wage, but on eliminating the tip credit for restaurant workers. We use data on past variation in tip credits – or minimum wages for restaurant workers – to provide evidence on the potential impacts of eliminating (or reducing) the tip credit. Our evidence points to higher tipped minimum wages (smaller tip credits) reducing jobs among tipped restaurant workers, without earnings effects on those who remain employed sufficiently large to raise total earnings in this sector. And most of our evidence provides no indication that higher tipped minimum wages would be well targeted to poor or low-income families or reduce the likelihood of being poor or very low income.
    JEL: J23 J38
    Date: 2021–09
  3. By: Alex Bryson (Univerity College London, NIESR, and IZA); Andrew E. Clark (Paris School of Economics, CNRS and IZA); Colin P. Green (Norwegian University of Science and Technology and IZA)
    Abstract: A small literature has shown that individual wellbeing varies with the price of company stock, but it is unclear whether this is due to wealth effects among those holding stock, or more general effects on sentiment, with individuals taking rising stock prices as an indicator of improvements in the economy. We contribute to this literature by using two data sets to establish the relationship between share prices on the one hand and worker wellbeing on the other. First, we use data on share price movements and employee stock holding in a single corporation and provide suggestive evidence that an increase in the firm’s stock price increases the wellbeing of those who belong to its employee share purchase plan (ESPP), and that these effects are greatest among those making the largest monthly contributions to the program who have the most to gain (or lose) from stock price fluctuations. There is also some tentative evidence that the wellbeing effects of a rise in the share price are greatest among those with the largest shareholdings. We then use almost 30 years of British panel data to show that employee job satisfaction moves with share prices among those whose pay is partly determined by company fortunes. Taken together these results suggest that the well-being effects of share prices work at least partly via changes in wealth.
    Keywords: Job Satisfaction; Wellbeing; Share Prices; Share Ownership; Profit-Sharing
    JEL: J28 J33 J54 J63 J81 M52
    Date: 2021–09–01
  4. By: Aziz, Imran (Yorkville University); Cortes, Guido Matias (York University, Canada)
    Abstract: A vast literature aimed at understanding the nature and causes of wage inequality focuses on the skill premium as a key object of interest. In an environment where both the skill premium and the share of skilled workers are changing, however, the between-skill-group component of inequality may fall even as the skill premium rises – a pattern that is indeed observed in the U.S. and in many local labor markets during the 2010s. Understanding the evolution of the skill premium is therefore not always useful in terms of understanding why broad inequality measures are changing.
    Keywords: skill premium, skill-biased technical change, between-group inequality
    JEL: J31 J21 J24
    Date: 2021–08
  5. By: Clark, Andrew E; Lepinteur, Anthony
    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
    Date: 2021–09
  6. By: Durlauf, Steven N.; Kourtellos, Andros; Tan, Chih Ming
    Abstract: This paper provides a synthesis of theoretical and empirical work on the Great Gatsby Curve, the positive empirical relationship between cross-section income inequality and persistence of income across generations. We present statistical models of income dynamics that mechanically give rise to the relationship between inequality and mobility. Five distinct classes of theories, including models on family investments, skills, social influences, political economy, and aspirations are developed, each providing a behavioral mechanism to explain the relationship. Finally, we review empirical studies that provide evidence of the curve for a range of contexts and socioeconomic outcomes as well as explore evidence on mechanisms. (Stone Center on Socio-Economic Inequality Working Paper)
    Date: 2021–09–10
  7. By: Nybok, Martin (IFAU - Institute for Evaluation of Labour Market and Education Policy); Stuhler, Jan (Universidad Carlos III de Madrid)
    Abstract: We use complete-count register data to describe various features of intergenerational mobility in Sweden. First, we document the extent of regional variation in educational and income mobility across Swedish municipalities, and describe its spatial pattern. Second, we study the stability of such regional rankings to the choice of mobility statistic. Third, we show that income inequality and mobility are negatively related, across all mobility measures. Fourth, we exploit variation in local exposure to show that the 1990s economic crisis and the 2007-2008 fi nancial crisis had a negative eff ect on income mobility.
    Keywords: The geography of intergenerational mobility; multigenerational mobility; income inequality; recession
    JEL: J62 R00
    Date: 2021–09–03
  8. By: Francesca Caselli; Matilde Faralli; Paolo Manasse; Ugo Panizza
    Abstract: This paper studies whether countries benefit from servicing their debts during times of widespread sovereign defaults. Colombia is typically regarded as the only large Latin American country that did not default in the 1980s. Using archival research and formal econometric estimates of Colombia's probability of default, we show that in the early 1980s Colombia's fundamentals were not significantly different from those of the Latin American countries that defaulted on their debts. We also document that the different path chosen by Colombia was due to the authorities' belief that maintaining a good reputation in the international capital market would have substantial long-term payoffs. We show that the case of Colombia is more complex than what it is commonly assumed. Although Colombia had to re-profile its debts, high-level political support from the US allowed Colombia do to so outside the standard framework of an IMF program. Our counterfactual analysis shows that in the short to medium run, Colombia benefited from avoiding an explicit default. Specifically, we find that GDP growth in the 1980s was higher than that of a counterfactual in which Colombia behaved like its neighboring countries. We also test whether Colombia's behavior in the 1980s led to long-term reputational benefits. Using an event study based on a large sudden stop, we find no evidence for such long-lasting reputational gains.
    JEL: F34 F32 H63
    Date: 2021–09
  9. By: Ferreira, Francisco H G; Firpo, Sergio P; Messina, Julián
    Abstract: The Gini coefficient of labor earnings in Brazil fell by nearly a fifth between 1995 and 2012, from 0.50 to 0.41. The decline in other measures of earnings inequality was even larger, with the 90-10 percentile ratio falling by almost 40 percent. Applying micro-econometric decomposition techniques, this study parses out the proximate determinants of this substantial reduction in earnings inequality. Although a falling education premium did play a role, in line with received wisdom, this study finds that a reduction in the returns to labor market experience was a much more important factor driving lower wage disparities. It accounted for 53 percent of the observed decline in the Gini index during the period. Reductions in horizontal inequalities – the gender, race, regional and urban-rural wage gaps, conditional on human capital and institutional variables – also contributed. Two main factors operated against the decline: a greater disparity in wage premia to different sectors of economic activity, and the “paradox of progress”: the mechanical inequality-increasing effect of a more educated labor force when returns to education are convex.
    Keywords: earnings inequality; Brazil; returns to experience; OUP deal
    JEL: D31 J31
    Date: 2021–03–25
  10. By: Jeremy Greenwood (University of Pennsylvania); Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros); Ricardo Marto (University of Pennsylvania)
    Abstract: The 20th century beheld a dramatic transformation of the family. Some Kuznets style facts regarding structural change in the family are presented. Over the course of the 20th century in the United States fertility declined, educational attainment waxed, housework fell, leisure increased, jobs shifted from blue to white collar, and marriage waned. These trends are also observed in the cross-country data. A model is developed, and then calibrated, to address the trends in the US data. The calibration procedure is closely connected to the underlying economic logic. Three drivers of the great transition are considered: neutral technological progress, skilled-biased technological change, and drops in the price of labor-saving household durables.
    Keywords: Average weekly hours, blue-collar jobs, calibration, college premium, education, family economics, fertility, housework, Kuznets, leisure, market work, marriage, neutral technological progress, price of labor-saving household durables, skilled-biased technological change, white-collar jobs.
    JEL: D10 E13 J10 O10
    Date: 2021–09
  11. By: Burdin, Gabriel (Leeds University Business School); Kato, Takao (Colgate University)
    Abstract: We describe the nature, scope and effects of various non-mandated participatory work practices in Japan, the U.S. and Europe through the lens of complementarity in organizations. Specifically, rather than treating each work practice in isolation, we consider it an element of HIWS (High Involvement Work System), an employment system comprised of clusters of complementary work practices. In so doing, we present a coherent and complete picture of non-mandatory participatory work practices. Furthermore, by applying the common framework of viewing participatory work practices as complementary elements of HIWS to seemingly disparate forms of work practices in different parts of the world, we shed light on how participatory work practices play out in diverse institutional, cultural and regulatory environments.
    Keywords: High Involvement Work System, High Performance Work System, employee participation
    JEL: M5 J5
    Date: 2021–08
  12. By: Daniele Girardi (Department of Economics, University of Massachusetts Amherst (USA)); Sai Madhurika Mamunuru (Department of Economics, Whitman College (USA)); Simon D Halliday (School of Economics, University of Bristol (UK)); Samuel Bowles (Santa Fe Institute (USA))
    Abstract: It is widely held that studying economics makes you more selfish and politically conservative. We use a difference-in-differences strategy to disentangle the causal impact of economics education from selection effects. We estimate the effect of four different intermediate microeconomics courses on students’ experimentally elicited social preferences and beliefs about others, and policy opinions. We find no discernible effect of studying economics (whatever the course content) on self-interest or beliefs about others’ self-interest. Results on policy preferences also point to little effect, except that economics may make students somewhat less opposed to highly restrictive immigration policies.
    Keywords: endogenous preferences, economics education, social preferences, self-interest, generosity, altruism, reciprocity, microeconomics, teaching
    Date: 2021

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