nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2023‒10‒16
eight papers chosen by
Maximo Rossi, Universidad de la República

  1. Childhood Health Shocks and the Intergenerational Transmission of Inequality By Eriksen, Tine Louise Mundbjerg; Gaulke, Amanda; Svensson, Jannet; Skipper, Niels; Thingholm, Peter Rønø
  2. From Happiness Data to Economic Conclusions By Daniel J. Benjamin; Kristen Cooper; Ori Heffetz; Miles S. Kimball
  3. Gender and the time cost of peer review By Diane Alexander; Olga Gorelkina; Erin Hengel; Richard Tol
  4. The Minimum Wage and Inequality Between Groups By Francine D. Blau; Isaac Cohen; Matthew L. Comey; Lawrence Kahn; Nikolai Boboshko
  5. Utility and Happiness By Miles S. Kimball; Robert J. Willis
  6. Parenting with Patience: Parental Incentives and Child Development By Del Boca, Daniela; Flinn, Christopher; Verriest, Ewout; Wiswall, Matthew
  7. The Accuracy of Job Seekers' Wage Expectations By Marco Caliendo; Robert Mahlstedt; Aiko Schmei{\ss}er; Sophie Wagner
  8. Monopsony, Efficiency, and the Regularization of Undocumented Immigrants By George J. Borjas; Anthony Edo

  1. By: Eriksen, Tine Louise Mundbjerg (VIVE - The Danish Centre for Social Science Research); Gaulke, Amanda (Kansas State University); Svensson, Jannet (Copenhagen University Hospital); Skipper, Niels (Aarhus University); Thingholm, Peter Rønø (Aarhus University)
    Abstract: We examine the role of health shocks in childhood and parental background in transmitting intergenerational inequality. We use Danish administrative registry data (a setting with universal access to health care) and the quasi-random onset of Type 1 Diabetes in childhood to document substantial penalties in adult employment and labor market income at age 30. We document wide disparities in treatment effects and show that high-socioeconomic parents mitigate the adverse impacts of the health shock. This gradient is partly driven by differential impacts on health and human capital across the socioeconomic distribution. Maternal educational attainment matters for adoption of new and more advanced treatment regimens.
    Keywords: intergenerational transmission of inequality, childhood health shocks, labor market outcomes
    JEL: I12 I14 I24
    Date: 2023–09
  2. By: Daniel J. Benjamin; Kristen Cooper; Ori Heffetz; Miles S. Kimball
    Abstract: Happiness data—survey respondents’ self-reported well-being (SWB)—have become increasingly common in economics research, with recent calls to use them in policymaking. Researchers have used SWB data in novel ways, for example to learn about welfare or preferences when choice data are unavailable or difficult to interpret. Focusing on leading examples of this pioneering research, the first part of this review uses a simple theoretical framework to reverse-engineer some of the crucial assumptions that underlie existing applications. The second part discusses evidence bearing on these assumptions and provides practical advice to the agencies and institutions that generate SWB data, the researchers who use them, and the policymakers who may use the resulting research. While we advocate creative uses of SWB data in economics, we caution that their use in policy will likely require both additional data collection and further research to better understand the data.
    JEL: D60 D63 D9 I31
    Date: 2023–09
  3. By: Diane Alexander (Wharton School); Olga Gorelkina (University of Liverpool); Erin Hengel (London School of Economics); Richard Tol (University of Sussex)
    Abstract: In this paper, we investigate one factor that can directly contribute to—as well as indirectly shed light on the other causes of—the gender gap in academic publishing: length of peer review. Using detailed administrative data from an economics field journal, we find that, conditional on manuscript quality, referees spend longer reviewing female-authored papers, are slower to recommend accepting them, manuscripts by women go through more rounds of review and their authors spend longer revising them. Less disaggregated data from 32 economics and finance journals corroborate these results. We conclude by showing that all gender gaps decline—and eventually disappear—as the same referee reviews more papers. This pattern suggests novice referees initially statistically discriminate against female authors, but are less likely to do so as their information about and confidence in the peer review process improves. More generally, they also suggest that women may be particularly disadvantaged when evaluators are less familiar with the objectives and parameters of an assessment framework.
    Keywords: Gender Inequality, Statistical Discrimination, Research Productivity, Peer Review.
    JEL: A11 D8 J16 J24 J7
    Date: 2023–07–28
  4. By: Francine D. Blau; Isaac Cohen; Matthew L. Comey; Lawrence Kahn; Nikolai Boboshko
    Abstract: We use wage data from the Current Population Survey Merged Outgoing Rotation Group (CPS MORG) to study the effect of state and federal minimum wage policies on gender, race, and ethnic inequality throughout the wage distribution, focusing on lower-tail inequality between men and women, Blacks and Whites, and Hispanics and Whites. We use estimates from three empirical strategies — two reduced-form, one structural — to provide counterfactual simulations of between-group inequality over four key “epochs” of minimum wage policy changes since 1979. Declines in the real minimum wage during the 1980s slowed progress in narrowing between-group inequality during that period. Fairly muted shifts in national and state policies from 1989 to 1998 and 1998 to 2007 meant that the minimum wage was less important over those time spans. Since 2007, several states have opted for steep minimum wage hikes, which we find have especially improved Hispanics’ relative wages, both because they continue to earn low wages and because they reside disproportionately in those states. Finally, we make predictions about the effect of raising the federal minimum wage to $12. We find that a change of this magnitude would reduce existing between-group wage gaps below the 15th percentile by 25-50% and would therefore have an economically important impact on gender, racial, and ethnic inequality in the present day.
    JEL: J15 J16 J31 J38
    Date: 2023–09
  5. By: Miles S. Kimball; Robert J. Willis
    Abstract: Psychologists have developed effective survey methods of measuring how happy people feel at a given time. The relationship between how happy a person feels and utility is an unresolved question. Existing work in Economics either ignores happiness data or assumes that felt happiness is more or less the same thing as flow utility. The approach we propose in this paper steers a middle course between the two polar views that “happiness is irrelevant to Economics” and the view that “happiness is a sufficient statistic for utility.” We argue that felt happiness is not the same thing as flow utility, but that it does have a systematic relationship to utility. In particular, we propose that happiness is the sum of two components: (1) elation–or short-run happiness–which depends on recent news about lifetime utility and (2) baseline mood–or long-run happiness–which is a subutility function much like health, entertainment, or nutrition. In principle, all of the usual techniques of price theory apply to baseline mood, but the application of those techniques is complicated by the fact that many people may not know the true household production function for baseline mood. If this theory is on target, there are two reasons data on felt happiness is important for Economics. First, short-run happiness in response to news can give important information about preferences. Second, long-run happiness is important for economic welfare in the same way as other higher-order goods such as health, entertainment, or nutrition.
    JEL: D60 D90 D91
    Date: 2023–09
  6. By: Del Boca, Daniela (University of Turin); Flinn, Christopher (New York University); Verriest, Ewout (New York University); Wiswall, Matthew (University of Wisconsin-Madison)
    Abstract: We construct a dynamic model of child development where forward-looking parents and children jointly take actions to increase the child's cognitive and non-cognitive skills within a Markov Perfect Equilibrium framework. In addition to time and money investments in their child, parents also choose whether to use explicit incentives to increase the child's self-investment, which may reduce the child's future intrinsic motivation to invest by reducing the child's discount factor. We use the estimated model parameters to show that the use of extrinsic motivation has large costs in terms of the child's future incentives to invest in themselves.
    Keywords: time allocation, child development, parenting styles
    JEL: J13 D1
    Date: 2023–09
  7. By: Marco Caliendo; Robert Mahlstedt; Aiko Schmei{\ss}er; Sophie Wagner
    Abstract: Job seekers' misperceptions about the labor market can distort their decision-making and increase the risk of long-term unemployment. Our study establishes objective benchmarks for the subjective wage expectations of unemployed workers. This enables us to provide novel insights into the accuracy of job seekers' wage expectations. First, especially workers with low objective earnings potential tend to display excessively optimistic beliefs about their future wages and anchor their wage expectations too strongly to their pre-unemployment wages. Second, among long-term unemployed workers, overoptimism remains persistent throughout the unemployment spell. Third, higher extrinsic incentives to search more intensively lead job seekers to hold more optimistic wage expectations, yet this does not translate into higher realized wages for them. Lastly, we document a connection between overoptimistic wage expectations and job seekers' tendency to overestimate their reemployment chances. We discuss the role of information frictions and motivated beliefs as potential sources of job seekers' optimism and the heterogeneity in their beliefs.
    Date: 2023–09
  8. By: George J. Borjas; Anthony Edo
    Abstract: In May 1981, President François Mitterrand regularized the status of undocumented immigrant workers in France. The newly legalized immigrants represented 12 percent of the non-French workforce and about 1 percent of all workers. Employers have monopsony power over undocumented workers because the undocumented may find it costly to participate in the open labor market and have restricted economic opportunities. By alleviating this labor market imperfection, a regularization program can move the market closer to the efficient competitive equilibrium and potentially increase employment and wages for both the newly legalized and the authorized workforce. Our empirical analysis reveals that the Mitterrand regularization program particularly increased employment and wages for low-skill native and immigrant men, and raised French GDP by over 1 percent.
    Keywords: Monopsony;Regularization;Undocumented Immigrants;Labor Market
    JEL: D43 J31 J42 J61
    Date: 2023–07

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