The NEP-LTV Blog

September 27, 2010

This blog is an experiment to explore the feasibility of scientific discussion on an Economics blog. NEP-LTV disseminates every week new working papers in the field of Unemployment, Inequality & Poverty. Among them, the NEP-LTV editor selects one to be discussed. Everyone is invited to comment. Try to stay civil, or your comments will be removed. And encourage others to read or join in the discussion.


Are the Spanish Long-Term Unemployed Unemployable?

February 21, 2018
By: Samuel Bentolila ; J. Ignacio García-Pérez ; Marcel Jansen
Long-term unemployment reached unprecedented levels in Spain in the wake of the Great Recession and it still affects around 57% of the unemployed. We document the sources that contributed to the rise in long-term unemployment and analyze its persistence using state-of-the-art duration models. We find pervasive evidence of negative duration dependence, while personal characteristics such as mature age, lack of experience, and entitlement to unemployment benefits are key to understand the cross-sectional differences in the incidence of long-term unemployment. The negative impact of low levels of skill and education is muted by the large share of temporary contracts, but once we restrict attention to employment spells lasting at least one month these factors also contribute to a higher risk of long-term unemployment. Surprisingly, workers from the construction sector do not fare worse than similar workers from other sectors. Finally, self-reported reservation wages are found to respond strongly to the cycle, but much less to individual unemployment duration. In view of these findings, we argue that active labour market policies should play a more prominent role in the fight against long-term unemployment while early activation should be used to curb inflows.
Keywords: long-term unemployment, great recession, duration models, survival probability, Spain
JEL: J63 J64 J65 C41

The ‘Healthy Worker Effect’: Do Healthy People Climb the Occupational Ladder?

February 21, 2018
By: Costa Font, Joan (London School of Economics) ; Ljunge, Martin (Research Institute of Industrial Economics (IFN))
The association between occupational status and health has been taken to reveal the presence of health inequalities shaped by occupational status. However, that interpretation assumes no influence of health status in explaining occupational standing. This paper documents evidence of non-negligible returns to occupation status on health (which we refer to as the ‘healthy worker effect’). We use a unique empirical strategy that addressed reverse causality, namely an instrumental variable strategy using the variation in average health in the migrant’s country of origin, a health measure plausibly not determined by the migrant’s occupational status. Our findings suggest that health status exerts significant effects on occupational status in several dimensions; having a supervising role, worker autonomy, and worker influence. The effect size of health is larger than that of an upper secondary education.
Keywords: Occupational status; Self-reported health; Immigrants; Work autonomy; Supervising role
JEL: I18 J50

The Non-Market Benefits of Education and Ability

February 21, 2018
By: James J. Heckman ; John Eric Humphries ; Gregory Veramendi
This paper analyzes the non-market benefits of education and ability. Using a dynamic model of educational choice we estimate returns to education that account for selection bias and sorting on gains. We investigate a range of non-market outcomes including incarceration, mental health, voter participation, trust, and participation in welfare. We find distinct patterns of returns that depend on the levels of schooling and ability. Unlike the monetary benefits of education, the benefits to education for many non-market outcomes are greater for low-ability persons. College graduation decreases welfare use, lowers depression, and raises self-esteem more for less-able individuals.
JEL: D01 I14 I24 I28

Subjective and physiological measures of well-being: an exploratory analysis using birth-cohort data

February 21, 2018
By: Andrén, Daniela (Örebro University School of Business) ; Clark, Andrew E (Paris School of Economics (PSE)) ; D´Ambrosio, Conchita (University of Luxembourg) ; Karlsson, Sune (Örebro University School of Business) ; Pettersson, Nicklas (Örebro University School of Business)
We use a rich longitudinal data set following a cohort of Swedish women from age 10 to 49 to analyse the effects of birth and early-life conditions on adulthood outcomes. These latter include both well-being and the stress hormone cortisol. Employment and marital status are important adult determinants of well-being. Log family income and absence from school also predict adult well-being, although their importance falls when controlling for adult and birth characteristics. Among the birth characteristics, we find that high birth weight (>4.3kg) affects adult well-being. We predict the level of adult cortisol only poorly, and suggest that the relationship between life satisfaction and cortisol is non-monotonic: both high and low cortisol are negatively correlated with life satisfaction. The results from an OLS life satisfaction regression and a multinomial logit of high or low cortisol (as compared to medium) are more similar to each other.
Keywords: life satisfaction; cortisol; birth-cohort data; adult; child and birth outcomes; multivariate imputation by chained equations
JEL: A12 D60 I31

Sibling Spillovers

February 21, 2018
By: Sandra E. Black ; Sanni Breining ; David N. Figlio ; Jonathan Guryan ; Krzysztof Karbownik ; Helena Skyt Nielsen ; Jeffrey Roth ; Marianne Simonsen
It is notoriously difficult to identify peer effects within the family, because of the common shocks and reflection problems. We make use of a novel identification strategy and unique data in order to gain some purchase on this problem. We employ data from the universe of children born in Florida between 1994 and 2002 and in Denmark between 1990 and 2001, which we match to school and medical records. To address the identification problem, we examine the effects of having a sibling with a disability. Utilizing three-plus-child families, we employ a differences-in-differences research design which makes use of the fact that birth order influences the amount of time which a child spends in early childhood with their siblings, disabled or not. We observe consistent evidence in both locations that the second child in a family is differentially affected when the third child is disabled. We also provide evidence which suggests that the sibling spillovers are working at least in part through the relative exposure to parental time and financial resources.
Keywords: sibling spillovers, child care, sibling fixed effects
JEL: I00 J13

Taxation, redistribution and observability in social dilemmas

February 21, 2018
By: Daniel A. Brent (Department of Economics, Louisiana State University, Business Education Complex, Baton Rouge, LA 70803-6306, U.S.A.) ; Lata Gangadharan (Department of Economics, Monash University, Clayton, Australia) ; Anca Mihut (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France) ; Marie Claire Villeval (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France)
In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.
Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment
JEL: C92 H23 D74

The impact of health on labour supply near retirement

February 20, 2018
By: Richard Blundell (Institute for Fiscal Studies and IFS and UCL) ; Jack Britton (Institute for Fiscal Studies) ; Monica Costa Dias (Institute for Fiscal Studies and Institute for Fiscal Studies) ; Eric French (Institute for Fiscal Studies and IFS and UCL)
Estimates of the effect of health on employment differ signi cantly from study to study due to differences in method, data, institutional background and health measure. We assess the importance of these differences using a unifi ed framework to interpret and contrast estimates of the impact of health on employment based on various measures of health and estimation procedures. This is done for the US and England. We fi nd that subjective and objective health measures, as well as subjective measures instrumented by objective measures produce similar estimates if a sufficiently large number of objective measures is used. Reducing the number of objective measures used compromises their ability to capture work capacity and biases estimates downwards. Failure to account for initial conditions leads to an overstatement of the effect of health on employment. We also find that a carefully constructed single index of subjective health yields estimates that are very similar to those obtained with multiple measures. Overall, declines in health can explain between 3% and 15% of the decline in employment between ages 50 and 70. These effects are larger among high-school dropouts and tend to drop with education; they are also larger in the US than in England. Finally, cognition has little added explanatory power once we also control for health, suggesting that cognition is not a key driver of employment at these ages.
Keywords: Health, cognition, labor supply, retirement
JEL: I10 J26 E24