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.
By: Pedro Carneiro (Institute for Fiscal Studies and cemmap and UCL) ; Oswald Koussihouèdé (Institute for Fiscal Studies) ; Nathalie Lahire (Institute for Fiscal Studies) ; Costas Meghir (Institute for Fiscal Studies and Yale University) ; Corina Mommaerts (Institute for Fiscal Studies)
The impact of school resources on the quality of education in developing countries may depend crucially on whether resources are targeted efficiently. In this paper we use a randomized experiment to analyze the impact of a school grants program in Senegal, which decentralized a portion of the country’s education budget. We find large positive effects on test scores at younger grades that persist at least two years. We show that these effects are concentrated among schools that focused funds on human resources improvements rather than school materials, suggesting that teachers and principals may be a central determinant of school quality.
Keywords: Quality of education; Decentralization; School resources; Child Development; Clustered Randomized Control Trials
JEL: H52 I22 I25 O15
By: Odermatt, Reto (University of Basel) ; Stutzer, Alois (University of Basel)
The correct prediction of how alternative states of the world affect our lives is a cornerstone of economics. We study how accurate people are in predicting their future well-being when facing major life events. Based on individual panel data, we compare people’s forecast of their life satisfaction in five years’ time to their actual realisations later on. This is done after the individuals experience widowhood, marriage, unemployment or disability. We find systematic prediction errors that are at least partly driven by unforeseen adaptation.
Keywords: adaptation, life satisfaction, life events, projection-bias, subjective well-being, utility prediction, unemployment
JEL: D03 D12 D60 I31
By: David Margolis (CES – Centre d’économie de la Sorbonne – UP1 – Université Panthéon-Sorbonne – CNRS, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics, IZA – Institute for the Study of Labor, IZA – Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor) – Bonn Universität – University of Bonn)
The motivation for introducing statutory minimum wages in many developing countries is often threefold: poverty-reduction, social justice and growth. How well the policy succeeds in attaining these goals will depend on the national context and the numerous choices made when designing the policy. Institutional capacity in developing countries tends to be limited, so institutional arrangements must be adapted. Nevertheless, a statutory minimum wage appears to have the potential to help low- and middle-income countries advance toward the aforementioned development objectives, even in the face of weak enforcement capacity and pervasive informality.
Challenges to promoting social inclusion of the extreme poor: evidence from a large scale experiment in Colombia By: Laura Abramovsky (Institute for Fiscal Studies) ; Orazio Attanasio (Institute for Fiscal Studies and University College London) ; Kai Barron (Institute for Fiscal Studies and University College London) ; Pedro Carneiro (Institute for Fiscal Studies and cemmap and UCL) ; George Stoye (Institute for Fiscal Studies)August 17, 2015
We evaluate the large scale pilot of an innovative and major welfare intervention in Colombia, which combines homes visits by trained social workers to households in extreme poverty with preferential access to social programs. We use a randomized control trial and a very rich dataset collected as part of the evaluation to identify program impacts on the knowledge and take-up of social programs and the labor supply of targeted households. We find no consistent impact of the program on these outcomes, possibly because the way the pilot was implemented resulted in very light treatment in terms of home visits. Importantly, administrative data indicates that the program has been rolled out nationally in a very similar fashion, suggesting that this major national program is likely to fail in making a significant contribution to reducing extreme poverty. We suggest that the program should undergo substantial reforms, which in turn should be evaluated.
Partial insurance and investments in children By: Pedro Carneiro (Institute for Fiscal Studies and cemmap and UCL) ; Rita Ginja (Institute for Fiscal Studies and University of Uppsala)August 17, 2015
This paper studies the impact of permanent and transitory shocks to income on parental investments in children. We use panel data on family income, and an index of investments in children in time and goods, from the Children of the National Longitudinal Survey of Youth. Consistent with the literature focusing on non-durable expenditure, we find that there is only partial insurance of parental investments against permanent income shocks, but the magnitude of the estimated responses is small. We cannot reject the hypothesis full insurance against temporary shocks. Another interpretation of our findings is that there is very little insurance available, but the fact that skill is a non-separable function of parental investments over time results in small reactions of these investments to income shocks, especially at later ages.
Keywords: Insurance; human capital; consumption
JEL: D12 D91 I30
Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth By: Black, Sandra E. (University of Texas at Austin) ; Devereux, Paul J. (University College Dublin) ; Lundborg, Petter (Lund University) ; Majlesi, Kaveh (Lund University)August 17, 2015
Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for genetics. We also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth.
Keywords: intergenerational mobility, nature versus nurture, portfolio allocation
JEL: G11 J01 J13 J62
Do More of Those in Misery Suffer from Poverty, Unemployment or Mental Illness? By: Flèche, Sarah (CEP, London School of Economics) ; Layard, Richard (London School of Economics)August 17, 2015
Studies of deprivation usually ignore mental illness. This paper uses household panel data from the USA, Australia, Britain and Germany to broaden the analysis. We ask first how many of those in the lowest levels of life-satisfaction suffer from unemployment, poverty, physical ill health, and mental illness. The largest proportion suffer from mental illness. Multiple regression shows that mental illness is not highly correlated with poverty or unemployment, and that it contributes more to explaining the presence of misery than is explained by either poverty or unemployment. This holds both with and without fixed effects.
Keywords: mental health, life-satisfaction, wellbeing, poverty, unemployment
JEL: I1 I31 I32