October 21, 2012
By: Richard Blundell, Luigi Pistaferri and Itay Saporta-Eksten
In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labor supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of males and females permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for their is little evidence of additional insurance.
October 21, 2012
By: Biavaschi, Costanza (IZA)
Eichhorst, Werner (IZA)
Giulietti, Corrado (IZA)
Kendzia, Michael J. (IZA)
Muravyev, Alexander (St. Petersburg University GSOM and IZA)
Pieters, Janneke (IZA)
Rodríguez-Planas, Núria (IZA, IAE-CSIC and UPF)
Schmidl, Ricarda (IZA)
Zimmermann, Klaus F. (IZA and University of Bonn)
This paper focuses on the determinants of the labor market situation of young people in developed countries and the developing world, with a special emphasis on the role of vocational training and education policies. We highlight the role of demographic factors, economic growth and labor market institutions in explaining young people’s transition into work. We then assess differences in the setup and functioning of the vocational education and training policies in major world regions, as an important driver of differential labor market situation of youth. Based on our analysis we argue in favor of vocational education and training systems combining work experience and general education and give some policy recommendations regarding the implementation of education and training systems adapted to a country’s economic and institutional context.
Keywords: vocational education and training, dual vocational training, youth employment, youth unemployment
October 12, 2012
By: Erdogan, Zeynep (Tilburg University), Jacobsen, Joyce P. (Wesleyan University) and
Kooreman, Peter (Tilburg University)
We examine the work experiences during middle school and high school of U.S. females and males and find that most of the child-oriented work such as babysitting and camp counseling is done by females. If the type of work undertaken while young affects either development of specific human capital or preferences, then these early work experiences may have measurable effects on later life outcomes. This paper examines whether or not having a job as a teenager, and whether or not it is a child-oriented job, causes differences in labor market behavior among young adults. In addition to a set of standard controls, in order to account for the endogeneity of students’ work decisions, we utilize a set of state-level instruments, including state-level child-labor laws and indicators of relative demand for, and supply of, child-oriented workers. While the effects we find are complex and sometimes hard to interpret, they suggest that work in 10th grade has a positive causal effect on later labor market outcomes and delays family formation, but to a lesser extent when jobs were child-oriented.
Keywords: human capital, gender, jobs while in school, labor market, family formation
October 1, 2012
By: Mizala, Alejandra (University of Chile)
Nopo, Hugo (Inter-American Development Bank)
How much are teachers paid in comparison to those in other professions in Latin America? How have these differences evolved at the turn of the 20th century? This paper reports the evolution, between circa 1997 and circa 2007, of teachers´ salaries vis-à-vis workers in other professional and technical occupations for thirteen Latin-American countries. After controlling the earnings differentials by observable characteristics linked to productivity it is found that the hourly earnings gap, although substantial, decreased throughout the decade. This has been the case for earnings gaps at the main and secondary jobs, and also for those measured in terms of monthly and yearly earnings. Nonetheless, behind the region averages there is an important cross-country heterogeneity.
Keywords: wage differentials, professional labor markets, national and international labor standards, Latin America, Caribbean
October 1, 2012
The Great Happiness Moderation
By: Clark, Andrew E. (Paris School of Economics)
Flèche, Sarah (Paris School of Economics)
Senik, Claudia (Paris School of Economics)
This paper shows that within-country happiness inequality has fallen in the majority of countries that have experienced positive income growth over the last forty years, in particular in developed countries. This new stylized fact comes as an addition to the Easterlin paradox, which states that the time trend in average happiness is flat during episodes of long-run income growth. This mean-preserving declining spread in happiness comes about via falls in both the share of individuals who declare low and high levels of happiness. Rising income inequality moderates the fall in happiness inequality, and may even reverse it after some point, for example in the US starting in the 1990s. Hence, if raising the income of all does not raise the happiness of all, it will at least harmonize the happiness of all, providing that income inequality does not grow too much. Behind the veil of ignorance, lower happiness inequality would certainly be considered as attractive by risk-averse individuals.
Keywords: happiness, inequality, economic growth, development, Easterlin paradox