Regression Analysis of Country Effects Using Multilevel Data: A Cautionary Tale

September 25, 2013
By: Bryan, Mark L. (University of Essex)
Jenkins, Stephen P. (London School of Economics)
Cross-national differences in outcomes are often analysed using regression analysis of multilevel country datasets, examples of which include the ECHP, ESS, EU-SILC, EVS, ISSP, and SHARE. We review the regression methods applicable to this data structure, pointing out problems with the assessment of country-level factors that appear not to be widely appreciated, and illustrate our arguments using Monte-Carlo simulations and analysis of women’s employment probabilities and work hours using EU SILC data. With large sample sizes of individuals within each country but a small number of countries, analysts can reliably estimate individual-level effects within each country but estimates of parameters summarising country effects are likely to be unreliable. Multilevel (hierarchical) modelling methods are commonly used in this context but they are no panacea.
Keywords: multilevel modelling, cross-national comparisons, country effects
JEL: C52

Career progression, economic downturns, and skills

September 25, 2013
By: Jerome Adda (Institute for Fiscal Studies and European University Institute)
Christian Dustmann (Institute for Fiscal Studies and University College London)
Costas Meghir (Institute for Fiscal Studies and Yale University)
Jean-Marc Robin (Institute for Fiscal Studies and Sciences Po)
This paper analyses the career progression of skilled and unskilled workers with a focus on how careers are affected by economic downturns and whether formal skills, acquired early on, can shield workers from the effect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across different regions, we follow workers from labour market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labour supply, and wage progression. Most particularly, our model allows for labour market frictions that vary by skill group and over the business cycle. We find that sources of wage growth differ: learning-by-doing is an important component for unskilled workers early on in their careers, while job mobility is important for workers who acquire skills in an apprenticeship scheme before labour market entry. Likewise, economic downturns affect skill groups through very different channels: unskilled workers lose out from a decline in productivity and human capital, whereas skilled individuals suffer mainly from lack of mobility.
Keywords: wage determination, skills, business cycles, apprenticeship training, job mobility

Is there a Double-Negative Effect? Gender and Ethnic Wage Differentials.

September 25, 2013
By: Piazzalunga, Daniela (University of Turin)
This paper investigates the gender and ethnic wage differentials for female Immigrants, applying the Oaxaca ecomposition to estimate the level of discrimination. The gender pay gap is quite small (7.42%), but it’s not explained by observable differences, whilst the ethnic wage gap is larger (27.11%), but the explained components account for about 30%. Ultimately, we will evaluate how the multiple levels of discrimination (due to being a woman and a foreigner at the same time) intersect, following the decomposition suggested by Shamsuddin (1998). The double – negative effect is estimated to be 56 – 62%.

Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes

September 25, 2013
By: Doyle, Orla (University College Dublin)
Harmon, Colm P. (University of Sydney)
Heckman, James J. (University of Chicago)
Logue, Caitriona (University College Dublin)
Moon, Seong Hyeok (University of Chicago)
The literature on skill formation and human capital development clearly demonstrates that early investment in children is an equitable and efficient policy with large returns in adulthood. Yet little is known about the mechanisms involved in producing these long-term effects. This paper presents early evidence on the nature of skill formation based on an experimentally designed, five-year home visiting program in Ireland targeting disadvantaged families – Preparing for Life (PFL). We examine the impact of investment between utero to 18 months of age on a range of parental and child outcomes. Using the methodology of Heckman et al. (2010a), permutation testing methods and a stepdown procedure are applied to account for the small sample size and the increased likelihood of false discoveries when examining multiple outcomes. The results show that the program impact is concentrated on parental behaviors and the home environment, with little impact on child development at this early stage. This indicates that home visiting programs can be effective at offsetting deficits in parenting skills within a relatively short timeframe, yet continued investment may be required to observe direct effects on child development. While correcting for attrition bias leads to some changes in the precision of estimates, overall the results are quite similar.
Keywords: early childhood intervention, human capital development, randomized control trial, multiple hypotheses, permutation testing
JEL: C12

European Capitals of Culture and Life Satisfaction

September 25, 2013
By: Lasse Steiner
Bruno S. Frey
Simone Hotz
This paper analyzes whether hosting the most prestigious European cultural event, the European Capital of Culture, has an impact on regional economic development or the life satisfaction of the local population. Concerning the economic impact, we show that European Capitals are hosted in regions with above average GDP per capita, but do not causally affect the economic development in a significant way. Even a positive impact on GDP per capita would not imply a positive impact on individual utility or social welfare of the regional population. Surprisingly, using difference-in-difference estimations, a negative effect on the well-being of the regional population is found during the event. Since no effect is found before the event, reverse causality and positive anticipation can be ruled out. The negative effect during the event might result from dissatisfaction with the high levels of public expenditure, transport disruptions, general overcrowding or an increase in housing prices.
Keywords: Life Satisfaction; Mega-Events; Culture; European Capital of Culture
JEL: Z11

If You’re Happy and You Know It, Clap Your Hands: How Do Mothers and Fathers Really Feel about Child Caregiving?

September 25, 2013
By: Connelly, Rachel (Bowdoin College)
Kimmel, Jean (Western Michigan University)
This paper considers the question posed by popular media, do women like doing child care more than men? Using experienced emotions data paired with 24 hour time diaries from the 2010 American Time Use Survey, the paper explores gender differences in how men and women who have done some child caregiving on the previous day feel when engaged in a set of common daily activities. We find that both men and women enjoy their time in child caregiving, men as much, or even more so, than women as evidenced by their average values for happiness, tiredness, and stress, their predicted values for the same three emotions and via an aggregated statistic, the unpleasantness index. Counter-factual unpleasantness indices provide evidence that difference between men and women come almost completely from differences in their experience emotions rather than from differences in how they use their time.
Keywords: experienced emotions, gender wage gap, child care, subjective well-being, time use, happiness
JEL: D13