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)

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.
URL: http://d.repec.org/n?u=RePEc:ifs:ifsewp:14/33&r=ltv

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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)

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

URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:19/15&r=ltv

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)

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

URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9227&r=ltv

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)

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

URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9224&r=ltv

Pricing Genius: The Market Evaluation of Innovation By: David Galenson (University of Chicago) ; Simone Lenzu (University of Chicago)

Economists have neglected a key issue for understanding and increasing technological change, in failing to study how talented individuals produce innovations. This paper takes a quantitative approach to this problem. Regression analysis of auction data from 1965-2015 reveals that the age-price profiles of Jackson Pollock and Andy Warhol – the two greatest painters born in the 20th century – closely resemble the age profiles of the two artists derived both from textbooks of art history and from retrospective exhibitions. The agreement of these sources confirms that the auction market assigns the highest prices to the most important art, and examination of the artists’ careers reveals that this art is the most important because it is the most innovative. These results lend strong support to our understanding of creativity at the individual level, with a sharp contrast between the extended experimental innovation of Pollock and the sudden conceptual innovation of Warhol.

URL: http://d.repec.org/n?u=RePEc:bfi:wpaper:2015-10&r=ltv

Aggregating Elasticities:\ Intensive and Extensive Margins of Female Labour Supply By: Attanasio, Orazio ; Levell, Peter ; Low, Hamish ; Sánchez-Marcos, Virginia

There is a renewed interest in the size of labour supply elasticities and the discrepancy between micro and macro estimates. Recent contributions have stressed the distinction between changes in labour supply at the extensive and the intensive margin. In this paper, we stress the importance of individual heterogeneity and aggregation problems. At the intensive margins, simple specifications that seem to fit the data give rise to non linear expressions that do not aggregate in a simple fashion. At the extensive margin, aggregate changes in participation are likely to depend on the cross sectional distribution of state variables when a shock hits and, therefore, are likely to be history dependent. We tackle these aggregation issues directly by specifying a life cycle model to explain female labour supply in the US and estimate its various components. We estimate the parameters of different component of the model. Our results indicate that (i) at the intensive margin, Marshallian and Hicksian elasticities are very heterogeneous and, on average, relatively large; (ii) Frisch elasticities are, as implied by the theory, even larger; (iii) aggregate labour supply elasticities seem to vary over the business cycle, being larger during recessions.
Keywords: aggregation; heterogeneity; labour supply elasticities; non-separability
JEL: D91 J22
URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:10732&r=ltv

Job Quality in Segmented Labor Markets: The Israeli Case By: Neuman, Shoshana

Till the early-1990s the collectively-bargained labor contract (between the trade-union that presented the employees, and the employer or the employers’-association) was the norm, granting salaried workers a stable and protected labor contract. Thereafter, and more significantly after 1995, the share of unionized workers dropped constantly, to almost half of its peak level (of more than 80 percent). In parallel, two other types of contracts became more common: personal temporary contracts (between an individual worker and his employer), and contracts between a labor-contractor and employees who are employed in a triangular mode of employment (employee-contractor-client). The latter involves precarious employment and is more common among the more vulnerable sub-populations of new-immigrants, disabled individuals, Israeli-Arabs, foreign-workers and women. The contractual changes resulted in work instability, growth of the secondary labor market and segmentation. Efforts to protect the disadvantaged secondary labor-market workers include legislation, reforms, new regulations, and enforcement of all the above.

Keywords: collective bargaining; contracted labor; foreign workers; immigrants; Israel; labor contracts; labor market segmenting; regulation

JEL: J15 J21 J31 J41 J51 J58 J61 J81

URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:10734&r=ltv

Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women By: David Card ; Ana Rute Cardoso ; Patrick Kline

There is growing evidence that firm-specific pay premiums are an important source of wage inequality. These premiums will contribute to the gender wage gap if women are less likely to work at high-paying firms or if women negotiate (or are offered) worse wage bargains with their employers than men. Using longitudinal data on the hourly wages of Portuguese workers matched with income statement information for firms, we show that the wages of both men and women contain firm-specific premiums that are strongly correlated with simple measures of the potential bargaining surplus at each firm. We then show how the impact of these firm-specific pay differentials on the gender wage gap can be decomposed into a combination of sorting and bargaining effects. We find that women are less likely to work at firms that pay higher premiums to either gender, with sorting effects being most important for low- and middle-skilled workers. We also find that women receive only 90% of the firm-specific pay premiums earned by men. Importantly, we find the same gender gap in the responses of wages to changes in potential surplus over time. Taken together, the combination of sorting and bargaining effects explain about one-fifth of the cross-sectional gender wage gap in Portugal.

JEL: J16 J31 J71

URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:21403&r=ltv

Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth By: Sandra E. Black ; Paul J. Devereux ; Petter Lundborg ; Kaveh Majlesi

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.

JEL: G0 G11 J13 J62

URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:21409&r=ltv

The Political Economy of Public Income Volatility: With an Application to the Resource Curse By: Robinson, James A ; Torvik, Ragnar ; Verdier, Thierry

We develop a model of the political consequences of public income volatility. As is standard, political incentives create inefficient policies, but we show that making income uncertain creates specific new effects. Future volatility reduces the benefit of being in power, making policy more efficient. Yet at the same time it also reduces the re-election probability of an incumbent and since some of the policy inefficiencies are concentrated in the future, this makes inefficient policy less costly. We show how this model can help think about the connection between volatility and economic growth and in the case where volatility comes from volatile natural resource prices, a characteristic of many developing countries, we show that volatility in itself is a source of inefficient resource extraction.

Keywords: income volatility; politics; public policy; resource extraction

JEL: D72 D78 Q2

URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:10721&r=ltv