Worms at work: Long-run impacts of a child health investment

November 6, 2015

By: Sarah Baird (George Washington University) ; Joan Hamory Hicks (University of California, Berkeley) ; Michael Kremer (Harvard University) ; Edward Miguel (University of California, Berkeley)

This study estimates long-run impacts of a child health investment, exploiting community-wide experimental variation in school-based deworming. The program increased education among women and labor supply among men, with accompanying shifts in labor market specialization. Ten years after deworming treatment, women who were eligible as girls are 25% more likely to have attended secondary school, halving the gender gap. They reallocate time from traditional agriculture into cash crops and entrepreneurship. Men who were eligible as boys stay enrolled for more years of primary school, work 17% more hours each week, spend more time in entrepreneurship, are more likely to hold manufacturing jobs, and miss one fewer meal per week. We estimate an annualized financial internal rate of return of at least 32.2%.

URL: http://d.repec.org/n?u=RePEc:gwi:wpaper:2015-16&r=ltv

Poor Little Rich Kids? – The Determinants of the Intergenerational Transmission of Wealth

November 6, 2015

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.

Keywords: Nature versus nurture; Wealth transmission

JEL: G11 J01 J13 J62

URL: http://d.repec.org/n?u=RePEc:ucn:wpaper:201516&r=ltv


November 6, 2015

By: Manuel Arellano (CEMFI, Centro de Estudios Monetarios y Financieros) ; Richard Blundell (University College London) ; Stéphane Bonhomme (University of Chicago)

We develop a new quantile-based panel data framework to study the nature of income persistence and the transmission of income shocks to consumption. Log-earnings are the sum of a general Markovian persistent component and a transitory innovation. The persistence of past shocks to earnings is allowed to vary according to the size and sign of the current shock. Consumption is modeled as an age-dependent nonlinear function of assets and the two earnings components. We establish the nonparametric identification of the nonlinear earnings process and the consumption policy rule. Exploiting the enhanced consumption and asset data in recent waves of the Panel Study of Income Dynamics, we find nonlinear persistence and conditional skewness to be key features of the earnings process. We show that the impact of earnings shocks varies substantially across earnings histories, and that this nonlinearity drives heterogeneous consumption responses. The transmission of shocks is found to vary systematically with assets.

Keywords: Earnings dynamics, consumption, panel data, quantile regression, latent variables.

JEL: C23 D31 D91

URL: http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2015_1506&r=ltv

Urban networks: Spreading the flow of goods, people and ideas

November 6, 2015

By: Edward L. Glaeser ; Giacomo A. M. Ponzetto ; Yimei Zou

Should China build mega-cities or a network of linked middle-sized metropolises? Can Europe’s mid-sized cities compete with global agglomeration by forging stronger inter-urban links? This paper examines these questions within a model of recombinant growth and endogenous local amenities. Three primary factors determine the trade-off between networks and big cities: local returns to scale in innovation, the elasticity of housing supply, and the importance of local amenities. Even if there are global increasing returns, the returns to local scale in innovation may be decreasing, and that makes networks more appealing than mega-cities. Inelastic housing supply makes it harder to supply more space in dense confines, which perhaps explains why networks are more popular in regulated Europe than in the American Sunbelt. Larger cities can dominate networks because of amenities, as long as the benefits of scale overwhelm the downsides of density. In our framework, the skilled are more likely to prefer mega-cities than the less skilled, and the long-run benefits of either mega-cities or networks may be quite different from the short-run benefits.

Keywords: Cities, Networks, Growth, Migration

JEL: R10 R58 F15 O18

URL: http://d.repec.org/n?u=RePEc:upf:upfgen:1489&r=ltv

Decomposing the wage losses of displaced workers: the role of the reallocation of workers into firms and job titles

November 6, 2015

By: Pedro Portugal ; Pedro S. Raposo ; Anabela Carneiro

Using an unusually rich matched employer-employee-job title data set for Portugal, this paper evaluates the sources of wage losses of workers displaced due to firm closure based on the comparison of workers’ wages differentials before and after displacement. Potential wage losses of displaced workers can be related to firm, job title, and match heterogeneity in the pre- and post-displacement jobs. In this vein, we estimate a threeway high-dimensional fixed effects regression model that enables us to decompose the sources of the wage losses into the contribution of firm, job title, and match fixed effects. The worker-firm match plays a very sizable role. We found that the allocation of workers into poorer matches accounts for 38 percent of the total average wage loss. Sorting among firms accounts for 36 percent. Job downgrading also plays a significant role in explaining the wage loss of displaced workers, accounting for the remaining 26 percent.

JEL: E21 E60 F40

URL: http://d.repec.org/n?u=RePEc:ptu:wpaper:w201511&r=ltv