Status Traps

June 30, 2016
By: Steven N. Durlauf (Department of Economics, University of Wisconsin, USA) ; Andros Kourtellos (Department of Economics, University of Cyprus, Cyprus; The Rimini Centre for Economic Analysis, Italy) ; Chih Ming Tan (Department of Economics, University of North Dakota, USA; The Rimini Centre for Economic Analysis, Italy)
In this paper, we explore nonlinearities in the intergenerational mobility process using threshold regression models. We uncover evidence of threshold effects in children’s outcomes based on parental education and cognitive and non-cognitive skills as well as their interaction with offspring characteristics. We interpret these thresholds as organizing dynastic earnings processes into “status traps”. Status traps, unlike poverty traps, are not absorbing states. Rather, they reduce the impact of favorable shocks for disadvantaged children and so inhibit upward mobility in ways not captured by linear models. Our evidence of status traps is based on three complementary datasets; i.e., the PSID, the NLSY, and US administrative data at the commuting zone level, which together suggest that the threshold-like mobility behavior we observe in the data is robust for a range of outcomes and contexts.
URL: http://d.repec.org/n?u=RePEc:rim:rimwps:16-13&r=ltv
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Symposium on Child Development and Parental Investment: Introduction

June 30, 2016
By: Francesconi, Marco (University of Essex) ; Heckman, James J. (University of Chicago)
This paper introduces the EJ Symposium on Child Development by reviewing the literature and placing the contributions of the papers in the Symposium in the context of a vibrant literature.
Keywords: child development, education, dynamic complementarity
JEL: H43 I21 I24 J13 J24
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9977&r=ltv

Job Creation in a Multi-Sector Labor Market Model for Developing Economies

June 30, 2016
By: Basu, Arnab K. (Cornell University) ; Chau, Nancy (Cornell University) ; Fields, Gary S. (Cornell University) ; Kanbur, Ravi (Cornell University)
This paper proposes an overlapping generations multi‐sector model of the labor market for developing countries with three heterogeneities – heterogeneity within self‐employment, heterogeneity in ability, and heterogeneity in age. We revisit an iconic paradox in a class of multi‐sector labor market models in which the creation of high‐wage employment exacerbates unemployment. Our richer setting allows for generational differences in the motivations for job search to be reflected in two distinct inverted U‐shaped relationships between unemployment and high‐wage employment, one for youth and a different one for adults. In turn, the relationship between overall unemployment and high‐wage employment is shown to be non‐monotonic and multi‐peaked. The model also sheds light on the implications of increasing high‐wage employment on self‐employed workers, who make up most of the world’s poor. Non‐monotonicity in unemployment notwithstanding, increasing high‐wage employment has an unambiguous positive impact on high‐paying self‐employment, and an unambiguous negative impact on free‐entry (low‐wage) self‐employment.
Keywords: multisector labor market, overlapping generations, poverty reduction, Harris‐Todaro model
JEL: O17 I32
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp9972&r=ltv

How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility?

June 30, 2016
By: Freeman, Richard Barry ; Han, Eunice ; Madland, David ; Duke, Brendan
This paper examines unionism’s relationship to the size of the middle class and its relationship to intergenerational mobility. Panel Study of Income Dynamics (PSID) 1985 and 2011 files are used to examine the change in the share of workers in a middle-income group (defined by persons having incomes within 50 percent of the median) and use a shift-share decomposition to explore how the decline of unionism contributes to the shrinking middle class. The files are also used to investigate the correlation between parents’ union status and the incomes of their children. Additionally, federal income tax data is used to examine the geographical correlation between union density and intergenerational mobility. Findings include that union workers are disproportionately in the middle-income group or above, and some reach middle-income status due to the union wage premium; the offspring of union parents have higher incomes than the offspring of otherwise comparable non-union parents, especially when the parents are low-skilled; and offspring from communities with higher union density have higher average incomes relative to their parents compared to offspring from communities with lower union density. These findings show a strong, though not necessarily causal, link between unions, the middle class, and intergenerational mobility.
URL: http://d.repec.org/n?u=RePEc:hrv:faseco:27304672&r=ltv

Keeping up with the e-Joneses: Do Online Social Networks Raise Social Comparisons?

June 8, 2016
By: Sabatini, Fabio ; Sarracino, Francesco
Online social networks, such as Facebook, disclose an unprecedented volume of personal information amplifying the occasions for social comparisons, which can be a cause of frustration. We test the hypothesis that the use of social networking sites (SNS) increases social comparisons as proxied by people’s dissatisfaction with their income and we compare the effect of SNS in Western and Eastern European countries. After controlling for the possibility of reverse causality, our results suggest that SNS users have a higher probability to compare their achievements with those of others. In Western countries, this leads individuals to a lower satisfaction with their economic conditions. The opposite holds in Eastern countries, where upward comparisons seemingly strengthen the hope that an improvement in individuals’ economic conditions will occur (so called “tunnel effect”). We conclude that SNS can be a strong engine of frustration for their users depending on the institutional and economic circumstances.
Keywords: Social Networks, Social Networking Sites, Social Comparisons, Satisfaction with Income, Relative Deprivation, Research Methods/ Statistical Methods, D83, I31, O33, Z1, Z13,
URL: http://d.repec.org/n?u=RePEc:ags:feemet:234936&r=ltv

The Race Between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment

June 8, 2016
5
By: Daron Acemoglu ; Pascual Restrepo
The advent of automation and the simultaneous decline in the labor share and employment among advanced economies raise concerns that labor will be marginalized and made redundant by new technologies. We examine this proposition using a task-based framework in which tasks previously performed by labor can be automated and more complex versions of existing tasks, in which labor has a comparative advantage, can be created. We characterize the equilibrium in this model and establish how the available technologies and the choices of firms between producing with capital or labor determine factor prices and the allocation of factors to tasks. In a static version of our model where capital is fixed and technology is exogenous, automation reduces employment and the share of labor in national income and may even reduce wages, while the creation of more complex tasks has the opposite effects. Our full model endogenizes capital accumulation and the direction of research towards automation and the creation of new complex tasks. Under reasonable conditions, there exists a stable balanced growth path in which the two types of innovations go hand-in-hand. An increase in automation reduces the cost of producing using labor, and thus discourages further automation and encourages the faster creation of new complex tasks. The endogenous response of technology restores the labor share and employment back to their initial level. Although the economy contains powerful self correcting forces, the equilibrium generates too much automation. Finally, we extend the model to include workers of different skills. We find that inequality increases during transitions, but the self-correcting forces in our model also limit the increase in inequality over the long-run.
JEL: J23 J24 O14 O31 O33
URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:22252&r=ltv

Top incomes and human well-being around the world

June 8, 2016
By: Richard V. Burkhauser ; Jan-Emmanuel De Neve ; Nattavudh Powdthavee
The share of income held by the top 1 percent in many countries around the world has been rising persistently over the last 30 years. But we continue to know little about how the rising top income shares affect human well-being. This study combines the latest data to examine the relationship between top income share and different dimensions of subjective well-being. We find top income shares to be significantly correlated with lower life evaluation and higher levels of negative emotional well-being, but not positive emotional well-being. The results are robust to household income, individual’s socio-economic status, and macroeconomic environment controls.
Keywords: Top income; life evaluation; well-being; income inequality; World top income database; Gallup World Poll
JEL: J1
URL: http://d.repec.org/n?u=RePEc:ehl:lserod:66411&r=ltv