Female Labor Supply, Human Capital and Welfare Reform

July 22, 2016
By: Richard Blundell (University College London) ; Monica Costa Dias (Institute for Fiscal Studies and CEF-UP at the University of Porto) ; Costas Meghir (Cowles Foundation, Yale University) ; Jonathan Shaw (Institute for Fiscal Studies and University College London)
We estimate a dynamic model of employment, human capital accumulation – including education, and savings for women in the UK, exploiting tax and benefit reforms, and use it to analyze the effects of welfare policy. We find substantial elasticities for labor supply and particularly for lone mothers. Returns to experience, which are important in determining the longer-term effects of policy, increase with education, but experience mainly accumulates when in full-time employment. Tax credits are welfare improving in the UK and increase lone-mother labor supply, but the employment effects do not extend beyond the period of eligibility. Marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts.
Keywords: Female labor supply, Welfare reform, Tax credits, Education choice, Dynamic discrete choice models, Life cycle models
JEL: H2 H3 J22 J24
URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1892r2&r=ltv

National Happiness and Genetic Distance: A Cautious Exploration

July 22, 2016


By: Proto, Eugenio (University of Warwick) ; Oswald, Andrew J. (University of Warwick)
This paper studies a famous unsolved puzzle in quantitative social science. Why do some nations report such high levels of mental well-being? Denmark, for instance, regularly tops the league table of rich countries’ happiness; Britain and the US enter further down; some nations do unexpectedly poorly. The explanation for the longobserved ranking – one that holds after adjustment for GDP and other socioeconomic variables – is currently unknown. Using data on 131 countries, the paper cautiously explores a new approach. It documents three forms of evidence consistent with the hypothesis that some nations may have a genetic advantage in well-being.
Keywords: Well-being; international; happiness; genes; 5HTT; countries JEL Classification: I30; I31
URL: http://d.repec.org/n?u=RePEc:cge:wacage:273&r=ltv

Education policy and intergenerational transfers in equilibrium

July 22, 2016
By: Brant Abbott (Institute for Fiscal Studies) ; Giovanni Gallipoli (Institute for Fiscal Studies and University of British Columbia) ;Costas Meghir (Institute for Fiscal Studies and Yale University) ; Gianluca Violante (Institute for Fiscal Studies)
This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Driven by both altruism and paternalism, parents make inter vivos transfers to their children. Both cognitive and non-cognitive skills determine the non-pecuniary cost of schooling. Labor supply during college, government grants and loans, as well as private loans, complement parental resources as means of funding college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by 4-5 percentage points in the long-run. Further expansions of government-sponsored loan limits or grants would have no salient aggregate effects because of substantial crowding-out: every additional dollar of government grants crowds out 30 cents of parental transfers plus an equivalent amount through a reduction in student’s labor supply. However, a small group of high-ability children from poor families, especially girls, would greatly benefit from more generous federal aid.
Keywords: Education, Financial Aid, Intergenerational Transfers, Altruism, Paternalism, Credit Constraints, Equilibrium.
JEL: E24 I22 J23 J24
URL: http://d.repec.org/n?u=RePEc:ifs:ifsewp:16/04&r=ltv

Suicide, age, and wellbeing: an empirical investigation

July 21, 2016
By: Anne Case (Princeton University) ; Angus Deaton (Princeton University)
Suicide rates, life evaluation, and measures of affect are all plausible measures of the mental health and well being of populations. Yet in the settings we examine, correlations between suicide and measured well being are at best inconsistent. Differences in suicides between men and women, between Hispanics, blacks, and whites, between age groups for men, between countries or US states, between calendar years, and between days of the week, do not match differences in life evaluation. By contrast, reports of physical pain are strongly predictive of suicide in many contexts. The prevalence of pain is increasing among middle-aged Americans, and is accompanied by a substantial increase in suicides and deaths from drug and alcohol poisoning. Our measure of pain is now highest in middle age—when life evaluation and positive affect are at a minimum. In the absence of the pain epidemic, suicide and life evaluation are likely unrelated, leaving unresolved whether either one is a useful overall measure of population wellbeing.
URL: http://d.repec.org/n?u=RePEc:pri:cheawb:june2015&r=ltv

Higher education and the fall and rise of inequality

July 21, 2016
By: Klaus Prettner (University of Hohenheim, Germany) ; Andreas Schaefer (ETH Zurich, Switzerland)
We investigate the effect of higher education on the evolution of inequality. In so doing we propose a novel overlapping generations model with three social classes: the rich, the middle class, and the poor. We show that there is an initial phase in which no social class invests in higher education of their children, such that the evolution of inequality is entirely driven by the level of bequests. Once a certain income threshold is surpassed, the rich start to invest in higher education of their children, which partially crowds out bequests and thereby reduces inequality in the short run. The better educated children of the rich, however, enjoy higher incomes and inequality starts to rise again. As time goes by, the middle class and eventually also the poor start to invest in higher education, but now the increase in inequality is driven by different levels of education. As the economy proceeds toward a balanced growth path, educational differences between social groups and thus inequality decline again. We argue that (1) the proposed mechanism has the potential to explain the Ushaped evolution of inequality in rich countries in the second half of the 20th Century and the first decade of the 21st Century and (2) the currently observed increase in inequality is rather a transitory phenomenon.
Keywords: Higher education, inequality, growth regime switch, middle income trap, Piketty curve
JEL: I23 I24 I25 O11 O41
URL: http://d.repec.org/n?u=RePEc:eth:wpswif:16-240&r=ltv

Measuring poverty in Latin America and the Caribbean : methodological considerations when estimating an empirical regional poverty line

July 21, 2016
By: Castaneda Aguilar,Raul Andres ; Gasparini,Leonardo Carlos ; Garriga,Santiago ; Lucchetti,Leonardo Ramiro ; Valderrama Gonzalez,Daniel
This paper contributes to the methodological literature on the estimation of poverty lines for country poverty comparisons in Latin America and the Caribbean. The paper exploits a unique, comprehensive data set of 86 up-to-date urban official extreme and moderate poverty lines across 18 countries in Latin America and the Caribbean, as well as the recent values of the national purchasing power parity conversion factors from the 2011 International Comparison Program and a set of harmonized household surveys that are part of the Socio-Economic Database for Latin America and the Caribbean project. Because of the dispersion of country-specific poverty lines, the paper concludes that the value of a regional poverty line largely depends on the selected aggregation method, which ends up having a direct impact on the estimation of regional extreme and moderate poverty headcounts.
Keywords: Regional Economic Development,ICT Applications,Pro-Poor Growth,Rural Poverty Reduction
URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:7621&r=ltv

Earnings and labour market volatility in Britain, with a transatlantic comparison

July 21, 2016
By: Lorenzo Cappellari ; Stephen P. Jenkins
We contribute new evidence about earnings and labour market volatility in Britain over the period 1992–2008, for women as well as men, and provide transatlantic comparisons (Most research about volatility refers to earnings volatility for US men.). Earnings volatility declined slightly for both men and women over the period but the changes are not statistically significant. When we look at labour market volatility, i.e. also including individuals with zero earnings in the calculations, there is a statistically significant decline in volatility for both women and men, with the fall greater for men. Using variance decompositions, we demonstrate that the fall in labour market volatility is largely accounted for by changes in employment attachment rates. We show that volatility trends in Britain, and what contributes to them, differ from their US counterparts in several respects.
Keywords: Earnings instability; Earnings volatility; Labour market volatility
JEL: C46 J41
URL: http://d.repec.org/n?u=RePEc:ehl:lserod:56667&r=ltv