Informal Labor and the Efficiency Cost of Social Programs: Evidence from the Brazilian Unemployment Insurance Program

 

By:	François Gerard ; Gustavo Gonzaga
It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs – transfer and social insurance programs – in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality – increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers’ need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes.
JEL:	H0 J46 J65
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:22608&r=ltv

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Women Working Longer: Facts and Some Explanations

 

By:	Claudia Goldin ; Lawrence F. Katz
American women are working more, through their sixties and even into their seventies. Their increased participation at older ages started in the late 1980s before the turnaround in older men’s labor force participation and the economic downturns of the 2000s. The higher labor force participation of older women consists disproportionately of those working at full-time jobs. Increased labor force participation of women in their older ages is part of the general increase in cohort labor force participation. Cohort effects, in turn, are mainly a function of educational advances and greater prior work experience. But labor force participation rates of the most recent cohorts in their forties are less than those for previous cohorts. It would appear that employment at older ages could stagnate or even decrease. But several other factors will be operating in an opposing direction leading us to conclude that women are likely to continue to work even longer.
JEL:	J21 J22 J26
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:22607&r=ltv

 

Electoral reciprocity in programmatic redistribution: Experimental Evidence

 

By:	Sebastian Galiani ; Nadya Hajj ; Pablo Ibarraran ; Nandita Krishnaswamy ; Patrick J. McEwan
We analyzed two conditional cash transfers experiments that preceded Honduran presidential elections in 2001 and 2013. In the first, smaller transfers had no effects on voter turnout or incumbent vote share. In the second, larger transfers increased turnout and incumbent share in similar magnitudes, consistent with the mobilization of the incumbent party base rather than vote switching. Moreover, we found that turnout and incumbent share increased when cumulative payments were similar, but larger payments were made closer to the elections. As in prior lab experiments, individuals seem to overweight “peak” and “end” payments in their retrospective estimation of net benefits. We further argue that a model of intrinsically-reciprocal voters is most consistent with the findings.
JEL:	H3 I38
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:22588&r=ltv

 

Knowledge Capital and Aggregate Income Differences: Development Accounting for U.S. States

 

By:	Hanushek, Eric A. (Stanford University) ; Ruhose, Jens (Leibniz University) ; Woessmann, Ludger (University of Munich)
Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. We develop detailed measures of skills of workers in each state based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. These new measures of knowledge capital permit development accounting analyses calibrated with standard production parameters. We find that differences in knowledge capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses, emphasizing the importance of appropriately measuring worker skills. These estimates support emphasis on school improvement as a strategy for state economic development.
Keywords:	economic growth, human capital, cognitive skills, schooling, U.S. states JEL Classification: O47, I25, J24
URL:	http://d.repec.org/n?u=RePEc:cge:wacage:299&r=ltv

 

Do Women Ask?

 

By:	Artz, Benjamin (University of Wisconsin, Oshkosh) ; Goodall, Amanda H. (Cass Business School) ; Oswald, Andrew J. (University of Warwick)
Women typically earn less than men. The reasons are not fully understood. Previous studies argue that this may be because (i) women ‘don’t ask’ and (ii) the reason they fail to ask is out of concern for the quality of their relationships at work. This account is difficult to assess with standard labor-economics data sets. Hence we examine direct survey evidence. Using matched employer-employee data from 2013-14, the paper finds that the women-don’t-ask account is incorrect. Once an hours-of-work variable is included in ‘asking’ equations, hypotheses (i) and (ii) can be rejected. Women do ask. However, women do not get.
Keywords:	matched employer-employee data, female discrimination, wages, gender
JEL:	J31 J71
URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp10183&r=ltv

 

The Growth-Employment-Poverty Nexus in Latin America in the 2000s: Cross-Country Analysis

 

By:	Guillermo Cruces (CEDLAS – UNLP , CONICET y IZA) ; Gary S. Fields (Cornell University y IZA) ; David Jaume (Cornell University) ; Mariana Viollaz (CEDLAS – UNLP)
In the great majority of Latin American countries in the 2000s, economic growth took place and brought about improvements in almost all labour market indicators and consequent reductions in poverty rates. Across countries, economic growth was not all that mattered; external factors were particularly important for changes in labour market conditions, while reductions in poverty were strongly related to improvements in earnings and employment indicators. Although the 2008 crisis affected some countries differently from others, nearly all labour market indicators were at least as high or higher by 2012 than immediately before the crisis in all countries but one.
JEL:	J21 J30 O10 O54
URL:	http://d.repec.org/n?u=RePEc:dls:wpaper:0200&r=ltv

Informal Labor and the Efficiency Cost of Social Programs: Evidence from the Brazilian Unemployment Insurance Program

 

By:	Gerard, Francois ; Gonzaga, Gustavo
It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs — transfer and social insurance programs — in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality — increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers’ need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes.
Keywords:	Informality; Unemployment insurance
JEL:	H00 J65
URL:	http://d.repec.org/n?u=RePEc:cpr:ceprdp:11485&r=ltv

Violence against Rich Ethnic Minorities: A Theory of Instrumental Scapegoating

By:	Yann Bramoullé (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS) ; Pauline Morault (Aix-Marseille University (Aix-Marseille School of Economics), CNRS& EHESS)
In many parts of the developing world, ethnic minorities play a central role in the economy. Examples include Chinese throughout Southeast Asia, Indians in East Africa and Lebanese in West Africa. These rich minorities are often subject to popular violence and extortion, and are treated ambiguously by local politicians. We develop a formal framework to analyze the interactions between a rent-seeking political elite, an economically dominant ethnic minority and a poor majority. We find that the local elite can always make use of the presence of the rich minority to maintain its hold on power. When the threat of violence is high, the government may change its economic policies strategically to sacrifice the minority to popular resentment. We analyze the conditions under which such instrumental scapegoating emerges, and the forms it takes. We then introduce some social integration between both elites capturing, for instance, mixed marriages and shared education. Social integration reduces violence and yields qualitative changes in economic policies. Overall, our results help explain documented patterns of violence and segregation
Keywords:	elites, popular violence, ethnic minority, scapegoat
URL:	http://d.repec.org/n?u=RePEc:aim:wpaimx:1626&r=ltv

 

Top Incomes and the Gender Divide

 

By:	A.B. Atkinson (Nuffield College, Oxford; London School of Economics; and INET at the Oxford Martin School) ; A. Casarico (Università Bocconi; CESifo; and Dondena Centre for Research on Social Dynamics and Public Policy) ; S. Voitchovsky (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and Graduate Institute of International and Development Studies, Geneva)
In the recent research on top incomes, there has been little discussion of gender. How many of the top 1 and 10 per cent are women? A great deal is known about gender differentials in earnings, but how far does this carry over to the distribution of total incomes, bringing selfemployment and capital income into the picture? We investigate the gender divide at the top of the income distribution using tax record data for a sample of eight countries with individual taxation. We show that women are under-represented at the top of the distribution. They account for between a fifth and a third of those in the top 10 per cent. Higher up the income distribution, the proportion is lower, with women constituting between 14 and 22 per cent of the top 1 per cent. The presence of women in the top income groups has generally increased over time, but the rise becomes smaller at the very top. As a result, the gradient with income has become more marked: the under-representation of women today increases more sharply. Examination of the shape of the income distribution by fitting a Pareto distribution shows that at the end of the period women disappear faster than men as one moves up the income scale in all countries. In this sense, there appears to be something of a “glass ceiling” for women. In the case of Canada, Denmark, Norway and New Zealand, there appears to have been a reversal over time, with the slope of the upper tail having been steeper for women in the past. In seeking to explain this, we highlight the role of income composition, where we show that there have been significant changes over time, underlining the fact that it is not sufficient to look only at earned income.
Keywords:	Top income groups, gender, income composition
JEL:	D31 J16
URL:	http://d.repec.org/n?u=RePEc:iae:iaewps:wp2016n27&r=ltv

Inequality Aversion and Coalition Formation

 

By:	David M. McEvoy ; John K. Stranlund
We explore the formation of coalitions to provide a public good when some players are averse to payoff inequality between coalition members and non-members. A model is presented to demonstrate how inequality-averse preferences could cause players to deliberately block profitable but inequitable coalitions from forming, and how the likelihood of such blocks is affected by the magnitude of payoff inequality. We then empirically examine coalition formation rates using laboratory experiments. Our results show that profitable coalitions are less likely to form the bigger the gap in payoffs between members and freeriding non-members. The experimental design allows us to tease out potentially confounding effects between the level of inequality and the minimum number of players required to make the coalition profitable. As predicted, controlling for the size of the participation threshold, we find that coalition formation rates fall as the payoff gap between members and non-members is increased. Key Words: self-enforcing agreements; inequality aversion; coalitions; experiments; public goods
URL:	http://d.repec.org/n?u=RePEc:apl:wpaper:16-09&r=ltv