Individual Well-Being and the Allocation of Time Before and After the Boston Marathon Terrorist Bombing

March 22, 2017

By: Andrew Clark (PSE – Paris-Jourdan Sciences Economiques – ENS Paris – École normale supérieure – Paris – INRA – Institut National de la Recherche Agronomique – EHESS – École des hautes études en sciences sociales – École des Ponts ParisTech (ENPC) – CNRS – Centre National de la Recherche Scientifique, PSE – Paris School of Economics) ; Elena Stancanelli (PSE – Paris School of Economics, CES – Centre d’économie de la Sorbonne – UP1 – Université Panthéon-Sorbonne – CNRS – Centre National de la Recherche Scientifique)
There is a small literature on the economic costs of terrorism. We consider the effects of the Boston marathon bombing on Americans’ well-being and time allocation. We exploit data from the American Time Use Survey and Well-Being Module in the days around the terrorist attack to implement a regression-discontinuity design. The bombing led to a significant and large drop of about 1.5 points in well-being, on a scale of one to six, for residents of the States close to Boston. The happiness of American women also dropped significantly, by almost a point, regardless of the State of residence. Labor supply and other time use were not significantly affected. We find no well-being effect of the Sandy Hook shootings, suggesting that terrorism is different in nature from other violent deaths.
Keywords: Well-being,Time Use,Terrorism

Is Global Equality the Enemy of National Equality?

March 21, 2017

By: Rodrik, Dani
The bulk of global inequality is accounted for by income differences across countries rather than within countries. Expanding trade with China has aggravated inequality in some advanced economies, while ameliorating global inequality. But the ‘China shock’ is receding and other low-income countries are unlikely to replicate China’s export-oriented industrialization experience. Relaxing restrictions on cross-border labor mobility might have an even stronger positive effect on global inequality. However it also raises a similar tension. While there would likely be adverse effects on low-skill workers in the advanced economies, international labor mobility has some advantages compared to further liberalizing international trade in goods. I argue that none of the contending perspectives — national-egalitarian, cosmopolitan, utilitarian — provides on its own an adequate frame for evaluating the consequences.


Segregation of women into low-paying occupations in the US

March 21, 2017


By: Carlos Gradín (Universidade de Vigo and EQUALITAS, Spain)
We present an approach to measure the stratification of occupations by sex. For that, we extend the conventional framework for measuring gender segregation to take into account the quality of jobs (e.g. average earnings) predominantly held by each sex. We complement segregation curves and measures derived from them, with their associated concentration curves and indices, to determine whether women are segregated into low-paying jobs. We investigate with this approach the long-term trends of gender segregation and stratification of occupations by sex in the US using census data. Our results show that de-stratification of occupations by sex was more intense than their desegregation, and lasted longer, even after segregation had stagnated. Neither segregation nor stratification levels can be explained by the different characteristics of male and female workforces, although the profound changes in the composition of workers over time (e.g. education, marital status) did help to substantially explain their trends. Changes in the earnings structure favoring occupations held by women since 1980 additionally contributed to reduce stratification over time. Finally, changes in the conditional occupational distribution by sex only reduced segregation and stratification before 1990.
Keywords: occupational segregation, stratification, low-paying occupations, gender.
JEL: J16 J42 J71 J82

Estimation and Inference for Actual and Counterfactual Growth Incidence Curves

March 21, 2017


By: Ferreira, Francisco H. G. (World Bank) ; Firpo, Sergio (Insper, São Paulo) ; Galvao, Antonio F. (University of Iowa)
Different episodes of economic growth display widely varying distributional characteristics, both across countries and over time. Growth is sometimes accompanied by rising and sometimes by falling inequality. Applied economists have come to rely on the Growth Incidence Curve, which gives the quantile-specific rate of income growth over a certain period, to describe and analyze the incidence of economic growth. This paper discusses the identification conditions, and develops estimation and inference procedures for both actual and counterfactual growth incidence curves, based on general functions of the quantile potential outcome process over the space of quantiles. The paper establishes the limiting null distribution of the test statistics of interest for those general functions, and proposes resampling methods to implement inference in practice. The proposed methods are illustrated by a comparison of the growth processes in the United States and Brazil during 1995-2007. Although growth in the average real wage was disappointing in both countries, the distribution of that growth was markedly different. In the United States, wage growth was mediocre for the bottom 80 percent of the sample, but much more rapid for the top 20 percent. In Brazil, conversely, wage growth was rapid below the median, and negative at the top. As a result, inequality rose in the United States and fell markedly in Brazil.
Keywords: growth incidence curves, potential outcomes, inference, quantile process
JEL: C14 C21 D31 I32


Early childcare, child cognitive outcomes and inequalities in the UK

March 21, 2017


By: Daniela Del Boca (University of Turin and Collegio Carlo Alberto) ; Daniela Piazzalunga (IRVAPP) ; Chiara Pronzato (University of Turin, CHILD and Collegio Carlo Alberto)
In this empirical analysis, we estimate the link between formal childcare and child cognitive outcomes, controlling for a large number of variables. We use the Millennium Cohort Survey (MCS) for the United Kingdom, which provides very detailed information about several modalities of childcare as well as several child outcomes. We also simulate how an increase in formal childcare attendance can affect inequalities across children. Our results indicate that childcare attendance has a positive impact on child cognitive outcomes, which are stronger for children from low socioeconomic background.
Keywords: childcare, child cognitive outcomes, Millennium Cohort Survey, MCS
JEL: J13 D10 I21

Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework

March 21, 2017


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, unobservable tastes and the two earnings components. We establish the nonparametric identification of the nonlinear earnings process and of the consumption policy rule. Exploiting the enhanced consumption and asset data in recent waves of the Panel Study of Income Dynamics, we find that the earnings process features nonlinear persistence and conditional skewness. We confirm these results using population register data from Norway. We then show that the impact of earnings shocks varies substantially across earnings histories, and that this nonlinearity drives heterogeneous consumption responses. The framework provides new empirical measures of partial insurance in which the transmission of income shocks to consumption varies systematically with assets, the level of the shock and the history of past shocks.
Keywords: Earnings dynamics, consumption, partial insurance, panel data, quantile regression, latent variables.
JEL: C23 D31 D91


Distributional National Accounts: Methods and Estimates for the United States

February 7, 2017


By: Thomas Piketty ; Emmanuel Saez ; Gabriel Zucman
This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.
JEL: E01 H2 H5 J3