Challenged by Migration: Europe’s Options

June 2, 2017

Challenged by Migration: Europe’s Options

By: Constant, Amelie F. ; Zimmermann, Klaus F.
This paper examines the migration and labor mobility in the European Union and elaborates on their importance for the existence of the EU. Against all measures of success, the current public debate seems to suggest that the political consensus that migration is beneficial is broken. This comes with a crisis of European institutions in general. Migration and labor mobility have not been at the origin of the perceived cultural shift. The EU in its current form and ambition could perfectly survive or collapse even if it solves its migration challenge. But it will most likely collapse, if it fails to solve the mobility issue by not preserving free internal labor mobility and not establishing a joint external migration policy.
Keywords: labor mobility,migration,European Union,refugees
JEL: D01 D02 D61 F02 F16 F22 F66 J6


Personality Traits, Intra-household Allocation and the Gender Wage Gap

June 2, 2017

By: Christopher Flinn (New York University) ; Petra Todd (University of Pennsylvania) ; Weilong Zhang (University of Pennsylvania)
A model of how personality traits affect household time and resource allocation decisions and wages is developed and estimated. In the model, households choose between two modes of behavior: cooperative or noncooperative. Spouses receive wage offers and allocate time to supplying labor market hours and to producing a public good. Personality traits, measured by the so-called Big Five traits, can affect household bargaining weights and wage offers. Model parameters are estimated by Simulated Method of Moments using the Household Income and Labor Dynamics in Australia (HILDA) data. Personality traits are found to be important determinants of household bargaining weights and of wage offers and to have substantial implications for understanding the sources of gender wage disparities.
Keywords: gender wage differentials, personality and economics outcomes, household bargaining, Time Allocation
JEL: D10 J12 J16 J22 J31 J71

Euler Equations, Subjective Expectations and Income Shocks

June 1, 2017


By: Attanasio, Orazio (UCL) ; Kovacs, Agnes (University of Oxford) ; Molnar, Krisztina (Dept. of Economics, Norwegian School of Economics and Business Administration)
In this paper, we make three substantive contributions: first, we use elicited subjective income expectations to identify the levels of permanent and transitory income shocks in a life-cycle framework; second, we use these shocks to assess whether households’ consumption is insulated from them; third, we use the shock data to estimate an Euler equation for consumption. We find that households are able to smooth transitory shocks, but adjust their consumption in response to permanent shocks, albeit not fully. The estimates of the Euler equation parameters with and without expectational errors are similar, which is consistent with rational expectations. We break new ground by combining data on subjective expectations about future income from the Michigan Survey with micro data on actual Income from the Consumer Expenditure Survey.
Keywords: life cycle models; estimating Euler Equations; survey expectations
JEL: C13 D12 D84 D91 E21

Inequality, redistribution and cultural integration in the Welfare State

June 1, 2017


By: Bisin, Alberto ; Verdier, Thierry
This paper constructs a simple theoretical political economy model to analyze the dynamic interactions between redistribution, public good provision and cultural integration of minority groups. Cultural differentiation erodes the support for general public good provision and vertical redistribution, reducing in turn the attractiveness of adoption of the mainstream culture by the minority groups. Our model shows the possibility for multiple politico-cultural steady state trajectories depending strongly on the initial degree of cultural differentiation in the society. An exogenous increase in income inequality is shown to increase the likelihood of multiple steady state trajectories. In a context with multiple minority groups, culltural fragmentation favors integration into the mainstream culture.
Keywords: cultural integration; inequality; political economy; redistribution
JEL: J13 J15 Z10

Americans’ Responses to Terrorism and Mass-Shooting: Evidence from the American Time Use Survey and Well-Being Module

June 1, 2017

By: Clark, Andrew ; Stancanelli, Elena
A small but significant literature concludes that terrorism impacts the economy, although the impact of mass-shooting has not yet been addressed by economists. We compare the economic effects of two tragedies: the 2013 Boston Marathon Bombing and the 2012 Sandy Hook School Shooting. Fatal attacks are rare on any given day, and to estimate their effects we combine RDD with differences-in-differences. Using diaries of daily activities for a representative, random sample of Americans, we find a decline of over half an hour per day in average hours worked, while time spent accessing the media increased slightly. Active leisure fell after the BMB but increased after the SHSS. Daily data on emotional feelings reveal that subjective well-being fell dramatically after the BMB, and especially so for women, who are likely more averse to risk; but the findings are mixed for the SHSS. The latter induced a significant increase in meaningfulness, which was greatest for respondents with college education. We discuss these differences against economic, a priori, and drive conclusions that may be relevant for policy.
Keywords: Well-being,Time Use,Terrorism
JEL: I31 J21 J22 F52

Perceptions of Distributive Justice in Latin America During a Period of Falling Inequality

June 1, 2017
By: Germán Reyes (The World Bank and CEDLAS) ; Leonardo Gasparini (CEDLAS-FCE and CONICET.)
In this paper we explore perceptions of distributive justice in Latin America during the 2000s and its relationship with income inequality. In line with the fall in income inequality in the region, we document a widespread, although modest, decrease in the share of the population that believes income distribution is unfair. The fall in the perception of unfairness holds across very heterogeneous groups of the population. Moreover, perceptions evolved in the same direction as income inequality for 17 out of the 18 countries for which microdata is available. Our analysis reveals unfairness perceptions are more correlated with relative measures of income inequality than absolute ones and that individual characteristics are correlated with distributive perceptions. On average, individuals that are older, more educated, unemployed, and left-wing tend to perceive income distribution as more unfair. We show that the decrease in unfairness perceptions during the last decade was due to changes in inequality, rather than to composition effects. Finally, we show that individuals that perceive income distribution as very unfair are more prone to mobilize and protest.
JEL: D31 D63 D83

When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Men

March 31, 2017


By: David Autor ; David Dorn ; Gordon Hanson
The structure of marriage and child-rearing in U.S. households has undergone two marked shifts in the last three decades: a steep decline in the prevalence of marriage among young adults, and a sharp rise in the fraction of children born to unmarried mothers or living in single-headed households. A potential contributor to both phenomena is the declining labor-market opportunities faced by males, which make them less valuable as marital partners. We exploit large scale, plausibly exogenous labor-demand shocks stemming from rising international manufacturing competition to test how shifts in the supply of young ‘marriageable’ males affect marriage, fertility and children’s living circumstances. Trade shocks to manufacturing industries have differentially negative impacts on the labor market prospects of men and degrade their marriage-market value along multiple dimensions: diminishing their relative earnings—particularly at the lower segment of the distribution—reducing their physical availability in trade-impacted labor markets, and increasing their participation in risky and damaging behaviors. As predicted by a simple model of marital decision-making under uncertainty, we document that adverse shocks to the supply of `marriageable’ men reduce the prevalence of marriage and lower fertility but raise the fraction of children born to young and unwed mothers and living in in poor single-parent households. The falling marriage-market value of young men appears to be a quantitatively important contributor to the rising rate of out-of-wedlock childbearing and single-headed childrearing in the United States.
JEL: F16 J12 J13 J21 J23