Direct and indirect effects of happiness on wage: A simultaneous equations approach

Using data from the United Sates National Longitudinal Survey of Youth (NLSY79) and following a two-stage method, the current study estimates wage, schooling and happiness equations simultaneously and demonstrates that happiness affects the worker's wage not only directly, but also indirectly through its direct effect on years of schooling. The simultaneous relation between happiness and schooling demonstrated in this study further suggests that schooling also affects wage both directly and indirectly through happiness. The study supports the argument presented in several earlier studies that higher income does not necessarily guarantee higher levels of happiness.     

How do Students Respond to Labor Market and Education Incentives? An Analysis of Homework Time

This study examines the extent to which high school students respond to education and labor market incentives when making decisions about homework. Student and state fixed effects estimators are used to control for unobserved individual and geographic heterogeneity and selection. I find that students’ choices about homework respond to unemployment rates and changes in the minimum wage, but not to changes in the price of higher education. These responses are not constant throughout the population: female students, low income students, and low achieving students in particular increase their homework time in response to a higher minimum wage, while male students are more responsive to changes in the unemployment rate.     

Young people's decision making involvement and educational attainment

Increasing participation in family decision making is an integral part of adolescent development. This paper uses longitudinal data from four low and middle income countries—Ethiopia, India, Peru and Vietnam—to assess the relationship between young people's involvement in schooling decision making and schooling outcomes. In the pooled sample, compared to young adults who indicate to have no say in educational choices at age 19, adolescents who make these decisions unilaterally or jointly with parents are on average 17%–23% more likely to drop out by age 22. The effects are, however, heterogenous across countries.     

Decomposition of Changes in Korean Wage Inequality, 1998–2007

South Korea experienced a steep increase in wage inequality between the Asian financial crisis in 1997 and the global financial crisis in 2008. This paper investigates the causes of the sharp change during that time period by looking at the contributions of changes in the distributions of schooling and unionization. The effects are estimated applying two robust distributional function based decomposition methods on Korean Labor and Panel Survey data for the time period 1998–2007. The results suggest changes in the distribution of schooling can explain about 10 % of the changes in the 90/50 percentile wage gap. The declining unionization rate does not have much impact on the upward trend of Korean wage inequality. In addition, aggregate decomposition results suggest that changes in labor force composition can explain a significant proportion of the total wage changes in the upper-tail of the distribution. Based on our findings we provide a list of policy recommendations to address the wage inequality issue in Korea.     

Immigration,labor force integration and the pursuit of self-employment

A correspondence analysis was used to examine the entire working life cycle of Canadian-born male age-education cohorts and immigrant male age-education cohorts who arrived during 1945-61. Data were drawn from the 1961 and 1971 census databases as well as the 1981 and 1991 public individual files. Findings support the existence of a split labor market based on immigrant status, particularly at the low end of the schooling spectrum. In 1961, immigrants with low levels of schooling were closely associated with the wage construction sector, whereas Canadian-born males below the high school level would most likely gravitate towards consumer services. Meanwhile, immigrants with a high school education were likely to be in consumer services; whereas, Canadian-born males with a high school education were closely aligned with public administration and distributive services. Moreover, immigrants with higher levels of schooling were less likely to work in ethnically dominated markets, while immigrants with low schooling moved into the self-employed construction sector. The existence of a split in the labor market was evident among workers with lower levels of schooling compared with university-educated workers.     

A CENTURY OF HUMAN CAPITAL AND HOURS

An average person born in the United States in the second half of the 19th century completed 7 years of schooling and spent 58 hours a week working in the market. In contrast, an average person born at the end of the 20th century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30%. What explains these trends? We consider a model of human capital and labor supply to quantitatively assess the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work. We find that the observed increase in wages and life expectancy accounts for 80% of the increase in years of schooling and 88% of the reduction in hours of work. Rising wages alone account for 75% of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25% of the increase in schooling and almost none of the decrease in hours of work. In addition, we show that the mechanism emphasized in the model is consistent with other trends at a more disaggregate level such as the reduction in the racial gap in schooling and the decrease in the cross‐sectional dispersion in hours. (JEL E1, I25, J11, O4)     

SURVEY MEASURES OF FAMILY DECISION PROCESSES FOR ECONOMETRIC ANALYSIS OF SCHOOLING DECISIONS

In this article, we consider the collection of novel subjective data on family processes of schooling decisions. In particular, we review recent progress on survey measurement of expectations, information, and locus of decision of American families within the context of secondary schooling, and we discuss possible future developments by providing concrete examples from recent exploratory efforts. We argue that collection of data on adolescents' and parents' perceptions of the available school options and the application‐and‐admission rules, their subjective expectations about short‐ and long‐term consequences of alternative choices, and their assessments of the locus of decision making within families could greatly enhance economic modeling and contribute to effective econometric analysis of schooling decisions. (JEL C83, D19, D79, D83, D84, I21, I26, J24)     

Household job search: A theoretical and empirical model

This article links the literature on family decision making and the economics of job search by examining job search by an unemployed individual within a household context. A theoretical model was developed which demonstrates the interdependence of the utility of household members when one is searching for work. The costs of search are borne by all household members while the benefits are captured in the searcher's expected future wage. A reservation wage was shown to be determined by household financing options, and the perception of relevant labor market parameters. An empirical model of the reservation wage for a sample of unemployment insurance recipients was estimated using two-stage least squares. Results, reported for male and female subgroups, support the hypotheses derived from the household job search model. In particular, the reservation wage was shown to depend on unemployment duration, labor market conditions, increased labor force participation of other household members, use of household assets to finance search, existence of dependents, and unemployment insurance benefits.     

Labor force participation and fertility: a social analysis of their antecedents and simultaneity.

The nature of the relationship between labor force participation and fertility is examined for 172 families residing in the Chicago metropolitan area. The sample represents a marriage cohort. The data was collected during the 6th year of marriage (1978). The average age of the wife was 27, that of the husband 29. About 15% of the sample was black, the rest white. The median years of schooling completed was 13 for the wife and 14 for the husband. Median family income (less wife's earnings) was US$15,000; approximately 96% of the husbands and 53% of the wives were employed. The hypothesis is that family decisions are socially constructed through husband and wife interactions wherein individual needs and desires of the spouses are resolved by means of give-and-take and mutual influence. Economic factors, societal forces, group pressures and physiological concerns are presumed to work through the psychological characteristics of the spouses and the social interactions transpiring between them. The is, the exogenous determinants are assumed to constitute the setting or context for individual and social decision making. They either enter as inputs to joint decision making or else shape the needs, desires, or other psychological reactions of spouse prior to decision making. In this study, the specific phenomena to be explained are wife's labor force participation and family size. Also tested is the effect of psychological investment in these 2 issues and the impact of the role relationship between the spouses. The hypotheses are scrutinized at 2 levels of analysis: the individual spouses and the husband-wife dyad. Comparisons are made among social psychological models, wherein either the husband of wife provides information as they perceive their relationship and a sociological model wherein group constructs are formed with the husband and wife acting as informants on the pattern of norms guiding their relation. A A strutural equation methodology is employed to better model measurement error and errors in equations imultaneously. The results show that labor force participation of wife and fertility do not appear to be causally related. Rather, social forces within the family function as common antecedents, thereby producing a spurious observed bivariate association. This implies that labor force participation and fertility decision entail joint decision making and influence. Another implication is that the decision process seems to be neither atomistic nor necessarily sequential. The present study also differs from previous efforts in the methodology employed. Variables were operationalized in concert with sociological theory--social variables were used to explain social outcomes.     

Persuasion: An experimental study of team decision making

This paper studies persuasion within teams and investigates why teams commonly take, by some measures, better decisions than individuals. The analysis is based on data from electronic communication within teams of two players. Thanks to the experimental design, changes of an individual’s decision can be attributed to the content of the team partner’s message. The results for knowledge-related and strategic problems show that individuals’ decisions change upon receiving more informative and sophisticated arguments and remain the same otherwise. This individual behavior is an essential part of the information aggregation in teams and can explain the advantage of teams in decision making and in games.     

THE ROLE OF EXPECTATIONS IN ADOLESCENT SCHOOLING CHOICES: DO YOUTHS RESPOND TO ECONOMIC INCENTIVES?

We address the role of youths' own choice-conditioned expectations in understanding their schooling choices by constructing a choice (or "switching") model. We emphasize the effect of individual student perceptions regarding the returns associated with graduating from high school versus dropping out, while controlling for an extensive set of family and community factors. We find that youths' expected income returns to graduating from high school are influential in their schooling choices, even when an extensive set of background, economic, family, and neighborhood variables, designed to capture the effects of parental and governmental decisions, is introduced into the analysis. (JEL I20 , J24 )     

A HUMAN CAPITAL MODEL OF THE EFFECTS OF ABILITY AND FAMILY BACKGROUND ON OPTIMAL SCHOOLING LEVELS

This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1-yr full-time equivalent (FTE) work experience cohorts for 1985–1989. The estimated Mincerian "overtaking" cohort (the years of work experience at which individuals' observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of experience, yielding on average a rate of return of 10.3% and an average (optimal) 11.4 yr of schooling. ( JEL J24, J31, J22)     

An integrated model of the economic effects of right-to-work laws

This study derives an empirical model which simultaneously traces the effect of Right-to-Work laws on the worker’s decision to join the union, the union’s decision to set the wage rate, and the firm’s decision to employ inputs. The model identifies two channels through which Right-to-Work laws affect these decisions: the wage effect and the productivity effect. Our results show that RTW laws tend to affect economic decisions through the wage effect, because the effect of RTW laws on productivity is small in most states. We thank an anonymous referee for helpful comments. Any errors that remain are the responsibility of the authors.     

Effects of positive attitude on earnings: Evidence from the US longitudinal data

To examine whether or not the worker's attitude to life affects his/her earnings, this study estimates wage equations with positive attitude as an explanatory variable under different econometric specifications. The results obtained from both cross-sectional and panel data confirm that positive and optimistic attitude to life influence the worker's wages positively, and that the magnitude of this effect is comparable to or even higher than the individual effects of the standard human capital variables on earnings. The study further demonstrates that in addition to its direct effects, positive attitude also affects earnings indirectly through its effects on schooling.     

Intra-household arrangements: How important are they in terms of male-female subjective well-being?

This paper aims to analyze the impact of different intra-household arrangements, defined in terms of income pooling and decision-making responsibilities, on individual subjective well-being in a number of European countries. Using the EU-SILC 2010 module on intra-household sharing of resources and self-assessed health, as a dimension of subjective well-being, we find that the relationship between self-reported health and family arrangements differs by gender and area of decision. The results provide interesting insights on the potential determinants of individual self-assessed health that go beyond the standard ones. In particular, we identify higher levels of males’ and females’ self-assessed health connected to them controlling or sharing financial decisions. Moreover, males’ self-assessed health is positively linked to female making domestic decisions, and negatively if decisions are of financial type; whereas females’ self-assessed health is positively associated to them taking domestic decisions only in households where incomes are not fully pooled. Thus, our findings might be of help for politicians to design the most effective policies intended to improve individual standards of living and to reduce social inequalities.     

THE QUANTITY-ADJUSTED VALUE OF LIFE

The traditional compensating differential analysis is extended to reflect the effects on wages of the duration of life at risk and of insurance benefits to the surviving spouse and dependents. The implicit discount rate that workers use in making their life-cycle employment decisions is also estimated. The revealed discount rate ranges from 10 to 12 percent, and the implicit value per year of life is 175,000. There is also evidence of significant wage reductions resulting from higher workers' compensation benefits for fatal and nonfatal injuries, suggesting an important tradeoff between ex ante and ex post compensation for risk.     

Cognitive skills and Black–White wages in the United States labor market

Using data from the National Longitudinal Survey of Youth (NLSY), this study analyzes the effects of cognitive skills on the wages of Whites and African Americans in white and blue collar occupations. The results show that cognitive skills, net of education, are important predictors of wages across all occupations. Mathematics skills, in particular contribute to significant wage premiums for workers in white and blue-collar occupations, with the exception of Blacks in blue-collar professions. English skills lead to significant wage premiums only for Blacks in blue-collar occupations. While the incorporation of cognitive skills narrows the Black-White wage gap considerably, the effects of skills on the wages of Blacks and Whites are far from uniform. The results also show that despite using detailed controls for the quality of education, an extra year of schooling yields the highest wage premium for Whites in all occupations.     

Computerizing protective services intake expertise: Preliminary research

Decision making at child welfare intake has been the subject of considerable investigation for the last thirty years. Previous reserach on the dynamics of abuse and neglect resulted in complexity and inconsistency to the extent that research moved away from determining the relevant information for creating a more structured decision making process. Recent developments in knowledge engineering and computerized expert systems provide new tools for examining protective services intake decision making. These tools are appropriate for organizing the vast amount of information workers use during decision making, extracting decisions from that information, and presenting the decisions and their supporting logic. This research examines existing expertise with a small sample of child welfare experts to determine the feasibility of developing an expert system for supporting intake decisions.     

An Anti-Introspectivist View of Career Decision Making

This article reviews 50 years of empirical literature on career decision making, summarizing 10 things the field knows “for sure.” An anti-introspectivist view of career decision making is then presented, developed by applying findings from cognitive and experimental social psychology to career decision making. This view holds that most processing performed by the human mind for decision making and behavior initiation is not performed at a conscious level and that reflection on those processes may be futile, and detrimental to good decisions. Although the anti-introspectivist perspective challenges many strongly held assumptions, it provides a plausible explanation of some of the difficulties encountered by decision makers and those who counsel them.