Wages, taxes and publicly provided day care

Public employment growth has been parallelled by increased female labour force participation, while real wages for typical female public sector occupations have not increased. In a theoretical model we, first, show that there is a tradeoff between day care provision and gross wages for occupations for which day care is a complement. It is possible to combine increased public labour demand with public day care provision leaving the wage unaffected. Second, non-parents will be in favour of increasing day care as long as day care productivity is higher than the inverse of the tax rate. This is because the effective labour supply and, therefore, the tax base increase. Third, parents want to push day care provision even further. They are prepared to accept a lower day care productivity than non-parents because day care provision relaxes the constraint on their desired labour supply. The Pareto efficient day care provision is between parents‘ and non-parents‘ preferred levels. Received: 12 December 1995 / Accepted: 17 September 1997     

Private transfers with incomplete information: A contribution to the “altruism-exchange motivation for transfers” debate

We examine the role of altruism in determining optimal transfers from a principal (a mother) to selfish agents (her children) in return for attention services. Transfer-attention contracts are studied in a setting in which informational asymmetries arise from the inability of a parent to determine the extent of her children's selfishness. We find a predominating exchange motive for transfers in the symmetric informational regime we study. However, both altruism and exchange are important motives under asymmetric information. We show that altruism facilitates transfer-attention exchange arrangements with certain trade partners under incomplete information, but diminishes trade with others. Received: 19 November 2000/Accepted: 17 May 2001 The paper was written while Edward Seiler was a fellow at the department of Agricultural Economics and Management at the Hebrew University. The authors wish to thank Elad Aharoni for research assistance, and Judith Rivlin, Yacov Tsur, two anonymous referees and seminar participants at the Hebrew University for helpful comments. Responsible editor: Alessandro Cigno.     

On private incentives to acquire household production skills

In non-cooperative family models, being good at contributing to family public goods like household production may reduce one's utility, since it tends to crowd out contributions from one's spouse. Similar effects also arise in cooperative models with non-cooperative threat point: improved contribution productivity entails loss of bargaining power. This strategic effect must be traded against the benefits of household production skills, in terms of increased consumption possibilities. Since cooperation involves extensive specialization, incentives to acquire household production skills are strikingly asymmetric, with the one not specializing in household production having strong disincentives for household skill acquisition. Received: 06 July 1999/Accepted: 08 June 2000     

Voluntary income sharing and the design of unemployment insurance

This paper uses a model of search unemployment to discuss the interaction between publicly provided insurance and informal insurance through voluntary income sharing, e.g., between spouses. Income sharing reduces the optimal level of public unemployment insurance. While it is always individually rational for partners to share income, the effect of voluntary income sharing on welfare will be negative unless partners can either observe each other's search behavior or are sufficiently altruistic towards each other. The model is also used to examine a family-based policy. The welfare gains from using such policy are argued to be small. Received: 14 December 2000/Accepted: 5 November 2001     

Continuous training in Germany

Using data from the German Socio Economic Panel, I analyze the incidence, financing, and returns to workplace training in Germany for the years 1986 to 1989. Much of this training seems general, and is provided to workers by their employer at no direct cost. While workers typically report larger productivty gains from the training during work hours, such training has lower returns than training undertaken during leisure time. Workers with higher earnings growth seem more likely to participate in training. I deal with this selection problem by estimating models that allow for inidividual level heterogeneity in earnings growth rates. Received: 24 November 1997/Accepted: 27 March 2000     

Immigrant quality and assimilation: a review of the U.S. literature

Empirical research on US immigrants is reviewed: their productivity and assimilation; their contribution and use of public services; and their impact on native Americans. I discuss the characteristics of cohorts of immigrants that enter the United States at different times, and then quantify the assimilation of immigrants, typically in terms of economic productivity of immigrants compared with natives. Few have found quantifiable negative effects of immigrants on native wages or unemployment in local labor markets, but a more general equilibrium approach than has been empirically implemented may be needed to draw any conclusions regarding the distributional consequences of immigration. Received: 22 September 1995 / Accepted: 2 March 1997     

Hebrew language usage: determinants and effects on earnings among immigrants in Israel

This paper uses the 1983 Census of Israel to analyze Hebrew speaking skills and the effects of Hebrew fluency on the earnings of adult male immigrants. Hebrew fluency increases with a longer duration in Israel, the presence of children in the household, marrying after immigration, living in an area in which a smaller proportion speak one‘s mother tongue, a younger age at migration, a higher level of schooling and varies by country of birth. Earnings increase monotonically with the use of Hebrew. Speaking English as a second language is associated with higher earnings, even when country of origin is held constant. Received: 9 June 1997/Accepted: 6 November 1997     

Immigrant earnings: Language skills, linguistic concentrations and the business cycle

This study of the determinants of earnings among adult foreign-born men using the 1990 Census of Population focuses on the effects of the respondent's own English language skills, the effects of living in a linguistic concentration area, and the effects of the stage of the business cycle at entry into the U.S. labor market. The analysis demonstrates the importance of English language fluency among the foreign born from non-English speaking countries. There is also strong evidence for the complementarity between language skills and other forms of human capital. Furthermore, there is strong evidence using selectivity correction techniques for the endogeneity between language and earnings. Received: 30 November 1999/Accepted: 6 February 2001     

Labor supply responses and welfare effects from replacing current tax rules by a flat tax: Empirical evidence from Italy, Norway and Sweden

This paper employs a microeconometric framework to examine the labor supply responses and the welfare effects from replacing current tax systems in Italy, Norway and Sweden by a flat tax on total income. The flat tax rates are determined so that the tax revenues are equal to the revenues as of 1992. The flat tax rates vary from 23 per cent in Italy, 25 per cent in Norway, to 29 per cent in Sweden. In all three countries the labor supply responses decline sharply with pre-reform disposable income. The results show that the efficiency costs of the current tax systems relative to a flat tax may be rather high in Norway and much lower, but positive, in Italy and Sweden. In all three countries “rich” households – defined by their pre-tax-reform income – tend to benefit (in terms of welfare) more than “poor” households. In Italy and Sweden a majority will lose from a shift to a flat tax, while in Norway a majority is predicted to win. Received: 19 May 1998/Accepted: 02 July 1999     

Personal income taxation under mobility, exogenous and endogenous welfare weights, and asymmetric information

This paper analyses how governments should tax labour income accruing to a group of highly skilled and geographically mobile individuals who divide their time or career between several jurisdictions. The analysis differs from previous models on migration and taxation by addressing optimal regulation when agents work for several principals. Optimal taxation is developed for social welfare functions with exogenous and endogenous welfare weights. Marginal income taxes are applied for screening purposes, and the rates are lower with endogenous than with exogenous welfare weights. Received: 22 January 1998/Accepted: 3 July 1999)     

The determinants of fertility in rural Peru: Program effects in the early years of the national family planning program

Using data from the 1991 Peru Demographic Health Survey, a linked Situation Analysis, and a unique region-level data set, this paper examines the determinants of fertility in rural Peru before and after the 1985 enactment of its National Policy on Population. The empirical framework combines a model of the timing and spacing of conceptions with a model of the timing of the placement of family planning services in communities in order to control for non-random placement of services. Results show the program helped reduce fertility post 1985. The magnitude of the effects is quantified with simulations. All correspondence to David Guilkey.We thank the editor and two referees for detailed comments on an earlier draft of this paper. Funding support for this project was provided by the MEASURE Evaluation Project under a Cooperative Agreement between the U.S. Agency for International Development and the Carolina Population Center (Number HRN-A-00-97-0018-00). The views expressed herein are those of the authors and not the sponsoring agency. Responsible editor: Junsen Zhang.     

Uncertain lifetime, fertility and social security

Investigating the effects of population aging on fertility and economic growth, we show that an increase in life expectancy lowers the fertility rate and raises life-cycle savings, and that a pay-as-you-go social security does not reverse the effect on fertility. Received: 10 March 2000/Accepted: 28 April 2000     

Sex selection and fertility in a dynamic model of conception and abortion

This paper investigates the effect of prenatal sex selection on fertility through a stochastic dynamic model with uncertainty in conception as well as in gender, where a woman makes decisions on conception and abortion with or without gender detection tests (i.e. sex-selective or sex-unselective abortion). The paper shows that, when the cost of gender detection test falls, the sex ratio at birth rises due to more selective abortions, but fertility can rise or fall with rising sex ratio. Fertility may rise (fall) if there are more (less) women giving up unselective abortions for selective abortions than women giving up childbirths without test for selective abortions. Similarly the paper shows that the sex ratio can rise or fall, when fertility decreases as the cost of children increases. I test these propositions as well as their implications against micro survey data on the pregnancy history of Korean women.Responsible editor: Junsen Zhang.     

One or two parents? Half or step siblings? The effect of family structure on young children's achievement

Do children who live with both biological parents fare better than children in other types of family structures? Does the presence of step or half-siblings affect child well-being? This study examines the effect of family structure on young children's achievement addressing two sources of potential bias: (1) misclassification of blended families and (2) the omission of within-family and individual time-invariant unobserved characteristics. The results show that family structure, when defined using traditional classifications, has little effect on young children's achievement test scores. When the definition of family type is expanded, living in a blended family and living in some types of single mother families, appears to have a small, unfavorable relationship with children's achievement.     

The allocation and value of time assigned to housework and child-care: An analysis for Switzerland

In this paper, data from the 1997 Swiss Labour Force Survey are used to analyse the allocation and value of time assigned to housework and child-care. It is shown that men's allocation of time to housework and child-care is largely invariant to changes in socio-economic factors. Women's allocation of time to housework and child-care, on the other hand, is shown to depend on several social, economic, and demographic factors. The value of time assigned to housework and child-care is calculated with two market replacement cost methods and three opportunity cost methods. The results show that the value of time assigned to housework and child-care ranges from 27% to 39% and from 5% to 8% of GDP (in 1997), respectively. The value of time assigned to housework and child-care is also calculated for different household structures. Received: 15 April 1999/Accepted: 5 May 2000     

Fertility,growth and the financing of public education and health

This paper considers the implications of the financing of government services to children when fertility decisions are endogenously determined. In particular, it is shown that when the services are financed by taxation, the equilibrium outcome is biased away from the socially preferred result. The bias results in higher fertility rates and lower economic growth rates than the efficient social optimum. This arises because each household internalizes the benefits, but not the costs of the tax-financed services. We consider alternative methods of financing the public provision of services and find that a combination of taxation and vouchers can eliminate the bias in the equilibrium outcome.We are grateful for comments from Alessandro Cigno and two anonymous referees.     

Determinants of family migration: short moves vs. long moves

This paper examines factors underlying family migration. Based on a sample of stable Finnish families, both short- and long-distance migration is investigated. The empirical analysis carried out using multinomial logit modelling shows a strong negative association between the family life-cycle and migration. The findings indicate that migration takes place mainly due to the demands of the husbands career, resulting in the wives being tied migrants. Two-earner families are less migratory, and in that sense the husbands are tied stayers. Distance matters; several differences are noticed between short- and long-distance migrants.Financial support from the Yrjö Jahnsson Foundation (project no. 4271) is gratefully acknowledged. I would like to thank two anonymous referees for their helpful comments on this paper. I also wish to thank Kari Hälänen, Sari Pekkala and Hannu Tervo for their comments on an earlier version of this paper. Responsible editor: John F. Ermisch.     

An analysis of reproductive behaviour in Canada: results from an intertemporal optimizing model

Results based on a sample of Canadian households challenge the findings of most studies which show significant negative effects of schooling on the fertility of women under the age of 45. This is due to the application of methods to an optimization model which distinguish between those households which have completed their reproductive behaviour from those which have not. Completion status and the desired number of children are used to infer characteristics of the optimal programme which are then employed to derive a likelihood function. Traditional demographic methods have so far not fully utilized the distinction between incomplete and completed households in sample surveys. These methods also lead to the conclusion that completed fertility had increased from its all time low in the nineteen seventies. Received: 9 July 1997/Accepted: 6 June 1998     

Who takes care of the children? The quantity-quality model revisited

We study the Becker and Lewis (1973) quantity-quality model of children adding an explicit child care time constraint for parents. Parents can take care of the children themselves or purchase day care. Our results are: (i) If there only is own care, a quantity-quality trade-off, different from that of Becker and Lewis (1973), arises. The income effect on fertility is positive if child quantity is a closer complement than child quality to the consumption of goods. (ii) If, instead, there is a combination of purchased and own care, the effect of income on fertility is ambiguous, even if quantity of children is a normal good in the standard sense. This is the Becker and Lewis (1973) result extended to a situation with a binding child care time constraint. The conclusion is that the Becker and Lewis (1973) result holds as long as at least some child care is purchased. Received: 12 November 1999/Accepted: 1 September 2000     

Intergenerational redistribution in a small open economy with endogenous fertility

For pay-as-you-go financed pension systems, claims may be calculated according to individual contributions (income) or the number of children of a family. We analyse the optimal structure of these parameters in a model with endogenous fertility. It is shown that for both structural determinants there exists no interior solution of the problem of intragenerational utility maximisation. Thus, pure systems are always welfare maximizing. Furthermore, children-related pension claims induce a fiscal externality that tends to be positive. The determination of the optimal contribution rate shows that the widely accepted Aaron-condition is in general a misleading indicator for the comparison of fully funded and pay-as-you-go financed pension systems. Received March 12, 1996 / Accepted January 27, 1997