Saving behaviour and earnings uncertainty: Evidence from the British Household Panel Survey

For the first time, this paper uses a panel data set, the British Household Panel Survey, to analyse saving behaviour in Britain. One objective is to test the precautionary saving hypothesis, according to which households save to self-insure against uncertainty. Our results show that in accordance with this hypothesis, various measures of uncertainty based on earnings variability have a statistically significant effect on households' saving decisions. Moreover, in accordance with the life cycle model, households save more if they expect their financial situation to deteriorate. Received: 15 June 1999/Accepted: 4 January 2001     

Household fertility responses following communism: Transition in the Czech Republic and Slovakia

In central Europe fertility fell during transition from centrally planned to market oriented economies. Families reevaluated fertility plans facing new wages, reduced child-care subsidies, and economic uncertainty. Using micro-data from 1984 and 1993 in the Czech Republic and Slovakia, this paper relates fertility changes following Communism to wages, pricesand risks. Earnings have little impact on fertility timing during transition, though age, job uncertainty, and children conceived during Communism do. In the Czech Republic, changed fertility demand parameters account for much of thefall in fertility. In Slovakia a sizable proportion results from predictable responses to changed incentives.I would like to thank my Czech collaborators Pavel Mahonn, Petr Mateju, and Jiri Vecernk for enabling this empirical work to proceed; T. Paul Schultz, and Jenny Hunt and seminar participants at Yale University, the NEUDC, and the Population Association of America annual meetings and two anonymous referees for helpful comments. I am also indebted to the Mellon Foundation Area Studies Grant program for financial support allowing field work on this topic. I am wholly responsible for all errors. Responsible editor: T. Paul Schultz.     

Effect of childbearing on Filipino women's work hours and earnings

The effects of childbearing and work sector on women's hours and earnings in the 8 years following an index pregnancy were examined in a cohort of more than 2,000 women in the Cebu Longitudinal Health and Nutrition Survey. Change in cash earnings and hours worked were each modeled jointly with sector of labor force participation using an estimation strategy that deals with endogeneity of childbearing decisions and selectivity into sector of work. Two or more additional children born in the 8 year interval significantly reduced women's earnings, while having an additional child under 2 years of age in 1991 reduced hours worked. Received: 16 July 1998/Accepted: 22 March 2001 All correspondence to Linda Adair. The authors wish to thank Family Health International and the U.S. Agency for International Development (USAID) for their generous support. This publication was funded by USAID under Cooperative Agreement USAID/CCP-3060-A-00-3021-00 to Family Health International (FHI). David Guilkey's participation in this paper was also supported by the MEASURE Evaluation Project also with support from the United States Agency for International Development (USAID) under Contract Number HRN-A-00-97-00018-00. The conclusions expressed in this report do not necessarily reflect the policies of FHI or USAID. Helpful comments by two anonymous referees are gratefully acknowledged. Responsible editor: T. Paul Schultz.     

The effects of the welfare system on marital dissolution

The economic theory of marriage predicts that the partners expectations of greater financial resources outside of marriage should increase the probability of marital dissolution. One potential implication is that marriages should be less stable in states with higher AFDC benefits. I study this implication empirically using data on separations and divorces among marriages involving women in the National Longitudinal Survey of Youth. I find no supporting evidence that higher welfare benefits lead to increased rates of marital dissolution among married women with children.I thank Mary Ellen Benedict, Madeline Zavodny, and two anonymous referees for helpful comments, and Saul Hoffman for providing his data on AFDC benefits. Responsible editor: T. Paul Schultz.     

Comparing migrants to non-migrants: The case of Dutch migration to New Zealand

We analyse post-war Dutch migration to New Zealand. We document that history, reflect on analytical and econometric modelling and then combine a sample of Dutch migrants in New Zealand with a representative sample of Dutch in The Netherlands to estimate wage equations and the determinants of the migration decision. We use the results for ex post evaluation of the migration decision.Joop Hartog is Fellow of IZA (Bonn), CESifo (München), AIAS and Tinbergen Institute (Amsterdam). Work on this project was begun when Hartog was Erskine Visitor at the University of Canterbury, Christchurch New Zealand. Rainer Winkelmann is Fellow of CEPR and IZA (Bonn). This paper is produced as part of a CEPR research programme on European Migration from Economic Analysis to Policy Response, supported by a grant from the Commission of the European Communities under its Human Capital and Mobility Programme (no. ERBCHRXCT940515).It was presented at the European Society for Population Economics meetings in Bonn, June 2000. We gratefully acknowledge comments by Justin Lee Tobias, Jacques Poot, Ed Vytlacil, an anonymous referee and Paul Schultz. Responsible editor: T. Paul Schultz.     

Different Reasons,Different Results: Implications of Migration by Gender and Family Status

Previous research on migration and gendered career outcomes centers on couples and rarely examines the reason for the move. The implicit assumption is usually that households migrate in response to job opportunities. Based on a two-year panel from the Current Population Survey, this article uses stated reasons for geographic mobility to compare earnings outcomes among job migrants, family migrants, and quality-of-life migrants by gender and family status. We further assess the impact of migration on couples’ internal household economy. The effects of job-related moves that we find are reduced substantially in the fixed-effects models, indicating strong selection effects. Married women who moved for family reasons experience significant and substantial earnings declines. Consistent with conventional models of migration, we find that household earnings and income and gender specialization increase following job migration. Married women who are secondary earners have increased odds of reducing their labor supply following migration for job or family reasons. However, we also find that migrating women who contributed as equals to the household economy before the move are no more likely than nonmigrant women to exit work or to work part-time. Equal breadwinner status may protect women from becoming tied movers.     

Cohort size and earnings in Great Britain

Numerous studies in the United States have confirmed that individuals born into large cohorts, ceteris paribus, tend to have lower earnings on entry into the labour force compared to individuals born into small cohorts. On the other hand, only limited attention has been directed towards exploring the relationship between cohort size and earnings in other nations. This paper examines empirically the relationship between cohort size and male earnings in Great Britain. The data used is a time-series of cross-sections (1973–1982) constructed from theGeneral Household Survey. Some support for the hypothesis that large cohorts have depressed earnings is found. However, this effect does not persist as the cohort ages.     

Brother correlations in earnings in Denmark, Finland, Norway and Sweden compared to the United States

The correlation in economic status among siblings is a useful “omnibus measure” of the overall impact of family and community factors on adult economic status. In this study we compare brother correlations in long-run (permanent) earnings between the United States, on one hand, and the Nordic countries (Denmark, Finland, Norway and Sweden) on the other. Our base case results, based on very similar sample criteria and definitions for all countries, show that this correlation is above 0.40 in the United States and in the range 0.14–0.26 in the Nordic countries. Even though these results turn out to be somewhat sensitive to some assumptions that have to be made, we conclude that the family and community factors are more important determinants of long-run earnings in the United States than in the Nordic countries. Received: 27 July 2000/Accepted: 7 March 2001 All correspondence to: Anders Bj?rklund. Comments from two referees, conference participants at ESPE2000 and the Canadian Employment Research Forum, seminar participants in Aarhus, Uppsala, Bonn, and Stockholm are gratefully acknowledged. We thank NOS-S for financial support. The Swedish data collection was also supported by HSFR and SFR. The Finnish data were obtained with support from the Yrj? Jahnsson Foundation. We thank Tom Erik Aab? for preparing the Norwegian data, and Esben Agerbo for computational assistance with the Danish data. Responsible editor: John F. Ermisch.     

Do more equal slices shrink the cake? An empirical investigation of tax-transfer reform proposals in Italy

A crucial issue in efficiency-equality evaluations of tax reforms resides in the possibility that the level as well as the distribution of welfare may change, where the household-specific measures of welfare capture the value of income as well as the value of leisure. A better-designed redistribution and income support system may not only foster equality but also improve the configuration of incentives and by this route contribute in its turn to efficiency. This paper presents an empirical analysis of the welfare effects for married couples of replacing the Italian tax system by three alternative hypothetical reforms: a flat tax, a negative income tax, and a work fare scheme. We employ a microeconometric model of household labour supply that represents partners simultaneous choices, allows for constraints in the choice of hours of work, and is sufficiently flexible to capture a large variety of supply responses. These features appear to be crucial in the evaluation of reform effects. The results suggest that there is scope for improving upon the current system under both the efficiency and the equality criterion. The benefits from the reforms, however, come from unexpected directions since the largest labour supply contribution come from poor and middle class households whereas rich households appear to be much less responsive to changes in the tax rates. The simulation results reveal that a crucial role in shaping the results is played by the relatively higher behavioural responsiveness of married women living in low and average income households.All correspondence to Ugo Colombino. We would like to thank Tom Wennemo for skilful programming assistance, Anne Skoglund for technical assistance and word processing, K.A. Breke and E. Holmøy and an anonymous referee for useful comments. Special thanks to Dino Rizzi (University of Venezia), who provided us with a program written by him for the simulation of the direct and inverse 1993 tax-transfer rules (Rizzi 1996). Part of the paper was written when Aaberge and Strøm were visiting ICER and the Department of Economics in Torino. ICER is gratefully acknowledged for providing financial support and excellent working conditions. Ugo Colombino gratefully acknowledges financial and organisational support from Statistics Norway and the Department of Economics in Oslo, and from the Italian Ministry of University and Scientific Research (MURST research grants 1998 and 2000). Responsible editor: Alessandro Cigno.     

Segregated jobs or ethnic niches?: The impact of racialized employment on earnings inequality

Using data from the Multi-City Study of Urban Inequality (MCSUI), this study examines the extent to which the racial or ethnic composition of jobs affects racial and ethnic-linked earnings inequalities among whites, blacks and Hispanics. Four types of jobs are distinguished according to the racial/ethnic composition of jobs in work establishments: predominantly white, multi-racial or mixed, predominantly black, and predominantly Hispanic. We found considerable differences among the four types of jobs. Jobs composed predominantly of white workers are characterized by the highest earnings, the highest status occupations, and the highest levels of education. In contrast, jobs predominantly composed of Hispanic workers are characterized by the lowest salaries, the lowest status occupations, and the lowest levels of education. The data analysis supports the hypothesis that job segregation is responsible for earnings disparities in the case of blacks versus whites, but only partial support for this hypothesis is found in the case of Hispanics versus whites. The analysis also provides support for the “devaluation hypothesis” which suggests that all workers experience pay penalties in jobs in which minority workers are predominant. Further analysis reveals that had most workers been rewarded like whites employed in predominantly white jobs, their earnings would have increased considerably. The only groups of workers who “benefit” from job segregation are Hispanic workers employed in predominately Hispanic jobs. In the absence of competition with others, Hispanics employed in predominantly Hispanic jobs earn more than they would earn in other jobs. The differential effects of the ethnic composition of jobs on economic outcomes of minority populations are evaluated and discussed in light of the roles played by sheltered and protected ethnic economies.     

Earnings,relative income,and family formation

The probability of first marriage for men who graduated from Wisconsin high schools in 1957 was analyzed with respect to their Social Security earnings records, Wisconsin income tax reports for parents, and other variables. The findings provide no support for Easterlin's hypothesis that marriage will occur earlier when young men judge their economic prospects favorably with respect to their parents' income. However, young men's earnings and time spent in schooling to increase them were found to be important influences on marriage timing. Additional schooling had little effect net of the time it absorbed.     

Below the Tip of the Iceberg: Examining Early Childhood Participation in SNAP and TANF from Birth to Age Six

Population Research and Policy Review - In the United States, the SNAP and TANF programs provide financial support to low-income households with children. Yet, little is known about the extent of...     

Legal and illegal immigrants: an analysis of optimal saving behavior

Savings of guest workers as well as of undocumented migrants represent important inflows of foreign exchange for some developing countries. This paper compares the saving behavior of these two types of migrants, assuming that the former are authorized to work abroad for a specific period of time, while the latter can stay until apprehended and deported by the immigration authorities. Due to the risk of deportation, the saving rate of an illegal immigrant is found to be initially above that of a documented migrant. This precautionary saving phenomenon is, however, short-lived. A key finding of the paper is that the total repatriated assets of an illegal migrant are always lower than those of a documented worker, provided that their duration of stay abroad is identical. This is because the undocumented migrant’s saving rate falls over time as her expected lifetime earnings are adjusted upwards every day that she avoids apprehension.     

Unobserved variables and marital status The schooling connection

Studies increasingly indicate that some of the characteristics of individuals are jointly determined with marital status, fertility, and labor supply. This study focuses on the effect of schooling on marital status. A Hausman-type test shows that schooling cannot be legitimately treated as an exogenous determinant of marriage and divorce. It is shown that if schooling is treated as an exogenous variable, the negative effect of schooling on the odds of marriage is underestimated. Further, the results indicate that schooling has a significant negative effect on divorce if it is treated as an exogenous variable; the coefficient for schooling is positive if it is treated as an endogenous variable.I wish to thank Gary Becker, T W. Schultz, and two anonymous reviewers for their comments. In addition, I am grateful for research support from DePaul's College of Commerce and Research Board.     

Fertility and Financial Development in South Asia

The paper empirically examines old-age security hypothesis to explain fertility rates in South Asia. Panel data is used for the period 1972–2013 for seven South Asian countries which include Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The estimated results reveal that in South Asia fertility rate decreases with the increase in financial development. Thus, the findings support old-age security hypothesis that parents use children as financial instruments to secure their old age. This paper validates the theory that the availability of alternative financial tools reduces the incentives of households to have large offspring. Infant mortality is also shown an important factor for high fertility rate in South Asia. This implies that households cover their risk from losing children by producing more children. The results also reveal that fertility rate decreases with the increase in per capita income, which implies that households treat children as inferior good in this region. In other words, households prefer quality of children over quantity of children when their income level increases. The results have also shown that fertility decreases with the increase in education, urbanization, agriculture productivity and industrialization. The study has some important policy implications.     

Death and Taxes: Longer life, consumption, and social security

We analyze in three steps the influence of the projected mortality decline on the long run finances of the Social Security System. First, on a theoretical level, mortality decline adds person years of life which are distributed across the life cycle. The interaction of this distribution with the age distribution of labor earnings minus consumption, or of taxes minus benefits, partially determines the corresponding steady state financial consequences of mortality decline. The effect of mortality decline on population growth rates also matters, but is negligible in low mortality populations. Second, examination of past mortality trends in the United States and of international trends in low mortality populations, suggests that mortality will decline faster than foreseen by the Social Security Administration s forecasts. Third, we combine the work of the first two parts in dynamic simulations to examine the implications of mortality decline and of alternative forecasts of mortality for the finances of the social security system. Also, we use stochastic population forecasts to assess the influence of uncertainty about mortality decline on uncertainty about finances; we find that uncertainty about fertility still has more important implications than uncertainty about mortality, contrary to sensitivity tests in the official forecasts.     

Natives and migrants in the London labour market, 1929–1931

Migrants are sometimes regarded as marginal workers in metropolitan labour markets. London has long been a major destination for migrants from elsewhere in Britain and abroad. In this paper we examine the earnings and unemployment experience in 1929–1931 of male workers who migrated to London, or within London. We use data from the New Survey of London Life and Labour, a large survey of working class households, the records from which have recently been computerised. Our findings indicate that migrants were not marginal, in fact they enjoyed slightly higher earnings and lower unemployment incidence than native Londoners. Much of the advantage can be explained by differences in average skill levels and personal characteristics. Received: 2 November 1999/Accepted: 3 August 2000     

Racial differences in per capita income, 1960–76: The importance of household size,headship, and labor force participation

Racial differences in average per capita income are decomposed, as are changes over time for both races. The 1960–76 decline in household size accounted for 13 percent of the per capita income inprovement of both races. Whereas real increases in earnings of husbands contributed most to improvements in well-being in husband-wife households, increases in income from sources other than earnings were most important to female headed households. During a period in which a growing proportion of both races resided in female headed households and racial differences in living arrangements widened, the per capita income of female headed households relative to husband-wife households declined.     

The effect of remittances on emigration intentions in Egypt, Morocco, and Turkey

Are remittances determined by altruism or enlightened self-interest, and do they trigger additional migration? In this paper these two questions are examined empirically in relation to data from Egypt, Turkey, and Morocco for households with family members living abroad. It is shown, firstly, that one cannot argue exclusively either for altruism or self-interest as motives, since for each country the data tell a different story and both motives can be identified as driving forces behind remittance behaviour. The general conclusion of this study is that the family ties and the net earnings potential of migrants have stronger effects on the flow of remittances than the net earnings potential of the households in the country of origin. Secondly, because the receipt of remittances has a positive effect on the emigration intentions of household members still living in the country of origin, the receipt of remittances may contribute to new flows of migration, particularly in the case of Morocco.     

The Index of Household Financial Condition,Combining Subjective and Objective Indicators: An Appraisal of Italian Households

With data from the Italian Survey of Household Income and Wealth, we present an Index of Household Financial Condition and quantify with it the position of households between 2004 and 2010. The Index of Household Financial Condition is composed of subjective and objective indicators, which enable to capture differently the existing uncertainty concerning the future development of a household’s financial situation. We show with a measurement model based on multi-group confirmatory factor analysis (MGCFA) that the proposed Index is two-dimensional and comprises financial position and financial prudence. Through application of the MGCFA, we show that the interrelations between the indicators had not changed at four measurement occasions (2004–2010), and thus the proposed set comprises a coherent and time-invariant framework for measuring two dimensions of the latent concept: financial condition. Established measurement invariance in the MGCFA framework allows an assessment of trend in financial position and financial prudence of Italian households. We show that the financial position of Italian households improved in the period 2004–2006 and later declined. Improvement of the financial prudence was observed, however, till 2008. Finally, we incorporate a set of socioeconomic features of Italian households into a structural equation model. With the provided set of indicators, we find positive relation between age and both financial position and prudence, but also we show the positive impact of white-collar jobs on scores in each of the dimensions of the financial condition.