Banking on fewer children: financial intermediation,fertility and economic development

This paper shows that financial intermediation can influence fertility and labor allocation decisions by raising market wages. The increase in wages induces some households to abandon “traditional” labor intensive methods of production managed at the household level and supply labor to “modern” sector firms. Since it is optimal for households in the modern sector to have fewer children, the labor allocation decision leads to lower national fertility. A panel VAR using financial intermediation, fertility and industrial employment share data in 87 countries is estimated. The empirical results show that the data are consistent with the theoretical predictions. Received: 20 October 1997/Accepted: 31 August 1998     

The fortunes of one's birth: Relative cohort size and the youth labor market in the United States

Using two different measures of relative cohort size – one indicating the size and placement of an individual's own birth cohort, and the other, the ratio of young to prime age adults in the United States in that year – it has been possible to isolate strong effects of the population age structure on wages in the United States over the past thirty-three years. These effects have been strong enough that virtually all of the observed change in the experience premium, and a substantial proportion of the changes in the college wage premium, can be explained by the relative cohort size variables alone. Even changes in the amount of within-group variance in wages appear to be largely a function of changing age structure, and absolute wage levels have been strongly affected by these demographic changes, suggesting that population growth can have positive effects on the economy. Received: 27 January 1998/Accepted: 6 June 1998     

Is the German apprenticeship system a panacea for the U.S. labor market?

This paper explores the structure of incentives undergirding the German system of apprenticeship training. We first describe characteristics of the German labor market which may lead firms to accept part of the cost of general training, even in the face of worker turnover. We then compare labor market outcomes for apprentices in Germany and high school graduates in the United States. Apprentices in Germany occupy a similar position within the German wage structure as held by high school graduates in the United States labor market. Finally, we provide evidence that – in both countries – the problem of forming labor market bonds is particularly acute for minority youth. JEL classification: J24, J31, J60 Received: July 4, 1996 / Accepted February 4, 1997     

Demographic transition and economic growth: Empirical evidence from Greece

Over the past decades, due to a combination of declining fertility rates and rising life expectancies, most industrialized countries have experienced aging populations and low numbers of young populations that may pose economic problems in the future. This paper investigates the relationship first between fertility rate and infant mortality rate and second among demographic changes, real wages and real output in Greece over the period 1960–96. When we control for fluctuations in overall economic activity and the labor market on the bivariate relationship between fertility and mortality rates, the evidence suggests that Granger-causation must exist in at least one direction. The results show that in the long run a decrease in infant mortality rates, taking into consideration economic performance and the labor market, causes a reduction in fertility rates. Also, employing the vector error-correction models, the variance decomposition analysis and the impulse response functions, the empirical results support the endogeneity of fertility choice to infant mortality, the labor market and the growth process. Received: 16 May 1999/Accepted: 18 September 2000     

Teenage truancy,part-time working and wages

Part-time work whilst still in full-time education is common in many industrialized countries, and teenagers constitute a significant component of the work force in some sectors of the labour market. In Britain, in the early 1990‘s, some 60% of 16–18 year olds still in full time education also worked part-time. Although the determinants of teenager participation in the labour market have been studied previously (both in the United States and the United Kingdom), there remain a number of neglected questions. We address some of these in this paper, basing our analysis on data taken from the UK National Child Development Study. We first examine how teenagers divide their time between working and studying. We further analyse what explains teenage wages and labour supply. We utilise a rich set of variables describing parental background, as well as parents‘ labour force status and draw on information on physical stature to explain variations in wages. JEL classification: I20, J20, J31 Received March 26, 1996/Accepted May 16, 1997     

Labor market institutions and demographic employment patterns

We study collective bargaining’s effect on relative employment for youth, women, and older individuals. Our model of collective wage setting predicts that unionization reduces employment more for groups with relatively elastic labor supply: youth, older individuals, and women. We test this implication using data from 17 Organization for Economic Cooperation and Development (OECD) countries over the 1960–1996 period. We find that time-varying indicators of unionization decrease the employment–population ratio of young and older individuals relative to the prime-aged, and of prime-aged women relative to prime-aged men, and unionization raises the unemployment rate of prime-aged women and, possibly, young men compared to prime-aged men.

The long-run labour market consequences of teenage motherhood in Britain

Common wisdom states that teenage childbearing reduces schooling, labour market experience and adult wages. However, the decisions to be a teenage mother, to quit school, and be less attached to the labour market might all stem from some personal or family characteristics.  Using the National Child Development Study (NCDS), we find that in Britain teenage childbearing decreases the probability of post-16 schooling by 12–24%. Employment experience is reduced by up to three years, and the adult pay differential ranges from 5% to 22%. The negative impact of teen motherhood on various adult outcomes is not only due to some pre-motherhood characteristics; hence policies aiming to encourage return to school and participation in the labour market may be an efficient way to reduce the long-term consequences of teenage pregnancy. Received: 10 October 2000/Accepted: 3 April 2002 All correspondence to Arnaud Chevalier. We are indebted to Martyn Andrews, Colm Harmon, Gauthier Lanot, Ian Walker and to the participants at the EEEG annual meeting (Southampton, 2000) and seminars at Keele University, LSE and Warwick University for their comments that greatly improved earlier versions of this paper. We also thank two anonymous referees and Christoph Schmidt for their insightful comments. All remaining errors are ours. The data was supplied by the Economic and Research Council's Data Archive at the University of Essex and are used with permission of the Controller of Her Majesty's Stationery Office. Responsible editor: Christoph M. Schmidt.     

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     

Competition, substitution, or discretion: an analysis of Palestinian and foreign guest workers in the Israeli labor market

This paper investigates the effects of foreign workers on labor market outcomes for Palestinian workers in the Israeli labor market. The paper utilizes a micro-dataset on the Palestinian labor force combined with time-series data on foreign workers in Israel. The data covers the period 1999–2003, a period in which Israel enforced a strict closure on labor (and goods) movement, particularly in 2001 and 2002. The evidence suggests that foreign workers in Israel do not affect Palestinian employment; however, an increase in the number of foreign workers in Israel tends to reduce Israeli wages paid to Palestinian workers from the Gaza Strip. The Israeli closure policy appears to be the main cause for the substantial reduction in long-run Palestinian employment levels in Israel, not the presence of foreign workers.     

Public policy and the labor market adjustment of new immigrants to Australia

Two separate cohorts of immigrants to Australia are compared in order to assess the potential role of immigrant selection criteria, labor market conditions, and income-support policy in facilitating the labor market adjustment of new arrivals. Although these two cohorts entered Australia only five years apart, their initial labor market outcomes varied dramatically. The results indicate that changes in immigration policy may have led to increased human capital endowments that in turn resulted in higher participation rates and reduced unemployment. At the same time, improvement in Australian labor market conditions and changes in income-support policy over the 1990s – which most likely altered the returns to human capital – were probably instrumental in reinforcing the effects of tighter immigrant selection criteria. As much as half of the fall in unemployment rates among women and one third the decline among men appears to have occurred as the result of changes in the returns to demographic and human capital characteristics. Responsible editor:Christoph M. Schmidt     

Age structure effects and growth in the OECD, 1950–1990

Economic growth depends on human resources and human needs. The demographic age structure shapes both of these factors. We study five-year data from the OECD countries 1950–1990 in the framework of an age structure augmented neoclassical growth model with gradual technical adjustment. The model performs well in both pooled and panel estimations. The growth patterns of GDP per worker (labor productivity) in the OECD countries are to a large extent explained by age structure changes. The 50–64 age group has a positive influence, and the group above 65 contributes negatively, while younger age groups have ambiguous effects. However, the mechanism behind these age effects is not yet resolved. Received: 16 January 1997/Accepted: 2 July 1998     

Sectoral gender wage differentials and discrimination in the transitional Chinese economy

China's economic reform has affected various ownership sectors to different degree. A comparison of gender wage differentials and discrimination among individuals employed in the three sectors – state sector, the collective sector, and the private sector – provides information on the impact of economic reform. Two Chinese data sets from Shanghai and Jinan are used to examine the gender wage gap across the three sectors. It is found that privatization/marketization of the economy leads to larger wage differentials as human capital characteristics are more appropriately rewarded. Both data sets show that the relative share of discrimination in the overall gender wage differential declines substantially across ownership sectors from the state to the private. The increase in gender wage differential due to marketization is much larger than any increase in differential that may arise from more gender discrimination. Received: 5 November 1997/Accepted: 10 January 2000     

Changing fertility rates in developed countries. The impact of labor market institutions

During the last two decades fertility rates have decreased and have become positively correlated with female participation rates across OECD countries. I use a panel of 23 OECD nations to study how different labor market arrangements shaped these trends. High unemployment and unstable contracts, common in Southern Europe, depress fertility, particularly of younger women. To increase lifetime income though early skill-acquisition and minimize unemployment risk, young women postpone (or abandon) childbearing. Further, both a large share of public employment, by providing employment stability, and generous maternity benefits linked to previous employment, such as those in Scandinavia, boost fertility of the 25–29 and 30–34 year old women.Financial help from a CRB grant from the University of Illinois is gratefully acknowledged. I would like to thank Carles Boix, Barry Chiswick, Carmel Chiswick, Evelyn Lehrer, three anonymous referees and seminar participants at ESPE 2000 (Bonn), Illinois Economic Meetings 2000 (Chicago), Simposi dAnalisi Economica 2000 (Barcelona), 2001 Winter meetings of the Econometric Society in New Orleans, ESPE 2001 (Athens), Braga (Portugal), University of Chicago, De Paul University, PAA 2002 (Atlanta) for helpful comments; Gosta Esping-Andersen for providing some data and Cristina Mora for excellent research assistance. Responsible editor: Junsen Zhang.     

The impact of labor market entry conditions on initial job assignment and wages

We estimate the effects of labor market entry conditions on wages for male individuals first entering the Austrian labor market between 1978 and 2000. We find a large negative effect of unfavorable entry conditions on starting wages and a sizable negative long-run effect. Our preferred estimates imply a decrease in starting wages by about 0.9 % and a lifetime loss in wages of about 1.3 % for an increase in the initial local unemployment rate by one percentage point. We show that poor entry conditions are associated with lower quality of a worker’s first employer and that the quality of workers’ first employer explains as much as three-quarters of the observed long-run wage effects resulting from poor entry conditions. Moreover, wage effects are much more persistent for blue-collar workers because some of them appear to be permanently locked in into low-paying jobs/tasks.     

Labor market assimilation and the self-employment decision of immigrant entrepreneurs

This paper uses data from the 1980 and 1990 U.S. Censuses to study labor market assimilation of self-employed immigrants. Separate earnings functions for the self-employed and wage/salary workers are estimated. To control for endogenous sorting into the sectors, models of the self-employment decision are estimated. Self-employed immigrants are found to do substantially better in the labor market than wage/salary immigrants. Earnings of self-employed immigrants are predicted to converge with natives' wage/salary earnings at about age 30 and natives' self-employed earnings at about age 40. Including the self-employed in the sample reduces the immigrant-native earnings gap by, on average, 14%. Received: 10 November 1999/Accepted: 3 August 2000     

Oppositional identities and the labor market

We develop a model in which nonwhite individuals are defined with respect to their social environment (family, friends, and neighbors) and their attachments to their culture of origin (religion or language), and in which jobs are mainly found through social networks. We find that depending on how strong peer pressures are, nonwhites choose to adopt “oppositional” identities because some individuals may identify with the dominant culture and others may reject that culture, even if it implies adverse labor market outcomes.      

The performance of immigrants in the Norwegian labor market

This paper tests the assimilation hypothesis with Norwegian data. Using both cross-section and cohort analyses, the results show that the 1970–1979 immigrant cohort experienced an earnings growth of about 11% between 1980 and 1990, when their earnings profile was compared to that of natives. This is lower than the 19% assimilation rate predicted by the cross-section method. On the contrary, the results reveal a rapid earnings divergence across cohorts, and between the 1960–1969 cohort and natives. It is also shown that the „quality” of successive immigrant waves has declined over time, thus biasing the cross-section estimates of assimilation. Received: 8 August 1995 / Accepted: 7 January 1997     

Returns to returning

We examine the labor market performance of return migrants using the Hungarian Household Panel Survey. Two distinct selection issues are considered in the estimation of the earnings equation; we implement a natural method using MLE. The result that there is a “premium” to work experience abroad for women is robust across the models we considered. For men, the return to working abroad is not generally significant. Received: 4 June 1998/Accepted: 16 April 1999     

Binge drinking and labor market success: a longitudinal study on young people

This paper presents a two-equation model of joint outcomes on an individual’s decision to binge drink and on his/her annual labor market earnings. The primary data source is the 1979 cohort of the National Longitudinal Survey of Youth (NLSY79), 1979–1994. We show that binge drinking behavior is quite alcohol-price responsive and is a rational addiction. A new result is that an individual’s decision to binge drink has a statistically significant negative effect on his/her earnings. Furthermore, we conducted simulations of the short-run and long-run impacts of increasing the alcohol price. They showed that the tendency for an individual to binge drink heavily is reduced significantly, and the reduction is greater in the long-run than short-run simulation. Also, an individual's annual earnings were increased. However, in the structural model, an individual’s earnings have no significant effect on his/her tendency to engage in binge drinking. Our results contradict earlier findings from cross-section evidence that showed increased alcohol consumption raised an individual’s earnings or wages.     

Informal search,bad search?: the effects of job search method on wages among rural migrants in urban China

The use of informal job search method is prevalent in many countries. There is, however, no consensus in the literature on whether it actually matters for wages, and if it does, what are the underlying mechanisms. We empirically examine these issues specifically for rural migrants in urban China, a country where one of the largest domestic migration in human history has occurred over the past decades. We find that there exists a significant wage penalty for those migrant workers who have conducted their search through informal channels, despite their popularity. Our further analysis suggests two potential reasons for the wage penalty: (1) the informal job search sends a negative signal (of workers’ inability to successfully find a job in a competitive market) to potential employers, resulting in lower wages, and (2) there exists a trade-off between wages and search efficiency for quicker entry into local labor market. We also find some evidence that the informal job search may lead to low-skilled jobs with lower wages. We do not find strong evidence supporting alternative explanations.