The changing nature of wage inequality

The paper reviews recent developments in the literature on wage inequality with a particular focus on why inequality growth has been particularly concentrated in the top end of the wage distribution over the last 15 years. Several possible institutional and demand-side explanations are discussed for the secular growth in wage inequality in the United States and other advanced industrialized countries.

Household skills and low wages

Household skills provide job skills when tasks in jobs and household production are similar and jobs produce substitutes for home-made services. Opportunity costs of higher education are foregone earnings during schooling and foregone household production while studying and later in life. I show that individuals in jobs requiring household skills accept lower wage rates than traditional human capital theory predicts, and that individuals with low household skills tend to enter higher education. According to these results, declining household skills may have contributed to the observed increasing demand for higher education by women.

Physical capital taxation and labor income taxation in an endogenous growth model with new generations

This paper examines the growth and welfare effects of physical capital taxation and labor income taxation. It is found that the impact of a rise in the physical capital tax rate on the balanced growth rate is crucially related to the birth rate, but a rise in the labor income tax rate definitely reduces the balanced growth rate regardless of the birth rate. It is also found that an increase in the physical capital income tax rate will harm the older but will benefit the younger, while an increase in the labor income tax rate will benefit the older but will harm the younger.

Growing old and staying young: population policy in an ageing closed economy

This paper analyses the relation between public pensions, fertility and child care in a closed-economy overlapping generations model with endogenous fertility. It is shown that raising a child involves two social externalities and that it is optimal to introduce child allowances if the government redistributes income from the young to the old. The optimal child allowance rises when longevity increases. If the costs of raising children depend positively on the wage, a third externality arises and the returns to savings should be taxed.

A dynamic general equilibrium analysis of the political economy of public education

The primary objective of this paper is to highlight the distinct roles of altruism and of self-interest in the political determination of a public education policy. I assess the relative importance of three factors in the determination of the equilibrium level of this policy: altruism, the impact of public funding of education on social security benefits, and its impact on factor prices. I then focus on the impact of implementing a social security system on the equilibrium levels of education funding and on welfare. I find that although in the benchmark economy, the presence of social security might generate support for public funding of education, its overall effect on the well-being of individuals is negative for any level of social security taxation.

Imperfect goods and labor markets, and the union wage gap

Existing theoretical literature fails to explain satisfactorily the differences between the pay of workers who are covered by collective agreements and others who are not. This study aims at providing a model framework that is amenable to an analysis of this issue. Our general-equilibrium approach integrates a dual labor market and a two-sector product market. The results suggest that the so-called “union wage gap” is largely determined by the degree of centralization of the bargains and, to a somewhat lesser extent, by the expenditure share of the unionized sector's goods.

International migration and economic growth: a source country perspective

This study analyzes the impact of international migration on economic growth of a source country in a stochastic setting. The model accounts for endogenous fertility decisions and distinguishes between public and private schooling systems. We find that economic growth crucially depends on the international migration since the migration possibility will affect fertility decisions and school expenditures. Relaxation of restrictions on the emigration of high-skilled workers will damage the economic growth of a source country in the long run, although a ‘brain gain’ may happen in the short run. Furthermore, the growth rate of a source country under a private education regime will be more sensitive to the probability of migration than a country under a public education regime.

First Exits from the Swedish Labor Market Due to Disability

Nowadays, with an increasingly aging population, an increasing proportion of the population on disability benefits, and an implicitly lower level of economic output and foregone tax revenue, disability has become a major public policy issue in many countries. Estimating both single risk and competing risks models on a Swedish longitudinal database, this study analyzes the risk of exit from the labor market due to disability at a certain age, conditional on having remained in the labor force until that age. The explanatory variables did not have identical coefficients across destination types. For example, the estimated single risk model shows that a higher level of education decreased the hazard of exiting the labor market with a disability pension, while the estimated competing risks model suggests that a higher level of education increased the hazard of exiting with a partial disability pension, but it decreased the hazard of exiting with a full disability pension.

Immigration as a commitment device

This paper shows that the admittance of immigrants who are on average less skilled than natives can be part of a support-maximizing government policy despite a general political bias in favour of the poor. We make this point in a simple model with redistributive unemployment insurance. Once wage contracts are binding, the government has an incentive to increase the unemployment benefit, which leads to excessive unemployment. Affecting the political balance within the constituency, immigrants can serve as a commitment device against this time inconsistency. We show that this possibility can be greatly promoted by restrictions on political naturalization.

Are women over-represented in dead-end jobs? A Swedish study using empirically derived measures of dead-end jobs

It has been claimed that women experience fewer career opportunities than men do mainly because they are over-represented in ‘Dead-end Jobs’ (DEJs). Using Swedish panel data covering 1.1 million employees with the same employer in 1999 and 2003, measures of DEJ are empirically derived from analyses of wage mobility. The results indicate that women are over-represented in DEJs, especially in the public sector. The findings are interesting from (a) a methodological viewpoint, as it is indicated that the career opportunities associated with occupations can be indicated using one measure for both men and women, (b) the glass ceiling perspective, which arguably under-emphasizes gender inequality in relation to low positions, and (c) a class perspective, which basically ignores gender and sector in explaining career chances.

Life expectancy, money, and growth

We examine the effect of an increase in life expectancy on portfolio choices of individuals and, thereby, on economic growth in a simple endogenous growth model populated by overlapping generations, in which money is introduced based on the money-in-the-utility-function approach. It is shown that an increase in longevity raises the balanced growth rate and lowers the inflation rate, offsetting the Tobin effect, if spillovers from accumulated capital to labor productivity sufficiently raise wage income and real savings, and, if not, it may retard economic growth and aggravate inflation. Under plausible conditions, the former will be the case.

The substitutability of labor between immigrants and natives in the Canadian labor market: circa 1995

This paper examines the substitutability or complementarity between Canadian-born and immigrant workers. These are examined by estimating a set of wage equations using a generalized Leontief production function. The paper finds that, in general, there is no displacement of Canadian-born workers by immigrants. Recent immigrants affect the native-born positively, while older immigrants are neither substitute nor complement for natives. However, the effects differ across industries. Overall, the evidence that immigrants harm the opportunities of native-born workers is scant.

Fertility, child care outside the home, and pay-as-you-go social security

We examine the long-run effects of the pay-as-you-go (PAYG) social security scheme on fertility and welfare of individuals in an overlapping generations model, assuming that child-care services are available in the market. We show that the impact of a tax increase on fertility depends on the relative magnitudes of the standard intergenerational redistribution effect through the social security system, the (implicit) subsidy effect through tax-exemption of child rearing at home, and the price effect through changes in the relative price of market child care, and that if parental child-rearing time is inelastic, a tax cut could bring about a Pareto-improving allocation.

Role of Parental Education in Schooling and Child Labour Decision: Urban India in the Last Decade

This paper uses household level data from National Sample Survey Organization (NSSO) of India, the 55th (1999–2000) and the 61st (2004–05) rounds, to show that even with a significant wage incentive for schooling of urban children, the school drop out rate and child labour incidence are not small over this period. The parents’ level of education plays an important role in reducing this tendency; thus establishing the linkage between social and human capital outcomes in the family. We also look at the incidence of harmful and manual occupations among the child labour. Mother’s education appears as the more important factor in the recent round in curbing the manual work incidences; supporting earlier findings that women’s empowerment (one important indicator of which would be female educational level) is indeed becoming instrumental in increasing parental awareness. Using a pooled data set, we have also analysed the changes in the impact of parental education on these decisions between 1999–2000 and 2004–05.

Personality traits and gender-specific income expectations in Dutch higher education

In this article we examine gender differences in income expectations of students in higher education. We found quite large gender differences. Men and women differ significantly in the income they expect to earn at the top of their career. We examined how much personality traits contribute to explain gender differences in income expectations, and to what extent personality typologies can add to insights about earnings potential derived from human capital theory. The research shows that personality does affect expected income, that impact goes beyond personality’s indirect effects, which are conveyed largely through gender differences and students’ choice of study subject.

The influence of market wages and parental history on child labour and schooling in Egypt

This paper examines the influence of adult market wages and having parents who were child labourers on child labour, when this decision is jointly determined with child schooling, using data from Egypt. The empirical results suggest that low adult market wages are key determinants of child labour; a 10% increase in the illiterate male market wage decreases the probability of child labour by 22% for boys and 13% for girls. The findings also indicate the importance of social norms in the intergenerational persistence of child labour: parents who were child labourers themselves are on average 10% more likely to send their children to work. In addition, higher local regional income inequality increases the likelihood of child labour.

Ceilings or floors? Gender wage gaps by education in Spain

This paper analyzes the gender gap throughout the wage distribution in Spain using data from the European Community Household Panel. Quantile regression and panel data techniques are used to estimate wage regressions. In contrast with the steep increasing pattern found in other countries, the flatter evolution of the Spanish gender gap hides an intriguing composition effect. For highly educated workers, in line with the conventional glass ceiling hypothesis, the gap increases as we move up the distribution. However, for less-educated workers the gap decreases. We label this novel fact as a floor pattern and argue that it can be explained by statistical discrimination exerted by employers in countries where less-educated women have low participation rates.

Asymmetric social protection systems with migration

We study the consequences of the coexistence of different social protection systems on contribution rate levels and migration in a two-country model. Before any migration takes place, the levels of contribution rates are chosen by a representative elected in each country. The migration of each agent depends on her anticipation of other agents’ migrations. We show that the richest agents are attracted to the Bismarckian country. The poorest agents tend to migrate toward one country or the other depending on the Beveridgean country contribution rate. The Beveridgean country can set a higher contribution rate to limit the departures of rich agents.

Dropping out of post-compulsory education in the UK: an analysis of determinants and outcomes

We analyse the decision to drop out of post-compulsory education over the period 1985–1994 using data from the Youth Cohort Surveys. We show that the dropout rate declined between 1985 and 1994, in spite of the rising participation rate in education, but is still substantial. Dropping out is more or less constant over the period of study, though the risk of dropout does vary with young people’s prior attainment, ethnicity, family background and the state of the labour market. The course of study has a substantial effect on the risk of dropout.

A discrete choice model for labor supply and childcare

A discrete choice model for labor supply and childcare for mothers of preschoolers is presented. The mothers are assumed to make choices from a finite set of job possibilities and from a finite set of childcare options. Options in the markets for childcare are characterized by opening hours, fees and quality attributes. Similarly, jobs are characterized by a fixed wage rate, working hours and a number of variables related to job satisfaction. In the estimation of the model, we take into account that the number of options available might vary across work/care combinations and that some mothers are rationed in the market for care at day care centers. The model is employed to simulate the female labor supply effects of the Norwegian home care allowance reform.