SELF‐EMPLOYMENT,EFFICIENCY WAGE,AND PUBLIC POLICIES

Empirical evidence suggests that unemployed workers are much more likely to become self‐employed than wage‐employed workers. Also, higher unemployment benefits significantly reduce the rate of self‐employment. This article develops a model of self‐employment which incorporates transitions between unemployment and self‐employment. It integrates two strands of theoretical literature—models of occupational choice and the efficiency wage models. In this model, a higher unemployment benefit reduces the self‐employment rate and the transition rate of unemployed workers to self‐employment, which is consistent with empirical evidence. (JEL J23, J58, J64)     

WAGES,EMPLOYMENT, AND STATISTICAL DISCRIMINATION: EVIDENCE FROM THE LABORATORY

We report results from laboratory experiments designed to examine statistical discrimination. Our design expands upon existing research by generating data both on wage contracts and unemployment rates of directly competing worker groups. We find some evidence for statistical wage discrimination against workers having an identical expected productivity but a higher productivity variance. However, those same subjects are less likely to be unemployed, suggesting that our employer‐subjects view hiring choice and wage contracts as substitutable. A clear implication is that field data discrimination estimates based on wages alone may overestimate the true impact of such discrimination. (JEL C90, J71)     

Effect of Husbands' Employment Status on Their Wives' Subjective Well‐being in Korea

This study used data from the Korea Labor and Income Panel Survey (2001, 2003–2007) to estimate the effect of a husband's unemployment on his wife's subjective well‐being (SWB). Ordinal and pooled binary logistic regression models were estimated using 20,099 observations from a sample of 4,569 married women; a fixed‐effects logistic regression model was also estimated using 5,514 observations from a restricted sample of 1,070 wives who experienced at least 1 change in SWB over the follow‐up period. The findings indicated that a husband's unemployment was detrimental to his wife's SWB. This spillover effect appeared to be mediated in part through nonpecuniary factors (i.e., dissatisfaction with family and social relations). These findings suggest that, beyond income loss and the well‐being of unemployed individuals, the social cost of unemployment should consider the negative effects of unemployment on the family, in particular the spouse.     

THE EFFECTS OF MACROECONOMIC CONDITIONS AT GRADUATION ON OVEREDUCATION

This article shows that unfavorable economic conditions at graduation decrease the likelihood of a good job‐worker match over a worker's subsequent career. Mismatch is quantified in terms of overeducation by both industry and occupation. The German Socio‐Economic Panel and region‐level unemployment rates from 1994 to 2012 are used. Instrumental variables estimates account for endogenous graduation timing. A single percentage point increase in regional unemployment causes an increase in the probability of overeducation of 1.6–1.7 percentage points for university graduates. Effects for technical tertiary education and apprenticeship graduates are smaller. Labor market entry conditions affect workers for up to 9 years after graduation. (JEL J23, J22, E32, I23)     

THE LONDON BOMBINGS AND RACIAL PREJUDICE: EVIDENCE FROM THE HOUSING AND LABOR MARKET

This paper investigates the impact of the London bombings on attitudes toward ethnic minorities, examining outcomes in housing and labor markets across London boroughs. We use a difference‐in‐differences approach, specifying “treated” boroughs as those with the highest concentration of Asian residents. Our results indicate that house prices in treated boroughs fell by approximately 2% in the 2 years after the bombings relative to other boroughs, with sales declining by almost 6%. Furthermore, we present evidence of a rise in the unemployment rate in treated compared to control boroughs, as well as a rise in racial segregation. (JEL J15, J71, R21)     

THE ROLE OF FINANCIAL LITERACY IN DETERMINING RETIREMENT PLANS

Workers nearing retirement face many important, and often irreversible, choices. We collected detailed demographic and financial literacy data on over 1,500 workers nearing retirement at three large companies to assess how individuals are planning for retirement. Many respondents display limited knowledge and understanding of public and company‐provided retirement benefits. Controlling for basic demographics and wealth, we find that misconceptions about eligibility ages and plan generosity influence workers' expected age of retirement. Although retirement‐related decisions will affect workers' well‐being for the remainder of their lifetimes, many do not possess enough basic financial knowledge to confidently make optimal choices. (JEL J26, J320, J240)     

THE UNEMPLOYMENT VOLATILITY PUZZLE: THE ROLE OF MATCHING COSTS REVISITED

Pissarides has argued that the standard search model with sunk fixed matching costs increases unemployment volatility without introducing an unrealistic response of wages of new matches to productivity shocks. We revise the role of matching costs and show that when these costs are not sunk and, therefore, can be partially passed on to new hired workers in the form of lower wages, the amplification mechanism of fixed matching costs is considerably reduced. Finally, we observe that an empirical reasonable share of sunk costs is not able to match the volatility of unemployment without introducing unrealistic sensitivity to unemployment benefits. (JEL E32, J32, J64)     

EMPLOYMENT DYNAMICS OF IMMIGRANTS VERSUS NATIVES: EVIDENCE FROM THE BOOM‐BUST PERIOD IN SPAIN, 2000–2011

This article studies whether the durations in unemployment and employment for immigrants and natives respond differently to changes in economic conditions and to the receipt of unemployment benefits. Using Spanish administrative data for the period 2000–2011, we estimate multi‐spell duration models that disentangle unobserved heterogeneity from true duration dependence. Our findings suggest that immigrants are more sensitive to changes in economic conditions both in terms of unemployment and employment hazards. The effect of the business cycle is not constant but decreases with duration at a higher rate among immigrants. We provide evidence that the higher job separation rates and lower capital‐labor complementarity of immigrants are mechanisms that are possibly compatible with these results. We also find evidence of a disincentive effect of unemployment benefits on unemployment duration, which is stronger for immigrants, but only at the beginning of the unemployment spell, especially under good economic conditions. Finally, unemployment benefits increase job match quality only for native workers with temporary contracts. (JEL J64, J61, C23, C41, J65)     

THE IMPACT OF MACROECONOMIC CONDITIONS IN CHILDHOOD ON ADULT LABOR MARKET OUTCOMES

This study examines the influence of business cycles in childhood on economic performance later in life. I relate unemployment rates between the year before one's birth and the year of one's 15th birthday to schooling, employment, and income as an adult. The analysis exploits variation in macroeconomic conditions across states over time. I address a number of identification challenges related to cohort effects, linear trends, current events, and economic persistence. The caregiving behaviors and background characteristics of parents are also studied. The average unemployment rate in childhood normally has a negative effect on human capital in adulthood. (JEL J11, J24, J31)     

BLACK UNEMPLOYMENT AND INFOTAINMENT

Why has the black unemployment rate in the United States been more than twice that of whites over the past three decades? This article builds on earlier efforts to explain this conundrum using a discrimination framework, but it refocuses the explanation onto indirect cultural factors that motivate discriminatory behavior. Consistent with a call for using social phenomena to explain economic outcomes, the article reveals that “infotainment” (information and entertainment) contributes to increases in the black‐white unemployment rate gap and to higher black unemployment. (JEL J164, J71, Z10)     

THE POWER OF THE LITTLE BLUE PILL: INNOVATIONS AND IMPLICATIONS OF LIFESTYLE DRUGS IN AN AGING POPULATION

The launch of Viagra in April 1998 led to a historically unprecedented high usage of erectile dysfunction (ED) drugs. We test whether Viagra's introduction significantly influenced outcomes for its target population such as sexually transmitted disease (STD) rates of older men, as well as its nontarget populations, such as divorces, natality, the distribution of the age spread within couples, female STDs, and sexual assault rates. We find causal evidence that Viagra's introduction increased gonorrhea rates in older men by 15%–28%. We find no significant evidence of any effects on other variables. We take this as evidence that this lifestyle drug causes significant changes in choices only which affect short‐term outcomes, while long‐term planned decisions are unaffected. Overall, we find that the welfare impacts of Viagra with respect to our outcomes of interest are positive and large. (JEL I1, J1, O33)     

ON THE HETEROGENEOUS EMPLOYMENT EFFECTS OF OFFSHORING: IDENTIFYING PRODUCTIVITY AND DOWNSIZING CHANNELS

This article examines the channels through which offshoring affects employment in a representative sample of German establishments, using a difference‐in‐differences matching approach. Offshoring is measured by an increase in the share of foreign to total intermediate inputs at the plant‐level. We identify a positive productivity effect and isolate a negative downsizing effect from offshoring on employment, by exploiting differences between offshoring plants that do and do not simultaneously restructure. Furthermore, we cannot find evidence of negative indirect employment effects on domestic suppliers or competitors. (JEL F16, J23, F23, C21)     

REGIONAL AND SECTORAL EVIDENCE OF THE MACROECONOMIC EFFECTS OF LABOR REALLOCATION: A PANEL DATA ANALYSIS

This article revisits the sectoral shifts hypothesis by examining unemployment fluctuations for 48 U.S. states over the period 1990:M01–2011:M12. We develop a panel approach that incorporates dynamics, parameter heterogeneity, aggregate factors, and cross‐sectional dependence (CSD). Our findings provide support for a positive and significant effect of the employment dispersion index on unemployment. This outcome is robust under alternative specifications and measures of employment dispersion. The empirical evidence corroborates the presence and relevance of CSD and heterogeneity among states. The results show that, once unobserved common factors and cross‐state heterogeneity are taken into account, labor reallocation has a significant effect on unemployment that is half the size of the estimate when cross‐sectional dependence is not taken into account. (JEL E24, E32, J21, R23, C23)     

THE IMPACT OF STOCK MARKET FLUCTUATIONS ON THE MENTAL AND PHYSICAL WELL‐BEING OF CHILDREN

The stock market crash of 2008 caused a severe impact to households. Earlier research has explored the impacts of a stock market crash on life well‐being, psychological stress, and adult health behaviors. We extend this literature by documenting impacts of stock market fluctuations on a range of child outcomes; including effects on both mental and physical health. We show a negative effect of a market crash on hospitalizations, child reported health status, sick days from school, and an aggregate health index measure. Both graphical and regression‐based analysis reveal that our results are not driven by a preexisting trend of declining child health before the market crash and extensive sensitivity analysis demonstrates that the results are robust to multiple empirical specifications. (JEL I15, E32, J13)     

THE IMPACT OF PAYING INTEREST ON RESERVES IN THE PRESENCE OF GOVERNMENT DEFICIT FINANCING

This paper reexamines the impact that paying interest on reserves has on price level indeterminacy, volatility, and economic well‐being. Unlike the previous literature, this model includes an after‐tax deficit financed by assets (bonds and reserves) whose returns are linked. I show that the number of steady‐state equilibria and the corresponding level of indeterminacy are equal to, or greater than, those arising in the no‐interest economy. When the level of indeterminacy is the same, the economic volatility is reduced by paying interest. However, greater indeterminacy in the interest economy results in greater volatility. Finally, paying interest on reserves can enhance welfare. (JEL D6, E3, E5)     

PARENTAL EARNINGS AND CHILDREN'S WELL‐BEING: AN ANALYSIS OF THE SURVEY OF INCOME AND PROGRAM PARTICIPATION MATCHED TO SOCIAL SECURITY ADMINISTRATION EARNINGS DATA

We estimate the association between parental earnings and child well‐being using data from the Survey of Income and Program Participation matched to Social Security Administration earnings records. We use very large samples on a wide variety of measures of child well‐being that are also linked to long histories of parent earnings from administrative records. Consistent with previous studies, we find that the use of longer time averages of parent earnings leads to substantially higher estimated associations compared to using only a single year of parent earnings. Using 7‐year time averages of parent earnings, we show, for example, that a doubling of parent earnings is associated with a reduced probability of a teenager reporting being in poor health by close to 50% and a decrease in the likelihood of a child repeating a grade by 39%. We also examine how the associations vary by the timing of when parental earnings are received during childhood. We find suggestive evidence that parental earnings received during the child's school‐going years (ages 6 to 17) are more strongly associated with college enrollment and children's future earnings as adults than parent earnings received earlier or later in the child's life. (JEL J13, I1, I2)     

Personal psychological resources,resilience and self-efficacy and their relationship with psychological distress in situations of unemployment / Los recursos psicológicos personales,resiliencia y autoeficacia,y su relación con el malestar psicológico en situaciones de desempleo

According to Hobfoll’s conservation of resources theory (1989), psychological resources such as resilience and self-efficacy could mediate the effects of unemployment on well-being. The objective of this study is to analyse the mediating role of self-efficacy and resilience on the relationship between the amount of time unemployed and psychological distress. A sample of unemployed persons from the Region of Murcia was used (N = 280). With a transversal design and using the macro PROCESS for SPSS (2013), a multiple mediation model is proposed which analyses the mediating role of psychological resources in relation to the amount of time unemployed and self-perceived health. The explained variance of this model is 23.79%. The results show that only self-efficacy partially mediates in the relationship between the two variables (β = .18, SD = 0.06, p < .01). The main contribution of this article is showing that personal psychological resources are an effective tool to cope with life stressors, such as, in this case, unemployment.     

Unemployed by choice: young creative people and the balancing of responsibilities through strategic self-management

The Danish welfare system inadvertently provides a good opportunity for young creative people to pursue their dreams in creative fields such as art, acting, music while being on unemployment benefits. As Michael, one of the participants, puts it: ‘I consider unemployment benefit entrepreneurial support’. The subversive practice is illegal. This qualitative study investigates how young unemployed people who choose to be unemployed in order to engage in innovative projects in creative fields understand and justify their practice. Analysis of in-depth interviews with six young unemployed persons shows how the understanding and management of responsibility is pivotal in the self-understanding and legitimization of receiving unemployment benefits by choice, not out of need. This creative group reflects the contours of a new type of unemployed that has received very little attention in the research literature. The group challenges the traditional representation of the unemployed and portrays themselves as innovative, competent and able to cope with financial insecurity even though it is psychologically distressing and a risky path to go down. We characterize them as strategic self-managing as they use educational systems and unemployment benefit systems for something entirely different from what they are intended – they use it to create their own artistic life courses. This study tentatively points to a categorization distinguishing between personal, social and societal responsibility by which we can improve our understanding of responsibility in neoliberal contexts.     

The social consequences of unemployment in hungary—a household perspective

In this article the following hypotheses are tested using the Hungarian Household Panel Survey and the SOCO data: (a) Poverty is more likely to be felt by ‘unemployed’ households (i.e. households in which one or more members are unemployed) than by ‘non‐unemployment’ households (i.e. households in which none of the members are unemployed); and (b) A household is more likely to be poor if the head of the household becomes unemployed rather than if the spouse or one of the elder children do. The analysis shows that unemployment is closely related to all aspects of poverty (e.g. income, expenditure, and subjective‐poverty), but this association is especially strong in the case of income. It also demonstrates that poverty is more likely when the head of the household, rather than any other member of the household, becomes unemployed. After controlling for all variables we see that when the head of the household becomes unemployed the probability of being poor increases only with regard to income‐ and subjective‐poverty. Wealth‐ and housing‐poverty are not influenced by unemployment in the household. By comparison, in the other Central European countries, when the head of the household becomes unemployed, the probability of being poor increases in all aspects of poverty. This finding suggests that unemployment in Hungary seems to be less devastating than in other post‐socialist countries.     

EFFECTS OF WELFARE REFORM ON ILLICIT DRUG USE OF ADULT WOMEN

Exploiting changes in welfare policy across states and over time and comparing relevant population subgroups within an econometric difference‐in‐differences framework, we estimate the effects of welfare reform on adult women's illicit drug use from 1992 to 2002, the period during which welfare reform unfolded in the United States. The analyses are based on all available and appropriate national data sets, each offering unique strengths and measuring a different drug‐related outcome. We investigate self‐reported illicit drug use (from the National Household Surveys on Drug Abuse and National Surveys on Drug Use and Health), drug‐related prison admissions (from the National Corrections Reporting Program), drug‐related arrests (from Federal Bureau of Investigation Uniform Crime Reports), and drug‐related emergency department episodes (from the Drug Abuse Warning Network). We find robust evidence that welfare reform led to a 10%–21% decline in illicit drug use among women at risk of relying on welfare, as well as associated declines in drug‐related arrests (6%–7%), drug‐related hospital emergency department episodes (7%–11%), and possibly drug‐related prison admissions (11%–19%). The findings indicate that an appropriately designed welfare system with sufficient job opportunities for those who are able to work can result in both increases in employment and decreases in drug use. (JEL I38, K42, J21)