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.

A collective model for female labour supply with non-participation and taxation

This paper presents a collective discrete-choice model for female labour supply. Preferences of females and the intra-household allocation process are both econometrically identified. The model incorporates non-participation and non-linear taxation. It is applied to Belgian micro-data and is used to evaluate two revenue-neutral versions of the 2001 Tax Reform Act. We find small positive behavioural responses to the reforms. The reforms are not unambiguously welfare-improving. Generally, the first revenue-neutral reform (the actual reform and a household lump-sum tax) is more beneficial to females in couples than the second (the actual reform and a proportional decrease of household disposable incomes).

The earned income tax credit and fertility

Government programs designed to provide income safety nets often restrict eligibility to families with children, creating an unintended fertility incentive. This paper considers whether dramatically changing incentives in the earned income tax credit affect fertility rates in the USA. We use birth certificate data spanning the period 1990 to 1999 to test whether expansions in the credit influenced birthrate among targeted families. While economic theory would predict a positive fertility effect of the program for many eligible women, our results indicate that expanding the credit produced only extremely small reductions in higher order fertility among white women.

Understanding sibling differences in child labor

This study considers sibling differences in child labor in Nepal. The data are consistent with a model where parents care equally for all children but siblings differ in comparative advantage in household production, although parental preferences and credit constraints could also be important. Girls, especially older girls, tend to work more than their brothers. This extra work increases with the number of younger siblings and the spacing between siblings. The extra work performed by girls is such that, at modal birth spacing, the younger girl actually spends significantly more time working than her older brother.

Growth and inequality: a demographic explanation

This paper investigates the relationship between growth and inequality from a demographic point of view. In an extended model of the accidental bequest with endogenous fertility, we analyze the effects of a decrease in old-age mortality rate on the equilibrium growth rate as well as on the income distribution. We show that the relationship between growth and inequality is at first positive and then may be negative in the process of population aging. The results are consistent with the empirical evidence in some developed countries.

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.

On the political economy of social security and public education

This paper analyzes simultaneous voting on the wage tax rate and investment in public education with three overlapping generations and ability differences inside each cohort. Wage tax revenue finances public education and social security benefits. The presence of ability differences introduces a time-consistency problem with repeated voting. This can be solved by trigger strategies, which do not punish upward deviations in the wage tax rate. If there are multiple equilibria, then higher tax rates are associated with more education. Surprisingly, the median voter may be a young citizen, even when cohorts are of the same size.

Sibling similarities and economic inequality in the US

I use a new methodological approach and larger US samples than previous studies and estimate that the sibling correlation across a range of economic outcomes is around 0.5. This suggests that half of economic inequality in the US can be attributed to family and community influences. A comparison with noneconomic outcomes suggests that individual choices rather than a simple mechanical relationship governs the intergenerational transmission of income. A decomposition of the sibling correlation suggests that the acquisition of human capital is an important channel through which family background affects future success but that noncognitive factors also play a role.

Are They Frigid to the Economic Development? Reconsideration of the Economic Effect on Subjective Well-being in Japan

The question about the contribution of economic growth to subjective well-being has caused long-standing debate in the literature on subjective well-being, and Japan is often mentioned as a typical case of no contribution. With a careful examination of the survey text, nevertheless, this study provides a completely opposite result. In other words, the average score of subjective well-being is significantly associated with the level of national income per capita. The study also finds that not only the level of national income per capita but also its growth rate is a significant explanatory variable. However, it is also suggested that a structural subsidence of subjective well-being occurred in the late 1990s, when many Japanese people lost confidence in their traditional economic system.

Who benefits from paid family leave? Impact of expansions in Canadian paid family leave on maternal employment and transfer income

This paper estimates the impact of a recent expansion in Canadian paid family leave from 25 to 50 weeks on maternal employment and transfer income. It finds the expansion coincided with increases in transfers to mothers of children age zero to one relative to mothers of children age three to four, and with decreases in returns to work in the year after birth. These changes were concentrated among economically advantaged groups of women, defined by marital status, education, and non-wage income. Despite these changes, there was no evidence of a decrease in returns to work or relative employment for mothers of children age one.

The role of marriage in immigrants’ human capital investment under liquidity constraints

This paper presents a two-period human capital investment model, which is used to study the optimal investment decisions of credit-constrained married immigrants relative to single immigrants and native couples facing a perfect capital market. The model predicts that: (1) The comparative advantage in investment in local skills of one of the spouses may emerge from his/her higher growth rate of imported human capital. (2) The optimal investment of each spouse is non-increasing in the level of imported human capital of the spouse with the comparative advantage in investment, while it is non-decreasing in the level of imported human capital of the other spouse. (3) When two immigrants get married, the spouse with the comparative advantage in investment invests more than when he/she was single whereas the other spouse invests less.

Do youth nonmarital childbearing choices reflect income and relationship expectations?

We hypothesize that teen nonmarital birth events are influenced by adolescent girls’ perceptions of the consequences of their choices. Two such consequences are explored: (1) a teen’s expected future marriage and cohabitation relationships and (2) the present value of expected future income. We also measure the effects of the characteristics of the teen, her prior choices, her family, her neighborhood, and the social and economic environment in which she lives. The results, based on the Michigan Panel Study of Income Dynamics, suggest that teens place greater weight on the relationship consequences than the income consequences, but that both consequences influence their nonmarital birth choices.

Understanding changes in Māori incomes and income inequality 1997–2003

This paper examines recent changes in weekly income levels and dispersion for Māori, New Zealand’s indigenous ethnic group. Changes in the Māori income distribution between 1997 and 2003 reflect rapid increases in economic growth and employment rate. A reduced proportion of people had zero or benefit-level incomes and a higher proportion had high incomes. Income inequality declined for working-aged Māori and was stable for employed Māori. The average income gap between Māori and Europeans declined. The increased Māori employment rate during this period was the single most important driver of changes in the Māori income distribution.

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.

Social Capital and Community Heterogeneity

Recent findings indicate that more pronounced community heterogeneity is associated with lower levels of social capital. These studies, however, concentrate on specific aspects in which people differ (such as income inequality or ethnic diversity). In the present paper, we introduce the number of parties in the local party system as a more encompassing measure of community heterogeneity. This builds on the argument that the number of relevant socio-economic cleavages in the population (i.e. heterogeneity) determines the level of party system fragmentation. Using data on 307 Flemish municipalities, we find that municipalities with a more heterogeneous population indeed have lower levels of social capital. Hence, our study endorses—and generalizes—previous results linking community heterogeneity to lower levels of social capital.

The political economy of social exclusion, with implications for immigration policy

Minorities such as ethnic and immigration groups have often been subject to exclusion through labor market discrimination, residential and employment segregation policies, business ownership regulations, restrictions on political participation, access to public services, and more. This paper studies the dynamics of minority exclusion. From the viewpoint of the dominant majority, the exclusion decision balances the motive to redistribute income in its favor and the interest in avoiding potential civic unrest or even violent confrontation with the minority. The analysis also has implications for immigration policies, suggesting that they have to take this group dynamics into account.

Production and consumption externalities of human capital: an empirical study for Italy

The estimation of the effect of local human capital on wages only might not identify properly human capital spillovers. Appropriate identification requires considering the joint effect of local human capital on both wages and rents. Empirically, we study the effects of local human capital on household-level rents and individual-level wages for a sample of Italian local labour markets. Our results show a positive and robust effect of local human capital on rents, supporting the idea that human capital generates positive externalities at the local level. Our results also suggest that consumption and production externalities have a similar impact on wages.

Information and racial exclusion

We present several economic models of racial segregation and income inequality. The use of race as a signal arises from imperfect information about the return to transactions with particular agents. In a search framework, signaling supports not simply a discriminatory equilibrium, but a pattern of racially segregated transactions, which in turn perpetuates the informational asymmetries. Equilibrium income disparities depend on the relative size of the minority group and on the informational “distance” between races. Under some circumstances, minority agents will self-segregate since they face an adverse selection of majority agents who are willing to trade with them.

Understanding the effects of siblings on child mortality: evidence from India

Given the intrinsically sequential nature of childbirth, timing of a child’s birth has consequences not only for itself but also for its older and younger siblings. The paper argues that prior spacing and posterior spacing between consecutive siblings are thus important measures of intensity of sibling competition for limited parental resources. While the available estimates of child mortality tend to ignore the endogeneity of sibling composition, we use a correlated recursive model of prior and posterior spacing and child mortality to correct it. There is evidence that uncorrected estimates under-estimate the effects of prior and posterior spacing on child mortality.

Absolute Income,Relative Income,and Happiness

This paper uses data from the World Values Survey to investigate how an individual’s self-reported happiness is related to (i) the level of her income in absolute terms, and (ii) the level of her income relative to other people in her country. The main findings are that (i) both absolute and relative income are positively and significantly correlated with happiness, (ii) quantitatively, changes in relative income have much larger effects on happiness than do changes in absolute income, and (iii) the effects on happiness of both absolute and relative income are small when compared to the effects several non-pecuniary factors.