Effect of a Family Policy Reform on Immigrants' Labour Supply and Earnings

An important feature of Scandinavian welfare states is the transfer of resources to families with children. Long parental leave and provision of high‐quality subsidized day care are important policies in this regard. This paper evaluates the impact of a recent Norwegian family policy reform on the labour supply of native and immigrant women in Norway. The reform provides cash benefits to families with 1–3‐year‐old children who do not utilize state‐subsidized day care centres. We find that the effect of the reform on labour force participation of women is fairly modest. However, given participation, earnings of natives and immigrants fell after the cash‐benefit reform. Specifically, earnings of highly educated non‐Western immigrants fell by more than those of natives.     

How the Risk of Displacement for Older Workers Has Changed

Using Blinder–Oaxaca decomposition and relying on the consistent design of the Displaced Worker Survey since 1996, this study analyses various factors contributing to the rising dislocation of older workers, such as changes in tenure, industry mix, educational attainment, and labor force participation. Although in the past older workers were less prone to displacement compared with prime‐age workers, this paper finds that older workers are now more likely to be displaced, conditional on education, manufacturing industry, and tenure. Declining tenure, a higher incidence of displacement in manufacturing, and a higher labor force participation among older workers largely explain the convergence of displacement rates among older and prime‐age workers.     

EQUILIBRIUM SEARCH UNEMPLOYMENT,ENDOGENOUS PARTICIPATION,AND LABOR MARKET FLOWS

The sustainability of welfare states requires high employment and high participation to raise the tax base. To analyze labor supply in a world with market frictions, we propose and solve a macro model of the labor market with unemployment and labor force participation as endogenous and distinct states. In our world, workers' decisions of participating are determined by an entry decision and an exit decision. A calibration of the model improves the usual representations of labor markets, since it quantitatively accounts for the observed flows between employment and nonparticipation. The paper investigates also the effect of payroll taxes and unemployment benefits on participation decisions. Taxes reduce entries and increase exits, whereas unemployment benefits, at a given job‐finding rate, raise entries and have ambiguous effects on exits. (JEL: J2, J6)     

Single Mothers,Welfare, and Incentives to Work

Abstract. This paper analyses the effect of a reform in the French single parents allowance on the labor supply of single mothers with very young children. The reform aimed at encouraging participation by allowing eligible single parents to accumulate welfare benefits and labor earnings for a limited period of time. The analysis shows that eligible single mothers were significantly more likely to work after the reform. During the same period, the employment rate of married mothers with young children did not experience a significant change, suggesting that at least part of the increase among single mothers was a consequence of the reform.     

HOW DESTRUCTIVE IS CREATIVE DESTRUCTION? EFFECTS OF JOB LOSS ON JOB MOBILITY,WITHDRAWAL AND INCOME

We analyze short and long‐term effects of worker displacement. Our sample consists of male workers displaced from Norwegian manufacturing plants. We find that displacement increases the probability of leaving the labor force by 31%. The drop‐out rate from the labor force is particularly high in the first years following displacement. The average earnings effects for those who remain in the labor force are moderate, a 3% loss relative to non‐displaced workers after seven years. Splitting displaced workers on within‐ and between‐firm movers, we find that the estimated earnings loss is entirely driven by between‐firm movers who experience a 3.6% loss. Transfers to other plants within multi‐plant firms upon displacement are quite common. Our results support the view that human capital is partly firm specific and partly industry specific. We find no evidence suggesting that human capital is plant specific.     

From Welfare to Work: Evaluating a Tax and Benefit Reform Targeted at Single Mothers in Sweden

Abstract. In this paper we evaluate a hypothetical tax and benefit reform to increase the working hours and to decrease welfare participation of single mothers in Sweden. We formulate and estimate simultaneously a structural static model of labor supply and welfare participation. The results suggest that labor supply among single mother households in Sweden is quite elastic, and that there is self‐selection into welfare. We also find that the proposed reform would generate welfare gains for virtually everyone in the sample, benefit low‐income households, and would at the same time generate a small revenue surplus.     

Dynamic Female Labor Supply

The increase in female employment and participation rates is one of the most dramatic changes to have taken place in the economy during the last century. However, while the employment rate of married women more than doubled during the last 50 years, that of unmarried women remained almost constant. To empirically analyze these trends, we estimate a female dynamic labor supply model using an extended version of Eckstein and Wolpin (1989) to compare the various explanations in the literature for the observed trends. This dynamic model provides a much better fit to the life‐cycle employment pattern than a static version of the model and a standard static reduced form model (Heckman (1979)). The main finding using the dynamic model is that the rise in education levels accounts for about 33 percent of the increase in female employment, and the rise in wages and narrowing of the gender wage gap account for another 20 percent, while about 40 percent remains unexplained by observed household characteristics. We show that this unexplained portion can be empirically attributed to cohort‐specific changes in preferences or the costs of child‐rearing and household maintenance. Finally, the decline in fertility and the increase in divorce rates account for only a small share of the increase in female employment rates.     

The Motherhood Wage Penalty and Its Determinants: A Public–Private Comparison

We investigate whether public and private sector employees bear a different wage penalty for having children. According to our estimates, the total motherhood wage penalty is much larger in the private than in the public sector. Nevertheless, in both sectors, we find no unexplained penalty once we control for potential determinants of the family pay gap, namely, a reduced labour supply of mothers, child‐related career interruptions, less access to management positions, and adjustments in working conditions. Finally, only child‐related career interruptions play a different role in explaining the motherhood wage penalty in each sector.     

Nature or Nurture? Learning and the Geography of Female Labor Force Participation

One of the most dramatic economic transformations of the past century has been the entry of women into the labor force. While many theories explain why this change took place, we investigate the process of transition itself. We argue that local information transmission generates changes in participation that are geographically heterogeneous, locally correlated, and smooth in the aggregate, just like those observed in our data. In our model, women learn about the effects of maternal employment on children by observing nearby employed women. When few women participate in the labor force, data are scarce and participation rises slowly. As information accumulates in some regions, the effects of maternal employment become less uncertain and more women in that region participate. Learning accelerates, labor force participation rises faster, and regional participation rates diverge. Eventually, information diffuses throughout the economy, beliefs converge to the truth, participation flattens out, and regions become more similar again. To investigate the empirical relevance of our theory, we use a new county‐level data set to compare our calibrated model to the time series and geographic patterns of participation.     

A Cross‐country Comparison of Attitudes Towards Mothers Working and their Actual Labor Market Experience

In this paper, we use data from the International Social Survey Project to present a cross‐country comparison of attitudes about the labor force participation of mothers. We also estimate earnings functions and probits for full‐time work and examine whether there is a link between attitudes and women’s actual labor market experience across countries. We find that while a woman’s own attitude about work does not directly influence her wage, it does influence the probability that she works full time.     

CHILDREN OF A (POLICY) REVOLUTION: THE INTRODUCTION OF UNIVERSAL CHILD CARE AND ITS EFFECT ON FERTILITY

What role does affordable and widely available public child care play for fertility? We exploit a major German reform generating large temporal and spatial variation in child care coverage for children under the age of three. Our precise and robust estimates on birth register data reveal that increases in public child care have significant positive effects on fertility. The fertility effects are more pronounced at the intensive than at the extensive margin, and are not driven by changes in the timing of births or selective migration. Our findings inform policy makers concerned about low fertility by suggesting that universal early child care holds the promise of being an effective means of increasing birth rates.     

The Effect of Having More Children on Women's Labour Force Participation in Korea: An Analysis Using Instrument Variables

The objective of this study was to examine the causal relations between having more children and women's labour force participation using Korean data. Given the strong preference for sons in Korea, variables regarding the number of daughters were used as instrument variables for having more children. The results using 1980s data showed that having a third child had a significantly positive impact on women's labour force participation in the ordinary least squares analysis, whereas the coefficient value was significantly negative in the two‐stage least squares analysis. Such results imply that, unlike in the western societies such as the USA and the UK, the ordinary least squares analysis results might underestimate the negative correlations between having more children and women's labour force participation in a developing country such as Korea.     

TECHNOLOGY ADOPTION,TURBULENCE, AND THE DYNAMICS OF UNEMPLOYMENT

Starting in the late 1970s, European unemployment began to increase while US unemployment remained constant. At the same time, capital‐embodied technical change began to accelerate, and the United States adopted the new capital much faster than Europe. I argue that these two facts are related. The main idea is that if there is capital‐embodied technical change, then the unemployment rate depends critically on how obsolete the installed capital stock is compared to the frontier. In particular, European workers initially worked with relatively obsolete capital, and so they lacked the skills required to work with frontier capital. When they lost their jobs they therefore stayed unemployed for longer than their American counterparts. I find that this channel accounts for about 70% of the discrepancy between the behavior of unemployment rates in Europe and the United States.     

Impact of the Minimum Wage on Youth Labor Markets

We study the effect of the minimum wage on labor market outcomes for young workers using US county‐level panel data from the first quarter of 2000 to the first quarter of 2009. We go beyond the usual estimates of earnings and employment effects to consider how differences across states in the minimum wage affect worker turnover via separations and accessions and job turnover through new job creation and job losses. We find that a higher minimum wage level is associated with higher earnings, lower employment and reduced worker turnover for those in the 14–18 age group. For workers aged 19–21 and 22–24, we find less consistent evidence of minimum wage effects on earnings and employment. But, even for these age groups, a higher minimum wage is found to reduce accessions, separations and the turnover rate.     

Risk Aversion,Collective Bargaining,and Wages in Germany

We develop an open‐shop model of trade union membership in which workers differ in their risk attitudes, and derive conditions under which the bargained wage will fall and union membership will increase with a general rise in risk aversion. Using data from the German Socio‐Economic Panel we define broad bargaining units and show that wages decline as average risk aversion of union members in these units rises, controlling for individual effects of risk aversion. Given a negative relationship between wages and employment, this suggests that secular changes in risk attitudes, because of an aging workforce or greater female labour force participation, can help to explain variations in the employment performance of unionized economies.     

The Effect of the Supply of Subsidized Day-care Facilities on Female Labour Supply

ABSTRACT: In this article the hypothesis that a higher level of subsidized day-care facilities leads to an increase in female labour supply is tested for the Netherlands on the basis of two surveys. The results show that (allowing for the women's wage rate, her non-labour income, her age, and the presence of children) labour supply is higher when subsidized day-care supply is higher. However, after including variables that reflect social norms the effect of day-care supply on female labour supply, though still positive and significant, becomes much weaker.     

New Mothers’ Labour Force Participation in Italy: The Role of Job Characteristics

Abstract. In this paper we use newly available individual‐level data from the Longitudinal Survey of Italian Households to investigate the factors associated with female labour force participation after the birth of the first child. We focus on the role of pre‐marital job characteristics and find that new mothers who worked without a contract are less likely to participate, while those who worked in the public sector or in a large private firm have a higher probability of being in the labour force after childbearing. We suggest that these effects could be at least partly attributed to differences in the level of job protection and employment stability enjoyed by workers. This implies that in Italy women with highly protected and stable jobs might find it easier to combine career and family, whereas those who are less sheltered by the legislation might be more likely to be inactive after becoming mothers.     

THE EFFECT OF JOINT CUSTODY ON FAMILY OUTCOMES

Since the 1970s almost all US states have introduced a form of joint custody after divorce. I analyze the causal effect of these custody law reforms on different family outcomes. My identification strategy exploits the different timing of reforms across the US states. Estimations based on state panel data suggest that the introduction of joint custody led to an increase in marriage rates, an increase in overall fertility (including a shift from nonmarital to marital fertility), and an increase in divorce rates for older couples. Accordingly, female labor market participation decreased. Further, male suicide rates and domestic violence fell in treated states. The empirical evidence is consistent with the hypothesis that joint custody increased the relative bargaining power of men within marriage.     

New Mothers’ Employment and Public Policy in the UK,Germany, the Netherlands,Sweden, and Japan

Abstract. This paper investigates the link between family‐friendly policies and women's employment after birth of the first child in the UK, Germany, the Netherlands, Sweden, and Japan in the 1980s and the 1990s. Our econometric analyses use household panel data from each of the five countries: BHPS, GSOEP, OSA, HUS, and JPSC, respectively. Public policies that facilitate the combination of motherhood and paid employment offer an effective means in increasing the participation rate of first‐time mothers. The results also indicate that the availability and stimulation of good‐quality part‐time employment can provide additional, strong incentives for new mothers to enter active employment.     

A Parsimonious Macroeconomic Model for Asset Pricing

I study asset prices in a two‐agent macroeconomic model with two key features: limited stock market participation and heterogeneity in the elasticity of intertemporal substitution in consumption (EIS). The model is consistent with some prominent features of asset prices, such as a high equity premium, relatively smooth interest rates, procyclical stock prices, and countercyclical variation in the equity premium, its volatility, and in the Sharpe ratio. In this model, the risk‐free asset market plays a central role by allowing non‐stockholders (with low EIS) to smooth the fluctuations in their labor income. This process concentrates non‐stockholders' labor income risk among a small group of stockholders, who then demand a high premium for bearing the aggregate equity risk. Furthermore, this mechanism is consistent with the very small share of aggregate wealth held by non‐stockholders in the U.S. data, which has proved problematic for previous models with limited participation. I show that this large wealth inequality is also important for the model's ability to generate a countercyclical equity premium. When it comes to business cycle performance, the model's progress has been more limited: consumption is still too volatile compared to the data, whereas investment is still too smooth. These are important areas for potential improvement in this framework.