Assistance to poor households when income is not observed: targeted in-kind and in-cash transfers

Policymakers frequently design self-targeting programs or target poor areas to assist poor families when income is not observed. Self-targeting schemes take advantage of differences in participation costs in assistance programs across households. Geographic targeting assumes that transfers are solely determined by the region of residence: to receive the benefits, households not initially present in the targeted areas must relocate away from their original place of residence and live with the poor, which entails a cost that can also be interpreted as a participation cost in the assistance program. The paper shows that a combination of in-kind and in-cash transfers tied to the consumption of a publicly provided private good targeted to the poor becomes very useful when non-poor households have different participation costs. By distinguishing users and non-users of public facilities additional in-cash transfers can be directed to the poor more effectively. The paper demonstrates that the publicly provided good ends up being undersupplied, and the distortion becomes less important as participation costs rise. More importantly, it shows that this kind of redistributive program dominates a pure in-cash scheme.     

Information distortion and competitive remedies in government transfer programs: The case of ethanol

This paper reconsiders the analogy between competitive markets and the political process that is central to much of the literature on the efficiency of government transfers. The key problem is that property rights in politics are much less well defined than they are in competitive markets. As the paper outlines, obtaining accurate information about the benefits and costs of transfers is likely to be much more difficult than envisioned in the literature. Investigators, as well as general voters, often must rely on the government and competing parties for provision of information about underlying program parameters and functional relationships. We argue that politicians and the affected interest groups have incentives to limit and distort the information that is released to voters and that political competition is unlikely to be an effective counter. In developing the argument, a theoretical framework is provided and applied in a case study of the ethanol transfer. The documented efforts to disguise the actual costs and benefits of the program are important for gaining a broader understanding of the functioning and costs of government transfers in the economy.     

The effectiveness of European active labor market programs

Active Labor Market Programs are widely used in European countries, but despite many econometric evaluation studies analyzing particular programs no conclusive cross-country evidence exists regarding “what program works for what target group under what (economic and institutional) circumstances?”. This paper aims at answering this question using a meta-analysis based on a data set that comprises 137 program evaluations from 19 countries. The empirical results of the meta-analysis are surprisingly clear-cut: Rather than contextual factors such as labor market institutions or the business cycle, it is almost exclusively the program type that seems to matter for program effectiveness. While direct employment programs in the public sector frequently appear detrimental, wage subsidies and “Services and Sanctions” can be effective in increasing participants' employment probability. Training programs – the most commonly used type of active policy – show modestly positive effects.     

An empirical model of transfers within a federation, with an application to the European Union

We construct a stylized model of transfers within a federation and apply it to the European Union. Our approach differs from that of most of the existing literature in that we fix the preferences for redistribution of resources among a federation's members, rather than fix the current budgetary rules or modify them on the basis of assumed scenarios. The model is tested (successfully) by assessing its ability to predict the effects of the last (1995) enlargement on the European budget. We then use the estimated model to predict the reallocation of the Union's net transfers after the upcoming Eastern enlargement. Our estimates of transfers to the incoming member states exceed those of the rest of the literature. Our results can be interpreted in one of two ways: first, either the European Union, in its collective decision-making process (that in the future will include the five incoming countries as voting members), will institute new rules and programs to further reduce the regional disparities in income, or second, if the current rules and programs are maintained, then the Eastern enlargement would result in a reduction in the “depth” of the Union. The approach we introduce can be more generally applied to the analysis of other intergovernmental or international organizations.     

The Effectiveness of Local Government Active Labor Programs: The Case of the Benefits-to-Wages Program in Russia

This paper presents the results of an implementation evaluation of a Benefits-to-Wages (BtW) program operated in Perm, Russia. In part because of the low level of support for Active Labor Market Programs (ALPs) by Russian national and regional governments, municipalities have begun implementing ALPs of their own. Participation in the BtW program is limited to an unemployed adult in very low income family where at least one child is present. The program appears to be highly successful, with 74% of applicants finding jobs while still participating in the program. The assessment found that participation in the program, and job acquisition in particular, were important in raising participant families' incomes. Nevertheless, only about 10% of participants with jobs were lifted out of poverty. Receipt of certain social services and Employment Services, including training, had little impact on which participants succeeded in finding a job. Similarly, person attributes, such as education and prior work experience paid no statistically significant role. This pattern is consistent with a situation in which job requirements are modest and are met by most program participants. Various patterns indicate the program did have a positive effect on job acquisition, although the absence of a control group prevents any stronger statement.     

Canada-United State Free Trade

A bstract The Canada US Free Trade AGreement (FTA) which came into force January 1. 1989 caused heated debate within Canada about the impact it would have on social programs , other directly or indirectly It was argued that Canada would have to give up some social programs because they would be deemed to be substdues to the production of goods or services Alternatively, it was feared that firms would argue that the programs would need to be cut in order to ensure that they could compete with US firms in firms in terms of taxes It is shown that public unease about the fate of social programs was based both on a misunderstanding of FTA provisions, and on 'misperception'of the mag nitude of social program expenditures Social Programs Such as unemployment insurance , even when they subsidize particular groups of people (eg fisher men) are not normally deemed to be unfair competition which would be countervailable In addition, firsm do not expertence any greter benefit costs in Canada than in the US, albeit there is a different public/private split and thus there is no justification for firms to argue for cutting programs in order tobe competitive, other things being equal     

Unequal jobs or unequal pay?

This article draws on new data to consider whether women would benefit most from upgrading the skill levels of their jobs or from achieving equal pay for work of equal value. It looks in detail at skill, gender, and whether work is full-time or part-time, concluding that reassessment of the value of women's jobs would be of greater immediate financial benefit to women than upgrading the skill level of their jobs unless this upgrading gave them access to men's jobs at men's pay and benefit rates.     

Workfare,welfare, agency,and well-being

Workfare programs are state-instituted programs that require able-bodied persons with children of school age who wish to claim welfare payments to participate in job training programs, and, eventually, to enter the work force. The philosophy of workfare is based on the value of work and the goal of self-determination. However, as a mandatory program for welfare recipients, workfare requires of those recipients certain duties which, according to those who challenge workfare, interfere with the freedom to choose what one will do with one's life. Whether some form of workfare will be adopted as part of our national welfare system remains to be seen. What the debate about such a program suggests is that welfare, in itself, by ignoring the necessity of security and education for full human agency, neither satisfies basic needs nor prepares its recipients for any life other than that of dependency. With all its difficulties workfare nevertheless presents an alternative to welfare that, at least in theory, more closely identifies its purpose with the values of our society.     

Woman's work: Seeking identity through occupations

Most adult women now hold full-time jobs outside the home, and the proportion is growing. While women's labor market experiences and successes have come closer to men's experiences and successes, their attachment to a labor market career, at least for married women, is not the compulsion that it is and has been for men. While many women have won the right to go off to the corporate citadel every morning, they have more often than not retained the obligation to bear most of the responsebility for the home. Ideally, postfeminist women woumen would like to be able to strike a balance between the responsibilities of the job and home. In reality, they are forced to choose between the two. Women have a right to seek identity through work as well as through parenthood-as men have always done. Those few women who insist on the right to meaningful work and the right to a family will have to push for changes in the work place as hard as they had to push to gain admittance to the jobs in the first place.     

Reducing income transfers to refugee immigrants: Does start-help help you start?

We estimate the effect of lowering income transfers to refugee immigrants in Denmark – labeled start-help – using a competing risk framework. Refugee immigrants obtaining residence permit before July 2002 received larger income transfers than those who obtained their residence permit later. Exploiting this ‘quasi-natural’ experiment, we find that the lower income transfer has a positive effect on the job-finding rate after two years in Denmark. We also find that the exit rate from the labour force is positively affected by start-help during the early phases of the integration process. Finally, we find that those with the poorest labour market prospects are the least responsive to the improvement in economic incentives.     

Mary E. Switzer: The Entrepreneur Within the Federal Bureaucracy

A bstract . Mary E. Switzer (1901-1972), a federal civil servant from 1921 to 1970, had a career which provides a case study of entrepreneurship within a bureaucracy. At first a staffer in progressive era social agencies, she became an assistant to Josephine Roche, well known advocate of government social programs. At first Switzer opposed federal health programs, believing that centralization of control would harm them. Then she became an advocate of federal aid to the local communities and health enterprises, with decentralized control over research and health services. Taking over vocational rehabilitation, she harmonized private and public power and at least managed to make a rehabilitation approach to social problems the cornerstone of President Eisenhower's domestic social welfare program. But the rehabilitation approach failed when applied to unemployment and poverty in general.     

The distributional implications of tax and transfer programs in US

The distributional consequences of changes in tax laws and transfer programs in the United States are studied. Using detailed household income data from the Panel Study of Income Dynamics (PSID) from 1981–91, income inequality is measured for both pretax/transfer and post-tax/transfer definitions of household income. A new statistical methodology for assessing the impact of changes in taxes and transfers on the size distribution of income is utilized. Confidence intervals are constructed for various measures of inequality, and hypothesis tests are conducted to determine whether observed changes in the distribution of income due to taxes and transfers are statistically significant. Using decomposable measures of inequality, the implications of type of tax table used are investigated.     

Interest Groups, Transfer Seeking and Democratization: Competition for the Benefits of Governmental Power May Explain African Political Instability

A bstract . The effect of permanent interest group transfer-seeking behavior on the degree of democratization is examined, Each permanent interest group is viewed as attempting to maximize its share of wealth transfers through the political process. To maximize the share of transfers, each group undertakes competitive strategies to control the instruments of transfers. Such competition is more intense the larger the number of permanent interest groups in a given country, and the higher the likelihood that the competition would involve non-democratic means to achieve and maintain control of the political machinery in those countries. It is predicted that the more intense the competition for transfers, which is a direct function of the number of permanent interest groups in any given country, the less democratic the system of government in that country is likely to be. This prediction is supported empirically using cross-sectional data for 65 countries.     

Direct transfers between the former Soviet Union central budget and the republics: Past evidence and current implications

This paper examines the magnitude of direct transfers between the former Soviet Union central buget and individual republics. It shows that Kazakhstan and Central Asian republics were primary recipients of large net transfers of funds from the Soviet central budget amounting in some cases to about ten percent of their GNP. On the contrary, Russia was the single largest net donor of funds to the Soviet central budget through more transfers paid to the union budget than received from it, both in rouble terms and as a share of the GNP.With the dissolution of the central budget in November 1991, these transfers were discontinued. This has caused a dent in fiscal budgets and a large negative income shock in recipient republics. To some extent, external saving is suggested as the way to ease up the burden of the loss of income induced by the collapse of the fiscal system and the system of direct transfers within the former Soviet Union.     

The World Bank and Poverty: A Review of the Evidence on Whether the Agency Has Diminished Emphasis on Aid to the Poor

Abstract . The World Bank's loan patterns in recent years are examined to see if there is any empirical evidence of a diminution of interest in poverty alleviation programs. Four very different concepts on what poverty alleviation is are used to categorize the international agency's loans: the share of lending going to (1) poor countries; (2) programs targeting direct aid to poor individuals; (3) certain sectors deemed to be intrinsically beneficial in meeting basic human needs, and (4) overall country programs which make poverty a key element of their goals. Each of the concepts has different criteria and standards. Analysis of the data indicates that the Bank seems to be doing at least as well today in the struggle against poverty as in previous decades. In some ways the Bank's current program is more poverty-oriented than are bilateral aid programs financed by the United States and other major donor countries.     

Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey

This paper studies the effects on registered employment and number of registered establishments of two employment subsidy schemes in Turkey. We implement a difference-in-differences methodology to construct appropriate counterfactuals for the covered provinces. Our findings suggest that both subsidy programs did lead to significant net increases in registered jobs in eligible provinces (5%–13% for the first program and 11%–15% for the second). However, the cost of the actual job creation was high because of substantial deadweight losses, particularly for the first program (47% and 78%). Because of better design features, the second subsidy program had lower, though still significant, deadweight losses (27%–46%). Although constrained by data availability, the evidence suggests that the dominant effect of subsidies was to increase social security registration of firms and workers rather than boosting total employment and economic activity. This supports the theory that in countries with weak enforcement institutions, high labor taxes on low-wage workers may lead to substantial incentives for firms and workers to operate informally.     

Low Pay,Higher Pay and Job Satisfaction in Wales

Abstract

Using the first six waves of the Welsh boosts to the British Household Panel Survey this paper attempts to explain the determinants of overall job satisfaction and four facets of job satisfaction in Wales, distinguishing between female and male workers and low-paid and higher paid workers. The motivation of the paper is the claim made widely in the EU that low-paid jobs are jobs of inherently low quality, in which case we should expect that job satisfaction would be lower in low-paid jobs. Since there are proportionately more low-paid workers in Wales than in either England or Scotland we would also expect to find that job satisfaction would be lower in Wales than in the other two countries.     

Productivity,seniority and wages: new evidence from personnel data

Wages may be observed to increase with seniority because of firm-specific human capital accumulation or because of self-selection of better workers in longer jobs. In both these cases, the upward sloping wage profile in cross-sectional regressions would reflect higher productivity of more senior workers. If this were true, the observation of an effect of seniority on wages would depend on the presence of controls for individual productivity. In this paper we replicate, using personnel data from a large Italian firm, the results of the pioneering work of Medoff and Abraham [Quarterly Journal of Economics (1980); The Journal of Human Resources, 15(2) (1981)] in which supervisors' evaluations were used as productivity indicators. Since the validity of supervisors' evaluations as measures of productivity has been widely criticised, we extend the work of Medoff and Abraham using different direct measures of productivity based on recorded absenteeism and misconduct episodes. Both these indicators and supervisors' evaluation suggest that the observed effect of seniority on wages does not reflect a higher productivity of more senior workers. Only at the lowest levels of the firm's hierarchy, the human capital theory contributes to explain the effect of seniority on wages. At least at all other levels, the explanation of the observed upward sloping profile has to be based on theories in which wages are deferred for incentive or insurance reasons.     

Job rotation and employee performance – evidence from a longitudinal study in the financial services industry

Job rotation, i.e. a lateral transfer of an employee between jobs within a company, is frequently used as a means to develop employees, learn about their abilities as well as to motivate them. We investigate the determinants and performance effects of job rotation empirically by analyzing a large panel data-set covering the German banking and financial services sector. In particular, we study (i) how prior individual performance affects the propensity to rotate and (ii) how performance changes after the rotation. We find that while both, low- and high-performers rotate, lateral moves are more frequent among low performers. However, those having been rotated between jobs achieve a higher performance in subsequent years as compared to other non-rotating employees in a comparable position. Interestingly, this effect is driven by high performers, whereas for low performers, we find no significant relationship between job rotation and future performance. The results thus suggest that firms should focus their job rotation programs on high performers and should not expect that low performers achieve performance gains when being rotated to a different function.