The Impact of Children on Women's Paid Work*

This paper investigates how and when differences in work behaviour between men and women develop, focusing on the evolution of the gender gaps over the period of family development. The findings support the theory that gender differences in the formal labour market stem from the presence of children in the home and that childbirth and children entering school are critical times in women's employment. Births mark a dramatic decline in participation in work for women, while school entry is a time of considerable turnover in participation. The length of absence from work following a subsequent birth is closely related to whether the mother was in work between births, while maternity pay and leave entitlements appear to influence the precise timing of the return to work. In addition, a return to work following birth is often only temporary. The gradual decline in women's relative wages following the first birth appears to stem from the accumulation of several shorter periods of unusually low wage growth for women around the times of birth and school entry. There is also a sharp movement into part‐time work for women following childbirth and a transition towards non‐permanent positions and non‐supervisory roles at both critical points.     

The Effect of Making a Voluntary Labour Market Programme Compulsory: Evidence from a UK Experiment

This paper investigates the effects on employment and benefit receipt of making a voluntary active labour market programme compulsory. This policy change, which targeted long‐term unemployed people over the age of 50, was piloted in a number of areas within the UK and evaluated by individual random assignment of the requirement to participate. The results show that mandating participation resulted in a sustained increase in employment and a corresponding reduction in benefit receipt. The results were driven at least in part by a deterrent effect.     

Effects of Family Policy Reforms in Norway: Results from a Joint Labour Supply and Childcare Choice Microsimulation Analysis*

Mothers of pre‐school children represent one part of the population that might be able to increase its labour supply. We discuss the effects of family policy changes that encourage the labour supply of these mothers, such as childcare fee reductions and increased availability of centre‐based care. The effects of policy changes are described by using a joint labour supply and childcare choice decision model. Detailed empirical results are provided with respect to mothers' labour supply, families' childcare choices, public expenditures, and distributions of income and money metric utility.     

The Effect of Financial Incentives on Labour Supply: Evidence for Lone Parents from Microsimulation and Quasi‐Experimental Evaluation*

The aim of this paper is to analyse the work incentive effects of a change in the Australian tax and transfer system on lone parents in July 2000. To evaluate the effect of the total change only, microsimulation can be used; but for a subgroup of lone parents, a few components of this policy change can be analysed through two alternative approaches — microsimulation and quasi‐experimental evaluation. Both approaches examine the effects on the probability of employment and on average working hours. The results from microsimulation show that the combined changes introduced in July 2000 — involving reduced withdrawl rates, changed family payments and lower income tax rates — have increased labour supply for lone parents to a moderate extent. The estimated effect on average working hours when using microsimulation is very close to the effect estimated in a quasi‐experimental approach using matching techniques to control for alternative influences.     

Effects of Temporary In‐Work Benefits for Welfare Recipients: Examination of the Australian Working Credit Programme*

We investigate the impact of ‘Working Credit’, a nationally‐implemented programme which created increased incentives for welfare recipients to undertake temporary work. Highlighting the difficulties in identifying programme effects in the absence of a randomised controlled trial or a natural experiment, we produce estimates of impacts under alternative identifying assumptions and also undertake various robustness checks. Unconditional and regression‐adjusted difference‐in‐difference estimates suggest that the introduction of the Working Credit programme increased employment rates, earnings and exits for those on income support, but matching methods and various robustness checks provide conflicting evidence on the impact on movements from welfare to work for unemployment benefit recipients. Moreover, estimated effects on earnings while on benefits are sensitive to identifying assumptions. Notwithstanding our inability to conclusively identify causal effects of the programme, we note that our findings are broadly consistent with the incentive effects of the programme, with recipients making use of the credits to increase earnings while on benefits, but not increasing movements off welfare.     

The Effect of Marriage Tax Penalties and Subsidies on Marital Status

The United States personal income tax system treats married and unmarried couples differently, creating both penalties and subsidies for marriage. This paper examines the effect of these penalties and subsidies on the choice of marital status. Endogeneity between the marriage penalty a couple faces and its marital status is dealt with using a simulated instrument capturing variation in the tax code over time and between states. I find that a $1,000 change in the financial incentive for marriage has a 1.7 percentage point (1.9 per cent) effect on the probability of marriage. This effect is symmetric for subsidies and penalties and, whilst modest, is four times larger than previously estimated. Lower education groups and couples without children are the most responsive.     

Entrepreneurship,College, and Credit: The Golden Triangle

We develop a model to evaluate the aggregate impact of college finance in an environment with entrepreneurship. The calibrated model captures the stylized fact that entrepreneurs with college are more common and more profitable in the United States. The calibration indicates this is mainly because higher labor earnings allow college‐educated agents to ameliorate credit constraints if and when they eventually become entrepreneurs. Changes in financing constraints on entrepreneurs can thus affect college attendance, and changes in financing constraints on college can affect entrepreneurship rates as well.     

Extensive and Intensive Margins of Labour Supply: Work and Working Hours in the US,the UK and France*

This paper provides a new analysis of the main stylised facts underlying the evolution of labour supply at the extensive and intensive margins in three countries: the United States, the United Kingdom and France. We propose a definition of the extensive and intensive margins corresponding respectively to the employment rate and to hours when employed. This definition is robust to the choice of the reference period and we develop a new statistical decomposition that provides bounds on changes at these margins. We focus on longer-run labour supply changes over the period 1977 to 2007 and abstract from the shorter-run impact of recessions. Examining secular changes over this period, we show that both margins matter in explaining changes in total hours. We then provide a detailed analysis across countries and across time by demographic type. Given the large systematic differences we uncover in the importance of these margins by age and gender, it is unlikely that a single explanation will suffice to account for the macroeconomic evolutions in the three countries.     

Decomposing Inequality Changes: Allowing for Leisure in the Evaluation of Tax and Transfer Policy Effects

In this paper, we present two alternative methods of accounting for changes in leisure time in decomposing the inequality effects of tax and transfer policy changes. Three components are identified: tax policy, labour supply responses to tax policy changes and other population effects. The methods are used to decompose inequality changes in Australia between 2001 and 2006. Inequality is first defined in non‐welfarist terms as a function of disposable income: the independent judge places no value on leisure. Then, this is modified to allow for evaluations using a weighted geometric mean of disposable income and leisure. This is seen to modify the evaluation of changes in important ways. The results are found to differ from those obtained using a ‘welfarist’ evaluation in terms of money metric utility, where separate labour supply effects cannot be isolated.     

Impact of macro-economic surprises on carry trade activity

Can official news and policy announcements affect foreign exchange speculation? A widespread speculative strategy in foreign exchange markets is carry trade. This paper explores the links between macro-economic news and foreign exchange options to identify macro-economic fundamentals most relevant to the pricing of downside risk – measured by risk reversals options contracts – to carry trade activity. Focusing primarily on the Japanese yen carry trade, we identify a significant impact of macro-economic surprises on dollar/yen risk reversals. The effect is sizeable, with news related to bilateral trade balance of particular concern. Moreover, there is a close link between risk reversals and speculative futures positions in Japanese yen. This allows us to quantify a substantial effect of macro-economic news on carry trade activity, with the cost of hedging as the transmission mechanism.     

Population Ageing,Fiscal Pressure and Tax Smoothing: A CGE Application to Australia*

This paper analyses the fiscal pressure from population ageing using an intertemporal CGE model, applied to Australia, and compares the results with those of a recent government‐commissioned study. The latter study uses an alternative modelling approach based on extrapolation rather than optimising behaviour of consumers and firms. The deadweight losses from the fiscal pressure caused by population ageing are equivalent to an annual loss of consumption of $260 per person per year in 2003 dollars in the balanced‐budget scenario. A feasible degree of tax smoothing would reduce this welfare loss by an equivalent of $70 per person per year. Unlike the extrapolation‐based model, the CGE approach takes account of feedback effects of ageing‐induced tax increases on consumption and labour supply, which in turn impact on the ultimate magnitude of fiscal pressure and therefore tax increases. However, a counterfactual simulation suggests that the difference in terms of deadweight losses between the two modelling approaches is modest, at about $30 per person per year.     

The Effective Tax Burden of Companies and of Highly Skilled Manpower: Tax Policy Strategies in a Globalised Economy*

Company taxes and taxes on highly skilled labour both influence the attractiveness of a particular region as a location for investment. We measure the effective tax burden on capital investment and on highly qualified labour in 33 locations across Europe and the United States. We then correlate both types of tax burden in order to study the different tax policy strategies applied in different countries. We find that effective tax rates on companies and on highly skilled employees are closely correlated for a number of countries. Ireland and most new EU Member States impose relatively lower taxes on capital investment than on highly skilled manpower. Conversely, in the US, companies are taxed heavily but the effective tax rate on highly skilled employees is moderate.     

A century of purchasing power parity confirmed: The role of nonlinearity

Taylor (2002) claims that Purchasing Power Parity (PPP) has held over the 20th century based on strong evidence of stationary for century-long real exchange rates for 20 countries. Lopez et al. (2005), however, found much weaker evidence of PPP with alternative lag selection methods. We reevaluate Taylor’s claim by implementing a recently developed nonlinear unit root test by Park and Shintani (2005). We find strong evidence of nonlinear mean-reversion in real exchange rates that confirms Taylor’s claim. We also find a possible misspecification problem in using the ESTAR model that may not be detected with Taylor-approximation based tests.     

The high-frequency response of exchange rates and interest rates to macroeconomic announcements

The joint movements of exchange rates and U.S. and foreign term structures over short-time windows around macro announcements are studied using a 14-year span of high-frequency data. In order to evaluate whether the joint effects can be reconciled with conventional theory, the implications of these joint movements for changes in expected future exchange rates and changes in foreign exchange risk premia are deduced. For several real macro announcements, a stronger than expected release appreciates the dollar today, and must either (i) lower the risk premium for holding foreign currency rather than dollars, or (ii) imply net expected dollar depreciation over the ensuing decade.     

The retirement wealth of the baby boom generation

The paper compares the well-being of the baby boom generation (ages 40-55) in 2001 with the same age group in 1983. I find little evidence that their relative position deteriorated over the period. By some indicators, this generation has seen an improvement. In terms of income, the 40-55 age group was at about the same relative position in 2001 as in 1983. In terms of conventional wealth, there was some slippage over the period. In terms of mean augmented wealth (net worth plus pension and Social Security wealth), their relative position improved somewhat but in terms of median augmented wealth there was again some slippage.     

The Impact of a Minimum‐Wage Increase on Temporary‐Contract Workers

We study the impact of the 2016 increase in the Irish minimum wage on the hours worked and the probability of job loss of minimum‐wage workers. We pay particular attention to temporary‐contract workers, who may be more susceptible to changes to their working conditions than permanent employees. The results indicate that the increase in the minimum wage had a negative and statistically significant effect on the hours worked of minimum‐wage workers, with an average reduction of approximately 0.6 hours per week. For temporary workers, the effect was greater, with a decline of approximately 3 hours per week. We find no evidence that the increase in the minimum wage led to an increased probability of becoming jobless in the six‐month period following the rate change, nor did it affect employment shares in sectors employing large numbers of minimum‐wage workers.     

Tax Amnesties and Income Tax Compliance: The Case of Spain

The aim of this paper is to evaluate the long‐term impact on Spanish individual income tax (IRPF) compliance of the amnesty measures granted in 1991 within the framework of the 1988–91 income tax reform programme. To that end, we combine time‐series techniques with outlier detection methods and the Bai and Perron (1998) test for the endogenous estimation of structural breaks. On the basis of the analysis of the monthly IRPF tax collection series from 1979 to 1998, we find that the amnesty had no effect on tax collection in either the short or the long term. By contrast, we find evidence of the permanent positive impact caused by the legislative and administrative measures linked to the IRPF reform process begun in 1988.     

Local persistence and the PPP hypothesis

This paper examines the statistical properties of the bilateral real exchange rates of the U.S. vs. France, Germany, and the U.K. during the Post-Bretton-Woods period, and draws implications on the Purchasing Power Parity (PPP) hypothesis. Contrary to traditional studies that consider only unit root and stationary processes to describe the real exchange rate behavior, this paper considers an in-between process, the locally persistent process. The empirical results demonstrate the following two findings: (1) Locally persistent processes describe the real exchange rate movements better than unit root and stationary processes, which implies that PPP reversion occurs and PPP holds in the long-run. (2) The confidence intervals for half-life deviations from PPP under local persistence tend to be narrower than those obtained by assuming the ADF and the local-to-unity models.     

Childcare Assistance: Are Subsidies or Tax Credits Better?

We evaluate price subsidies and tax credits for childcare. We focus on partnered women's labour supply, household income and welfare, demand for childcare and government expenditure. Using Australian data, we estimate a joint, discrete structural model of labour supply and childcare demand. We introduce two methodological innovations – a more flexible quantity constraint that total formal and informal childcare hours are at least as large as the mother's labour supply and the explicit inclusion of maternal childcare in the utility function as a proxy for child development. We find that tax credits are more effective than subsidies in terms of increasing average hours worked and household income. However, tax credits disproportionately benefit wealthier and more educated women. Price subsidies, while less efficient, have positive redistributional effects.     

Medical Labour Supply and the Production of Healthcare

Medical labour markets are important because of their size and the importance of medical labour in the production of healthcare and in subsequent patient outcomes. We present a summary of important trends in the UK medical labour market, and we review the latest research on factors that determine medical labour supply and the impact of labour on patient outcomes. The topics examined include: the responsiveness of labour supply to changes in wages, regulation and other incentives; factors that determine the wide variation in physician practice and style; and the effect of teams and management quality on patient outcomes. This literature reveals that while labour supply is relatively unresponsive to changes in wages, medical personnel do react strongly to other incentives, even in the short run. This is likely to have consequences for the quality of care provided to patients. We set out a series of unanswered questions in the UK setting, including: the importance of non‐financial incentives in recruiting and retaining medical staff; how individuals can be incentivised to work in particular specialties and regions; and how medical teams can be best organised to improve care.