Moonlighting Politicians: Motivation Matters!

We study self‐selection into politics and effort once in office of citizens with different abilities and motivations in a framework where moonlighting is allowed. We find that high‐ability motivated (public‐fit) politicians exert higher effort in politics than high‐ability non‐motivated (market‐fit) politicians, and that high‐ability citizens, both public‐fit and market‐fit, may decide to enter politics. We test our predictions using a database of Italian parliamentarians for the period 1996–2006. We find evidence of advantageous selection of both market‐fit and public‐fit parliamentarians. We also show that public‐fit parliamentarians have higher voting attendance and that only voting attendance of market‐fit parliamentarians is negatively affected by income opportunities.     

Entrepreneurship in post‐conflict transition1

We examine new self‐employment entry and its viability in Bosnia and Herzegovina, using a rich household survey for the years 2001–2004. We find that wealthier households are more likely to engage in viable self‐employment and create employment suggesting an important role for financing constraints. Specifically, although having an existing bank relationship is not significantly related to the entry decision, it is positively related to the survival for new entrepreneurs and their employment creation. We also find a non‐linear relationship between remittances and entry in that individuals not receiving remittances are more likely to enter self‐employment; but, if they do receive them, the likelihood of starting a business increases in the fraction of wealth received from domestic remittances. Finally, people working in the informal sector are more likely to become viable entrepreneurs, particularly those provided with loans from micro‐credit organizations. These findings support the perception of the informal sector as an incubator for formal self‐employment in the early years of transition.     

Gender differences in self‐employment

This paper examines the factors that influence transitions into self‐employment, paying particular attention to gender differences. We find that: (i) men are more responsive to the wage differential between wage/salaried employment and self‐employment; (ii) liquidity constraints are more important for men; and (iii) the link between father's self‐employment status and the probability of self‐employment is stronger for men. Taken together, these results suggest that, for women, self‐employment is a closer substitute for part‐time work and labour‐market inactivity than it is for men. We attribute such differences to the different labour market opportunities and occupational strategies of women.     

Does the Gap in Family‐friendly Policies Drive the Family Gap?*

Segregation of the labour market into a family‐friendly and a non‐family‐friendly sector implies that women self‐select into sectors depending on institutional constraints, preferences for family‐friendly working conditions and expected wage differences. We take this sector dimension into account and find a severe penalty after birth‐related leave in the non‐family‐friendly sector, so that women who would be affected by this penalty self‐select into the family‐friendly sector. The penalty is a combination of a large human‐capital depreciation effect, a child penalty and no recovery.     

SELF‐REPORTED ECONOMIC CONDITION AND HOME PRODUCTION: INTRA‐HOUSEHOLD ALLOCATION IN ITALY

This paper applies a collective model of intra‐household welfare distribution using individual self‐reported data. The model accounts for household production, and self‐reported information on economic condition is used to identify the sharing rule governing the bargaining process in the family. The theoretical framework implies a broad concept of full income, which includes household production as time allocated to domestic activities. We find that self‐reported data on economic status are useful in recovering individual shares of household income and that both wages and non‐strictly‐economic individual variables play an important role in the bargaining process determining the sharing rule in Italy.     

How does entry regulation influence entry into self‐employment and occupational mobility?1

We analyse how an entry regulation that imposes a mandatory educational standard affects entry into self‐employment and occupational mobility. We exploit German reunification as a natural experiment and identify regulatory effects by comparing differences between regulated and unregulated occupations in East Germany with the corresponding differences in West Germany after reunification. Consistent with our expectations, we find that entry regulation reduces entry into self‐employment and occupational mobility after reunification more in regulated occupations in East Germany than in West Germany. Our findings are relevant for transition or emerging economies as well as for mature market economies requiring large structural changes after unforeseen economic shocks.     

Occupational and Job Mobility in the US*

We propose a new methodology to measure worker mobility across occupations and jobs in the US, building on the limited longitudinal dimension of monthly CPS data. For the period 1979–2006, we find that about 3.5% of male workers employed in two consecutive months report different three‐digit occupations. This rate is procyclical, mildly rising in the 1980s and falling after 1995. We also revise upward current estimates of aggregate job‐to‐job mobility since 1994, from 2.7% to 3.2% of employment per month. Despite extreme similarity of average levels and time‐series behavior, occupational and job mobility are only weakly correlated.     

A Measure of the Shadow Economy in a Small Economy: Evidence from Household‐Level Expenditure Patterns

In this paper we measure the size of the shadow economy in North Cyprus by using micro‐econometric approaches and then calculate its implications on national accounts and fiscal balances. There is a relatively new strand of literature that focuses on comparing income–expenditure patterns of households to calculate the degree of underreporting of income levels by self‐employed and privately employed individuals, as compared with public servants. We use the 2008 Household Budget Survey of North Cyprus and analyze the differences in food consumption patterns among three kinds of employees: self‐employed, privately employed, and public. We found that self‐employed and privately employed individuals underreport their income levels by 20 percent and 13 percent, respectively, compared with publicly employed individuals. This has important implications for the aggregate economy in North Cyprus, where we estimate that the shadow economy created by underreporting is as much as 8.6 percent of GNP and 11.1 percent of total tax revenue.     

Why has unemployment risen in the New South Africa?1

We document the rise in unemployment in South Africa since the transition in 1994. We describe how changes in labour supply interacted with stagnant labour demand to produce unemployment rates that peaked between 2001 and 2003. Meanwhile, compositional changes in employment at the sectoral level widened the gap between the skill‐level of the employed and the unemployed. Using nationally representative panel data, we show that stable unemployment rates mask high individual‐level transition rates in labour market status. Our analysis highlights several key constraints to addressing unemployment in South Africa. We conclude that unemployment is near equilibrium levels and is unlikely to self‐correct without policy intervention.     

The employment dynamics of less‐educated men in the United States: The role of self‐employment

Using data from the 1979 National Longitudinal Survey of Youth, I construct a sample of working‐age males and examine the employment dynamics with a particular focus on the role of self‐employment for less‐educated men in the US. I find that men responding they had at some point been self‐employed tend to spend less time in non‐employment than other less‐educated men. The results from the dynamic multinomial logit model reveal positive aspects of self‐employment by indicating that less‐educated men who were self‐employed in the previous year were less likely to be non‐employed in the future as compared to those who were paid workers in the previous year.     

Teacher moonlighting: evidence from the US Current Population Survey

This article reports new evidence on teacher moonlighting from the US Current Population Survey. I investigate the determinants of teacher moonlighting and examine the effect that the teacher moonlighting has on the number of hours teachers spend on their primary job. I find that male teachers and teachers with advanced degrees are more likely to moonlight, but teacher pay appears to have little or no effect on the propensity to moonlight. I also find that holding a second job reduces the amount of time teachers spend on their primary jobs by about 1?h per week. Thus, teacher moonlighting may have harmful effects on education, though the effect on hours worked is neither trivial nor especially large.     

A contribution to the public–private wage inequality debate

This paper studies the public–private wage inequality in Romania. Although public sector employment is perceived as safer and offering more benefits, we find that in Romania it also offers higher wages, after controlling for experience, education and gender. This result is at odds with the negative premium uncovered in other transition economies. The public–private wage premium is increasing across the wage distribution, leading to more inequality in the public sector. Decomposing the wage premium into the effect of personal characteristics, coefficients and residuals, we show that only about half of this premium can be attributed to personal characteristics, especially in the top half of the wage distribution. We also find that the number of other public sector employees in the family is a significant driver of public sector employment, facilitating access to jobs. However, the effects of self‐selection are negligible, the premium being still positive and significant after controlling for this.     

Choices and Constraints over Retirement Income Streams: Comparing Rules and Regulations*

The new Simplified Superannuation regulations for Australian superannuation provide tax concessions to retirement income streams which comply with legislated minimum drawdown rules. We evaluate these new drawdown rules against four alternatives, including three formula‐based ‘rules of thumb’ used by financial planners. We find that the new regulations are a substantial improvement on the previous rules for allocated pensions and, when compared with the formula‐based rules, are a good compromise in terms of simplicity, adequacy and risk. We also find that welfare is lower for most individuals who follow the Simplified Superannuation rules compared with welfare under an optimal path or a simple fixed percentage drawdown rule, but that outcomes could be improved through a further simplification of the new rules.     

Employees and second-job holding in the Federal Republic of Yugoslavia

This paper explores the second‐job holding (or ‘moonlighting’) behaviour of a sample of employees using data from a unique survey conducted for the Federal Republic of Yugoslavia (FRY) in January 1998. Both participation in ‘moonlighting’ and the number of hours worked are examined. The participation model performs better in an econometric sense and provides the focus for our discussion. We note a strong regional dimension to ‘moonlighting’ in the FRY with employees in Central Serbia disproportionately represented in this activity. In addition, blue‐collar workers are found to be more likely to engage in ‘moonlighting’ than white‐collar workers. The set of labour supply variables implied by neo‐classical theory exerts a strong influence and explains a significant amount of the phenomenon of interest. Our calculations suggest that if main (or regular) job earnings are restored to levels that prevailed at the time of the ‘break‐up’ of the federation, employee second‐job holding in the FRY would only fall by about one‐seventh. JEL classification: J21, J22, P2, P3.     

Self‐employment Dynamics in Australia and the Importance of State Dependence

Using Australian labour force data, both cross‐sectional and longitudinal, this study examines the dynamics of self‐employment with a particular focus on workers transitioning between self‐employment and salaried employment, and the extent to which self‐employment is the result of workers’ observed and unobserved characteristics or is instead determined by their prior employment experience itself. Probability models of self‐employment using both pooled‐panel probit and dynamic random‐effects panel probit methods are estimated, and the results are found to be extremely sensitive to the differences in the econometric methods. Once unobserved heterogeneity and initial conditions are controlled for in the dynamic model, the importance of observed characteristics in determining self‐employment is greatly diminished. Instead, workers’ past experience in self‐employment (as opposed to salaried employment) is found to have a large favourable effect on their future self‐employment prospects. The influence of this state dependence is also considerably more important in determining self‐employment outcomes than salaried ones. Despite establishing the importance of state dependence, however, what this effect implies about why individuals choose to become self‐employed or the role that self‐employment plays in the labour market remains unresolved.     

Self-Employment and Wage Earning in Hungary

This paper examines the earnings determinants of the self‐employed and wage earners in Hungary in the mid‐1990s, taking into account two forms of selection: selection into working or non‐working for every individual in its sample and selection into self‐employment or wage‐earning jobs for workers only. Previous studies use switching regression to examine the returns to individual characteristics, taking into account only selection into self‐employment or wage‐earning jobs. The authors find that the estimated returns to individual characteristics when accounting for both forms of selection, differ from estimates correcting for only selection into self‐employment or wage‐earning jobs. They also find that the earnings determinants of the two sectors are not significantly different from each other.     

HOW DO HIGH SCHOOL GRADUATES IN JAPAN COMPETE FOR REGULAR,FULL‐TIME JOBS? AN EMPIRICAL ANALYSIS BASED UPON AN INTERNET SURVEY OF THE YOUTH*

We use a survey of Japanese youth within 10 years after high school graduation to investigate impacts of academic and social skills on their success in the job market. We find three major factors account for the job market outcome immediately after school: school characteristics and job‐placement services, academic performance, and social skills, including negative impacts of problematic behaviors at school. Second, when we run a probit regression on whether or not the surveyed individuals hold regular, full‐time jobs, we find the persistent but declining (over age) impact of the job placement immediately after school. Moreover, we find that the impact of variables pertaining to social skills remain significant even after controlling for the job‐placement outcome after school, whereas other variables, such as grade point average or attributes of high schools, are largely irrelevant to the current employment status.     

Are Americans Really Less Happy with Their Incomes?

Recent economic research on international comparisons of subjective well‐being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper we concentrate on self‐reported satisfaction with income in two countries: the Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. We find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes, the distribution of satisfaction in the two countries is essentially identical. In addition, we find that the within‐country cross‐sectional effect of income on satisfaction—a key parameter in the recent debate in the economic literature—is significantly underestimated, especially in the U.S., when differences in response scales are not taken into account.     

Causal Effects of Paternity Leave on Children and Parents

Reserving a share of the parental leave period for fathers is considered necessary in order to induce fathers to take leave, and to increase men's participation in child‐rearing. We investigate how a parental leave reform directed towards fathers affected leave‐taking, and, in turn, children's and parents' long‐term outcomes. A paternal leave quota greatly increases the share of men taking paternity leave. We find evidence that children's school performance improves as a result, particularly in families where the father has higher education than the mother. We find no evidence that paternity leave counters the traditional allocation of parents' labor supply.     

SHORT-TERM CONTRACTS REGULATIONS AND DYNAMIC LABOUR DEMAND: THEORY AND EVIDENCE

We present a dynamic labour demand model where we evaluate the impact of employment regulations on permanent and temporary employment. We consider three different kinds of regulations, namely firing costs, hiring costs and a constraint on temporary contracts. These regulations differently affect the size and composition of employment. The theoretical results are interpreted and questioned on the basis of empirical evidence on the employment effects of the regulation reforms that occurred in the major European countries in the period 1983–1999. The empirical analysis is based on a new set of time‐varying indicators on permanent employment protection, fixed‐term contracts and temporary agency work regulations. We find evidence in support of the hypothesis that fixed‐term contracts have been effective stepping‐stones to permanent jobs during the period under observation. On the contrary, flexible temporary agency work regulations seem to induce a substitution of permanent with temporary contracts.