FORMAL HOME HEALTH CARE,INFORMAL CARE,AND FAMILY DECISION MAKING*

We use the 1993 wave of the Assets and Health Dynamics Among the Oldest Old (AHEAD) data set to estimate a game‐theoretic model of families' decisions concerning the provision of informal and formal care for elderly individuals. The outcome is the Nash equilibrium where each family member jointly determines her consumption, transfers for formal care, and allocation of time to informal care, market work, and leisure. We use the estimates to decompose the effects of adult children's opportunity costs, quality of care, and caregiving burden on their propensities to provide informal care. We also simulate the effects of a broad range of policies of current interest.     

Work and Wage Dynamics around Childbirth

In this paper, we investigate how the wage processes of women who are well established in the labour market are affected by having children. We estimate a flexible fixed‐effects wage regression model extended by post‐childbirth fixed effects. We use register data on West Germany, and we exploit the expansionary family policy during the late 1980s and 1990s for identification. On their return to work after childbirth, the wages of mothers drop by 3–5.7 per cent per year of leave. We find negative selection back to full‐time work after childbirth. We discuss the policy implications regarding statistical discrimination and the results concerning the family gap.     

R&D Spillovers and Growth: Specialization Matters

We explore the relationship between openness and growth by taking a closer look at trade‐related knowledge spillovers at the industry level. First, we estimate the relation between sectoral R&D expenditures, trade‐related spillovers, and growth. Next, we incorporate these R&D linkages in a computable general‐equilibrium model for the world economy. We simulate trade liberalization in the model with R&D spillovers and compare the effects on GDP in different regions with a non‐R&D‐based model simulation. We find that the GDP effects of trade liberalization are magnified considerably by R&D spillovers for some regions—notably Japan and Southeast Asia. In other regions, such as China, the additional GDP effects are modest. These findings can be traced back to changing specialization and import patterns.     

Family ties and employment behavior: The role of financial intermediaries

We study the interaction effect of financial intermediaries and family ties on labor participation and employment type in China. Although existing studies examine these effects separately, we investigate the effects of both factors in one model. We give empirical evidence to support earlier arguments that family ties negatively affect labor force participation and positively affect self‐/family‐employment behavior and that financial development positively affects labor force participation. Departing from the extant literature, our results overall indicate a compensating effect of financial intermediaries for family ties in labor participation and employment type. We further argue that there are gender, urban/rural, and age differences in the role of financial intermediaries. The effect of financial intermediaries on the strength of family ties is more relevant for female, rural, and younger people compared to male, urban, and older people.     

Financial Student Aid and Enrollment in Higher Education: New Evidence from Germany*

Means‐tested student aid might affect enrollment in higher education. To derive the potential influence of student aid, we use a tax‐benefit microsimulation model. The effect is a non‐linear function of parental income, with variation as a result of bracket creeping and various reforms. Therefore, the effect of student aid on enrollment can be separated from the effects of income and other family characteristics. Using the German Socio‐Economic Panel, we find a small but significant positive effect, similar in size to the effects reported in previous studies for European countries but smaller than in the US.     

THE GROWTH OF FAMILY EARNINGS INEQUALITY IN CANADA, 1980–2005

In this study we document recent trends in family earnings inequality using data from the Canadian Census and provide insight into the various factors that drive changes in the family earnings distribution. Over the period 1980–95 we observe substantial increases in family earnings inequality. In contrast, we find that some decrease in inequality occurred over the period 1995–2005 although the earnings of the richest 1 percent of families increased substantially. We use semi‐parametric decomposition methods to show that increases in the employment rates of men and women, increases in their educational attainment, and decreases in assortative mating tended to have equalizing effects on the family earnings distribution. We also show that increases in the returns to higher education and increases in the proportion of single individuals as well as lone‐parent families drove increases in family earnings inequality.     

The selection of migrants and returnees in Romania

This paper uses census and survey data to identify the wage earning ability and the selection of recent Romanian migrants and returnees on observable characteristics. We construct measures of selection across skill groups and estimate the average and the skill‐specific premium for migration and return for three typical destinations of Romanian migrants after 1990. Once we account for migration costs, we find evidence that the selection and sorting of migrants are driven by different returns to skills in countries of destination. Our identification strategy for the effects of work experience abroad permits a cautious causal interpretation of the premium to return migration. This premium increases with migrants' skills and drives the positive selection of returnees relative to non‐migrants. Based on the compatibility of the results with rationality in the migration decisions, we simulate a rational‐agent model of education, migration and return. Our results suggest that for a source country like Romania relatively high rates of temporary migration might have positive long‐run effects on average skills and wages.     

Shifting Taxes from Labor to Consumption: More Employment and more Inequality?

This paper investigates the effect of shifting taxes from labor income to consumption on labor supply and the distribution of income in Germany. We simulate stepwise increases in the value‐added tax (VAT) rate, which are compensated by revenue‐neutral reductions in income‐related taxes. We differentiate between the personal income tax (PIT) and social security contributions (SSC). Based on a dual data base and a microsimulation model of household labor supply behavior, we find a regressive impact of such a tax shift in the short run. When accounting for labor supply adjustments, the adverse distributional impact persists for PIT reductions, while the overall effects on inequality and progressivity become lower when payroll taxes are reduced. This is partly due to increases in aggregate labor supply, resulting from higher work incentives.     

Sources of Inequality: Measuring the Contributions of Income Sources to Rising Family Income Inequality

We develop a simulation method for measuring the impact of changes in the distributions of the main income sources on growth in family income inequality. We simulate the entire distribution of family income under the counterfactual, “What if the distribution of each source had not changed?” The simulation method allows us to evaluate the impact of changes at any point in the distribution as well as with multiple measures of inequality. We incorporate married‐couple and single‐person families, appropriately accounting for changes in the proportion married. We apply the simulation method to investigate the impact of changes in male earnings, female earnings, and capital income on the distribution of family income in the United States between 1969 and 1999. We find that changes in the distribution of male earnings account for more of the growth in family income inequality than do changes in any other source of income. Changes in the distribution of female earnings have reduced family income inequality.     

Trade, Multinational Sales, and FDI in a Three-factor Model

The overwhelming importance of multinational activities as well as the coexistence of exporters and multinationals within the developed countries demand for theoretical models which provide a convincing explanation of simultaneous two‐way trade and horizontal multinational activities. We present a model with three factors of production to disentangle the two‐fold role of headquarters for their affiliates into a know‐how (headquarters services) and a capital‐serving part (FDI). We simulate the model to derive predictions about the impact of trade costs, plant set‐up costs, fixed multinational network costs, relative country size and factor endowments on exports, multinational sales and FDI. The effects are not uniform for multinational sales and FDI. Whereas exports and affiliate sales increase with the similarity in country size, FDI is more likely to increase monotonously with the sending country's size.     

Banknotes And Economic Growth

Modern paper currency contributes little to productive investment. This shortcoming is not inherent to paper money. It stems from the fact that currency today is monopolistically supplied by public monetary authorities that are poor intermediaries. Commercial banknotes may, in contrast, support efficient intermediation, just as private bank deposits do. We demonstrate this advantage in an endogenous growth model, and use the model to simulate, for a sample of developing countries, steady‐state growth‐rate gains from various degrees of banknote deregulation. The simulated gains are generally large compared with those from conventional forms of financial liberalization.     

Rigid labour markets with trade and capital mobility: theory and evidence

Abstract We develop a multi‐country model with imperfect labour markets to study the effect of labour market frictions on bilateral trade flows. We use a framework that allows for goods trade and capital mobility and show that labour market imperfections exert opposite effects in the absence of capital mobility (the short run) and its presence (the long run), respectively. In the short run, a higher degree of labour market rigidity decreases the value of total trade, but increases the share of intra‐industry trade for a country that is larger than its trading partner. The reverse effects are observed when capital is allowed to cross country borders. Using data on unemployment and income distribution for 23 OECD countries, we compute the central parameter in our theoretical model that describes the degree of labour market rigidity. We use this new empirical concept to provide evidence for our theoretical findings by means of reduced‐form regressions as well as simulation results of a calibrated general equilibrium model.     

Impact of Low‐Skilled Immigration on Female Labour Supply

In this paper, segmenting the market by educational levels, we investigate which native‐born women are more affected by an increase of low‐skilled immigrants working in the household service sector. We present a model of individual choice with home production and, using a harmonized dataset (the Cross‐National Equivalent File), we estimate its main comparative static results. The results suggest that the share of immigrants working in services is positively associated with an increase of native‐born women's labour supply at the intensive margin, if skilled, and at the extensive margin, if unskilled. Moreover, the results show that these effects are larger in countries with less‐supportive family policies.     

REGIONAL UNEMPLOYMENT DISPARITIES: AN EVALUATION OF POLICY MEASURES*

This paper analyses the efficacy of regional and federal government policies in reducing inter‐regional unemployment disparities. We use as our framework a two‐region general equilibrium model with a given freely‐mobile supply of labour. We assume inter‐regional migration to occur in response to inter‐regional utility differentials. Each region has households, firms and a regional government. In addition to regional governments, there is a federal government. The firms in a region use a single factor, labour, to produce a single good which we assume to be different to that produced in the other region. It is supplied to households and to the regional government in the form of payroll taxes. Households consume some, trade some with households in the other region and give some up to the federal government as income tax. Firms and households bargain over wages and firms then choose employment to maximise profits. The resulting equilibrium will generally not be a full‐employment one. We simulate a linearised numerical version of the model. We examine seven alternative policies, six carried out by a regional government and one by the federal government. In the first group there are traditional tax/expenditure polices as well as policies which might be seen as attacking the natural rate of unemployment: changes in unemployment benefits, changes in union power, changes in the labour force and changes in labour productivity. The federal government policy is a regionally‐differentiated fiscal policy. Contrary to expectations, many policies which have traditionally been recommended to alleviate unemployment are found, in fact, to exacerbate the unemployment problem.     

Post‐secondary attendance by parental income in the U.S. and Canada: Do financial aid policies explain the differences?

We examine the extent to which tuition and needs‐based aid policies explain important differences in the relationship between family income and post‐secondary attendance relationships between Canada and the U.S. Using data from recent cohorts, we estimate substantially smaller attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, cognitive achievement, and local‐residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low‐income youth than are Canadian policies. Equalizing these policies across Canada and the U.S. would likely lead to a greater difference in income‐attendance gradients.     

Gender Power,Fertility, and Family Policy

The birth of children often shifts the balance of power within a family. If family decisions are made according to the welfare function of the spouses, this shift in power might cause a time‐consistency problem. In a model of cooperative family decision‐making, we show that this problem can lead to a systematic downward bias in fertility. By keeping fertility low, spouses mitigate the ex ante undesired shift in the balance of power that results from the presence of children. This provides scope for welfare‐enhancing policy intervention. We discuss to what extent existing family policy measures are suitable for overcoming the bias.     

Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism

The idea of family altruism is that parents care only about their children's income and not about the use of this income made by the children. First, we establish dynamical properties which place the OLG model with family altruism halfway between the model with pure life‐cyclers ( Diamond 1965 ; American Economic Review 55, 1126–1150) and the one with dynastic altruism ( Barro 1974 ; Journal of Political Economy 82, 1095–1117). Then, we show that this concept leads to interesting fiscal policy conclusions less clear‐cut and more realistic than those obtained with the two previous standard OLG models: a pay‐as‐you‐go social security is neutral but not a public debt.     

DOES TEACHER‐FAMILY EXPERIENCE AFFECT TEST SCORES?

Since families play a pivotal role in elementary schools, student learning may be influenced by how well the teacher knows a family and how well the parents know the teacher. We test this hypothesis by evaluating whether assignment to a teacher who has previously taught an older sibling affects test scores. We refer to teachers who have previously taught the older sibling as having “teacher‐family experience” when teaching the younger sibling. Using a novel data set that includes administrative data on students and teachers matched to family identifiers, we find that when the older sibling's teacher is teaching in the younger sibling's grade, 40% of younger siblings are assigned their older sibling teachers. We find that teacher‐family experience does not have any significant effects on test scores and we can statistically rule out small effects. (JEL I20)     

CRIMES BY YOUTH: DETERRENCE AND MORAL COMPLIANCE WITH THE LAW

We use a decision theory framework to evaluate the extent to which crimes by youth are explained by the "economic model of crime." We expand the model from the usual formulation including deterrence effects to investigate the impact of earned income and income supplements on individuals' crime participation. Additionally, we evaluate variables representing the forces of moral compliance and family attitudes. We find that moral compliance has a moderating effect on the decision to commit crimes, even by persistently criminal individuals.     

Taking Chances: The Effect that Growing Up on Welfare Has on the Risky Behavior of Young People*

In this paper, we analyze the effect that growing up in a family with a history of welfare receipt has on young people's engagement in a variety of social and health risks. Unique administrative data matched to survey data for 18‐year‐olds and their mothers allow us to evaluate the effect of welfare receipt over the course of a young person's childhood. Much of the apparent link between family welfare history and risk taking disappears once we control for the effects of family structure, mothers’ own risk taking, and mothers’ investments in their children. We find no evidence that growing up on welfare causes young people to engage in risky behavior.