Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State*

There is a heated debate in many developed countries about how to design a welfare system that moves lone mothers off welfare and into work. We analyze the consequences of a major Norwegian workfare reform of the generous welfare system for lone mothers. The reform imposed work requirements and time limits on welfare receipt, while raising in‐work benefits. Our difference‐in‐differences estimates show that the reform was successful in improving labor‐market participation and in increasing the earnings of lone mothers. However, the reform was associated with income loss and increased poverty among a sizeable subgroup of lone mothers, who were unable to offset the loss of out‐of‐work benefits with gains in earnings.     

Is health care a necessity or a luxury? Evidence from urban China

This article uses a smooth transition regression (STR) model to research the income elasticity of the health care expenditure of China’s urban residents in the 1990–2013 period. The results demonstrate that if the real income of China’s urban residents that lags a period is taken as a transition variable, urban residents’ health expenditure follows an LSTR1 nonlinear two-regime model. Here, the income elasticity of health care expenditure of China’s urban residents is 1.4919 in 1990–2002 and 1.2216 in 2003–2013. Overall, the income elasticity of health care of China’s urban residents is greater than 1, indicating that health care is a luxury.     

Can Defaults Save the Climate? Evidence from a Field Experiment on Carbon Offsetting Programs

Individual preferences for environmental policies can be influenced by the frame in which choices and decisions are presented. In this paper we present results of a field experiment on the contributions to carbon offsetting programs under two alternative treatments for the default option. The opt-in treatment asked subjects to pay for the policy proposal while the opt-out treatment asked subjects if they wanted to be excluded from payment for the policy proposal. The results show that the frame of the default option had a significant effect on the amount of money paid for the policy proposal. Subjects were more likely to accept the policy proposal if the default option was the opt-out treatment. The results have implications for the design of environmental policies.     

Do Extrinsic Incentives Undermine Social Norms? Evidence from a Field Experiment in Energy Conservation

Policymakers use both extrinsic and intrinsic incentives to induce consumers to change behavior. This paper investigates whether the use of extrinsic financial incentives is complementary to intrinsic incentives, or whether financial incentives undermine the effect of intrinsic incentives. We conduct a randomized controlled trial that uses information interventions to residential electricity customers to test this question. We find that adding economic incentives to normative messages not only does not strengthen the effect of the latter but may reduce it. These results are consistent with recent theoretical work that suggests a tension between intrinsic motivation and extrinsic incentives.     

Does Monetary Policy Respond to Uncertainty? Evidence from Australia

We construct a novel measure of uncertainty using expert monetary policy recommendation data for Australia. Our results suggest that the Reserve Bank of Australia (RBA) tends to lower the cash rate when expert uncertainty is high. This result is robust to using other uncertainty measures.     

Are children an incentive or a disincentive for migration? Evidence from Vietnam

This study analyzes the influence of children on household migration decisions using data on current internal movement in Vietnam a country that has experienced significant rural–urban migration in the recent years. Families with children usually have three migration choices: move together, stay together or send only one parent to work afar. Using an instrumental variable approach, we show that having an additional child reduces the probability of household migration by 0.0115, while it increases the likelihood of fathers’ migration by 0.0121. These effects suggest that households with more children may be less mobile but may have a greater economic need for migration.     

Can sickness absence be affected by information meetings? Evidence from a social experiment

During the last decade several empirical studies have stressed the importance of norms and social interactions for explaining sickness-absence behavior. In this context, public discussions about the intentions of the insurance, and of the rights and duties of the receivers, may be important for reducing the sickness absence. In this article, we study whether information meetings about the Swedish sickness insurance affect the length of sickness-absence spells. The study is based on experimental data on individuals with weak labor market attachments. The displacement of when the call to the meeting was sent out was randomized. Comparing the survival functions of those called immediately with those whose calls were delayed (by about 30 days) makes it possible to study whether the length of sickness absence is affected by receiving the call earlier. The result suggests that the length is reduced by, on average, 20%. In the long term (12 months later), there is no effect of the information meeting. This suggests that attendance to the information meeting does not change individuals’ long-term behavior.     

Do farmers choose to be inefficient? Evidence from Bicol

Farming households that differ in their ability or willingness to take on risks are likely to allocate resources and effort among income producing activities differently with consequences for productivity. In this paper we measure voluntary and involuntary departures from efficiency for rice producing households in the Bicol region of the Philippines. We take advantage of a panel of observations on households from 1978, 1983 and 1994. Available monthly weather data and survey information on planting times allows us to create household specific measures of weather shocks, which we use in our analysis. We find evidence that diversification and input choices do affect efficiency outcomes among farmers, although these effects are not dominant; accumulated wealth, past decisions to invest, favorable market conditions, and propitious weather are also important determinants of efficiency outcomes among Bicol rice farmers. Our findings suggest that the costs of incomplete formal and informal insurance markets are higher for poorer farmers.     

Does the Welfare State Destroy the Family? Evidence from OECD Member Countries

We study the effect of the size of the welfare state on demographic trends in OECD member countries. Exploiting exogenous variation in public social spending, due to varying degrees of political fractionalization (i.e., the number of relevant parties involved in the legislative process), we show that an expansion in the welfare state increases fertility, marriage, and divorce rates with a quantitatively stronger effect on the marriage rate. We conclude that the welfare state supports family formation in the aggregate. Further, we find that the welfare state decouples marriage and fertility, and therefore alters the organization of the average family.     

Do Employees’ Sickness Absences React to a Change in Costs for Firms? Evidence from a Natural Experiment*

We analyse the impact of a social security reform that changed the costs incurred by firms due to sickness absences. The reform abolished a compulsory insurance for firms, which insured them against the wages paid to sick blue-collar workers. During the first year after its introduction, we estimate that the reform resulted in about 6.3 percent fewer sickness absences, and in about 8.6 percent fewer absence days. We do not find evidence for changes in hiring or firing, and we find only limited workforce composition changes. We do not find spillover effects on the absences of white-collar workers. Robustness checks confirm these results.     

International or national implementers—Who is better? Evidence from a framing experiment

Behavioral economics has shown that changing small features in framing a context or action may drastically change behavior. A key factor characterizing most development interventions is the salience of either a local or an international implementer. Using the setup of an intervention conducted in Indonesia, we show that the study population in the Acehnese context exhibits higher levels of support for the project if the participation of international actors is highlighted. We find that previous experience with the respective actor is pivotal. Qualitative evidence suggests that internationals' perceived skills drive results, highlighting the importance of strengthened local capacities for positive experiences with local implementers. Overall, the study underlines the benefits of linking framing experiments to the actual experiences of respondents to generate insights into the real world.     

Should a central bank react to food inflation? Evidence from an estimated model for Chile

We examine whether food price shocks are a major source of macroeconomic fluctuations. We estimate a small open economy DSGE model using an alternative Taylor rule applied to Chilean data. The empirical evidence suggests that food inflation played a non-trivial role in shaping Chile's de facto monetary policy actions. Consistent with its commitment to price stability, the central bank increases the policy rate in reaction to food inflation. Despite an immediate monetary policy reaction to a food price shock, the policy rate gradually tapers off. This is due to a second-round effect on non-food inflation propagated by the food price shock. A main finding is that monetary policy that targets headline inflation is welfare improving.     

Inflation targeting: Should it be modeled as an instrument rule or a targeting rule?

The paper discusses how current inflation targeting should be modeled, and argues that it is better represented as a commitment to a targeting rule (a rule specifying operational objectives for monetary policy or a condition for the target variables), than as a commitment to a simple instrument rule (like a Taylor rule).     

Does Raising the Principal's Wage Improve the School's Outcomes? Quasi‐experimental Evidence from an Unusual Policy Experiment in Israel

This paper reports estimates of the causal effects of a 50 percent increase in the salary of headmasters of high schools in Israel. The results suggest that the program led to significant improvements in twelfth‐grade students' academic achievements. However, the effect was relatively modest, comprising increases of about 5–10 percent in the school mean matriculation rate, average score and number of subjects and credit units taken in matriculation programs. Based on these results and the lack of evidence regarding the effect of increasing teachers' salary, it seems that priority should be given to paying higher wages to school principals.     

Does early bird catch the worm or a lower GPA? Evidence from a liberal arts college

Research in psychology has shown that early morning classes are not conducive to learning because of the peculiar sleep cycles of adolescents and young adults that cause them to be especially groggy in the morning. Our study examines the relationship between the times that classes are offered and the grades that students in these classes earn at a highly selective liberal arts college. Our main findings are that morning classes are harmful for student achievement. Grades are especially lower for classes that were scheduled at 8 am and 9 am. Moreover, while students of both genders are adversely affected by early morning courses, the effects are particularly pronounced for male students. This institution assigns students randomly to different sections of the same course, thus creating a quasi-natural experiment and enabling us to control for unobserved characteristics of students. In addition, we include student and faculty fixed effects.     

What are the Policy Lessons from Sweden? On the Rise,Fall and Revival of a Capitalist Welfare State

This paper discusses a number of questions with regard to Sweden's economic and political development:

? How did Sweden become rich?

? What explains Sweden's high level of income equality?

? What were the causes of Sweden's problems from 1970 to 1995?

? How is it possible that Sweden, since the crisis of the early 1990s, is growing faster than most EU countries despite its high taxes and generous welfare state?

These questions are analysed using recent insights from institutional economics, as well as studies of inequality and economic growth. The main conclusion is that there is little, if any, Swedish exceptionalism: Sweden became rich because of well-functioning capitalist institutions, and inequality was low before the expansion of the welfare state. The recent favourable growth record of Sweden, including the period of financial stress (2008–10), is a likely outcome of a number of far-reaching structural reforms implemented in the 1980s and 1990s.