A test of a unitary model on labour supply using the information of household decision-making systems

This article tests whether a unitary model is consistent with household behaviour using the data of two-earner couples. It focuses on the unitary model assuming that all family members have the same utility function. The analysis investigates the difference in a husband's and wife's labour supply between the household that determines the wife to be the main decision-maker and the household that selects a different decision-making system under the control of individual and household characteristics. The estimation employs a treatment effects model to consider the selectivity bias caused by unmeasured characteristics. Results show that the household with the wife as the main decision-maker increases the husband's working hours by 15% and decreases the wife's working hours by 59%, compared to the household that selects a different decision-making system. This implies that the unitary model is rejected. Additionally, the husband's wage rate, the husband's and wife's health status, and their gambling addiction determine the household decision-making system such as the variables that determine the reservation utility of not being married. The effect of the decision-making system on the labour supply and that of the determinant factors on the decision-making system are consistent with the implications obtained from Nash bargaining models and collective models.     

An Investigation into the Positive Effect of an Educated Wife on Her Husband’s Earnings: The Case of Japan in the Period between 2000 and 2003

We analyze the effect of a wife??s human capital on her husband??s earnings, using individual-level data for Japan in the period 2000?C2003. We find a positive association between a wife??s education and her husband??s earnings, which can be attributed to the assortative mating effect as well as the positive effect of an educated wife on her husband??s productivity. We divide the sample into those couples with non-working wives and those with working wives, and also employ an estimation strategy proposed by Jepsen (Review of Economics of the Household 3:197?C214, 2005), attempting to control for the assortative mating effect. Our regression analysis provides suggestive evidence that educated wives increase their husbands?? productivity and earnings only when they are non-workers and have sufficient time to support their husbands.     

Gender Roles and the Division of Unpaid Work in Spanish Households

Abstract

This paper examines the role of the doing-gender hypothesis versus traditional models of the household in explaining how the woman's share of home labor varies with relative earnings. The findings, using the 2002–3 Spanish Time Use Survey (STUS; Spanish Statistical Office 2003), support the doing-gender hypothesis in the case of housework: a woman's relative share of housework fails to decrease with her relative earnings beyond the point where her earnings are the same as her husband's. In contrast, a woman's share of childcare time displays a flat pattern over the distribution of her spouse's relative earnings. This last result is neither consistent with traditional theories of the household, nor with the doing-gender hypothesis. It can, however, still be interpreted in light of social norms, whereby women specialize in this type of caring activity regardless of their relative productivity or bargaining power.     

Income splitting, specialization, and intra-family distribution

Abstract Income splitting for tax purposes results in more specialization of wives, but does this in turn generate more gender inequality? In my dynamic bargaining model with a divorce threatpoint, I find that who controls the couple's labour supply plays a crucial role in establishing this link. If spouses choose their labour supply non‐cooperatively, only the husband's increase – but not her own decrease – in labour supply introduces a negative term in the wife's change in welfare. If the wife does not control her own labour supply, a decrease in her own labour supply introduces an additional negative term.     

LOVE,TOIL, AND HEALTH INSURANCE: WHY AMERICAN HUSBANDS RETIRE WHEN THEY DO

The provision of health insurance has previously been shown to be an important determinant of retirement timing among older Americans, but the existing literature has largely ignored some aspects of the interspousal dependence of health insurance benefits. Specifically, the literature examines only how retirement may affect the health insurance available to the potential retiree but not how it might affect a spouse's options. Using data from the Health and Retirement Study, I find that the impact a husband's retirement might have on a wife's health insurance options has a statistically significant impact on a husband's rate of retirement that is independent of considerations of his own health insurance options. In households where the wife is the only one at risk of losing affordable health insurance if the husband retires, the husband is 30% less likely to retire than if neither spouse is at risk (a 5 percentage point decrease in the retirement rate). Based on these findings, prior research is missing one avenue that changes to the Medicare eligibility age and health insurance policy changes through the Affordable Care Act might impact the labor supply of older workers. (JEL I13, J26, J32)     

NEW EVIDENCE ON REAL WAGE CYCLICALITY WITHIN EMPLOYER–EMPLOYEE MATCHES

In the most thorough study to date on wage cyclicality among job stayers, Devereux's (2001) analysis of men in the Panel Study of Income Dynamics (PSID) produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux's finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth (NLSY) data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux's conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers' real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages.     

Health insurance and labor market outcomes: Joint decision-making within households

Most Americans obtain access to health insurance through an employer. In this paper, we ask how the link between health insurance and employment affects labor market choices such as whether to work full-time. To understand the effect of the incentives embedded in the employer-based insurance system, we study the joint decision-making of husbands and wives that determines the household's access to health insurance. We estimate the effect on a wife's (husband's) labor market outcomes of husband's (wife's) health insurance, allowing the health insurance of both spouses to be endogenous. Obtaining unbiased estimates of such effects is complicated by the likelihood that positive assortative mating creates correlations between a couple's characteristics and the possibility that there are important unobservable household income effects. Our innovation is to measure these biases by examining a second fringe benefit, paid sick leave, in addition to health insurance. We find that, as predicted, spouse's insurance has statistically significant negative effects on being offered own employer insurance as well as on the probability of working full-time with health insurance.     

How working time reduction affects jobs and wages

In 1996, by law the maximum standard workweek in Portugal was reduced from 44 h to 40 h. We find that for workers involved this change reduced the job separation rate and increased hourly wages, keeping monthly earnings approximately constant. The working hours reduction also affected workers working less than 40 h per week; they were more likely to lose their job.     

HAS NEW ZEALAND'S EMPLOYMENT CONTRACTS ACT INCREASED EMPLOYMENT AND REDUCED WAGES?*

The Employment Contracts Act 1991 substantively altered the structure of the industrial relations system in New Zealand. This study estimates the effects of this legislation on employment levels and average hourly earnings in this country using disaggregate industry level data from 1986(1) to 1996(2). In the five years following the enactment of the ECA, nonagricultural union membership declined from 49.5 to 27.2 per cent of the work force. This is an important consideration because our regression analysis suggests that this decrease in unionisation is solely responsible for any effects of the ECA on the labour market. Full-time equivalent employment grew by 14.2 per cent between 1991(2) and 1996(2). At least 2.3 percentage points of this employment growth can be attributed to this legislation. If the ECA was partly responsible for the recent economic recovery, then more of this employment growth could be credited to this act. There are two basic reasons why the ECA might have increased employment over the past five years. It could have lowered hourly earnings, or increased effective labour demand. Estimates of a reduced-form wage equation and a structural labour demand function both point to the latter explanation. Since there is no statistical evidence that ECA reduced hourly earnings, falling unionisation must have increased effective labour demand.     

Conditional Earnings Subsidies for Low Earners

In order to be eligible for in-work tax credits, it is often not enough to have low earnings. In Ireland, New Zeand the United Kingdom, for example, for eligibility, it is also required that the number of hours worked is sufficiently high. Similarly, in Belgium and France, the hourly wage rate must be sufficiently low. In this paper, I provide a justification for such additional conditions. I analyze Pareto-efficient redistribution from high to low ability individuals in a model where labor has several intensive margins. Besides labor hours, labor effort – a vector of unpleasant, but productive features of labor – is also an object of choice. Effort and ability determine the hourly wage rate. I find that conditional subsidies on earnings for low earners are optimal: the earnings of low earners should be subsidized at the margin, but only if they earn more by working more hours at a sufficiently low wage rate.     

Public Sector Employment,Wage Inequality and the Gender Pay Ratio in the UK

This paper assesses the relative contributions of the different systems of pay determination in the private sector and the public sector toward the changing level of wage inequality and the gender pay ratio in the UK. The greater centralisation of pay arrangements in the public sector compared with the private sector in the UK suggests that public sector employment may have acted to offset the widening wage inequality seen in recent years, as well as making an important contribution to the increase in women's relative average earnings compared to men. This issue is addressed by drawing on unpublished occupational hourly earnings data from the New Earnings Survey and applying decomposition of the Theil index of wage inequality to analyse both static and dynamic trends. The change in wage inequality for the period 1986 to 1995 primarily reflected the change in wage dispersion within the private sector, and the narrowing of the gender pay gap among the public sector workforce was an important factor in explaining the overall improvement in women's relative earnings. The paper argues that the relatively centralised pay arrangements in the public sector, compared with the private sector, played an important role in slowing the increase in wage inequality and narrowing the gender pay gap. As such, future policies to decentralise pay determination in the UK public sector may exacerbate the increasing level of wage inequality and reverse women's recent relative pay improvements.     

Effects of growing wage disparities and changing family composition on the U.S. income distribution

U.S. income inequality soared after 1979. The present paper estimates the contribution of increased earnings inequality to the surge in overall income inequality between 1979 and 1996. The direct contribution of increased earnings inequality is surprisingly modest. Even if male and female earnings inequality had remained unchanged at their 1979 levels, about two thirds of the observed increase in overall U.S. inequality would have occurred. Other factors contributing to higher overall inequality include the growing correlation of husband and wife earned incomes and the increasing percentage of Americans who live in single-adult families, families that typically have much more unequal incomes than husband–wife families.     

Work-limiting health,earnings, and employment: an analysis with SIPP data

ABSTRACT

This study examines the role of work-limiting health conditions on employed people’s earnings, employment status, and working hours, and distinguishes between the different degree and severity of predictable shocks. Using data from the 2004 Survey of Income and Program Participation (SIPP), we evaluate the impact of any work-limiting health condition as well as a subset of health conditions that appear to arrive largely exogenously on post-onset earnings, employment, and working hours. We find that people who report being employed and later experience the onset of any work-limiting health condition tend to have lower subsequent earnings, a reduced probability of being employed, and fewer working hours per month compared to those who remain healthy. The adverse impact is even greater for people with health conditions that arrive less predictably. We use a difference-in-differences regression model with person and year fixed effects as the primary estimation method.     

Migrants as second-class workers in urban China? A decomposition analysis

In urban China, urban resident annual earnings are 1.3 times larger than long-term rural migrant earnings as observed in a nationally representative sample in 2002. Using microsimulation, we decompose this difference into four sources, with particular attention to path-dependence and statistical distribution of the estimated effects: (1) different allocation to sectors that pay different wages (sectoral effect); (2) hourly wage disparities across the two populations within sectors (wage effect); (3) different working times within sectors (working time effect); and (4) different population structures (population effect). Although sector allocation is extremely contrasted, with very few migrants in the public sector and very few urban residents working as self-employed, this has no clear impact on earnings differentials, because the sectoral effect is not robust to the path followed for the decomposition. The second main finding is that the population effect is robust and significantly more important than wage or working time effects. This implies that the main source of disparity between the two populations is pre-market (education opportunities) rather than on-market.     

Income Growth and Earnings Variations in New Zealand, 1998–2004

This article analyses changes in the distributions of working‐age individuals' earnings and total income in New Zealand over the period 1998–2004. We find that there have been broad gains in income across the distribution, suggesting the spoils of growth have been shared widely. Mean and median earnings increased 15 and 23 per cent respectively, while mean and median income increased 12–13 per cent. Inequality, as measured by the Gini coefficient, was more stable: earnings inequality fell 4 per cent, while income inequality was unchanged. The main drivers of the changes were employment and real wage growth. We estimate that roughly one‐half of the growth in average incomes was due to employment growth, and one‐quarter each to demographic changes and wage growth. The relative employment and wage contributions varied across the income distribution: employment growth dominated gains at the lower end of the distribution, while wage gains dominated changes at the higher end.     

Negotiating Domestic Labor: Women's Earnings and Housework Time in Australia

Abstract

Recent research in the United States has found that wives' absolute earnings level is more important than their earnings relative to their spouses in determining time spent on housework. Utilizing data from the Household, Income and Labour Dynamics in Australia (HILDA) survey, this article examines whether women's housework time in Australia is associated with relative or absolute earnings and extends previous work by examining possible mechanisms linking women's earnings with their time on housework, outsourcing through the use of paid domestic help, and unmeasured heterogeneity among women. The research finds that women's housework time is more strongly affected by women's relative earnings than by their absolute earnings, and neither outsourcing nor unobserved heterogeneity can explain the relationship between women's earnings and their housework time in Australia. These results indicate that Australia has a strong male-breadwinner institutional framework that continues to hinder gender equality in paid and unpaid work.     

Four decades of Asian American women's earnings: Japanese, Chinese, and Filipino American women's earnings 1960–1990

This article examines the earnings progress of Asian American women from 1960 through 1990 by comparing their actual hourly wage and salary earnings to simulated earnings. The simulated earnings are obtained by using parameter estimates obtained from human capital models of white women corrected for sample selection bias. Data come from the decennial census Public Use Micro Samples data. American-born Asian American women appear to have made dramatic gains in the 1970s. The 1980s and 1990s show some fluctuations in actual earings relative to simulated earnings between Asian American and white women. These fluctuations may be due to problems measuring experience as opposed to differences in discrimination over time.     

The Effects of Earnings Guidance on Investors’ Perceptions of Firm Credibility in a Two-Firm Setting

This study investigates how a peer firm's earnings guidance affects investors' credibility assessments of a target firm. Results suggest that when both a target firm and a peer firm provide earnings guidance, contrast effects occur such that the more accurate the earnings guidance of the target firm relative to the peer, the greater are investors' credibility assessments for the target. However, such contrast effect diminishes as the target firm's earnings guidance becomes more accurate. On the contrary, when a peer provides earnings guidance but the target firm does not, assimilation effects as opposed to contrast effects dominate investors' credibility judgments.     

Structural Features of Female Employment Status and Earnings Mobility: The Experience in Germany

Structural changes in basic economic indicators, changes in traditional role patterns, and in female employment behavior shed light on the performance of the European labor markets in the 90s. This paper focuses on the cyclical sensitivity of women's employment status and earnings position in Germany. Using data from the German Socio-Economic Panel (GSOEP) we test the hypothesis that labor market adjustments are not gender-neutral but affect women's employment status and women's relative earnings position to a greater extent than those of men. Cross-sectional as well as longitudinal analysis indicate positive effects on female employment status and earnings position during a period with worsening economic indicators. Logistic regression analysis confirms an increasing likelihood of an upward earnings mobility for women in the 90s. Notwithstanding these positive trends the results show that - due to social norms and attitudes - women are still discriminated against in the labor market and in terms of their relative earnings position. Thus social policy is called upon to improve women's social and employment conditions.     

On hourly wages and weekly earnings in the current population survey

This paper examines hourly wages and weekly earnings in the Outgoing Rotation Group (ORG) and the March Supplement of Current Population Survey (CPS) from 1998 to 2004. The findings suggest that the ORG contains less errors than the March CPS, and that weekly earnings contain less errors than hourly wages. The paper further finds that earnings differ systematically in the ORG and in the March CPS by gender and education levels.