POOR AND SICK: ESTIMATING THE RELATIONSHIP BETWEEN HOUSEHOLD INCOME AND HEALTH

This study evaluates the effect of the individual's household income on their health at the later stages of working life. A structural equation model is utilized in order to derive a composite and continuous index of the latent health status from qualitative health status indicators. The endogenous relationship between health status and household income status is taken into account by using IV estimators. The findings reveal a significant effect of individual household income on health before and after endogeneity is taken into account as well as a host of other factors known to influence health, including hereditary factors and the individual's locus of control. Importantly, it is also shown that the childhood socioeconomic position of the individual has long lasting effects on health as it appears to play a significant role in determining health during the later stages of working life.     

Welfare dependence and recidivism in an era of welfare reform

This study examines the dynamics of welfare programme participation during the initial period (1993–1995) of programme reforms at the state-level in Iowa. The programme changes for the state were remarkably similar to the national reforms implemented in the USA in 1996. Analysis of the Family Investment Program (FIP) participation over the programme's first two years show that, on average, recipients stayed fewer months in the second year compared with the first, although a relatively large share of participants (36%) stayed on for the full two years. Fixed effect and semiparametric duration models are used to examine welfare dependence and recidivism, respectively. Results indicate that income from wages and child support are significant factors in reducing welfare participation. Child support and wage income are crucial in determining the chances of exiting and of staying off the programme, especially during the early months of the exit.     

The Sins of the Fathers: Intergenerational Income Mobility in China

This paper aims to obtain an accurate estimate of China's intergenerational income mobility and to present evidence on its distributional pattern. Using panel data from the China Health and Nutrition Survey (CHNS) over the period 1989–2009, I find that China is less mobile than most developed countries. Then, I employ five different approaches to investigate the distributional pattern of China's intergenerational mobility across income levels. The results suggest that poor families have relatively high mobility, indicating opportunities for the poor children to escape poverty. Finally, I show that while wealthy fathers are likely to pass on their favorable economic status to their sons, rich sons come from a very wide range of family economic backgrounds.     

A panel data model for subjective information on household income growth

Subjective expectations about future income changes are analyzed, using household panel data. The models used are extensions of existing binary choice panel data models to the case of ordered response. We consider static models with random and fixed individual effects. We also look at a dynamic random effects model which includes a measure for permanent and transitory income. We find that income change expectations strongly depend on realized income changes in the past: those whose income fell, are more pessimistic than others, while those whose income rose are more optimistic. Expected income changes are also significantly affected by employment status, family composition, permanent income, and past expectations. Expectations are then compared to the head of household’s ex post perception of the realized income change for the same period. The main finding is that rational expectations are rejected, and that in particular, households whose income has decreased in the past underestimate their future income growth.     

Long‐term care and intrafamily moral hazard: Optimal public policy

The paper studies optimal public long‐term care (LTC) policy in the context of intrafamily moral hazard suggested by Pauly. The model considers a representative family consisting of an adult child and her elderly parent who might become dependent, in which case he places a special value on the LTC provided to him by his child. Since the child's caregiving is decreasing in the amount of insurance coverage, the parent prefers to underinsure, which is socially suboptimal. The child's choice of caregiving is also inefficient since she does not internalize its positive effect on the parent. The paper tackles these inefficiencies and shows that intrafamily moral hazard is a sufficient justification for public intervention targeted at insurance. If not necessarily for the introduction of mandatory public insurance, then at least for the taxation or subsidization of private insurance premiums.     

The effects of education on spouses’ satisfaction in Europe

This article identifies the effects of both own and spouses' education levels on individual economic satisfaction for European households. To that end, it estimates several specifications based on the family collective approach, for each of the 14 EU countries, by using the eight waves of the European Community Household Panel, 1994–2001. After demonstrating that the IV Hausman–Taylor procedure is the selected estimation method in the majority of cases, the empirical results show that male and female income satisfaction significantly increases when the husband achieves higher education qualifications in the majority of European countries. However, the positive effect of the wife's higher education on female income satisfaction only appears in a very limited number of countries. Additionally, increases in individual wage and nonwage incomes generally lead to higher satisfaction levels.     

Cross-country evidence on the distributional impact of fiscal policy

This article provides new evidence on the distributional effects of fiscal policy using data on a panel of OECD economies over the last four decades. We study how four measures of income inequality and poverty respond to several stock and flow variables accounting for fiscal actions. We find that increases in government debt and expenditure promote a less unequal distribution of income. We detect a significant distributional impact of education and social spending as well as of government consumption expenditure. We also investigate potential redistributive implications of large fiscal expansion and consolidation episodes finding no evidence of additional effects beyond those associated with conventional fiscal variables.

Abbreviations: OECD: Organisation for Economic Co-operation and Development; GDP: Gross Domestic Product; G20: Group of 20 economies (forum of 19 dvanced and emerging countries plus the European Union); CGE: Computational General Equilibrium models; DSGE: Dynamic Stochastic General Equilibrium models; UN-WIDER: United Nations World Institute for Development Economics Research; SWIID: Standardized World Income Inequality Database; WDI: World Development Indicators; PPP: Purchasing-Power Parity; LIS: Luxembourg Income Database; GMM: Generalized Method of Moments; FE: Fixed Effects; RE: Random Effects; SE: Standard Errors; CPI: Consumer Price Index     

CAN GREATER ATTENTION TO WOMEN'S RIGHTS HELP ADDRESS INCOME INEQUALITY?

We investigate the relationship between women's economic, social, and political rights with the level of income inequality. We use dynamic panel estimation to check our hypothesis that that strong rights for women translate into higher participation in economic productive activities, improve income and education and support for future generations, thus reducing the overall income inequality in the economy. We further look at how a country's overall economic performance and the status of women's education alter the relationship. The relationship is strengthened if countries are either in the higher‐income spectrum or have higher levels of female educational attainment. (JEL O1, I00, H00)     

Intergenerational Mobility in the United States and Great Britain: A Comparative Study of Parent–Child Pathways

We build on cross‐national research to examine the relationships underlying estimates of relative intergenerational mobility in the United States and Great Britain using harmonized longitudinal data and focusing on men. We examine several pathways by which parental status is related to offspring status, including education, labor market attachment, occupation, marital status, and health, and perform several sensitivity analyses to test the robustness of our results. We decompose differences between the two nations into that part attributable to the strength of the relationship between parental income and the child's characteristics and the labor market return to those child characteristics. We find that the relationships underlying these intergenerational linkages differ in systematic ways between the two nations. In the United States, primarily because of the higher returns to education and skills, the pathway through offspring education is relatively more important than it is in Great Britain; by contrast, in Great Britain the occupation pathway forms the primary channel of intergenerational persistence.     

Toddler economicus: childhood habit cessation in a Beckerian Model of pacifier use

As a test of elements of Gary Becker's model of habitual behaviours, the present study examines another potential example of a habit?–?pacifier use?–?within the youngest segment of the population, infants and toddlers. To explore the facets of a child's pacifier habit, we make use of an extensive questionnaire on the effectiveness of several proposed methods for stopping a child's pacifier consumption. Results indicate that children's pacifier use approaches the habit/addiction threshold, and it is best alleviated with abrupt cessation, or ‘cold turkey.’ Interestingly, our empirical finding that ‘cold turkey’ dominates or is superior to other methods of getting children to stop relying on pacifier use (e.g. limiting time of use, altering the pacifier's tip, etc.) has two implications. First, it supports the Beckerian notion that a child's pacifier habit approaches the habit/addiction threshold, as stated above. Second, it contradicts suggestions from many in the health profession to seek methods other than ‘cold turkey’ to stop a child's pacifier use.     

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.     

A STOCHASTIC DYNAMIC MODEL OF THE MENTAL HEALTH OF CHILDREN*

We estimate the parameters of a dynamic multiperiod model where parents with one child periodically decide whether their child uses mental health services. In this model, parents receive utility from household consumption and from their child's mental health. Mental health services may improve the child's mental health, but may be costly in terms of reduced household consumption and direct disutility. We find that mental health services can slightly improve a child's mental health, but the use of services accounts for a small fraction of the improvement of the mental health of the children in our sample.     

A natural experiment of the effect of advertising on sales: the SASOL case

China's so-called ‘reform and opening up’ policy (Gai Ge Kai Fang), implemented nearly 30 years ago, has led to tremendous economic development. China's nominal Gross Domestic Product (GDP) was 3.25 trillion US dollars in 2007, making it the fourth largest economy in the world. At the same time, income inequality has become quite skewed in China, inviting considerable criticism. Moreover, the trend towards greater income inequality persists. Of particular public policy relevance is the effect of income inequality on health disparities in China, particularly for low-income households. This study addresses this issue using a longitudinal dataset from the China Health and Nutrition Survey (CHNS) over the period 1997 to 2006. Our central finding is that income inequality affects health differently by socioeconomic status: income inequality harms individual health among low income households by more than it does among high income households. More specifically, health is more adversely affected by greater income inequality for households with low incomes. China's central government is committed to making further investments in the health care system. As part of that effort, attention should be directed at low income households to reduce health inequality, possibly providing them with a health insurance safety net similar to Medicaid in USA.     

Does immigration boost per capita income?

Using a cross-section of countries, we adapt Frankel and Romer's (1999) IV strategy to international labor mobility. Controlling for institutional quality, trade, and financial openness, we establish a robust and non-negative causal effect of immigration on real per capita income.     

A quantitative analysis of Turkish Private Education Reform

A recent education policy Turkish government is wishing to undertake is to shut down all private supplementary education centers (SECs) unless SECs manage to convert into a private school. With this policy, the government is willing to increase equality of opportunity among students. We show quantitatively that the policy, in fact, leads to a decrease in equality of opportunity since SECs are given the option to convert into private schools. We use a political economy model of education at which households, heterogeneous with respect to exogenously set income, choose among a continuum of private schools differentiated by tuition and a public school. Households choosing the public school can privately supplement their child's education spending in any amount. Public school is free of charge, and its spending is financed by income tax revenue collected from all households. Income tax rate is determined by majority voting. Achievement of a child depends only on educational spending. We calibrate the model's parameters by matching certain targets from 2013 Turkish data. We then exogenously restrict the supplemental education spending to zero in a counterfactual experiment. We find that variance of achievement (or inequality of opportunity) increases by 23.51% and mean achievement decreases by 1.74%.     

Do family resources matter? Educational attainment during transition in Poland*

We analyse the relationship between family background and children's educational attainment in the 1990s in Poland. If parental poverty affects children's educational prospects, the increase in social inequalities observed in the Polish transition process will be transmitted between generations. We apply an ordered probit model of educational attainment on longitudinal data from the Polish Labour Force Survey. Surprisingly, parents’ income and their labour market status have only a weak impact on children's education. Parents’ schooling, however, is strongly related to children's, and so are household structure, city size, and region of residence. We conclude that, if transmission of inequality takes place between generations, this seems to be primarily caused by the inheritance of human capital rather than by pure wealth effects.     

EDUCATIONAL VOUCHERS WHEN THERE ARE PEER GROUP EFFECTS—SIZE MATTERS*

In this article, I study the effects various educational voucher policies have on the sorting of children across schools and the per‐student expenditure levels at these schools, when a child's peer group matters and students differ over income and ability. I find that, depending on the magnitude of the voucher, switching from a public system to a voucher system could entail either welfare gains or losses. All voucher policies under consideration lead to greater inequality than the public system; however, these increases are not monotone in the voucher size.     

Free‐Riding and the Provision of Public Goods in the Family: A Laboratory Experiment*

We examine the provision of family public goods using experimental economics methods. With sufficient altruism and shared resource arrangements, families can provide the efficient level of family public goods. Becker's Rotten Kid Theorem asserts that transfers from altruistic parents will induce children to maximize family income even if children are not altruistic toward other family members. Consistent with altruism, parents and children contributed more to a public good when in groups with family members than when in groups with strangers. In contrast to the predictions of the Rotten Kid Theorem, however, children's behavior fell short of maximizing family income.     

Altruism,Liquidity Constraint,and Investment in Education

In Japan and other East Asian societies, household educational expenditures per child (especially private tutoring expenditures) have increased sharply, perhaps to an excessive degree. This paper suggests a rationale for many families to invest extensively in education, whereas other relevant literature rarely addresses the possibility of excessive educational investment. Introducing altruism and liquidity constraints into a model in which parent and child interact for determining investment in the child's education, we show that educational investment may be excessive unless the family is profoundly liquidity‐constrained. Our result extends previous findings incorporating the Samaritan's Dilemma. We also discuss public policy designed to remedy the inefficiency in educational investment.