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.     

Increasing dispersion of skills and rising earnings inequality

In recent decades many countries have simultaneously liberalized their trading regimes and expanded their education systems. The theoretical effect of these regime shifts on the wage differential between skilled and unskilled workers is ambiguous. On the one hand, openness to trade causes demand shifts in the labor market which may widen or narrow the differential. This result depends on whether the unskilled wage is depressed, as in the case of importing countries, or raised, as in the case of exporting countries. On the other hand, an increased supply of more educated workers reduces their wages and narrows the skill wage gap. In this study of the labor market of Hong Kong, we document that recent changes in response to the trade liberalization of Mainland China and expanded access to education have increased the earnings differential between skilled and unskilled workers. Using detailed census data, we argue that the main reason for this outcome is the widened dispersion of skills across the earnings distribution, resulting from demand and supply shifts in the labor market caused by trade openness and expanded access to higher education.     

Sources of earnings inequality: Estimates from an on-the-job search model of the US labor market

Since the early 1980s the labor market in the United States has seen a substantial increase in earnings dispersion. We study the issue by developing an on-the-job search model of the US labor market that allows for wage and employment mobility as a result of optimal individual behavior. We estimate its structural parameters on PSID data at different points in time to clarify the sources of the evolution of earnings inequality and instability between 1987 and 1996. This procedure allows to: compute lifetime measure of inequality on top of the usual cross-sectional measure of inequality and provide counterfactual experiments that evaluate the contribution of different parameters to changes over time by taking into account some equilibrium effects. We find that the increase in lifetime inequality and in cross-sectional inequality have been generated by different sources and that these sources are different by skills: changes in the wage offer distribution are the main determinant of the increase in inequality for skilled workers while both mobility changes and wage offer distribution changes are needed to explain changes for the unskilled.     

On the persistence of income shocks over the life cycle: Evidence,theory, and implications

How does the persistence of earnings change over the life cycle? Do workers at different ages face the same variance of idiosyncratic earnings shocks? This paper proposes a novel specification for residual earnings that allows for an age profile in the persistence and variance of labor income shocks. We show that the statistical model is identified, and we estimate it using Panel Study of Income Dynamics data. We find that shocks to earnings are only moderately persistent (around 0.75) for young workers. Persistence rises with age, up to unity, until midway through life. The variance of persistent shocks exhibits a U-shaped profile over the life cycle (with a minimum of 0.01 and a maximum of 0.05). These results suggest that the standard specification in the literature (with age-invariant persistence and variance) cannot capture the earnings dynamics of young workers. We also argue that a calibrated job turnover model can account for these nonflat profiles. The key idea is that workers sort into better jobs and settle down as they age; in turn, magnitudes of wage growth rates decline, thereby decreasing the variance of shocks. Furthermore, the decline in job mobility results in higher persistence. Finally, we investigate the implications of age profiles for consumption–savings behavior. The welfare cost of idiosyncratic risk implied by the age-dependent income process is up to 1.6 percent of lifetime consumption lower compared with its age-invariant counterpart. This difference is mostly due to a higher degree of consumption insurance for young workers, for whom persistence is moderate. These results suggest that age profiles of persistence and variances should be taken into account when calibrating life-cycle models.     

ON‐THE‐JOB SEARCH,PRODUCTIVITY SHOCKS,AND THE INDIVIDUAL EARNINGS PROCESS*

Individual labor earnings observed in worker panel data have complex, highly persistent dynamics. We investigate the capacity of a structural job search model with on‐the‐job search, wage renegotiation by mutual consent, and i.i.d. productivity shocks to replicate salient properties of these dynamics, such as the covariance structure of earnings, the evolution of individual earnings mean, and variance with the duration of uninterrupted employment, or the distribution of year‐to‐year earnings changes. Structural estimation of our model on a 12‐year panel of highly educated British workers shows that our simple framework produces a dynamic earnings structure that is remarkably consistent with the data.     

Market segmentation and information values of earnings announcements: Some empirical evidence from an event study on the Chinese stock market

This paper investigates the trading activities of two distinct classes of shareholders, namely, the Chinese domestic investors and the foreign investors in the segmented Chinese A- and B-share markets, respectively. We conduct an event study on the annual earnings announcements based on two different accounting standards: International accounting standards (IAS) and PRC generally accepted accounting principles (PRC GAAP). The earnings announcements based on IAS and PRC GAAP are value relevant. The investors in the B-share market react to both the IAS and PRC GAAP earnings announcements, while the investors in the A-share market pay more attention to the PRC GAAP earnings reports. In the B-share market, positive abnormal returns are associated with positive earnings surprise and negative abnormal returns go with negative earnings surprise. We find preevent abnormal trading volumes without significant price changes for the A shares, which may be due to existing information in the A-share market prior to earnings announcements. The postevent abnormal trading volumes last for a longer period in the A-share market than in the B-share market.     

Inequality of opportunity in earnings and assets in Egypt

ABSTRACT

By most available measures, the level of inequality in the MENA region, including Egypt, is considered relatively low. This regularity applies to both inequality of outcomes as well as inequality of opportunity. This paper challenges this view. It argues specifically that circumstances beyond the control of individuals account for a larger share of inequality of opportunity when asset distribution is considered rather than the distribution of earnings, essentially because earnings are subject to measurement errors and idiosyncratic shocks. The paper tests this proposition by estimating the extent to which factors related to the circumstances a person is born into contribute to inequality of opportunity in earnings as well as asset ownership. The results show that circumstances account 26–32% of inequality of asset distribution, compared with only 8–10% of inequality of opportunity in earnings. The analysis further shows that the area of birth and fathers education level are the two most important circumstance factors contributing to inequality of opportunity, for both assets and earnings.     

Education and earnings in urban West Africa

Using a series of comparable labor force surveys in urban West Africa, we estimate the private returns to education among representative samples of workers in seven economic capitals (Abidjan, Bamako, Cotonou, Dakar, Lome, Niamey and Ouagadougou). The data allow us to provide a unique cross-country comparison using rigorously the same variables and methodology for each country. We tackle the issues of endogenous sector allocation (public, formal private and informal sectors) and endogeneity of the education variable in the earnings functions. We find that the returns to schooling are most often enhanced once an endogenous education variable is accounted for. This effect holds particularly true in the informal sector. In most West African cities of our sample, the public sector gives more value to education, followed by the formal private sector and then the informal sector. We also shed light on convex returns to education in all the cities and sectors, including in informal activity. More generally, a major contribution of this paper is to provide evidence of significant effects of education on individual earnings in the informal sectors of the West African cities, even at high levels of schooling.     

Levels of computer self-efficacy, computer use and earnings in China

Levels of self-efficacy in computer use were found to be positively related to computer use at work among a sample of workers in Shanghai. The simultaneous estimation of computer use and earnings indicated that an earnings premium for computer use accrues only to females, not to males.     

Directors network centrality and earnings quality

This study examines whether firms with network central boards of directors behave differently from other firms in terms of financial reporting quality. We find that earnings quality among firms is low when board networks are channels of incorrect information transmission (including earnings management information) and for firms whose directors are awarded equity-based compensation have connections through boardroom networks, but earnings quality is better for firms with good performance in spite of their networks. These results are robust to controlling for firm information environment, growth, size, age, leverage, performance, volatility in firm operations, and corporate governance.     

Black-white earnings ratios: the role of cohort size effects

"While black-white earning ratios have been rising over time across cohorts [in the United States] there is some evidence that they have been dropping over time within cohorts of recent entrants to the labor market. This has coincided with the entry of the large baby boom cohorts into the labor market. This paper examines the role of race differences in cohort size effects on black-white earnings ratios for male high school graduates using Current Population Survey data. In larger cohorts, the black-white earnings ratio is lower at entry and falls as the cohort progresses through the career, consistent with recent evidence."     

Errors in self-reported earnings: The role of previous earnings volatility and individual characteristics

I report the measurement error in self-reported earnings for a developing country using a novel data set. The data set consists of two cross-sections of the Federated States of Micronesia (FSM) wage and salary sectors; additionally, a subset of the two cross-sections may be linked to create a panel. Administrative data from FSM Social Security office are matched to the FSM Census data for the wage and salary sectors. I find that the error in annual self-reported earnings is centered on zero. Additionally, I find strong evidence for mean reversion in the data suggesting non-classical measurement error. I identify the impact of prior years' earnings variability on the current reporting of earnings using administrative data on earnings histories. Prior earnings volatility strongly affects measurement error in current period. However, the effect of prior shocks diminish significantly over time—suggesting that first-differencing and fixed-effects techniques will not improve accuracy.     

Child Labour's effect on long-run earnings: An analysis of cohorts

The effect of child labour on wages in adulthood is conceptually ambiguous. Children who work learn responsibility and work-ethic, increasing adult earnings. However, working children have less time for play and homework, hindering cognitive development, resulting in lower earnings. The limited existing empirical work is similarly confounding. This paper assesses the nexus between child labour and adult earnings using unique data from an Ecuadorian 2015 labour market survey. It applies novel instrumental variable regression techniques that account for earnings, education and child labour being jointly determined. The sample is divided into age cohorts (20s, 30s, 40s and 50+) to ascertain the long-run consequences of child employment at different stages of life. The results suggest that former child (and teenage) workers earn significantly less per hour. The analysis of cohorts reveals that the effect is stronger for older workers. This gives impetus to the hypothesis that child work hinders cognitive development, which becomes more evident when workers reach full maturity. The study concludes with policy recommendations.     

The asymmetric relationship between executive earnings management and compensation: a panel threshold regression approach

Prior research shows that chief executive officers (CEOs) are rewarded for their earnings management. We re-examine this issue using a panel threshold regression approach, which allows the effect of earnings management on the CEO compensation to change across the level of earnings management and CEO compensation. Our results show that the effect of CEOs’ discretionary accounting choices on their compensation is not homogeneous across various degrees of earnings management and compensation. In particular, for firms with moderate (inordinate) levels of earnings management and CEO compensation, earnings management is rewarded (penalized).     

国家职业资格证书、工人技能水平和收入效应——来自5家制造型企业21个生产车间的经验证据

推行国家职业资格证书是我国劳动就业政策的重要内容,也是广大劳动者非学历职业教育的主要方式,对加强技能人才培养、促进劳动力市场建设等方面具有重要意义。本文利用5家制造型企业21个生产车间的调查数据,对国家职业资格证书与工人的技能水平和年收入之间的关系进行了研究。研究发现,获得国家职业资格证书的工人在技能水平上显著高于无证工人,证书等级越高,技能水平越高。与无证工人相比,初级工和中级工证书的收入效应约为9.5%,高级工证书的收入效应为11.0%,技师及以上等级证书的收入效应显著上升至24.0%。进一步的分析揭示,初级工、中级工和高级工证书的收入效应主要是因为工人技能水平提高带来的;技师以上等级证书的收入效应一方面来源于工人技能水平的提高,另一方面则是由一些非技能因素造成的。     

Earnings Differentials among Ethnic Groups in Canada: A Review of the Research

Canada has a large foreign-born population with an increasingly diverse ethnic profile. The 1986 Employment Equity Act designated ''visible minorities,'' Aboriginal peoples, women, and disabled persons as facing labor market disadvantages. This review of a growing body of research on ethnic earning differentials shows that the sizeable earnings shortfall of Aboriginal peoples could be ''explained'' by their lesser endowments of work-related characteristics. The high variance in discrimination estimates among men can be traced to the treatment of immigration effects, aggregation of diverse ethnic groups, and the choice of the non-discriminatory earnings norm.     

Employment tenure,job expectancy,and earnings profile in Japan

The purpose of this study is to examine the relationships between employment tenure and earnings profile in Japan. Since the Japanese labour market has recently experienced substantial changes, it is natural for the Japanese employment and compensation system to be influenced by such changes. In this study, the changes that have happened to the Japanese employment and compensation system in recent years have been considered empirically by focusing on the relationships between employment tenure and earnings profiles. To do this, a forward-looking variable called ‘expected job tenure (or job expectancy)’ is introduced and the effects of it on earnings profile.     

盈余信息度量、市场反应与投资者框架依赖偏差分析

本文以2 0 0 0年9月到2 0 0 3年1 2月沪市A股3 3 8家上市公司为研究对象,应用实证研究方法,检验以四种不同度量方式表示同一盈余信息所产生的“盈余惯性现象”是否存在差异。结果表明:在三因素模型进行风险调整之前,基于四种盈余信息指标的盈余惯性现象都显著地存在。但经过三因素模型风险调整后,基于“意外盈余率”和“标准化意外盈余率”二个指标的盈余惯性现象消失了;基于“意外盈余”和“标准化意外盈余”二个指标的盈余惯性现象仍然存在,所以买入赢家组合、卖出输家组合仍可获得显著的超常收益。显然,这一研究结果并不支持风险定价学派的观点。笔者认为,根据Tversky和Kahneman( 1 981 )提出的“框架依赖偏差”(FramingDependenceBias)理论,四个盈余信息指标所产生的盈余惯性现象的差异表明我国投资者对盈余信息的反应依赖于信息度量的方式。     

Immigrant earnings differentials in Canada: A more general specification of age and experience effects

This paper investigates empirically the role of age and arrival cohort effects on immigrant earnings differentials. The dataset used consists of a sample of 5,069 adult Canadian male employees from the 1973 Job Mobility Survey, a non-census dataset that provides information on actual work experience, language attributes, and numerous parental family background characteristics. It thus allows a more general specification of foreign-born/native-born earnings differentials, particularly the effects of age, work experience and years since immigration. The results confirm the importance of cross-sectional age cohort effects and refine previous findings on arrival cohort effects. Sample selectivity bias is investigated and found to be significant only when respondent's occupation is not controlled for. Adjustment for sample selection bias leaves essentially unchanged the main findings.For their helpful comments on an earlier version of this paper presented at a Labour Economics Conference at The University of Western Ontario, the authors would like to thank Martin Dooley, John Vanderkamp, Hank Farber, David Card and John Abowd. The authors also gratefully acknowledge the useful comments offered by members of the Labor Economics/Institute for Research on Poverty Workshop at the University of Wisconsin-Madison and an anonymous referee. The authors, of course, retain full responsibility for all remaining errors and shortcomings. The first version of this paper was written while the second author was visiting the Industrial Relations Section at Princeton University and the Institute for Research on Poverty at the University of Wisconsin-Madison.     

Unemployment insurance benefits and the supply of labor of an employed worker

The unemployment insurance program is believed to adversely affect the supply of labor of the unemployed. Yet, it generates favorable incentives for the employed. Since unemployment benefits are aimed to compensate the unemployed for earnings loss, of which past earnings serve as a practical measure, a worker might choose to increase his efforts when employed, insuring himself partially against future unemployment. However, this possible impact on labor supply has escaped any attention until very recently. Incorporating an earnings-related benefits scheme into a multi-period decision model, the present paper investigates the labor supply behavior of an insured worker over time.