FISCAL EXPANSIONS,UNEMPLOYMENT, AND LABOR FORCE PARTICIPATION: THEORY AND EVIDENCE*

Structural VARs indicate that for many OECD countries labor force participation, employment, and the unemployment rate significantly increase following increases in government expenditures under a variety of specifications and identification schemes. Fiscal expansions also tend to increase real wages. Existing models have difficulties in generating such responses. We show that the empirical regularities can be reproduced with two additions into a standard New Keynesian model with matching frictions: (a) a labor force participation choice and (b) workers’ heterogeneity.     

EFFECTS OF HEALTH AND CHRONIC DISEASES ON LABOUR FORCE PARTICIPATION OF OLDER WORKING‐AGE AUSTRALIANS*

This study examines the effects of general health and chronic diseases on the labour force participation of older working‐age Australians. To account for potential endogeneity of health status, a simultaneous equation model is estimated and chronic diseases are used as instrumental variables. The effects of chronic diseases on labour force participation are assessed indirectly using the parameters estimated from the simultaneous equation model. The results show that both health status and chronic diseases have significant effects on labour force participation. It also appears that the effects of chronic diseases are more accurately estimated from the simultaneous equation model than from a single equation labour force participation model.     

FEMALE LABOUR FORCE PARTICIPATION AND RELIGION: A CROSS‐COUNTRY ANALYSIS

This paper empirically examines whether female labour force participation (FLFP) in a cross‐section of countries between 1985 and 2005 varies depending upon the religion practised in these countries. Using a cross‐sectional empirical specification, we initially find that FLFP is lower in Muslim countries. However, the association between Islam and FLFP greatly diminishes once other controls are included in the regression, suggesting that Islam might not diminish FLFP as some have argued. Moreover, once these additional controls are included, the association between Islam and FLFP is similar to that between Catholicism and FLFP. Countries where Protestantism is prevalent or where no religion is practised have higher FLFP. Finally, we find some evidence that the association between FLFP and religion is weakening over time.     

SEPARATE AND UNEQUAL: THE EFFECT OF UNEQUAL ACCESS TO EMPLOYMENT-BASED HEALTH INSURANCE ON SAME-SEX AND UNMARRIED DIFFERENT-SEX COUPLES

Employers' health insurance coverage for legal spouses places unmarried couples at a disadvantage for obtaining coverage. Data from the Current Population Survey confirm that people with same-sex or different-sex unmarried partners are two to three times more likely to be uninsured than married people, even after controlling for factors influencing coverage. Universal partner coverage would cut that uninsured rate by as much as 50%. Employers offering domestic partner benefits would see a small enrollment increase: 0.1%–0.3% for gay and lesbian partners and 1.3%–1.8% for heterosexual partners. We find no evidence of adverse selection. (JEL J32 , J38 , J71 )     

TAXES,HEALTH INSURANCE,AND WOMEN'S SELF‐EMPLOYMENT

I examine whether the availability of health coverage through the spouse's health plan influences a married woman's decision to become self‐employed. The Tax Reform Act of 1986 (TRA86) introduced a tax subsidy for the self‐employed to purchase their own health insurance. I test whether this “natural” experiment induced more women without spousal health insurance coverage to select into self‐employment. The most conservative difference‐in‐difference estimates based on an analysis of employed women indicate that the incidence of self‐employment among single women rose by 10% in the post‐TRA86 period, while a multinomial specification based on a sample of both employed and nonemployed women suggests that the increase was about 13%. (JEL J0, J3, I1)     

BUSINESS CYCLES IN THE EQUILIBRIUM MODEL OF LABOR MARKET SEARCH AND SELF‐INSURANCE*

I introduce risk‐aversion, labor‐leisure choice, capital, individual productivity shocks, and market incompleteness to the standard model of labor search and matching and investigate the model’s cyclical properties. I find that the model can generate the observed large volatility of unemployment and vacancies with a reasonable replacement rate of unemployment insurance benefits of 64%. Labor‐leisure choice plays a crucial role through additional utility from leisure when unemployed and further amplification from adjustments of hours worked. On the other hand, the borrowing constraint or individual productivity shocks do not significantly affect the cyclical properties of unemployment and vacancies.     

MEDICAID AND THE LABOR SUPPLY OF SINGLE MOTHERS: IMPLICATIONS FOR HEALTH CARE REFORM

The Medicaid expansions and health insurance subsidies of the Affordable Care Act (ACA) change work incentives for single mothers. To evaluate the employment effects of these policies ex ante, I estimate a model of labor supply and health insurance choice exploiting variation in pre‐ACA Medicaid policies. Simulations show that single mothers increase their labor supply at the extensive and intensive margin by 12% and 7%, respectively, uninsurance rates decline by up to 40%, and an average family's welfare improves by 1,600 dollars per year. Health insurance subsidies and not Medicaid expansions mostly drive these effects.     

SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM PARTICIPATION AND HEALTH: EVIDENCE FROM LOW‐INCOME INDIVIDUALS IN TENNESSEE

We investigate the factors that contribute to participation in the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program) and the effects of such participation on self‐assessed health (SAH). Our estimation approach consists of an endogenous switching ordered probability model, using the copula approach, for a sample of current and former Temporary Assistance for Needy Families (TANF) recipients in Tennessee. Results indicate that sociodemographic characteristics play a role in SNAP participation. Interestingly, we find that participation in SNAP is inversely related to SAH. (JEL I12, I38, C31)     

RISK ATTITUDES AND THE DEMAND FOR PRIVATE HEALTH INSURANCE: THE IMPORTANCE OF 'CAPTIVE PREFERENCES'

ABSTRACT ** :  Captivity to a mainstream public insurer, is hypothesized to constrain the choice of purchasing private health insurance, by influencing risk attitudes. Namely, risk averse individuals are more likely to stay captive to the National Health System (NHS). To empirically test this hypothesis we use a small scale database from Catalonia to explore the determinants of private health insurance (PHI) purchase under different forms of captivity along with a measure of risk attitudes. Our results confirm that the captivity corrections are significant and can potentially bias the estimates of the demand for PHI. Risk aversion increases the probability of an individual being captive to the NHS. The latter suggests a potential behavioural (or cultural) mechanism to isolate the influence of risk attitudes on the demand for PHI in publicly financed health systems.     

ARE LABOUR FORCE PARTICIPATION RATES NON‐STATIONARY? EVIDENCE FROM 130 YEARS FOR G7 COUNTRIES*

This paper applies a unit root test with a non‐linear threshold to examine whether labour force participation rates are mean reverting for G7 countries using annual data over a 130 year period. We find some evidence of mean reversion for just over half the sample; however, this result is sensitive to regime shifts. We also examine whether the labour force participation rate is trend reverting through employing a lagrange multiplier (LM) unit root test with one and two structural breaks in the intercept and slope. The LM unit root test provides no additional evidence in support of stationarity. On the basis of the unit root tests for mean reversion we conclude that there is at best mixed evidence that long‐term changes in unemployment rates translate into long‐term changes in employment rates and that the unemployment rate is a useful indicator of joblessness.     

THE VALUE OF VOLUNTEER LABOR AND THE FACTORS INFLUENCING PARTICIPATION: EVIDENCE FOR THE UNITED STATES FROM 2002 THROUGH 2005

According to the U.S. Department of Labor, the number of people who volunteered rose from 59.8 million in 2002 to 65.4 million in 2005. Those volunteering benefit from their activity in various ways; however, these benefits are non-pecuniary and are generally not recognized in the national economic accounts used to measure gross domestic product (GDP). This paper uses data from the 2002–05 Current Population Survey Volunteer Supplements to assign a dollar value to volunteering. Different methodologies yield annual estimates from $116 to $153 billion (in 2005 dollars) over the four years (between 0.9 and 1.3 percent of 2005 GDP). Additionally, characteristics of individuals most likely to volunteer are identified. The volunteer rate varies by demographic characteristics in addition to geographic location, labor force participation, and business sector. Furthermore, the data suggest that volunteering is a "normal good" because participation increases with income even after controlling for observables.     

CRIME AND LOCAL LABOR MARKET OPPORTUNITIES FOR LOW‐SKILLED WORKERS: EVIDENCE USING JAPANESE PREFECTURAL PANEL DATA

This paper examines the link between crime and labor market opportunities in Japan. To consider this link, we estimate the crime supply function first introduced by Becker using panel data for Japanese prefectures. The main empirical results are as follows. First, we expect that increasing the number of police will reduce crime, regardless of its type (i.e. whether referring to total crime, violent crime or larceny). Second, crime rates are generally lower in prefectures where a low‐skilled individual can find a job more easily. Third, the effects of wages for low‐skilled workers on crime, especially larceny, are significantly negative, whereas average wages in a prefecture do not appear to affect crime. Fourth, the prefectures with lower educational standards are expected to suffer more crime than other prefectures. Finally, prefectures with higher Gini coefficients on schooling years are also expected to suffer more crime than other prefectures.     

IMPACT OF OUTCOME AMBIGUITY ON SELF‐INSURANCE AND SELF‐PROTECTION: EXPERIMENTAL EVIDENCE

This experimental study examines and compares individual valuations of the two risk reduction mechanisms: self‐insurance and self‐protection in risky versus ambiguous outcome situations. Results confirm that individuals do not perceive these mechanisms differently under risk. Moreover, ambiguity in the outcome (i.e., size of loss) affects valuations weakly, and changing representations of ambiguity do not alter valuation. In general, individuals are found to be ambiguity averse for low sizes of loss and ambiguity neutral for high sizes of loss, regardless of the probability of loss. Finally, no strong support is found for any particular model of ambiguity.     

TEMPORARY EMIGRATION AND WELFARE: THE CASE OF LOW‐SKILLED LABOR

This article studies the implications of temporary emigration for the welfare of a source country. The framework is one of general equilibrium, where the economy's stocks of both capital and labor are endogenously determined by the saving and migration decisions of optimizing agents. Simulations of the model suggest that for realistic values of the parameters, welfare of nonmigrants of the source country is maximized when the migrants are employed abroad for a period in the range of roughly 8–12 years. The ideal duration is found to be an increasing function of the international wage differential, migration costs, and the degree to which the rights of migrants are protected in the host country.     

TIME‐INCONSISTENCY AND WELFARE PROGRAM PARTICIPATION: EVIDENCE FROM THE NLSY*

We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time‐inconsistent preferences. Using panel data on the choices of single women with children from the National Longitudinal Surveys (NLSY) 1979, we provide estimates of the degree of time‐inconsistency, and of its influence on the welfare take‐up decision. With these estimates, we conduct counterfactual experiments to quantify a measure of the utility loss stemming from the inability to commit to future decisions, and the potential gains from commitment mechanisms such as welfare time limits and work requirements.     

LABOR MARKET CONDITIONS AT SCHOOL‐LEAVING: LONG‐RUN EFFECTS ON MARRIAGE AND FERTILITY

In this study, we assess the long‐run impact of labor market conditions at the time of school‐leaving on marriage and fertility outcomes. We draw data from the National Longitudinal Survey of Youth 1979. Our sample left school between 1976 and 1989, and we use variation in the state unemployment rate at the time of school‐leaving to identify persistent effects. We find that men who left school when the state unemployment rate was high are less likely to be married and have children at age 45, but are more likely to be divorced. Women, however, are more likely to have children. (JEL J1, J2)     

HYSTERESIS HYPOTHESIS IN UNEMPLOYMENT AND LABOUR FORCE PARTICIPATION RATES: EVIDENCE FROM AUSTRALIAN STATES AND TERRITORIES *

This article simultaneously investigates the hysteresis hypothesis of unemployment and labour force participation using regional level data in Australia. The conventional univariate and panel unit root tests indicate that the hysteresis hypothesis cannot be rejected for most of the regions in Australia. To further confirm if the hysteresis finding in unemployment and labour force participation results from not considering structural breaks. We employ a panel stationarity test recently developed by Carrion‐i‐Silvestre et al. (2005 ), which considers multiple structural breaks and cross‐sectional dependence. The test results lend support for unemployment hysteresis and participation regime‐wise stationarity. Accordingly, the findings imply that a temporary shock may have permanent effects on the unemployment rate but not on labour force participation in Australia and thus call for policies aimed at improving the adjustment mechanism in unemployment.     

PARTICIPATION IN WORKPLACE EMPLOYER‐SPONSORED TRAINING IN CANADA: ROLE OF FIRM CHARACTERISTICS AND WORKER ATTRIBUTES

In this work, we study the role of firm characteristics and worker attributes in determining participation in workplace employer‐sponsored training in Canada using the Workplace and Employee Survey (WES) of Statistics Canada. We attempt to answer the following questions using the rich information of firms that are available in WES data: Does firms' provision of workplace training encourage workers' participation in Canada? How do changes in market competition, organizational changes, and technological innovation affect workers' participation in workplace training in Canada? We find that firms' training provision significantly affects workers' participation in Canada. We also find that increased international competition, organizational changes, and technological innovation are significantly correlated with workers' training participation at workplaces. We note that workers in some sectors and in smaller firms have lower workplace training incidence and older, part‐time, production and marketing/sales workers and workers with preschool children participate less in workplace training. (JEL J080, J240, J290)     

AVERTING AND INSURANCE DECISIONS IN THE WILDLAND–URBAN INTERFACE: IMPLICATIONS OF SURVEY AND EXPERIMENTAL DATA FOR WILDFIRE RISK REDUCTION POLICY

When confronted by catastrophic wildfire risk, homeowners simultaneously allocate resources between insurance and averting activities. Expected utility theory suggests that complete insurance coverage precludes investment in averting activities. However, when potential losses include a significant nonmarket component, optimal choice includes both. To investigate this issue, the authors analyze a unique combination of contingent valuation and experimental data. Both settings include a split-sample treatment to test the influence of wildfire risk zone information. The authors find that amenity values, subjective risk, averting efficacy perception, and demographic factors influence both willingness to pay and averting share and that risk information has the predicted ordering effect. (JEL C9 , Q51 , Q54 )     

ENDOGENOUS DEBT‐EQUITY RATIO AND BALANCE‐SHEET CHANNEL: IMPLICATIONS FOR GROWTH AND WELFARE

This paper endogenizes the debt‐equity ratio and embodies financial leverage in a cash‐in‐advance model of endogenous growth. Our analysis finds that the debt‐equity ratio is positively related to the balanced‐growth rate, since it serves as a ‘financial accelerator’ to stimulate investment projects. Compared to previous studies, this positive relationship gives rise to an additional balance‐sheet effect, which substantially affects the macroeconomic consequences of monetary and taxation policies. Due to the existence of the balance‐sheet effect, we also find that the Friedman rule is not necessarily optimal.