The Financial Crisis of 1929 Reexamined: The Role of Soaring Inequality

The financial crisis of 1929 that triggered the Great Depression has been endlessly studied. Still there is little consensus regarding what caused it. This article claims that wage stagnation and exploding inequality fueled three dynamics that set the stage for a financial crisis. First, consumption was constrained by the smaller share of total income accruing to workers, thereby restricting investment opportunities in the real economy. Flush with greater income and wealth, the elite flooded financial markets with credit, helping keep interest rates low and encouraging the creation of new credit instruments, some of which recycled the rich's surplus assets as debt to those less well off. Second, greater inequality pressured households to find ways to consume more in order to maintain their relative social status, resulting in reduced household saving, greater household debt, and possibly longer work hours. Third, as the rich took larger shares of income and wealth, they gained relatively more command over everything, including ideology. Reducing taxes on the rich, favoring business over labor, and failing to regulate newly evolving credit instruments flowed out of this ideology.     

中国城市居民的家庭收入、消费和储蓄行为:一个基于组群的实证研究

近年来,中国的高储蓄率越来越引起关注。本文利用中国城镇居民住户调查数据对城市家庭的收入、消费以及储蓄率进行基于组群分析的实证研究。实证结果表明,中国城市家庭的储蓄行为具有独特性,家庭储蓄率不断提高。本文从两个方面对此做出解释:其一,各个组群的家庭消费增长慢于收入增长;其二,年轻组群的高储蓄倾向及其在样本中随时间的比重不断提高。此外,本文也分析了养老金收入对于年老组群家庭收入和储蓄的影响。     

The determinants of household and private savings in Thailand

A broad set of possible determinants of household and private savings behaviour is examined through an in-depth case study of Thailand during the period 1960 to 2004. Results suggest that an increase in economic growth, inflation and terms of trade all have a significant positive impact on household and private saving rates. In contrast, the availability of bank credit tends to reduce household and private saving rates. While an increase in both old and young dependency has a negative impact on household and private saving rates, the magnitude of the impact on the former is far greater than that on the latter. Furthermore, public saving seems to crowd out household and private saving, but less than proportionately. This reflects a possible role of fiscal policy in increasing national savings in the economy. Over and above these variables, corporate saving is another important determinant of household saving. An increase in the former brings about a significant reduction in the latter.     

Tax and transfer programs,retirement behavior,and work hours over the life cycle

In this paper, we use a computable overlapping generations model economy to analyze the quantitative effects of some reforms on tax and transfer programs, aimed at easing the tax burden on the labor supply of older workers. We focus on retirement behavior, work hours over the life cycle, and efficiency gains. We find that the labor supply of older workers is very responsive to changes in tax and transfer programs and show that the gains, in terms of old-age work hours, are non-trivial. However, we also find that longer careers may not substantially increase aggregate hours because workers may reallocate labor supply over the life cycle in response to retiring later. Moreover, since longer careers may also reduce saving rates, we also find that changes in tax and transfer programs aimed at boosting the employment rates of the elderly may reduce output per head.     

A comparison of national saving rates in the UK, US and Italy

We develop the approach of Gokhale, Kotlikoff and Sabelhaus [1996. Understanding the postwar decline in US saving: A cohort analysis. Brookings Papers on Economic Activity 0, 315-390], based on the life-cycle model of savings, to decompose the differences in the national saving rates between the UK, US and Italy. Our work suggests that the US saving rate is lower principally because Americans on average retire later. In contrast, the Italian saving rate is higher predominantly because Italians are credit constrained, particularly when young. We also found that demography and the different tax and benefit systems are able to explain little of the cross-sectional differences in saving rates. The study accounts for the possible importance of inter-generational private transfers in determining saving rates.     

UNCERTAINTY AND CONSUMPTION: NEW EVIDENCE IN OECD COUNTRIES

This work analyses the empirical evidence about precautionary saving in OECD countries in the period 1955–2000. Unlike the previous literature, we perform the test using a measure of uncertainty allowing for heterogeneity in stochastic processes which generate data for each country and selecting for each economy the autoregressive moving average process which best describes the series. The results obtained support the main conclusion of precautionary saving theory, showing that a greater degree of uncertainty increases saving. A less clear conclusion is obtained with reference to the effect of uncertainty on consumption growth, which does not seem to be strongly supported by the data.     

The optimality and overuse of labour in Estonian manufacturing enterprises*

Transition economies need labour market flexibility for successful restructuring and reallocation of the labour force, and for coping with the requirements of the European Monetary Union. In this paper we apply a novel approach to the issue of labour market flexibility in transition countries by studying the optimality and efficiency of labour usage in Estonian manufacturing enterprises. We employ a dynamic model in which both the long‐run optimal level of employment and the speed at which actual employment is adjusted to the optimal are modelled as functions of several variables. Firm‐level panel data of 1995–99 were used. The results showed that in the long run, employment responds most strongly to wages, followed by value added and capital stock. The speed of adjustment, labour use optimality and efficiency all show much greater variations over firms than over time. In the course of time, both labour‐saving technical change and an increase in the efficiency of labour usage occur. On average, there is shortage of labour compared to firms’ own optimal level, along with overuse of labour compared to best‐practice technology. Capital seems to be a binding constraint on the development of employment in the Estonian labour market.     

Destined to Receive: The Impact of Remittances on Household Decisions in Armenia

The paper uses data from Armenia to test the implications of remittance flows on behavior of receiving households. We find that remittance‐receiving households work fewer hours and spend less on the education of their children. While saving more, these households are not leveraging their savings to borrow from the banking system to expand their business activities. This evidence suggests that the benefits of remittances might be overstated and emphasizes the importance of measuring their impact in a general‐ rather than a partial‐equilibrium context.     

Globalization and household saving: is there a link?

This article proposes that globalization can affect household saving in the long run in a number of ways. Social interactions between different cultures can induce value changes, which can result in shifts in consumption and saving behaviour. International trade allows consumers to have easier access to status goods, stimulating consumption and dampening saving. Extending from Veblen’s conspicuous consumption theory, saving may also decrease when globalization leads to greater population mobility and fosters urbanization, thus enhancing the importance of consumption as a way to display wealth. In addition, financial globalization reduces credit constraints and allows households to save less. Using cross-country data from the United Nations (UN), the OECD, and other sources, this article finds evidence that household saving declines as globalization deepens, especially in the social and cultural dimensions.     

How is the worker’s weekly hour related to wage over the life cycle? The U.S. evidence

The current study estimates the relationship between weekly hours and weekly wage over the life cycle of a representative sample of workers. Recognizing the endogeneity of these two variables, the study estimates both equations in a simultaneous equations framework and demonstrates that the relationship between weekly hours and weekly wage is not uniform over the worker’s life cycle. These two variables are negatively related when the workers are young and have a positive relationship when they are matured adults. This conclusion remains valid for both men and women. Our robustness check further confirms that workers respond to wage increases differently at different stages of their working career. This has interesting policy implications. Any policy to influence the worker’s hours decision through wage incentive must consider the stage of his/her working career.     

Suburban Nongrowth Policies

Because work time and its control are unevenly distributed, it shapes opportunities across different groups in society, both reflecting and reinforcing existing forms of inequality. Work time flexibility is seen by many as a way to promote gender equality by increasing the ability of women to exercise some control over their work time, thus facilitating their ability to participate in paid work while maintaining families. Yet, flexibility may take on very different meanings in different contexts, particularly with respect to the degree of control workers have over important aspects of their working time. This paper examines the meaning and distribution of work time flexibility for women in the United States. The paper begins with a brief discussion of the social construction and gendered nature of work time, and the complex and evolving distribution of work time in the United States. Measures of flexibility that seek to capture different aspects of workers' control over work time are then defined and examined through recent data for male and female workers from the General Social Survey (GSS).     

WAGES,HOURS OF WORK AND JOB SATISFACTION OF RETIREMENT‐AGE WORKERS*

I analyse, theoretically and empirically, the effects of pension benefits, family conditions and the personal characteristics of older individuals on their labour supply, wages, hours worked and job satisfaction, in the framework of the Nash bargaining condition whereby an older worker and a firm bargain over employment conditions such as wages, hours of work and job investment. It is stressed that as workers become older they tend to give greater priority to the number of hours worked, work environment and type of job than to wages, and try to improve these through job investment, even at the cost of lower wages.     

Gender Roles and Labor Use Strategies: Women's Part-Time Work in the European Union

Progress towards equal opportunities is critically dependent upon the development of a more equal and more balanced allocation of time in both paid and unpaid work. Gender divisions relating to working time arise primarily from differences in gender divisions within the household but the extent and form that these gender divisions take in the labor market are moderated or mediated by national working-time regimes. These regimes are found to be extremely diverse across Europe with very different implications for gender equality. Current interests in greater flexibility in working time are leading to pressures to changes in working-time regimes and to an increase in the extent of unsocial hours working. The strategies adopted to meet these pressures may vary by country and sector but the restructuring of working time is also likely to be influenced by gender factors and divisions. The result may be increasing differentiation by both gender and class. Progress towards equality requires a renewal of interest in reducing standard working hours and a questioning of the current assumption that increasing unsocial hours working is essential for competitiveness.     

Does greater income inequality cause increased work hours? New evidence from high income economies

We explore the extent to which individual's allocation of time between labour and leisure is affected by the consumption standards of the rich. Utilizing a panel data methodology and panel Granger causality tests we investigate the relationship between income inequality and work hours for a cluster of 24 high-income OECD countries over the period 1990–2015. Four alternative measures of income inequality are considered. We find that greater income inequality is associated with longer work hours indicating stronger concern for conspicuous consumption rather than conspicuous leisure. Even though the resulting estimates lend support to the theoretical framework on consumption emulation, the generated evidence also appears to be in line with a Duesenberry's and Frank's expenditure cascading approach. The ambiguity however arising from the Granger Causality tests appears to lead – to a certain extent – to different conclusions about the direction of causality or whether a causal relationship does even exist. It is therefore imperative that caution should be exercised when interpreting the direction of the causal dimension.     

Part–Time Work During Post–Compulsory Education And Examination Performance: Help Or Hindrance?

This paper examines the effects on examination performance of having a part–time job whilst in full–time post–sixteen education, using new data on young people in Northern Ireland. Around 35% engaged in part time employment during their education spell, compared to over 60% found by recent GB studies. This may be related to Northern Ireland's comparatively slack youth labour market and might reflect part–time employment levels in other peripheral regions. Our estimations suggest working part–time per se is not detrimental to examination performance, although working long hours is. Policy makers might improve educational performance by reducing incentives to work long hours.     

THE SOLOW CONDITION IN AN EFFICIENCY WAGE MODEL WITH OVERTIME WORK*

A simple synthesis of an efficiency wage model and a conventional labour supply model is used to investigate the validity of the Solow condition which holds that the effort-wage elasticity is unity. The key feature of the model is its consideration of the possibility that workers may work in excess of standard working hours. It is found that when employees are free to choose the number of working hours and actually work more than the standard hours, the effort-wage elasticity is less than unity. This result proposes a possible explanation to support Akerlof and Yellen's criticism that the unitary effort-wage elasticity is too high.     

Survival misperception,time inconsistency,and implications for life-cycle saving and welfare

Some empirical studies firmly reveal that people tend to form overly pessimistic survival expectations for relatively less distant ages and overly optimistic survival expectations for relatively more distant ages. We incorporate this observation into a life-cycle continuous time overlapping-generations model of consumption/saving with a general form for a subjective survival function. Resulting time-inconsistent optimal control problem has been analytically solved. At the micro level, time inconsistency leads to higher consumption at young and old ages, but this alone fails to improve lifetime well-being since micro-level decisions made with a lack of information about true mortality are suboptimal. In general equilibrium, however, such time inconsistent behavior with survival misperception is conducive to aggregate capital accumulation and greater equilibrium bequest income. The latter effects can produce substantial welfare gains. We also note that empirically observed old age optimistic bias is an important phenomenon, as it helps to avoid unrealistic very old-age debt accumulation within a life-cycle model. In addition, if for a given level of optimistic bias we increase early-life pessimism, this would result in slower capital accumulation, lower bequest income, and thus be detrimental to welfare. Since recent literature reports that young-age survival pessimism has grown over time, it raises some concerns.     

Hours Constraints and In‐Work Poverty

We develop a new approach to modelling the impact of personal characteristics on the extent of poverty, using propensity score matching methods. This is used to evaluate the contribution of hours constraints to poverty, as revealed in UK and US datasets. The results reveal a significant difference, consistent with the existence of greater labour market flexibility in the US.     

The Impact of China's New Rural Pension Program on Elderly Labor,Grandchild Care,and Old-Age Support

ABSTRACT

This study examines how a social pension program changes paid work patterns and expectations about the source of future financial support for the elderly in China. Using the 2011 and 2013 waves of the China Health and Retirement Longitudinal Study (CHARLS), the study finds that the New Rural Pension Program (NRPP) reduced the hours of farmwork and increased the hours of grandchild care among elderly rural men; and both elderly women and men reported less expected reliance on adult children for financial support when they become infirm. These differential effects probably occur because the size of the pension benefit is very small and because of previous gender differences in farmwork and grandchild care. Additionally, the study shows that adult children reduced out-migration and increased their hours spent in farming activities, indicating that the effect of the NRPP has spilled over to younger members of the household.