Reasonable and Risk‐Based? Replacing NFIP Generally Subsidized Rates with a Means‐Tested Subsidy

The National Flood Insurance Program was created to seek two often conflicting goals: (i) shifting risks from federal taxpayers to those who choose to live in flood plains and (ii) ensuring flood insurance is available to everyone at “reasonable” rates. Efforts to accomplish the second goal currently take the form of subsidies based on location and the date a home was constructed. The resulting revenue from subsidized insurance premiums is not sufficient to cover the true cost of flood insurance, and federal taxpayers have paid the difference: $30 billion to date. Based on a detailed survey of households in the high‐risk flood zones of New York City (NYC), we find that replacing existing premium subsidies with risk‐based prices and a subsidy for low‐income housing‐burdened households could better meet both goals by ensuring low‐income individuals have access to affordable flood insurance while still saving the federal taxpayer up to $183 million per year in NYC alone.     

Remittances and relative concerns in rural China

The paper investigates the impact of remittances on the relative concerns of households in rural China. Using the Rural to Urban Migration in China (RUMiC) dataset we estimate a series of subjective well-being functions to simultaneously explore relative concerns with respect to income and remittances. Our results show that although rural households experience substantial welfare loss due to income comparisons, they gain well-being by comparing their remittances with those received by their reference group. In other words, we find evidence of a “status effect” with respect to income and of a “signal effect” of similar magnitude with respect to remittances. This finding is robust to various specifications, alternative reference group definitions, controls for the endogeneity of remittances and selective migration, as well as the use of migrants' net contribution to household income.     

Return Migrants: The Rise of New Entrepreneurs in Rural China

This paper analyzes return migrants’ self-employment decision upon their return to their home villages, by using an original rural household survey conducted in Wuwei County (Anhui province, China) in 2008. We find that return migrants are more likely to be self-employed than nonmigrants, and that both return savings and the frequency of job changes during migration increase the likelihood for return migrants to become self-employed. These findings suggest that (a) return migration can help revitalize rural economies and alleviate poverty in less developed areas in China, and (b) repatriated capital is a key, stimulating factor in promoting rural entrepreneurial activities.     

Estimating Local Welfare Generated by an NFL Team under Credible Threat of Relocation

This study offers the opportunity to examine the welfare contribution of the Minnesota Vikings to Minnesota households in the context of a credible threat of team relocation. We find the credibility of the threat of relocation is essential to providing unbiased estimates of welfare. This study utilizes contingent valuation methodology (CVM) and a random utility model (RUM) to analyze Minnesotans' decision‐making mechanisms for supporting a new stadium initiative. While previous studies have attempted to measure the welfare associated with a sports franchise, we develop and discuss bias that may be imparted to estimates when the researcher fails to calculate a “choke price.” Further, we develop an unbiased approach to identify welfare when respondents perceive a risk of losing the franchise. The range of welfare contribution by the Vikings to households in Minnesota is $;445.3 million to $;1,571.3 million according to a 95% confidence interval based on our study.     

Public Goods in the Field: Katrina Evacuees in Houston

Crises and disasters, whether natural or man-made, are defined by conditions of uncertainty, disorder, and stress. In this research, we explore the extent to which individuals who were evacuated from New Orleans to Houston in the aftermath of Hurricane Katrina cooperated with one another in a public goods game. The study focuses on predominantly African-American evacuees from New Orleans who were relocated to Houston-area shelters in the weeks immediately after Hurricane Katrina. In this study, 352 evacuees participated in small groups across six different Houston evacuation shelters from September 10 through 19, 2005. The experiments reported here are adaptations of “dictator” and “public goods” experiments. We find strong evidence of group cooperation in the Houston-area shelters.     

Where are the migrants from? Inter- vs. intra-provincial rural-urban migration in China

Using a representative sample of rural migrants in cities, this paper investigates where the migrants in urban China come from, paying close attention to intra-provincial vs. inter-provincial migrants, and examining the differences in their personal attributes. We find that migrants who have come from within the province differ significantly from those who have come from outside of the province. Using a nested logit model, we find that overall, higher wage differentials, larger population size, higher GDP per capita, and faster employment growth rate are the attributes of a city that attract rural-to-urban migrants. In addition, moving beyond one's home province has a strong deterrent effect on migration, analogous to the “border effect” identified in international migration studies. We also explore the role of culture, institutional barriers, and dialect in explaining such a pronounced “border effect”.     

Income inequality between one-earner and two-earner Households: Is it real or artificial

Summary Most welfare comparisons between countries or between household types are made on the basis of monetary income only. Taking into account the value of income in kind may change these comparisons considerably. In this paper we focus on one type of income, viz., home production. We estimate the monetary value of home production in Dutch one-earner and two-earner households. We find that if we account for this forgotten income component, income inequality between the groups of one-earner and two-earner households is almost reduced to nil. In most of the world the share of income in kind via non-market production may be assumed to be much higher than in a Western-type economy. Application of this analysis to less developed countries may be particularly revealing.He is now with SWOKA, Institute for Consumer Research.He is also a member of the Scientific Council for Government Policy, The Hague.     

No longer left-behind: The impact of return migrant parents on children's performance

Using data from a rural household survey in China in 2009, we examine the impact of parental migration on children's educational outcomes. Consistent with the findings of a large empirical literature, we find that parental migration has a significantly negative impact on left-behind children's educational outcomes as measured by test scores in Chinese and math. But unlike much of the existing studies on the subject, we focus on the remediation effect of return migrant parents on once left-behind children's performance. This empirical strategy allows us to avoid the endogeneity issue concerning the migration decision that may have contaminated previous studies. We find evidence that return migrant parents help alleviate the harms caused by parental migration, and the remediation effect is stronger for children attending middle schools, and stronger for daughters. We also find suggestive evidence that return migrant parents improve children's performance through increases in after-school study time and education-related expenditures, following the return of migrant parents.     

Do Air Quality Alerts Affect Household Migration?

This article examines the effect of air quality information on immigration and emigration of households in California counties by measuring the change in the number of air quality alert days. Based on panel data for 2000–2014, I find evidence suggesting that more frequent air quality alerts reduce the rate of population growth in a county by decreasing immigration of households. This is driven by “Unhealthy” air alerts, which signals weaker air quality than “Unhealthy for Sensitive Groups.” The negative impacts on immigration are larger for high household income counties and are strongest when there is a sharp increase in the number of air quality alerts.     

Sibling Rivalry and Strategic Parental Transfers

This paper develops a noncooperative Nash model in which two siblings compete for their parents' financial transfers. Treating sibling rivalry as a “rent-seeking contest” and using a Tullock-Skaperdas contest success function, we derive the conditions under which more financial resources are transferred to the sibling with lower earnings. We find that parental transfers are compensatory and that the family as an institution serves as an “income equalizer.” Within a sequential game framework, we characterize the endogeneity of parental transfers and link it to parents' income, altruism, and children's supply of merit goods (e.g., parent-child companionship or child services). We show that merit goods are subject to a “moral hazard” problem from the parents' perspective.     

Education and family health care spending

Michael Grossman's seminal work on the demand for health extended the concept of a household production function to the commodity “good health.” In this framework, education represents an “environmental variable” that enhances the monetary returns to investments in health through the use of time and medical care in health production. Using data from the 2004 to 2012 Medical Expenditure Panel Survey (MEPS), we examine the association between parental education and family health care spending in single-mother and two-parent families. We estimate one- and two-part expenditure models for total family health care spending, for specific components of such spending, and also examine the impact of parental education on selected measures of family health. Controlling for family income and health insurance status, we find consistent evidence that parental education beyond 12 years of schooling is associated with increases in family health care spending and with reductions in the likelihood of adverse health conditions.     

Social Assistance Amidst the COVID-19 Epidemic in South Africa: A Policy Assessment

In an attempt to minimise the negative economic impacts of COVID-19 on vulnerable households the South African government allocated R50 billion in additional social assistance spending. The cash transfer package included a temporary increase in existing grants and introduced a new “Covid grant.” We assess the chosen package and compare it with an initial proposal to increase the Child Support Grant (CSG). Coverage, cost and welfare effects are calculated to measure the relative impacts in each case. We find that while a significant increase in the CSG delivers resources most progressively, the addition of the COVID-19 grant may potentially reach a much larger group of otherwise uncovered, vulnerable individuals. Critically, this extended coverage comes at a cost to the poorest households, via additional transfers to the upper income deciles. However, we identify several categories of vulnerable household groups which suggests that the workers most negatively affected by the pandemic are not necessarily those in the poorest households. The paper emphasises that social assistance to mitigate the consequences of COVID-19 should not be viewed necessarily as a standard poverty reduction exercise, but rather as an attempt to mitigate COVID-19-related income shocks for the vulnerable who were most negatively affected by the pandemic.     

Remittances and expenditure patterns of the left behinds in rural China

This paper investigates how private transfers from internal migration in China affect the expenditure behavior of families left behind in rural areas. Using data from the Rural–Urban Migration in China (RUMiC) survey, we assess the impact of remittances sent to rural households on consumption-type and investment-type expenditures. We apply propensity score matching to account for the selection of households into receiving remittances, and estimate average treatment effects on the treated. We find that remittances supplement income in rural China and lead to increased consumption rather than increased investment. Moreover, we find evidence of a strong negative impact on education expenditures, which could be detrimental to sustaining investment in human capital in poor rural areas in China.     

Digital Financial Inclusion and Consumption Smoothing in China

In this paper, we investigate the effect of digital financial inclusion (DFI) on household consumption smoothing in China. We use four waves of the biennial China Family Panel Studies from 2010 to 2016, during which time DFI has significantly developed alongside financial technology across China. We split household income shocks into permanent and transitory components, and evaluate if DFI may help households to buffer against these shocks. We find that households are not able to insure against permanent shocks to income, but they can smooth approximately 70 percent of transitory shocks to income. We also find that DFI has diminished households’ ability to insure against transitory income shocks. This is partly because online purchase may lead to the oversensitivity of consumption to income. In addition, we find that contrary to DFI, traditional financial sector development contributes to better household consumption smoothing against transitory income shocks.     

The impacts of income gaps on migration decisions in China

Using survey data from China, this article examines the effects of income gaps on migration decisions and the sources of these gaps. The econometric results support the hypothesis that income gaps significantly influence migration decisions. When income gap reaches a certain level, the reaction of the migration probability to income gap is weaker for men than for women. The relative income of women is less sensitive to an increase in rural income but more sensitive to a decrease in urban income than that of men. Moreover, we find that the urban to rural income gap is larger for women than for men, which suggests that women receive larger monetary return from migration than men do. In decomposing income gaps, we find that the gap for men is largely determined by differences in the attributes of migrants and nonmigrants, whereas for women, the gap is mainly determined by differences in returns to attributes.     

The Wealthy Hand-to-Mouth Households in South Korea

This study establishes the stylized facts on household balance sheets in South Korea and empirically investigates their macroeconomic implications based on the concept of ‘wealthy hand-to-mouth (HtM)’ households that hold little liquid wealth with owning large amount of illiquid assets. Using a household-level panel data for the period of 2000–2014, we find that (1) there are neither deleveraging of household debts nor a sharp decline in house price even during the financial crisis, (2) run-up in household debt in 2000s is led by high-income group, (3) regardless of net worth level, wealth is highly concentrated on illiquid assets such as housing and real estate, (4) the share of wealthy HtM households is very high compared to the cases of other advanced countries. We estimate the marginal propensity to consume out of a transitory shock and find that the consumption response of HtM households is larger compared to the non-credit-constrained group, posing a threat to macroeconomic stability. Using discrete choice models with fixed effects, we also find that a household that acquire more real estate assets is more likely to become wealthy HtM when its income is relatively lower or its indebtedness is relatively higher. We discuss the characteristics of HtM households and the role of macroprudential policy.     

Cash Transfer Programs with Income Multipliers: PROCAMPO in Mexico

Cash transfer programs create multiplier effects when recipients put the money they receive to work to generate further incomes. When this is the case, the ultimate income effects are multiples of the amounts transferred. We analyze the PROCAMPO program in Mexico that was introduced to compensate farmers for the anticipated negative effect of NAFTA on the prices of basic crops. The transfer rules and the timing of the panel data collected allow unique control of biases in this impact analysis. We find that the multiplier among ejido sector recipients is in the range 1.5–2.6. Multipliers are higher for households with medium and large farms, low numbers of adults in the household, nonindigenous backgrounds, and located in the Center and Gulf regions. High multipliers reflect income opportunities that had remained unrealized due to liquidity constraints that are relaxed by the transfers. Opportunities come from the asset endowments that these households received through the land reform, particularly irrigated land, and they are enhanced by access to technical assistance.     

The impact of retirement on household consumption in Japan

Using monthly data from the Japanese Family Income and Expenditure Survey, we examine the impact of retirement on household consumption. We find little evidence of an immediate change in consumption at retirement, on average, in Japan. However, we find a decrease in consumption at retirement for low income households that is concentrated in food and work-related consumption. The availability of substantial retirement bonuses to a large share of Japanese retirees may help smooth consumption at retirement. We find that those households that are more likely to receive such bonuses experience a short-run consumption increase at retirement. However, among households that are less likely to receive a retirement bonus, we find that consumption decreases at retirement.     

How rich countries became rich and why poor countries remain poor: It's the economic structure…duh!

Becoming a rich country requires being able to produce and export commodities that embody certain characteristics. We classify 779 commodities (exported) according to two dimensions: (1) sophistication (measured by the income content of the products exported) and (2) connectivity to other products (measured by how easy it is to ‘jump’ into other potential exports). We identify 88 “good” products (highly sophisticated and well connected products), 93 “bad” products (unsophisticated and poorly connected products), and 598 “middle” products. Then, we categorize 154 countries into four groups according to the export share of each of these three types of products. There are 21 countries whose export baskets contain at least 15% of “good” products; 41 countries with a significant share of relatively sophisticated and well connected products; 50 countries with a significant share of relatively unsophisticated and not well connected products; and 42 countries whose export basket contains at least 15% of “bad” products.     

The Timing of Redistribution

We investigate whether late redistribution programs that can be targeted toward low income families, but that may distort savings decisions, can “dominate” early redistribution programs that cannot be targeted as a result of information constraints. We use simple two‐period overlapping generations models with heterogeneous agents under six policy regimes: a model calibrated to the U.S. economy (benchmark), two early redistribution (lump sum) regimes, two (targeted) late redistribution regimes, and finally a model without taxes and redistribution. Redistribution programs are financed by a labor tax on the young generation and a capital tax on the old generation. We argue that if the programs are small in size, late redistribution can dominate early redistribution in terms of welfare but not in terms of real output. Better targeting of low income households cannot completely offset savings distortions. In addition, we find that the optimal transfer and tax policy implies a capital tax of 100% and transfers exclusively to the young generation.