NEP: New Economics Papers Central and South America

NEP: New Economics Papers
Central and South America

Edited by:	Maximo Rossi
	Universidad de la República
Issue date:	2010-01-23
Papers:	3

Note: Access to full contents may be restricted.
NEP is sponsored by SUNY Oswego.

In this issue we have:

1. Latin American Immigration in the United States: Is There Wage Assimilation Across the Wage Distribution?
   Catalina Franco Buitrago
2. Evolución de la informalidad laboral en Colombia: determinantes macro y efectos locales
   Gustavo Adolfo García
3. Developing countries, dispute settlement, and the advisory centre on WTO law
   Bown, Chad P.; McCulloch, Rachel

Contents.

1. Date:	2010-01-18
   By:	Catalina Franco Buitrago
   URL:	http://d.repec.org/n?u=RePEc:col:000118:006447&r=lam
   Immigration has been one of the main driving forces that have contributed to shape the United States as it is today. The current wave of immigration started in 1965 and has different characteristics to the previous inflows of immigrants1. In particular, the 1965 Immigration Act had an impact in shifting the national origin of U.S. immigrants mostly to Latin Americans and Asians, widening therefore the gap between natives and immigrants in terms of language and culture (Card, 2005). Since immigration from Latin America has constituted between 40 and 50 percent of total immigration in the current wave, and given that Latin Americans are relatively less skilled than U.S. natives and other immigrants, it is worth studying the wage differentials that potentially exist between natives and Latin American immigrants.

2. Date:	2010-01-18
   By:	Gustavo Adolfo García
   URL:	http://d.repec.org/n?u=RePEc:col:000118:006449&r=lam
   En este trabajo se estudian los determinantes macroeconómicos de la informalidad laboral en Colombia. Teniendo en cuenta varias definiciones de informalidad, se encuentra que este fenómeno tiene una relación inversa con el nivel de educación de la población ocupada y el grado de desarrollo industrial de las ciudades. También se observa que un sector público muy grande genera un efecto positivo sobre la informalidad, lo cual indica que existen posibles ineficiencias estatales o cargas institucionales que afectan la decisión de formalizarse. Así mismo se evidencia que existe un importante efecto local en la informalidad asociado con la estructura productiva e integración comercial, que dependen de la ubicación geográfica de las ciudades.

3. Date:	2010-01-01
   By:	Bown, Chad P. McCulloch, Rachel
   URL:	http://d.repec.org/n?u=RePEc:wbk:wbrwps:5168&r=lam
   Critical appraisals of the current and potential benefits from developing country engagement in the World Trade Organization (WTO) focus mainly on the Doha Round of negotiations. This paper examines developing country participation in the WTO dispute settlement system to enforce foreign market access rights already negotiated in earlier multilateral rounds. The dispute data from 1995 through 2008 reveal three notable trends: developing countries’ sustained rate of self-enforcement actions despite declining use of the Dispute Settlement Understanding (DSU) by developed countries, developing countries’ increased use of the DSU to self-enforce their access to the markets of developing as well as developed country markets, and the prevalence of disputes targeting highly observable causes of lost foreign market access, such as antidumping, countervailing duties, and safeguards. The paper also examines potential impacts of the Advisory Centre on WTO Law (ACWL) into the WTO system in 2001. A close look at the data reveals evidence on at least three channels through which the ACWL may be enhancing developing countries’ability to self-enforce foreign market access: increased initiation of sole-complainant cases, more extensive pursuit of the DSU legal process for any given case, and initiation of disputes over smaller values of lost trade.
   Keywords:	Debt Markets,World Trade Organization,Trade Law,Emerging Markets,Country Strategy&Performance

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This nep–lam issue is ©2010 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, it must include this copyright notice. It may not be sold, or placed in something else for sale.

General information on the NEP project can be found at http://nep.repec.org/. For comments please write to the director of NEP, Marco Novarese at <>.

NEP: New Economics Papers Unemployment, Inequality and Poverty

NEP: New Economics Papers Unemployment, Inequality and Poverty

January 25, 2010 by maximorossi

NEP: New Economics Papers
Unemployment, Inequality and Poverty

Edited by:	Maximo Rossi
	University of the Republic
Issue date:	2010-01-23
Papers:	14

Note: Access to full contents may be restricted.
NEP is sponsored by SUNY Oswego.

In this issue we have:

1. Health Care Expenditure and Income in the OECD Reconsidered: Evidence from Panel Data
   Badi H. Baltagi; Francesco Moscone
2. Obesity and Happiness
   Marina-Selini Katsaiti
3. Determinants of Health Disparities in Italian Regions
   Luisa Franzini; Margherita Giannoni
4. Income Support Systems, Labor Market Policies and Labor Supply: The German Experience
   Caliendo, Marco
5. Policies to Create and Destroy Human Capital in Europe
   Heckman, James J.; Jacobs, Bas
6. Cultural Integration in Germany
   Constant, Amelie F.; Nottmeyer, Olga; Zimmermann, Klaus F.
7. Years of Schooling, Human Capital and the Body Mass Index of European Females
   Brunello, Giorgio; Fabbri, Daniele; Fort, Margherita
8. Welfare Rankings From Multivariate Data, A Non-Parametric Approach
   Gordon Anderson; Ian Crawford; Andrew Leicester
9. Making Inferences About Rich Country – Poor Country Convergence: The Polarization Trapezoid and Overlap measures.
   Gordon Anderson; Teng Wah Leo; Oliver Linton
10. Self-delusion in the pursuit of happiness
    Dag Einar Sommervoll
11. “In every rank, or great or small, ’Tis industry supports us all”: Romanians and ethnic Hungarians, and their wages, in transition
    Andrén, Daniela
12. The Effect of Protestantism on Education before the Industrialization: Evidence from 1816 Prussia
    Becker, Sascha O.; Woessmann, Ludger
13. On the relation between income inequality and happiness: Do fairness perceptions matter?
    Bjørnskov, Christian; Dreher, Axel; Fischer, Justina A. V.; Schnellenbach, Jan
14. Inequality in health outcomes in India: the role of caste and religion
    Borooah, Vani /K

Contents.

1. Health Care Expenditure and Income in the OECD Reconsidered: Evidence from Panel Data

   Date:	2010-01
   By:	Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020) Francesco Moscone
   URL:	http://d.repec.org/n?u=RePEc:max:cprwps:120&r=ltv
   This paper reconsiders the long-run economic relationship between health care expenditure and income using a panel of 20 OECD countries observed over the period 1971-2004. In particular, the paper studies the non-stationarity and cointegration properties between health care spending and income. This is done in a panel data context controlling for both cross-section dependence and unobserved heterogeneity. Cross-section dependence is modelled through a common factor model and through spatial dependence. Heterogeneity is handled through fixed effects in a panel homogeneous model and through a panel heterogeneous model. Our findings suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in previous studies.
   Keywords:	Health expenditure, income elasticity, cross section dependence, heterogeneous panels, factor models
   JEL:	C31

2. Obesity and Happiness

   Date:	2009-10
   By:	Marina-Selini Katsaiti (University of Connecticut and University of Athens)
   URL:	http://d.repec.org/n?u=RePEc:uct:uconnp:2009-44&r=ltv
   This paper provides insight on the relationship between obesity and happiness. Using the latest available cross sectional data from Germany (GSOEP 2006), UK (BHPS 2005), and Australia (HILDA 2007). We examine whether there is evidence on the impact of overweight on subjective well being. The Hausman test is employed in the univariate and multivariate specifications chosen and reveals evidence for the presence of endogeneity in the German and the Australian data. Instrumental variable analysis is performed under the presence of endogeneity whereas for the UK we run OLS regressions. Results indicate that in all three countries obesity has a negative and significant effect on the subjective well being of individuals. For Germany, using a differences-in-differences methodology, I find that non-overweight/non-obese individuals are on average 0.5 units happier than their overweight/obese counterparts. My findings also have important implications for the effect of other socio-demographic, economic and individual characteristics on well being.
   Keywords:	Happiness, Obesity, Instrumental Variable Analysis, Subjective Well Being
   JEL:	D60

3. Determinants of Health Disparities in Italian Regions

   Date:	2009-10-20
   By:	Luisa Franzini Margherita Giannoni
   URL:	http://d.repec.org/n?u=RePEc:pia:wpaper:70/2009&r=ltv
   There is an extensive literature on regional disparities in health, but much of thisliterature focuses on the United States. Among European countries, Italy is the country whereregional health disparities contribute the most to socioeconomic health disparities. In this paper,we report on regional differences in self-reported poor health and explore possible determinantsat the individual and regional levels in Italy. We use data from the “Indagine Multiscopo sulle Famiglie”, a survey of aspects ofeveryday life in the Italian population, to estimate multilevel logistic regressions that model poorself-reported health as a function of individual and regional socioeconomic factors. Next we usethe causal step approach to test if living conditions, healthcare characteristics, social isolation,2and health behaviors at the regional level mediate the relationship between regionalsocioeconomic factors and self-rated health. We find that residents living in regions with more poverty, more unemployment, andmore income inequality are more likely to report poor health and that poor living conditions andprivate share of healthcare expenditures at the regional level are determinants of socioeconomicdisparities in self-rated health among Italian regions. The implications are that regional contexts matter and that regional policies in Italyhave the potential to reduce health disparities by implementing interventions aimed at improvingliving conditions and access to quality healthcare.
   Keywords:	health inequality, Italy, self-reported health, regional health disparities
   JEL:	I10

4. Income Support Systems, Labor Market Policies and Labor Supply: The German Experience

   Date:	2009-12
   By:	Caliendo, Marco (IZA)
   URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp4665&r=ltv
   In view of the demographic trends, most EU countries face the problem of a declining work force in the future. Understanding the interaction between income support systems (such as unemployment benefits, social assistance, early retirement and pension systems) and total labor supply is of crucial importance to combat problems and ensure economic growth in the future. The German labor market has been plagued by high and persistent unemployment in the last two decades in combination with a relatively low labor force participation of women. This created a situation where labor market reforms were unavoidable. The speed and depth of the reforms are remarkable, mainly aimed at activating people by increasing their incentives to take up work. The aim of this paper is to give a brief overview of the German income support systems and labor market polices, their recent reforms and – where already possible – effects of these reforms. Overall, Germany seems to be on the right track. The recent reforms helped to tackle some labor market problems but also created high political unrest. It remains to be seen how future governments react to worsened economic conditions in light of these experiences.
   Keywords:	unemployment, labor force participation, labor supply, benefit systems, public policy
   JEL:	J26

5. Policies to Create and Destroy Human Capital in Europe

   Date:	2009-12
   By:	Heckman, James J. (University of Chicago) Jacobs, Bas (Erasmus University Rotterdam)
   URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp4680&r=ltv
   Trends in skill bias and greater turbulence in modern labor markets put wages and employment prospects of unskilled workers under pressure. Weak incentives to utilize and maintain skills over the life-cycle become manifest with the ageing of the population. Reinvention of human capital policies is required to avoid increasing welfare state dependency among the unskilled and to reduce inefficiencies in human capital formation. Policy makers should acknowledge strong dynamic complementarities in skill formation. Investments in the human capital of children should expand relative to investment in older workers. There is no trade-off between equity and efficiency at early ages of human development but there is a substantial trade-off at later ages. Later remediation of skill deficits acquired in early years is often ineffective. Active labor market and training policies should therefore be reformulated. Skill formation is impaired when the returns to skill formation are low due to low skill use and insufficient skill maintenance later on in life. High marginal tax rates and generous benefit systems reduce labor force participation rates and hours worked and thereby lower the utilization rate of human capital. Tax-benefit systems should be reconsidered as they increasingly redistribute resources from outsiders to insiders in labor markets which is both distortionary and inequitable. Early retirement and pension schemes should be made actuarially fairer as they entail strong incentives to retire early and human capital is thus written off too quickly.
   Keywords:	family policy, (non)cognitive skills, returns to education, inequality, dynamic complementarity, training, retirement, labor supply, human capital, skill formation, training policy, active labor market policy, tax, pension, benefit systems, welfare state
   JEL:	H2

6. Cultural Integration in Germany

   Date:	2009-12
   By:	Constant, Amelie F. (DIW DC, George Washington University) Nottmeyer, Olga (DIW Berlin) Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University)
   URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp4675&r=ltv
   This chapter investigates the integration processes of immigrants in Germany by comparing certain immigrant groups to natives differentiating by gender and immigrant generation. Indicators which are supposed to capture cultural integration of immigrants are differences in marital behavior as well as language abilities, ethnic identification and religious distribution. A special feature of the available data is information about overall life satisfaction, risk aversion and political interest. These indicators are also presented. All of these indicators are depicted in comparison between natives and immigrants differentiated by ethnic origin, gender and generation. This allows visualization of differences by ethnic groups and development over time. Statements about the cultural integration processes of immigrants are thus possible. Furthermore, economic integration in terms of female labor force participation is presented as an additional feature. Empirical findings suggest that differences among immigrants and between immigrants and Germans do exist and differ significantly by ethnic origin, gender and generation. But differences seem to diminish when we consider the second generations. This indicates greater adaptation to German norms and habits, and thus better cultural, socio-economic and political integration of second generation immigrants in Germany.
   Keywords:	cultural integration, immigrants, Germany, ethnic origin, gender, generation
   JEL:	F22

7. Years of Schooling, Human Capital and the Body Mass Index of European Females

   Date:	2009-12
   By:	Brunello, Giorgio (University of Padova) Fabbri, Daniele (University of Bologna) Fort, Margherita (University of Bologna)
   URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp4667&r=ltv
   We use the compulsory school reforms implemented in European countries after the II World War to investigate the causal effect of education on the Body Mass Index (BMI) and the incidence of overweight and obesity among European females. Our IV estimates suggest that years of schooling have a protective effect on BMI. The size of the estimated effect is not negligible but smaller than the one found in comparable recent work for the US. We depart from the current empirical literature in three main directions. First, we use a multi-country approach. Second, we complement the standard analysis of the causal impact of years of schooling on BMI with one relying on a broader measure of education, i.e. individual standardized cognitive tests, and show that the current focus in the literature on years of schooling as the measure of education is not misplaced. Last, we evaluate whether the current focus on conditional mean effects should be integrated with an approach which allows for heterogeneous responses to changes in compulsory education. Although our evidence based on quantile regressions is mixed, there is some indication that the protective effect of schooling does not increase monotonically from the lower to the upper quantile of the distribution of BMI. Rather, the marginal effect is stronger among overweight (but not obese) females than among females with BMI above 30.
   Keywords:	obesity, human capital, Europe
   JEL:	I12

8. Welfare Rankings From Multivariate Data, A Non-Parametric Approach

   Date:	2010-01-14
   By:	Gordon Anderson Ian Crawford Andrew Leicester
   URL:	http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-386&r=ltv
   Economic and Social Welfare is inherently multidimensional. However choosing a measure which combines several indicators is difficult and may have unintended and undesireable effects on the incentives for policymakers. We develope a nonparametric empirical method for deriving welfare rankings based on data envelopment which avoids the need to specify a weighting scheme. The results are valid for all possible social welfare functions which share certain cannonical properties. We apply this method to data on human development.
   Keywords:	Welfare Rankings, Data Envelopment, Human development
   JEL:	I3

9. Making Inferences About Rich Country – Poor Country Convergence: The Polarization Trapezoid and Overlap measures.

   Date:	2010-01-14
   By:	Gordon Anderson Teng Wah Leo Oliver Linton
   URL:	http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-387&r=ltv
   Underlying the unresolved debate over whether the gap between rich and poor country GNP per capita has narrowed is a concern for wellbeing. The issue is really about the changing shapes of distributions of wellbeing indicators. As limiting cases con- vergence between rich and poor country groups can be brought about by countries within groups becoming less alike without any diminution of growth rate differentials between them or it can be brought about by reductions in these differentials without any diminution of within group identity. In essence the debate is about the extent to which rich and poor countries are polarizing, a subject first theoretically explored by Esteban and Ray (1994). The empirical issue is about whether separate groups can be identified in the overall distribution and whether they are tending toward common or distinct equilibria. This paper proposes two simple statistics for the problem, the Overlap measure and the Trapezoidal measure, changes in which reflect a combination of increasing (decreasing) subgroup location differences and decreasing (increasing) subgroup spreads which are the characteristics of polarization (convergence). The former statistic is of use when the sub-distributions are identified, while the latter can be used whether or not the subgroups are identified. These techniques are applied to the examination of convergence in GDP per capita between rich and poor nations when growth is viewed either as a wellbeing index or a technology index (i.e. the data are, or are not, population weighted). It turns out that such a distinction matters, viewed technologically there is divergence, viewed in a wellbeing sense there is convergence. As a collection of countries Africa is diverging from the rest of the world whatever the perspective of growth.
   Keywords:	Convergence, Polarization, Trapezoid Measure, Overlap measure
   JEL:	I3

10. Self-delusion in the pursuit of happiness

    Date:	2010-01
    By:	Dag Einar Sommervoll (Statistics Norway)
    URL:	http://d.repec.org/n?u=RePEc:ssb:dispap:604&r=ltv
    The paper explores how repeated revisions of consumption plans increase long-run utility. If agents value present anticipations of future consumption, some revisions may be viewed as a benign form of self-delusion. We consider a minimal generalization of the Samuelson discounted utility model to allow for utility linked to next period consumption. Agents are assumed to vary with respect to their sophistication. Different environments likely to facilitate repeated revisions are also considered.
    Keywords:	Intertemporalchoice;selfdelusion;timeinconsistency;naivete;self-con trol;discountedutilityfunctions;anticipation;memory
    JEL:	A12

11. “In every rank, or great or small, ’Tis industry supports us all”: Romanians and ethnic Hungarians, and their wages, in transition

    Date:	2010-01-15
    By:	Andrén, Daniela (Department of Business, Economics, Statistics and Informatics)
    URL:	http://d.repec.org/n?u=RePEc:hhs:oruesi:2010_001&r=ltv
    Legally binding treaties or memorandums have been used over time to regulate the issue of national borders of many European countries. As a result, relatively large groups of people have become ethnic minorities in other countries. They may conserve their ethnic identities, and therefore their children may accumulate ethnic human capital (e.g., language, culture, and religion) in addition to the general human capital of the country. Therefore, they can get access to an appropriate occupation linked by tradition or other factors to their ethnic group. This paper uses estimates from a selection model with an endogenous switch among three broad types of occupational groups to analyze the composition of the wage gap between Romanians and ethnic Hungarians in Romania before and during the transition from a planned to a market economy. The results suggest that the institutional settings of the controlled economy allowed Romanians to work in occupations that gave them the best returns, while the changes during the transition years allowed ethnic Hungarians to work in occupations that gave them the best returns.
    Keywords:	ethnic wage gap; occupation; selection model with an endogenous switch; wage gap decomposition
    JEL:	J31

12. The Effect of Protestantism on Education before the Industrialization: Evidence from 1816 Prussia

    Date:	2010-01
    By:	Becker, Sascha O. Woessmann, Ludger
    URL:	http://d.repec.org/n?u=RePEc:stl:stledp:2010-01&r=ltv
    This paper uses recently discovered data on nearly 300 Prussian counties in 1816 to show that Protestantism led to more schools and higher school enrollment already before the industrialization. This evidence supports the human capital theory of Protestant economic history of Becker and Woessmann (2009), where Protestantism first led to better education, which in turn facilitated industrial development. It rules out that the existing end-of-19th-century evidence can be explained by a Weberian explanation, where a Protestant work ethic first led to industrialization which then increased the demand for education.
    Keywords:	Pre-Industrialization; Protestantism; Education

13. On the relation between income inequality and happiness: Do fairness perceptions matter?

    Date:	2010-01-15
    By:	Bjørnskov, Christian Dreher, Axel Fischer, Justina A. V. Schnellenbach, Jan
    URL:	http://d.repec.org/n?u=RePEc:awi:wpaper:0495&r=ltv
    In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.
    Keywords:	Happiness; life satisfaction; subjective well-being ; inequality; income distribution; redistribution; political ideology; justice; fairness
    JEL:	I31

14. Inequality in health outcomes in India: the role of caste and religion

    Date:	2010
    By:	Borooah, Vani /K
    URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:19832&r=ltv
    The “social gradient to health” – whereby people belonging to groups higher up the social ladder had better health outcomes than those belonging to groups further down – is essentially a Western construct; there has been very little investigation into whether, in developing countries also, people’s state of health is dependent on their social status. The purpose of this paper is to evaluate the relative strengths of economic and social status in determining the health status of persons in India. In other words, even after controlling for non-community factors, did the fact that Indians belonged to different social groups, encapsulating different degrees of social status, exercise a significant influence on the state of their health? The existence of a social group effect would suggest that there was a “social gradient” to health outcomes in India. Furthermore, there was the possibility that the “social gradient” existed with respect to some outcomes but not to others. In investigating this, the paper addresses, in the Indian context, an issue which les at the heart of social epidemiology: estimating the relative strengths of individual and social factors in determining health outcomes.
    Keywords:	Health outcomes; Caste; Religion; India
    JEL:	I12

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This nep–ltv issue is ©2010 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, it must include this copyright notice. It may not be sold, or placed in something else for sale.

General information on the NEP project can be found at http://nep.repec.org/. For comments please write to the director of NEP, Marco Novarese at <>.