Labor Studies Program Meeting

March 4, 2011
David Card of the University of California, Berkeley, Organizer

Douglas Miller, Marianne E. Page, and Ann Huff Stevens, University of California, Davis and NBER, and Mateusz Filipski, University of California, Davis
The Best of Times, the Worst of Times: Understanding Pro-cyclical Mortality

A growing literature documents cyclical movements in mortality and health. Miller, Page, Stevens, and Filipski examine this pattern more closely and attempt to identify the mechanisms behind it. Specifically, they distinguish between mechanisms that rely on fluctuations in own employment or time use and those involving factors that are external to the individual. Their investigation suggests that changes in individuals' own behavior contribute very little to pro-cyclical mortality. Looking across broad age and gender groups, they find that own-group employment rates are not systematically related to own-group mortality. In addition, they find that most of the additional deaths that occur during times of economic growth are among the elderly, particularly elderly women, who have limited labor force attachment. Focusing on mortality among the elderly, they show that cyclicality is especially strong for deaths occurring in nursing homes, and is stronger in states where a higher fraction of the elderly reside in nursing homes. They also demonstrate that staffing in skilled nursing facilities moves counter-cyclically. Taken together, these findings suggest that cyclical fluctuations in the mortality rate are partly driven by fluctuations in the quality of health care.

Philippe Belley, Kansas State University; Marc Frenette, Social Research & Demonstration Corporation; and Lance Lochner, University of Western Ontario and NBER
Post-Secondary Attendance by Parental Income in the U.S. and Canada: What Role for Financial Aid Policy?

Belley, Frenette, and Lochner examine the implications of tuition and need-based financial aid policies for family income-post-secondary (PS) attendance relationships. They conduct a parallel empirical analysis of the effects of parental income on PS attendance for recent high school cohorts in both the United States and Canada first, using data from the 1997 Cohort of the National Longitudinal Survey of Youth and Youth in Transition Survey. They estimate substantially smaller PS attendance gaps by parental income in Canada than in the United States, even after controlling for family background, adolescent cognitive achievement, and local residence fixed effects. Then they document that U.S. public tuition and financial aid policies are actually more generous to low-income youth than Canadian policies. By contrast, Canada offers more generous aid to middle-class youth than the United States does. These findings suggest that the much stronger family income-PS attendance relationship in the United States is not driven by differences in the need-based nature of financial aid policies. Based on previous estimates of the effects of tuition and aid on PS attendance, the authors consider how much stronger income- attendance relationships would be in the absence of need-based aid, and how much additional aid would need to be offered to lower income families to eliminate existing income-attendance gaps entirely.

Nicholas J. Sanders, Stanford University
What Doesn't Kill You Makes You Weaker: Prenatal Pollution Exposure and Educational Outcomes

Sanders examines the impact of prenatal suspended particulate pollution on educational outcomes, using ambient total suspended particulates (TSPs) as a measure of particulate exposure and standardized test scores of exposed individuals as a measure of educational achievement. He focuses on individuals born between 1979 and 1985 to exploit the shock of the industrial recession of the early 1980s. This variation helps separate the causal effects of pollution reduction from general time trends. Considering the 7-year time period as a whole yields statistically insignificant results, but focusing on the 3-year period around the recession (1981-3) yields negative and statistically significant results, suggesting that the relationship is subtle enough to require large-scale changes to be detectable. These results suggest that a standard deviation decrease in the mean pollution level in a student's year of birth is associated with 1.87 percent of a standard deviation increase in test scores in high school. He also employs an instrumental variables strategy, using changes in relative manufacturing employment driven by the recession as an instrument for TSP levels. Instrumental variables results are approximately 3.7 times the size of the OLS results, suggesting the potential presence of measurement error in ambient pollution. Results are robust to the inclusion of school fixed effects, year of birth, and year of test fixed effects and various demographic and economic covariates. Sanders also investigates the potential bias sources of migration and selection into motherhood, and shows them to be unlikely to explain the results.

Florian Hoffman, University of British Columbia
An Empirical Model of Life-Cycle Earnings and Mobility Dynamics

Conventional estimates of empirical human capital investment models of post-graduation career dynamics suggest that pre-labor market skills are the predominant source of life-cycle earnings inequality. Hoffman tests whether this conclusion is significantly altered when a proto-typical dynamic Roy model of life-cycle income dynamics and vertical occupational mobility is enriched with a number of potentially important sources of career heterogeneity, such as match heterogeneity, search frictions, and permanent shocks to skills. He estimates the parameters of the resulting structural model using a unique administrative panel dataset that follows a large sample of employees with identical educational attainments from the time of their labor market entry until 23 years into their careers. He finds that a large fraction of life-cycle income inequality is driven by match heterogeneity among workers with the same observable and unobservable credentials. Differences in comparative advantages,although quantitatively important as well, have a much smaller impact than what has been found in research relying on estimates from more restrictive dynamic Roy models. Thus, compared to the conclusions drawn from models that do not control for unobserved sources of career heterogeneity that accumulate over a life-cycle, these results suggest that policies targeting pre-labor market skill accumulation are likely to be less effective, and active labor market policies are likely to be more effective in fostering career progression.

Camille Landais, Stanford University; Henrik Kleven, London School of Economics; and Emmanuel Saez, University of California, Berkeley and NBER

Taxation and International Migration of Superstars: Evidence from the European Football Market (NBER Working Paper No. 16545)

Landais, Kleven, and Saez analyze the effects of top earnings tax rates on the international migration of top football players in Europe. They construct a panel dataset of top earnings tax rates, football player careers, and club performances in the first leagues of 14 European countries since 1985. They identify the effects of top earnings tax rates on migration using a number of tax and institutional changes: 1) the 1995 Bosman ruling that liberalized the European football market; 2) top tax rate reforms within countries;, and 3) special tax schemes offering preferential tax rates to immigrant football players. They begin by presenting reduced-form graphical evidence showing large and compelling migration responses to country-specific tax reforms and labor market regulation. They then set out a theoretical model of taxation and migration, which is tested using all sources of tax variation simultaneously. The results show that: 1) the overall location elasticity with respect to the net-of-tax rate is positive and large; 2) location elasticities are extremely large at the top of the ability distribution but negative at the bottom because of ability sorting effects; and 3) cross-tax effects of foreign players on domestic players (and vice versa) are negative and quite strong because of displacement effects.

Peter J. Kuhn, University of California, Santa Barbara and NBER, and Kailing Shen, Xiamen University
Gender Discrimination in Job Ads: Theory and Evidence

Kuhn and Shen study firms' advertised gender preferences in a population of ads on a Chinese internet job board, and interpret these patterns using a simple employer search model. The model allows them to distinguish firms' underlying gender preferences from firms' propensities to restrict their search to their preferred gender. The model also predicts that higher job skill requirements should reduce the tendency to gender-target a job ad; this is strongly confirmed in our data. They also find that firms' underlying gender preferences are highly job-specific, with many firms requesting men for some jobs and women for others, and with one third of the variation in gender preferences within firms' occupation cells.

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