Persistence of Regional Inequality in China
Forthcoming in Pacific Economic Review | With Candelaria and Hale
Regional inequality in China appears to be persistent and even growing in the last two decades. We study potential explanations for this phenomenon. After making adjustments for the difference in the cost of living across provinces, we find that some of the inequality in real wages could be attributed to differences in quality of labor, industry composition, labor supply elasticities, and geographical location of provinces. These factors, taken together, explain about half of the cross-province real wage difference. Interestingly, we find that inter-province redistribution did not help offset regional inequality during our sample period. We also demonstrate that inter-province migration, while driven in part by levels and changes in wage differences across provinces, does not offset these differences. These results imply that cross-province labor market mobility in China is still limited, which contributes to the persistence of cross-province wage differences.
Unexpected Life Cycle Events and Economic Well-Being
Forthcoming in Edited Volume | With Couch and Zissimopoulos
Disability and Subjective Well-Being
Forthcoming in Unexpected Lifecycle Events and Economic Well-Being, ed. by Daly/Couch/Zissimopoulus. Stanford University Press | With Gardiner
Journal of Money, Credit, and Banking 46(S2), 2014, 51-93 | With Hobijn
We introduce a model of monetary policy with downward nominal wage rigidities and show that both the slope and curvature of the Phillips curve depend on the level of inflation and the extent of downward nominal wage rigidities. This is true for the both the long-run and the short-run Phillips curve. Comparing simulation results from the model with data on U.S. wage patterns, we show that downward nominal wage rigidities likely have played a role in shaping the dynamics of unemployment and wage growth during the last three recessions and subsequent recoveries.
National Institute Economic Review 228: R58-R64, May 2014 | With Nechio, Fernald, and Jorda
This note examines labor market performance across countries through the lens of Okun’s Law. We find that after the 1970s but prior to the global financial crisis of the 2000s, the Okun’s Law relationship between output and unemployment became more homogenous across countries. These changes presumably reflected institutional and technological changes. But, at least in the short term, the global financial crisis undid much of this convergence, in part because the affected countries adopted different labor market policies in response to the global demand shock.
Review of Economics and Statistics 95(5), December 2013, 1480-1500 | With Wilson and Johnson
We assess the importance of interpersonal income comparisons using data on suicide deaths. We examine whether suicide risk is related to others’ income, holding own income and other individual and environmental factors fixed. We estimate models of the suicide hazard using two independent data sets: (1) the National Longitudinal Mortality Study and (2) the National Center for Health Statistics’ Multiple Cause of Death Files combined with the 5 percent Public Use Micro Sample of the 1990 decennial census. Results from both data sources show that, controlling for own income and individual characteristics, individual suicide risk rises with others’ income.
Is Australia One Recession Away From Disability Blowout? Lessons from Other OECD Countries
Australian Economic Review 46(3), August 2013, 357-368 | With Burkhauser and Lucking
Blowout in disability-based cash transfer programs resulted in fundamental reforms over the last decade in several OECD countries. Similar reforms are being proposed in the United States in the wake of their disability program growth following the Global Financial Crisis. We compare trends in U.S. and Australian disability receipt with those of the Netherlands and Sweden and argue that Australia’s current Disability Support Pension program is vulnerable to the same forces that caused unsustainable program growth in these countries. Absent fundamental reforms focused on return to work over benefit receipt, Australia could be one recession away from disability benefit blowout.
Disability and Subjective Well-Being
In Lifecycle Events and Their Consequences, ed. by Couch/Daly/Zissimopolous | Stanford University Press, 2013 | With Gardiner
A Search and Matching Approach to Labor Markets: Did the Natural Rate of Unemployment Rise?
Journal of Economic Perspectives 26(3), June 2012, 3-26 | With Hobijn, Sahin, and Valletta
The U.S. unemployment rate has remained stubbornly high since the 2007-2009 recession, leading some observers to conclude that structural rather than cyclical factors are to blame. Relying on a standard job search and matching framework and empirical evidence from a wide array of labor market indicators, we examine whether the natural rate of unemployment has increased since the recession began, and if so, whether the underlying causes are transitory or persistent. Our analyses suggest that the natural rate has risen over the past several years, with our preferred estimate implying an increase of close to a percentage point above its pre-recession level. An assessment of the underlying factors responsible for this increase, including labor market mismatch, extended unemployment benefits, and uncertainty about overall economic conditions, implies that only a small fraction is likely to be persistent.
Social Security Disability Insurance: Time for Fundamental Change
Journal of Policy Analysis and Management 31, February 2012, 454-461 | With Burkhauser
Journal of Economic Behavior and Organization 80(3), 2011, 435-442 | With Oswald, Wilson, and Wu
Suicide kills more Americans than die in motor accidents. Its causes remain poorly understood. We suggest in this paper that the level of others’ happiness may be a risk factor for suicide (although one’s own happiness likely protects one from suicide). Using U.S. and international data, the paper provides evidence for a paradox: the happiest places tend to have the highest suicide rates. The analysis appears to be the first published study to be able to combine rich individual-level data sets–one on life satisfaction in a newly available random sample of 1.3 million Americans and another on suicide decisions among an independent random sample of about 1 million Americans–to establish this dark-contrasts paradox in a consistent way across U.S. states. The study also replicates the finding for the Western industrialized nations. The paradox, which holds individual characteristics constant, is not an artifact of population composition or confounding factors (or of the ecological fallacy). We conclude with a discussion of the possible role of relative comparisons of utility.
Journal of European Economic Association 7, 2009, 539-549 | With Wilson
The use of subjective well-being (SWB) data for investigating the nature of individual preferences has increased tremendously in recent years. There has been much debate about the cross-sectional and time-series patterns found in these data, particularly with respect to the relationship between SWB and relative status. Part of this debate concerns how well SWB data measures true utility or preferences. In a recent paper, Daly, Wilson, and Johnson (2007) propose using data on suicide as a revealed preference (outcome-based) measure of well-being and find strong evidence that reference-group income negatively affects suicide risk. In this paper, we compare and contrast the empirical patterns of SWB and suicide data. We find that the two have very little in common in aggregate data (time series and cross-sectional), but have a strikingly strong relationship in terms of their determinants in individual-level, multivariate regressions. This latter result cross-validates suicide and SWB micro data as useful and complementary indicators of latent utility.
Economics Letters 99(2), May 2008, 215-219 | With Valletta
We compare trends in earnings inequality in the United States, Germany, and Great Britain. Estimation of a heterogeneous growth model of permanent and transitory earnings variation reveals substantial convergence in the permanent component of inequality in these countries during the 1990s.
Regional Economic Conditions and Aggregate Bank Performance
In Research in Finance, 24, ed. by A. Chen | Bingley, UK: Emerald Group Publishing, 2008. 103-127 | With Krainer and Lopez
The idea that a bank’s overall performance is influenced by the regional economy in which it operates is intuitive and broadly consistent with historical bank performance. Yet, micro-level research on the topic has borne mixed results, failing to find a consistent link between various measures of bank performance and regional economic variables. This chapter attempts to reconcile the intuition with the micro-level data by aggregating bank performance, as measured by nonperforming loans, up to the state level. This level of aggregation reduces the influence of idiosyncratic bank effects sufficiently so as to examine more clearly the influence of state-level economic variables. We show that regional variables, such as employment growth and changes in real estate prices, are not particularly useful for predicting changes in bank performance, but that coincident indicators developed to track a state’s gross output are quite useful. We find that these coincident indicators have a statistically significant and economically important influence on state-level, aggregate bank performance. In addition, the coincident indicators potentially contribute to the out-of-sample forecasts of the relative riskiness of state-level bank portfolios, which should be of interest to bankers and bank supervisors.
Inequality and Poverty in the United States: The Effects of Rising Dispersion of Men’s Earnings and Changing Family Behavior
Economica 73(289), February 2006, 75-98 | With Valletta
Using semiparametric density estimation techniques, we analyze the effect of rising dispersion of men’s earnings and related changes in family behavior on increasing inequality in the distribution of family income in the United States. For the period 1969-1989, the growing dispersion of men’s earnings and changing family structure can account for most of the rise in family income inequality. By contrast, the increase in labor force participation by women offset this trend. Inequality grew at a slower rate in the 1990s than in earlier decades, largely because of stabilization in the relative earnings of men from low-income families.
Journal of Income Distribution Fall/Winter, Fall 2003, 56-78 | With Couch | yes
Using data from the Current Population Survey, we examine recent trends
in the relative economic status of black men. Our findings point to gains in the relative wages of black men (compared to whites) during the 1990s, especially among younger workers. In 1989, the average black male worker (experienced or not) earned about 69 percent as much per week as the average white male worker. In 2001, the average younger black worker was earning about 86 percent as much as an equally experienced white male; black males at all experience levels earned 72 percent as much as the average white in 2001. Greater occupational diversity and a reduction in unobserved skill differences and/or labor market discrimination explain much of the trend. For both younger and older workers, general wage inequality tempered the rate of wage convergence between blacks and whites during the 1990s, although the effects were less pronounced than during the 1980s.
Left Behind: SSI in the Era of Welfare Reform
Focus 22(3), Summer 2003 | With Burkhauser
SSI was established in 1972, born out of a compromise at the time between those wanting to provide a guaranteed income floor and those wishing to limit it to individuals not expected to work: the aged, blind, and disabled. SSI is now the largest federal means-tested program in the United States, serving a population dominated by low-income adults and children with disabilities. With other forms of federal support devolving to state programs (e.g., welfare), policymakers pressing to redefine social expectations about who should and should not work, and the Americans with Disabilities Act guaranteeing people with disabilities the right to employment, the goals and design of SSI have come under scrutiny. In this article we review the role that SSI has played to this point and consider the directions SSI might take in a work-dominated welfare environment where people with disabilities increasingly wish to be included in the labor market.
Employment Declines among People with Disabilities: Population Movements, Isolated Experience, or Broad Policy Concern?
In The Decline in Employment of People with Disabilities, ed. by Stapleton and Burkhauser | Kalamazoo, MI: Upjohn, 2003. 87-129 | With Houtenville
We look beyond the overall decline in employment among working-age
people with disabilities in the 1990s to track the importance of three factors on the observed changes: (1) trends among key subgroups, especially those with employment-risk factors other than disability; (2) population shifts towards subgroups with lower-than-average employment rates; and (3) changes in self-reported health status. Our analysis is based on crosssectional data from the Current Population Survey. Our results suggest that the decline was broad-based, present in a wide range of demographic and educational subgroups. In terms of population shifts, we find no evidence that compositional changes in the population with disabilities account for the average employment decline during the 1990s. In contrast, we find that compositional changes were important to the increase in employment among those with disabilities during the 1980s. Finally, we show that self-reported health among those with disabilities remained relatively stable in the latter half of the 1990s, making changes in health status an unlikely cause of declining employment rates.
The Supplemental Security Income Program
In Means-Tested Transfer Programs in the United States, ed. by Moffitt | Chicago: NBER and University of Chicago Press, 2003. 79-139 | With Burkhauser
Self-Reported Work Limitation Data: What They Can and Cannot Tell Us
Demography 39(3), August 2002, 541-555 | With Burkhauser, Houtenville, and Nargis
Data constraints make the long-term monitoring of the working-age
population with disabilities a difficult task. Indeed, the Current Population Survey (CPS) is the only national data source that offers detailed work and income questions and consistently asked measures of disability over a 20-year period. Despite its widespread use in the literature, the CPS and surveys like it have come under attack of late, with critics discounting the results of any research obtained from such data. We put these criticisms in perspective by systematically examining what the CPS data can and cannot be used for in disability research. Based on comparisons with the National Health Interview Survey (NHIS), a data set with much more information on health than the CPS, we find that the work limitation-based definition of disability available in the CPS underestimates the size of the broader population with health impairments in the NHIS, but that the employment trends in these two populations in the NHIS are not significantly different from one another. We then show that the trends in employment observed for the NHIS population defined by self-reported work limitation are not statistically different from those found in the CPS. Based on these findings, we argue (1) that the CPS and other nationally representative employment-based data sets can be used to monitor trends in outcomes of those with disabilities and, (2) that the dramatic decline in the employment of people with disabilities we describe in the CPS during the 1990s is not an artifact of the data.
United States Disability Policy in a Changing Environment
Journal of Economic Perspectives 16(1), 2002, 213-224 | With Burkhauser
In this paper we provide a broader perspective from which to evaluate
current disability policy. We begin by reviewing the major aspects of the
Disability Insurance and Supplemental Security Income programs. We then
examine trends in employment and disability benefit receipt among those
with disabilities, paying particular attention to the last 15 years. Within this
framework we summarize the primary difficulties in crafting an efficient
and equitable assistance program for a heterogeneous population that
changes with its environment. Finally, we place disability policy in the
context of the broader United States social welfare system and consider
how changes in other social welfare programs likely will affect disability program usage in the future.
Black-White Wage Inequality in the 1990s: A Decade of Progress
Economic Inquiry 40(1), 2002, 31-41 | With Couch
Using Current Population Survey data, we find that the gap between the wages of black and white males declined during the 1990s at a rate of about .60 percentage point per year. Wage convergence was most rapid among workers with less than 10 years of potential experience, with declines in the gap averaging 1.40 percentage points per year. Using standard decomposition methods, we find that greater occupational diversity and reductions in unobserved or residual differences are important in explaining this trend. General wage inequality tempered the rate of wage convergence between blacks and whites during the 1990s.
Optimal Indicators of Socioeconomic Status for Health Research
American Journal of Public Health 92, 2002, 1151-1157 | With Duncan, McDonough, and D. Williams
This paper examines the relationship between various measures of socioeconomic status (SES) and mortality for a representative sample of individuals. We use data from the Panel Study of Income Dynamics, sampling 3,734 individuals aged 45 and older who participated in the 1984 interview and tracking them between 1984 and 1994 using Cox event-history regression models. We found that wealth and recent family income were the indicators that were most strongly associated with subsequent mortality. These associations persisted after we controlled for the other SES indicators and were stronger for women than for men and for nonelderly than for elderly individuals. We found that the economic indicators of SES were usually as strongly associated with mortality as, if not more strongly associated with mortality than, the more conventional indicators of completed schooling and occupation.
How Working-Age People with Disabilities Fared over the 1990s Business Cycle
In Ensuring Health and Income Security for an Aging Workforce, ed. by Budetti et al. | Kalamazoo, MI: Upjohn Institute for Employment Research, 2001. 291-346 | With Burkhauser and Houtenville
Using data from the March Current Population Survey (CPS) we show that
while the longest peacetime economic expansion in the United States’ history has increased the economic well-being of most Americans, the majority of working-age men and women with disabilities have been left behind. Robust economic growth since the recession of the early 1990s has lifted nearly all percentiles of the income distribution of working-age men and women without disabilities beyond their previous business cycle peak levels of 1989. In contrast, the majority of working-age men and women with disabilities did not share in economic growth over this period. Not only did their employment and labor earnings fall during the recession of the early 1990s, but their employment and earnings continued to fall during the economic expansion that followed.
Premiums and Penalties for Surplus and Deficit Education: Evidence from the United States and Germany
Economics of Education Review 19(2), 2000, 169-178 | With Buchel and Duncan
An intriguing finding in the literature on the role of education in the labor market concerns workers who have acquired either more or less education than they say their jobs require. Contrary to predictions from a rigid, structural view of jobs, several authors have found that the labor market rewards workers for having completed more schooling than their jobs require and penalizes workers who have “too little” schooling. We investigate whether the structural changes in the labor market in the United States over the 1970s and 1980s (see Levy, F., and Murnane, R. 1992. “U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations” Journal of Economic Literature 30, pp. 1,333-1,381) affected the rewards and penalties associated with having too much or too little schooling for a job. We then examine whether the same rewards and penalties for surplus and deficit education observed in the United States apply in Germany, a country with a much more structured educational system and labor market. We test explicitly for differences over time in the United States and at a point in time between the United States and Germany. We find, consistent with a universalistic view of labor markets, more similarities across countries than over time.
Testing the Significance of Income Distribution Changes over the 1980s Business Cycle: A Cross-National Comparison
Journal of Applied Econometrics 14, 1999, 253-272 | With Burkhauser, Crews, and Jenkins
Demography 36(2), 1999, 219-232 | With Couch and Wolf
We provide estimates of a reduced-form model of the allocation of household time and money resources. We consider four demands for these resources: time spent working, time spent providing care for non-coresident elderly parents, time spent performing housework, and monetary transfers to non-coresident elderly parents. We focus on the effects of wage rates and parental characteristics on the allocation decisions of adult children and their households concerning these four demands. We find that households with individuals earning high wages rely relatively more on cash transfers and relatively less on time transfers than do lower-wage households. We also find evidence consistent with an unmeasured tendency of some families to provide multiple sources of support.
Macro-to-Micro Linkages in the Relation between Income Inequality and Mortality
The Milbank Quarterly 76(3), 1998, 315-339 | With Duncan, Kaplan, and Lynch
Characteristics of SSI and SSDI Recipients in the Years Prior to Receiving Benefits: Evidence from the PSID
In Growth in Disability Benefits: Explanations and Policy Implications, ed. by Rupp and Stapleton | Kalamazoo, MI: Upjohn Institute for Employment Research, 1998
Recounting Winners and Losers in the 1980s: A Critique of Income Distribution Methodology
Economics Letters 54, 1997, 35-40 | With Burkhauser and Crews
Who Is Protected by the ADA? Evidence from the German Experience
Annals of the American Academy 549, 1997, 101-116
Worker Adaptation and Employer Accommodation Following the Onset of a Work-Limiting Health Impairment
Journal of Gerontology 51b(2), 1996, s53-s60 | With Bound
The Potential Impact of the ADA on the Employment of People with Disabilities
In Implementing the Americans with Disabilities Act, ed. by West | Cambridge, MA: Blackwell Publishers, 1996 | With Burkhauser
Employment and Economic Well-Being Following the Onset of a Disability
In Disability, Work, and Cash Benefits, ed. by Mashaw, et al. | Kalamazoo, MI: Upjohn Institute for Employment Research, 1996 | With Burkhauser
The Economic Consequences of Disability: A Comparison of German and American People with Disabilities
Journal of Disability Policy Studies 5(1), 1994, 25-52 | With Burkhauser