High times for students

https://pixabay.com/en/tobacco-smoking-cigarettes-porro-978239/When a U.S. state passes a medical marijuana law (MML), effectively lowering the costs of obtaining marijuana for both patients and non-patients, part-time college students in the state spend significantly less time attending and studying for class. Moreover, this reduction in educationally productive time is approximately offset by an increase in time spent watching television.

These results, reported in an IZA discussion paper by researchers Yu-Wei Luke Chu (Victoria University of Wellington) and Seth Gershenson (American University & IZA), enhance our understanding of how marijuana usage affects the accumulation of human capital in two main ways. First, it suggests that there is a negative, causal relationship between marijuana use and educational outcomes, since increased marijuana use is the main mechanism through which MMLs are likely to affect students’ time use.

Second, these results provide evidence on the mechanisms through which access to marijuana might affect college students’ educational achievement and attainment. These results are broadly consistent with those of a previous IZA paper, which demonstrates that increased access to marijuana decreased the academic performance of students at Maastricht University, particularly among relatively low-performing students.

Unintended consequences of medical marijuana laws

More generally, these results contribute to a growing literature on the impacts of MMLs on individuals’ behaviors and health outcomes, some of which are arguably unintended consequences of the laws. For example, past research documents positive effects of MMLs on illicit marijuana use and negative effects on the suicide rates of young men, alcohol-related traffic fatalities, and the prevalence of obesity.

Like in past studies, the authors identify the effect of MMLs on time use using a difference-in-differences strategy that compares student time use between MML and non-MML states, after controlling for pre-existing (i.e., pre-MML implementation) differences between the two types of states. Individuals’ daily time use is measured using data from 24-hour retrospective time diaries collected by the American Time Use Survey (ATUS), which is a nationally representative survey that has been administered annually since 2003 by the Bureau of Labor Statistics. Retrospective time diaries are the ideal instruments with which to measure time spent in school-related activities, as they likely yield more accurate measures of students’ non-school time use and are less prone to over-reporting of socially desirable activities than are other types of survey instruments.

MMLs did not affect secondary (high school) students’ time use, which is consistent with extant evidence that MMLs did not affect teenagers’ marijuana use, nor did MMLs affect full-time college students. Because full-time college-goers tend to be stronger academically than part-time college-goers, the latter null result is also consistent with evidence that access to marijuana disproportionately harms the achievement of relatively low-performing students. Another interesting source of heterogeneity is demographic background: the impact of MMLs on part-time students’ time use is slightly larger in magnitude among black students and male students, two demographic groups who attend and complete college at lower rates than their white and female counterparts.

These results remind of the potential for unintended consequences of public policy, which should be accounted for in both the design and evaluation of MMLs.

Read the complete paper (IZA DP No. 9887):

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IZA Prize goes to Claudia Goldin


Claudia Goldin

The 2016 IZA Prize in Labor Economics goes to Claudia Goldin, the Henry Lee Professor of Economics at Harvard University. Professor Goldin has been awarded the IZA Prize for her career-long work on the economic history of women in education and the labor market.

The award ceremony at which the Prize will be conferred formally will be held during the annual meeting of the Allied Social Science Associations in Chicago, IL, USA on January 6, 2017.

The decision on awarding the Prize was made by the IZA Prize Committee, which consists of six distinguished economists, five of whom are previous Awardees.

Read more about Claudia Goldin, her impressive vita, her “detective work” as an economic historian and labor economist, and her insights on the gender gap:

[more about the IZA Prize]

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Two solutions to the challenges of population aging

By Milena Nikolova

Population aging—the increase of the share of older individuals in a society due to fertility declines and rising life expectancy—is an irreversible global trend with far-reaching economic and socio-political consequences. By 2050, the number of people aged 60 and older will more than double from its current levels, reaching around 2 billion. While Europe was the first global region to embark on a demographic transition, most of the expected growth in the number of older people by 2050 will come from developing countries. Population aging will likely lead to declining labor forces, lower fertility, and an increase in the age dependency ratio, the ratio of working-age to old-age individuals. To illustrate, while there were 10 workers for every person older than 64 in the world in 1970, the expected number in 2050 is only four; it will even be less than two in some European countries.


Milena Nikolova

Aging populations pose a challenge to the fiscal and macroeconomic stability of many societies through increased government spending on pension, healthcare, and social benefits programs for the elderly. This may hurt economic growth and overall quality of life if governments need to divert public spending from education and infrastructure investment to finance programs for the elderly. In addition, the recent economic crisis not only increased the demand for social protection but it also drew attention to population aging issues as many countries faced unsustainable public debts. In many nations, the already-high public spending limits the fiscal possibilities for increased aging-related spending in the long run. Therefore, pertinent and prompt policy solutions are necessary to ensure fiscal and macroeconomic sustainability as well as the health and well-being of citizens of all ages.

Two-part solution focused on work

For monetary and non-monetary reasons, work is a pivotal element of one’s well-being. Recognizing this could be an essential part of the solution. Paid work contributes not only to material well-being but also to psychological well-being through social interactions and opportunities for personal and professional growth. And unpaid work, like volunteering, care work, and artistic work, can provide these same psychological benefits. Given these positive effects, encouraging and rewarding paid and unpaid work among the elderly could be a pivotal part of the solution to the aging-related fiscal and social challenges.

To enact such a strategy, policy-makers could consider: (i) a gradual retirement scheme allowing older individuals to lower their working hours yet remain in the workforce and pay taxes until a later age; and (ii) furnishing options for and rewarding volunteering, care, and artistic activities among older society members.

Phased-in retirement, fiscal sustainability, and well-being

retirementEncouraging older workers to remain longer in the labor force is often cited as the most viable solution to fiscal pressures and macroeconomic challenges related to population aging. Phased-in retirement entails a scheme whereby older workers could choose to work fewer hours yet remain longer in the labor force, including after they retire. And gradual retirement can be beneficial to societies, employers, and workers:

  • First, phased-in retirement allows continuity in tax revenues and reduced expenditure on pensions, which holds particular importance for fiscal and macroeconomic stability;
  • Second, older workers can be valuable to organizations and younger colleagues due to their knowledge and experience;
  • And third, late-life work has positive health and perceived well-being consequences for older employees.

Promotion of volunteering, care, and artistic work among the elderly

volunteersIn cases where individuals are unable to take advantage of phased-in retirement—due to health issues, family obligations, or skills mismatch—governments could promote and reward volunteering, care work, and artistic work among the elderly. Such unpaid activities improve the quality of the social fabric, help the well-being of those engaging in them, contribute to the economy, and reduce healthcare and welfare costs.

Volunteering is among the most important pro-social behaviors with many social and individual benefits. For example, about 25 percent of U.S. residents volunteer, providing 7.9 billion hours of service and contributing $184 billion of service. Additionally, late-life volunteers have lower rates of deteriorating mental and physical health and delayed mortality. Because of these benefits, national policies should seek to facilitate, reward, and adapt such opportunities for older individuals. And care work undertaken by older people—such as childcare, preparing meals, cleaning, and helping the elderly or disabled—should be recognized for its value and rewarded financially.

Further, providing incentives and encouraging the elderly to engage in creative work related to painting, music, or creative writing can also be beneficial to society and prevent social isolation. Governments can promote such activities by financing arts and crafts courses in social clubs or community centers for older participants.

Policy conclusions

Providing opportunities for the elderly to remain in the workforce longer as well as engage in volunteering, care, and artistic activities can provide both social and economic benefits and relieve some of the fiscal pressures related to aging societies. However, work activities for the elderly do not automatically translate into social welfare gains. Policies should be arranged in a way that recognizes the dignity and autonomy of older individuals as opposed to providing them with meaningless or degrading tasks merely to keep them occupied. In addition to furnishing meaningful and rewarding opportunities, activities should be adapted to the physical and mental aptness of older individuals. And while paid and unpaid work activities are beneficial to society and the elderly, allowing for choice and autonomy is key.

It’s also important to recognize that implementing these programs and schemes may have short-term costs. Employers and older workers may face bargaining costs related to negotiating phased-in retirement options. Employers could also incur expenses related to restructuring or adapting tasks, while local governments may need to open community centers to accommodate volunteering and other activities for the elderly. Nonetheless, the long-run welfare benefits to society will likely exceed these short-run costs and improve fiscal and macroeconomic health.


This is a slightly edited version of an article that originally appeared on the Brookings Institution’s Up Front blog. Reposted with kind permission.

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The market for paid sick leave

In most OECD countries, general practitioners (GPs) play several fundamentally different roles. Clearly, on the one hand, they are responsible for their patients’ health and physical well-being. On the other hand, they also play an often unforeseen, but economically important role: acting as the arbiters of sick leave. This latter capacity is of great fiscal relevance because doctors act as “gatekeepers,” deciding which types of social insurance expenditures and medical treatments are ultimately necessary for their patients.

While the GP is probably the person best placed to objectively assess the true health condition of the patient, in a market this position is ripe with skewed incentives and moral dilemmas. For example, if some patients exaggerate or even ‘invent’ health problems to justify paid absence from work, might they, as customers, choose those doctors that are more generous in giving out sick notes?

In order to find out how this particular situation affects doctors’ behavior, Knut Røed and Simen Markussen empirically analyzed Norwegian doctors’ standards when it comes to doling out sick leave and the patients’ choices of GPs. In their new IZA Discussion Paper, the experts from the Ragnar Frisch Centre for Economic Research first identified each doctor’s degree of leniency, i.e., the physician’s readiness to give out a sick note to a patient.

To do this, they designed an indicator based on the overall certification of sick pay days for each doctor’s patients, taking into account the different characteristics of patients (age, employment, etc.) and the fact that many patients often switch doctors. In a second step, the authors were then able to use this leniency indicator to examine the extent to which workers chose family doctors which were more generous in giving out sick notes.

Lenient doctors attract more patients

The researchers show that not only do patients choose the more “free handed” doctors, but doctors actually anticipate the “leniency preference” of their customers when choosing their own level of leniency. Moreover, when the local competitive environment changes—for example, when another doctor moves to town, increasing competitive pressure—GPs tend to become more lenient to attract or keep patients.

But how much does this actually account for social welfare losses? The authors propose that if all the GPs in Norway received fixed salary contracts instead of letting them run their own businesses, the level of illness-induced absence from work would decrease by roughly 3-4%. Given that the Norwegian physician market has relatively little competition, the authors expect this effect to be much larger in more competitive markets.

The study concludes that by combining the incompatible roles of business owner and health provider, GPs are faced with highly contradictory incentives. In such a situation, GPs are forced to decide between performing their “gatekeeping” function in the most ethical manner possible or furthering their financial interests by attracting and keeping more patients as customers.

Read the complete paper (IZA DP No 9825):

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Gender discrimination at work: What if your boss is a woman?

female-bossDespite the remarkable increase of female participation in education, the labor market and political life that has taken place over the past several decades, women are on average still paid less than men and are largely underrepresented in supervisory, managerial and executive positions. As research has shown, firms profit from establishing gender balance throughout their workforce for several reasons, for example, through promoting a more cooperative work environment.

Another positive effect of having women in leadership positions was highlighted in a new IZA Discussion Paper by Claudio Lucifora (Università Cattolica del Sacro Cuore and IZA) and Daria Vigani (Università Cattolica del Sacro Cuore), which investigates the association between female leadership, work organization practices and perceived gender discrimination within firms.

The female boss effect

The authors use data for 30 European countries for the period 1995-2010 and find that having a female boss is associated with lower overall gender discrimination at work. When investigating the underlying mechanisms that shape gender imbalances within firms, Lucifora and Vigani find evidence of a “women helping women” pattern, along with its associated spill-over effects, which leads to a reduction in discrimination toward women.

A better balance between work and life, a supportive work environment, and flexible working time, particularly for women in high-skilled jobs, are shown to be effective in reducing gender discrimination. There are several implications of the above findings for gender equity at work:

First, promoting a higher presence of women in leadership positions all along the occupational spectrum is an effective way of reducing gender bias and discrimination toward women in workplaces. This has a direct (causal) effect as well as an indirect (spill-over) effect on female subordinates in predominantly female jobs. While there is evidence of an adverse effect on male employees in predominantly female jobs, it is difficult to say whether this is the result of a reversal of (taste or statistical) discrimination against women or a genuine behavioral effect of women discrimination toward men.

Second, the results show that when there is a gender bias in the way work is organized (long working hours, rigid working-time schedules and low work-life balance), women are more likely to be penalized. Thus, promoting family-friendly work practices such as part-time work, flexible working time and parental leave arrangements is another effective way to better balance work and life across gender, particularly for women (and men) with caring responsibilities.

Changing work culture

Whether these changes should be implemented through company provided benefit schemes, through public subsidies for part-time work and child care facilities, or both is yet to be assessed. Conversely, any company or public policy that disproportionately rewards long and inflexible working time schedules, either through company bonuses or tax-breaks on overtime work, will make it more difficult for women to gain higher management positions.

The same is true for career concerns that are centered on high work intensity and rank-ordered tournaments, which are likely to reduce opportunities for women in organizations as well. While affirmative action and mandatory quotas for women in executive boards may reverse the general pattern in top positions, the results suggest that female leadership itself can have a welfare improving effect on gender discrimination all along the occupational hierarchy.

Read the complete article:

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Are you clever enough to tell the truth?

dice People have different propensities to tell the truth, particularly when there is an incentive to lie. According to an experiment conducted with soldiers and civilians in Israel, researchers found that it’s not the differences in religious, economic or social background that determines who is more willing to lie or tell the truth. Instead, the analysis by Yossi Tobol (Jerusalem College of Technology) and Bradley J. Ruffle (Wilfrid Laurier University) revealed a striking correlation between honesty and cognitive ability.

The truth-telling experiment was conducted with a group of 427 Israeli soldiers and repeated with 156 random passersby in an Israeli shopping mall. After a survey about individual characteristics, the participants were asked to roll a six-sided die in private and then state the rolled number. Higher reported numbers were rewarded with spare time for the soldiers and small monetary incentives for the civilians.

Common sense about rolling a fair die tells us that each side should show up with about equal frequency. Here is what the soldiers’ results look like (the civilian results are similar):

diceHigher numbers were disproportionately reported by both the soldiers and civilians. Interestingly, the authors found that one specific characteristic was related to differences in reporting. Soldiers who scored higher on cognitive ability in their military entrance test (kaba) were less likely to over-report by lying about their die roll.

dice2This result is somewhat surprising in that rewards for lying in this experiment are clear and straight-forward (rewards in spare time/money). Still, however, there are costs associated with lying, for example, through later detection and/or an eroded self-image of honesty. The authors suggest that higher cognitive-ability subjects are able to think through these costs and, as a result, resist the temptation to inflate their die reports.

Download the complete paper (IZA DP No. 9860):

Read coverage in the Washington Post’s Wonkblog (April 14, 2016):

The importance of such internal costs of lying via an eroded self-image have also been shown in a phone call experiment conducted in Germany by Johannes Abeler (University of Oxford and IZA), Anke Becker (University of Bonn) and Armin Falk (briq and IZA), published as IZA DP No. 6919. These authors find almost no pattern of lying in their experiment despite the fact that detection was virtually impossible and thus the reputation costs were almost negligible.

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How to close the disability employment gap

disabilityAnti-discrimination legislation has been largely ineffective at improving the employment prospects of the disabled. A new report, just published by IZA World of Labor, finds that despite the introduction of a range of legislative and policy initiatives designed to eliminate discrimination and facilitate work, disability is still associated with substantial and enduring employment disadvantages.

Author of the report Melanie Jones (Cardiff University) states:

mjones“There is no consistent evidence that anti-discrimination legislation has improved the labor market outcomes of disabled individuals.”

Key points of the report:

  • Across European countries, one in eight working-age individuals (aged 15–64) report disability as defined by a long-term health problem.
  • There is evidence of a substantial and enduring disability employment gap (average of 20 percentage point difference between disabled and non-disabled persons).
  • There is little evidence that legislation prohibiting disability discrimination has led to a narrowing of the disability employment gap.
  • Employers are crucial in supporting flexibility and adjustments to work to enable employees with a disability to retain or recommence employment.
  • Government policies and welfare systems should support reentry/entry into the workforce for people with disabilities.

IZA-WoL-disabilityUnderstanding the work-related well-being of disabled workers is not only important in its own right, but also because of its likely contribution to the employment and earnings gaps via the impact on the recruitment, retention and productivity of disabled individuals. It is also important to note that differences in the type, severity and chronicity of disability are fundamental to the pattern of disadvantage experienced, and are therefore also critical to the design of effective support mechanisms.

Jones advises that the importance of the employer (and effective occupational health) is recognized in supporting flexibility and adjustments to work in order to enable employees to keep their jobs, or recommence employment. The government also plays an important role in this regard, by providing incentives for employers to retain disabled workers and by designing welfare systems that support working disabled individuals rather than schemes which provide permanent support conditional on not working. The broadening of permitted employment and/or the provision of temporary financial support to facilitate work-related adjustments would provide greater incentives for disabled individuals to remain in work, or return to work, when they are able.

Read the full article online:

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