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Global Skill Partnership: Regulate skilled migration for global equity

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The migration of skilled labor is often seen as unfair, benefiting rich countries (through receiving well-skilled workers to fill labor demands) at the expense of poor ones (who bear the financial burden of education and experience a brain drain of their skilled population). This concern is particularly acute in the health sector. A common reaction is to call for limits or taxes on the migration of skilled workers. But there is an alternative: Change the terms on which migration among the highly trained occurs, so that the countries involved agree to terms that are mutually beneficial.

Michael Clemens, in a new article in the IZA Journal of Labor Policy, has proposed a novel policy tool to regulate skilled migration. A ‘Global Skill Partnership’ can connect skilled immigration directly with skill formation in the migrant-origin country—on terms beneficial to both countries and without restrictions on mobility.

In a Global Skill Partnership, the two countries agree up front on mechanisms for employers, governments, or workers at the destination to support technical training at the origin, for both migrants and non-migrants. Destination countries benefit from large cost savings in training, filling shortage occupations, and recruiting on equitable terms. Origin countries benefit from training support, net increases in human capital, stronger training institutions, and technology transfer. And migrants benefit from mobility to international professional opportunities.

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Roadmap to vocational education and training: IZA research in ILR Review symposium on skills

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The latest issue of the Industrial and Labor Relations Review addresses the closely linked topics of skill shortages, skill mismatch and structural unemployment. The core of this collection of articles consists of three papers on skill demand and skill supply issues, complemented by papers on firm-level developments in countries like Korea, Spain, Italy and China, which point at the role of differently skilled segments of the workforce.

The articles by Peter Cappelli and Katharine Abraham focus on the current situation in the United States. A third contribution by IZA researchers Werner Eichhorst, Núria Rodríguez-Planas, Ricarda Schmidl and Klaus F. Zimmermann outlines a “Roadmap to Vocational Education and Training in Developed Countries”. This article provides a broad and structured overview on the evidence that is available on the effects of different types of vocational education and training, such as vocational schooling, formal apprenticeships and dual vocational training on the transition from school to work and early individual labor market careers.

The paper makes a strong point in arguing that dual vocational training can pave the way to sustainable jobs for young people because during the dual apprenticeship they acquire a combination of occupational and general skills that matches the skill demand from the employer side. Hence, effective forms of vocational training can help avoid skills shortages on the one hand, and mismatch and unemployment on the other. Dual vocational training systems are quite demanding as they require the involvement of firms, social partners and government. Building such capacities is not an easy task for policy makers as existing points of departure vary considerably between countries. Nonetheless, developing effective training models seems viable if they take these conditions into account.

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Carmel Chiswick on the effect of economic choices for religious traditions

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In a video interview, IZA Fellow Carmel U. Chiswick (George Washington University) talks about the link between economic choices and religious traditions.

She states how economic incentives can be the context for religious traditions and what the economic choices are when you are born into a particular religion. Furthermore, Chiswick explains how international migration affects religious observance of migrants. Finally, she addresses the role of religious laws.


 

For more information on this topic see Carmel Chiswicks’s book on Judaism in Transition: How Economic Choices Shape Religious Traditions.

Barry Chiswick on the design of immigration policies

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In a video interview, IZA Fellow Barry Chiswick (George Washington University) talks about the design of immigration policies.

He explains how today’s immigration policy can draw on the U.S. experience with mass immigration a century ago, and whether the current annual flow of non-OECD immigrants into OECD countries is too high or too low. Moreover, Chiswick comments on the U.S. approach of focusing on border enforcement to control illegal or unauthorized immigration.


 

For more information on migration economics see related articles in IZA World of Labor.

David Neumark on the employment effects of minimum wages

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In a video interview, IZA Fellow David Neumark (University of California, Irvine) talks about the employment effects of minimum wages – one of the most hotly debated issues in labor economics.

Although a minimum wage policy is intended to ensure a minimal standard of living, unintended consequences undermine its effectiveness, says Neumark. Widespread evidence indicates that minimum wage increases are offset by job destruction. Furthermore, the evidence on distributional effects, though limited, does not point to favorable outcomes, although some groups may benefit.

For more information on this topic see David Neumark’s article on Employment effects of minimum wages published in IZA World of Labor.

The negative labor market outcomes of a Muslim minority: How policy can make a big difference

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The labor market success of ethnic and religious minorities often lags behind the average population. Discrimination, segregation and cultural frictions are suspected to drive

Nitsa Kasir, Eran Yashiv

this gap in wages and employment probabilities. Israeli Arabs are a striking example of such a disadvantaged minority. IZA fellow Eran Yashiv and his co-author Nitsa Kasir analyze the role that government policy can play to mitigate this disadvantage through investment in education, active labor market policies, physical infrastructure, tax and benefits reform, and anti-discrimination legislation and enforcement.

(Note: This column was originally published on voxeu.org; edited and reposted with permission.)

In Israel, almost 21% of the 8.3 million population is Arab, predominantly Muslim. The economic performance of this native minority lags behind that of Jews, in particular in the labor market. Recent work has documented the key features of this under-performance and has studied policy solutions. Some of these issues and solutions may be relevant for other advanced economies with Muslim minorities.

[Read more…] about The negative labor market outcomes of a Muslim minority: How policy can make a big difference

Interview with the authors of Applied Nonparametric Econometrics

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The majority of empirical research in economics ignores the potential benefits of nonparametric methods, while the majority of advances in nonparametric theory ignore the problems faced in applied econometrics. A new book by IZA fellow Daniel J. Henderson (University of Alabama) and Christopher F. Parmeter (University of Miami) helps bridge this gap. In an interview with IZA Newsroom, the authors explain what it’s all about.

What are nonparametric methods? Sounds like pretty dry stuff…

It’s all in the pitch. Nonparametric regression is simply a special case of classic linear regression. Anyone who understands weighted least-squares can understand nonparametric regression. For example, local-linear regression is simply linear regression local to a point of interest. That is, instead of weighting via say heteroskedastic errors, we give more weight to observations near the point of interest. When this is repeated over a grid of points, we end up with a smooth function that does not require a priori restrictions and hence better fits the data.

Why is this particularly relevant for labor economists?

Labor economists recognize that the impact of a policy is likely heterogeneous across a population. Some individuals may benefit more than others while some may actually be worsened. These differences often result from underlying nonlinearities in the relationships between variables policy makers have control over and the observed outcomes. Typically the underlying relationship is not known to the researcher/policy maker and hence many labor economists are turning to nonparametric methods.

Can you give an example from the real world?

In a recent IZA Discussion Paper, Ozabaci, Henderson and Su look at the relationship between child care use by single mothers in the United States and their children’s subsequent test scores. The choice of when/whether a woman should return to work is an important question and it is also relevant whether or not the government should subsidize such care. The use of nonparametric methods here confirms many of the findings in the literature (e.g., negative returns to child care when mothers have higher levels of education), but as the estimators allow for heterogeneity both across and within groups, they are able to contradict many findings in the literature. Specifically, they are able to show that it is the amount (more child care leads to more negative returns) and not type (formal versus informal) of child care that matters.

What was your motivation for writing this book?

We believe the majority of empirical research in economics still ignores the potential benefits of nonparametric methods. Applied economists do not necessarily dismiss these methods because they do not like them. We believe a major reason many do not employ them is because they do not understand how to use them. Our book helps bridge the gap between applied economists and nonparametric econometricians/statisticians by teaching the methods in terms that someone with one year of graduate econometrics can understand.

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The last will: Unequal division between children is more common than you think

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There are many reasons why parents may consider distributing their inheritance unevenly among their children. One of them might have a much higher income, or a larger family. Or perhaps the daughter took care of the ill parents while the son only showed up for Christmas (or vice versa).

An IZA Discussion Paper by Marco Francesconi, Robert A. Pollak and Domenico Tabasso shows that unequal bequests are much more common than generally recognized, with one third of parents with wills planning to divide their estates unequally among their children. This behavior is particularly concentrated in complex families, that is, families with stepchildren and families with genetic children with whom the parent has had no contact (e.g., children from previous marriages). The researchers use data from the Health and Retirement Study (HRS) that regularly interviews 22,000 Americans above age 50.

Comparing parents who have had no contact with at least one of their genetic children with those who have had at least some contact with all of their genetic children, the authors find the no-contact parents about 25 percentage points less likely to intend equal bequests. The data also indicates that as the proportion of stepparents has risen considerably in the last twenty years, so has the fraction of parents who plan unequal bequests.

Furthermore, the researchers find that many elderly Americans have not made wills. 30 percent of HRS respondents aged 70 and over have no wills. And of the HRS respondents who died between 1995 and 2010, 38 percent died intestate (i.e., without wills). So focusing exclusively on the bequest intentions of parents who have made wills provides an incomplete and misleading picture of end-of-life transfers.

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James Heckman on Gary Becker’s unique approach to economics

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Gary Becker (December 2, 1930 – May 3, 2014) has changed the economic profession like few before him. With his brilliant work on human capital and the economics of the family, but also on such issues as drug abuse and crime, he broadened both the scope and the methodology of economics.

Gary S. Becker † 

A new IZA Discussion Paper by James Heckman analyzes what made Becker’s approach so unique and fruitful in transforming empirical economics by extending the range of problems considered by economists.

Becker’s approach was distinguished by data-driven model-building, going back and forth between empirical analysis and theoretical hypotheses. Initial mismatches between models and data led to creative insights to empirical challenges. Consistent research schemes along his long career demonstrate his ability to focus on problems over long stretches of time.

Don’t doze off… Being tired might make you risky

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It is common sense that making important decisions after a night of poor sleep might be a bad idea. Marco Castillo, David L. Dickinson and Ragan Petrie put this notion to an experimental test. In a study published in the IZA series, they exploit differences in people’s circadian cycle. Individuals differ in what is called the “diurnal preference”: Some people are early risers or “morning types” while others are most alert in the evening.

The experimenters assigned individuals from both groups to sessions early in the morning or late at night, where they were asked to place tokens on more or less risky investments. The results indicate that being tired is associated with a higher willingness to take risks.

This experimental evidence is in line with real world observations, such as the increased likelihood of being involved in traffic accidents for individuals who are “off” their circadian cycle. The findings may also have important implications for businesses in the financial sector, where long working days with little sleep are common and go hand in hand with risky decisions involving large monetary stakes.

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