In the United States the well-being of blacks is still below the well-being of whites. This has been shown by a new IZA Discussion paper by Betsey Stevenson and Justin Wolfers. Yet, compared to the early 1970s the study reveals that the racial gap in well-being has shrunk: two-fifths of the gap has closed and these relative gains have occurred despite little progress in closing other racial gaps such as those in income, employment, and education. The authors suggest that large declines in prejudicial attitudes towards blacks could be explained with improvements in the subjective well‐being of blacks. However there remains prejudice today and, along with it, a racial gap in well‐being, some of which may have its explanation in the unfinished parts of the civil‐rights era agenda. As much of the current racial gap in well-being can be explained by differences in the objective conditions of the lives of black and white Americans, the authors argue that making further progress will likely require progress in closing racial gaps in objective circumstances.
Search and mating: the effect of the Internet on marriage rates
Internet facilitates searching tremendously. This should not only be true when you shop online for books or software, but also when you are look for a partner. A new IZA discussion paper by Andriana Bellou examines the effects of Internet diffusion in the United States since the 1990s on marriage rates. By now, dating platforms are the second most popular venue of meeting a partner, especially among young people. Among couples that met in 1994-1998, 3.9% report having met online for the first time. Interestingly, this number has risen to 11% and 20% for couples that met between 1999-2003 and 2004-2006 respectively. Beyond these mere correlations, the author uses the geographic variation in the adoption of broadband Internet to show that there is a causal relationship between Internet diffusion and marriage rates. The estimates suggest that the increase in broadband access has contributed to higher marriage rates by roughly 13%-30% relative to what they might have been in the absence of this technology. Moreover, the results suggest that Internet has repelled other traditional meeting venues, such as through family and friends. Last, the author provides some suggestive evidence that Internet availability even reduces the probability of getting separated or divorced.
Former IZA Research Director and IZA Research Fellow Daniel S. Hamermesh talks about topical economic issues in the latest IZA Interview: what would be the consequences of a general minimum wage for the German economy? How will the U.S. budget cuts affect Europe? What can Europe learn from the U.S. in the current debt crisis? Why is it so difficult to fight labor market discrimination?
Pay later to increase honesty – evidence from a field experiment with soldiers
People tend to be more honest if they are not rewarded immediately but rather in the distant future. This is the result of a new IZA Discussion Paper by Bradley Ruffle and Yossi Tobol, who show in a field experiment with Israeli soldiers that honesty increases when temporally distancing the decision task from the payment of the reward. Each of 427 soldiers rolled a six-sided die in private and reported the outcome to the unit’s cadet coordinator. For every point reported, the soldier received an additional half-hour early release from the army base on Thursday afternoon. Soldiers who participated on Sunday (the first work day of the week) are significantly more honest than those who participated later in the week. The simple and likely explanation: as the week goes by, the weekend nears and becomes more relevant.
The finding could have quite interesting implications for everyday life: For example, insurance fraud whereby the customer overstates the value of claims or falsely reports missing or damaged items might be diminished by delaying reimbursement. Also, instead of immediately paying company managers and employees based on their self-reported tasks, remuneration should be delayed to some (possibly unannounced) future date to promote honesty. On a different level, parents often condition rewards to their children on good behavior or the completion of their chores or homework. The optimal time to ask your eight-year-old son whether he behaved well at school is not as you tear off the wrapper from his promised candy, but well beforehand.
According to the authors, there is, however, a flip side to this argument: if you want to hear reliable, honest intentions regarding a costly outcome, the question should be posed as close as possible to the outcome. Ask a person about his intention to begin exercising, dieting or saving not weeks ahead, but rather the day before the intended start date.
Do family-friendly policies hamper women’s careers?
Over the past 20 years, female labor participation in the U.S. has decreased remarkably relative to other Western countries: In 1990, the US had the sixth highest female labor participation rate among 22 OECD countries. By 2010, its rank had fallen to 17th. A recent IZA discussion paper by IZA Prize winner Francine D. Blau and Lawrence M. Kahn finds that the expansion of “family-friendly” policies including parental leave and part-time work entitlements in other OECD countries explains 28-29% of the increase in women’s labor force participation in these countries relative to the US.
However, the authors find that these family-friendly policies might come at a cost as they encourage part-time work and make women more likely to end up in lower level positions. In the U.S., women are more likely than in other countries to work as managers or professionals. Thus, the analysis suggests that there may be a tradeoff between family-friendly policies and women’s advancement at work. On the one hand, such policies likely facilitate the labor force entry of less career-oriented women (or of women who are at a stage in the life cycle when they would prefer to reduce labor market commitments). On the other hand, entitlements to long, paid parental leaves and part-time work may encourage women who would have otherwise had a stronger labor force commitment to take part-time jobs or lower-level positions. Moreover, on the employer side, such policies may lead employers to engage in statistical discrimination against women for jobs leading to higher-level positions: if employers cannot tell whether a female job candidate will downgrade to a part-time job later in the career, she might not be considered for a high-level position in the first place.
Older people are less productive: Evidence from professional chess players
Do people become less productive when they grow old? According to a new IZA Discussion Paper by Marco Bertoni, Giorgio Brunello and Lorenzo Rocco the answer is Yes. The authors analyze data on professional chess players — individuals doing a brain-intensive and purely individual activity — and find that the relationship between age and productivity follows an inverted U: productivity at chess increases by close to 20 percent from age 15 to its peak at age 42, and smoothly declines by 11 percent until age 60. This indicates that better skills and longer experience cannot completely offset the decline in numerical and reasoning abilities.
The finding is at odds with other evidence by Jan C. van Ours, which suggests that mental productivity of economists does not decline with age until the age of 60. Marco Bertoni, Giorgio Brunello and Lorenzo Rocco present the following argument that can reconcile the contradictory findings: less talented professionals are more likely to quit their job in early ages of the career. Therefore, older professionals are more able than the average professional across all ages. If one takes this selection mechanism into account, productivity declines with age — at least for chess players. If this finding also holds for other brain-intensive professions, it could have important macroeconomic implications given the ageing population in many developed countries.
The Guardian reports on IZA study: No ‘welfare migration’ within EU
According to a comprehensive study of 19 European countries over a period from 1993 to 2008, national differences in unemployment benefits have no impact on migration flows within the European Union. IZA researchers Corrado Giulietti, Martin Guzi, Martin Kahanec and Klaus F. Zimmermann find that — contrary to widespread prejudice — benefit generosity overall does not influence the individual decision to migrate. For non-EU immigrants only a small, statistically insignificant effect was found. “It is a popular myth that scores of immigrants come to take advantage of the welfare state,” said IZA Director Klaus F. Zimmermann. “While such cases exist, they are rather due to ill-designed immigration policies than to generous public benefits.”
Read the full article in The Guardian or download IZA Discussion Paper No. 6075.
David G. Blanchflower on the economic crisis and how to end it
IZA program director and visiting research fellow David G. Blanchflower talks about the economic crisis, tax policies and the role of central banks.
It matters if you’re black or white – on Australian buses!
Almost 60 years after the famous Montgomery Bus Boycott triggered by black civil rights activist Rosa Parks, a new IZA discussion paper by Paul Frijters and Redzo Mujcic investigates whether there is still racial discrimination in buses by conducting a natural field experiment in Queensland, Australia. The authors sent trained testers who differed in ethnic appearance to bus stops asking the driver for a free ride on the basis that their bus pass was faulty (which it was). In total, they obtained 1,552 observations of testers either allowed a free ride or not, in each case recording the characteristics of the bus driver, the tester, and the circumstances. The paper shows strong evidence of discrimination against black-skinned individuals.
White testers were accepted during 72% of the interactions versus only 36% for black testers. Indian testers were let on 51% of the time and Asian testers (mainly Chinese) were let on 73% of the time. Favors were more likely to be granted when the bus driver and tester were of the same ethnicity, and when there were fewer people in the bus. Patriotic appearance matters in that testers wearing army uniforms were accepted at a rate of 97% if they were white and 77% if they were black. Status appearance also mattered in that black passengers in business attire were just as likely to be favored as casually dressed white testers. When bus drivers were confronted with hypothetical situation of granting a free ride using photos taken of the real testers, 86% responded they would let on black passengers, more than double the actual number accepted, indicating dishonest self-reporting on this topic.
What happens to the careers of European workers when immigrants “take their jobs”?
A new IZA Discussion paper by Cristina Cattaneo, Carlo V. Fiorio and Giovanni Peri evaluates the effect of immigrants on the career of natives. The authors follow native individuals who have been exposed to competition of immigrants in European countries. In countries and occupations with more competition between native and immigrants they find that natives are pushed to faster occupational upgrades towards jobs using more sophisticated skills, requiring higher education and paying higher wages. Natives are also more likely to undertake enterpreneurial activities in response to larger immigrant competition. This implies that immigrants “push up” natives in the labor market and the overall effect on wages and income of natives is small and usually positive. The implications of these findings are that immigrants do not hurt native labor market opportunities but rather create incentives for their improvement. By filling manual and less-skilled occupations immigrants encourage native careers. More open immigration policies, combined with flexible labor markets, could result in better opportunity for the career of natives.