Research – Page 52

Is formal care as good as the support of loving grandparents?

November 19, 2014 by admin

Since early childcare plays an important role in the development of cognitive skills, it partially determines success later in life. What improves cognitive ability and behavioral development at a young age is therefore of crucial policy importance.

While early psychological theories have stressed the need for maternal care, more recent studies in psychology as well as in sociology and economics show that other childcare arrangements do not necessarily produce negative outcomes. Two of the most common alternatives to parental care are support by the grandparents and formal care centers.

In a new IZA Discussion Paper, Daniela Del Boca, Daniela Piazzalunga and Chiara Pronzato analyze the influence of these arrangements on the development of the child. Using data on 10,000 babies born in the UK in 2000 and 2001, the researchers find that children cared for by grandparents are better at naming objects, but perform worse in tests concerning basic concepts development, problem-solving, mathematical concepts and constructing ability than children in formal care.

Concerning school readiness at age three, the authors observe a positive effect of formal care centers, while more hours spent with grandparents have a negative influence. Also the positive effect on grandparents’ support on vocabulary at age three vanishes when the children become five years old.

Nevertheless, these results hide strong heterogeneities: The positive association between grandparents’ care and child outcomes is stronger for children growing up in more advantaged households (higher income and education) while the negative association is significant only for children in more disadvantaged households (lower income and education).

Is formal care as good as the support of loving grandparents?

November 18, 2014 by admin

Mobilizing employment potentials of the service sector in manufacturing-heavy economies

November 17, 2014 by admin

Modernizing developed economies in order to remain competitive in global markets is a pressing issue when manufacturing jobs can be automated or off-shored, with the threat of many of these jobs disappearing in the nearer future. This potentially affects all developed economies, but in particular manufacturing-heavy countries such as Germany or Korea.

The Korean Development Institute (KDI) recently organized an international expert forum in Seoul to discuss how to promote future employment potentials in different types of services. A major challenge is to take advantage of technical innovations such as digitalization to create new and more sophisticated manufacturing goods that can be complemented by services. In the future we will likely see more service-oriented types of employment around innovative manufacturing core activities. Here, skill formation, but also regional and sectoral clustering is important. And the better this works, the smaller is the risk of off-shoring and automation, as IZA Director of Labor Policy Europe Werner Eichhorst explained at this event, using the German experiences as a case in point.

Related to the issue of rapid structural change and observable job polarization between knowledge-intensive and personal service tasks in many developed economies is the important issue of creating employment opportunities for the most disadvantaged, in particular the low-skilled and the long-term unemployed. Here, different options are available: training investment, publicly supported employment and direct job creation or a more flexible labor market relying on non-standard types of employment and low pay.

An international workshop organized by the Korean Employment Information Service (KEIS) collected the international evidence and stimulated the exchange of national experiences with these policy approaches. Apart from questions around the design and evaluation of active labor market policies for the most vulnerable groups, Werner Eichhorst addressed the issue of low pay and increased labor market flexibility as an alternative option in order to foster job creation for low-skilled or long-term unemployed people.

Werner Eichhorst also appeared on Korea’s Arirang television (Dec. 4, 2014):

Online quizzes can motivate students to learn more

November 11, 2014 by admin

A large fraction of students fail at university. One potential reason is that students do not exercise enough effort on a regular basis. If intrinsic motivation does not suffice to induce satisfactory student performance, then what interventions might help to increase student effort and performance?

In a recent IZA Discussion Paper, Arnaud Chevalier, Peter Dolton and Melanie Lührmann vary incentives for students to provide effort on a weekly basis. They focus only on one type of effort, participation to a weekly online quiz which provides students with feedback of their understanding of the lecture.

On a given week, students face either no incentive, get additional educational material if they participate, the best performer wins a book voucher, or the quiz is declared to be compulsory. In a second cohort, two additional incentives are included, the quiz grade counts for 2.5% or 5% towards the final grade for the course.

The study finds that the provision of additional educational material has little impact on weekly effort, whereas the book voucher rewarding only the top performer even reduces participation. But if effort is rewarded in terms of grades, then participation becomes close to what it is under compulsion. Assessment weighting increases quiz effort and continuous learning relatively more among lower ability students.

For the cohort subjects to the assessment weighting of quiz grades final grades improve at an average of 4%. These performance increases are in the order of magnitude of the results for large financial incentives. Since all incentives in the setup relate directly to course outcomes and are easy to scale up at a low cost, the authors conclude that it is quite easy to increase students effort and grades.

Which kids are born in a crisis? Evidence from the fall of the Berlin Wall

November 6, 2014 by admin

By Arnaud Chevalier and Olivier Marie

Do individuals born at different points of the economic cycle have different outcomes, and what could be the reasons? To answer this question, we explore the educational attainment and criminal activity of children born in East Germany, in the few years after the collapse of the Berlin Wall when uncertainty about the future was extremely high. We first discuss how such economic circumstances could affect parenting decisions of individuals differently depending on their characteristics and thus lead to cohort selection. We then provide empirical evidence on selection looking both at the child’s outcome and at the mechanisms which may have led to them.

This November, Germany and the rest of Europe celebrate the twenty fifth anniversary of the fall of the Berlin Wall which was perhaps the most symbolic moment of the collapse of the communist regimes in Eastern Europe. This event had colossal repercussions in the economic development of the region but also, and maybe less obviously, on its demography. Following the collapse of the Communist regimes, fertility in Eastern Europe went into a sharp decline. This was especially marked in East Germany which over a very short period experienced a 50% drop in fertility (see figure below) which has been described by demographers as the “most substantial fall in birth rates that ever occurred in peacetime”.

Based on administrative population data from the Federal Institute for Population Research.

Economic uncertainty was one of the main reasons for the fertility drop. Which kind of parents decide to still have children in these distressing economic times, and does this parental selection matter in terms of the cohort outcomes? Theoretically, an economic downturn has two opposite effects on the demand for children, it reduces household income (income effect) but it also reduces the opportunity costs of having children (substitution effect). Which effect dominates is a priori ambiguous, but since fertility is pro-cyclical, the income effect appears to dominate overall. In fact, it is likely that the relative size of the substitution and income effect depends on family characteristics, leading to differences in parental composition throughout the economic cycle. Indeed, a 2004 study shows that in the U.S. white mothers giving birth when unemployment is higher are less educated resulting in worse health outcomes at birth.

The fall of the Berlin Wall provides a unique “natural experiment” to study this question. In our 2013 paper we define the cohort of children born in East Germany between August 1990 (conceived just after the collapse of the wall) and December 1993 as the “Children of the Wall”. We provide evidence on parental selection based on i) the average criminal activity of the Children of the Wall as they grew up, ii) their educational attainment and iii) detailed individual level data, on both mother and child, regarding parental skills.

Using state level statistics on contact with the police by age group over the period 1993-2011, we find that the Children of the Wall exhibit arrest rates at least 40 percent higher when compared to older cohorts and to their West German peers. This is true for all crime types and for both boys and girls. Importantly, these differences in the frequency of contact with the police start appearing as early as age 6 (see figure below). This is despite being part of a numerically smaller cohort, which is usually associated with positive outcomes and is indicative of a strong negative parental selection.

Based on administrative arrest data provided by the Federal Criminal Police Office.
Vertical red lines indicate the Children of the Wall cohort.

Similarly, the children of the Wall have worse educational outcomes. Compared to their class peers who were conceived just before the wall fell, they have lower test scores in PIRLS (age 11-12) and PISA (age 15-16) and are over-represented amongst low achievers. As such, they are 33% more likely to have repeated a grade by age 12 and 9% more likely to have been put into a lower educational track.

To explore if these negative outcomes are driven by negative parental characteristics, we make use of very detailed survey data from the German Socio Economic Panel (SOEP) and the Deutsches JugendInstitut survey (DJI). Women who gave birth in East Germany just after the end of the communist regime were on average younger, less educated, less likely to be in a relationship and less economically active. Importantly, they also provided less educational input to their children even if they are not poorer. The Children of the Wall also rate their relationship with their mothers and the quality of parental support they have received by age 17 much less favorably than their peers. Both these children and their mothers are also far more risk-taking than comparable individuals who did not give birth (were not born) in East Germany between August 1990 and December 1993.

While these results are in line with negative parental selection, they could also be driven by timing of birth effects: Due to the economic turmoil prevalent at the time, these children may have experienced higher levels of maternal stress in utero and during early childhood, which may have shaped their future behavior. To assess this hypothesis, we examine the same set of outcomes for the older siblings of the Children of the Wall who were born in the non-uncertain times of East German Communism. They also similarly report having a poor relationship with their mothers, lower educational attainment, and are more risk taking individuals. We thus reject the possibility that the Children of the Wall have worse outcomes due to being born in ‘bad times’ and instead conclude that the negative outcomes observed for this cohort are explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty. A possible reason for this negative parental selection is that the fertility decision of these women does not react as strongly to changes in the economic environment. Indeed, further analysis of the SOEP reveals that, less educated mothers are far less l

Note: The graph plots the estimated probability of having a child in the period 1991/93 separately for individuals reported to be very worried about the economy (‘very’ = 1 and ‘somewhat’/‘never = 0) or not, by years of education for all women aged 17 to 47 surveyed in SOEP during this period. The probit model which generates these coefficients also includes education, age and year dummies. The grey area represents the 95 percent confidence intervals.

ikely than more educated one to reduce their fertility when they perceive a bad economic environment (see figure):

Our findings confirm that parental selection may be one of the best predictors of the future outcome of a cohort, and that this most likely works through quality of parenting. These conclusions have potentially important policy implications. First, provision of public services should not only be based only on the size of an incoming cohort, and more attention should be paid on its composition. Second, interventions need to start from a very young age, and targeting could probably be improved by more commonly including non-cognitive characteristics such as risk attitude of expecting mothers or children.

How many participants do you need to detect a treatment effect?

November 5, 2014 by admin

Experiments are commonly used in economics to test whether certain factors affect, for example, the behavior of consumers or the productivity of workers. When planning an experiment, several important decisions have to be made, such as how many subjects should participate. If this number is too small, there is a risk that the study cannot uncover an existing effect.

Another important question concerns the choice of design, whether participants take part in all experimental conditions (a so-called within-subjects design) or whether each participant takes part in only one experimental condition (between-subjects design). Both decisions imply tradeoffs. Between-subjects designs require more participants than within-subjects designs. But it is generally not known how much more participants are needed.

In a new IZA Discussion paper, Charles Bellemare, Luc Bissonnette and Sabine Kröger demonstrate how ex-ante power calculations can be conducted in a flexible way using simulations in order to compute the minimal number of participants. They show the trade-off between the choice of design and minimal number of participants needed. In their application of labor market gift giving field experiments, they find that between-subjects designs require 4 to 8 times more participants than within-subjects designs to reach the same power to detect an effect. The authors offer a STATA software package that runs the simulations and can be used to compute the minimal number of sample size needed to detect an effect for a variety of situations for different design choices.

Online quizzes can motivate students to learn more

November 5, 2014 by admin

Read the abstract or download the complete discussion paper [PDF].

Beware of moral hazard: Joint unemployment insurance for the EMU

October 29, 2014 by admin

The ongoing crisis calls for better fiscal cooperation within the European Economic and Monetary Union (EMU). Beyond tax policy coordination, there is also a strong demand for shock-absorbing mechanisms that could replace the lost instrument of exchange rate adjustment. The introduction of an EMU-wide unemployment insurance mechanism is currently debated as a potential tool to stabilize output and employment in recessions.

A new IZA Policy Paper by Werner Eichhorst and Florian Wozny analyzes and compares two different proposals:

A basic EU-wide unemployment insurance which uses direct contributions from employers and employees to provide a permanent minimum level of insurance benefits to the unemployed. Countries could increase benefit generosity through national contributions.
A “kicking-in” scheme that would supplement or extend national unemployment insurance schemes whenever predefined indicators, such as the interest rate of the unemployment rate, exceed a certain threshold.

Such insurance instruments naturally rely on heterogeneous developments of incurred risks. If insured countries were hit by a homogenous external shock, the system would be in trouble because all countries would need possible transfers for themselves. Although economic trends trend to converge between countries with extensive trade links, the recent crisis in the EMU showed that there would have been ample room to maneuver. At least in the recent past, a number of countries with relatively robust economies could have served as net contributors, which is the necessary condition for an insurance mechanism to work.

However, given that both EMU-wide unemployment insurance schemes are potentially vulnerable to moral hazard and manipulation, the design is of main interest. The existing proposals do not capture the main motivation of such a scheme in their design, which is to combat credit market constraints. Bank lending constraints, which led to high interest rates in the recent crisis, are a key argument for a transfer mechanism in the form of a transnational automatic stabilizer. Countries like Greece, Spain, Portugal and Ireland were unable to stabilize out-of-work income maintenance and support for the unemployed. Particularly in strong recessions, therefore, transnational unemployment insurance transfers would ease budget constraints in the hardest-hit countries.

A kicking-in scheme, linked to interest rate thresholds, captures these constraints. It would also reduce the risks of moral hazard and manipulation compared to a basic scheme. If policymakers actively tried to cross those threshold values in order to become entitled to transfers, this would be associated with the direct costs of higher interest payments, which makes manipulation less tempting. A further reduction of moral hazard could be achieved by linking transfers to structural reforms and other threshold values like the unemployment rate. Overall, this makes a kicking-in scheme appear superior to a basic scheme.

Should housework be shared more equally between partners?

October 24, 2014 by admin

Women do more housework than men. For most of history this phenomenon went largely unremarked. Housework was what women did, while men supported their families with paid work. However, the role of women has been changing: women’s educational levels are now at least as good as those of men; most women do paid work for most of their adult lives; and although gender pay gaps still exist, women’s earnings (in particular, the earnings of younger childless women) have been gradually approaching those of men. While things have also been changing in the domestic sphere, with men doing an increasing share of housework and childcare, surveys still show that women do the lion’s share of housework – even in households where both partners have full-time paid jobs.

Several theories have been proposed as to why unequal shares of housework have persisted even in the context when women do about as much paid work as men. The full range of these theories is discussed in a new IZA paper. The work by Katrin Auspurg, Maria Iacovou and Cheti Nicoletti investigates one strand of theory, namely the suggestion that men and women have systematically different preferences over housework because of internalized gender norms. Variants of this theory, which essentially proposes that women like housework more (or dislike it less) than men do, have been put forward by both economists and sociologists.

Previous attempts to test this theory empirically have been based on information on reported satisfaction or well-being gathered from surveys. These potentially suffer from a number of problems. First, surveys find so few households in which the man does most of the housework that it’s impossible to obtain reliable estimates of how people feel about these arrangements. Second, there is a potential problem of post-hoc rationalization – it’s likely that reported preferences are affected by people making the best of the situation in which they actually find themselves. And third, because preferences may be affected by some of the same factors which drive the amount of housework that people do, it’s almost impossible to work out the direction of any causal relationships.

The new paper takes a different approach, using data from an experiment conducted in the course of the Innovation Panel of Understanding Society. Men and women were presented with hypothetical scenarios (“vignettes”) in which several factors varied: the distribution of housework; the distribution of paid work; earnings; the presence of children; and whether the couple had paid help with housework. Each respondent was presented with three different scenarios, and was asked to rate how satisfied they would be with each scenario on a scale from 1 (completely dissatisfied) to 7 (completely satisfied). In all, 4,547 valid responses were obtained from 1,609 respondents.

The results show that:

(1) Both men and women prefer scenarios in which housework is shared more or less equally between members of a couple. They dislike scenarios in which their partner does most of the housework almost as much as they dislike scenarios in which they themselves do most of the housework.

(2) People consider paid work and housework in combination when assessing the scenarios. The general unpopularity of unequal housework distributions is reduced in scenarios where the partner doing more housework is doing less paid work, and increased in scenarios where the partner doing more housework is doing more paid work.

(3) Men’s and women’s preferences are remarkably similar over virtually the entire range of possible scenarios. The only discernible difference between the sexes is that women are less favorably disposed than men to working full-time themselves while their partner works part-time. But this difference is small and relates to paid work rather than housework.

The authors therefore conclude that there is no evidence that preferences over housework differ between the sexes as the result of internalized gender norms, and that the reasons behind the gendered allocation of housework must lie elsewhere, perhaps in the different bargaining strategies employed by men and women.

Can migration boost incomes, happiness and freedom satisfaction?

October 23, 2014 by admin

By Carol Graham and Milena Nikolova

The recent economic crisis and the subsequent lagging economic recovery renewed the immigration debate in the United States and beyond. While there are benefits from migration for the recipient economies, there are also potential costs, which range from concerns about migrants adding to the ranks of welfare systems, to threats to the jobs of natives, to the difficulties of assimilating migrants from different countries and cultures. On balance, migration’s benefits for the destination economies outweigh the costs: immigrants are net contributors to public coffers and complementarities between low-skilled immigrants and natives may exist, particularly when new migrants take low-skilled jobs that native workers eschew. While the effect of migration on the well-being of native populations is important, so is the question of how migrants fare once they reach their destination countries.

In part, this is because of the sheer magnitude of migration stocks: about 232 million people lived outside their country of birth in 2013. Most migrants move across international borders to maximize their earnings and to gain opportunities, and most do make significant income gains. Whether these earnings gains are mirrored by improvements in reported well-being and broader quality of life is still largely an open question, however.

Higher levels of immigrant well-being can be instrumentally important for social outcomes such as public health and productivity, as happier individuals are typically more productive and healthier. In contrast, immigrant dissatisfaction may reflect lack of assimilation and social exclusion, and even extremist attitudes among natives, all of which can result in social unrest and lower economic output. From the point of view of the sending countries, meanwhile, emigrant well-being is important as migrants send remittances and contribute to the well-being of their home countries through investments, the spread of ideas, and technology.

Understanding the well-being consequences of migrating is challenging, as comparing migrants with those who did not migrate in either the sending or the destination countries is methodologically flawed. Such comparisons may simply reflect the traits of those who choose to migrate, and who may have differences in ability, risk tolerance, aspirations, and motivation, for example. The direction of causality between well-being and migration is also unclear: while migration may influence well-being, the reverse can also be true. While migration may indeed affect happiness, a recent paper using South American data finds that respondents who intend to migrate in the next year are wealthier and more educated than the average, but also less happy and more critical of their current and future economic opportunities.

Despite the large income gains typically associated with migrating, it can also be accompanied by declining happiness because of adaptation and rising aspirations. While migrants’ (absolute) incomes increase, so do their expectations as they compare themselves to high-earning natives in the host countries. In a recent IZA Discussion Paper, we use Gallup World Poll data and statistical techniques to understand the well-being consequences of migration for movers from transition economies to advanced nations. Like other studies, we find unequivocal income increases due to migration. More importantly, we show that there are significant gains in life satisfaction and in perceptions of freedom. (See Figure 1 for the average well-being outcomes of migrants and stayers in the pre- and post-periods).

We studied migrants from transition and post-transition societies as they are quantitatively the most important migration source for the OECD economies in Europe. To illustrate, in 2012, Poland and Romania were among the top three migrant sources of OECD migrants. Migrants from transition economies leave countries, which are relatively more advanced and culturally similar to the destination countries, compared with movers from Asia, Africa, and Latin America, for example.

We find that migrants from transition countries achieve a better quality of life after they go abroad. The average household income premium from migration for our sample is about 21,000 international dollars (about 10,500 ID per household member). And even if reference norms and aspirations change, migrants’ life satisfaction also improves. The average benefit is substantively and statistically significant: an increase of about 1.0-1.2 (on a life satisfaction scale 0-10). Third, and perhaps most important, migration positively affects perceptions of freedom of choice, with migrants from the most recent EU enlargements being nearly 40 percent more satisfied with their freedom. Data from around the world show that freedom to seek life fulfillment is a pivotal element of human well-being.

At a time when there is ample reason to be concerned about the state of world affairs, our research findings are a “happy” story highlighting that by voting with their feet, migrants from transition economies can improve their well-being. Surely migration does not solve the problems in the countries the migrants left, nor can we be confident at this stage that our results apply to migrants from different origins and/or to those migrating to different destinations. Yet it does suggest that win-win outcomes are possible from increasing mobility in global labor markets. That is a story worth learning more about.

This post also appeared on the Brookings Institutions’s UP FRONT blog.

Milena Nikolova is a Research Associate at IZA and a Nonresident Fellow at Brookings. Carol Graham is the Leo Pasvolsky Senior Fellow at Brookings, College Park Professor at the University of Maryland, and a Research Fellow at IZA.