Search Results
Discussion Paper
Individual heterogeneity and interindustry wage differentials
Estimates of interindustry wage differentials are obtained using a fixed-effects estimator on a long panel, the National Longitudinal Survey of Young Men (NLS). After controlling for observable worker characteristics, 84 percent of the residual variance of log wages across industries is explained by individual fixed-effects. Only 16 percent of the residual variance is explained by industry dummies. Since no controls for specific job characteristics are used, job characteristics that vary across industries could potentially explain this rather small residual across-industry log wage variance ...
Working Paper
Health Shocks, Health Insurance, Human Capital, and the Dynamics of Earnings and Health
We specify and calibrate a life-cycle model of labor supply and savings incorporating health shocks and medical treatment decisions. Our model features endogenous wage formation via human capital accumulation, employer-sponsored health insurance, and means-tested social insurance. We use the model to study the effects of health shocks on health, labor supply and earnings, and to assess how health shocks contribute to earnings inequality. We also simulate provision of public insurance to agents who lack employer-sponsored insurance. The public insurance program substantially increases medical ...
Discussion Paper
Sectoral shift theories of unemployment: evidence from panel data
This paper examines the response of sectoral real wages and location probabilities to oil price shocks using U.S. micro-panel data (the National Longitudinal Survey of Young Men). The goal is to determine whether the observed response patterns are consistent with so-called sectoral shift theories of unemployment. These theories predict that shocks that change sectoral relative wages should increase unemployment in the short run and lead to labor reallocation in the long run. Consistent with these predictions, the oil price changes of the 1970s resulted in substantial movements in industry ...
Journal Article
A new idea for welfare reform
This article analyzes several proposals to build work incentives into the U.S. welfare system. It concludes that the most cost effective way to do that is to offer a work subsidy to all low-income single parents?in other words, to simply pay them for working in the labor market. This conclusion is based on a model of the labor force participation behavior of low-income single mothers that the author developed with Robert Moffitt. Among the proposals evaluated in the article, besides the work subsidy, are proposals to reduce the rate that welfare benefits are reduced when welfare recipients ...
Working Paper
What Explains the Growing Gender Education Gap? The Effects of Parental Background, the Labor Market and the Marriage Market on College Attainment
In the 1960 cohort, American men and women graduated from college at the same rate, and this was true for Whites, Blacks and Hispanics. But in more recent cohorts, women graduate at much higher rates than men. To understand the emerging gender education gap, we formulate and estimate a model of individual and family decision-making where education, labor supply, marriage and fertility are all endogenous. Assuming preferences that are common across ethnic groups and fixed over cohorts, our model explains differences in all endogenous variables by gender/ethnicity for the ‘60-‘80 cohorts ...
Working Paper
A structural model of multiple welfare program participation and labor supply
One of the long-standing issues in the literature on transfer programs for the U.S. low-income population concerns the high cumulative marginal tax rate on earnings induced by participation in the multiplicity of programs offered by the government. Empirical work on the issue has reached an impasse partly because the analytic solution to the choice problem is intractable and partly because the model requires the estimation of multiple sets of equations with limited dependent variables, an estimation problem which until recently has been computationally infeasible. In this paper we estimate a ...
Report
Statistical inference in the multinomial multiperiod probit model
Statistical inference in multinomial multiperiod probit models has been hindered in the past by the high dimensional numerical integrations necessary to form the likelihood functions, posterior distributions, or moment conditions in these models. We describe three alternative approaches to inference that circumvent the integration problem: Bayesian inference using Gibbs sampling and data augmentation to compute posterior moments, simulated maximum likelihood (SML) estimation using the GHK recursive probability simulator, and method of simulated moment (MSM) estimation using the GHK simulator. ...
Working Paper
The career decisions of young men
Report
An empirical analysis of income dynamics among men in the PSID: 1968-1989
This study uses data from the Panel Survey of Income Dynamics (PSID) to address a number of questions about life cycle earnings mobility. It develops a dynamic reduced form model of earnings and marital status that is nonstationary over the life cycle. The study reaches several firm conclusions about life cycle earnings mobility. Incorporating non-Gaussian shocks makes it possible to account for transitions between low and higher earnings states, a heretofore unresolved problem. The non-Gaussian distribution substantially increases the lifetime return to post-secondary education, and ...
Report
Mixture of normals probit models
This paper generalizes the normal probit model of dichotomous choice by introducing mixtures of normals distributions for the disturbance term. By mixing on both the mean and variance parameters and by increasing the number of distributions in the mixture these models effectively remove the normality assumption and are much closer to semiparametric models. When a Bayesian approach is taken, there is an exact finite-sample distribution theory for the choice probability conditional on the covariates. The paper uses artificial data to show how posterior odds ratios can discriminate between ...