The social impact of a WTO agreement in Indonesia

Indonesia experienced rapid growth and the expansion of the formal financial sector during the last quarter of the 20th century. Although this tendency was reversed by the shock of the financial crisis that spread throughout Asia in 1997 and 1998, macroeconomic stability has since then been restored, and poverty has been reduced to pre-crisis levels. Poverty reduction remains nevertheless a critical challenge for Indonesia with over 110 million people (53 percent of the population) living on less than $2 a day. The objective of this study is to help identify ways in which the Doha Development Agenda might contribute to further poverty reduction in Indonesia. To provide a good technical basis for answering this question, the authors use an approach that combines a computable general equilibrium (CGE) model with a microsimulation model. This framework is designed to capture important channels through which macroeconomic shocks affect household incomes. It allows making recommendations on specific trade reform options as well as on complementary development policy reforms. The framework presented in this study generates detailed poverty outcomes of trade shocks. Given the magnitude of the shocks examined here and the structural features of the Indonesian economy, only the full liberalization scenario generates significant poverty changes. The authors examine their impact under alternative specifications of the functioning of labor markets. These alternative assumptions generate different results, all of which confirm that the impact of full liberalization on poverty would be beneficial, with wage and employment gains dominating the adverse food price changes that could hurt the poorest households. Two alternative tax replacement schemes are examined. While direct tax replacement appears to be more desirable in terms of efficiency gains and translates into higher poverty reduction, political and practical considerations could lead the Government of Indonesia to choose a replacement scheme through the adjustment of value-added tax rates across nonexempt sectors.Rural Poverty Reduction,Economic Theory&Research,Poverty Assessment,Achieving Shared Growth,Inequality

Europe and Central Asia's great post-communist social health insurance experiment : impacts on health sector and labor market outcomes

The post-communist transition to social health insurance in many of the Central and Eastern European and Central Asian countries provides a unique opportunity to try to answer some of the unresolved issues in the debate over the relative merits of social health insurance and tax-financed health systems. This paper employs a regression-based generalization of the difference-in-differences method and instrumental variables on panel data from 28 countries for the period 1990-2004. The authors find that, controlling for any concurrent provider payment reforms, adoption of social health insurance increased national health spending and hospital activity rates, but did not lead to better health outcomes. The authors also find that adoption of social health insurance reduced employment in the economy as a whole and increased unemployment, although it did not apparently increase the size of the informal economy.Health Monitoring&Evaluation,Health Systems Development&Reform,Population Policies,Health Economics&Finance,Disease Control&Prevention

Reassessing the Gender Wage Gap: Does Labour Force Attachment Really Matter? Evidence from Matched Labour Force and Biographical Surveys in Madagascar

Assessing gender inequalities has become one of the key issues of the new international poverty reduction strategies implemented in most LDCs in the past few years. It has been argued that differences in labour force attachment across gender are important to explain the extent of the gender earnings gap. However, measures of women's professional experience are particularly prone to errors given discontinuity in labour market participation. For instance, the classical Mincerian approach, where potential experience is used as a proxy for actual experience due to lack of appropriate data, has its limits in estimating the true returns to human capital. Such biases in the estimates cannot be ignored since the returns to human capital are used in the standard decomposition techniques to measure the extent of gender-based wage discrimination. By matching two original surveys conducted in Madagascar in 1998 - a labour force survey and a biographical survey - we built a unique dataset that enabled us to combine the original information gathered from each of them, particularly the earnings from current employment and the entire professional trajectories. Our results lead to an upward reappraisal of returns to experience, as potential experience always exceeds actual experience, for both males and females. In addition, controlling for further qualitative aspects of labour force attachment, we obtain a significant increase in the portion of the gender gap explained by observable characteristics, while the differences in average actual experience across sexes lead to markedly different estimates of the fraction of the gender earnings gap explained by experience.gender wage gap, returns to human capital, labour force participation, biographical data, Madagascar.

Household and Individual Decision-Making Over the Life Cycle: A First Look at Evidence from Peruvian Cohorts

Peruvian society has achieved significant improvements in terms of lower fertility and mortality over the last forty years, which has brought down population growth rates to less than 1. 2% a year. These improvements have led, on average, to a demographic transition with lower dependency ratios. In general, this transition increases the ability of the society to take proper care of its non-working population groups, children and the elderly, which may be reflected in changes in household structure. We identify stylized facts about the implications of these changes at the micro level through the use of pseudo-panels from household-level data for Peru. We calculate age, cohort and year effects for variables related to household structure, educational attainment, labor force participation and savings. We find some evidence that suggests differences, by educational level, in the Peruvian demographic transition. Household size is smaller for the younger cohorts in all households but those with less educated heads. We argue that these different profiles are explained by the fact that reductions in fertility have not reached the less educated. On the one hand, these differences in household size patterns are similar to those in the number of children. On the other hand, cohort patterns in family living arrangements—i. e. , households with extended families—are similar across educational groups. However, family living arrangements change throughout the life cycle, in the sense that extended families are more common for households with very young (under 25) and elderly (over 60) heads. These changes in family arrangements over the life cycle add confusion to the meaning of headship, since in some cases the household reports as its head the older member and in other cases the main income earner. We also find that younger cohorts are more educated, are larger than older ones, and show lower returns to education. This is consistent with an increase in relative supply of educated workers that outpaces the increase in relative demand induced by economic growth, under the assumption of imperfect substitutability between equally educated workers of different cohorts. Finally, we show that intergenerational family arrangements over the life cycle limit the ability of the life cycle hypothesis (LCH) to explain household savings behavior. We find evidence that Peruvian households, especially the less educated, smooth consumption over the life cycle, not only through the typical saving-dissaving mechanism, but also by smoothing income. Net cash transfers, or living arrangements between parents and their offspring, play an important role in this income smoothing.

Labor Market Institutions and Demographic Employment Patterns

Using data from 17 OECD countries over the 1960-96 period, we investigate the impact of institutions on the relative employment of youth, women, and older individuals. Theoretically, we show that labor market institutions meant to improve workers' income share imply larger disemployment effects for groups whose labor supply is more elastic. Using an empirical model that allows us to control for unmeasured country-specific factors that affect relative employment and unemployment, we find that, for both men and women, more extensive involvement of unions in wage-setting significantly decreases the employment rate of young and older individuals relative to the prime-aged, with no significant effects on the relative unemployment of these groups. In contrast, a larger role for unions has insignificant effects on male-female employment differentials, but raises female unemployment relative to male unemployment. These results suggest that union wage-setting policies price the young and elderly out of employment and drive disemployed individuals in these groups to non-labor-force (education, retirement) states. A possible scenario for women is that high union wages encourage female labor force participation, but that women who would otherwise be disemployed by high wage floors are able to find work in unregulated sectors or are absorbed by public employment.

Commitment and the Modern Union: Assessing the Link Between Premarital Cohabitation and Subsequent Marital Stability

In recent years, the incidence of premarital cohabitation has increased dramatically in many countries of Western Europe and in the United States. As cohabitation becomes a more common experience, it is increasingly important to understand the links between cohabitation and other steps in the process of family formation and dissolution. We focus on the relationship between pre- marital cohabitation and subsequent marital stability, and analyze data from the 1981 Women in Sweden survey using a hazards model approach. Our results indicate that women who premaritally cohabit have almost 80 percent higher marital dissolution rates than those who do not cohabit. Women who cohabit for over three years prior to marriage have over 50 percent higher dissolution rates than women who cohabit for shorter durations. Last, cohabitors and non-cohabitors whose marriages have remained intact for eight years appear to have identical dissolution rates after that time. In addition, we provide evidence that strongly suggests a weaker commitment, on the part of those who cohabit premaritally, to the institution of marriage.

Bearing children in unstable times: psychological traits and early parenthood in a lowest-low fertility context, Rostock 1990 - 1995

In this paper, we analyze a unique longitudinal data set from Rostock in Eastern Germany. Data collection began in the communist era and has been followed up until today. Employing proportional-hazard models, we use psychological individual-level measures (such as personality traits, social and cognitive resources, coping styles, etc.) at age 20 as determinants of the subjects´ subsequent transition rate to parenthood. We find strong evidence to support the notion that psychological factors function as proximate determinants of differential fertility. We conclude that psychological individual-level data are important in understanding patterns, especially during times when society faces massive and incalculable upheavals.