WP 21 - A two-step first-difference estimator for a panel data tobit model

This study formulates an easy-to-use two-step first-difference estimator for a panel data Tobit model. In the first step a bivariate Probit is estimated, using all observations. These estimates are used to construct correction terms that are added to the first-difference equation. This equation is estimated by Least Squares on a sub-sample of observations for which the dependent variable is positive in both periods. Most of this study is concerned with the derivation of the corrections terms.

WP 18 - Permanent and transitory wage inequality of British men, 1975-2001: Year, age and cohort effects

We examine the variance-covariance structure of log-wages over time and over the lifecycle of British men from 1975 to 2001, hereby controlling for cohort effects. Wage inequality has risen sharply during the 1980’s and early 1990’s and remained fairly constant in the second half of the 1990’s. We show that this increase is caused mainly by a strong increase in transitory wage inequality and only to a lesser extent to an increase in permanent wage inequality. The transitory component of log-wages is, however, highly persistent over time: serial correlation decreases from 0.88 over a one-year period to 0.65 over a ten-year period. The constant wage inequality in the second half of the 1990’s is attributed to a slight decrease in permanent wages inequality, a stabilization of the variance of the transitory wage shock, and the strong decrease in transitory wage inequality for the cohorts entering employment since the end of the 1980’s. Ignoring age effects in transitory wage inequality and cohort effects, as is commonly done, leads to severely distorted inferences concerning the changes in permanent wage inequality.Panel Data, Wage Distribution, Inequality, Mobility. JEL codes: C23, D31, J31, J60

A Decomposition of Poverty Trends across Regions: The Role of Variation in the Income and Inequality Elasticities of Poverty

globalization, poverty, income growth, inequality

Risk preferences, preventive behaviour, and the probability of a loss : Empirical evidence from the COVID-19 pandemic

Rationale: A theoretical model of optimal choice under risk, in which an individual chooses the level of prevention to avoid a loss, has the ambiguous prediction that a higher risk-taking preference increases the probability of a loss. Objective: To empirically investigate the prediction in the case of COVID-19 with individual-level survey data. Data: Survey data from the Understanding America Study (UAS). The UAS Coronavirus Tracking Survey followed 8628 respondents from March 2020 until July 2021 (29 survey waves) and data was gathered on having contracted COVID-19, vaccination, and preventive behaviour. Separate UAS modules gathered data on individuals’ risk preferences; twice before and once during the COVID-19 pandemic. UAS also gathered data on pre-pandemic health and socio-economic status. Combining these data, and dropping missing observations, provided longitudinal data for 4335 respondents (96,370 observations) of whom 530 contracted COVID-19. Results: In support of the theoretical prediction, the empirical findings show that a one-standard deviation higher risk-taking preference is associated with about a one-third higher probability of contracting COVID-19 within two weeks. Furthermore, the findings show that individuals’ risk-taking preference is negatively associated with the preventive behaviour of social distancing and not associated with getting vaccinated. There is, however, no support for preventive behaviour being associated with the probability of contracting COVID-19. The exception is for being vaccinated, which is negatively associated with the probability of contracting COVID-19. The findings, therefore, do not support that the positive association of the risk-taking preference with the probability of contracting COVID-19 is mediated through observed preventive behaviour. Conclusions: The findings support the importance of individuals’ risk-taking behaviour for contracting COVID-19 and, more generally, the importance of loss prevention as a risk management tool for individuals

The associations between early life circumstances and later life health and employment in the Netherlands and Spain

Using data from the Survey of Health, Ageing and Retirement in Europe, this paper provides empirical evidence for the Netherlands and Spain on the associations between individuals' early life circumstances - measured by health and socioeconomic status (SES) during childhood - educational attainment, and later life health and employment (at ages 50-64). We find that for both men and women in the Netherlands and Spain, favorable early life circumstances (i.e., better childhood health and higher SES) are associated with a higher level of education, which is in turn associated with better health later in life. This latter is also linked to early life circumstances conditional on educational attainment. For men only, favorable early life circumstances are associated with a higher incidence of later life employment, primarily because of better later life health. Our findings thus suggest that policies aimed at improving children's s health and SES may have long-term benefits through increased individual educational attainment and later life health and employment.Early life circumstances, health, employment

Григорій Герасимович Аврахов

Обірвалася земна дорога відомого літературознавця, текстолога, викладача й педагога, музейного працівника Григорія Герасимовича Аврахова

WP 20 - Individuals’ unemployment durations over the business cycle

Using a large panel of administrative records on unemployment durations this study confirms the predictions of the ranking model of Blanchard and Diamond (1994) that an individual’s probability of leaving unemployment decreases with unemployment duration and increases with labour market tightness. I find no strong empirical evidence to support the further prediction of the ranking model that genuine negative duration dependence is stronger the more depressed the labour market. Moreover I show that the findings in some previous studies in line with this latter prediction of the ranking model may arise from failing to control for cyclical fluctuations in the composition of the newly unemployed. In line with the matching model of Lockwood (1991) I find that genuine negative duration dependence is slightly stronger the tighter the labour market for unemployment durations up to four years.Unemployment, Duration model, Business Cycles