The Reservation Wage Theory, Vocational Rehabilitation and the Return to Work of Disabled Employees

Previous studies find that participation in educational measures does not increase sick-listed em-ployees’ chance of returning to work. This is surprising because education is supposed to increase human capital and raise productivity. However, a higher productivity may make the participants raise their reservation wage. Therefore, it is possible that educational measures increase the chance of returning to work in high pay jobs but reduce the chance of returning to work in low pay jobs. To test this hypothesis, we use panel data of 671 long-term sick-listed employees to estimate a random effects hazards rate model, with returning to work in high paid jobs and low-medium paid jobs, re-spectively, as the two outcomes. Our findings do not support the reservation wage hypothesis. We find that while participation in education significantly increases the probability of returning to work in medium or low paid jobs, it does not affect the probability of resuming work in high paid jobs.

Comparing Fixed Effects and Covariance Structure Estimators

In this paper we compare the traditional econometric fixed effect/first difference estimator with the maximum likelihood estimator implied by covariance structure models for panel data. Our findings are that the maximum likelihood estimator is remarkable robust to mis-specifications, however in general the fixed estimator is preferable in small samples. Furthermore, we argue that we can use the Hausman test as a test of consistency of the maximum likelihood estimator. Finally we show that the covariance structure models is not identified in the case of time-invariant independent variables.

Case Management Interviews and the Return to Work of Disabled Employees

This study measures the effect of case management interview (CMI) on 1,000 long-term sick-listed employees’ probability of returning to work. In contrast to previous studies, we use instrumental variables to correct for selection effects in CMI. Using a competing hazard rate model, we find that CMI increases the probability of returning to work for the pre-sick leave employer, but has no effect on the probability of resuming work for a new employer. We argue that CMI either motivates the sick-listed employees to resume work or adjusts for asymmetric information between the employee and the pre-sick leave employer.Hazard rate model; case management; long-term sickness; work-disability; return to work

Probit Models with Binary Endogenous Regressors

Sample selection and endogeneity are frequent causes of biases in non-experimental empirical studies. In binary models a standard solution involves complex multivariate models. A simple approximation has been shown to work well in bivariate models. This paper extends the approximation to a trivariate model. Simulations show that the approximation outperforms full maximum likelihood while a least squares approximation may be severely biased. The methods are used to estimate the influence of trust in the parliament and politicians on voting- propensity. No previous studies have allowed for endogeneity of trust on voting and it is shown to severely affect the results.endogeneity; multivariate probit; approximation; Monte Carlo simulation

How Stressful is Retirement? New Evidence from a Longitudinal, Fixed-effects Analysis

The purpose of this paper is to investigate the effect of retirement on psychological well-being. Findings from previous research in this field are inconsistent, as both positive, negative, and sometimes no effect of retirement on well-being is reported. In the paper we suggest that the divergent results may arise from the mixing of cross-sectional and longitudinal studies, problems with the size and quality of existing longitudinal data, and the statistical methods used to analyze the impact of retirement on well-being. In the paper we propose to deploy the fixed-effect estimator whichs provides consistent estimates of the effect of retirement on well-being, even when retirement is correlated with other observed and unobserved explanatory variables. Using a large (N = 4,634) and nationally representative panel data set with elderly Danish respondents, we find that retirement does not have any significant effect on well-being. When estimating separate model for men and women we find indications (p = .06) that men experience a decline in well-being as a consequence of retirement, while women are unaffected by retirement. Our findings for men would substantiate the crisis theory perspective that holds that retirement implies a loss of important social roles associated with labor market participation. Several suggestions for future research are also discussed.retirement; psychological well-being; gender; methodology; fixed-effect model

Relative Risk Aversion and Social Reproduction in Intergenerational Educational Attainment: Application of a Dynamic Discrete Choice Mode

The theory of Relative Risk Aversion (RRA) claims that educational decision-making is ultimately motivated by the individual’s desire to avoid downward social class mobility, and that this desire is stronger than the desire to pursue upward mobility. This paper implements a dynamic programming model which tests the central behavioral assumption in the RRA theory stating that (1) individuals are forward-looking when choosing education and (2) that the RRA mechanism comprises an important component in the educational decision-making process. Using data from the Danish Youth Longitudinal Study, we find strong evidence of RRA in educational decision-making over and above the effect of traditional social background variables.

Selection Bias in Educational Transition Models: Theory and Empirical Evidence

Most studies which use Mare’s (1980, 1981) seminal model of educational transitions find that the effect of family background variables decreases across educational transitions. Cameron and Heckman (1998, 2001) have argued that this “waning coefficients” phenomenon might be driven by selection on unobserved variables. This paper, first, analyzes theoretically how selection on unobserved variables leads to waning coefficients and, second, illustrates empirically how selection affects estimates of the effect of family background variables on educational transitions. Our empirical analysis which uses data from the United States, United Kingdom, Denmark, and the Netherlands shows that the effect of family background variables on educational transitions is largely constant across transitions when we control for selection on unobserved variables. We also discuss the inherent difficulties in estimating educational transition models which deal effectively with selection on unobserved variables.

Job-search Incentives From Labour Market Programs - an Empirical Analysis

In this paper we examine whether the prospect of compulsory programme participation motivates individuals to leave the unemployment insurance (UI) system prior to participation. We analyze data from the Danish labour market. Here a series of reforms have enforced program participation and gradually restricted the duration of unemployment before individuals must enroll into programmes. However, there is substantial heterogeneity in enrollment probabilities. If individuals want to avoid participation and observe the heterogeneity in participation, this will also affect their search behaviour. We estimate a model for anticipatory effects of participation, allowing for heterogeneity, on search behaviour and find large significant effects from anticipation of enrollment on the exit probability out of unemployment.active labour market measures; hazard rates; unobserved heterogeneity

Intergenerational Educational Mobility in the Comprehensive Danish Welfare State: Testing the Primacy of Non-monetary Social Origin Effects

The aim of this paper is investigate the extent to which monetary and non-monetary social background factors explain intergenerational educational attainment in Denmark. The main hypothesis tested is that non-monetary social background factors (cultural, social, and cognitive parental resources) are particularly important relative to economic factors within the institutional context of the comprehensive and highly redistributive Danish welfare state. Drawing on the notion of ‘capital’ by Pierre Bourdieu and a longitudinal Danish data set, we find that parental economic capital is of little importance in explaining educational outcomes, while different non-monetary social background resources, and especially cultural capital, are very important. Our findings then indicate that a particular Scandinavian institutional “mobility regime” may exist in which educational inequalities are predominantly generated by non-monetary forms of stratification. Several suggestions for future research are also discussed.intergenerational educational mobility; Denmark; mobility regimes; Bourdieu; forms of capital; mixed logit model; concomitant variables; confirmatory factor analysis

Which background factors matter more in intergenerational educational attainment: Social class, cultural capital or cognitive ability? A random effects approach

The sociological research literature on intergenerational educational attainment has highlighted three types of theoretical frameworks in explaining to what extent social origins influences people’s educational choices and possibilities. The three explanatory frameworks are 1) the socio-economic situation in the upbringing, 2) the “cultural capital” of the home (e.g. the level of education of the parents), and finally 3) the cognitive abilities of the individual. While all three explanatory frameworks have been shown empirically to be of significance in explaining people’s educational attainment when analyzed individually or two at a time, then only very few studies have simultaneously included all three frameworks and thus been able to present a coherent picture of the influence of social origins on educational attainment vis-à-vis individual ability. As a consequence very little knowledge exists on the relative significance of each of the three explanatory frameworks in explaining educational attainment when analyzed in a common, multivariate setting. Using data from the Danish Youth Longitudinal Panel Survey we analyse the relative significance of each of the proposed explanatory frameworks in explaining intergenerational educational attainment. By means of a multinomial random effects logit model we find father’s social class to be the strongest predictor of educational attainment followed by father’s level of education and finally cognitive ability. Furthermore, we find that the direct effect of father’s level of education is complex in that it to some extent is transmitted via cognitive ability and is more vulnerable to unobserved characteristics captured in the random effect.educational attainment; social mobility; multinomial logit regression; random effects model; Denmark