Is Retirement Depressing?: Labor Force Inactivity and Psychological Well-Being in Later Life

This paper assesses how retirement - defined as permanent labor force non-participation in a man's mature years - affects psychological welfare. The raw correlation between retirement and well-being is negative. But this does not imply causation. In particular, people with idiosyncratically low well-being, or people facing transitory shocks which adversely affect well-being might disproportionately select into retirement. Discontinuous retirement incentives in the Social Security System, and changes in laws affecting mandatory retirement and Social Security benefits allows the exogenous effect of retirement on happiness to be estimated. The paper finds that the direct effect of retirement on well-being is positive once the fact that retirement and well being are simultaneously determined is accounted for.

The Correlation of Welath Across Generations

This paper examines the similarity in wealth between parents and their children, and explores alternative explanations for this relationship. We find that the age-adjusted elasticity of child wealth with respect to parental wealth is 0.37, before the transfer of bequests. Lifetime income and ownership of particular assets, both of which exhibit strong intergeneration similarity, jointly explain nearly two-thirds of the wealth elasticity. Education, past parental transfers, and expected future bequests account for little of the remaining elasticity. Using new experimental evidence, we assess the importance of risk tolerance. The risk tolerance measures vary as theory would predict with the ownership of risky assets, and are highly correlated between parents and children. However, they explain little of the intergenerational correlation in the propensity to own different assets, suggesting that children's savings propensities are determined by mimicking their parents' behavior, or the inheritance of preferences not related to risk tolerance. Additionally, these risk tolerance measures explain only a small part of the remaining intergenerational wealth elasticity.

Gender Differences in Completed Schooling

This paper summarizes the dramatic changes in relative male-females educational attainment over the past three decades. Stock measures of education among the entire adult population show rising attainment levels for both men and women, with men enjoying an advantage in schooling levels throughout this interval. Cohort specific analysis reveals that these stock measures mask two interesting patterns: (a) gender difference at the cohort level had vanished by the early 1950 birth cohort and reversed sign ever since; (b) for several cohorts, attainment rates were flat for women and flat and falling for men. This last is puzzling in the face of the large college premia that these cohorts observed when making their schooling choices. We present a simple human capital model showing how the anticipated dispersion of future wages should affect educational investment and find that a model which includes measures of future earnings dispersion fits the data for relative schooling patterns quite well.

Job Displacement, Disability, and Divorce

This paper examines how job displacement and physical disability suffered by a spouse affects the probability that the person's marriage ends in divorce. According to the standard economic model of marriage, the arrival of new information about a partner's earning capacity that a negative earnings shock conveys might affect the gains that the couple believes it will receive from remaining married. Shocks may therefore affect divorce probability. Little previous work has explored this issue. The few efforts that exist use no explicit measures of earning shocks. Using the Panel Study of Income Dynamics, this paper finds an increase in the probability of divorce following a spouse's job displacement but no change in divorce probability after a spousal disability. This difference casts doubt on a purely pecuniary motivation for divorce following earnings shocks, since both types of shocks exhibit similar long-run economic consequences. Furthermore, the increase in divorce is found only for layoffs and not for plant closings which suggests that information conveyed about a partner's non-economic suitability as a mate due to a job loss may be more important than the financial losses in precipitating a divorce.

Conspicuous Consumption and Race

Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. We demonstrate that these differences exist among virtually all sub-populations, that they are relatively constant over time, and that they are economically large. While racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used to reflect a household's economic position relative to a reference group. Using merged data on race and state level income, we demonstrate that a key prediction of our model -- that visible consumption should be declining in mean reference group income -- is strongly borne out in the data separately for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption. We conclude with an assessment of the role of conspicuous consumption in explaining lower spending by racial minorities on items likes health and education, as well as their lower rates of wealth accumulation.

Studying Discrimination: Fundamental Challenges and Recent Progress

We discuss research on discrimination against blacks and other racial minorities in labor market outcomes, highlighting fundamental challenges faced by empirical work in this area. Specifically, for work devoted to measuring whether and how much discrimination exists, we discuss how the absence of relevant data, the potential noncomparability of blacks and whites, and various conceptual concerns peculiar to race may frustrate or render impossible the application of empirical methods used in other areas of study. For work seeking to arbitrate empirically between the two main alternative theoretical explanations for such discrimination as it exists, we distinguish between indirect analyses, which do not directly study the variation in prejudice or the variation in information, the mechanisms at the heart of the two types of models we review, and direct analyses, which are more recent and much less common. We highlight problems with both approaches. Throughout, we discuss recent work, which, the various challenges notwithstanding, permits tentative conclusions about discrimination. We conclude by pointing to areas that might be fruitful avenues for future investigation.

Do State Laws Affect the Age of Marriage? A Cautionary Tale About Avoidance Behavior

This paper investigates the response of young people in the United States to state laws dictating the minimum age at which individuals could marry, with and without parental consent. We use variation across states and over time to document behavioral responses to laws governing the age of marriage using both administrative records from the Vital Statistics and retrospective reports from the U.S. Census. We find evidence that state laws delayed the marriages of some young people, but the effects are much smaller in Census data than in Vital Statistics records. This discrepancy appears to be driven by systematic avoidance behavior of two kinds. First, some young people marry outside their state of residence, in states with less restrictive laws. Second, many young people appear to have evaded minimum age of marriage laws by misrepresenting age on their marriage certificate. This avoidance was especially pronounced in earlier years, when few states required documented proof of age and when there was greater gain to marrying out of state because of wider variation in laws. Our results have important implications about the quality of administrative data when it is poorly monitored; about the effect of laws when agents can avoid them; and about the validly of estimates using cross-state variation in laws as an instrumental variable. By contrasting two data sources, we achieve a more complete picture of behavioral response than would be possible with either one alone.

Employment, Wages and Voter Turnout

This paper argues that, since activities that provide political information are complementary with leisure, increased labor market activity should lower turnout, but should do so least in prominent elections where information is ubiquitous. Using official county-level voting data and a variety of OLS and TSLS models, we find that increases in wages and employment: reduce voter turnout in gubernatorial elections by a significant amount; have no effect on Presidential turnout; and raise the share of persons voting in a Presidential election who do not vote on a House of Representative election on the same ballot. We argue that this pattern (which contradicts some previous findings in the literature) can be fully accounted for by an information argument, and is either inconsistent with or not fully explicable by arguments based on citizens’ psychological motivations to vote in good or bad times; changes in logistical voting costs; or transitory migration. Using individual-level panel data methods and multiple years’ data from the American National Election Study (ANES) we confirm that increases in employment lead to less use of the media and reduced political knowledge, and present associational individual evidence that corroborates our main argument.

Conspicuous Consumption and Race

Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. These differences exist among virtually all subpopulations, are relatively constant over time, and are economically large. Although racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used as a costly indicator of a household\u27s economic position. Using merged data on race- and state-level income, we demonstrate that a key prediction of the status-signaling model—that visible consumption should be declining in reference group income—is strongly borne out in the data for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption