What Determines Family Structure?

We estimate the effects of policy and labor market variables on the fertility, union formation and dissolution, type of union (cohabiting versus married), and partner choices of the NLSY79 cohort of women. These demographic behaviors interact to determine the family structure experienced by the children of these women: living with the biological mother and the married or cohabiting biological father, a married or cohabiting step father, or no man. We find that the average wage rates available to men and women have substantial effects on family structure for children of black and Hispanic mothers, but not for whites. The tax treatment of children also affects family structure. Implementation of welfare reform and passage of unilateral divorce laws had much smaller effects on family structure for the children of this cohort of women, as did changes in welfare benefits. The estimates imply that observed changes from the 1970s to the 2000s in the policy and labor market variables considered here contributed to a reduction in the proportion of time spent living without a father by children of the NLSY79 cohort of women. This suggests that the observed increase in this non-traditional family structure in the U.S. in the last three decades was caused by other factors.family structure

Social Security and the Retirement and Savings Behavior of Low Income Households

In this paper, we develop and estimate a model of retirement and savings incorporating limited borrowing, stochastic wage offers, health status and survival, social security benefits, Medicare and employer provided health insurance coverage, and intentional bequests. The model is estimated on sample of relatively poor households from the first three waves of the Health and Retirement Study (HRS), for whom we would expect social security income to be of particular importance. The estimated model is used to simulate the responses to several counterfactual experiments corresponding to changes in social security rules. These include changes in benefit levels, in the payroll tax, in the social security earnings tax and in early and normal retirement ages.Social Security, Retirement, Savings

Evaluating the Effect of an Antidiscrimination Law Using a Regression-Discontinuity Design

The regression discontinuity (RD) data design is a quasi-experimental design with the defining characteristic that the probability of receiving treatment changes discontinuously as a function of one or more individual characteristics. This data design occasionally arises in economic and other applications but is only infrequently exploited in evaluating the effects of a treatment. We consider the problem of identification and estimation of treatment effects under a RD data design. We offer an interpretation of the IV or so-called Wald estimator as a regression discontinuity estimator. We propose nonparametric estimators of treatment effects and present their asymptotic distribution theory. Then we apply the estimation method to evaluate the effect of EEOC-coverage on minority employment in small U.S. firms.

Unintended Consequences of Welfare Reform: The Case of Divorced Parents

This paper formulates a model to examine the effects of changes in tax-benefit policy on the behavior of divorced parents and the well-being of children in single-parent households. Noncustodial parents choose the level of a child support payment to transfer to custodians. These, in turn, decide over child good expenditures and the allocation of time between market work and parenting. In general, ex-spouses fail to achieve an efficient allocation of their resources. On the custodial side, there are inefficiently high levels of labor supply and inefficiently low levels of expenditures on child goods, while on the noncustodial side child support payments are suboptimally low. Our results rationalize the adverse effects that welfare reforms might have on divorced parents and their children. Such adverse effects may arise because an increase in the custodian's effective wage, either through lower marginal income tax rates or higher childcare subsidies, reinforces the inefficiencies of divorced parents' decisions: that is, such an increase further depresses child support transfers from noncustodial parents and induces custodial parents to work even more. We explore several extensions of this model, link our findings to the existing empirical literature on the impacts of welfare reform, and discuss the implications of our results for policy and further economic analysis.non-intact families, in-work benefit reform, child care, child support, non-cooperation

Anatomy of Welfare Reform Evaluation:Announcement and Implementation Effects

This paper formulates a simple model of female labor force decisions which embeds an in-work benefit reform and explicitly allows for announcement and implementation effects. We explore several mechanisms through which women can respond to the announcement of a reform that increases in-work benefits, including sources of intertemporal substitution, human capital accumulation, and labor market frictions. Using the model�s insights and information of the precise timing of the announcement and implementation of a major UK in-work benefit reform, we estimate its effects on single mothers� behavior. We find large and positive announcement effects on employment decisions. We show that this finding is consistent with the presence of frictions in the labor market. The impact evaluations of this reform which ignore such effects produce implementation effect estimates that are biased downwards by 15 to 35 percent.

A Regression-Discontinuity Evaluation of the Effect of Financial Aid Offers on College Enrollment

Regression-Discontinuity design, program evaluation, selection bias, instrumental variables, financial aid, college enrollment

The Graying of American Debt

Between 2003 and 2015, real aggregate debt in the hands of Americans aged 50 to 80 increased by 59 percent. Meanwhile, real debt held by Americans in their twenties and thirties was approximately flat. Using data from the Federal Reserve Bank of New York’s Consumer Credit Panel, we describe the extent of this debt increase and the distribution of debt growth by loan type. Real per capita home-secured debts held by older consumers show the steepest growth, though older borrowers have increased their obligations in all major debt categories. For long-held debts, these developments lead us to ask how such changes emerged: did older borrowers carry more debt through the Great Recession, after which access to consumer credit declined for new borrowers of all ages? Alternatively, have loan originations since the Great Recession favored older over younger borrowers? While our results indicate that the stock of long-held, home-secured debt sits largely with older borrowers, we also uncover evidence of a decisive tilt of new auto and mortgage originations away from younger borrowers and toward borrowers in their fifties, sixties, and even seventies. The motivation behind older consumers’ substantial new borrowing, often with long repayment terms, is the focus of ongoing research

Improving survey measures of household inflation expectations

Expectations about future inflation are generally thought to play an important role in households’ decisions about spending and saving. They are also of great interest to central bankers, who take them into account when determining policy or assessing the effectiveness of communications with the public. To help improve existing survey measures of inflation expectations, the Federal Reserve Bank of New York recently joined with other institutions and academic consultants to develop a set of survey questions that will yield more reliable information on households’ inflation expectations, inflation uncertainty, and expectations about future wage changes.Inflation (Finance) ; Households - Economic aspects ; Economic surveys ; Federal Reserve Bank of New York ; Economic forecasting

Household Debt and Saving During the 2007 Recession

Using administrative credit report records and data collected through several special household surveys we analyze changes in household debt and savings during the 2007 recession. We find that while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks and whether they had secure jobs, the crisis’ impact appears to have been widespread, affecting large shares of households across all age, income and education groups. In response to their deteriorated financial situation, households reduced their average spending and increased saving. The latter increase – at least in 2009 – did not materialize itself through an increase in contributions to retirement and savings accounts. If anything, such contributions actually declined on average during that year. Instead, the higher saving rate appears to reflect a considerable decline in household debt, with households paying down mortgage debt in particular. At the end of 2009 individuals expected to continue to increase saving and pay down debt, which is consistent with what we have observed so far in 2010. In contrast, consumers were pessimistic about the availability of credit, with credit expected to become harder to obtain during 2010.