Impact of Aging and Underemployment on Income Disparity between Agricultural and Non-Agricultural Households

This paper examines how aging and underemployment affect household income and household income disparity between agricultural and non-agricultural sectors. Our study uses household panel data from South Korea for the period 2009–2016, which include, on average, 6721 representative households each year. A three-step regression analysis was conducted to estimate the aging and underemployment effects on household income and the income disparity between agricultural and non-agricultural households. First, we estimate aging and underemployment effects on household income from all households using a year fixed-effect longitudinal model. Second, our study investigates whether the marginal effect of aging and underemployment on household income differs between agricultural and non-agricultural sectors. Finally, we simulate the estimated model to illustrate how government policies could help reduce the income disparity. Our results show that aging and underemployment affect household income negatively overall. The negative marginal effect of the two factors was greater in the agricultural sector than in the non-agricultural sector. Results from policy simulations suggest that the implementation of proper government policies to address aging and underemployment problems in agricultural households could significantly reduce the income disparity between agricultural and non-agricultural sectors.

“Meet Me Halfway”: The Costs and Benefits of Bargaining

Bargaining is an important pricing mechanism, prevalent in both online and offline markets. However, there is little empirical work documenting the costs and benefits of bargaining, primarily because of the lack of real-world bargaining data. We leverage rich, transaction-level bargaining data from a major online platform and supplement it with primary data to quantify the costs and benefits of bargaining for sellers, buyers, and the platform. We do this by building a structural model of buyer demand and seller pricing decisions while allowing for the existence of bargaining initiation cost, loss-of-face cost, and price discrimination. Using our results, we perform three policy simulations to quantify the importance of not distinguishing between no-bargain and failed-bargain transactions, ignoring the loss-of-face cost, and not allowing for bargaining. These simulations provide rich details on how the various costs of bargaining impact our understanding of buyer and seller behavior and transaction outcomes. Banning bargaining, in particular, benefits the buyer and the platform greatly but only has a modest benefit for sellers. Finally, we show that our results are robust to our assumptions and replicate in another product category.

Assessing The Macroeconomic Effects Of Water Scarcity In South Africa Using A Water-CGE Model

We develop a dynamic computable general equilibrium (CGE) model to assess the macroeconomic impacts of water scarcity and water (in)security in South Africa. The water-CGE model which includes a detailed representation of water flows (surface water, groundwater, wastewater, and seawater) has been calibrated with an updated social accounting matrix enabling to conduct policy simulations up to 2030. We show that water scarcity will have an impact on the South African economy. With an increase of water scarcity by 17%, the CGE model predicts a decrease of South African GDP by -0.34% in 2030. The long-term impact of water scarcity varies from one sector to another, with the most negatively impacted sectors being those related to water (loss of GDP up to -2.48%). Due to the increase of water scarcity, the unemployment rate is expected to be 0.1% higher in 2020 which represents a loss of 18,000 jobs compared to the baseline year (2013). The 17% increase in water scarcity is also expected to have a negative impact on household welfare: by 2030, household consumption may decrease by -0.26%. Some policies can mitigate the negative impacts of water scarcity, the most promising one being to promote water saving.

Notching R&D Investment with Corporate Income Tax Cuts in China

We study a Chinese policy that awards substantial tax cuts to firms with R&D investment over a threshold or “notch.” Quasi-experimental variation and administrative tax data show a significant increase in reported R&D that is partly driven by firms relabeling expenses as R&D. Structural estimates show relabeling accounts for 24.2 percent of reported R&D and that doubling R&D would increase productivity by 9 percent. Policy simulations show that firm selection and relabeling determine the cost-effectiveness of stimulating R&D, that notch-based policies are more effective than tax credits when relabeling is prevalent, and that modest spillovers justify the program from a welfare perspective. (JEL D22, D24, H25, O14, O32, P31, P35)

Do Disability Policies Shape How People Perceive Work Limitation? An International Perspective

This study explored the role that cross-country disability policy differences play in shaping individuals’ work limitation reporting styles. We used anchoring vignettes available in comparable U.S. and European survey data to test and adjust for reporting differences in self-reported work limitation measures. We found that disability policy generosity scores showed statistically significant predictive power for respondents’ work limitation classification scales, with the association stronger and more statistically significant at the lower end and the middle of the scale. That is, respondents under more generous disability regimes tended to apply a more inclusive (i.e., lenient) scale in classifying a mild, moderate, or severe work limitation. Because there is no natural interpretation of the magnitude of the correlation, we conducted counterfactual policy simulations to illustrate the strength of the association; for example, if the United States were to adopt more generous disability policies such as those in Sweden, there might be an associated increase of more than 36 percentage points in the proportion of Americans aged 50 years and above reporting work limitation (of any severity). This research contributes to a better understanding of the role of disability policy in reporting heterogeneity in comparative disability research, an area that has been seldom studied.

EXPRESS: Drinking through good times and bad: The role of consumer differences

We revisit the question of alcohol consumption and public health over business cycles by decomposing overall alcohol consumption into drinking frequency and intensity in relation to consumer heterogeneity. To study this question, we use consumer-level panel data on the reported consumption (not purchases) of beer, which is the most heavily consumed alcoholic beverage and accounts for the majority of binge drinking in the United States. Leveraging the panel nature of the data, we find a negative (positive) relationship between unemployment and drinking frequency (intensity). Total consumption, which is the product of drinking frequency and intensity, is pro-cyclical. To uncover differences in behavior across consumers and to provide policy recommendations at a segment level, we present a structural model where consumers simultaneously choose the frequency and intensity of their alcohol consumption. We find differences across consumers in their behaviors; notably with respect to income and age. We conduct policy simulations to compare the effectiveness of alcohol-related policies to counter the adverse effects of recessions on the health of vulnerable groups like the low-income and elderly populations.

Household Poverty in Egypt: Poverty Profile, Econometric Modeling and Policy Simulations

Recognizing and understanding the roots of poverty, its elements and determinants in Egypt is vital to coming up with policy recommendations that help eradicate poverty and ameliorate welfare. As a developing country, Egypt has been suffering from increasing poverty rates since year 2000. In this study, the three most recent Egyptian Households Income, Expenditure and Consumption Surveys conducted by the Central Agency for Public Mobilization and Statistics for the years 2011, 2013 and 2015 are utilized to analyze and model the determinants of poverty in Egypt. A comprehensive poverty profile is constructed for the three years, as well as a comparison for the changes that have occurred over time on the national, rural and urban levels. Some determinants were selected as the most important factors affecting poverty, such as: demographic characteristics, employment status and educational attainment. Additionally, two econometric techniques are employed to model the different factors affecting households’ consumption as well as probability of falling in poverty in Egypt; namely, Fixed Effects Regression and Logistic Regression. The results of the poverty profile, as well as both models, illustrate that the main variables which help reduce poverty are: having low family size, high number of earners and better educational attainment. On the other hand, factors that worsen poverty status of households are working in agriculture and construction sectors, depending on pension as the main source of income in addition to having high dependency ratio. Furthermore, poverty simulation analyses are conducted to assess the effect of changes in the levels of determinants of poverty on probability of being poor to show the possible consequences and effects of potential poverty lessening policies and plans.

Workforce Composition, Productivity, and Labor Regulations in a Compensating Differentials Theory of Informality

We develop a search model of informal labor markets with realistic labor regulations, including minimum wage, and heterogeneous workers and firms. Smaller firms and lower wages in the informal sector emerge endogenously as firms and workers decide whether to comply with regulations. Because skilled and unskilled workers are imperfect substitutes in production, the model uniquely captures the informality consequences of shocks that affect returns to skill, such as rising educational levels. The model also reproduces empirical patterns incompatible with other frameworks: the presence of skilled and unskilled workers in the formal and informal sectors, the rising share of skilled workers by firm size, and formal and firm-size wage premiums that vary by skill level. We estimate the model using 2003 data from Brazil and show that it successfully predicts labor market changes observed between 2003 and 2012. Under a range of different assumptions, changes in workforce composition appear as the main drivers of the reduction in informality over this period. Policy simulations using the estimated model suggest that progressive payroll taxes are a cost-effective way to reduce informality.