The Fourth ICEF Conference on Applied Economics (online)

Speaker: Eric French (University Of Cambridge)

The Intergenerational Elasticity of Earnings: Exploring the Mechanisms (with Uta Bolt, Jamie Hentall MacCuish and Cormac O’Dea) 
Paper (PDF, 1,01 Мб)
 

Abstract: Using data covering a single cohort’s first 55 years of life, we show that most of the intergenerational elasticity of earnings (IGE) is explained by differences in: years of schooling, cognitive skills, investments of parental time and school quality, and family circumstances during childhood. To decompose the fraction of the IGE explained by each of these channels, we implement a multi-level mediation analysis combined with a latent factor framework that accounts for measurement error. Multilevel mediation analysis allows us to assess not only the direct effect of each channel on the IGE, but also its indirect effects working through the other channels, thus providing an in-depth understanding of the link between parents’ and children’s earnings. Of these channels, we show that the main driver of the IGE is increased levels of parental investments received by children of high income parents early in their lives, which encourages greater cognitive development and lifetime earnings.

Discussant: Markus Gebauer (ICEF)

Speaker:  Eren Arbatli (HSE)

Sectarian Aid, Sanctions and Subnational Development (with David Gomtsyan)
 Paper (PDF, 1,27 Мб)

Abstract: Hezbollah, a Shia Islamist political party and militant group based in Lebanon, is believed to receive a significant amount of informal funding from Iran. We evaluate whether this funding has had any economically meaningful effect on subnational development in Lebanon. Since the amount of funding is not observed, we use Iranian oil rents and the intensity of sanctions against Iran as plausibly exogenous drivers of transfers to Hezbollah. Then, we leverage the well-established sectarian bias in Hezbollah's spending to obtain conservative estimates of the direct effect of funding to Hezbollah. Studying the 1993-2010 period, we find a positive and economically significant relationship between Iranian oil windfalls and nighttime lights. This effect is significantly stronger in areas with a greater concentration of Shia population. Also, nighttime lights are relatively lower in Shia areas than elsewhere during periods when sanctions against Iran intensified. These novel results attest to the non-negligible developmental effects of informal aid as well as how economic sanctions against donors might offset such effects.
 

Discussant: Eric French (University Of Cambridge)

Speaker: Russell Weinstein (University of Illinois at Urbana-Champaign)

Graduating from a Less Selective University During a Recession: Evidence from Mobility Report Cards and Employer Recruiting
Paper (PDF, 606 Кб)

Abstract: Using mobility report card data, I show graduates of less selective universities experience more adverse impacts of graduating in a recession. I highlight one mechanism: during recessions employers stop recruiting at less selective universities. Using a unique dataset of employer recruiting strategies for 65 prestigious firms, I show they are more likely to stop recruiting at universities that are less selective, smaller, farther, and have less affluent students. Firms also resume recruiting less quickly at less selective and farther campuses. Finally, losing access to prestigious firms while on campus is associated with an additional 13% decline in the 2014 income success rate.

Discussant: Fabian Slonimczyk (ICEF)

Speaker:  Noemi Mantovan (Bangor Business School, Bangor University)

The Dynamics of Domestic Violence: Learning about the Match (with Rob Sauer and Dan Anderberg)

Abstract: We present a dynamic lifecycle model of women's choices with respect to partnership status, labour supply and fertility when they cannot directly observe whether a given male partner is of a violent type or not. The model is estimated by the method of simulated moments using longitudinal data from the Avon Longitudinal Study of Parents and Children. The results indicate that uncertainty about a partner's abusive type creates incentives for women to delay fertility, reduce fertility overall, divorce more often and increase labour supply. We also study the impact of higher female wages, income support to single mothers, and subsidized childcare when the mother is working. While higher wages reduce women's overall exposure to abuse, both income support and subsidized childcare fail to do so because they encourage early fertility. Income support also leads to less accumulated labour market experience and hence higher abuse rates.

Discussant: Anna Yurko (ICEF)

Speaker:   Gordon B. Dahl (University of California, San Diego)

Intergenerational and Sibling Peer Effects in High School Majors (with Dan-Olof Rooth and Anders Stenberg)
Paper (PDF, 812 Кб)
 

Abstract: This paper estimates peer effects both from parents to children and from older to younger siblings in academic fields of study in high school. Despite the importance of family peer effects, causal evidence is scarce due to correlated unobservables and a lack of data. Our setting is Sweden, where admission to oversubscribed majors is determined based on a student’s GPA. Using a regression discontinuity design, we find large intergenerational and sibling peer effects that depend on the gender mix of a dyad. Younger brothers are 25% more likely to choose the major their older brother enrolls in, but 25% less likely to copy their older sister. Younger sisters copy older sisters (18% increase), but not older brothers. Effects vary based on birth spacing and whether a major is gender conforming. Turning to the effect of parental completion of a major, sons are 22% and 18% more likely follow in the footsteps of their fathers and mothers, respectively. In contrast, parents have little effect on their daughters’ choices, except when a mother majors in the male-dominated program of Engineering. Since high school majors have a strong link to future occupation and earnings, these within family spillovers have long-term consequences for intergenerational income mobility and gender wage gaps. Finally, correlations greatly overstate these causal spillover effects, and miss heterogeneity by gender mix.

Discussant: Eren Arbatli (HSE)

Speaker:  Vitalijs Jascisens (ICEF)

Million Dollar Baby: Should Parental Benefits Depend on Wages When the Payroll Tax Evasion is Present? (with A. Zasova)
 

Abstract: This paper explores the effect of tying social security benefits to declared wages on firm-worker collusion and strategic income reporting before the benefit entitlement. We use administrative data from Latvia covering the entire working population over a 15-year period from 1996 to 2010 to study generous parental benefits, which depend on the reported wage in the time period before the child-birth. Our analysis delivers three principal results. First, we observe a sharp increase in the wage during the time period taken into account to calculate parental benefits, and interpret the obtained result as a collusive legalization of previously unreported income with an aim to increase the future benefit. Depending on the specification, we conclude that during this period the wage on average increases by 5.4–7.5%. Second, obtained effects are highly heterogeneous. We find that the wage growth is much higher in small firms, where it is presumably easier to sustain collusion between employees and employers. Finally, we demonstrate that legalization of wages is temporary and lasts only until the end of the period taken into account to calculate parental benefits.

Discussant: Noemi Mantovan (Bangor Business School, Bangor University)

Previous conferences

The Third ICEF Conference on Applied Economics (special online edition on COVID-19) >>

The Second ICEF Conference on Applied Economics >> 

The First ICEF Conference on Applied Economics >>