Gabriella Berloffa

Unemployment risk, labour force participation and savings

This paper analyses labour force participation and precautionary savings in the presence of risks of being fired or failing to secure a job offer when out of the labour market. We use a finite horizon framework with two employment states and a stage utility function which is CARA in consumption but non-separable in leisure. The results are that there is precautionary labour force participation: employment risk lowers the reservation wage; generally it also reduces consumption. However due to the non-separability assumption, precautionary savings, as usually defined, may not be positive. We characterize the reservation wage and contrast the results with those in which the stage utility is additive in leisure and consumption. We extend the analysis to study the effects of cyclical variation in employment risk, of stochastic future wage rates, and of adding a third employment state of search. Copyright 2003, Wiley-Blackwell.

Differences in Equivalent Income Across Cohorts of Households: Evidence from Italy

Using Italian SHIW data, this paper explores how the evolution of household equivalent income over the 1989–2004 period has modified the relative position of different cohorts of households, at the same heads age. The descriptive analysis reveals the economic difficulties faced by young generations: while households whose heads were born in the 1930s and 1940s gain about 8 percent over the preceding cohorts, the younger ones record an average loss of about 5 percent. These differences result from the joint occurrence of various events, like the poor performance of the economy and its adverse effects on younger workers, institutional changes to the labor market, the new rules introduced for the pensions system, and an exceptional increase in house prices and rents.

Changing Labour Market Opportunities for Young People in Italy and the Role of the Family of Origin

This paper considers the increased incidence of insecure job conditions for young individuals entering the Italian labour market and their chances of moving to a more secure job after a reasonable period of time. In particular, we investigate empirically whether and how long-term changes in labour market institutions and conditions have altered the role of the family of origin in both labour market entry and subsequent transitions. We use the Italian Households Longitudinal Study (Ilfi) and show that employment opportunities have changed significantly in Italy over the past three decades (from the late 1970s to the early 2000s). For an increasing share of young adults precariousness extends over a fairly long period of their working life. The family of origin reduced the probability of insecurity both in the early 1980s and during the 1990s, but in a different way: in the early 1980s, it had an effect in the entry year, but not subsequently; after the implementation of the Treu reform, its effect appeared only in the years following that of entry. Our overall results suggest that the rapid expansion of insecure contractual arrangements in the 1990s-early 2000s has increased the difficulty of transitioning to a “better” job condition (i.e. secure employment). This has enhanced the role of the family of origin in overcoming the difficulty and generated new inequalities among young Italians.

Measuring (In)Security in the Event of Unemployment: Are We Forgetting Someone?

In this paper we argue that the consequences of the unemployment risk may be quite different according to the number of household members who depend on the income of the earners. We propose new measures for the aggregate economic (in)security related to employment risk, that take into account the household composition: a per-earner amount corresponding to the aggregate equivalent expected loss, and the inactive-unemployed dependency rate (IUDR), i.e. the average number of persons not in the labor force that each unemployed has to provide for (beyond herself). Both have a simple interpretation but the latter has an advantage in terms of data-requirement. Our results suggest that the overall level of insecurity associated with similar unemployment and replacement rates increases if we consider all the individuals in the households that are potentially affected by this risk. Moreover, the use of net rather than gross incomes and of micro-level data changes quite significantly the relative position of countries in terms of insecurity levels.

Health, Welfare and Inequality

This paper uses data from the Health and Retirement Study (HRS) to study the relationship between health status and economic welfare at household level. We develop a model to estimate the welfare cost of ill health by exploiting the methodology of the equivalence scales. The crucial variables in this approach are, besides the health status (measured in several dimensions), the economic decisions of the household which can be directly related to health conditions, such as health-related expenses. By estimating a demand system we derive health-equivalence scales to learn about the cost of health conditions on economic welfare, controlling for other covariates. Our estimates suggest that � when taking account of health � the welfare of households in poor health drops substantially and inequality increases. There are important social welfare costs associated with differences in the health status of the elderly in the USA.

Inequality, Poverty and Growth: the Balkan Case

The economic experience of the Balkan countries is striking with respect to several aspects. In the last decade the region has been the poorest European area with a large percentage of the population living below the poverty line. At the same time, in the last couple of years, the economies of these countries have grown at higher rates than the EU economy and inflation has remained low. However, unemployment is high, the informal sector is large, and institutions are poor. The launch of the SAP by the EU with the five Western Balkans (SEES) has created a new momentum for trade integration/liberalization in and of SEE but each country finds itself at different stages of integration and faces different problems and challenges. The process has important implications for trade integration and institutional upgrading; and trade policies and institutional upgrading have been recognized as key priorities for private sector development and economic growth in the Balkan region.