H. Naci Mocan

Structural Unemployment, Cyclical Unemployment, and Income Inequality

This is the first study that decomposes unemployment into its structural and cyclical components and investigates their impact on income distribution, controlling for the influence of inflation. Increases in structural unemployment have a substantial aggravating impact on income inequality. Inflation has a progressive impact, which is due to the unexpected component. The study demonstrates that previous work failed to take into account the stochastic trend behavior of the variables. Consequently, specifications used by previous research cannot predict the behavior of income shares after 1983, whereas the specification used by this paper generates accurate forecasts. The results also indicate that a sustained GNP growth is not necessarily associated with an improvement in income inequality, because sustained GNP growth can coexist with increased structural unemployment.

Asymmetric Crime Cycles

Recent theoretical models underscore the potential asymmetric response of various behaviors, ranging from criminal activity to smoking. In this paper, we use state-level panel and individual-level panel data to document the previously unnoticed asymmetric response of crime to changes in the unemployment rate. The results have policy implications, and they have potentially widespread ramifications because similar asymmetries may also be prevalent in other domains, ranging from the relationship between income and health to peer quality and student outcomes.

THE SUPPLY OF QUALITY IN CHILD CARE CENTERS

We use data from a sample of child care centers to estimate the relationships between cost and child care quality, and between revenue and quality. We use a measure of child care quality, designed by developmental psychologists, that is positively associated with child development. Taking the estimated cost-quality and revenue-quality relationships as given, we estimate the objective functions of firms and compute the quality supply function. The results indicate that the supply of quality is moderately elastic with respect to price and the wages of child care center workers. Implications of the results for child care policy are discussed.