John P. Haisken-DeNew

INTERINDUSTRY AND INTERREGION DIFFERENTIALS: MECHANICS AND INTERPRETATION

In their seminal study on interindustry wage differentials, Krueger and Summers (1988) expressed estimated industry differences as deviations from a hypothetical employment-share weighted mean. Virtually the whole labor literature has followed their approach, yet most studies avoid calculating the exact standard errors of these differences. This note relates this problem to the general literature on dummy variables and their interpretation. It is demonstrated that the implementation of exact estimates involves only simple matrix operations, making any approximative procedure difficult to justify. Disregarding this conclusion will in practice, even with large samples, lead to substantially overstated standard errors of the estimated differentials and to the understatement of their overall variability.

You're Fired! The Causal Negative Effect of Entry Unemployment on Life Satisfaction

This paper examines the impact of unemployment on life satisfaction for Germany 1984-2006, using a sample of men and women from the German Socio-Economic Panel (SOEP). Across the board we find large significant negative effects for unemployment on life satisfaction. This paper expands on previous cornerstone research from Winkelmann and Winkelmann (1998) and explicitly identifies truly exogenous unemployment entries starting from 1991. We find that for women in East and West Germany, company closures in the year of entry into unemployment produce strongly negative effects on life satisfaction over and above an overall effect of unemployment, providing prima facie evidence of a reduced outside work option, large investments in firm-specific human capital or a family constraint. The compensating variation in terms of income is dramatic, indicating enormous non-pecuniary negative effects of exogenous unemployment due to company closures.

Can the large swings in russian life satisfaction be explained by ups and downs in real incomes

Russians reported large changes in their life satisfaction over the post-transition years. In this paper, we explore the factors that drove these changes, focusing on exogenous income changes, using panel data from the Russian Longitudinal Monitoring Survey over the period 1995 to 2001 and implementing a recently developed ordinal fixed-effects estimator. We apply a causal decomposition technique that allows for bias arising from panel attrition when establishing aggregate trends in life satisfaction. Changes in real household incomes explained 10% of the total change in reported life satisfaction between 1996 and 2000, but up to 30% of some year-on-year changes.

Employer Learning and the Returns to Schooling

We examine the dynamic role of education and experience as determinants of wages. It is hypothesized that an employee’s education is an important signal to the employer initially. Over time, the returns to schooling should decrease with labor market experience and increase with initially unobserved ability, since the employer gradually obtains better information on the productivity of an employee. Replicating US studies using data from a large German panel data set (GSOEP), we find no evidence for the employer learning hypothesis for Germany. Differentiating blue-collar and white-collar workers and estimating quantile regressions, however, leads to the conclusion that employer learning takes place for blue-collar workers at the lower end of the wage distribution. We further show, that information on the productivity of an employee is to a large extend private.

Creating low skilled jobs by subsidizing market-contracted household work

The paper analyses the determinants of household work contracted in the German shadow economy. The German socio-economic household panel, which enumerates casual domestic employment, is used to estimate the demand for such household work. The regressors include regional wage rates, household income and several control variables for household composition. It is found that the demand for household work in the shadow economy is very income elastic. This suggests that targeted wage subsidies, linked to household work agencies, would be very effective in raising the legal demand for domestic help. A wage subsidy of 50% of wage costs could thus establish up to 500 000 new jobs for previously unemployed or non-working low skilled workers. The net fiscal costs of such a scheme are about 6.200 Euro per full-time job. In addition, society benefits from more law enforcement and from a raised female labour supply, especially by highly qualified mothers.

Panelwhiz and the Australian Longitudinal Data Infrastructure in Economics

PanelWhiz is a graphical user interface that was written for the statistical software, Stata SE/MP Version 11 (Win/Mac/Linux) or later, which allows users to extract data from complicated multi‐level longitudinal datasets in an easy and efficient manner. Specifically, Australian datasets, such as Household, Income and Labour Dynamics in Australia Survey, Medicine in Australia: Balancing Employment and Life, Growing Up in Australia: The Longitudinal Study of Australian Children, Footprints in Time - The Longitudinal Study of Indigenous Children and Consumer Attitudes, Sentiments & Expectations in Australia, have already been integrated into the common platform of the PanelWhiz system.

Sheepskin Effects in Japan

Using data for the 1990s, this Paper examines the role of sheepskin effects in the returns to education for Japan. Our estimations indicate that sheepskin effects explain about 50% of the total returns to schooling. We further find that sheepskin effects are only important for workers in small firms with the size of these effects being similar to comparable estimates for the US. These results could be explained by the particular recruitment system of large firms in Japan, which makes the university diploma unimportant as a screening device for large firms.

How Well Do Individuals Predict Their Future Life Satisfaction? Evidence from Panel Data Following a Nationwide Exogenous Shock

Using German panel data, we investigate how well individuals predict their own future life satisfaction. The context is the decade following the 1990 reunification of Germany, which provided a large shock to the future prospects of the inhabitants of the former East Germany. We find that the majority of East Germans significantly overestimated the satisfaction gains from reunification in the years immediately after transition, but by 1994 had converged on correct aggregate expectations. Some evidence of micro-heterogeneity in the prediction errors is found by age and education. For West Germans, we find some initial over-optimism, although less than for East Germans.

A Hitchhiker's Guide to the World's Household Panel Data Sets

This article describes four household panel data sets: the American Panel Study of Income Dynamics, the German Socio‐Economic Panel, the British Household Panel Study, the Canadian Survey of Labour and Income Dynamics and the Cross‐National Equivalent File.

The Increasingly Mixed Proportional Hazard Model: An Application to Socioeconomic Status, Health Shocks, and Mortality

We introduce a duration model that allows for unobserved cumulative individual-specific shocks, which are likely to be important in explaining variations in duration outcomes, such as length of life and time spent unemployed. The model is also a useful tool in situations where researchers observe a great deal of information about individuals when first interviewed in surveys but little thereafter. We call this model the “increasingly mixed proportional hazard” (IMPH) model. We compare and contrast this model with the mixed proportional hazard (MPH) model, which continues to be the workhorse of applied single-spell duration analysis in economics and the other social sciences. We apply the IMPH model to study the relationships among socioeconomic status, health shocks, and mortality, using 19 waves of data drawn from the German Socio-Economic Panel (SOEP). The IMPH model is found to fit the data statistically better than the MPH model, and unobserved health shocks and socioeconomic status are shown to play powerful roles in predicting longevity.