Lynn A. Karoly

Demographic Change, Rising Earnings Inequality, and the Distribution of Personal Well-Being, 1959 1989*

This paper uses new methods to determine the sources of the sharp fall and then the steep rise in personal income inequality between 1959 and 1989. The increase in the proportion of single-head families tended to boost inequality over the entire period. Forty percent of the reduction in income inequality in the 1960s occurred because of the decline in earnings inequality among male heads of families; more than one-third of the increase in inequality after 1969 occurred because inequality in male earnings soared. Since 1979 females’ gains in earnings have increased inequality because these gains have been concentrated increasingly in families with high incomes

Health insurance and retirement behavior: evidence from the health and retirement survey.

This paper studies the role of health insurance in the retirement decisions of older workers. As policymakers consider mechanisms for how to increase access to affordable health insurance for the near elderly, considerations of the potential labor force implications of such policies will be important to consider--potentially inducing retirements just at a time when the labor force is shrinking. Using data from the 1992 and 1996 waves of the Health and Retirement Survey, this study demonstrates that access to post-retirement health insurance has a large effect on retirement. Among older male workers, those with retiree health benefit offers are 68% more likely to retire (and those with non-employment based insurance are 44% more likely to retire) than their counterparts who would lose employment-based health insurance upon retirement. In addition, the study demonstrated that in retirement models, when retiree health benefits are controlled for, the effects of pension coverage are reduced, suggesting that these effects may have been overestimated in the prior literature.

The Effect of Access to Post-Retirement Health Insurance on the Decision to Retire Early

The authors analyze the effect of the availability of post-retirement health insurance on early retirement behavior of men using data from the 1984, 1986, and 1988 panels of the Survey of Income and Program Participation (SIPP). They extend previous static models of retirement to account for access to health insurance as a factor in the retirement decision. The estimates from probit models of retirement during the SIPP panel period show that the offer of continued employer-provided health insurance coverage after retirement increased the likelihood of retirement before age 65. Also, the authors find evidence that the presence before retirement of retirement insurance coverage through a source in addition to the employer increased the likelihood of early retirement.

Early Care and Education for Children in Immigrant Families.

A substantial and growing share of the population, immigrant children are more likely than children with native-born parents to face a variety of circumstances, such as low family income, low parental education, and language barriers that place them at risk of developmental delay and poor academic performance once they enter school.Lynn Karoly and Gabriella Gonzalez examine the current role of and future potential for early care and education (ECE) programs in promoting healthy development for immigrant children. Participation in center-based care and preschool programs has been shown to have substantial short-term benefits and may also lead to long-term gains as children go through school and enter adulthood. Yet, overall, immigrant children have lower rates of participation in nonparental care of any type, including center-based ECE programs, than their native counterparts.Much of the participation gap can be explained by just a few economic and sociodemographic factors, the authors find. To some extent, the factors that affect disadvantaged immigrant children resemble those of their similarly disadvantaged native counterparts. Affordability, availability, and access to ECE programs are structural barriers for many immigrant families, as they are for disadvantaged families more generally. Language barriers, bureaucratic complexity, and distrust of government programs, especially among undocumented immigrants, are unique challenges that may prevent some immigrant families from taking advantage of ECE programs, even when their children might qualify for subsidies. Cultural preferences for parental care at home can also be a barrier. Thus the authors suggest that policy makers follow a two-pronged approach for improving ECE participation rates among immigrant children. First, they note, federal and state ECE programs that target disadvantaged children in general are likely to benefit disadvantaged immigrant children as well. Making preschool attendance universal is one way to benefit all immigrant children. Second, participation gaps that stem from the unique obstacles facing immigrants, such as language barriers and informational gaps, can be addressed through the way publicly subsidized and private or nonprofit programs are structured.

Facing human capital challenges of the 21st century : education and labor market initiatives in Lebanon, Oman, Qatar, and the United Arab Emirates

This title describes the education and labor market initiatives implemented or under way in four countries in the Arab region - Lebanon, Oman, Qatar, and the United Arab Emirates - to address the human resource issues they each face as they prepare their countries for a place in the 21st century global economy. Together, these countries highlight the variety of challenges faced by countries in the region and responses to those challenges.

Employment and Self-employment in the Wake of Hurricane Katrina

We use data from the monthly Current Population Survey to examine the short- and longer-term effects of Hurricane Katrina on the labor market outcomes of prime-age individuals in the most affected states—Alabama, Florida, Louisiana, and Mississippi— and for evacuees in any state. We focus on rates of labor force participation, employment, and unemployment, and we extend prior research by also examining rates of self-employment. With the exception of Mississippi, employment and unemployment one year after the hurricane were at similar rates as the end of 2003. This aggregate pattern of labor market shock and recovery has been observed for other disasters but masks important differences among subgroups. Those evacuated from their residences, even temporarily, were a harder-hit group, and evacuees who had yet to return to their pre-Katrina state up to one year later were hit especially hard; these findings hold even after controlling for differences in observable characteristics. We also find evidence of an important role for self-employment as part of post-disaster labor market recovery, especially for evacuees who did not return. This may result from poor job prospects in the wage and salary sector or new opportunities for starting businesses in the wake of Katrina.

Using regional data to reexamine the contribution of demographic and sectoral changes to increasing U.S. wage inequality

This paper uses geographical disaggregation to reevaluate the importance of sectoral and demographic shifts in explaining recent changes in the U.S. wage distribution. Using hourly earnings data from the Current Population Survey we explore two approaches to assessing the contribution of demographic and sectoral changes to the increase in inequality in that distribution. The first approach uses fine disaggregations of the sample of workers by age and industry to conduct shift-share analyses. The second approach conducts regression analyses of the trend in inequality of our panel sample of geographic areas as a function of aggregate measures of demographic industry macroeconomic and international trade variables. This chapter is reprinted from the Changing Distribution of Income in an Open U.S. Economy edited by J. H. Bergstrand et al. pp. 183-216 Amsterdam Netherlands Elsevier Science 1994. (EXCERPT)

Toward Standardization of Benefit-Cost Analysis of Early Childhood Interventions

A growing body of benefit-cost analyses (BCAs) of early childhood programs has been prompted by the increased demand for results-based accountability when allocating public and private sector resources. While the BCAs of early childhood programs serve to make such investments more compelling, there are limitations in the current state of the art, including a lack of standardization in the BCA methods used, from discount rates to shadow prices. The objective of this paper is to delineate a set of standards for conducting BCAs of early childhood programs. The paper reviews the existing evidence of the economic returns from early childhood programs that serve children and families in the first five years of life, discusses the challenges that arise in applying the BCA methodology such programs, highlights the variation in current methods used, and proposes a set of standards for applying the BCA methodology to early childhood programs. The recommendations concern issues such as the discount rate to use and the age to which costs and benefits should be discounted; stakeholder disaggregation; outcomes to value, the associated values, and projections of future outcomes; accounting for uncertainty; sensitivity analysis; and reporting of results. The proposed standards can guide the choices that analysts need to make about the methods to use when performing BCAs for one or more early childhood programs and they can support greater transparency in the results the analysts provide. The standards can also support consumers of the BCA results in their need to understand the methods employed and the comparability across different studies.

Toward Standardization of Benefit-Cost Analyses of Early Childhood Interventions

A growing body of benefit-cost analyses (BCAs) of early childhood programs has been prompted by the increased demand for results-based accountability when allocating public and private sector resources. While the BCAs of early childhood programs serve to make such investments more compelling, there are limitations in the current state of the art, including a lack of standardization in the BCA methods used, from discount rates to shadow prices. The objective of this paper is to delineate a set of standards for conducting BCAs of early childhood programs. The paper reviews the existing evidence of the economic returns from early childhood programs that serve children and families in the first five years of life, discusses the challenges that arise in applying the BCA methodology such programs, highlights the variation in current methods used, and proposes a set of standards for applying the BCA methodology to early childhood programs. The recommendations concern issues such as the discount rate to use and the age to which costs and benefits should be discounted; stakeholder disaggregation; outcomes to value, the associated values, and projections of future outcomes; accounting for uncertainty; sensitivity analysis; and reporting of results. The proposed standards can guide the choices that analysts need to make about the methods to use when performing BCAs for one or more early childhood programs and they can support greater transparency in the results the analysts provide. The standards can also support consumers of the BCA results in their need to understand the methods employed and the comparability across different studies.

Liquidity Constraints, Household Wealth, and Self-Employment: The Case of Older Workers

Evidence of liquidity constraints affecting entrepreneurship includes increasing rates of business formation with increases in household wealth and no relationship between the likelihood of business formation and wealth at high wealth levels. Using longitudinal data from the Health and Retirement Study on workers over age 50 and employing probit regressions with a non-linear specification of household wealth and liquid wealth, the authors find the relationship between wealth and business formation is consistent with this pattern. The paper also finds that wealth matters more for the formation of businesses requiring high starting capital. Employing the availability of a lump-sum distribution option (LSO) of an employer-provided pension plan as a new proxy for liquidity, the results show that workers with an LSO are more likely than workers with a pension and without an LSO to transition into self-employment. This provides further evidence of the existence and importance of liquidity constraints.