Marco Manacorda

Why do Most Italian Youths Live with Their Parents? Intergenerational Transfers and Household Structure

More than 80% of Italian men aged 18-30 live with their parents. We argue that one contributing factor to this remarkably high rate of cohabitation is parents’ tastes for co-residence. In order to investigate the role of parental preferences, we estimate the effect of exogenous changes in parental income on rates of cohabitation in Italy using SHIW micro-data from 1989 to 2000. The key econometric issue is the potential endogeneity of parental income. In order to identify a source of exogenous variation in parental income, we use changes in fathers’ retirement age induced by the 1992 reform of the Italian Social Security system as an instrumental variable for parental income. By raising retirement age, this reform forced some fathers to remain in the labour market longer than they would have otherwise, therefore raising their disposable income. We use a two-sample instrumental variable (TSIV) strategy. Our TSIV estimates indicate that a rise in parents’ income significantly raises the children’s propensity to live at home: a 10% increase in annual parental income results in approximately a 10% rise in the proportion of boys living with their parents. Although we cannot definitely rule out alternative interpretations, these results are consistent with our hypothesis that cohabitation is a normal good for Italian parents.

Skill mismatch and unemployment in OECD countries

This paper uses evidence on employment, labour force, and wage differentials by skills from a number of OECD countries to investigate on the characteristics and the consequences of a skill-biased shift in the structure of labour demand and labour supply. A convex relationship between wages bargained and unemployment is adopted as the non-competitive element that allows such sectoral shocks to have aggregate effects. The model is then calibrated using US and British data. The analysis predicts that nearly half of the increase in unemployment experience in Britain over the past two decades can be attributed to an unbalanced evolution in demand and supply of skills, while in the US the impact of this imbalance was fully offset by counter-acting forces.

Changes in Returns to Education in Latin America: The Role of Demand and Supply of Skills

Using micro data for the urban areas of Argentina, Brazil, Chile, Colombia, and Mexico, the authors document trends in mens returns to education during the 1980s and the 1990s and estimate the role of supply and demand factors in explaining the changes in skill premia. They propose a model of demand for skills with three production inputs, corresponding to workers with primary-, secondary-, and university-level education. Further, the authors demonstrate that an unprecedented rise in the supply of workers having completed secondary-level education depressed their wages relative to workers with primary-level education throughout Latin America. This supply shift was compounded by a generalized shift in the demand for workers with tertiary education.

Telecommunication Reforms, Access Regulation, and Internet Adoption in Latin America

The authors review the stylized facts on regulatory reform in telecommunications and its effects on telecommunications development and Internet penetration in Latin America. Relying on data from the International Telecommunication Union, the Information for Development Program (InfoDev), and the World Bank for 1990-99, the authors then test econometrically the determinants of the differences in Internet penetration rates across Latin America. The results show that effective implementation of the reform agenda in telecommunications regulation could accelerate adoption of the Internet in Latin America-even though it is only part of the solution (income levels, income distribution, and access to primary infrastructure are the main determinants of growth in Internet connections and use). Regulation will work by cutting costs. Cost cutting will require that regulators in the region take a much closer look at the design of interconnection rules and at the tradeoffs that emerge from the complex issues involved. It will also require a commitment to developing analytical instruments, such as cost models, to sort out many of the problems. Appropriate cost models will generate benchmarks that are much more consistent with the local issues and with the local cost of capital than international benchmarks will ever be for countries in unstable macroeconomic situations. Cost cutting will require an equally strong commitment to imposing regulatory accounting systems that reduce the information asymmetrics that incumbents use to reduce the risks of entry. All these changes will ultimately require a stronger commitment by competition agencies, since in many countries a failure to negotiate interconnection agreements will raise competition issues just as often as it will raise regulatory questions.

School Proximity and Child Labor: Evidence from Rural Tanzania

Is improved school accessibility an effective policy tool for reducing child labor in developing countries? We address this question using microdata from rural Tanzania and a regression strategy that attempts to control for nonrandom location of households around schools as well as classical and nonclassical measurement error in self-reported distance to school. Our analysis shows that school proximity leads to a rise in school attendance but no significant fall in child labor.

Telecommunications Performance, Reforms, and Governance

The authors assess the effects of private capital and independent regulatory agencies on telecommunications performance by using cross-country panel data from 1990 to 2003. In general, they find that having independent regulatory agencies positively affects affordability and labor productivity, but negatively affects quality. Having private capital positively affects access, quality, and labor productivity, but negatively affects affordability. However, reform policies affect industrial and developing countries differently in some cases. The authors also find that governance plays an important role as it affects performance and interacts with reform policies.

European versus US unemployment: different responses to increased demand for skill?

According to Paul Krugman, “the European unemployment problem and the US inequality problem are two sides of the same coin”. In other words, both continents have had the same shift in demand towards skill; in the US relative wages have adjusted and in Europe not. The implication of this hypothesis is that in Europe the unemployment rate for the unskilled will have risen but the unemployment rate for the skilled will have fallen. In fact it has risen. To investigate the hypothesis more systematically we develop an internally consistent model which allocates the change in a country’s unemployment between that resulting from (a) shifts in relative demand for skill minus shifts in relative supply, (b) shifts in the relative intercepts of skilled and unskilled wage functions, (c) shifts in aggregate wage pressure. We show that the rise in British unemployment relative to the US since the 1970s is almost certainly due to shifts in aggregate wage pressure. Similarly for 5 other European countries the combination of (a) and (b) accounts for none of the increase in unemployment since the 1970s.

Local labor demand and child labor

This paper uses micro data from the Brazilian PNAD between 1981 and 2002 to ascertain the role that local labor demand – proxied by male adult employment in the area of residence - plays in shaping the work and schooling decisions of children aged 10-15. Contrary to the widespread view that child labor is procyclical, we find evidence that employment (schooling) falls (increases) among young children (aged 10-12) when local labor demand is stronger. This result is consistent with the view that childrens work is to a large extent the result of poverty, and that parents want to protect their children from child labor and do so if offered the opportunity.

Industrial Structure and Child Labor: Evidence from the Brazilian Population Census

This paper uses micro data from the 1980, 1991, and 2000 population censuses to investigate the role of changes in the industry mix in accounting for the differential trends in the incidence of child work (ages 10–15) across Brazilian states. We find that exogenous compositional changes account for around 20% of the observed fall in child employment in rural areas.

Local labor demand and child work

This chapter uses micro data from the Brazilian Pesquisa Nacional Por Amostra de Domicilios (PNAD) between 1981 and 2002 to ascertain the role that local labor demand – proxied by male adult employment in the area of residence – plays in shaping the work and schooling decisions of children aged 10–15 years. We find that child work is on average procyclical, while school enrollment is essentially unaffected by local labor market conditions: As local labor demand conditions improve, children are more likely to combine work with school and are less likely to be inactive. One exception is young urban boys with older brothers: These children experience a fall in employment when local labor demand is stronger. This result is consistent with older children subsidizing younger siblings’ schooling and play time.