Peter F. Orazem

Haddad, Lawrence, John Hoddinott, and Harold Alderman, eds. Intrahousehold Resource Allocation in Developing Countries: Models, Methods, and Policy. Baltimore MD: Johns Hopkins University Press, 1997, 384 pp.,

In this volume economists, demographers, sociologists and anthropologists collaborate in the study of how resources are allocated within households in developing countries and why it matters from a policy perspective. Surveying a broad range of theory and evidence, the contributors examine the many social and cultural factors that influence decisions about the family and household level about the allocation of time, income, assets and other resources. Ths contributors show that a more complete understanding of intrahousehold behaviour can increase the likelihood that policies will reach the people they are intended to affect.

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A utility maximizing framework is used to model how wages, housing prices, and commuting time affect joint decisions of where to live and where to work. The implied multinomial logit model yields plausible estimates of the role of economic variables on joint residence/job location choices.

The Effects of Housing Prices, Wages, and Commuting Time on Joint Residential and Job Location Choices

Abstract The paper summarizes existing hard evidence concerning the changing value of human capital in Slovenias transition to a market system. It investigates changes in patterns of job mobility (via estimating multinomial logit and hazard models) and changes in the structure of wages (via earnings functions) associated with education, experience, gender, and ethnicity. Data are drawn from unusually rich administrative data sets that include personal characteristics, work history and earnings for virtually all labor force participants. All evidence points to rapidly increasing marginal returns to human capital in transition economies.

Value of human capital in transition to market: Evidence from Slovenia

Brazil has maintained a high incidence of child labor despite its relatively high level of income per capita. Brazilian law in the 1990s prohibited children under the age of 14 from working, but the law was not enforced effectively. Although the proportion of working children increased 5 percentage points as children went from age 13 to 14, the increase is small relative to the proportion already working illegally at younger ages. Of all children aged 10 to 13, 6% in urban areas and 33% in rural areas worked at some time in 1996. Complicating enforcement of the child-labor laws is the fact that most children work informally as unpaid family labor. In urban areas, 59% of working children were unpaid; in rural areas, the proportion was 91%. With such informal employment arrangements among household enterprises, it is very difficult to distinguish illegal labor from legal chores.1

Limiting Child Labor through Behavior-based Income Transfers: An Experimental Evaluation of the PETI Program in Rural Brazil

Balochistan Province of Pakistan initiated two pilot programs attempting to induce the creation of private schools for poor girls. Randomized assignment to treatment and control groups is used to measure program effectiveness. The pilot schools were successful in urban areas, but relative failures in rural areas. Urban schools benefited from larger supplies of children not served by government schools, better availability of teachers, and more educated parents with higher incomes. Use of experienced school operators in the urban pilot was another critical difference. All urban schools appear self-sustaining or else require a modest subsidy, whereas only one rural school may survive as a private school. These pilots show that private schools may offer a viable alternative supply of educational services to poor urban neighborhoods in developing countries. However, they are not likely to offer solutions to undersupply of educational services to rural areas.

Design, Evaluation, and Sustainability of Private Schools for the Poor: The Pakistan Urban and Rural Fellowship School Experiments.

This study develops a model of occupational and educational choices. Individuals are assumed to choose careers based on expected utility maximization, given uncertainty concerning future earnings. The model directly leads to estimable equations relating career choices to the moments of occupational earnings distributions. The authors report maximum likelihood estimates using a sample of high school graduates from Maryland school districts, 1951-69. The eight observed career choices respond as expected to the first and second moments of the earnings distribution and to a measure of school quality. Reasonable estimates of human capital production and supply elasticities are obtained for the career choices. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Human Capital, Uncertain Wage Distributions, and Occupational and Educational Choices

Biomedical studies suggest that a persons behavior matters to health, but these studies usually treat human choice as exogenous. This study shows that individual choices on nutrient intake, exercise, and use of medication are influenced by exogenous food prices, wages, and non-labor income. Using these exogenous variables as instruments for endogenous behavior makes a big difference in the estimated impact of nutrient intake, exercise, and medication on blood pressure. For example, application of instrumental variables methods changes the impact of sodium on blood pressure from positive to negative and significant. Copyright 2002, Oxford University Press.

Prices and Health: Identifying the Effects of Nutrition, Exercise, and Medication Choices on Blood Pressure

Unusually rich administrative data sets covering both firms and workers enabled the authors to study displacement in Slovenia during 1987-93. They describe displacement trends and the characteristics of displaced workers comparing them to those in North America during a major recession. They analyze the determinants of displacement in the framework of labor turnover, and explore factors associated with postdisplacement wage losses. Their findings were as follows. One, a comparison of displacement in Slovenia in 1990-93 and in North America during the recession of the early 1980s shows striking similarities in the incidence of displacement by gender and industry, as well as reemployment paths. Two, workers try to avoid displacement both by switching to another job and by leaving the labor force. Before becoming displaced, they also take wage cuts. Three, both the probability of displacement and the probability of job quits are negatively correlated with tenure. Fourth, women are no more likely to be displaced than men, and face smaller postdisplacement wage losses. Non-Slovenians are no more likely to be displaced than Slovenians, and face equal wage losses. Five, firm characteristics matter. The smaller and less profitable the firm, the greater the likelihood of both displacement and job-switching. Restructuring subsidies that lower firm layoff costs increase the number of firm- and worker-initiated transitions. Six, about half the displaced workers who find new jobs change occupations and about a third change industry. Seven, only about a third of workers displaced in 1990 had found a job by the end of 1991. Surprisingly, for more than 68 percent of them, wage growth exceeded the median wage growth in the economy (17 percent). Those not reemployed seem to be paying a heavy toll: not only do they stay unemployed much longer, but they face much lower reemployment wages. Eight, as studies of displacement in the United States also show, greater job experience is associated with heavier postdiplacement wage losses. The magnitude of those losses is consistent with findings about U.S. wage losses.

Worker Displacement during the Transition: Experience from Slovenia

This paper develops an empirical strategy for testi ng competing hypotheses of expectation regimes when direct measures of expectati ons are unavailable. The procedure takes as given an assumed structural relation ship between expected values of exogeneous variables and a given decision variab le. By imposing different expectation regimes on this model, the authors obtain an artificial nesting of the hypothesized regimes which allows us to test whethe r any specification dominates. This methodology is extended to multipleequation applications with any number of hypothesized expectation regimes. The tests are illustrated using a model of the response of county-level farm acreage allocati on to expected commodity prices. Copyright 1986 by MIT Press.

An Indirect Test for the Specification of Expectation Regimes

This paper reviews the stylized facts regarding the levels of human capital investments and the returns to those investments in developing countries. These returns are substantial and are pervasive across demographic groups. Returns are comparable between men and women and between urban and rural residents. The study shows that 23% of children in developing countries do not complete the fifth grade and of these, 55% started school but dropped out. We argue that eliminating dropouts is the most cost effective way to make progress on the goal of Universal Primary Education. Of the various mechanisms we can use, mechanisms that stimulate schooling demand have the strongest evidence of success to date and are the most cost effective.