Negative Income Effect Research Articles

The Effect of Health Insurance on Crime Evidence from the Affordable Care Act Medicaid Expansion

Little evidence exists on the Affordable Care Act (ACA) on criminal behavior, a gap in the literature that this paper seeks to address. Using a one period static model of criminal behavior, I argue we should anticipate a decrease in time devoted to criminal activities in response to the expansion, since the availability of public health insurance not only has a pure negative income effect on crime but also raises the opportunity cost of crime. This prediction is particularly relevant for the ACA expansion, because it primarily affects childless adults, the population that is most likely to engage in criminal behavior. I validate this forecast using a difference-in-differences approach, estimating the expansion’s effects on a panel dataset of state- and county-level crime rates. My point estimates show that the ACA Medicaid expansion is negatively related to burglary, motor vehicle theft, criminal homicide, robbery, and aggravated assault. The value of this Medicaid expansion induced reduction in crime to expansion states is almost $10 billion per year.

China’s Slowdown and Rebalancing: Impacts on Sub-Saharan Africa

This paper explores the economic impacts of two related tracks of China’s expected transformation, that is, economic slowdown and rebalancing away from investment toward consumption. It estimates the spillovers for the rest of the world with a special focus on Sub-Saharan African countries. By 2030, an average 1 percent annual slowdown of China’s GDP is expected to result in 1.1 percent GDP decline in Sub-Saharan Africa and a 0.6 percent global slowdown relative to past trends. However, if China’s transformation also entails substantial rebalancing, the negative income effects of the economic slowdown could be offset through higher overall imports by China and positive terms-of-trade effects for its trading partners. Slowdown and rebalancing in China is estimated to increase GDP by 4.7 percent for Sub-Saharan Africa and by 4.8 percent for the global economy. China’s transformation is also estimated to reduce poverty, but the extent depends on country in the Sub-Saharan Africa.

Dragon Babies

Using multiple sources of individual-level administrative data from the multicultural city-state of Singapore, we study the life outcomes of large birth cohorts created by the Chinese superstitious practice of zodiac birth timing, where parents prefer to give birth in the year of the Dragon. This practice is followed exclusively by the Chinese majority—between 1960 and 2007 the average number of births jumps by 9.7% in Dragon years among the Chinese majority, with no similar patterns detected among non-Chinese minorities. Chinese Dragon babies earn significantly lower income than other Chinese cohorts after entering the labor market (by 6.3%), relative to the income difference between Dragons and non-Dragons within the non-Chinese subpopulation. The adverse labor market outcome is not due to selection on family background; rather it reflects the aggregate resource implications of substantially larger cohort sizes. We find a significant negative income effect for the non-Chinese born in Dragon years, as well as for other birth cohorts who happen to enter the labor market at the same time as Chinese Dragons. The evidence suggests that the income effect partly arises from rather inelastic labor demand. Despite the government’s efforts to increase public educational resources, Dragon babies have lower applicant scores and admission chances to local national universities, suggesting limited capacity of such measures to accommodate the surge in demand for resources associated with larger birth cohorts.

Income and Armed Civil Conflict: An Instrumental Variables Approach

AbstractThe large empirical conflict literature has established that there is a strong negative link between economic variables and the onset of an armed civil conflict. However, it has been difficult to demonstrate a clear causality between poor economic performance and increased risk of conflict because of potential endogeneity issues, especially for large country samples. Most existing studies that analyse the causal links focus on the effects of economic growth on conflict, even though conventional conflict studies find the strongest relationship for income levels. In this article, we use three new exogenous instruments for income per capita, based on historical data for mailing times, telegram charges and urbanization rates. Using instrumental variables methods and global panel data for the period 1946–2014, we show that the negative effect of income per capita on the probability of conflict onset is consistently strong and larger than in conventional estimations using pooled ordinary least square regressions.

The new deflation and housing market bubbles in the USA and UK: a monetary policy dilemma

PurposeThe purpose of this paper is to develop an analysis of the improbable events of housing market bubbles occurring in a period when US and UK central bankers were responding to perceived risks of a new deflation.Design/methodology/approachThe methodology focuses on how the anti-deflation policies implemented by the Federal Reserve and the Bank of England contributed to the housing market bubbles. The central bankers perceived the deflation as a Keynesian short-run deficiency in aggregate demand, triggered by a financial crisis. Indications are that the deflation is in the nature of long-run aggregate-supply-driven trend as explained in Veblen’s theory of “chronic” deflation driven by cost-reducing advances in technology and globalization.FindingsThe Keynesian anti-deflation policies of the Federal Reserve and Bank of England failed to counter the deflation risks while contributing to housing market bubbles. Moreover, the policies failed to address the structural problems of unemployment and income inequality associated with long-run aggregate supply deflation.Originality/valueEffective policies must be based on a correct theoretical understanding of the problems. The chronic nature of the new deflation points to the need for new approaches to deal with the negative income and employment effects that exclude an increasing number from the housing markets.

Why is the Labour Force Participation of Women Declining in India?

Summary This paper explores the recent fall in female labour force participation and its socio-economic determinants in India. The major contribution of this paper is: to explore both micro- and macro-level factors which determine female labour force participation rate (LFPR); to examine the “U shape” female LFPR, by examining the likely income and substitution effects of the real wage increase, to identify the sub-sectors within manufacturing and service sectors that could create jobs for new female job aspirants and those older women displaced from agriculture in recent years; and thus to understand the conditions under which female LFPR could be raised. Using both macro-level and household survey (NSS) data, we find that the recent fillip in the process of structural transformation has pushed a large number of females out of agriculture. The growing mechanization in agriculture and rising capital intensity in manufacturing sectors together have limited the opportunity for females because of their low education and skill and due to other cultural constraints. We also found that the rise in real wages in rural areas and the consequent improvement in the standard of living has produced a strong negative income effect which outweighs the positive substitution effect and as a result female LFPR has declined substantially. However, with the massive increase in female enrollment in secondary and higher levels of education, it could be expected that the substitution effect of the increase in real wage would become stronger if appropriate measures are taken by the government, which are suggested.

The efficiency cost of protective measures in climate policy

Despite recent achievements towards a global climate agreement, climate action to reduce greenhouse gas emissions remains quite heterogeneous across countries. Energy-intensive and trade-exposed (EITE) industries in industrialized countries are concerned on stringent domestic emission pricing that puts them at a competitive disadvantage against producers of similar goods in other countries with more lenient emission regulation. This paper focuses on climate policy design in the United States of America (US) and compares the economic implications of four alternative protective measures for US EITE industries: (i) output-based rebates, (ii) exemptions from emission pricing, (iii) energy intensity standards, and (iv) carbon intensity standards. Using a large-scale computable general equilibrium model we quantify how these protective measures affect competitiveness of US EITE industries. We find that protective measures can improve common trade-related competitiveness indicators such as revealed comparative advantage or relative world trade shares but at the same time may lead to a decline in the output value for EITE industries because of negative income effects. The economy-wide cost of emission abatement under protective measures increase as compared to uniform emission pricing stand-alone such that the gains of protective measures for EITE exports may be more than compensated through losses in domestic EITE demand.

Are Spanish companies involved in profit shifting? Consequences in terms of tax revenues

AbstractIn this paper the authors analyze the existence of profit shifting between Spain and other OECD and EU countries. Using a sample of 1,169 Spanish subsidiaries owned by foreign OECD and EU parent companies and a sample of 317 EU subsidiaries owned by Spanish parent companies, taken from the AMADEUS Database for the period 2005 to 2014, and a simple tax rate difference as a measure of the tax incentive, the authors obtain a negative effect of corporate income taxes on reported profits. When the tax rate differences between Spain and the foreign countries vary by one percentage point, reported profits vary by approximately 2.7 to 3%. This is consistent with profit shifting activity by corporations and matches the empirical results in the literature. Furthermore, the authors calculate the impact of this activity on Spain’s tax revenues from the sample of Spanish subsidiary companies. They obtain that the tax revenues vary from year to year, depending on the level of taxation of the main investor countries in Spain in comparison to the Spanish tax rate.

Gender Differences in the Link between Income and Trust Levels: Evidence from Longitudinal Data

We investigate the effect of individual income on interpersonal trust levels, using longitudinal survey data for 22,219 Australians over the 2005-2014 period. Our results produce two key insights. First, we demonstrate the importance of accounting for individual-level fixed effects, as the income coefficient goes from positive and statistically significant in a pooled regression to negative and statistically significant in a fixed effects panel model. Second, this negative effect of income on trust holds only for men, and not for women. This result appears to be concentrated among males who are young and moving from no income to positive income, but employment status is not the driving factor. Further, we explore a potential channel via psychological characteristics and find evidence of men reporting greater levels of neuroticism and fretfulness following an increase in income but, again, women do not. In turn, neuroticism and fretfulness are robust predictors of decreased trust levels; these additional findings are based on cross-sectional variation only, since both these variables are available in only one of the survey waves to date.

Price Hike of Staple Food, Nutritional Impact and Consumption Adjustment: Evidence from the 2005-2010 Rice Price Increase in Rural Bangladesh

This paper studies the nutritional impact and the adjustment in consumption as a result of the 2005-2010 rice price increase in rural Bangladesh. We compare the net rice buyers, who suffer from a negative income effect, with the self sufficient households. Our findings indicate that rural households in Bangladesh cope well with the surge in the domestic rice price as indicated by the absence of any effect on their calorie intake and food diversity. Income plays a crucial role in dietary diversity indicating the importance of effective income support programmes at the time of food price shocks.

Gender bias in household education expenditure: the case of West Bengal

Purpose This paper aims to detect gender bias in education expenditure on “students”, who are children and young adults, in a household in the rural and the urban sectors of West Bengal. Outlay equivalent ratios have been calculated using the Engel curve approach, where the budget share function is log quadratic in income, to identify items relating exclusively to education of school/college going students. Heckman’s (1979) two-step procedure is used for estimation to address selection bias The 68th round (July 2011 to June 2012) household level consumption expenditure survey data of the National Sample Survey Organisation have been used for the analysis. Design/methodology/approach Engel curve approach is used to capture parental preference for student’s welfare and to find the existence of male student favouritism in the field of education. In case of exclusive adult goods, the addition of a student will reduce the resource allocated for adult goods leading to negative income effect. If a household favours males over females, then that household is likely to sacrifice more for a male student’s education than that for a female student. To address selection bias, Heckman’s two-step procedure has been used. Findings The authors find that not all education items relate exclusively to students of a household. Expenditure on books is not exclusively for students, whereas other educational items, such as stationary and photocopy charges, tuition fees and private coaching fees, are found to be students’ items only. Transport cost is found to be an adult good. Further, we find evidence of pro male bias in expenditure on educational items, and the extent of gender bias is more in the urban sectors compared to the rural sectors in West Bengal. Originality/value The objective of this paper is to identify the educational items exclusively for “students” and to test the difference in the allocation of resources in education, with respect to these items, between a male student and a female student for both sectors in West Bengal, using the outlay equivalent ratios.

The economics of international child adoption: An analysis of adoptions by U.S. parents

Abstract The paper develops a two-period model of international child adoption by considering decision-making by a poor household and derive a number of testable predictions: the negative effect of income and the positive effect of household size on adoption. We provide supporting evidence based on a panel of U.S. adoptions from 178 countries during the last three decades. Our findings suggest that, on average, a one hundred-dollar increase in real per capita income in a sending nation reduces U.S. adoptions by three cases while a ten-million increase in child population raises adoptions by 18 cases.

Growth in Earnings and Health: Nothing is as Practical as a Good Theory

We discuss some issues associated with the empirical analysis of the relationship between socioeconomic status and health. We point out that, in addition to elaborate empirical modeling and good data, a conceptual framework is helpful both for making sense of one's own results and for the purpose of reconciling results across studies. We find that when we align the empirical specification with the Grossman model, a negative effect of income on health emerges. Even though this unexpected finding can be rationalized, we think that some caution regarding standard dynamic panel data techniques is warranted in this context.

Income and Wealth Effects on Private-Label Demand: Evidence from the Great Recession

We measure the causal effects of income and wealth on the demand for private-label products. Prior research suggests that these effects are large and, in particular, that private-label demand rises during recessions. Our empirical analysis is based on a comprehensive household-level transactions database matched with price information from store-level scanner data and wealth data based on local house value indices. The Great Recession provides a key source of the variation in our data, with a large and geographically diverse impact on household incomes over time. We estimate income and wealth effects using “within” variation of income and wealth at the household level. Our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization. We establish a precisely measured negative effect of income on private-label shares. The effect of wealth is negative but not precisely measured. However, the estimated effect sizes are small, in contrast with prior academic work and industry views. An examination of the possible supply-side response to the recession shows only small changes in the relative price of national-brand and private-label products. Our estimates also reveal a large positive trend in private-label shares that predates the Great Recession. We examine some possible factors underlying this trend, but find no evidence that this trend is systematically related to specific private-label quality tiers or to the overall rate of private-label versus national-brand product introductions.

Income and Wealth Effects on Private-Label Demand: Evidence from the Great Recession

We measure the causal effects of income and wealth on the demand for private-label products. Prior research suggests that these effects are large and, in particular, that private-label demand rises during recessions. Our empirical analysis is based on a comprehensive household-level transactions database matched with price information from store-level scanner data and wealth data based on local house value indices. The Great Recession provides a key source of the variation in our data, with a large and geographically diverse impact on household incomes over time. We estimate income and wealth effects using “within” variation of income and wealth at the household level. Our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization. We establish a precisely measured negative effect of income on private-label shares. The effect of wealth is negative but not precisely measured. However, the estimated effect sizes are small, in contrast with prior academic work and industry views. An examination of the possible supply-side response to the recession shows only small changes in the relative price of national-brand and private-label products. Our estimates also reveal a large positive trend in private-label shares that predates the Great Recession. We examine some possible factors underlying this trend, but find no evidence that this trend is systematically related to specific private-label quality tiers or to the overall rate of private-label versus national-brand product introductions.

Relationship between income and repeat criminal victimization in Brazil

This study analyzes the effect of income on repeat criminal victimization in Brazil using data from the 2009 National Household Sample Survey and its special supplement on victimization and access to justice. Two count-data models were estimated for four types of crime: theft, robbery, attempted theft/robbery, and physical assault. A positive nonlinear effect of income on repeat victimization for the three types of property crimes and a negative nonlinear effect of income on physical assault were observed. Analisamos o efeito da renda na vitimização criminal repetida utilizando dados da PNAD 2009 e do seu suplemento especial sobre vitimização e acesso à justiça no Brasil. Foram estimados dois modelos de dados de contagem para quatro tipos de crime: furto, roubo, tentativa de furto/roubo e agressão física. Concluímos que há uma relação não-linear positiva entre renda e vitimização repetida para crimes contra a propriedade, e uma relação não-linear negativa para agressão física.

The effect of universal child benefits on labour supply

AbstractUsing a difference‐in‐differences estimator, I find the Canadian Universal Child Care Benefit has significant negative income effects on the labour supply of married individuals. The likelihood of lower‐educated mothers to participate in the labour force is reduced 3.2 percentage points when receiving the benefit. Median hours worked per week among lower‐educated mothers is reduced by 1.9 hours. The effects on higher‐educated mothers are substantial, with median hours worked among higher‐educated mothers reduced by nearly one hour per week. For men, the evidence suggests small but significant income effects on labour supply, consistent with the literature on labour supply elasticities.

Anthropogenic effects on global mean fire size

Wildland fires are an important agent in the earth’s system. Multiple efforts are currently in progress to better represent wildland fires in earth system models. Although wildland fires are a natural disturbance factor, humans have an important effect on fire occurrence by directly igniting and suppressing fires and indirectly influencing fire behaviour by changing land cover and landscape structure. Although these factors are recognised, their quantitative effect on fire growth and burned area are not well understood and therefore only partly taken into account in current process-based fire models. Here we analyse the influence of humans on mean fire size globally. The mean fire size was extracted from the global Moderate Resolution Imaging Spectroradiometer (MODIS) burned area product MCD45. We found a linear decreasing trend between population density and observed mean fire size over the globe, as well as a negative effect of cropland cover and net income. We implemented the effect of population density on fire growth in a global vegetation model including a process-based fire model (SPITFIRE–JSBACH). When including this demographic control, spatial trends in modelled fraction of burned area generally improved when compared with satellite-derived burned area data. More process-based solutions to limit fire spread are needed in the future, but the empirical relations described here serve as an intermediate step to improve current fire models.

The Effect of Unconditional Cash Transfers on Adult Labour Supply: A Unitary Discrete Choice Model for the Case of Ecuador

AbstractWe examine the effect of unconditional cash transfers by a unitary discrete labour supply model. We argue that there is no negative income effect of social transfers in the case of poor adults because leisure could not be assumed to be a normal good under such conditions. Using data from the national employment survey of Ecuador (ENEMDUR) we estimate the effect of the

Has the digital divide been reversed? – Evidence from five EU countries

This paper examines the digital divide in internet use in general and internet use for specific purposes (leisure, improving human capital and obtaining goods and services). It uses a unique dataset which covers the entire clickstream of almost 20.000 internet users in the five largest EU economies during 2011. Our main finding is that, conditional on internet adoption, the digital divide in internet use has been reversed. Low-income internet users spend more time on the internet than high-income users. In addition, we find the effect of income on internet use is not affected by employment status of the internet users and we discuss several possible explanations for this result. There is some evidence of an education-based digital divide in the ability to use websites related to career, education, health and buying and obtaining goods and services. Using quantile regressions, we find that the negative effect of income on time spent on internet and the positive effect of education on time spent on websites related to career, education, health and buying and obtaining goods and services hold for the entire conditional distribution of these online activities and that these effects are higher for the upper quantiles than for the lower quantiles.