Non-labor Income Research Articles

Approaching the female labor supply from the unpaid work and non-work functions

Purpose – The purpose of this paper is to study the allocation of time to paid work, unpaid work and non-work by women in Britain in 1998-1999. To infer the labor supply from the other time-use expressions. Design/methodology/approach – The paper uses weekly diary data to estimate the unpaid work and non-work functions. It infers the (residual) paid work expression. As the latter is recovered from uncensored regressions, it makes direct use of the complete set of observations. Hence, it contains more information than the conventional labor supply functions that are estimated from the data obtained from paid work participants via the Tobit and Heckit or selection-bias correction (SBC) techniques. Findings – The women surveyed generally allocated 69 percent of their time toward non-work, 18 percent to unpaid work, and 13 percent to paid work. The non-work function is dominated by the autonomous component, and all three functions depend on subjects’ age, wage, non-labor income, household composition, the unpaid work contributions of adult relatives and region of residence. The unpaid work and non-work functions are more consistent with the SBC rather than the Tobit version of the labor supply. Moreover, the Tobit predicts unrealistic paid work allocations for women engaging in very little non-work. Research limitations/implications – The unpaid work and non-work functions are regressed separately, as often the case in the literature. Their consideration within a seemingly unrelated regression framework necessitates a reduction in the number of observations to match those considered in the Tobit and SBC versions of the labor supply. Nuances may arise when the time reported in the diaries does not add up to 24 daily hours for all respondents. Knowledge of the recovered regional, age, household member and other effects on women time allocation might had come handy to economic development authorities who sought to attract women out of the household into market production, and from part-time to full-time employment in the context of the 2000-2010 Lisbon Strategy. Similar lessons may be valid today. Originality/value – The data set derives from a survey that has not been used before. It relies on week-long diaries in order to avoid the occurrence of many zeros in a good number of activities (which is the norm in short diaries), and to ensure the study of a censored time-use function through its uncensored complements. The findings are compared to those of a weekly diary survey conducted in 1987 that solicited similar information. Hence, the study fills a gap in time-use analysis. Identifying the factors which influence the number of hours that women engage in work (both paid and unpaid) and non-work is useful for economic policy purposes. The study exposes a limitation in the conventional estimation of the labor supply which, in turn, casts doubt on the reliability of empirical results for policy making.

Gender ratio, divorce rate, and intra-household collective decision process: evidence from iranian urban households labor supply with non-participation

This paper provides an empirical investigation on the individual labor supply of Iranian spouses in an intra-household collective decision framework in which gender ratio and divorce rate play a central role for resource allocation of household. The dataset is taken from the Households’ Expenditures Survey (2008) and the Annual Statistical Yearbook (2008) of Iran. I have conducted the parameters estimation and hypothesis testing using switching regression technique to catch the presence of the widespread non-participation of spouses across Iranian households. Reduced forms of labor supply are estimated considering the endogeneity of wage rates. The findings show that the unitary model of resource allocation and the collective model of decision process under Iranian civil procedure rules are strongly rejected, but the Pareto efficiency in the family resource allocation and validity of the specified model are confirmed. Furthermore, the coherency condition of labor supply reduced forms is satisfied. The structural labor supplies are derived from the reduced forms, and they indicate that leisure is a normal good for spouses. They also show the cross elasticity of a wife’s labor supply with respect to her husband’s wage is negative. The calculated marginal effect of non-labor income on the wife’s share is 0.76. The gender ratio and the divorce rate are both significant determinants of the sharing rule and the estimated coefficients of these variables are consistent with theoretical considerations.

Wage shocks, household labor supply, and income instability

Do married couples make joint labor supply decisions in response to each other’s wage shocks? The study on this question aids in understanding the link between the rising income instability and household insurance. Existing studies on household insurance either focus on consumption smoothing and take labor supply as a given, or only focus on wife’s labor responses to husband’s unemployment shocks. This article develops an intra-household insurance model that allows for insurance against permanent and transitory wage shocks from both partners. Estimation using the Survey of Income and Program Participation shows that wife increases labor supply in response to husband’s adverse wage shocks when both of them are working, and wife gets more nonlabor income when she is out of work. This intra-household insurance reduces earnings instability by about 2 to 9 %. These results suggest that joint labor supply decisions provide an extra smoothing effect on income instability.

Culture and Household Decision Making. Balance of Power and Labor Supply Choices of US-Born and Foreign-Born Couples

This study investigates how spouses’ cultural backgrounds mediate the role of intra-household bargaining in the labor supply decisions of foreign-born and US-born couples, in a collective-household framework. Using data from the 2000 US Census, I show that the hours worked by US-born couples, and by those foreign-born coming from countries with gender roles similar to the US, are significantly related to common bargaining power forces such as differences between spouses in age and non-labor income, controlling for both spouses’ demographic and socioeconomic characteristics. Households whose culture of origin supports strict and unequal gender roles do not exhibit any association of these power factors with their labor supply decisions. This cultural asymmetry suggests that spousal attributes are assessed differently across couples within the US, and that how spouses make use of their outside opportunities and economic and institutional environment may depend on their ethnicities.

Culture and Household Decision Making: Balance of Power and Labor Supply Choices of Us-Born and Foreign-Born Couples

This study investigates how spouses' cultural backgrounds mediate the role of intra-household bargaining in the labor supply decisions of foreign-born and US-born couples, in a collective-household framework. Using data from the 2000 US Census, I show that the hours worked by US-born couples, and by those foreign-born coming from countries with gender roles similar to the US, are significantly related to common bargaining power forces such as differences between spouses in age and non-labor income, controlling for both spouses' demographic and socioeconomic characteristics. Households whose culture of origin supports strict and unequal gender roles do not exhibit any association of these power factors with their labor supply decisions. This cultural asymmetry suggests that spousal attributes are assessed differently across couples within the US, and that how spouses make use of their outside opportunities and economic and institutional environment may depend on their ethnicities.

Optimal Commodity Taxes for Norway with Cross-Border Shopping

An empirically based simulation model consisting of a representative consumer is constructed and calibrated, for the purpose of finding optimal commodity taxes for Norway. The model includes endogenous labor supply and cross-border shopping. Focusing on commodities exposed to cross-border shopping, such as alcoholic beverages, tobacco, and food, optimal commodity taxes are computed conditional on the preexisting wage income tax and nonlabor income. The optimal tax structure is highly differentiated. Compared to the actual tax rates for Norway in the base year 2006, almost all tax rates on commodities exposed to cross-border shopping increase, the exception being the one on tobacco. The analysis demonstrates a considerable effect of making cross-border shopping or labor supply endogenous on the optimal tax structure.

Compensated Discrete Choice with Particular Reference to Labor Supply

Dagsvik and Karlstrom (2005) have demonstrated how one can compute Compensating Variation and Compensated Choice Probabilities by means of analytic formulas in the context of discrete choice models. In this paper we offer a new and simplified derivation of the compensated probabilities. Subsequently, we discuss the application of this methodology to compute compensated labor supply responses (elasticities) in a particular discrete choice labor supply model. Whereas the Slutsky equation holds in the case of the standard microeconomic model with deterministic preferences, this is not so in the case of random utility models. When the non-labor income elasticity is negative the Slutsky equation implies that the compensated wage elasticity is higher than the uncompensated one. In contrast, in our random utility model we show empirically that in a majority of cases the uncompensated wage elasticity is in fact the highest one. We also show that when only the deterministic part of the utility function is employed to yield optimal hours and related elasticities, these elasticities are numerically much higher and decline more sharply across deciles than the random utility ones.

Family Welfare and the Great Recession

The analysis in this paper provides estimates of family welfare losses generated by wage and nonlabor income declines experienced across the Great Recession and by labor market constraints existing postrecession. Welfare losses are greater as families (both married and single) move up the income distribution. Total static welfare losses are estimated to amount to roughly $190 billion, comparing family welfare between 2007 and 2011.

DECOMPOSING TRENDS IN INCOME VOLATILITY: THE “WILD RIDE” AT THE TOP AND BOTTOM

We use 2‐year panels from the Current Population Survey to provide a detailed accounting of family income volatility from 1980 to 2009. Volatility doubled overall, and the increase was most pronounced among the top 1% of the income distribution, but in any given year the level of volatility among the bottom 10% exceeds that of the top. The increased volatility comes from higher instability of head and spouse earnings, other nonlabor income, and from reduced covariance between these income sources with the tax system. This suggests that current tax policy is less effective in mitigating income shocks than previous decades. (JEL J31, I30)

Labor supply and household meal production among working adults in the Health and Retirement Survey

In this paper, I consider how working adults near retirement age in the United States allocate time and monetary resources to meal production. Using the Consumption and Activities Mail Survey supplement to the Health and Retirement Survey, I use a fixed-effects tobit specification to estimate the effect of hours worked, labor income, non-labor income and assets on meal production decisions for respondents between 45 and 75 years of age who either live alone or with their spouse/partner. These relationships are estimated separately by gender and household structure (single-headed and dual-headed households). Among single males, increasing labor supply by 10 h per week was associated with 33.8 fewer minutes per week allocated to at-home meal preparation, 39.5 fewer minutes per month eating at restaurants, and $6.73 more per week spent on groceries. In contrast, the time and expenditure allocations of single females did not respond to changes in hours worked. Within dual-member households, increasing own-labor supply by 10 h per week was associated with a decrease in time allocated to preparing meals for both the male (30.4 min per week) and female member (30.5 min per week) with only weak evidence that the spouse/partner compensated by increasing their allocation of time.

The Effects of Brazil’s Taxation and Social Spending on the Distribution of Household Income

Relative to other countries in Latin America, Brazil has high rates of taxation and large social spending. We estimate the redistributive effect of fiscal policy on income distribution and poverty in Brazil using household survey data that contain detailed information about many labor and nonlabor income sources, direct taxes paid, contributions to the pension system, transfers received, use of public education and health services, and consumption. On the spending side, we find that although Brazil has some well-targeted antipoverty programs, these transfers have relatively low per capita amounts and a large portion of direct transfer beneficiaries are nonpoor. As a result, inequality and poverty reduction are low relative to Brazil’s spending. On the tax side, indirect taxes paid by the poor often surpass the direct transfer and indirect subsidy benefits they receive.

Austerity Distorts the Common Economic Interests between Generations

Austerity political economy is a platform for justifying cuts in the social wage. Raising the social wage raises nonlabor income, living standards for working families, and makes retirement—and other forms of paid nonwork—possible. A higher social wage increases the relative bargaining power of workers in the labor market. It is not a surprise that advocates for cutting social spending expenditures attempt to divide the interests and political strength of working families. A particular form of the division is the false claim that spending for the old takes away from spending on youth. There is no evidence for the argument that in the light of shrinking federal spending, any dollar preserved for the old will be taken away from the young. This claim is fierce and wrong. The myth that we have arranged our society in a reptilian way—so that the old eat the young (as lizards and other reptiles do when food is scarce)—has been advanced for over three decades by conservative critics and business-aligned interests. The deprivation of American children is not caused by the existence of programs for the elderly; in fact, whenever support for old age programs increase, so does support for spending that helps children out of poverty. I argue that prominent “generational-divide” economists are mistaken because the economics of their narrative are wrong. The well-being of our children and grandchildren depends on political alliances and economic growth that distributes the productivity gains of workers to workers, retired workers, and children of workers, not cuts in Social Security and Medicare.

Behavioral games and intrahousehold allocation: teenage mothers and their mothers in Brazil

Two games from experimental economics are paired to test household models. These experimental techniques can be helpful for informing policy that assigns welfare transfers, especially in the context of endogenous relationships or when impoverished families are omitted from income separability tests due to a lack of non-labor income, which is required for demand analysis of intrahousehold models. A trust game tests for Pareto efficiency, and a newly developed game tests for bargaining by determining if willingness-to-pay for a product changes based on endowment ownership. These games are applied in Salvador, Brazil, to a population not yet studied in the economic intrahousehold literature: adolescent mothers who live with their mothers. Their relationship is key for the welfare of adolescents’ children. The game outcomes reject Pareto efficiency but little evidence of bargaining is found. Qualitative survey questions confirm a cooperative relationship.

Labor Supply and Household Meal Production Among Working Adults in the Health and Retirement Survey

In this paper, I consider how working adults near retirement age in the United States allocate time and monetary resources to meal production. Using the CAMS supplement to the Health and Retirement Survey, I use a fixed-effects tobit specification to estimate the effect of hours worked, labor income, non-labor income and assets on meal production decisions for respondents between 45 and 75 years of age who either live alone or with their spouse/partner. These relationships are estimated separately by gender and household structure (single-headed and dual-headed households). Among single males, increasing labor supply by ten hours per week was associated with 33.8 fewer minutes per week allocated to at-home meal preparation, 39.5 fewer minutes per month eating at restaurants, and $6.73 more per week spent on groceries. In contrast, the time and expenditure allocations of single females did not respond to changes in hours worked. Within dual-member households, increasing own-labor supply by ten hours per week was associated with a decrease in time allocated to preparing meals for both the male (30.4 minutes per week) and female member (30.5 minutes per week) with only weak evidence that the spouse/partner compensated by increasing their allocation of time.

Do Remittances Alter Labor Market Participation?

The paper focuses on the impact of remittances on the labor market participation using propensity score matching. Using household survey data for Albania, this paper relies on the matching approach for the identification. The nearest neighbor and kernel estimators are used to obtain the matching results.The vector of covariates includes information related to individual and households characteristics such as; age, gender, schooling, area of residence etc. In the model, household incomes are considered separately from remittances in order to identify whether income from remittances have the same effect as other types of household non-labor income in the decision of participating in the labor market.

Are Remittances Spent in a Healthy Way? Evidence from Albania

Using household survey data for Albania, the paper investigates the effect of remittances on health capital accumulation. Total expenditure is divided into two categories: expenditure on medicines and expenditure on visits and laboratory services. The estimation is presented for two separate sub groups, rural and urban area. In the paper both instrumental variable and propensity score matching are used to give answer to the research question about the impact of remittances in the health capital investment.The findings indicate that households increase their expenditure for medicines and other health services in the presence of remittance income. The positive relationship is statistically significant in the case of remittance receiving households living in the rural area. The magnitude is lower in the case of total expenditure for visits and laboratory. However, total expenditure for visits and laboratory are likely to have significant impact on the health outcome given their prevention nature. These findings show that remittance flows pay a heterogeneous role in the decision making process of remittance-receiving household members. However, these non-labor income flows may play an important role in supporting expenditures, especially for those living in rural areas.

Remittances and Human Capital Investment: Evidence from Albania

Using household survey data for Albania, this study compare decision-making about human capital investment in remittance-receiving households and non-remittance-receiving households. The Cox proportional hazard model is used to capture the effects of remittances. The crucial assumption in the proportional hazard model is that the effect of the covariates is proportional over the entire base line. The vector of covariates includes information such as; children’s demographic characteristics, parental schooling, household income and the presence of remittances. In the model, household incomes are considered separately from remittances in order to identify whether income from remittances have the same effect as other types of household non-labor income in the decision to invest in more years of schooling for household members.

Labor Market and Income Distribution in Latin America in Times of Economic Growth: Advances and Shortcomings

The high rhythm of economic growth experienced by Latin America between 2003 and 2008 has had a positive impact on social and labor market indicators. This has become evident through the dynamic creation of employment, the reduction of unemployment and the fall of income inequality and poverty. However, even in this positive context the region continues to exhibit important shortcomings in the labor market. The most evident are high levels of unemployment, precariousness and informality. Along with this, Latin America is still one of the most unequal regions in the world. This paper aims to provide an in-depth analysis of labor and income inequality dynamics in Latin America in the new millennium. In particular, we seek to identify the factors behind the changes observed in the distribution of family incomes, evaluating the role played by labor incomes vis a vis other non-labor income sources. Also, given the significance of labor incomes in total incomes, the analysis will address a distinctive feature of labor markets in the region: the phenomenon of labor informality, by studying its characteristics and distributive impacts.

Inequality and the Top of the Income Distribution in Chile 1990-2012: Questioning the Consensus

In Chile, the official figures on income distribution show no significant progress in the last 22 years, despite fast economic growth and a significant reduction in poverty. This result is based almost exclusively on one household survey, the Socioeconomic Characterization Survey (CASEN). This article challenges the finding by comparing the micro data from CASEN with the results emanating from the (New) Supplementary Survey of Income ((N)ESI) conducted by Chile’s National Statistical Institute (INE). The paper reviews what has happened in terms of inequality in Chile in the period 1990–2012 and, contrary to the ongoing consensus, finds that important improvements in income distribution can be shown. Using Gini decompositions, this study shows how the behaviour of income in the richest 1% of households is central to the finding and identifies how the two surveys critically differ in the data on the upper end of the distribution. The paper demonstrate that labor income is best represented in (N)ESI, while non-labor incomes in CASEN, and that this issue must be considered to build the Gini correctly.

Another Hurdle for Married Women: Private Tutoring of Children and Women's Labor in Korea

Using data from Seoul and six major cities in Korea, this study examines the relationship between the cost of children's private tutoring and the employment of their mothers. The results indicate that private tutoring for children is a barrier for participation in the labor force by women with school-aged children, as social norms require them to bear the burden of supporting children's educational activities in the household alone. Specifically, empirical results suggest that every one standard deviation increase in the tutoring cost is associated with a 6.5 percent decrease in employment probability of married women with school-aged children. It is noteworthy that the negative effect of the cost of private tutoring appears to be greater for women with higher education or with relatively higher non-labor income than for their counterparts. Different responses from groups with different levels of education and income may be due to differences in “productivity’ for generating “quality’ children and market opportunities.