Relative Economic Conditions Research Articles

Subjective Well-Being in China: Associations with Absolute, Relative, and Perceived Economic Circumstances

Numerous studies examining the impact of income on subjective well-being (SWB) have found significant positive relationships exhibiting decreasing marginal returns. However, the impact of economic circumstances on SWB is better captured through a combination of income, wealth (per capita net worth), and perceived and relative economic conditions. Using data from the Chinese Household Income Project, I find that within rural and urban China, wealth significantly predicts SWB, exhibiting decreasing marginal returns independent of more common measures of economic circumstances such as income and occupational status. Within urban China, these associations decrease in magnitude and significance with the addition of objective relative measures of wealth and income. Finally, I find that subjective perceptions of relative standard of living are strongly associated with SWB independent of other measures. These results highlight the importance of using multiple objective and subjective measures of economic circumstances, demonstrating potential limitations of studies that have focused exclusively on income as a predictor of well-being. Results are interpreted within the context of China’s changing social and economic structure.

Young Adults Failure to Thrive Syndrome

Many young working age adults in developed countries are failing to thrive in economic, demographic and social terms. Their failure to thrive is a relatively new phenomenon that has not been widely recognized, but it affects young adults in virtually all the more developed countries for which we have relevant data. Young adults nowadays are more often in poverty. They are leaving their parental homes at ever later ages and in some countries the frequency of psychological problems increased. The seriousness of failure to thrive syndrome is reflected in the relationship between relative economic conditions and increased suicide rates. The syndrome is important because young adults are at the prime ages for finding employment, establishing long-run career paths and building an economic basis for founding a family. Developing strategies to arrest the spread of failure to thrive syndrome among young adults, in order to keep them vibrant contributors to our societies, should be a priority for policy makers.

Voting with Their Feet? Local Economic Conditions and Migration Patterns in New England

Over the past several years, policymakers and business leaders throughout New England have expressed concern regarding the region’s ability to attract and retain skilled workers, given the economic climate of the region compared with other parts of the nation. Indeed, net domestic migration for New England became increasingly negative after the 2001 recession, as the number of people leaving the region exceeded those entering. Examining the factors underlying these migration trends is important for determining what role, if any, public policy might play in addressing their potential impact on the region’s labor supply. Using a logistic migration model, this paper examines the relative role of economic factors — namely labor market conditions, per capita incomes, and housing affordability — in determining domestic state-to-state migration flows. Using such flows from the Internal Revenue Service for each of the 48 states in the continental United States from 1977 through 2006, the model controls for demographic characteristics of origin states as well as state-specific fixed amenities, such as climate, culture, and natural features. The model’s estimates show that while all three measures of relative economic conditions are significant determinants of migration, the magnitude of their impact varies. The estimates also show that the impact of these economic factors on state-to-state migration flows has changed considerably over time. For example, the importance of per capita income as a determining factor has fallen considerably since the late 1970s, while that of housing affordability has risen. Forecasts of net domestic migration based on the model show that while New England will continue to lose individuals to other states during 2009, the pace of out-migration will likely slow, particularly in Massachusetts. This is likely due to the fact that both the region and the Bay State are performing slightly better than the nation as a whole during the current recession. However, this trend may reverse itself if economic conditions deteriorate in the New England states relative to other parts of the country.

Alternative Measures of State UI Systems

Comparisons among state unemployment insurance (UI) systems can be misleading. Frequently quoted indicators of benefit generosity, tax cost, and adherence to the experience-rating principle are influenced by the relative economic conditions of states. Such comparisons thereby obscure underlying structural differences in state UI systems. A business considering alternative states in which to locate a production facility should be cautious when interpreting UI information in an economic developer's marketing pitch. This paper offers alternative indicators based on how representative firms, with a well specified unemployment experience, would fare in different states. The authors use a micro-simulation approach to model the experiences of representative workers and firms to compare 28 states and contrast the results with those obtained from more conventional indicators. In closing, the authors consider whether a business location decision would be influenced differently by the alternative measures of state UI systems.

Voting with their feet: Relative economic conditions and state migration patterns

Over the past decade, state and local policymakers and business leaders across the U.S. have expressed concern regarding the ability to attract and retain skilled workers, given the economic climate of their states compared with other parts of the nation. Examining the factors underlying state-level migration trends is important to determine what role, if any, public policy might play in addressing their potential impact on local labor supply. Using data from the Internal Revenue Service for each of the 48 states in the continental United States from 1977 through 2006, this paper examines the role of three economic factors—namely labor market conditions, per capita incomes, and housing affordability—in determining domestic state-to-state migration flows. Estimates from a logistic model of out-migration show that while all three measures of relative economic conditions are significant determinants of migration, the magnitude of their impact varies and has changed considerably over time. For example, the importance of per capita income as a determining factor has fallen considerably since the late 1970s, while that of housing affordability has risen. Interestingly, the role of labor market conditions—while significant throughout the entire 30-year period—was most prominent in the late 1980s and early 1990s. Estimates from the model are used to forecast migration for 2009 for selected states. The results from this exercise are surprisingly accurate when compared to actual state migration patterns for that year.

How Have the Poor in South Asia Fared between 1980 and 2004? An Assessment of Living Conditions

Development literature reports significant progress towards reducing poverty in the recent past in South Asia. The consistently positive rates of economic growth support this conclusion, as do the declining poverty headcount ratios. Policymakers facing enormous resource constraints, however, assess the progress in terms of a reduction in the poverty headcount, since any policy measure ought to target improvements in the living conditions of people with different characteristics. Slightly declining headcount ratios and poverty gaps in South Asia do not necessarily indicate meaningful progress in reducing poverty. In fact, the actual poverty headcount in the region has not declined; if anything, it has increased during the last 25 years. The relative economic conditions of the poor have also worsened considerably. Although the overall human development statistics have improved, it is far from certain that the genuine poor have equally benefited, since they are often difficult to reach out with services. This article calls for using comprehensive, economic and noneconomic measures of living conditions together with appropriate poverty lines.

Do Physicians Always Flee from HMOs? New Results Using Dynamic Panel Estimation Methods

To assess the impact of changes in relative health maintenance organization (HMO) penetration on changes in the physician-to-population ratio in California counties when changes in the economic conditions in California counties relative to the U.S. average are taken into account. Data on physicians who practiced in California at any time from 1988 to 1998 were obtained from the AMA Masterfile. The analysis was restricted to active, patient care physicians, excluding medical residents. Data on other covariates in the model were obtained from the Bureau of Economic Analysis, InterStudy, the Area Resource File, and the California state government. Data were merged using county FIPS codes. Changes in the physician-to-population ratio in California counties include the effects of both intrastate migration and interstate migration. A reduced-form model was estimated using the Arellano-Bond dynamic panel estimator. Economic conditions in California relative to the U.S. were measured as the ratio of county-level real per capita income to national-level real per capita income. Relative HMO penetration in California was measured as the ratio of county-level HMO penetration to HMO penetration in the U.S. relative HMO penetration was instrumented using five identifying variables to address potential endogeneity. Omitted-variable bias was controlled for by first differencing the model. The model also incorporated eight other covariates that may be associated with the demand for physicians: the percentage of the population enrolled in Medicaid, beds in short-term hospitals per 100,000 population, the percentage of the population that is black, the percentage of the population that is Hispanic, the percentage of the population that is Asian, the percentage of the population that is below age 18, the percentage of the population that is aged 65 and older, and the percentage of the population that are new legal immigrants in a given year. All of the above variables were lagged one period. The lagged physician-to-population ratio was also included to control for the supply of physicians. Separate equations were estimated for primary care physicians and specialist physicians. Changes in lagged relative HMO penetration are negatively associated with changes in specialist physicians per 100,000 population. However, this effect of HMO penetration is attenuated and at times reversed in areas where the magnitude of the difference in relative economic conditions is sufficiently large. We did not find any statistically significant effects for primary care physicians. Consistent with prior studies, we find that changes in physician supply are associated with changes in relative HMO penetration. Relative economic conditions are an important moderator of the effect of changes in relative HMO penetration on physician migration.

Macroeconomic Fundamentals and Net Portfolio Investment Between Developed Regions*

Our paper investigates how macroeconomic fundamentals correlate with net capital inflows in the US. Understanding the factors associated with capital flows helps policy makers to predict future capital flows and analyse the international implications of domestic macroeconomic policy. Yet the theoretical relationship between net capital inflows and relative economic conditions is ambiguous. Using quarterly data from 1988 to 2003, we analyse the relation between a set of relative macroeconomic variables and net purchases of US stocks and bonds from Western Europe, Canada, Japan and Australia. We find that relative output growth is uncorrelated with net US investment for all regions. However, other macroeconomic factors matter; for example, an increase in US interest rates relative to European interest rates is associated with an increase in net portfolio investment from Europe. The linkages between macroeconomic factors and net foreign investment in the US are strongest for Western Europe, implying that information costs, home bias and other capital frictions are less relevant for US–Europe flows compared with capital flows between the US and the other three source regions. Lastly, stock purchases are more correlated with macroeconomic fundamentals than bonds, a striking finding suggesting that equity traders are more likely than bond traders to change their net asset holdings as a result of a macroeconomic event.

Dollarization and the Mexican Labor Market

This paper examines how dollarization affects wages and employment in the Mexican labor market. Dollarization is modeled as a fixed real exchange rate and also as a potentially increased inflow of capital from abroad. The effects of dollarization depend upon whether adopting a fixed exchange reduces the rate of return on emigration and helps to attract foreign capital. The paper investigates how Mexican emigration to the United States responds to changes in bilateral economic conditions. The evidence indicates that the flow of illegal immigrants from Mexico into the United States is sensitive to economic conditions and is more volatile when the Mexican monetary authorities have fixed the exchange rate in the past. In contrast, the legal immigrant flow is not sensitive to changes in relative economic conditions.

Incorporating U.S. Policy into a Model of the Immigration Decision

Immigration to the United States has become an important component of labor market and overall population growth. Understanding the role of U.S. policy in the immigration process is vital because immigration is the only component of labor market and population growth over which policymakers have direct control. This paper incorporates immigration policy into a model of the immigration decision and considers its interaction with relative economic conditions in determining the characteristics of successful immigrants.

The Worldwide Market for Skilled Migrants: Can Australia Compete?

"The purpose of this article is to...[analyze] the relative importance of internal and external factors on the demand for skilled immigration visas to Australia. Our objectives are to determine how the size of the pool of potential migrants is influenced by factors such as relative economic conditions and U.S. and Canadian immigration policies and to determine what implications these factors have on the relative quality (skill level) of potential migrants to Australia. Our results indicate that the demand for skilled immigration visas to Australia is related to the number of immigrants accepted by the United States and Canada as well as employment possibilities in Australia. We do not find a relationship between U.S. and Canadian policy and the relative quality of the applicant pool."

European Migration: Push and Pull

In recent decades Europe has experienced periods of push and pull migration. Whereas pull migration has been seen as economically beneficial, there is concern that push migration will accelerate the employment crisis. This article qualifies this view by arguing that migration may erode institutional constraints. The theoretical framework behind this idea accounts for heterogeneous labor, monopoly union behavior, and unemployment with regulated migration. A review of empirical studies for Europe concludes that migration was largely beneficial in the past. New econometric investigations suggest that immigration from countries that are targeted for recruitment was strongly driven by business cycle effects (demand-pull) and chain migration (supply-push), but that the processes changed with the halt in recruitment in 1973. Contrary to general expectations, (lows of asylum seekers and refugees (supply-push) are also affected by relative economic conditions in the receiving countries.

Does the Threat of Border Apprehension Deter Undocumented US Immigration?

The study explores whether U.S. Border Patrol enforcement actively discourages undocumented migration at its source. Two models are compared. One includes such familiar determinants of undocumented migration as relative economic conditions between the United States and Mexico the size of the Mexican young-adult population and implementation of the 1986 Immigration Reform and Control Act. An alternative model relates the magnitude of undocumented migration to lagged monthly values of estimated apprehension probabilities on the assumption that migrants form expectations about the apprehension risks they will face on the basis of experiences of other recent undocumented migrants. The study shows not only that both models have some explanatory power but also that the influence of perceived risks of apprehension all but disappears when both sets of predictor variables are combined into a single model. (SUMMARY IN FRE AND SPA) (EXCERPT)