Margin Of Supply Research Articles

Joint effects of ill-health, health shocks and social protection on the intensive margin of labour supply: evidence from Malawi

BackgroundThere is sparse evidence on the joint effects of ill-health, health shocks and social protection on the intensive margin of labour supply, particularly in developing countries. We interact ill-health and health shocks with access to social protection and estimate their joint effects on weekly hours of work.MethodsWe employ a zero-inflated Poisson model to assess joint effects of ill-health, health shocks and social protection on weekly hours of work exploiting pooled repeated cross-sectional data from Malawi.ResultsWe find that overall, individuals who suffered from ill-health or a health shock, including an illness/injury, a hospital admission or a chronic illness and benefited from social protection, reduced their weekly hours of work.ConclusionsThe study provides novel empirical evidence on the potential joint effects of ill-health, health shocks and social protection on the intensive margin of labour supply, shedding light on the role social protection can play in developing countries.

Should Italy switch to a flat tax? An assessment based on a heterogeneous agents OLG model

We use a heterogeneous agents overlapping generations (OLG) model to quantitatively assess the impact of a reform in which a personal income tax with increasing marginal tax rates is replaced by a flat tax possibly complemented with a deduction. The value of the flat tax rate is set in order to balance the government budget and accordingly it increases with the value of the deduction. The model is calibrated and simulated for Italy. For low values of the deduction, aggregate labor supply increases, though this aggregate effect masks a completely different impact on the intensive and the extensive margin of labor supply: in particular, the activity rate is reduced by the introduction of a flat tax. As to inequality, it rises and this increase can be mitigated by using an higher value of the tax deduction, which however dampens down the positive effect of a flat tax on economic performance. Finally, the effect of a flat tax on social welfare crucially depends on the degree of inequality aversion embedded in the social welfare function and on the Frisch elasticity of labor supply.

The impact of wealth loss on household economic well-being in China—the case of over-quota birth fines

ABSTRACT This paper investigates the impact of wealth loss induced by over-quota birth fines on household economic well-being in China. We find that household labour supply adjusts to fertility fines primarily via the extensive margin of maternal labour supply, which is followed by higher savings rates and more remittances sent home. Fertility fines have no effects on non-food consumption; however, they significantly decrease food consumption. We propose two instrumental variables and placebo tests as identification strategies, all of which yield consistent results. Our study deepens the understanding of how households respond to over-quota birth fines and sheds light on responses to negative wealth shocks.

The relationship between female labor force participation and violent conflicts in South Asia

ABSTRACT This paper explores the link between the prevalence of violent conflicts and the extremely low female labor force participation rates observed in South Asian countries. The Labor Force Surveys from Bangladesh, Sri Lanka, India, and Pakistan are merged with the Global Terrorism Database to estimate the effect of terrorist attacks on female labor supply. We exploit the geographical variation in exposure to violence to compare administrative units exposed to events with those not exposed. We find that for each wounded and killed person, female labor force participation falls 0.000026 and 0.0001 percentage point, respectively, while male labor force participation remains unchanged, thus widening the gender labor participation gap. We test the non-linearity of various violence effects, finding that the deterring effect is higher in administrative units with higher baseline FLFP rates. We also provide suggestive evidence that terrorism has a negative effect on the intensive margin of female labor supply.

Optimal fiscal policy in incomplete market business cycle economies

In this paper, we study how a government should set its fiscal instruments in order to provide insurance to individuals and deal with inequality. We quantitatively evaluate the role of public debt and its interaction with progressive income taxation. To guide our assessment, we develop a DSGE model with incomplete markets that embeds two empirical relevant features that have not been considered by the literature: cyclical idiosyncratic risk and the extensive margin of labor supply. We calibrate the model to be consistent with the micro and macro evidence for the US economy. We study the importance of time-varying idiosyncratic risk and labor supply elasticity in determining optimal policies by considering two nested versions of the model that shut down one feature at a time. We find that considering both ingredients together significantly increases the optimal debt to output ratio. In addition, we show that the model generates a positive relationship between public debt and income tax progressivity, consistent to what is observed in the data.

A framework to estimate a long-term power shortage risk following large-scale earthquake and tsunami disasters.

While power shortages during and after a natural disaster cause severe impacts on response and recovery activities, related modeling and data collection efforts have been limited. In particular, no methodology exists to analyze long-term power shortages such as those that occurred during the Great East Japan Earthquake. To visualize a risk of supply shortage during a disaster and assist the coherent recovery of supply and demand systems, this study proposes an integrated damage and recovery estimation framework including the power generator, trunk distribution systems (over 154 kV), and power demand system. This framework is unique because it thoroughly investigates the vulnerability and resilience characteristics of power systems as well as businesses as primary power consumers observed in past disasters in Japan. These characteristics are essentially modeled by statistical functions, and a simple power supply-demand matching algorism is implemented using these functions. As a result, the proposed framework reproduces the original power supply and demand status from the 2011 Great East Japan Earthquake in a relatively consistent manner. Using stochastic components of the statistical functions, the average supply margin is estimated to be 4.1%, but the worst-case scenario is a 5.6% shortfall relative to peak demand. Thus, by applying the framework, the study improves knowledge on potential risk by examining a particular past disaster; the findings are expected to enhance risk perception and supply and demand preparedness after a future large-scale earthquake and tsunami disaster.

The welfare effects of tax progressivity in a frictional labor market

A progressive tax schedule is usually justified in terms of redistribution and insurance. When the labor market is frictional and there is no intensive margin of labor supply, progressive taxation has been shown to reduce unemployment by lowering wages. However, a more progressive tax schedule discourages the individual's supply of labor and (precautionary) savings, thus potentially reducing capital accumulation and total production.I examine the different effects of a progressive tax and transfer schedule on unemployment, labor income, an individual's labor supply, and savings. My modeling strategy follows Setty and Yedid-Levi (2020), who build on the workhorse model of Krusell et al. (2010), to which I add individual labor supply. I allow for ex ante heterogeneity in productivity, as well as in preferences, while the only idiosyncratic risk is the endogenous risk of unemployment. I compare my baseline model with a frictional labor market to one with a Walrasian labor market where the unemployment risk is exogenous.Steady state comparisons, based on a utilitarian welfare criterion, show that a tax and transfer schedule with a positive degree of progressivity is optimal in both frameworks, and that the presence of labor market friction implies that the optimal level of progressivity is (slightly) higher.

Is more complex safer in the case of bail-out rebreathers for extended range cave diving?

Nowhere is redundancy more indispensable than extended range cave diving. Training and practice in this discipline ensure divers are equipped with backup regulators, gauges, lights, and adequate breathing gas for a safe exit, emergencies, and decompression. Depending on penetration distances and depth, open circuit cave diving may require carrying more gas cylinders than can be logistically managed by the diver themselves while maintaining safe gas supply margins. Consequently, divers are forced to either stage cylinders in the cave prior to the dive or rely on resupply from support divers. Both scenarios have significant drawbacks. Due to the improved efficiency of breathing gas utilisation and other advantages, closed circuit rebreathers (CCR) have enabled extended range cave diving. With increasing depths, penetration distances, and bottom times, these divers must also plan for an increasing amount of open circuit bail-out gas in the event of CCR failure. Staged cylinders have traditionally been utilised, but this strategy has limitations due to the advanced dives needed to place them and equipment degradation due to prolonged water immersion, which can often result in cylinder and regulator corrosion with consequent leakage of contents over time. Consequently, a growing number of CCR divers are foregoing open-circuit bailout altogether by carrying an additional CCR system for bailout. Although these bailout rebreathers may facilitate further exploration and have certain advantages, the risks of diving with two complex machines remain to be clearly defined.

Conglomerate to mudstone lacustrine cycles revealed in Junggar Basin, Northwest China: Middle Permian Lucaogou and Jingjingzigou formations

The Junggar Basin is one of the very large, long-lived, Late Paleozoic lacustrine basins of China, developed by the closure of the early Paleozoic Junggar Ocean. The novelty of the reported research is outcrop measurements through the mid-Permian Jingzingzigou and Lucaogou formations, allowing reconstruction of interacting very coarse and very fine-grained alluvial-to-lacustrine depositional cycles within a km-thick succession of organic-rich mudstones. The deposits are interpreted as coarse grained fan deltas that extend subaqueously into Junggar lacustrine basin, depositing fine-grained muddy, sediment gravity flow deposits. The coarseness and frequency of both alluvial and subaqueous sediment gravity flows that thin and pinch out over short distances suggests that the margin of the basin was likely steep and fringed by relatively deep lake waters, but was not the main margin of sediment supply. The proposed depositional model highlights the process response to climate-driven lake-level changes around the steep lake margin. However, the coarse-grained alluvial to fan-delta cycles and the muddy lacustrine cycles occur at different thickness scales. The former (5–13 m thick) contain internal erosion surfaces and are dominated by river sheet flood and debris flow deposits and are likely incomplete due to frequent shifting, erosion and reworking of the sediments. The lacustrine cycles (few meters thick) are dominated by current-driven, very fine sandstone, siltstone and organic-rich mudstone beds with ripple lamination and graded beds, as well as dolomites during times or places where subaqueous currents were lacking. The age dating control is not detailed but we propose that depositional cycles were likely a response to Milankovitch orbital cyclicity, also suggested by previous Permian climate modeling, that cause alternating wet and dry periods and trigger tens of meters lake level changes with abrupt grainsize changes in the shallow proximal areas and more subtle changes in sediments of distal/deep lacustrine regions. The climate changes therefore cause both sediment supply changes subaerially and lake accommodation changes subaqueously, though these would also be modulated to a lesser extent in the resultant stratigraphy by autogenic responses and tectonic forcing of sediment yield.

Taxes, benefits and labour force participation: A survey of the quasi-experimental literature

We review the literature that uses quasi-experimental methods to estimate the elasticity of labour force participation with respect to the financial gain from work. We find a wide range of elasticities, with an average of 0.36. 27 out of 35 papers find elasticities larger than 0.1, providing strong evidence that individuals respond to incentives on the extensive margin of labour supply. Elasticities are larger for women, and have declined over time.

The role of wage beliefs in the decision to become a nurse.

In light of skilled-labor shortage, the effect of a change in the wage of nurses on their labor supply is intensely discussed in recent literature. Using extensive data of German 14- to 15-year-olds, I analyze the role of the beliefs about a nurse's wage in the decision to become one. To estimate a partial effect, I select controls and their functional form using post-double-selection, which is a data-driven selection method based on regression shrinkage. Highlighting the importance of wages at the extensive margin of labor supply, the wage beliefs play a positive and statistically significant role. Although information is publicly available, educational choices knowingly suffer from misinformation. I find that especially those who do not become a nurse understate the wage. The results lead to two important policy implications. First, increasing the wage may help to overcome the shortage observed in many countries. Second, providing more information on the (relative) wage may be a successful strategy to attract more individuals into this profession. To assess the sensitivity of the results regarding omitted variable bias, I apply a novel approach. It turns out that potential unobserved confounders would have to be strong to overrule the conclusions.

Capacity Reservation and Wholesale Price Contracts under Forecast Sharing: A Behavioral Assessment

We study a supply chain setup in which a buyer has private end customer demand information that she can share with the supplier. The demand information is relevant to the supplier's capacity decision. We address the question of whether the supplier benefits from installing nonlinear capacity reservation contracts rather than wholesale price contracts. We contribute to the literature by providing the first internally valid comparison of both contracts with human decision makers. We setup an experimental study with four treatments (both contracts as well as different supplier margins). From a supplier's perspective, we observe that the capacity reservation contract significantly outperforms the wholesale price contract; however, the supplier's benefit from using capacity reservation is much higher under low margins than under high margins. Regarding supply chain performance, the positive effect for the supplier exceeds the negative effect for the buyer in the low margin setting, while the two effects neutralize each other in the high margin setting. We identify behavioral factors explaining deviations from the theoretical predictions. In particular, we observe naïve anchoring and trust as strong behavioral drivers common to both contract types. Even though the complexity of the nonlinear contract results in weaker performance than that predicted by theory, our study reveals that suppliers can still benefit from installing them; thus, providing important managerial implications for the choice of the contract type.

Using Nonlinear Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Earnings Test

We estimate the impact of the Social Security Annual Earnings Test (AET) on older workers’ employment. The AET reduces social security claimants’ current benefits in proportion to their earnings in excess of an exempt amount. Using a regression kink design and Social Security Administration data, we document that the discontinuous change in the benefit reduction rate at the exempt amount causes a corresponding change in the slope of the employment rate, suggesting that the extensive margin of labor supply is more sensitive to this policy than commonly thought. We develop a model and method that allow us to translate the behavioral responses into a lower bound estimate of 0.49 for the extensive margin elasticity, which implies more than a 1 percentage point increase in work in the absence of the AET. (JEL H55, J14, J22, J26, J31)

Nonlinear occupations and female labor supply over time

Long hours worked associated with higher hourly wages are common to many occupations, known as nonlinear occupations. Over the last four decades, both the share of workers in nonlinear occupations and their relative wage premium have been increasing. Females in particular have been facing rising experience premiums, especially in these types of occupations. We quantitatively explore how these changes have affected the female labor supply over time using a quantitative, dynamic general equilibrium model of occupational choice and labor supply at both the extensive and intensive margins. Our decomposition analysis finds that rising experience premiums are important in explaining the intensive margin of female labor supply, which has continued to increase even in the most recent period. Meanwhile, technical changes biased toward nonlinear occupations help to explain recent stagnating female employment rates. Finally, a counterfactual experiment suggests that, if the barrier aspects of nonlinearities had instead gradually vanished, female employment over this same time period would have been considerably higher at the expense of significantly lower labor supplies at the intensive margin.

The hedonic treadmill: Electricity access in India has increased, but so have expectations

As household electrification rates continue to increase globally, the focus in energy access planning is increasingly shifting towards quality of service. To inform this planning, we explore changes in household electricity and people's use and satisfaction with their service over time in rural India. Fielded in 2015, the ACCESS survey collected data on energy access from more than 8,500 households living across six Indian states. In 2018, the same households were re-surveyed. Using this longitudinal dataset, we sketch the changes in electricity access that took place during these three years. We find that access and the quality of supply have both improved substantially, with a 17 percentage points increase in electrification rates (95% CI: [15,19]). However, a large minority (about one fifth) remains unsatisfied with its electricity access. People's satisfaction levels were more sensitive to the quality of supply in 2018 compared to 2015. We propose that this change is a result of evolving expectations of electricity services that are offered. As households climb electricity access tiers and acquire more and larger electric appliances (such as fans or TVs), their demands increasingly shift from focusing on the extensive margin of supply to its intensive margin.

Employment Effects of the Earned Income Tax Credit: Taking the Long View

The earned income tax credit (EITC) is the cornerstone US anti-poverty program for families with children, typically lifting millions of children out of poverty each year. Targeted to low-income households with children and only available to those who work, the EITC contains strong incentives for nonworkers to become employed. Most of the existing economics literature focuses on federal EITC expansions in the 1980s and 1990s. This paper takes a longer view, studying all federal expansions since the program’s inception in 1975. We find robust evidence that EITC expansions increase the extensive margin of labor supply.

Trapped in inactivity? Social assistance and labour supply in Austria

Financial incentives affect the labour supply decisions of households. However, the impact usually varies significantly across household types. Whilst there is a substantial amount of literature on the labour supply effects of tax reforms and in-work benefits, the impact of changes in social assistance benefits has received less attention. This paper analyses labour supply responses to changes in social assistance. We show that labour supply elasticities vary substantially across gender and household type. Women exhibit higher labour supply elasticities, both on the intensive and the extensive margins. Additionally, labour supply elasticities are typically higher for singles and for households with children. Using these results, we analyse the impact of the Austrian reform proposal “Neue Sozialhilfe” (New Social Assistance), which was introduced in 2019 and substantially cut social assistance benefits for migrants and families with children. The overall effects of the reform are especially strong for men and migrants. Migrants and couples with children, that is, the groups hardest hit by the reform’s social assistance reductions, show the strongest labour supply reactions to the New Social Assistance. Furthermore, we show that overall, the reform is expected to have a positive, but small, effect on the intensive margin of labour supply.

Price regulation and supplier margins in the Hungarian electricity markets

It is highly debated whether residential electricity markets were mature enough for market liberalization. While most countries are unambiguously committed to the trend of liberalization, the Hungarian government decided to re-regulate the residential electricity prices after the liberalization reforms were completed. This situation provides a unique opportunity to study the price effects of a subsequent regulation process. The present paper examines the interaction between the universal service provider (USP) and free-market trader margins on the Hungarian electricity market. We distinguish three main regulatory periods: the transitional system between 2004 and 2008, the fully liberalized system between 2008 and 2010, and the post-liberalized regime from 2010 to date. A vector autoregression model is applied to assess the relationship between the different margins. The results show that in the transition period, margins were independent, while in the deregulated period, mutual dependence was evidenced between them, and in the third one, only traders' margins affected the margins of the universal service providers. This suggests that the public intervention, which was intended to focus on universal service and residential consumers, surprisingly did not have an indirect horizontal profit reallocation effect between USPs and traders. The findings can support countries that plan to modify the regulatory framework of the electricity market.

Моніторинг електроенергетичної безпеки як інструмент державного регулювання ринку електроенергії України

The article substantiates the methodological approach to electricity safety monitoring and developing practical guidelines for its implementation. Electricity safety is a state of the electric power system, which ensures its existence and guarantees that the electric power interests of its elements are satisfied. Ensuring electricity safety means achieving a systemic state in which electricity consumers are aware of the effective level of their own consumption, which provides them with the chosen option of operation, and electricity producers can meet their electricity interests to the required extent. Electricity safety monitoring should be carried out regularly (daily) and be of an operational and preventive nature in order to quickly identify risks and respond to threats of electricity crises. The methodical approach to monitoring electricity safety includes the following points: development of the electricity safety components and synthesis of the electricity safety indicators; quantitative and qualitative assessment of electricity safety; generalized assessment and qualitative interpretation of electricity safety. A methodical approach to monitoring electricity safety is proposed, which requires daily assessment of the quantitative and qualitative state of electricity safety by consumer (adequacy margin), production (reliability margin) and fuel (supply margin) components, and makes it possible to quickly identify and respond to risks, thus avoiding electricity crises. The approbation of the proposed approach allowed us to specify the crisis level of the real electricity security and the pre-crisis level of the nominal electricity security. Such a situation requires immediate action by the central executive body to prevent power outages

Gender Gaps in Latin American Labor Markets: Implications from an Estimated Search Model

We develop and estimate a search model that captures the specific characteristics of Latin America and Caribbean (LAC) labor markets and the crucial differences between men and women. Labor force participation decisions are integrated in the labor market dynamics, taking into account sample selection over unobservables. The model is estimated on four LAC countries (Argentina, Chile, Colombia and Mexico) and on three education levels (Primary, Secondary and Tertiary). We use the estimated model to study changes in gender gaps and in output implied by policies that increase the labor force participation of women. We focus on four policies: an increase in the provision of child care, an increase in average female productivity, a gender-based contribution rate for formal employees, and changes in formality and informality costs. We find that the impact on the extensive margin of the female labor supply is the main channel responsible for the policy-induced increase in output.