Intergenerational Transmission of Labor Market Outcomes
Paper Session
Saturday, Jan. 8, 2022 10:00 AM - 12:00 PM (EST)
- Chair: Maria B. Zhu, Syracuse University
Minimum Wages and the Human Capital of the Next Generation
Abstract
A long-standing question in economics concerns the consequences of minimum wage policies. An enormous literature estimates the effects of minimum wage policies on employment, wages, and earnings inequality. Yet whether these policies can affect children of covered workers over the long run remains an open question. Previous studies focus mainly on the contemporary impacts on individuals making high school dropout or college enrollment decisions. However, retrospective exposure during critical periods of child development may be equally or even more relevant. In this paper, we study the long-run consequences of the unprecedented minimum wage expansion caused by the 1966 Amendments to the Fair Labor Standards Act. Our identification strategy relies on the policy adoption timing and the geographic variation in the baseline population size gaining below the new minimum wage floor before the reform. The results indicate that childhood exposure to the reform increased adult human capital and adult economic self-sufficiency. To understand the mechanisms behind these effects, we find that the reform led to an immediate and persistent increase in parental income, especially for mothers and individuals at the bottom of the distribution. At the same time, we observe no meaningful changes in parental employment, fertility, or marital outcomes in the immediate aftermath of the reform. Our results suggest that when high minimum wages have limited effects on disemployment, they can also have the potential to increase welfare and reduce inequalities by promoting a higher level of parents' investment in children's education. Therefore, minimum wage policies could constitute to a certain extent an effective welfare tool to reduce inequality improving the early life conditions of the poor.A Bridge to Graduation: Testing the Effects of an Alternative Pathway for Students Who Fail Exit Exams
Abstract
High school exit exams are meant to standardize the quality of public high schools and to ensure that students graduate with a set of basic skills and knowledge. Evidence suggests that a common perverse effect of these exit exams is an increase of dropout for students who have difficulty passing tests, with a disproportionately larger effect on minority students. Some states mitigate this adverse effect by offering alternative ways for students who have failed their exit exams to demonstrate mastery of high school curricula. This study, investigates the post-secondary effects of an alternative high school graduation program in the state of Maryland. Among students who initially fail their exit exam, those who eventually graduate through an alternative project-based pathway, have lower college enrollment but similar employment outcomes to students who graduate by retaking and passing their exit exams. However, compared to similar students who fail to complete high school, those students who take the alterative pathway have better post-secondary outcomes in both education and employment.The Effect of Microinsurance on Child Work and Schooling: Evidence from Northern Kenya and Southern Ethiopia
Abstract
Poor households in developing countries often cannot make adequate investments in human capital. Vulnerability to the adverse weather shock exacerbates this problem since access to formal insurance markets is limited in these settings. Agricultural insurance is designed to reduce smallholder farmers and pastoralists' risk exposure and received attention from policymakers and researchers. However, since it affects the production strategies such as labor use and capital investment while it increases the expected income, its effect on child work and schooling is ambiguous. Despite the ambiguity of its prediction and importance for the long-term development of the economy, the effect of agricultural insurance on child work and schooling has been understudied. This paper examines the effects of index-based microinsurance on children's welfare using a microinsurance product called Index-Based Livestock Insurance (IBLI), which targets pastoral households comprising the majority of the population in the study area – Northern Kenya and Southern Ethiopia. For identification, we exploit the randomly distributed discount coupons as an instrument for insurance coverage. Coupon distribution was implemented to encourage insurance purchase and evaluate the effect of the insurance. Our data come from five rounds of panel surveys conducted in northern Kenya and four rounds in southern Ethiopia as part of the program and the administrative dataset of the insurance company. We find that microinsurance decreases the probability of a child engaged in full-time or part-time work and schooling and increases the probability of a child being a full-time student. The effect is significant both statistically and economically. We also provide suggestive evidence that our results stem from the income effect dominating the reduced demand for child labor by showing the herd size does not change significantly, and the results hold even for the subgroup which increases herd size.Public and Parental Investments, and Children’s Skill Formation
Abstract
This paper studies the interaction between parental and public inputs in children’sskill formation when families can sort into public institutions with different quality.
We show theoretically that the effects of public investments depend on the elasticity
of substitution between inputs made at home and in institutions. Using an RCT that
increased public preschool quality, we test the main model implications. We find that
improved preschool quality leads to heterogeneous parental responses, which mediate
the longer-run effects on children’s skills. We show that these responses are only
compatible with inputs made at home and in institutions being substitutes.
JEL Classifications
- J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers