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Creator: Jones, Larry E., Manuelli, Rodolfo E., and McGrattan, Ellen R. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 317 Abstract:
We study the large observed changes in labor supply by married women in the United States over the post–World War II period, a period that saw little change in the labor supply by single women. We investigate the effects of changes in the gender wage gap, the quantitative impact of technological improvements in the production of nonmarket goods, and the potential inferiority of nonmarket goods in explaining the dramatic change in labor supply. We find that small decreases in the gender wage gap can simultaneously explain the significant increases in the average hours worked by married women and the relative constancy in the hours worked by single women and by single and married men. We also find that the impact of technological improvements in the household on married female hours and on the relative wage of females to males is too small for realistic values. Some specifications of the inferiority of home goods match the hours patterns, but they have counterfactual predictions for wages and expenditure patterns.
Palabra clave: Gender wage gap, Technological improvements, and Hours of work Tema: J22 - Time Allocation and Labor Supply and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Creator: Guvenen, Fatih, Kaplan, Greg, and Song, Jae Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 716 Abstract:
We analyze changes in the gender structure at the top of the earnings distribution in the United States over the last 30 years using a 10% sample of individual earnings histories from the Social Security Administration. Despite making large inroads, females still constitute a small proportion of the top percentiles: the glass ceiling, albeit a thinner one, remains. We measure the contribution of changes in labor force participation, changes in the persistence of top earnings, and changes in industry and age composition to the change in the gender composition of top earners. A large proportion of the increased share of females among top earners is accounted for by the mending of, what we refer to as, the paper floor – the phenomenon whereby female top earners were much more likely than male top earners to drop out of the top percentiles. We also provide new evidence at the top of the earnings distribution for both genders: the rising share of top earnings accruing to workers in the Finance and Insurance industry, the relative transitory status of top earners, the emergence of top earnings gender gaps over the life cycle, and gender differences among lifetime top earners.
Palabra clave: Glass ceiling, Industry, Paper floor, Top earners, and Gender gap Tema: E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, G10 - General Financial Markets: General (includes Measurement and Data), and J31 - Wage Level and Structure; Wage Differentials
Creator: Guvenen, Fatih and Rendall, Michelle Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 704 Abstract:
In this paper, we study the role of education as insurance against a bad marriage. Historically, due to disparities in earning power and education across genders, married women often found themselves in an economically vulnerable position, and had to suffer one of two fates in a bad marriage: either they get divorced (assuming it is available) and struggle as low-income single mothers, or they remain trapped in the marriage. In both cases, education can provide a route to emancipation for women. To investigate this idea, we build and estimate an equilibrium search model with education, marriage/divorce/remarriage, and household labor supply decisions. A key feature of the model is that women bear a larger share of the divorce burden, mainly because they are more closely tied to their children relative to men. Our focus on education is motivated by the fact that divorce laws typically allow spouses to keep the future returns from their human capital upon divorce (unlike their physical assets), making education a good insurance against divorce risk. However, as women further their education, the earnings gap between spouses shrinks, leading to more unstable marriages and, in turn, further increasing demand for education. The framework generates powerful amplification mechanisms, which lead to a large rise in divorce rates and a decline in marriage rates (similar to those observed in the US data) from relatively modest exogenous driving forces. Further, in the model, women overtake men in college attainment during the 1990s, a feature of the data that has proved challenging to explain. Our counterfactual experiments indicate that the divorce law reform of the 1970s played an important role in all of these trends, explaining more than one-quarter of college attainment rate of women post-1970s and one-half of the rise in labor supply for married women.
Palabra clave: Divorce, Divorce law reform, College-gender gap, Remarriage, Marriage, and Female labor supply Tema: D13 - Household Production and Intrahousehold Allocation, J12 - Marriage; Marital Dissolution; Family Structure; Domestic Abuse, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Creator: Cooper, Russell and Willis, Jonathan L. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 310 Abstract:
We study inferences about the dynamics of labor adjustment obtained by the “gap methodology” of Caballero and Engel  and Caballero, Engel and Haltiwanger . In that approach, the policy function for employment growth is assumed to depend on an unobservable gap between the target and current levels of employment. Using time series observations, these studies reject the partial adjustment model and find that aggregate employment dynamics depend on the cross-sectional distribution of employment gaps. Thus, nonlinear adjustment at the plant level appears to have aggregate implications. We argue that this conclusion is not justified: these findings of nonlinearities in time series data may reflect mismeasurement of the gaps rather than the aggregation of plant-level nonlinearities.
Palabra clave: Adjustment Costs, Aggregate Employment, and Employment Tema: J23 - Labor Demand, E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, and J60 - Mobility, Unemployment, Vacancies, and Immigrant Workers: General
Creator: Guvenen, Fatih, Kuruscu, Burhanettin, and Ozkan, Serdar Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 438 Abstract:
Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts. We begin by documenting two new empirical facts that link these inequality differences to tax policies. First, we show that countries with more progressive labor income tax schedules have significantly lower before-tax wage inequality at different points in time. Second, progressivity is also negatively correlated with the rise in wage inequality during this period. We then construct a life cycle model in which individuals decide each period whether to go to school, work, or be unemployed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. We find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 76% of the difference in inequality at the upper end (log 90-50 differential). When this economy experiences skill-biased technological change, progressivity also dampens the rise in wage dispersion over time. The model explains 41% of the difference in the total rise in inequality and 58% of the difference at the upper end.
Palabra clave: Skillbiased technical change, Ben-Porath, Wage inequality, Progressive taxation, Human capital, and Labour income tax Tema: E62 - Fiscal Policy and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Creator: Erceg, Christopher J. and Levin, Andrew T. (Andrew Theo) Series: Joint commitee on business and financial analysis Abstract:
The durable goods sector is much more interest sensitive than the non-durables sector, and these sectoral differences have important implications for monetary policy. In this paper, we perform VAR analysis of quarterly US data and find that a monetary policy innovation has a peak impact on durable expenditures that is roughly five times as large as its impact on non-durable expenditures. We then proceed to formulate and calibrate a two-sector dynamic general equilibrium model that roughly matches the impulse response functions of the data. We derive the social welfare function and show that the optimal monetary policy rule responds to sector-specific inflation rates and output gaps. We show that some commonlyprescribed policy rules perform poorly in terms of social welfare, especially rules that put a higher weight on inflation stabilization than on output gap stabilization. By contrast, it is interesting that certain rules that react only to aggregate variables, including aggregate output gap targeting and rules that respond to a weighted average of price and wage inflation, may yield a welfare level close to the optimum given a typical distribution of shocks.
Palabra clave: Monetary policy, Consumer, Business cycles, Durable goods, and Social welfare Tema: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles
Creator: Eckstein, Zvi and Nagypál, Éva Series: Quarterly review (Federal Reserve Bank of Minneapolis. Research Department) Number: Vol. 28, No. 2 Abstract:
The goal of this article is to summarize the main trends in the earnings and employment distribution in the United States using data drawn from the March Current Population Surveys covering the period between 1961 and 2002. We show that inequality started to increase for men in 1974, and for women in 1981, and for both genders inequality continued to increase throughout 2002. During the same period the wage premium of college graduates over non-college workers increased substantially and the ratio of college educated workers to non-college workers also increased. These facts support the popular skill-biased technical change (SBTC) hypothesis. However, other facts raise some doubts about the SBTC hypothesis. First, the college wage premium is mainly due to workers with a postgraduate degree, but their increase in the labor force started much earlier than the spectacular rise in their wages. Also there has been no marked change in recent decades in the occupational distribution of workers. However, the earning premium of professional over blue collar workers followed the same trend as the college earning premium. And finally, the most dramatic changes in the labor market took place among women.
Creator: Galor, Oded, 1953- and Weil, David N. Series: Productivity and the industrial revolution Abstract:
This paper develops a unified model of growth, population, and technological progress that is consistent with long-term historical evidence. The economy endogenously evolves through three phases. In the Malthusian regime, population growth is positively related to the level of income per capita. Technological progress is slow and is matched by proportional increases in population, so that output per capita is stable around a constant level. In the post-Malthusian regime, the growth rates of technology and total output increase. Population growth absorbs much of the growth of output, but income per capita does rise slowly. The economy endogenously undergoes a demographic transition in which the traditionally positive relationship between income per capita and population growth is reversed. In the Modern Growth regime, population growth is moderate or even negative, and income per capita rises rapidly. Two forces drive the transitions between regimes: First, technological progress is driven both by increases in the size of the population and by increases in the average level of education. Second, technological progress creates a state of disequilibrium, which raises the return to human capital and induces parents to substitute child quality for quantity.
Palabra clave: Technological change, Malthusian, Growth, Development, Demographics, Demographic transition, Fertility, and Population Tema: O11 - Economic development - Macroeconomic analyses of economic development, J13 - Demographic economics - Fertility ; Family planning ; Child care ; Children ; Youth, O40 - Economic growth and aggregate productivity - General, and O33 - Technological change ; Research and development - Technological change : Choices and consequences ; Diffusion processes
Creator: Edge, Rochelle Mary, 1971- and Rudd, Jeremy Bay, 1970- Series: Joint commitee on business and financial analysis Abstract:
We add a nominal tax system to a sticky-price monetary business cycle model. When nominal interest income is taxed, the coefficient on inflation in a Taylor-type monetary policy rule must be significantly larger than one in order for the model economy to have a determinate rational expectations equilibrium. When depreciation is treated as a charge against taxable income, an even larger weight on inflation is required in the Taylor rule in order to obtain a determinate and stable equilibrium. These results have obvious implications for assessing the historical conduct of monetary policy.
Palabra clave: Monetary policy, Business cycle, Cycle, Interest, Inflation, Policy, Prices, Monetary, Rational expectation, and Tax Tema: E43 - Money and interest rates - Determination of interest rates ; Term structure of interest rates, E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E12 - General aggregative models - Keynes ; Keynesian ; Post-Keynesian, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles