Devereux, Paul J.
Devereux, Paul J.
Devereux, Paul J.
Now showing 1 - 10 of 49
- PublicationThe (Un)Importance of InheritanceTransfers from parents—either in the form of gifts or inheritances—have received much attention as a source of inequality. This paper uses a 19-year panel of administrative data for the population of Norway to examine the share of the Total Inflows available to an individual (defined as the capitalized sum of net labor income, government transfers, and gifts and inheritances received over the period) accounted for by capitalized gifts and inheritances. Perhaps surprisingly, we find that gifts and inheritances represent a small share of Total Inflows; this is true across the distribution of Total Inflows, as well as at all levels of net wealth at a point in time. Gifts and inheritances are only an important source of income flows among those who have very wealthy parents. Additionally, gifts and inheritances have very little effect on the distribution of Total Inflows – when we do a counterfactual Total Inflows distribution with zero gifts and inheritances, it is not much different from the actual distribution. Our findings suggest that inheritance taxes may do little to mitigate the extreme wealth inequality in society.
- PublicationOptimally combining censored and uncensored datasetsWe develop a simple semiparametric framework for combining censored and uncensored samples so that the resulting estimators are consistent, asymptotically normal, and use all information optimally. No nonparametric smoothing is required to implement our estimators. To illustrate our results in an empirical setting, we show how to estimate the effect of changes in compulsory schooling laws on age at first marriage, a variable that is censored for younger individuals. Results from a small simulation experiment suggest that the estimator proposed in this paper can work very well in finite samples.
- PublicationReal wage cyclicality of job stayers, within-company job movers, and between-company job moversUsing the British New Earnings Survey Panel Data for 1975-2001, the authors estimate the wage cyclicality (the degree to which wage levels rise and fall with economic upturns and downturns) of three groups: job stayers, within-company job movers, and between-company job movers. Wages of internal movers, they find, were slightly more procyclical, and wages of external movers considerably more procyclical, than those of stayers. The greater cyclicality of movers' wages is particularly apparent for private sector workers and persons not covered by collective agreements. Nevertheless, because job stayers comprised about 90% of all observations in this large sample of British workers, the procyclicality of their wages was the predominant determinant of the overall procyclical pattern found across all groups. Thus, the analysis does not support the implication of some rigid wage models that employers use job title changes to adjust wages to the business cycle.
- PublicationThe more the merrier? The effect of family composition on children's educationAmong the perceived inputs in the “production” of child quality is family size; there is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family. However, there is little causal evidence that speaks to this theory. Our analysis is able to overcome many limitations of the previous literature by using a rich dataset that contains information on the entire population of Norway over an extended period of time and allows us to match adult children to their parents and siblings. In addition, we use exogenous variation in family size induced by the birth of twins to isolate causation. Like most previous studies, we find a negative correlation between family size and children’s educational attainment. However, when we include indicators for birth order, the effect of family size becomes negligible. This finding is robust to the use of twin births as an instrument for family size. In addition, we find that birth order has a significant and large effect on children’s education; children born later in the family obtain less education. These findings suggest the need to revisit economic models of fertility and child “production”, focusing not only on differences across families but differences within families as well.
- PublicationSmall sample bias in synthetic cohort models of labor supply(University College Dublin. School of Economics, 2006-05)In synthetic cohort models (cross-sectional data grouped at the cohort and year level), researchers often ignore potential biases induced by sampling error because they have 100 or 200 observations per group. I investigate small sample biases in the context of two synthetic cohort labor supply applications - a model of intertemporal labor supply of men (similar to that of Browning, Deaton, and Irish, 1985) and a female labor supply model (similar to that of Blundell, Duncan, and Meghir, 1998). My approach is to use the Current Population Survey to compare the estimates when group sizes are extremely large to those that arise from randomly drawing subsamples of observations from the large groups. This provides a natural framework for examining the extent of small sample biases and the group sizes required so that small sample biases are negligible. I augment this approach with Monte Carlo analysis so as to precisely quantify biases and coverage rates. I find that, in these two applications, thousands of observations per group are required before small sample issues can be ignored in estimation. In these applications, sampling error leads one to underestimate intertemporal labor supply elasticities for men, and conclude that the income response of female labor supply is zero or tiny when in fact it is quite large.
- PublicationUnderstanding Intergenerational Mobility: The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and BehaviorsWealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors and we find little evidence that nature/nurture interactions are important. When bequests are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth. We further build on the existing literature by providing a more comprehensive view of the role of nature and nurture on intergenerational mobility, looking at a wide range of different outcomes using a common sample and method. We find that environmental influences are relatively more important for wealth-related variables such as savings and investment decisions than for human capital. We conclude by studying consumption as an overall measure of welfare and find that, like wealth, it is more determined by environment than by biology.
- PublicationChoosing Differently? College Application Behaviour and the Persistence of Educational AdvantageWe use administrative data from Ireland to study differences in college application behaviour between students from disadvantaged versus advantaged high schools. Ireland provides an interesting laboratory for this analysis as applicants provide a preference-ordering of college programs (majors) and marginal applications are costless. Also, college admission depends almost completely on grades in the terminal high school examinations. Thus, we can compare the application choices of students who have equal chances of admission to college programs. Conditional on achievement and college opportunities, we find that students from advantaged high schools are more likely to apply to universities and to more selective college programs. They are also more likely to have preferences that cluster by program selectivity rather than by field of study. Our results suggest that, alongside differences in achievement, differences in college application behaviour also cause persons from advantaged high schools to be more likely to enrol in selective colleges and enter more selective programs. Importantly, we find that enrolment gaps for equally qualified applicants are smaller than differences in application behaviour; the relatively meritocratic centralised admissions system based on achievement undoes much of the effect of the differences in application behaviour.
- PublicationDo employers provide insurance against low frequency shocks? Industry employment and industry wages(University of Chicago Press, 2005)I use panel data to examine whether long-term changes in industry wages are positively related to long-term changes in industry employment. Previous research using repeated cross-sectional data found no systematic relationship between these variables. Using standard fixed effects models to deal with individual heterogeneity, I find a robust positive relationship between changes in composition-constant industry wages and industry employment. This suggests that growing industries attract less skilled individuals in a manner that biases down the estimated relationship between industry employment and wages in repeated cross-sectional data. The results imply that supply curves facing industries are elastic but upward sloping.
- PublicationLike father, like son? A note on the intergenerational transmission of IQ scores(Institute for the Study of Labor, 2008-08)More able parents tend to have more able children. While few would question the validity of this statement, there is little large-scale evidence on the intergenerational transmission of IQ scores. Using a larger and more comprehensive dataset than previous work, we are able to estimate the intergenerational correlation in IQ scores, examining not just average correlations but also how this relationship varies for different subpopulations. We find that there is substantial intergenerational transmission of IQ scores; an increase in father’s IQ at age 18 of 10% is associated with a 3.2% increase in son’s IQ at the same age. This relationship holds true no matter how we break the data. This effect is much larger than our estimated elasticity of intergenerational transmission of income of approximately .2.
- PublicationUnder pressure? The effect of peers on outcomes of young adultsA variety of public campaigns, including the “Just Say No” campaign of the 1980s and 1990s that encouraged teenagers to “Just Say No to Drugs”, are based on the premise that teenagers are very susceptible to peer influences. Despite this, very little is known about the effect of school peers on the long-run outcomes of teenagers. This is primarily due to two factors: the absence of information on peers merged with long-run outcomes of individuals and, equally important, the difficulty of separately identifying the role of peers. This paper uses data on the population of Norway and idiosyncratic variation in cohort composition within schools to examine the role of peer composition in 9th grade on longer-run outcomes such as IQ scores at age 18, teenage childbearing, post-compulsory schooling educational track, adult labor market status, and earnings. We find that outcomes are influenced by the proportion of females in the grade, and these effects differ for men and women. Other peer variables (average age, average mother’s education) have little impact on the outcomes of teenagers.