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Intergenerational return to human capital

Better educated parents invest more time and money in their children, who are more successful in the labor market

10.15185/izawol.19 19 Devereux, P

by Paul J. Devereux

Governments invest a lot of money in education, so it is important to understand the benefits of this spending. One essential aspect is that education can potentially make people better parents and thus improve the educational and employment outcomes of their children. Interventions that encourage the educational attainment of children from poorer families will reduce inequality in current and future generations. In addition to purely formal education, much less expensive interventions to improve parenting skills, such as parental involvement programs in schools, may also improve child development.

Can government policies reverse undesirable declines in fertility?

Government policies can have a modest effect on raising fertility—but broader social changes lowering fertility are stronger

10.15185/izawol.23 23 Brainerd, E

by Elizabeth Brainerd

Since 1989 fertility and family formation have declined sharply in Central and Eastern Europe and the former Soviet Union. Fertility rates are converging on—and sometimes falling below—rates in Western Europe, most of which are below replacement levels. Concerned about a shrinking and aging population and strains on pension systems, governments are using incentives to encourage people to have more children. These policies seem only modestly effective in countering the impacts of widespread social changes, including new work opportunities for women and stronger incentives to invest in education.

Childcare subsidy policy: What it can and cannot accomplish

What are the implications of childcare subsidies for care quality, family well-being, and child development?

10.15185/izawol.43 43 Tekin, E

by Erdal Tekin

Most public expenditure on childcare in the US 
is made through a federal program, the Child Care and Development Fund (CCDF), established as 
part of landmark welfare reform legislation in 1996. The main goal of the reform was to increase employment and reduce welfare dependence among low-income families. Childcare subsidies have been effective in enabling parents to work, but apparently at some cost to the well-being of parents and children.

Inheritance, bequests, and labor supply

Inheritance-related work disincentives can be strong, but labor supply could increase if bequests facilitate entrepreneurship

10.15185/izawol.69 69 Cox, D

by Donald Cox

Inheriting money can be a problem since the new wealth might sap the beneficiaries’ incentive to work. Or it could do the opposite, by facilitating entrepreneurship among those whose ambition to start a business had been stymied by a lack of cash. Recent evidence suggests inheritance-related work disincentives can be strong—unexpected inheritances can matter a lot for early retirement, for example. But where inheritances facilitate self-employment, as some evidence suggests, the labor supply might increase.

Human capital effects of marriage payments

Investing in female human capital can reduce brideprice and dowry practices and increase welfare

10.15185/izawol.77 77 Anderson, S

by Siwan Anderson

Payments at the time of marriage, which are ubiquitous in developing countries, can be substantial enough to impoverish parents. Brideprice and dowry have both been linked to domestic violence against women, and inflation in these payments has prompted legislation against them in several jurisdictions. Marriage payments are often a substitute for investment in female human capital, so from a welfare and policy perspective, they should be prohibited. This highlights the importance of promoting direct economic returns over legal and customary rights.

Should divorce be easier or harder?

The evidence, though weak, favors legal, easy, unilateral divorce

10.15185/izawol.113 113 Gonzalez, L

by Libertad Gonzalez

Many countries have enacted legislation over the past few decades making divorce easier. Some countries have legalized divorce where it had previously been banned, and many have eased the conditions required for a divorce, such as allowing unilateral divorce (both spouses do not have to agree on the divorce). Divorce laws can regulate the grounds for divorce, division of property, child custody, and child support or maintenance payments. Reforms can have a range of social effects beyond increasing the divorce rate. They can influence female labor supply, marriage and fertility rates, child well-being, household saving, and even domestic violence and crime.

The promises and pitfalls of universal early education

Universal early education can be beneficial, and more so for the poor, but quality matters

10.15185/izawol.116 116 Cascio, E

by Elizabeth U. Cascio

There is widespread interest in universal early education, both to promote child development and to support maternal employment. Positive long-term findings from small-scale early education interventions for low-income children in the US have greatly influenced the public discussion. However, such findings may be of limited value for policymakers considering larger-scale, more widely accessible programs. Instead, the best insight into the potential impacts of universal early education comes from analysis of these programs themselves, operating at scale. This growing research base suggests that universal early education can benefit both children and families, but quality matters.

Fertility postponement and labor market outcomes

Postponed childbearing increases women’s labor market attachment but may reduce overall fertility

10.15185/izawol.117 117 Bratti, M

by Massimiliano Bratti

The rise in the average age of women bearing their first child is a well-established demographic trend in recent decades. Postponed childbearing can have important consequences for the mother and, at a macro level, for the country as a whole. Research has focused on the effect postponing fertility has on the labor market outcomes for mothers and on the total number of children a woman has in her lifetime. Most research finds that postponing the first birth raises a mother’s labor force participation and wages but may have negative effects on overall fertility, especially in the absence of supportive family-friendly policies.

Are married immigrant women secondary workers?

Patterns of labor market assimilation for married immigrant women are similar to those for men

10.15185/izawol.119 119 Ferrer, A

by Ana Ferrer

What is the role of married women in immigrant households? Their contribution to the labor market has traditionally been considered of secondary importance and studied in the framework of temporary attachment to the labor force to support the household around the time of arrival. But this role has changed. Evidence from major immigrant-receiving countries suggests that married immigrant women make labor supply decisions similar to those recently observed for native-born married women, who are guided by their own opportunities in the labor market rather than by their spouses’ employment trajectories.

Measuring the cost of children

Knowing the real cost of children is important for crafting better
 economic policy

10.15185/izawol.132 132 Donni, O

by Olivier Donni

The cost of children is a critical parameter used in determining many economic policies. For instance, correctly setting the tax deduction for families with children requires assessing the true household cost of children. Evaluating child poverty at the individual level requires making a clear distinction between the share of family resources received by children and that received by parents. The standard ad hoc measures (equivalence scales) used in official publications to measure the cost of children are arbitrary and are not informed by any economic theory. However, economists have developed methods that are grounded in economic theory and can replace ad hoc measures.

The determinants of housework time

Boosting the efficiency of household production could have large economic effects

10.15185/izawol.133 133 Stratton, L

by Leslie S. Stratton

The time household members in industrialized countries spend on housework and shopping is substantial, amounting on average to about half as much time as is spent on paid employment. Women bear the brunt of this burden, a difference that is driven in part by the gender differential in wages. Efforts to reduce the gender wage gap and alter gendered norms of behavior should reduce the gender bias in household production time and reduce inefficiency in home production. Policymakers should also note the impact of tax policy on housework time and consider ways to reduce the distortions caused by sales and income taxes.

Childcare choices and child development

Generous parental leave and affordable, high-quality childcare can foster children’s abilities

10.15185/izawol.134 134 Del Boca, D

by Daniela Del Boca

The economic and psychological literatures have demonstrated that early investments (private and public) in children can significantly increase cognitive outcomes in the short and long term and contribute to success later in life. One of the most important of these inputs is maternal time. Women’s participation in the labor market has risen rapidly in most countries, implying that mothers spend less time with their children and that families rely more on external sources of childcare. This trend has raised concerns, and an intense debate in several countries has focused on the effectiveness of childcare policies.

Immigrant labor and work-family decisions of native-born women

As immigration lowers childcare and housework costs, native-born women alter their work and fertility decisions

10.15185/izawol.139 139 Furtado, D

by Delia Furtado

Many countries are reviewing immigration policy, focusing on wage and employment effects for workers whose jobs may be threatened by immigration. Less attention is given to effects on prices of goods and services. The effect on childcare prices is particularly relevant to policies for dealing with the gender pay gap and below-replacement fertility rates, both thought to be affected by the difficulty of combining work and family. New research suggests immigration lowers the cost of household services and high-skilled women respond by working more or having more children.

Pension reform and couples’ joint retirement decisions

The success of policies raising the retirement age depends on people’s responsiveness to changes in pension eligibility

10.15185/izawol.142 142 Hospido, L

by Laura Hospido

Rising life expectancy and the growing fiscal insolvency of public pension systems have prompted many developed countries to raise the pension entitlement age. The success of such policies depends on the responsiveness of individuals to such changes. Retirement has increasingly become a decision made jointly by a couple rather than individually by one partner. The empirical evidence indicates that almost a third of dual-earner couples in Europe and the US coordinate their retirement decision despite age differences between partners. This joint determination of retirement has important implications for policies intended to reduce the burden of pension costs.

Migration and families left behind

Families that stay behind when a member migrates do not clearly benefit

10.15185/izawol.144 144 Démurger, S

by Sylvie Démurger

About a billion people worldwide live and work outside their country of birth or outside their region of birth within their own country. Labor migration is conventionally viewed as economically benefiting the family members who are left behind through remittances. However, splitting up families in this way may also have multiple adverse effects on education, health, labor supply response, and social status for family members who do not migrate. Identifying the causal impact of migration on those who are left behind remains a challenging empirical question with inconclusive evidence.

The quantity–quality fertility–education trade-off

Policies to reduce fertility in developing countries generally boost education levels, but only slightly

10.15185/izawol.143 143 Liu, H

by Haoming Liu

At the national level, it has long been observed that a country’s average education level is negatively associated with its total fertility rate. At the household level, it has also been well documented that children’s education is negatively associated with the number of children in the family. Do these observations imply a causal relationship between the number of children and the average education level (the quantity–quality trade-off)? A clear answer to this question will help both policymakers and researchers evaluate the total benefit of family planning policies, both policies to lower fertility and policies to boost it.

Do joint custody laws improve family well-being?

Joint child custody laws affect not only divorced families but intact families as well

10.15185/izawol.147 147 Halla, M

by Martin Halla

Custody laws governing living arrangements for children following their parents’ divorce have changed dramatically since the 1970s. Traditionally, one parent—usually the mother—was assigned sole custody of the child. Today, many divorced parents continue to share parental rights and responsibilities through joint custody arrangements. While joint custody laws have improved the situation of divorced fathers, recent empirical research has documented intended and unintended consequences of joint custody laws for families in such areas as family formation, labor force participation, suicide, domestic violence, and child outcomes.

Intermarriage and the economic success of immigrants

Who is the driving factor—the native spouses or the immigrants themselves?

10.15185/izawol.160 160 Nottmeyer, O

by Olga K. Nottmeyer

Marriages between immigrants and natives (intermarriages) are often associated with economic success and interpreted as an indicator of social integration. Intermarried immigrant men are on average better educated and work in better paid jobs than nonintermarried immigrant men. In this context, native spouses could deliver valuable insights into the host country and provide business contacts. However, intermarriage may not be the driving factor of economic success but instead be its byproduct, as better education and personal characteristics could be both economically beneficial and increase the likelihood of meeting natives. Intermarriage might also be more “suspense-packed” (positively and negatively) and can thus be associated with an increase in severe stress and a higher risk of divorce.

Intergenerational income persistence

Measures of intergenerational persistence can be indicative of equality of opportunity, but the relationship is not clear cut

10.15185/izawol.176 176 Blanden, J

by Jo Blanden

A strong association between incomes across generations—with children from poor families likely to be poor as adults—is frequently considered an indicator of insufficient equality of opportunity. Studies of such “intergenerational persistence,” or lack of intergenerational mobility, are concerned with measuring the strength of the relationship between parents’ socio-economic status and that of their children as adults. However, reliable measurement requires overcoming important data and methodological difficulties. Moreover, the association between equality of opportunity and common measures of intergenerational persistence is not as clear-cut as is often assumed.

Institutional long-term care and government regulation

Focus on family and portable allowances to lower the costs of institutional long-term care while monitoring its quality

10.15185/izawol.179 179 Stancanelli, E

by Elena Stancanelli

The demand for institutional long-term care is likely to remain high in OECD countries, because of longer life expectancy and falling cohabitation rates of the elderly with family members. As shortages of qualified nurses put a cap on the supply of beds at nursing homes, excess demand builds. That puts upward pressure on prices, which may not reflect the quality of the services that are provided. Monitoring the quality of nursing home services is high on the agenda of OECD governments. Enlisting feedback from family visitors and introducing portable benefits might improve quality at little extra cost.

Should the earned income tax credit rise for childless adults?

The earned income tax credit raises income and work incentives among low-income parents but little goes to adults without children

10.15185/izawol.184 184 Holzer, H

by Harry J. Holzer

The earned income tax credit provides important benefits to low-income families with children in the US. At an annual cost of about $60 billion, it increases the incomes of such families while encouraging parents to work more by subsidizing their incomes. But low-income adults without children and non-custodial parents receive only very low payments under the program, providing them with little income benefits or work incentives. Many of these adults are low-income young men whose wages and employment rates have been declining for years and who might benefit substantially from expanded eligibility for the earned income tax credit.

Does return migration influence fertility at home?

Migrants encounter different fertility norms while abroad, which they can bring back upon returning home

10.15185/izawol.204 204 Bertoli, S

by Simone Bertoli

Demographic factors in migrant-sending countries can influence international migration flows. But when migrants move across borders, they can also influence the pace of demographic transition in their countries of origin. This is because migrants, who predominantly move on a temporary basis, encounter new fertility norms in their host countries and then bring them back home. These new fertility norms can be higher or lower than those in their country of origin. So the new fertility norms that result from migration flows can either accelerate or slow down a demographic transition in migrant-sending countries.

Impact of remittances on fertility

Remittances are closely linked to household fertility choices with consequences at the community and country level

10.15185/izawol.207 207 Naufal, G

by George S. Naufal

The growth in the number and in the size of remittances and the stability of these monetary transfers have made them a prime target for policymakers. Because remittance flows go directly to households in emigrants’ home countries, one has to wonder about their effects on household decision-making, particularly in relation to the number of children to have. While this is household specific, when considered at the community and country level, there are significant policy implications for remittance-receiving economies. Therefore, it is crucial to more fully understand the relationship between remittance inflows and fertility rates.

Feminization of migration and trends in remittances

Independent female migrants may be a reliable source of remittances despite the difficulties they encounter in labor markets

10.15185/izawol.220 220 Le Goff, M

by Maelan Le Goff

Migrants’ remittances to developing countries have increased in recent decades, partly due to reduced transactions costs and improved living conditions in host countries. The feminization of international migration represents yet another explanation. Despite the difficulties female migrants encounter in the labor market, their total remittances may be higher and more resilient than those of male migrants, owing to these women’s stronger links to family members left behind and self-insurance motives. Policymakers need to understand how this new and significant upward trend in female migration could affect the economic and social development of home countries.

Parental employment and children’s academic achievement

Quality of parental time spent with children is more important than quantity

10.15185/izawol.231 231 Schildberg-Hörisch, H

by Hannah Schildberg-Hörisch

Female labor market participation rates have increased substantially in many countries over the last decades, especially those of mothers with young children. This trend has triggered an intense debate about its implications for children’s well-being and long-term educational outcomes. The overall effect of maternal and paternal employment on children’s cognitive and educational attainment is not obvious: on the one hand, children may benefit from higher levels of family income, on the other hand, parental employment reduces the amount of time parents spend with their children.

Female education and its impact on fertility

The relationship is more complex than one may think

10.15185/izawol.228 228 Kim, J

by Jungho Kim

The negative correlation between women’s education and fertility is strongly observed across regions and time; however, its interpretation is unclear. Women’s education level could affect fertility through its impact on women’s health and their physical capacity to give birth, children’s health, the number of children desired, and women’s ability to control birth and knowledge of different birth control methods. Each of these mechanisms depends on the individual, institutional, and country circumstances experienced. Their relative importance may change along a country’s economic development process.

Do childcare policies increase maternal employment?

Subsidized childcare fosters maternal employment, but employment status, childcare quality, and availability matter

10.15185/izawol.241 241 Vuri, D

by Daniela Vuri

Women’s labor force participation has rapidly increased in most countries, but mothers still struggle to achieve a satisfactory work−life balance. Childcare allows the primary caregiver, usually the mother, to take time away from childrearing for employment. Family policies that subsidize childcare and increase its availability have different effects on female labor supply across countries. For policymakers to determine how well these policies work, they should consider that policy effectiveness may depend on country-specific pre-reform female employment and earnings, and childcare availability, costs, and quality.

The effects of recessions on family formation

Fertility and marriage rates are pro-cyclical in many countries, but the longer-term consequences are inconclusive

10.15185/izawol.248 248 Kondo, A

by Ayako Kondo

Low fertility rates are a cause of social concern in many developed countries, with growing youth unemployment often being considered a primary cause. However, economic theory is not conclusive about whether deterioration in youth employment prospects actually discourages family formation or for how long the effect might persist. In addition, recessions can affect the divorce rate. Therefore, understanding the relationship between labor market conditions and family formation can provide important insights into the type of policies that would be most effective in promoting fertility.

Effects of entering adulthood during a recession

Recent declines in youth employment, net worth, and family formation could permanently affect financial well-being

10.15185/izawol.242 242 Dettling, L

by Lisa Dettling

Current cohorts of young adults entered adulthood during an international labor and housing market crisis of a severity not experienced since the Great Depression. Concerns have arisen over the impacts on young adults’ employment, income, wealth, and living arrangements, and about whether these young adults constitute a “scarred generation” that will suffer permanent contractions in financial well-being. If true, knowing the mechanisms through which young adults’ finances have been affected has important implications for policy measures that could improve the financial well-being of today’s young adults in the present and future.

Should common law marriage be abolished?

The availability of common law marriage may affect couple formation, labor supply, and the decision to have children

10.15185/izawol.256 256 Grossbard, S

by Shoshana Grossbard

In addition to regular marriage, Australia, Brazil, and 11 US states recognize common law (or de facto) marriage, which allows one or both cohabiting partners to claim, under certain conditions, that an informal union is a marriage. France and some other countries also have several types of marriage and civil union contracts. The policy issue is whether to abolish common law marriage, as it appears to discourage couple formation and female labor supply. A single conceptual framework can explain how outcomes are affected by the choice between regular and common law marriage, and between various marriage and civil union contracts.

Parental leave and maternal labor supply

Parental leave increases the family–work balance, but may have negative impacts on mothers’ careers

10.15185/izawol.279 279 Kunze, A

by Astrid Kunze

Numerous studies have investigated whether the provision and generosity of parental leave affects the employment and career prospects of women. Parental leave systems typically provide either short unpaid leave mandated by the firm, as in the US, or more generous and universal leave mandated by the government, as in Canada and several European countries. Key economic policy questions include whether, at the macro level, female employment rates have increased due to parental leave policies; and, at the micro level, whether the probability of returning to work and career prospects have increased for mothers after childbirth.

Can universal preschool increase the labor supply of mothers?

The success of universal preschool education depends crucially on the policy parameters and specific country context

10.15185/izawol.312 312 Cattan, S

by Sarah Cattan

Since the 1970s, many countries have established free or highly subsidized education for all preschool children in the hope of improving children’s learning and socio-economic life chances and encouraging mothers to join the labor force. Evaluations reveal that these policies can increase maternal employment in the short term and may continue to do so even after the child is no longer in preschool by enabling mothers to gain more job skills and increase their attachment to the labor force. However, their effectiveness depends on the policy design, the country context, and the characteristics of mothers of preschoolers.

Childcare expansion and mothers’ employment in post-socialist countries

A range of other policies and changes are needed for childcare expansion to increase mothers’ labor supply

10.15185/izawol.319 319 Lovász, A

by Anna Lovász

In 2002, the EU set targets for expanding childcare coverage, but most of the post-socialist countries are behind schedule. While childcare expansion places a heavy financial burden on governments, low participation in the labor force by mothers, especially those with children under the age of three, implies a high potential impact. However, the effectiveness of childcare expansion may be limited by some common characteristics of these countries: family policies that do not support women’s labor market re-entry, few flexible work opportunities, and cultural norms about family and gender roles shaped by the institutional and economic legacy of socialism.