Comment: Earnings Returns to Education in Urban China: A Note on Testing Differences among Groups

Comment on Wu and Xie, ASR, June 2003

Identity, incentives and the value of information

We examine the impact of identity preferences on the interrelation between incentives and performance measurement. In our model, a manager identifies with an organization and loses utility to the extent that his actions conflict with effort-standards issued by the principal. Contrary to prior arguments in the literature, we find conditions under which a manager who identifies strongly with the organization receives stronger incentives and faces more performance evaluation reports than a manager who does not identify with the organization. Our theory predicts that managers who experience events that boost their identification with the firm can decrease their effort in short-term value creation. We also find that firms are more likely to employ less precise but more congruent performance measures, such as stock prices, when contracting with managers who identify little with the organization. In contrast, they use more precise but less congruent measures, such as accounting earnings, when contracting with managers who identify strongly with the firm.

Inequality in Income and Wealth in Switzerland from 1970 to 2010

The supposed rise of inequality in income and wealth is a much-discussed issue. Since in a number of industrialized countries a trend towards more inequality was observed over the last decades, it is often assumed that Switzerland has experienced a similar development. Yet, although a variety of studies exists that provide inequality estimates for the Swiss society at different points in time, no conclusive picture of the changes in inequality can be drawn from these studies. For example, recent estimates by the Swiss Federal Statistical Office indicate that – against expectations – inequality in disposable equivalent-incomes has not risen since the end of the 1990ies, whereas other studies indicate that earnings from employment – especially top salaries – have become more unequal. The reasons for the inconclusive picture are manifold. For example, trends might have been different for different income types and results might strongly depend on the quality of the used data. To close the knowledge gap in inequality research in Switzerland a new Swiss National Science Foundation project by the University of Bern and the Bern University of Applied Sciences has been started in 2013. Individual tax data from cantons will be analyzed along with aggregate data from the Swiss Federal Tax Administration, covering a period from the early 1970ies to the present. The goal is to gain a systematic overview of the development of inequality in income and wealth in Switzerland as a whole and within cantons, and to determine how changes can be explained. In our talk we will present first results from this project.

Cost-effectiveness analysis of paclitaxel-coated balloons for endovascular therapy of femoropopliteal arterial obstructions.

PURPOSE To explore the cost-effectiveness of using drug-eluting balloon (DEB) angioplasty for the treatment of femoropopliteal arterial lesions, which has been shown to significantly lower the rates of target lesion revascularization (TLR) compared with standard balloon angioplasty (BA). METHODS A simplified decision-analytic model based on TLR rates reported in the literature was applied to baseline and follow-up costs associated with in-hospital patient treatment during 1 year of follow-up. Costs were expressed in Swiss Francs (sFr) and calculated per 100 patients treated. Budgets were analyzed in the context of current SwissDRG reimbursement figures and calculated from two different perspectives: a general budget on total treatment costs (third-party healthcare payer) as well as a budget focusing on the physician/facility provider perspective. RESULTS After 1 year, use of DEB was associated with substantially lower total inpatient treatment costs when compared with BA (sFr 861,916 vs. sFr 951,877) despite the need for a greater investment at baseline related to higher prices for DEBs. In the absence of dedicated reimbursement incentives, however, use of DEB was shown to be the financially less favorable treatment approach from the physician/facility provider perspective (12-month total earnings: sFr 179,238 vs. sFr 333,678). CONCLUSION Use of DEBs may be cost-effective through prevention of TLR at 1 year of follow-up. The introduction of dedicated financial incentives aimed at improving DEB reimbursements may help lower total healthcare costs.

Long-term effectiveness of supported employment: 5-year follow-up of a randomized controlled trial

Objective The individual placement and support model of supported employment has been shown to be more effective than other vocational approaches in improving competitive work over 1-2 years in persons with severe mental illness. The authors evaluated the longer-term effects of the model compared with traditional vocational rehabilitation over 5 years. Method A randomized controlled trial compared supported employment to traditional vocational rehabilitation in 100 unemployed persons with severe mental illness. Competitive work and hospital admissions were tracked for 5 years, and interviews were conducted at 2 and 5 years to assess recovery attitudes and quality of life. A cost-benefit analysis compared program and total treatment costs to earnings from competitive employment. Results The beneficial effects of supported employment on work at 2 years were sustained over the 5-year follow-up period. Participants in supported employment were more likely to obtain competitive work than those in traditional vocational rehabilitation (65% compared with 33%), worked more hours and weeks, earned more wages, and had longer job tenures. Reliance on supported employment services for retaining competitive work decreased from 2 years to 5 years for participants in supported employment. Participants were also significantly less likely to be hospitalized, had fewer psychiatric hospital admissions, and spent fewer days in the hospital. The social return on investment was higher for supported employment participants, whether calculated as the ratio of work earnings to vocational program costs or of work earnings to total vocational program and mental health treatment costs. Conclusions The results demonstrate that the greater effectiveness of supported employment in improving competitive work outcomes is sustained beyond 2 years and suggest that supported employment programs contribute to reduced hospitalizations and produce a higher social return on investment.

Disparate Wages in a Globalized World

This study uses wage data from the UBS Prices and Earnings survey to highlight Disparate Wages in a Globalized World from di↵erent perspectives. This wage data is characterised by remarkable consistency over the last 40 years, as well as unusual global comparability. In the first chapter we analyse the convergence hypothesis for purchasing power adjusted wages across the world for 1970 to 2009. The results provide solid evidence for the hypotheses of absolute and conditional convergence in real wages, with the key driver being faster overall growing wage levels in lower wage countries compared to higher wage countries. At the same time, the highest skilled professions have experienced the highest wage growth, while low skilled workers’ wages have lagged, thus no convergence in this sense is found between skill groups. In the second chapter we examine deviations in international wages from Factor Price Equalisation theory (FPE). Following an approach analogous to Engel (1993) we find that deviations from FPE are more likely driven by the higher variability of wages between countries than by the variability of di↵erent wages within countries. With regard to the traditional analysis of the real exchange rate and the Balassa-Samuelson assumptions our analysis points to a larger impact on the real exchange rate likely stemming from the movements in the real exchange rate of tradables, and only to a lesser extent from the lack of equalisation of wages within countries. In the third chapter our results show that India’s economic and trade liberalisation, starting in the early 1990s, had very di↵erential impacts on skill premia, both over time and over skill levels. The most striking result is the large increase in wage inequality of high-skilled versus low-skilled professions. Both the synthetic control group method and the di↵erence-in-di↵erences (DID) approach suggest that a significant part of this increase in wage inequality can be attributed to India’s liberalisation.

Zum Einfluss vorschulischer Kinderbetreuung auf den Bildungsweg und den erwarteten Erfolg am Arbeitsmarkt

In dem Beitrag wird der Frage nachgegangen, welchen Einfluss die Inanspruchnahme frühkindlicher Bildungs- und Betreuungsangebote auf den späteren Schulbesuch von Kindern hat und wie sich dies längerfristig auf die zu erwartenden Lebenseinkommen und damit einhergehend den langfristigen volkswirtschaftlichen Nutzen auswirkt. Untersucht werden Kinder in Deutschland der Jahrgänge 1990 bis 1995. Die Datengrundlage liefert das Sozio-oekonomische Panel (SOEP). Der Schwerpunkt der Analysen liegt auf der Bestimmung des Effekts des Krippenbesuchs auf die spätere Einstufung in die verschiedenen Schultypen in Abhängigkeit der sozialen Herkunft und des Migrationshintergrunds der Kinder. Ausgehend von diesen Schätzungen werden dann die zu erwartenden, über den Bildungsabschluss vermittelten Auswirkungen des Krippenbesuchs auf das spätere Lebenseinkommen bestimmt, um einen Eindruck der langfristigen volkswirtschaftlichen Folgen vorschulischer Kinderbetreuung zu erhalten. Der Beitrag zeigt, dass der Krippenbesuch die Wahrscheinlichkeit einer Einstufung ins Gymnasium nach Kontrolle relevanter Drittvariablen im Schnitt um rund 14 Prozentpunkte erhöht. Dieser Einfluss entspricht einem erwarteten Lebenseinkommenszuwachs von rund 27000 Euro. Wird dieser Ertrag auf den Zeitpunkt des Krippenbesuchs abdiskontiert und den Kosten eines durchschnittlichen Krippenbesuchs in der Höhe von rund 8000 Euro gegenübergestellt, so ergibt sich ein Kosten-Nutzen-Verhältnis von 1 zu 2.7. (DIPF/Orig.).

Relative Distribution Methods in Stata

The concept of the relative density seems like a fruitful nonparametric approach to studying distributional differences between groups (Handcock and Morris 1999), yet it appears that the technique has gone more or less unnoticed in applied social science research. A scarcity of canned software might be one of the reasons the method is underutilized. Therefore, I present a new Stata command called reldist to plot the relative density, decompose distributional differences into location and shape effects, and compute relative distribution summary measures. The command is illustrated by an application comparing earnings by sex.

DECOMPOSE: Stata module to compute decompositions of wage differentials

Given the results from two regressions (one for each of two groups), decompose computes several decompositions of the outcome variable differential. The decompositions shows how much of the gap is due to differing endowments between the two groups, and how much is due to discrimination. Usually this is applied to wage differentials using Mincer type earnings equations.