employment misclassification in survey and administrative reports abstract this paper analyses measurement error in the classification of employment using matched survey and administrative data from new zealand we show that the true employment rate and time invariant error rates can be identified given access to two measures of employment with independent errors empirical identification requires data with time varying employment rates over at least two periods we find that both measures have error with the administrative data being substantially more accurate than the survey data and false positives are much more likely than false negatives in both sources allowing for errors substantially affects estimated employment rates

corruption a review as is increasingly recognised in academic literature and by international organisations corruption acts as a major deterrent to growth and development the aim of this survey is to organise and summarise existing theoretical and empirical work on corruption with a view to identifying opportunities for further research the paper begins with a brief overview of key definitions of corruption and then turns to a review of the factors that favour or deter the growth of corruption together with a brief look at related models this is followed by an examination of the consequences of corruption for society and the consideration of measures that might help to reduce corruption the paper ends with suggestions for future research and includes summaries of data sources and key variables for use in this research

corruption manufacturing plant growth and the asian paradox indonesian evidence summary using panel data from the indonesian manufacturing industry during the suharto era 1975 95 we assess the impact of plant level corruption on output and productivity growth in support of the grease the wheels hypothesis and the view of an asian paradox we find that corruption measured as bribes and indirect tax payments has a positive and statistically significant effect on individual plant growth this effect persists over the entire period which suggests improvements in the efficacy of the bribe system and a strengthening of the long term contract between firms and the government

on the importance of the participation margin for labor market fluctuations abstract conventional analyses of labor market fluctuations ascribe a minor role to labor force participation we show by contrast that flows based analyses imply that the participation margin accounts for around one third of unemployment fluctuations a novel stock flow apparatus establishes these facts delivering three further contributions first the role of the participation margin appears robust to adjustments for spurious transitions induced by reporting error second conventional stocks based analyses are subject to a stock flow fallacy neglecting offsetting forces of worker flows on the participation rate third increases in labor force attachment among the unemployed during recessions are a leading explanation for the role of the participation margin

misclassification errors and the underestimation of the us unemployment rate using recent results in the measurement error literature we show that the official u s unemployment rates substantially underestimate the true levels of unemployment due to misclassification errors in labor force status in current population surveys our closed form identification of the misclassification probabilities relies on the key assumptions that the misreporting behaviors only depend on the true values and that the true labor force status dynamics satisfy a markov type property during the period of 1996 to 2009 the corrected monthly unemployment rates are 1 to 4 6 percentage points 25 to 45 higher than the official rates and are more sensitive to changes in business cycles labor force participation rates however are not affected by this correction we also provide results for various subgroups of the u s population defined by gender race and age

an equilibrium queuing model of bribery it is sometimes argued that bribery is inefficient because bureaucrats may cause delays for attracting more bribes this hypothesis is examined in the context of a queue where customers having different values of time are ranked by their bribe payments to the queue s server the nash equilibrium strategies of the customers are derived it is shown that the server is unlikely to slow down the allocation process when bribery is allowed the model does not have stringent informational requirements and the equilibrium outcome minimizes the average value of time costs of the queue it also suggests a useful auctioning procedure

withdrawal location with progressive tax rates optimal withdrawal strategies are developed for retirees with multiple types of tax advantaged savings accounts in an environment of progressive tax rates the ability to convert pretax funds in traditional iras at low tax rates substantially increases investors residual accumulations and withdrawal sustainability specifically informed withdrawal location strategies in which traditional ira distributions can be applied against exemptions deductions and lightly taxed tax brackets can increase residual accumulations by more than 1 million in these strategies the optimal tax bracket through which an investor should take distributions is directly related to the investor s wealth level

does front loading taxation increase savings evidence from roth 401 k introductions can governments increase private savings by taxing savings up front instead of in retirement roth 401 k contributions are not tax deductible in the contribution year but withdrawals in retirement are untaxed the more common before tax 401 k contribution is tax deductible in the contribution year but both principal and investment earnings are taxed upon withdrawal using administrative data from eleven companies that added a roth contribution option to their existing 401 k plan between 2006 and 2010 we find no evidence that total 401 k contribution rates differ between employees hired before versus after the roth introduction which means that the amount of retirement consumption being purchased by 401 k contributions increases after the roth introduction a survey experiment suggests two behavioral factors play a role in the unresponsiveness of contribution rates to their tax treatment 1 employee confusion about or neglect of the tax properties of roth balances and 2 partition dependence

taxable and tax deferred investing a tax arbitrage approach we analyze an intertemporal portfolio problem with both taxable and tax deferred retirement accounts using a tax arbitrage argument we identify conditions under which the optimal location decision where to place an asset is separable from the allocation decision how much to allocate to each asset investors place highly taxed assets in the tax deferred account to maximize the tax benefit and adjust their taxable portfolios to achieve the optimal risk exposure we show that the two account problem can be reduced to a taxable account only problem the results are robust to capital gains tax deferrals consumption and contribution decisions and stochastic tax rates

unemployment benefits and labor market transitions a multinomial logit model with errors in classification this paper utilizes validation data on survey response error in the current population survey to generalize the standard multinomial logit model to allow for spurious events that result from classification error the authors basic approach could be used with other stochastic models of discrete events as well they illustrate their algorithm by studying the effect of unemployment insurance on transitions from unemployment to employment and on labor force withdrawal their results confirm earlier work suggesting that unemployment insurance lengthens unemployment spells and show that correcting for classification error strengthens the apparent effect of unemployment insurance on spell durations copyright 1995 by mit press

state dependence serial correlation and heterogeneity in intertemporal labor force participation of married women a dynamic search framework is developed to analyze the intertemporal labor force participation behavior of married women using longitudinal data to allow for a rich dynamic structure the sensitivity to alternative distributional assumptions is evaluated using linear probability and probit models the dynamic probit models are estimated using maximum simulated likelihood msl estimation to overcome the computational difficulties inherent in maximum likelihood estimation of models with nontrivial error structures the results find that participation decisions are characterized by significant state dependence unobserved heterogeneity and negative serial correlation in the error component the hypothesis that fertility decisions are exogenous to women s participation decisions is rejected when dynamics are ignored however there is no evidence against this hypothesis in dynamic model specifications women s participation response is stronger to permanent than current nonlabor income reflecting unobserved taste factors

earnings losses and labor mobility over the life cycle an extensive empirical literature has documented that workers with high tenure suffer large and persistent earnings losses when they get displaced we study the reasons behind these losses in a tractable search model with a life cycle dimension endogenous job mobility worker and match heterogeneity the model reconciles key characteristics of the u s labor market large average transition rates a large share of stable jobs and the earnings losses from displacement we decompose the earnings losses and find that only 50 result from skill losses endogenous reactions and selection account for the remainder our findings have important implications for the welfare costs of displacement and labor market policy

retirement security in an aging population abstract elderly individuals exhibit wide disparities in their sources of income for those in the bottom half of the income distribution social security is the most important source of support program changes would directly affect their well being income from private pensions assets and earnings are relatively more important for higher income elderly individuals who have more diverse income sources the trend from private sector defined benefit to defined contribution pension plans has shifted responsibility for retirement security to individuals a significant subset of the population is unlikely to be able to sustain their standard of living in retirement without higher pre retirement saving

does corruption boost or harm firms performance in developing and emerging economies a firm level study in the last decade a growing number of studies have addressed the ongoing debate about whether corruption sands or greases the wheels of business at the firm level this study revisits this debate and proposes a comprehensive theoretical framework to test whether corruption harms or boosts firm performance as well as the extent to which this relationship is mediated by the countries institutional settings the size and strategic behaviour of the firms and market competition based on a sample of 21 250 firms located in 117 emerging and developing countries and resorting to instrumental variable iv estimations three main results were found a regardless of the proxy used for corruption and firm performance the former clearly harms the latter b corruption greases the wheels of business for african firms but it sands the wheels for firms in latin america the caribbean eastern europe central asia and southern asia and c the negative impact of corruption on performance is mitigated for larger and exporting firms

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

when saving is gambling abstract prize linked savings pls accounts which allocate interest using lottery payments rather than fixed interest encourage savings by appealing to households gambling preferences i introduce new data on casino cash withdrawals to measure gambling and examine how individual gambling expenditures respond to the introduction of pls in nebraska using a difference in differences design after pls is introduced individuals who live in counties that offer pls reduce gambling by at least 3 more than unaffected individuals the substitution effect is stronger in low frills gambling environments which most resemble pls indicating that these accounts fulfill the desire to gamble

the tradeoff between mortgage prepayments and tax deferred retirement savings abstract many households face the tradeoff between paying an extra dollar off the remaining mortgage on their house and saving that extra dollar in tax deferred accounts tdas used for retirement we show that under certain conditions it becomes a tax arbitrage to reduce mortgage prepayments and to increase tda contributions because of the tax deductibility of mortgage interest and tax exemption of qualified retirement savings using data from the survey of consumer finances we document that a significant number of households that are accelerating their mortgage payments instead of saving in tdas forgo a profitable tax arbitrage opportunity finally we show empirically that this inefficient behavior is unlikely to be driven by liquidity or other financial constraints rather the observed behavior can be attributed to a certain extent to the reluctance of many households to participate in financial markets as either lenders or borrowers

are stocks desirable in tax deferred accounts abstract existing literature suggests that in order to maximize the tax benefit of retirement accounts investors should follow a pecking order location rule of placing highly taxed assets e g bonds in a tax deferred account and lightly taxed assets e g stocks in a taxable account empirical evidence however documents that a large number of investors violate this rule in this paper we show that such violations can be optimal for risk averse investors who face portfolio constraints in particular while the strategy of placing bonds in the tax deferred account maximizes the expected level of tax benefit it may lead to volatile benefits under different realizations of stock returns by holding a similar portfolio in both accounts investors can achieve a more balanced growth in the two accounts minimize the likelihood of violating the constraints in the future and hence smooth the volatility of the tax benefit for some risk averse investors this smoothing motive can lead to the observed violation of the pecking order location rule our model predicts that such violations are more likely when future tax benefits are more volatile which can occur for example when i the tax rate differential across assets increases over time due either to tax law changes or to tax bracket changes for investors ii asset returns are more volatile and iii investors anticipate large future liquidity needs

classification error models and labor market dynamics measurement error is often a severe problem in longitudinal data such as labor market flows two correction methods have been used for labor market flows but the methods tend to adjust the data in opposite directions one method shows a rigid labor market with long unemployment spells whereas the other shows the opposite because the methods appear theoretically similar one might interpret the differing results as an indictment of both procedures this article documents and explains the differences between the two methods more important it argues that the differences result from the reliance of one method on assumptions that are theoretically implausible and rejected by the data

unemployment participation and worker flows over the life cycle we estimate and report life cycle transition probabilities between employment unemployment and inactivity for male workers using current population survey monthly files we assess the relative importance of each probability in explaining the life cycle profiles of participation and unemployment rates using a novel decomposition method a key robust finding is that most differences in participation and unemployment over the life cycle can be attributed to the probability of leaving employment and the probability of transiting from inactivity to unemployment while transitions from unemployment to employment the job finding probability play secondary roles we then show that a simple life cycle extension of a three state labor search model with leisure shocks can qualitatively replicate the empirical unemployment and participation life cycle profiles without introducing age or worker heterogeneity in market abilities we conclude that models that seek to explain life cycle work patterns should not ignore transitions to and from inactivity

on the robustness of alternative unemployment measures abstract the unemployment rate is one of the most important economic indices this article extends the work of feng and hu 2013 and examines the effects of potential misclassifications in labor force statuses on the different bureau of labor statistics bls unemployment measures compared to the official us unemployment rate u 3 the broader measure u 6 is more robust to such classification errors in the survey data that are used to calculate unemployment rates if one prefers the definitions of u 3 then we offer an approach to use reported unemployment measures to proxy for the unobserved true u 3

the measurement of unemployment an empirical approach although the unemployment rate is one of the most widely cited and closely monitored economic statistics the definition and measurement of unemployment remain controversial an important issue is whether non employed persons who display a marginal attachment to the labor force for example those who are available for and desire work but are not searching for work should be classified as unemployed or non participants although this issue has been extensively debated it has never been tested empirically this paper carries out empirical tests of this and related hypotheses using a unique longitudinal data set from canada we find within the marginally attached a waiting group whose behavior indicates that they would be more appropriately classified as unemployed rather than out of the labor force the remainder of the marginally attached exhibit behavior between that of the unemployed and the balance of non participants suggesting that the desire for work among non searchers conveys substantial information about labor force attachment and future employment status our methods also apply to heterogeneity within the unemployed and we investigate behavioral variation linked to differences in job search methods and reasons for entry into unemployment although those using passive job search do exhibit behavior somewhat distinct from active searchers our results reject the practice of classifying passive job searchers as out of the labor force overall our results indicate that the non employed are very heterogeneous so that any single division into unemployment and out of the labor force is unlikely to fully capture the variety of degrees of labor force attachment this abstract was borrowed from another version of this item

restoring rational choice the challenge of consumer financial regulation abstract this lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively the lecture argu

tax uncertainty and retirement savings diversification abstract we investigate the optimal savings decisions for investors with access to pre tax traditional and post tax roth versions of tax advantaged retirement accounts the model features a progressive tax schedule and uncertainty over future tax rates traditional accounts are valuable for hedging retirement account performance and managing current income near tax bracket cutoffs whereas roth accounts allow investors to mitigate uncertainty over future tax schedules the optimal asset location policy for most households involves diversifying between traditional and roth vehicles contrary to conventional advice the substantial economic benefits from roth investments are not limited to investors with low current income