Works in Progress and downloads of papers:
- project 1: relational capital, creative destruction, politics and growth
- project 2: happiness studies
- project 3: labour market studies
- miscellaneous
- Download papers here
Project 1: Relational capital, creative destruction, economic development, transition
co-authors: Dirk Bezemer and Uwe DulleckThis series of projects attempts to rethink the link between social networks, technological growth, political interference, and economic development. We introduce the term Relational Capital (RC) which consists of contacts between economic agents that are necessary to acquire inputs and to sell outputs units. These contacts form the individual aspect of social capital that is directly productive. Replacement of old contacts by new ones is part of Schumpeterian creative destruction leading to technological progress. A growing economy is thus one with ever growing yet changing networks of contacts. The main growth-preventing role politicians can play is to prevent the break-up of old contacts. Even though that does not hurt in the short run, it hinders technological growth and thereby leads to stagnation in the long run. Cold-turkey liberalisations, such as those in Eastern Europe, lead to such an enormous amount of creative destruction that trade relations collapse to the detriment of the whole economy. A managed degree of creative destruction, together with the gradual introduction of more and better market institutions turns out to be optimal for economic growth in both developing and developed nations. Informal social networks in this framework are indirectly productive in the sense that they facilitate the search for contacts. Indeed, many empirical studies find that social networks support income generation and innovation. Market institutions (MI) however perform exactly the same role but enjoy increasing returns to scale in aiding contact formation compared to informal social capital networks: MI does the same thing cheaper. For growth rates in developing countries to increase, a 'fundamental transformation' from informal to formal search institutions is therefore required.
Paper 1: RC and transition (PDF)
Paper 2: RC, social capital and growth (the most technical paper of the series) (rap-format)
Paper 3: The fundamental transformation and a graphical representation (no maths) (Word)
Paper 4: RC, political networks, and micro-politics (rap-format)
Paper 5 (very preliminary): 4 micro-models of the value of contacts (tex-format)
Project 2: Satisfaction
In this series of projects we look at satisfaction of life, and satisfaction with several aspects of life (health, finances, Job, Housing, etc.).
Ongoing work looks at
- the determinants of Danish job-satisfaction (together with Anna Christina d'Addio and Tor Erikson);
- the rationality of forward-looking life satisfaction expectations (PDF). With Shields, M.A., and J.P. Haisken-DeNew (2002)
Here, we use the reunification as a natural experiment in expectations. We see that the expected life satisfaction in 5 years time in East Germany in 1991 was overly optimistic. We find however that virtually all of this optimism was population specific, i.e. the whole population was overly optimistic, although the higher educated and the old were least wrong. We find convergence over time between expectations and realisations of satisfaction, implying aggregate rationality to be a reasonable assumption during normal times, though not during very volatile times.
- the effect of income on health satisfaction using German reunification as source of random income variation (with M and J) (PDF);
Here, we go all-out to explain health satisfaction. We use the reunification as leading to a lot of random variation in income changes. As regressors, we have most of the important life events (marriage, death, disability, childbirth, job-break-up, moving house, etc.) and most of the important demographics (education, income, political orientiation, etc.). As with life satisfaction, we here again see that all these observables do little to explain the aggregate changes in health satisfaction. The older cohorts in East Germany are characterised by far more pessimistic 'missing individual traits' than the younger cohorts. For all cohorts, unobserved aggregate circumstances seem to have deteriorated since reunification. The massive increases in income seem to have no effect, whether we take yearly income, permanent income, regional income, or relative income.
- the link between morbidity, health satisfaction, income, personality traits (PDF) , and life shocks using German panel data of 20000 individuals of whom 2500 died between 1984-2002. Also develops a new duration model with increasing unobserved heterogeneity (in progress with M and J).
- happiness in Russia: decomposing the sources of the Russian happiness increase between 1994 and 2001 using a panel (with M, J, and Ingo Geishecker) (PDF)
- checking for a taste for discrimination by looking at whether white employees have lower job satisfaction and higher wages if the percentage of co-workers that is ethnic is high. Uses matched employee-employer UK data and macro-models the whole competitive set-up (with M, Steve Whitley Price(S), and Nikos Theodoropoulos) (PDF)
Project 3: Labour market studies
Various theoretical papers and empirical analyses on German, Australian, UK, and Dutch labour markets.
- Do you need a job to get a job? Whether the arrival rate of job offers of a certain wage arrive more often in employment than in unemployment, using a unique Australian panel with search intensity, job offer, reservation wage, and realised wage information.With Guyonne Kalb and Deborah Cobb-Clark.
Download: article (PDF)
- Entrepreneurial incentives and education choices. A short article looking at barriers to setting up (venture capital and start-up costs) new entreprises and the ensuing education choices of individuals. With Uwe Dulleck and Rudolf Winter-Ebmer.
Download: version of article (PDF)
- Choosing to become a lost cause. How benefits that are conditional on being sufficiently 'a lost cause' force individuals on the margin in disinvestments. Shows how a direct improvement can be made by making benefits conditional on observed effort earlier in life (school attendance rates in particular). With Lisa Farrell.
Download: version of article (rap-format)
- Nurse UK labour supply and Teacher UK Labour supply. With Mike Shields and Steve Whitley Price. Download: version of Nurse paper (Word) ; version of Teacher paper (Word)
- How does ethnic search in the UK differ from those of whites? With Mike Shields and Steve Whitley Price. Download: version of article (Word)
- Repeat unemployment and persistence effects.
Here we estimate an MPH model with competing risks, multiple spells and non-parametric unobserved heterogeneity with 27 points of support on administrative unemployment and tax data. We essentially find no negative effects from longer spells without work, although we do find strong selectivity of individuals who are long-term unemployed. If anything, the long-term unemployed who do find a job themselves seem to hang on to that job longer than others. With Maarten Lindeboom and Gerard van der Berg
Preliminary persistence article (PDF)
- Structural Empirical Analysis of a Nonstationary Job Search Model with Endogenous Nonparticipation
by Paul Frijters and Bas van der Klaauw
In a non-stationary job search model we allow for the continuous option of going into non-participation. Allowing for such endogenous exits reveals that for the individuals in the German Socio Economic Panel data set, the decision to go into non-participation is due to the fact that both the level and arrival rate of wages drops with the duration of unemployment. Also, we find that the value of non-participation increases over time. Taking non-stationarities and endogenous entries into non-participation into account was hence found to be important for explaining job search behaviour.
Download: preliminary article (PDF)
Miscellaneous
Mike Shields (M), John Haisken-deNew (J), Ada Ferrer-i-Carbonell
- The economic motives for child allowances: altruism, exchange or the value of independence
by Farrell, L., Frijters, P., Shields, M.A. (2002),
A paper that examines the determinants of child allowances. We argue that a combination of altruism and child heterogeneity in its value of independence (maturity) can explain observed relations between child allowances and child income.
Download: article (PDF)
-. Unemployment benefits and educational choices
by P. Frijters and Mike Shields.
In this paper it is argued that educational choices also imply choices for future unemployment risks on the labour market. Unemployment benefits thereby alter the distribution of educational choices, leading to more individuals with more risky educations. The irreversibility of education then creates a persistence in the risks of those on the labour market. This simply idea is shown to work in a dynamic general equilibrium framework with risks that are tied to educational choices and where production is determined by a continuous CES function.
Download: preliminary article (PDF)
-. Early retirement benefits, uncertainty and health choices
by Frijters and M. Shields.
Similar in approach to the previous paper, this paper looks at the irreversible effect of early educational and career choices that impact on health risks later in life. We use the persistence in health risks to explain the sluggish short-term reaction and strong long-term reaction of disability take-up rates to changes in financial incentives.
Download: article (PDF)
-. Output gap and Solow: theory and empirical application.
by Lee, K., Shields, K., Frijters, P. (2002)
In this paper, we use Okun's concept of the output gap to decompose output growth into trends, transitory shocks (demand) and permanent shocks (supply). So far, the model performs abysmally, though still better than the stochastic Solow model. Until it does better, no download will be available.
-. The integrated hazard approach to estimating MHP models: theory and an application
by Woutersen, T., Frijters, Van den Berg (2002)
In this paper, we slightly extend and apply Woutersen's integrated hazard estimator of the fixed-effect MPH model. We find no negative effect of past unemployment on current hazard rates.
Download: article (PDF)
Paper downloads in historical order, followed by recent work in progress, followed by older works
Frijters, P. “Discrimination and job uncertainty”, Journal of Economic Behaviour and Organisation 1998, 36(4), pp. 433-446. article (PDF)
Frijters, P. “A three factor search model”, Economics Letters, 64 (1999), pp. 319-324. article (PDF)
Frijters, P. “A model of fashion and status”, Economic Modeling 1998, 15, pp. 501-517 article (PDF)
Frijters, P. "Hiring on the basis of expected productivity in a South African clothing firm", Oxford Economic Papers 1999, 51, pp. 345-354. article (Word)
B.M.S. Van Praag and P. Frijters (1999), “Different data sources for studying behaviour”, in Fase, M.M.G., Kanning, W., Walker, D.A. (eds) Economics, welfare policy and the history of economic thought. Essays in honour of Arnold Heertje, Edward Elgar, Cheltenham UK, pp. 290-309. article (Word)
B.M.S. Van Praag and P. Frijters (1999), “The measurement of welfare and well-being; the Leyden approach”, in Kahneman, D., Diener, E., Schwarz, N. (Eds), Well-being: the foundations of hedonic psychology, New York: Russel Sage Foundation, pp. 413-432. article (PDF)
Frijters, P. (2000), ‘Do individuals try to maximise satisfaction with life as a whole’ Journal of Economic Psychology, 21, pp. 281-304, 2000. article (PDF)
Frijters, P. 2000, ‘The sale of relational capital’, Labour Economics 2000, 2, pp. 373-84. article (PDF)
Frijters, P. (2001), ‘Interpretation problems with changes in indices based on categorizations’, Economic Letters. article (PDF)
Frijters, P. (2001), The non-parametric identification of lagged duration dependence Economic Letters, 75(3), pp.289-292. article plus unpublished application (PDF)
B.M.S. Van Praag, Frijters, P. , Ferrer-i-Carbonel, A., (2003), ‘Happiness unfolded’, Journal of Economic Behavior and Organisation, 51, pp. 29-49. version of article (Word)
Ferrer-i-Carbonel, A., Frijters, P. (2004), ‘The effect of methodology on the determinants of happiness’, Economic Journal 114, 641-659. Working paper version (PDF)
Frijters, P., Shields, M.A., and J.P. Haisken-DeNew (2004), ‘The value of reunification in Germany; An analysis of changes in life satisfaction?’, Journal of Human Resources 39(3), pp. 649-674. Working paper version (PDF)
Frijters, P., Shields, M.A., and J.P. Haisken-DeNew (2004), ‘Money does matter! Evidence from increasing real incomes in East Germany following reunification’, American Economic Review, 94(3), pp. 730-741. Working paper version (PDF)
Frijters, P., Shields, M.A., and J.P. Haisken-DeNew (2005), ‘The effect of income on health: evidence from a large scale natural experiment’, Journal of Health Economics (24), pp. 997-1017. IZA working paper. Working paper version (PDF)
Frijters, P., Shields, M.A., Whitley-Price,S. (2005), ‘Job-search of ethnic workers in the UK?’,Economic Journal, F359-376. Working paper version (PDF)
Dulleck, U., Frijters, P., and Winter-Ebmer, R. (2006), ‘Reducing Start-up costs for New Firms: The Double Dividend on the Labor Market.’, Scandinavian Journal of Economics, 108(2), 317-338. Also IZA paper. Working paper version (PDF)
Frijters, P., Geishecker, I., Shields, M.A., J.P. Haisken-DeNew (2006), ‘What happened to life satisfaction in Russia in the 1990’s’, forthcoming Scandinavian Journal of Economics. Working paper version (PDF)
Frijters, P., Gregory, R. (2006), ‘From golden age to golden age: Australia’s Great Leap forward’, June 2006 edition (volume 82, issue 2) of the Economic Record for the celebration of Prof. Robert Gregory’s career, pp. 207-225. Working paper version (PDF).
Frijters, P., and Klaauw, B. v.d. (2006), ‘Job search with nonparticipation’, Economic Journal, January 2006, v. 116, iss. 508, pp. 45-83. Tinbergen Institute Discussion paper. IZA working paper. Working paper version (PDF)
Frijters, P., Shields, M.A., Whitley-Price,S. (2006), ‘Investigating the quitting decisions of nurses: panal data evidence of the British National Health Service’, forthcoming Health Economics. Working paper version (PDF)
Frijters, P., Farrell, L. (2007), ‘Choosing to become a lost cause: the perverse effects of benefit preconditions’, Oxford Economic Papers, forthcoming. Working paper version (PDF)
Some recent works in progress
2008 Literature review on Income and happiness with Andrew Clark and Michael Shields (PDF)
Unpublished papers downloads
"The extent to which incomes are under-reported in Russian surveys." finished article ( tex-format)
Skill-biased technological change, minimum employment costs, unemployment and fixed natural resources." by Paul Frijters. TI discussion report 173/3, 1996 finished article (tex-format)
Consumption complementarities, monopolies, and coordination" by Paul Frijters. TI discussion report 048/3, 1998 finished article (tex-format)
Uncertainty, reference incomes and the shape of the utility function by Paul Frijters: preliminary article (tex-format)
Why do families have to pay a dowry for their girls? By Paul Frijters: preliminary article (Word)
The influence of the media on the outbreaks of wars. by Paul Frijters preliminary article (tex-format)
Frijters, P. and B.M.S. Van Praag (1998), “Estimates of poverty ratios and equivalence scales for Russia and parts of the former USSR”, revised version of the Tinbergen Discussion Paper no. 95-149. finished article (Word)
Irreversible investments with private information and complementarities. By Paul Frijters article (rap-format)
Income and subjective well-being: what can we learn from regional differences? By Paul Frijters article (tex-format)
Crime, investments, and government lethargy: when being slow to react can be a good thing. by P. Frijters and A.F. Tieman article (tex-format)