The nine new GLO Discussion Papers deal with (i) China’s One-Child Policy, (ii) issues of inequality, (iii) education, (iv) working from home, (v) migration, trade and economic growth, and (vi) green investments and worker voice.

Papers

1706 The Legacy of China’s One-Child Policy on Human Capital: How Being Raised by an Only Child Affects Cognitive and Noncognitive Skill Development – Download PDF
by Feng, Shuaizhang & Gan, Yu & Han, Yujie & Kautz, Tim

Abstract. China’s One-Child Policy (OCP) restricted most couples to a single birth, leading to a rapid increase in the prevalence of only children. Using longitudinal data and a regression discontinuity design around the policy’s start, we estimate the effects on grandchildren’s human capital. We find that children with only-child mothers perform significantly better in cognitive skills (0.71 SD) and noncognitive skills (0.50 SD) than comparable peers. The effects are larger for boys, consistent with son preference, and for those with less-educated grandparents, for whom quantity-quality trade-offs are more applicable. Additionally, we find that only-child parents have higher educational attainment and provide more favorable home environments, which may explain their children’s advantages in human capital outcomes. These findings suggest that, in the presence of quantity-quality trade-offs, fertility restrictions can improve human capital across multiple generations.

1705 Tax expenditures and redistribution – The case of Portugal – Download PDF
by Christl, Michael & Berdeal, Silvia Navarro

Abstract. This paper assesses the fiscal and distributional effects of personal income tax expenditures in Portugal using EUROMOD and 2022 EU-SILC microdata. We compare the 2023 tax-benefit system with a counterfactual scenario in which tax expenditures are removed to estimate first-round impacts. We find that tax expenditures account for almost 40% of personal income tax revenues and predominantly benefit middle- and higher-income households, with large variation in redistributive effectiveness across instruments. While the Net Minimum Income Guarantee is progressive and cost-efficient in reducing inequality, most work- and pensionrelated allowances deliver limited equity gains, suggesting scope for reform.

1704 The Wealth of Nations: Origins of Prosperity and Seeds of Inequality – Download PDF
by Galor, Oded

Abstract. What ignited humanity’s momentous ascent from millennia of stagnation to an era of sustained economic growth? And what are the roots of the vast disparities in the wealth of nations? These enduring mysteries, which have preoccupied scholars across generations, lie at the core of Unified Growth Theory. This encompassing framework captures the evolution of societies over the entire course of human history and identifies the universal wheels of change that governed humanity’s long journey, propelled the growth process, and shaped inequality across the globe. The theory uncovers the forces underlying the dramatic transformation in living standards over the past two centuries, emerging from an economic ice age of near stagnation, while highlighting the enduring historical roots of the immense divergence in the prosperity of nations. It suggests that forces set in motion in the distant past played a pivotal role in shaping development across the globe and remain essential for the design of effective policies that foster economic progress and mitigate inequality in the wealth of nations.

1703 The Returns to Education in Arkansas: Evidence from the 1987 Compulsory Education Law – Download PDF
by Patrinos, Harry Anthony & Rivera-Olvera, Angelica

Abstract. This paper estimates the returns to education in Arkansas-one of the last states to extend compulsory schooling-using ACS 2023 data and the 1987 Compulsory Schooling Law (CSL) reform as an instrument. OLS estimates imply returns of 9.5-10.4 percent per year of schooling. The CSL reform increased schooling among compliers by 0.67-0.73 years and yields IV returns of 10.4-11.7 percent, exceeding OLS estimates. The results indicate that those compelled to remain in school benefited most, consistent with global evidence on higher causal returns for disadvantaged students.

1702 Beyond lockdowns: work-from-home, mental health, and the moderating roles of intensity, job control and social support – Download PDF
by Bilgrami, Anam

Abstract. During and shortly after the height of the COVID-19 pandemic, concerns were expressed that working from home (WFH) was creating a ‘mental health crisis’. Australia experienced a three-phase ‘WFH experiment’, with widespread high-intensity WFH imposed by lockdowns in 2020, deepened restrictions in 2021, and a transition to flexible work arrangements and more autonomy in 2022 as vaccination rates increased. Using data from the Household, Income and Labour Dynamics in Australia survey, this study estimates the impact of WFH on worker mental health across these phases. Findings show that WFH led to a modest, statistically significant deterioration in average worker mental health outcomes during the lockdown years (2020-2021), particularly among women. Negative effects were present in workers across the social support and job control spectrum, suggesting limited buffering capacity to counter the stress of lockdown restrictions. However, by 2022, the negative effects of WFH dissipated with positive effects for those WFH 25-50% of time, indicating that pandemic-related lockdowns, rather than WFH itself, were primarily responsible for mental health declines. The exception was workers with low job control, and females with dependents, who continued to experience negative effects, highlighting that job autonomy and unequal caregiving responsibilities may shape longer-term wellbeing outcomes.

1701 Migration and Population Growth’s Impact on Natural Resources and Welfare: The Role of Manufacturing’s Returns to Scale – Download PDF
by Schiff, Maurice

Abstract. I examine the impact of population growth and endogenous migration on renewable natural resources (NR) and welfare in a general equilibrium model with two sectors – a commodity and a manufacturing sector, and with two inputs – labor and NR. Under population growth and no migration, a country’s NR and welfare are unchanged (increase) (decline and eventually collapse) over time for constant (increasing) (decreasing) returns to scale in the manufacturing sector, i.e., for R = (>)(<)1. Migration’s impact is more complex. For instance, migration is nil under R = 1. It results in convergence (divergence) between home and host countries under R < (>)1, and benefits both countries only if R < (>) 1 in the home (host) country. Thus, ignoring how the level of the manufacturing sector’s returns to scale affects migration flows and their impact on NR and welfare is likely to lead to erroneous conclusions and policy implications.

1700 Can Trade Benefit Natural Resources under Population Growth? The Role of Manufacturing’s Returns to Scale – Download PDF
by Schiff, Maurice

Abstract. I examine whether trade can improve the impact of population growth on natural resources (NR) and welfare over time. Under autarky, population growth results in NR and welfare collapse over time for any value of the returns to scale in the manufacturing sector, R. Under trade, NR and welfare are unchanged (increase) (collapse) over time for R = (>)(<)1– though the decrease in welfare under R < 1 is dampened relative to autarky. Thus, countries experiencing rapid population growth may benefit from opening up to trade.

1699 Green Investments and Worker Voice – Download PDF
by Bisi, Davide & Landini, Fabio & Rinaldi, Riccardo

Abstract. The interaction between organised employee representation (ER) and firms’ engagement in the green transition remains insufficiently understood. Theoretically, two opposing mechanisms may operate. In the bargaining view, representation can slow green investments by increasing adjustment costs and exposing firms to rent-seeking pressures. In contrast, the employee voice perspective holds that ER enables sustainability by facilitating information exchange, eliciting workers’ environmental preferences, and supporting joint problem-solving when organisational adaptation is required. We test these predictions using survey and administrative data from nearly 2,000 firms in Emilia-Romagna. Firms with ER are systematically more likely to pursue green investments, especially in climate mitigation, water use, circularity, and pollution prevention. These results also hold when accounting for the endogeneity of ER via IV. Consistent with the voice mechanism, the association between ER and green investments is stronger in firms employing younger and more educated workers, who are more likely to hold proenvironmental preferences and contribute specialised knowledge relevant for organisational change. Taken together, our findings challenge the view that organised labour inhibits the green transition. Instead, ER emerges as a strategic policy lever that can foster decarbonisation pathways that are technologically feasible, socially negotiated, and democratically anchored at the workplace level.

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