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Why Don't More Puerto Rican Men Work? The Rich Uncle (Sam) Hypothesis

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  • Maria Enchautegui
  • Richard B. Freeman

Abstract

Puerto Rico has an extraordinarily low employment rate for men. We document the low employment rate using Census of Population and labor force survey data and offer "the rich uncle (Sam) hypothesis" that the connection of the relatively poor economy of Puerto Rico to the wealthier US has created conditions that generate low employment. In support of the hypothesis, we show: 1) that GNP and GDP have diverged on the island, distorting the relationship between GDP and employment, due potentially to federal tax benefits to companies operating in Puerto Rico; 2) transfers to Puerto Rican families funded mainly by the federal government, which account for about 22 percent of personal income; 3) open borders to the U.S. that give men with high desire for work incentive to migrate to the US, and potentially creates a lower bound to wages on the island; (4) a wage structure with relatively higher earnings in low paid jobs; and (5) employment in the informal sector, which is unmeasured in official statistics. We note that other regional economies with rich "uncles", such as East Germany with West Germany, Southern Italy with Northern Italy, have comparable employment problems.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11751.

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Date of creation: Nov 2005
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Publication status: published as Collins, Susan M., Barry Bosworth, and Miguel A. Soto (eds.) The Economy of Puerto Rico: Restoring Growth. Brookings Institution Press, 2006.
Handle: RePEc:nbr:nberwo:11751

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  1. Spilimbergo, Antonio, 1999. "Labor Market Integration, Unemployment, and Transfers," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 641-50, November.
  2. Bound, John & Waidmann, Timothy, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1393-419, November.
  3. David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 157-205, February.
  4. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 177-212 National Bureau of Economic Research, Inc.
  5. repec:fth:prinin:330 is not listed on IDEAS
  6. Jennifer Hunt, 2004. "Convergence and determinants of non-employment durations in Eastern and Western Germany," Journal of Population Economics, Springer, vol. 17(2), pages 249-266, 06.
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Cited by:
  1. Steven J. Davis & Luis Rivera-Batiz, 2005. "The Climate for Business Development and Employment Growth in Puerto Rico," NBER Working Papers 11679, National Bureau of Economic Research, Inc.

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