Centenary Symposium June 8 - June 9, 2023

Firms' Organizations and the Minimum Wage

Nicholas Lawson *13

Université du Québec à Montréal

Abstract 

Labour economists have studied minimum wages for decades, but overwhelmingly with a focus on its effects on employment; there has been very little work about the effect of minimum wages on the organization of the firm. We analyze the effects of minimum wages on the hierarchical organization of labour within the firm. In our empirical analysis, we combine the French DADS data with a novel empirical strategy based on a unique source of variation in minimum wages during the transition to the 35-hour week in 1998-2006. We show that higher minimum wages are associated with smaller firms with fewer layers in their hierarchy, but also higher levels of productivity. We then calibrate and simulate a model of hierarchical firms to show that these empirical findings are consistent with the profit-maximizing organization of knowledge within firms.

Favorite Section memory:

Although my research - then and now - has been more theoretical than is typical for the IR Section, being surrounded by people who were innovators in empirical strategies and questions of identification made me a better economist...and, unexpectedly, a good teacher of econometrics.

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The Perverse Effect of Flexible Work Arrangements on Informality

Giovanni Mastrobuoni *06

Collegio Carlo Alberto, University of Turin, CEPR, IZA

Abstract 

Flexible work arrangements, which are on the rise in many countries, allow for quick labor demand adjustments and are seen as a way to discourage undeclared work. In 2008, Italy introduced one of the most flexible alternative work arrangements: labor vouchers.
Using random timing in labor inspections, as well as the abolition of labor vouchers, we show that badly designed alternative work arrangements disrupt the work of labor inspectors, allowing firms to increase the amount of undeclared work. Firms who use vouchers for this purpose are shown to hire more regular part-time and fixed-term workers when vouchers become unavailable.

Link to Giovanni's paper 
 

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Wage Adjustment in Efficient Long-Term Employment Relationships

Gary Solon *83

University of Michigan

This paper is joint with Michael Elsby, Axel Gottfries, and Pawel Krolikowski

Abstract

We present a model in which efficient long-term employment relationships are sustained by wage adjustments prompted by shocks to idiosyncratic productivity and the arrival of outside job offers. In accordance with casual and formal evidence, these wage adjustments occur only sporadically, due to the presence of renegotiation costs. The model is amenable to analytical solution, and yields new insights for a number of labor market phenomena, including: (1) an explanation of why empirical distributions of year-to-year wage change for job stayers exhibit many instances of no wage change, more instances of wage increase, and a non-trivial incidence of wage reduction; (2) a property of near-“memorylessness” in wage dynamics that implies that initial hiring wages have only limited influence on later wages and allocation decisions; and (3) a crucial role for non-base pay, such as recruitment and retention bonuses, in sustaining efficient employment relationships.

Favorite Section memory:

What a time and place to train for a career in labor economics. I got to learn from Orley Ashenfelter's example, and to study alongside fellow students like Dave Card, Mike Ransom, Mark Plant, Joe Altonji.... It doesn't get any better than that.

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The Declining Growth in the Well-Being of the Average American Manufacturing Production Worker

John Pencavel *69

Princeton University

Abstract

The results of a search for an enduring long-term relation accounting for movements in real wages and in hours of work of the average manufacturing production worker are reported. Using annual observations of this worker from the late 19th century to the first decades of the 21st century, initially real wages rose and working hours fell, but these improvements in the well-being of this worker slowed and ultimately ceased. Possible explanations for this pattern including movements in labor productivity, statutory legislation, and the role of trade unions are examined.

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The Impact of Immigration on Firms and Workers: Insights from the H-1B Lottery and US Employer-Employee Matched Data

Mingyu Chen *19

IZA Institute of Labor Economics

Abstract 

We study how random variation in the availability of highly educated immigrants impacts firm performance and recruitment behavior. To do so we combine two rich data sources: 1) the Longitudinal Employer-Household Dynamics (LEHD), an employer-employee matched data set from the US Census Bureau, and 2) firm-level information on the large-scale 2007 and 2008 H-1B visa lotteries. Using an event-study approach, we find that lottery wins induce temporary increases in a firm's college-educated immigrant workforce but permanent increases in revenues and labor productivity. We do not find evidence that H-1B immigrants crowd out workers at the firm level.

Favorite Section memory:

What I learned from faculties, peers, and visitors at the IR Section shaped how I conduct empirical research and think about economics and causal inference. My favorite moments include hearing about stories of former students/faculties and how they come up with their famous papers in the common space and doing push up challenges with graduate students and RA's.

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Labor Disutility in a Warmer World: The impact of climate change on the Global Workforce

Michael Greenstone *98

University of Chicago

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Can the Low-Carbon Transition Energize Labor Markets? Evidence from Wind Electricity Investments in the U.S.

Olivier Deschenes *01

University of California, Santa Barbara

Abstract 

Most western countries have made commitments or enacted policies aiming to transform their economies to become carbon-neutral by 2050. Many of the proposed policies to reduce carbon emissions are also promoted as engines of job creation and local economic development. While low-carbon transition policies continue to be debated and proposed, none have been implemented for a long enough period of time to permit an empirical evaluation of their impact.

This paper uses the natural experiment provided by the rapid deployment of wind electricity projects in the United States over the period 2000-2019 to shed light on whether the low-carbon transition can deliver long-lasting and high-quality jobs. We compile detailed data on the location and operation date of 55,000 wind turbines, combined with county-level data on employment and earnings to estimate the impact of wind projects on employment rates and earnings. The empirical analysis points to a small, but durable positive effect of wind electricity investments on local labor market outcomes. Overall, the results suggest that the deployment of 100 GW of wind electricity production capacity over the last two decades created close to 150,000 jobs.

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Immigration Enforcement, Crime, and Police-Community Trust

Elisa Jacome *21

Northwestern University

Abstract

This paper studies the impact of immigration enforcement on both public safety and victim willingness to contact the police. While heightened immigration enforcement may improve safety by incapacitating serious offenders, safety may suffer if victims are unwilling to report crime. We examine the Secure Communities program, which increased cooperation between local law enforcement and federal immigration authorities and significantly increased the volume of detentions and deportations of unauthorized migrants. Using survey data from the U.S. Census Bureau, we find that Hispanic individuals are more likely to become victims of a crime after the program's introduction, and that Hispanic individuals who are victims of a crime are less likely to report their incident to the police. These two opposing effects result in a null impact of the program on reported crime, explaining previous studies' findings that this program did not alter reported crime rates. We also find no corresponding increase in victimization or decline in reporting among non-Hispanic individuals. We provide evidence that the decline in Hispanic reporting is a key channel driving their increased victimization. Our findings shed light on the importance of directly measuring victim reporting practices for understanding the impact of criminal justice policies.

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Intergenerational Income Transmission among the 1.5 Generation in Canada: The Role of Age at Immigration

Marie Connolly *07

University of Quebec in Montreal

Abstract 

In this paper, we exploit intergenerationally-linked tax files and Census data to first document the intergenerational income transmission between individuals who immigrated to Canada as children—the 1.5 generation—and their parents. We find that the correlation between parental income rank and child income rank becomes stronger the older the child is at arrival. We then try to get at the causal effect of the age at immigration by estimating a model in which child rank is explained by interactions between age at arrival and the average predicted rank of second-generation immigrants from the same region of origin, living in the same region in Canada, from the same birth cohort, given their parental income. The model gives us the rate at which children from the 1.5 generation catch up to second-generation immigrants. We find that up to age 10, the relation between age at immigration and income is flat, but starting at age 11, each year is associated with 3.3 fewer percentile ranks.

Favorite Section memory:

Back before the age of cloud computing and file syncing using Dropbox, at the Section we had a server (alfa?) that we could connect to remotely, store our files on, and run computer code. It was very useful and state-of-the-art! But I think what I remember most fondly is the intimacy of the old Section in Firestone, the proximity with professors and other grad students, and the support from everyone. That, and the many lunches at Prospect House with seminar speakers, with the crab cakes always "a great choice." A treat for a grad student!

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The Racial Wealth Gap, Financial Aid, and College Access

Phil Levine *90

Wellesley College

Abstract 

We examine how the racial wealth gap interacts with financial aid in American higher education to generate a disparate impact on college access and outcomes. Retirement savings and home equity are excluded from the formula used to estimate the amount a family can afford to pay. All else equal, omitting those assets mechanically increases the financial aid available to families that hold them. White families are more likely to own those assets and in larger amounts. We document this issue and explore its relationship with observed differences in college attendance, types of institutions attended, degrees attained, and education debt using data from the Survey of Consumer Finances (SCF), the National Postsecondary Student Aid Study (NPSAS), and the Panel Study of Income Dynamics (PSID). We show that this treatment of assets provides an implicit subsidy worth thousands of dollars annually to students from families with above-median incomes. White students receive larger subsidies relative to Black students and Hispanic students with similar family incomes, and this gap in subsidies is associated with disadvantages in educational advancement and student loan levels. It may explain 10 percent to 15 percent of white students’ advantage in these outcomes relative to Black students and Hispanic students.

Link to Phil's paper 

Favorite Section memory: 

I learned more about doing economics in the IR Section standing around the counter talking with faculty and other students than I did in any economics class!

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Gender Differences in Economics PhD Field Specializations with Correlated Choices

Ronald Oaxaca *71

Princeton University

Abstract 

The focus of our paper is the process underlying gender differences in the choice of field specialization among students in doctoral programs in economics. We model the choice among beginning economists within a multi- variate logit framework that accommodates single- and dual-primary field specializations and incorporates corre- lations among field specialization choices. Conditioning on personal, economic, and institutional variables reveals that women graduate students are less likely to specialize in Labor/Health, Macro/Finance, Industrial Organi- zation, Public Economics, and Development/Growth/International and are more likely to specialize in Agricul- tural/Resource/Environmental Economics. Field-specific gender faculty ratios and expected relative salaries as well as economics department rankings are significant factors for gender doctoral specialization dissimilarity. Preferences and characteristics contribute about equally to field specialization dissimilarity.

Link to Ronald's paper 

Favorite Section memory

My fondest memories from my days as a graduate student in the Princeton IRS were the daily afternoon teas. These events generally comprised gatherings around Dean Douglas Brown J. or Dean Richard Lester to hear ``war’’ stories about the establishment of the U.S. Social Security System or the early days of the Section. My subsequent career as an economist was fundamentally shaped by my stimulating intellectual and social experiences in the Section. I felt then, as I do now, that I was most privileged to benefit from my tutelage by Al Rees and Orley Ashenfelter who were at the vanguard of modern, theoretical, and quantitative approaches to labor economics as well as from Fred Harbison representing the traditional institutional perspective on labor economics and labor relations.

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CPS, Sample Selection, Top-Coding and Wage Growth

Luojia Hu *00

Federal Reserve Bank of Chicago

Abstract 

We explore to what extent measures of wage growth using CPS data are sensitive to attrition and to alternative methods for dealing with top-coding. A Chicago Fed Letter by Cole, Hu and Schulhofer-Wohl (2017) discussed conditions under which various statistical measures are the relevant ones. Some of the measures discussed there can be subject to sample selection bias resulting from the fact that wages are only observed for people who work, and all of the measures can suffer from sample selection bias that results from attrition and the failure to match individual over time. When implementing these wage-growth measures using CPS data, one also has to take a stand on how to deal with top-coding.

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"One Instrument to Rule Them All: the Bias and Coverage of Just-ID IV"

Josh Angrist *89

Massachusetts Institute of Technology

Favorite Section memories:

Sit-downs at the big table with Orley (for dissertation progress reports)

Watching David edit my drafts with scissors, scotch tape, and a glue stick!

My time in the Section was (as they say) life-changing: I've been building on what I learned there ever since.

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Supercompliers

Zhuan Pei *13

Cornell University

This paper is joint with Matt Comey and Amanda Eng

Abstract 

In a binary-treatment instrumental variable framework, we define supercompliers as the subpopulation whose treatment take-up positively responds to eligibility and whose outcome positively responds to take-up. Supercompliers are the only subpopulation to benefit from treatment eligibility and, hence, are of great policy interest. Given a set of jointly testable assumptions and a binary outcome, we can completely identify the characteristics of supercompliers. Specifically, we require the standard assumptions from the local average treatment effect literature along with an outcome monotonicity assumption (i.e., treatment is weakly beneficial). We can estimate and conduct inference on supercomplier characteristics using standard instrumental variable regression.

Link to Zhuan's paper

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The Effect of Education on the Relationship between Genetics, Early-Life Disadvantages, and Later-Life SES

Silvia Barcellos *10

University of Southern California

Abstract 

We investigate whether education weakens the relationship between early-life disadvantages and later-life SES. Besides early, favorable family and neighborhood conditions, we argue that the genes children inherit also represent a source of advantages. Using a regression discontinuity design, we study a UK compulsory schooling reform that generated exogenous variation in schooling. The reform reduced educational disparities but did not weaken the relationship between early-life disadvantages and wages because advantaged children had higher returns to schooling. Exploiting family-based random genetic variation, we find the policy reduced educational differences driven by both environmental (e.g. credit constraints) and genetic advantages (e.g. innate ability).

Favorite Section memory:

So many happy memories! I loved the tradition of toasting to celebrate successful dissertation defenses. It gave me something to look forward to, even when my own dissertation results kept falling apart.

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Local Public Goods and Property Tax Compliance: Evidence from Residential Street Pavement

Climent Quintana-Domeque *08

University of Exeter

Abstract 

Does property tax compliance improve when the supply of local public goods expands? This paper uses administrative property tax records and information on the rollout of first-time asphalting of streets in inhabited residential neighborhoods in Mexico to show that the provision of local public goods can improve property tax compliance rates. We put forward a simple explanation to link local public goods and property tax compliance: When citizens observe public goods being delivered, they update their beliefs about the government's quality in public good provision and become more likely to comply.

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Administrative Burden and Procedural Denials: Experimental Evidence from SNAP

Tatiana Homonoff *13

New York University

Abstract

Many safety net program applications result in procedural denials due to the administrative burden associated with applying. We study the effect of an alternative application process for the Supplemental Nutrition Assistance Program designed to alleviate barriers to program access associated with the intake interview. Using a field experiment involving over 60,000 applicants in Los Angeles, we find that access to on-demand interviews expedites approvals and increases overall participation rates: early approvals nearly double and approval rates increase by six percentage points. Our findings highlight the importance of incorporating flexibility into the design of program integrity policies to minimize procedural denials.

Link to Tatiana's paper.

Favorite Section memory:

Watching Orley do a photoshoot with 50 Big Macs...and then getting to eat 50 Big Macs.

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Tax Cuts, Firm Growth, and Worker Earnings: Evidence from Small Businesses in Canada

Terry Moon *19

University of British Columbia

Abstract

This paper assesses the effects of corporate tax reductions for small businesses on their growth and employee earnings. Following a 2014 reform in Quebec, Canada, firms that received tax cuts increase their employment, payrolls, and capital stock by 1.7 percent, 2.3 percent, and 3.2 percent, respectively, relative to unaffected firms. In turn, these firms experience 5.2 percent, 0.4 percentage points, and 890 dollars increases in their sales, profit margins, and EBITDA per worker. Furthermore, annual earnings increase by 1.3 percent for workers in treated firms relative to workers in control firms. We estimate that workers without ownership in their own firms bear about a third of corporate tax burdens, and combined workers (with or without ownership) bear about three quarters of the tax burdens. Additionally, the effects are larger for firms and workers in high-growth and high-tech industries, suggesting a cash-flow channel playing an important role behind our results. Taken together, these findings suggest that tax incentives designed for small businesses may lead to significant increases in their growth and worker earnings, and targeting a specific sector or industry when designing corporate tax cuts may be an effective way to stimulate growth and employment in the economy.

Link to Terry's paper

Favorite Section memory: 

Favorite memory from my time in the Section is observing a collection of Orley's wine bottles in his office back in the Firestone Library. The Section had a tremendous impact on my academic and personal life -- I learned a lot just by talking with other members in the Section, and it really felt like a family.

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Judges for Sale: The Effect of Campaign Contributions on State Criminal Courts

Neel Sukhatme *15

Georgetown University Law Center

Abstract 

Scholars and policymakers have long sought to determine how campaign contributions might affect the behavior of elected officials. Using data on donations from Texas, we show that criminal defense attorneys who contribute to a district judge's electoral campaign are preferentially assigned by that judge to indigent defense cases, i.e., public contracts in which the state pays private attorneys to represent poor defendants. We estimate that attorney donors receive twice as many cases as non donors during the month of their campaign contribution. Nearly two thirds of this increase is explained by the contribution itself, with the remainder attributable to shared preferences within attorney-judge pairs, such as professional, ideological, political, or personal ties. Defendants assigned to donor attorneys also fare worse in cases resolved in the month of contribution, with fewer cases dismissed and more convictions and incarcerations. Further evidence suggests recipient judges close cases to cash out their attorney benefactors, at the expense of defendants. Our results provide some of the strongest causal evidence to date on the corrosive potential of campaign donations, including their impact on the right to counsel as guaranteed by the U.S. Constitution.

Link to Neel's paper

Favorite Section memory:

attending the weekly labor workshops in Firestone, and talking shop with colleagues in the IR Section lounge while enjoying an espresso!

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Social Connectedness in Marijuana Use

Elaine Liu *08

University of Houston

Abstract 

We study how the social network is facilitating how marijuana legalization in one state affects other areas. To do this we combine data on social connectedness from Facebook and substance use from the National Survey of Drug Use and Health. We find that marijuana consumption increases more in areas that are more socially connected to the states that legalized recreational marijuana use or licensed sales. Our findings of the externality of legalization in one state to other more connected out-of-state areas imply that studies that estimate the impact of legalization using a standard difference-in-differences approach without taking into account the network underestimate the direct effect on the state that legalizes.

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The Effects of Exposure to a Large-Scale Recession on Higher Education and Early Career Outcomes

Eleanor Choi *11

Hanyang University

Abstract 

This study examines the effects of the timing of exposure to the 1997–98 Asian financial crisis on higher education and early labor market outcomes. We estimate an extended difference-in-differences model using variation in age at exposure and regional severity of the recession in South Korea. Using data from the Census and twenty waves of the Youth Panel, we find that individuals living in regions more severely affected by the recession are less likely to attend and graduate from four-year colleges, and are less likely to choose humanities majors conditional on college enrollment. We also find that the quality of the first job, measured by wage, firm size, and skill level, deteriorates for those more hard-hit by the crisis. These effects are more pronounced for those who were younger (below age 12) at the time of the recession.

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The Labor Market Impacts of Major Switching

Carl Lieberman *21

Center for Economic Studies, US Census Bureau

Abstract 

How does major switching in college affect students' earnings trajectories after they finish schooling? Using novel data combining the Post-Secondary Employment Outcomes and Longitudinal Employer-Household Dynamics program, I examine the effects of switching majors on items such as graduation and earnings and also explore how they may vary across different demographics.

Favorite Section memory:

The best part of being in the Section was having so many open doors to knock on: faculty, visitors, postdocs, grad students, RAs, staff, everyone. The environment was warm and collegial, and these conversations were invaluable for support, research ideas, and what level to cluster your standard errors.

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