Knowledge that Transforms

We examine US and Canadian local labor markets from 1990 to 2011 using comparable household and business data. Wage levels and inequality rise with city population in both countries, albeit less in Canada. Neither country saw wage levels converge despite contrasting migration patterns from/to high-wage areas. Local labor demand shifts raise nominal wages similarly, although in Canada they attract immigrant and highly skilled workers more while raising housing costs less. Chinese import competition had a weaker negative impact on manufacturing employment in Canada. These results are consistent with Canada’s more redistributive transfer system and larger, more educated immigrant workforce.

We document racial and ethnic disparities in the propensity of law enforcement to formally book juvenile arrests. A fair share of these disparities can be attributed to differences in arrest offense severity and arrest history as well as cross-agency differences in practice. The disparities are the largest for age ranges and offenses where the greatest discretion is exercised. We explore whether booked arrests increase the likelihood of future arrests and bookings exploiting the discontinuity in the booking probability at age 18. The results suggest sizable effects of a prior booking on the likelihood of a future arrest and subsequent booking.

Disability insurance take-up has expanded substantially in the past 20 years in the United States while shrinking in Canada. We empirically assess these trends by measuring the strength of the “push” from weak labor markets versus the “pull” of more generous benefits. Using an instrumental variables strategy comparing benefit changes across country, age, and year, we find that both benefits and regional wages matter. Simulations suggest that the upswing in disability insurance take-up in the United States would be reversed, dropping the caseload by 41% if benefits and wages had followed the growth path observed in Canada.

We assess changing patterns of migration and their association with labor outcomes for the 1979 and 1997 cohorts of the NLSY. Although the long-distance migration rate is lower in the 1997 cohort, we find that migration fell mostly because return migration fell. We uncover little difference in patterns of selection into migration in the two cohorts, little difference in correlation between migration and labor market outcomes, and little evidence in either cohort of a positive labor market return to migration. Our findings suggest that reductions in geographic mobility do not explain the poor recent labor market performance of young adults.

We analyze changes in unemployment, marginal labor force attachment, and participation in Canada and the United States using consistent measurement concepts. We show the importance for the comparative evolution of aggregate unemployment of changes in the fraction of those “wanting work”—the unemployed and marginally attached. We also study changes in the fraction of the nonemployed who are unemployed. Using micro data on labor market transition behavior at these margins, we find remarkably consistent results in the two countries, with the marginally attached displaying behavior lying between unemployment and nonattachment. The three nonemployment states are distinct in both countries.

This paper studies the endogenous formation of intersibling altruism. The theory suggests that parental incentive to foster children’s fraternal love is positively related to efficiency gains from more human capital investment in the more gifted child. The empirical analyses explore the plausibly exogenous within-twin difference in birth weight, a proxy for prenatal endowment. Consistent with the theory, the estimation results show that a larger difference in children’s birth weight leads to more intensive parenting practice to foster children’s fraternal love and that when such practice is more intensive, the heavier child obtains more investment relative to the other child.

Children whose parents were self-employed before China’s socialist transformation were more likely to become self-employed after the economic reform, even though they had no direct exposure to their parents’ businesses. The effect is statistically significant only for sons. The lack of direct exposure to family businesses impedes the transfer of business human capital and motivates us to explore personality traits as the underlying mechanisms. We find that children with self-employed parents are also more likely to invest in risky assets and to consume cigarettes. This suggests that children of self-employed parents inherit personality traits that induce risky behaviors.

This paper investigates marriage market equilibrium when bargaining in marriage (BIM) determines allocation within marriage. In contrast, the standard marriage market model assumes that prospective spouses make binding agreements in the marriage market (BAMM) that determine allocation within marriage. When BIM determines allocation within marriage, the appropriate framework for analyzing marriage market equilibrium is the Gale-Shapley matching model, not the Koopmans-Beckmann-Shapley-Shubik assignment model. BIM and BAMM have different implications not only for allocation within marriage but also for who marries, who marries whom, the number of marriages, and the Pareto efficiency of marriage market equilibrium.

Since 2000, US real average wages stagnated or declined while Canadian wages increased. We investigate the role of the Canadian resource boom in explaining this difference. We focus on wage spillovers to nonresource workers through a bargaining channel. We find that long-distance commuting to resource regions had substantial spillover effects on noncommuters in sending regions. Through spillovers, we account for 49% of the increase in the real mean wage in Canada between 2000 and 2012. We also find long-distance commuting effects in the United States. We conclude that long-distance commuting integrates regions, spreading benefits and costs of booms across the economy.