Christopher L. Foote of Federal Reserve Bank of Boston reviews, “The Redistribution Recession: How Labor Market Distortions Contracted the Economy” by Casey B. Mulligan. The Econlit abstract of this book begins: “Explores the decline of employment in the United States after the financial crisis and its failure to recover and considers the role of economic activity and public policy. Discusses the rise of labor productivity; the expanding social safety net; supply and demand—labor market consequences of safety net expansions; means-tested subsidies and economic dynamics since 2007; cross-sectional patterns of employment and hours changes; Keynesian and other models of safety net stimulus; recession-era effects of factor supply and demand—evidence from the seasonal cycle, the construction market, and minimum wage hikes; incentives and compliance under the federal mortgage modification guidelines; and uncertainty, redistribution, and the labor market. Mulligan is Professor of Economics at the University of Chicago.”

This comment makes three observations about Donohue and Levitt's paper on abortion and crime (Quarterly Journal of Economics 119(1) (2001), 249–275). First, there is a coding mistake in the concluding regressions, which identify abortion's effect on crime by comparing the experiences of different age cohorts within the same state and year. Second, correcting this error and using a more appropriate per capita specification for the crime variable generates much weaker results. Third, earlier tests in the paper, which exploit cross-state rather than within-state variation, are not robust to allowing for differential state trends based on statewide crime rates that predate the period when abortion could have had a causal effect on crime.

The 1918–47 employee records of the Ford Motor Company provide a rare opportunity to study a firm willing to hire black workers when similar firms would not. The evidence suggests that Ford did profit from discrimination elsewhere, but not by paying blacks less than whites. An apparent “wage‐equity constraint” prevailed, resulting in virtually no racial variation in wages inside Ford. An implication was that blacks quit Ford jobs less often than whites, holding working conditions constant. Arbitrage profit came from exploiting this nonwage margin, as Ford placed blacks in hot, dangerous foundry jobs where quit rates were generally high.

In this paper, we use two comprehensive micro-data sets to study how the distribution of mortgage debt evolved during the 2000s housing boom. We show that the allocation of mortgage debt across the income distribution remained stable, as did the allocation of real estate assets. Any theory of the boom must replicate these facts, and a general equilibrium model shows that doing so requires two elements: (1) an exogenous shock that increases expected house price growth or, alternatively, reduces interest rates and (2) financial markets that endogenously relax borrowing constraints in response to the shock. Empirically, the endogenous relaxation of constraints was largely accomplished with subprime lending, which allowed the mortgage debt of low-income households to increase at the same rate as that of high-income households.

The (S, s) model has enjoyed tremendous popularity over the past decade. It has been employed almost everywhere that discrete adjustment is observed. Today microeconomic rigidities are seen as an important influence on aggregate dynamics. In this paper we quickly characterize the microeconomic evidence for the model. To narrow the scope of our discussion, we will focus our attention on real variables, and we will comment on price inertia where appropriate. We conclude that, in spite of its popularity, the evidence for the importance of the (S, s) adjustment is surprisingly weak. We argue that discrete adjustment is, in and of itself, of little macroeconomic interest. To be important these frictions must coordinate agents to act together, thereby exacerbating deviations from the neoclassical benchmark. To date there have been few attempts at empirically identifying such interactions. In the last section, we present some results of our own. We test one of the main implications of (S, s) adjustment, that a greater variance in the forcing process leads to more frequent adjustment. Using data on automobiles from the Consumer Expenditure Survey, we find that more variable income leads to less frequent adjustment. We speculate that this correlation is indicative of a link between discrete adjustment and imperfect capital markets. This interaction could provide an important role for (S, s) frictions.