Knowledge that Transforms

This paper evaluates self-employment assistance (SEA) programs, which are government initiatives extending the unemployment insurance system to support unemployment to self-employment transitions. Using a general equilibrium model of the US labor market, we show that these programs have important labor market mobility effects and increase the self-employment rate. They also significantly impact the composition and performance outcomes of self-employment: while lump-sum subsidies select low-skilled individuals, SEA programs contingent on previously employed earnings select skilled and wealthier individuals. At the aggregate level, the latter programs mainly reallocate individuals from employment to self-employment, leaving the unemployment rate largely unaffected.

Weak local labor market conditions may change the trajectories of young adults who expected to find work. Well-documented responses include increasing educational investments, moving to more prosperous labor markets, or reducing labor force attachment. Military enlistment is a channel of potential adjustment that has received less study. Using data on Army recruits, we demonstrate a significant local response in enlistment to mass layoffs, characterized by increased labor supply to the military rather than increased local military recruiting. Our work documents the significance of military employment as an important arm of adjustment to local labor market shocks.

The long-term decline in US workers’ attempts to organize labor unions accelerated after 2000. We find that the swift rise of imports from China arising from a change in trade policy accounts for nearly all of this post-2000 acceleration: union certification elections decreased substantially among workers in manufacturing industries directly exposed to imports, but also among workers indirectly exposed through their local labor market. Consistent with a simple model of workers’ decision to seek union representation, direct exposure lowered the expected wage gain from unionization, whereas indirect exposure increased the cost of job loss—both of which discourage organizing.

We investigate the returns to adolescent friendships on earnings in adulthood using data from the National Longitudinal Study of Adolescent to Adult Health. Because both education and friendships are jointly determined in adolescence, OLS estimates of their returns are likely biased. We implement a novel procedure to obtain bounds on the causal returns to friendships: we assume that the returns to schooling range from 5 to 15% (based on prior literature), and instrument for friendships using similarity in age among peers. Having one more friend in adolescence increases earnings between 7 and 14%, substantially more than OLS estimates would suggest.

Natives are expected to respond to the wage impact of immigration by moving across markets. We argue that the observed impact depends not only on the size of the native response but also on which natives choose to respond. Specifically, a nonrandom response produces a selection bias. We document its empirical relevance by showing that the strong feminization of the French immigrant workforce reduced the employment of native women, leading to sizable compositional shifts and no correlation between immigration and female wages. Adjusting for selection bias results in a wage elasticity that becomes negative for women and similar to men.

We investigate the causal impact of a generous unconditional cash transfer at birth on children’s health and academic performance. Using rich administrative data, we take advantage of the unexpected introduction of a baby bonus in Spain in 2007 and implement a difference-in-discontinuity approach comparing children born in the surrounding months in different years. We find little impact on children’s health and test scores. We also fail to find meaningful changes in household structure, maternal employment, parental time, or child-related monetary investments. Our results contribute to understanding which interventions are effective at fostering children’s health and human capital formation.