Knowledge that Transforms

We characterize the joint evolution of cross-sectional inequality in earnings, other sources of income and consumption across generations in the U.S. To account for cross-sectional dispersion, we estimate a model of intergenerational persistence and separately identify the influences of parental factors and of idiosyncratic life-cycle components. We find evidence of family persistence in earnings, consumption and saving behaviours, and marital sorting patterns. However, the quantitative contribution of idiosyncratic heterogeneity to cross-sectional inequality is significantly larger than parental effects. Our estimates imply that intergenerational persistence is not high enough to induce further large increases in inequality over time and across generations.

Using full count US census data, we study the impact of early twentieth-century state-industry-specific minimum wage laws that primarily targeted female employees. Our triple-difference estimates suggest a null impact of the minimum wage laws, potentially reflecting disemployment effects and the positive selection bias of the workers remaining in the labor force. When comparing county-industry trends between counties straddling state borders, female employment is lower by around 3.1% in affected county-industry cells. We further investigate the implications for own-wage elasticity of labor demand as a function of cross-industry concentration, the channels of substitution between men and women, and heterogeneity by marital status.

Many workers are evaluated on their ability to engage with customers. We measure the impact of gender-based customer discrimination on the productivity of online sales agents in sub-Saharan Africa. Using a novel framework that randomly varies the gender of names presented to customers without changing worker behavior, we find the assignment of a female-sounding name leads to 50 percent fewer purchases. Customers also lag in responding, are less expressive, and avoid discussing purchases. We show similar results for customers around the world and across workers. Removing customer bias, we find women would be more productive than their male coworkers.

Using Danish registry data linked to the Labor Force Survey, we provide the first rigorous evidence with external validity on the hours-career nexus (positive association between hours and career success). Guided by three theories (human capital; rat race; tournament), we unpack the hours-career nexus through examining: the differential effect of hours in the present firm and elsewhere; hours relative to peers’ hours; standard vs. evening/night/weekend hours; and the importance of sustaining long hours. Supplemented by the time use survey, we show the gender gap in hours and career success is due mostly to gendered division of labor in household production.

We present evidence that is consistent with large disparities across firms in their on-the-job learning opportunities using administrative datasets from Brazil and Italy. We categorize firms into discrete “classes”—which our conceptual framework interprets as skill-learning classes—using a clustering methodology that groups together firms with similar distributions of unexplained wage growth. Mincerian returns to experience vary widely across experiences acquired in different firm classes. Four tests leveraging firm movers, occupation/industry switchers, hiring wages, and displaced workers point toward a portable and general human capital interpretation. Heterogeneous employment experiences explain an important share of wage variance by age 35.

Firstborns, on average, complete more education than laterborns. We study whether individuals’ endowments measured by genetic information amplify this effect. Our familyfixed effects approach allows exploiting exogenous variation in birth order and genetic endowments among 14,850 siblings in the UK Biobank. We find that those with higher genetic endowments benefit disproportionately more from being firstborn compared to those with lower endowments, providing a clean example of how nature and nurture interact in producing human capital. Since parental investments are a dominant channel driving birth order effects, our results are consistent with complementarity between endowments and investments in human capital formation.

We analyze trends in labor-market returns to psychological traits using data from half a million Finnish men from 2001 to 2015. Cognitive skills' value declined, while noncognitive skills' value increased. Our novel findings show that extraversion drives this rise, while conscientiousness remains stable. Extraversion's rising returns are most pronounced for lower earners and those on the employment margin. These traits predict different labor market paths: extraversion predicts lower education and more work experience, while cognitive ability and conscientiousness lead to higher education and high-paying jobs.

We investigate the role of gender norms in shaping parental childcare following changes in the relative take-home pay of mothers and fathers. Exploiting variation from Swedish tax reforms, we estimate the elasticity of substitution in parental childcare for native and immigrant couples from a variety of countries characterized by varying gender norms. Couples originating from countries with relatively conservative norms are more likely to reallocate childcare to mothers following a reduction in the father’s tax rate and less likely to reallocate childcare to fathers following a reduction in the mother’s tax rate, thereby reinforcing a traditional allocation of childcare across parents.

We study the consequences of job markets' heavy reliance on referrals. Referrals lead to more opportunities for workers to be hired, which lead to better matches and increased productivity but also disadvantage job seekers with few or no connections to employed workers, increasing inequality. Coupled with homophily, referrals also lead to immobility. We identify conditions under which distributing referrals more evenly reduces inequality and improves future productivity and mobility. We use the model to examine the short- and long-run welfare impacts of policies such as affirmative action and algorithmic fairness.