Knowledge that Transforms

This paper studies the evolution of income concentration in Japan from 1886 to 2005 by constructing long-run series of top income shares and top wage income shares, using income tax statistics. We find that (i) income concentration was extremely high throughout the pre-WWII period during which the nation underwent rapid industrialization; (ii) a drastic de-concentration of income at the top took place in 1938–1945; (iii) income concentration remained low during the rest of the century but shows some sign of increase in the last decade; and (iv) top income composition in Japan has shifted dramatically from capital income to employment income over the course of the twentieth century. We attribute the precipitous fall in income concentration during WWII primarily to the collapse of capital income due to wartime regulations and inflation. We argue that the change in the institutional structure under the occupational reforms made the one-time income de-concentration difficult to reverse. In contrast to the sharp increase in wage income inequality observed in the United States since 1970, the top wage income shares in Japan have remained relatively stable over the last thirty years. We show that the change in technology or tax policies alone cannot account for the comparative experience of Japan and the United States. Instead we suggest that institutional factors such as internal labor markets and union structure are important determinants of wage income concentration.

This paper uses decennial Census data to examine the residential integration of the foreign born in the United States between 1910 and 2000. Immigrant segregation declined in the first part of the century, but has been rising over the past few decades. Recent immigrants tend to hail from countries with greater cultural distinctions from U.S. natives, whether economic, racial, or linguistic. These factors explain much of the increase in segregation after 1970. Evidence also points to changes in urban form, particularly native-driven suburbanization and the decline of public transit as a transportation mode, as an explanation for the new immigrant segregation.

This study analyzes the automobile purchase behavior of all residents of two Finnish provinces over several years. Using a comprehensive data set with location coordinates at the individual consumer level, it finds that the purchases of neighbors, particularly in the recent past and by those who are geographically most proximate, influence a consumer's purchases of automobiles. There is little evidence that emotional biases, like envy, account for the observed social influence on consumption.

We study workplace segregation in the United States using a unique matched employer-employee data set that we have created. We present measures of workplace segregation by education and language, and by race and ethnicity, and we assess the role of education- and language-related skill differentials in generating workplace segregation by race and (Hispanic) ethnicity. Our results indicate that there is considerable segregation by race, ethnicity, education, and language in the workplace. Only a tiny portion of racial segregation in the workplace is driven by education differences between blacks and whites, but a substantial fraction of ethnic segregation in the workplace can be attributed to differences in English-language proficiency. Finally, additional evidence suggests that segregation by language likely reflects complementarity among workers speaking the same language.

In this paper we develop two nonparametric tests of treatment effect heterogeneity. The first test is for the null hypothesis that the treatment has a zero average effect for all subpopulations defined by covariates. The second test is for the null hypothesis that the average effect conditional on the covariates is identical for all subpopulations, that is, that there is no heterogeneity in average treatment effects by covariates. We derive tests that are straightforward to implement and illustrate the use of these tests on data from two sets of experimental evaluations of the effects of welfare-to-work programs.

This paper investigates the remarkable extremes of growth experiences within countries and the changes that occur across growth transitions. We find two main results. First, virtually all but the very richest countries experience both growth miracles and failures over substantial periods. Second, growth accelerations and collapses are asymmetric phenomena. Collapses typically feature reduced investment amidst increasing price instability, whereas growth takeoffs are primarily associated with large expansions in international trade. The results show that even very poor countries regularly grow rapidly, but sustaining growth is difficult and may pose a very different set of challenges than starting it. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

We develop dynamic binary probit models and apply them for predicting U.S. recessions using the interest rate spread as the driving predictor. The new models use lags of the binary response (a recession dummy) to forecast its future values and allow for the potential forecast power of lags of the underlying conditional probability. We show how multiperiod-ahead forecasts are computed iteratively using the same one-period-ahead model. Iterated forecasts that apply specific lags supported by statistical model selection procedures turn out to be more accurate than previously used direct forecasts based on horizon-specific model specifications.

This paper presents a methodology that uses matching comparisons to explain gender wage differences. The approach emphasizes gender differences in the supports of the distributions of observable characteristics and provides insights into the distribution of unexplained gender pay differences. This nonparametric alternative to the Blinder-Oaxaca (BO) decomposition does not require the estimation of earnings equations and divides the gap into four additive elements. Two of these are analogous to the elements of the BO decomposition (but computed only over the common support of the distributions of characteristics), while the other two account for differences in the supports.

The paper proposes a new measure of exogenous oil supply shocks. The timing, the magnitude, and the sign of this measure may differ greatly from current state-of-the-art estimates. It is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions. Exogenous oil supply shocks cause a sharp drop of U.S. real GDP growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in CPI inflation after three quarters. Overall, exogenous oil supply shocks made remarkably little difference for the evolution of the U.S. economy since the 1970s, although they did matter for some historical episodes.

We provide a systematic analysis of the bilateral factors driving portfolio equity holdings across countries. We find that bilateral equity holdings are strongly correlated with bilateral trade in goods and services. Larger bilateral positions are also associated with proxies for informational proximity.