Knowledge that Transforms

This article investigates the pricing distortions that arise from the use of a common nonlinear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor’s accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters in which they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6%–8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.

In most countries, employers are financially responsible for sick pay during an initial period of a worker’s absence spell, after which the public insurance system covers the bill. Based on an empirical evaluation of a quasi-natural experiment in Norway, where pay liability was removed for pregnancy-related absences, we show that the system of short-term pay liability creates a sick pay trap: firms are discouraged from letting long-term sick workers back into work since they then face the financial risk associated with subsequent relapses. We present evidence indicating that this disincentive effect is both statistically and economically significant.

We evaluate the effect of performance-based incentive programs on educational outcomes for community college students from a random assignment experiment at three campuses. Incentive payments over 2 semesters were tied to meeting two conditions—enrolling at least half-time and maintaining a C or better grade point average. Eligibility increased the likelihood of enrolling in the second semester after random assignment and total number of credits earned. Over 2 years, program group students completed nearly 40% more credits. We find little evidence that program eligibility changed types of courses taken but some evidence of increased academic performance and effort.

This article examines whether gay and lesbian workers sort into tolerant occupations. With information on sexual orientation, prejudice, and occupational choice taken from Australian Twin Registers, we find that gays and lesbians shy away from prejudiced occupations. We show that our segregation results are largely driven by those gay and lesbian workers with disclosed identities and are robust to the inclusion of unobserved factors that are inherited and observed factors that strongly correlate with productive skills and vocational preferences. Our segregation estimates are consistent with prejudice-based theories of employer and employee discrimination against gay and lesbian workers.

This article revisits the effectiveness of public-sponsored training programs for Germany accounting for dynamic selection into heterogeneous programs. We carefully assess to what extent various aspects of our empirical strategy, such as conditioning flexibly on employment and benefit histories, the availability of rich data, handling of later program participations, and further methodological choices affect our estimates. Our results imply pronounced negative lock-in effects in the short run and positive medium-run effects on employment and earnings when job-seekers enroll after having been unemployed for some time. We find that data and specification issues can have a large effect.

I model how children’s acquisition of a given form of human capital incentivizes adults in their household to either learn from them (if children can teach the skill to adults, adults’ cost of learning falls) or lean on them (if children’s human capital substitutes for that of adults in household production, adults’ benefit from learning falls). Using variation in compliance with an English-immersion mandate in California schools, I find that English instruction improved immigrant children’s English proficiency but discouraged adults living with them from acquiring the language. Whether family members “learn” or “lean” affects the externalities associated with education policies.

We analyze how the absence behavior of Italian public sector employees has been affected by a law, passed in June 2008, reducing sick leave compensation and increasing monitoring. We use micro data on 889 workers employed in public administration. We find that the employees’ probability of being absent diminishes and that the reduction is greater among employees suffering higher earnings losses. Employees are responsive to the monitoring intensity and to the announcement of policy changes. Females react more strongly. While the reform has increased the hazard of ending an absence spell for short durations, the hazard for long durations decreased.

In 1998 the Norwegian government introduced a program that increased parents’ incentives to stay home with children under the age of 3. Many eligible children had older siblings, and we investigate how this program affected the long-run educational outcomes of the older siblings. Using comprehensive administrative data, we estimate a difference-in-differences model that exploits differences in older siblings’ exposures to the program. We find a significant positive treatment effect on older siblings’ tenth-grade GPA, and this effect seems to be largely driven by mother’s reduced labor force participation and not by changes in family income or father’s labor force participation.

The two key predictions of hedonic wage theory are that there is a trade-off between wages and nonmonetary rewards and that the latter can be used as a sorting device by firms to attract and retain the kind of employees they desire. We use the vignettes method to estimate individuals’ willingness-to-pay for fringe benefits and job amenities. We find negative wage-fringe trade-offs, considerable heterogeneity in willingness-to-pay for fringe benefits, and signs of sorting.

The SEED schools, which combine a “No Excuses” charter model with a 5-day-a-week boarding program, are America’s only urban public boarding schools for the poor. We provide the first causal estimate of the impact of attending SEED schools on academic achievement, with the goal of understanding whether changing a student’s environment is an effective strategy to increase achievement among the poor. Using admission lotteries, we show that attending a SEED school increases achievement by 0.211 standard deviation in reading and 0.229 standard deviation in math per year. However, subgroup analyses show that the effects may be driven by female students.