Knowledge that Transforms

Using data from a Canadian field experiment on financial barriers to higher education, we estimate the distribution of the value of financial aid for prospective students. We find that a considerable share of prospective students perceive significant credit constraints. Most individuals are willing to pay a sizable interest premium above the prevailing market rate for the option to take up a loan, with a median interest rate wedge equal to 6.8 percentage points for a $1,000 loan. The willingness to pay for financial aid is heterogeneous across students, with discount factors playing a key role in accounting for this variation.

We assess the biases induced by measurement error in a study of correlations in educational attainment across two and three generations in the United States using linked data spanning 1940–2015. Although multigenerational regressions show an economically meaningful “grandparent effect,” we find that this effect is overstated and likely not statistically or economically significant after we correct for measurement error. However, that same measurement error means that inferences derived using only two generations of data understate persistence in educational attainment by roughly 20%. We find an 18% decline in the intergenerational correlation of educational attainment over the twentieth century.

We investigate whether increased animosity toward Muslims after 9/11 had spillover effects on Black and Hispanic individuals in the federal criminal justice system. Using linked administrative data tracking defendants from arrest through sentencing, we find that after 9/11, sentence and presentence outcomes for Hispanic defendants significantly worsened. Outcomes for Black defendants were unchanged. The findings are consistent with judges and prosecutors displaying social preferences characterized by contagious animosity from Muslims to Hispanics. Our findings provide among the first field evidence of contagious animosity, indicating that social preferences across out-groups are interlinked and malleable.

One concern regarding US immigration policies is that skilled workers on temporary visas may be bound to their employers in “indentured servitude,” giving rise to monopsony power. I investigate this concern by estimating the effect of acquiring permanent residency on the job mobility and earnings of these workers. Using fixed effects models, I find an immediate upsurge in mobility upon permanent residency receipt, primarily driven by voluntary moving being depressed during the employer-sponsored immigration process. Job lock reduces the earnings of male workers by 4.7%, which translates to a 2% surplus for firms after extra hiring costs are subtracted.

The Federal Pell Grant Program lowers the cost of higher education for low-income students. We estimate Pell’s average effect for the universe of federally aided students—the broadest swath of higher education studied to date. Exploiting discontinuities and kinks in the grant schedule, we find that the effect of Pell on completion rates and postcollege earnings is much smaller than the findings of recent prominent studies focused on specific states. We argue that interactions between Pell grants and state aid programs may explain this difference, underscoring the importance of understanding how the impact of financial aid depends on context.

Choosing where to apply to college is a complex problem with long-term consequences, but many students lack the guidance necessary to make optimal choices. I show that a technology that provides low-cost personalized college admissions information to more than 40% of high schoolers significantly alters college choices. Students shift applications and attendance to colleges for which they can observe information on schoolmates’ admissions experiences. Responses are largest when such information suggests a high admissions probability. Disadvantaged students respond the most, and information on in-state colleges increases their 4-year college attendance. Data features and framing, however, deter students from selective colleges.

We investigate the role of training in reducing the gender wage gap using the British Household Panel Survey. On the basis of a life-cycle model and using tax and welfare benefit reforms as a source of exogenous variation, we evaluate the role of formal training and experience in defining the evolution of wages and employment careers, conditional on education. Training is potentially important in compensating for the effects of children, especially for women who left education after completing high school, but does not fundamentally change the wage gap resulting from labor market interruptions following child birth.

We construct the first long-term comparison of cross-sectional and panel estimates of immigrant earnings assimilation in the United States from a single data source. Unlike previous results, we find that selective out-migration of higher-earning immigrants biases downward cross-sectional estimates for all education groups. Cross-sectional estimates dramatically understate earnings growth for high-skilled foreign-born workers. The bias stems from both selective out-migration and selective employment; among high-skilled immigrants, low earners find employment with a substantial delay, while high earners work immediately on arrival. We present suggestive evidence that the H-1B visa program may play a role in estimated immigrant earnings dynamics.

This paper examines the short and longer-term economic effects of the 1966 Fair Labor Standards Act (FLSA) which increased the national minimum wage to its highest level of the 20th Century and extended coverage to an additional 9.1 million workers. Exploiting differences in the "bite" of the minimum wage due to regional variation in the standard of living and industry composition, this paper finds that the 1966 FLSA increased wages dramatically but reduced aggregate employment only modestly. However, the disemployment effects were significantly larger among African-American men, forty percent of whom earned below the new minimum wage in 1966.

Noncognitive characteristics and personality traits can be strong predictors of economic and social outcomes of individuals. In this paper, using data on cognitive ability and psychologist-assessed “sociability” and “adaptability” linked to administrative data for the male 1932–33 birth cohort in Norway, we analyze how these three characteristics affect men’s probability to migrate across labor markets. We find that higher adaptability, the capacity to adjust to new environments and situations, and higher cognitive ability are significant predictors of the probability to migrate. Adaptability is a particularly strong migration predictor for individuals with low cognitive ability or low socioeconomic background.