In this paper we exploit a unique database that merges longitudinal earnings data on Pennsylvanian workers with national death records to study the detailed nature of the correlation between earnings and mortality. We find that the estimates typically reported in the literature, which are based on single years of earnings data, are likely to understate substantially the strength of the association between income and mortality. In particular, relative to a single year of earnings, the average of earnings over a six-year period predicts a 70 percent greater impact of income on mortality. In addition, controlling for the mean level of earnings over a period, we find that greater earnings volatility is associated with higher mortality. We also examine the lag structure of the relationship between earnings and mortality. We find that conditional on a small number of years of recent earning levels, there is little or no correlation between earnings levels in earlier years and current mortality. This runs counter to the interpretation of the earnings-mortality correlation that views workers as "buying health" by allocating a steady fraction of their earnings to the accumulation of a health stock. It is also inconsistent with interpretations of the earnings- mortality link emphasizing the correlation of both variables with an unobserved, time-invariant trait, such as the rate at which workers discount the future. We find that explaining the patterns of correlation appears to require a relatively complex theory that we leave to future research.

This paper proposes a new measure of the disincentive cost of unemployment insurance (UI): the ratio of the behavioral cost (BC) to the mechanical cost (MC) of a UI reform. This measure represents the labor supply distortion relative to the additional (mechanical) transfer from the UI reform. We show the BC/MC ratio naturally arises from a model of optimal UI and can be readily computed and compared across different types of reforms and labor market contexts. We summarize the evidence regarding the BC/MC ratio for existing studies and relate it to typical measures of employment effects of UI.

Longitudinal administrative data show that rejected male applicants to the Disability Insurance (DI) program who are younger or have low-mortality impairments such as back pain and mental health problems exhibit substantial labor force attachment. While we confirm that employment rates of older rejected applicants are low, continued high numbers of younger and low-mortality beneficiaries have raised the potential employment of DI beneficiaries. Three findings support economic inducement to apply. Mean preapplication earnings have fallen, rejected applicants experience preapplication declines in earnings, and beneficiaries whose first applications were rejected at the DDS level but who ultimately received benefits exhibit substantial employment. JEL: H55, J14, J28, J31

We document the sources behind the costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings after displacement are large, persistent, and highly cyclical, nearly doubling in size during downturns. A large part of the long-term earnings losses and their cyclicality is driven by declines in wages. Key to these long-lasting wage declines and their cyclicality are changes in employer characteristics, as displaced workers switch to lower-paying firms. These losses increase with duration of nonemployment. Changes in characteristics of displaced workers or displacing firms, and other post-job loss career outcomes explain little of the cyclicality.

We exploit administrative data on young German workers and their employers to study the long-term effects of an early job loss. To account for non-random sorting of workers into firms with different turnover rates and for selective job mobility, we use changes over time in firm- and age-specific labor demand as an instrument for displacement. We find that wage losses of young job losers are initially 15% but fade to zero within five years. Only workers leaving very large establishments suffer persistent losses. A comparison of estimators implies that initial sorting, negative selection, and voluntary job mobility may have biased previous U.S. studies finding permanent effects of early displacements.

We estimate that unemployment insurance (UI) extensions reduce reemployment wages using sharp age discontinuities in UI eligibility in Germany. We show this effect combines two key policy parameters: the effect of UI on reservation wages and the effect of nonemployment durations on wage offers. Our framework implies if UI extensions do not affect wages conditional on duration, then reservation wages do not bind. We derive resulting instrumental variable estimates for the effect of nonemployment durations on wage offers and bounds for reservation wage effects. The effect of UI on wages we find arises mainly from substantial negative nonemployment duration effects.

We summarize findings from an audit study investigating how unemployment duration, age, and holding a low-level “interim” job affect the likelihood that experienced college-educated females applying for administrative support jobs receive a callback from potential employers. The results show no relationship between callback rates and unemployment duration. In contrast, workers age 50 and older and workers with an “interim” job are significantly less likely to receive callbacks. We also summarize disparate findings in the growing literature of resume-based audit studies of career histories, and discuss avenues in which the literature could achieve results that are more comparable and externally valid.

The majority of papers analyzing the employment effects of unemployment insurance (UI) benefit durations focus on the duration of the first unemployment spell. In this paper, we make two contributions. First, we use a regression discontinuity design to analyze the long-term effects of extensions in UI durations. These estimates differ from standard estimates in that they incorporate differences in UI benefit receipt and employment due to recurrent unemployment spells. Second, we derive a welfare formula of UI extensions that incorporates recurrent nonemployment spells.

We document variation in working conditions in the United States, present estimates of how workers value these conditions, and assess the impact of working conditions on estimates of wage inequality. We conduct a series of stated-preference experiments to estimate workers’ willingness to pay for a broad set of working conditions, which we validate with actual job choices. We find that working conditions vary substantially, play a significant role in job choice, and are central components of the compensation received by workers. We find that accounting for differences in preferences for working conditions often exacerbates wage differentials and intensifies measures of wage inequality.