Knowledge that Transforms

This study examines the long-term effects of student loans and grants in Chile through a regression discontinuity design. It finds that university loans significantly boost degree completion, especially among women and low-income students, with marginal positive effects on employment and earnings for women. Vocational loans benefit only those ineligible for university loans. Conversely, grants, alongside loans, do not affect education or labor market outcomes. The limited impact of the tuition reductions induced by grants, combined with the substantial gains for low-income students, highlights the presence of credit constraints.

This paper evaluates self-employment assistance (SEA) programs, which are government initiatives extending the unemployment insurance system to support unemployment to self-employment transitions. Using a general equilibrium model of the US labor market, we show that these programs have important labor market mobility effects and increase the self-employment rate. They also significantly impact the composition and performance outcomes of self-employment: while lump-sum subsidies select low-skilled individuals, SEA programs contingent on previously employed earnings select skilled and wealthier individuals. At the aggregate level, the latter programs mainly reallocate individuals from employment to self-employment, leaving the unemployment rate largely unaffected.

Weak local labor market conditions may change the trajectories of young adults who expected to find work. Well-documented responses include increasing educational investments, moving to more prosperous labor markets, or reducing labor force attachment. Military enlistment is a channel of potential adjustment that has received less study. Using data on Army recruits, we demonstrate a significant local response in enlistment to mass layoffs, characterized by increased labor supply to the military rather than increased local military recruiting. Our work documents the significance of military employment as an important arm of adjustment to local labor market shocks.

The long-term decline in US workers’ attempts to organize labor unions accelerated after 2000. We find that the swift rise of imports from China arising from a change in trade policy accounts for nearly all of this post-2000 acceleration: union certification elections decreased substantially among workers in manufacturing industries directly exposed to imports, but also among workers indirectly exposed through their local labor market. Consistent with a simple model of workers’ decision to seek union representation, direct exposure lowered the expected wage gain from unionization, whereas indirect exposure increased the cost of job loss—both of which discourage organizing.

We investigate the returns to adolescent friendships on earnings in adulthood using data from the National Longitudinal Study of Adolescent to Adult Health. Because both education and friendships are jointly determined in adolescence, OLS estimates of their returns are likely biased. We implement a novel procedure to obtain bounds on the causal returns to friendships: we assume that the returns to schooling range from 5 to 15% (based on prior literature), and instrument for friendships using similarity in age among peers. Having one more friend in adolescence increases earnings between 7 and 14%, substantially more than OLS estimates would suggest.