Knowledge that Transforms

true Throughout most of the twentieth century, economic growth was associated with rising median real wages. However, since the early 1980s, measured median real hourly compensation has been stagnant despite robust productivity growth. To the extent that measured real wage growth has occurred, it has been concentrated disproportionately at the upper end of the wage distribution. Many view the lack of growth of median wages over this time period as evidence that the American middle class has not advanced and as a symptom of declining social mobility. The decoupling of measured median real wage growth and productivity growth has been viewed as a puzzle among both academics and policy makers. During this time period, there has also been a separation of wage growth and othermacroeconomic fundamentals. For instance, theUnited States has had record low levels of unemployment in the years prior to the global pandemic, yet during the prepandemic period there was little accompanying wage growth. This presents an apparent contradiction of the long-standing Phillips curve analysis that negatively relates unemployment towage growth. Researchers have begun to dig into this puzzle of late (see, e.g., Del Negro et al. 2020). Recent explanations involve the possibility that we have mismeasured the amount of slack in the economy (Krueger, Cramer, and Cho 2014; Abraham, Haltiwanger, and Rendell 2020) or that we have a flatter

Workfare can impact child development by inducing parents to spend less time at home. I study the mechanisms by which workfare policies affect children using the New Hope workfare experiment. The program randomly assigned individuals to a policy bundle including income and childcare subsidies conditional on full-time work. For families with young children, the program had positive effects on child academic performance and classroom behavior. Counterfactual experiments from a dynamic discrete choice model indicate that most of the effect of New Hope on young children is explained by parents enrolling their children in center-based childcare.

In the United States, age at first marriage was lowest and the education gap between husbands and wives was highest during the 1950s. The conventional explanation for such a negative correlation is that early marriage leads to earlier and higher fertility, which in turn prevents women from acquiring education. Here, we propose that early marriages enabled couples to overcome credit constraints in education. A model that includes this motive and mechanism can replicate not only the marriage and education patterns observed in the middle of the century in the United States but also the overall trends over the twentieth century.

This study investigates the effects of unobserved earnings-related endowments on marital outcomes, focusing on potential gender differences. Using a less stringent, more plausible assumption that monozygotic twins share more similar endowments relative to dizygotic twins, we develop a novel identification strategy from the twins experiment. Using unique Chinese twins survey data, we find that men with genetic endowments related to higher earnings marry earlier and have younger, taller wives; such women marry later and have older husbands with higher education and income. Results cast doubt on the conventional assumption of independence between unobservables and observable marital attributes.

Rising between-firm pay dispersion accounts for the majority of the dramatic increase in earnings inequality in the United States in the last several decades. This paper shows that a distinct cross-cohort pattern drives this rise: newer cohorts of firms enter more dispersed and stay more dispersed throughout their lives. These cohort patterns suggest a link between changes in firm entry associated with the decline in business dynamism and the rise in earnings inequality. Cohort effects also imply a slow diffusion of inequality: inequality rises as younger and more unequal cohorts of firms replace older and more equal cohorts.

We model optimal treatment assignment in programs with a limited number of seats and study how the presence of peer effects impacts the optimal allocation rule. We then use data from a randomized control trial to show evidence that there are large peer effects in the context of job training for disadvantaged adults in the United States. Finally, we combine the model and the empirics to show that the program would have had a much greater impact if the assignment choices had accounted for the peer effects.

There are two essential mechanisms in the canonical model of the transmission of income across generations—parents’ financial resources and parental education. I provide novel empirical evidence to disentangle the significance of these two mechanisms in explaining the intergenerational transmission of income. Utilizing two reforms and administrative data from Sweden, I find that parents’ financial resources amount to about 25% of the effect of parental education on children’s income. Additionally, I show that parents’ financial resources matter less for sons. Overall, my findings suggest a comparatively modest impact of parental financial resources on children’s income.