Knowledge that Transforms

We assess the impact of nationwide minimum wages on employment throughout the whole wage distribution by exploiting geographical variation in the level of wages. We find a substantial increase in wages at the bottom of the wage distribution, while we detect a small, statistically insignificant negative effect on employment. Combining the estimated change in the wage distribution with a tax and benefit microsimulation model, we show that the minimum wage generates considerable proportional income gains up to the middle of the household income distribution.

We estimate the effect of a female employee giving birth and taking parental leave on small firms and coworkers in Denmark using a dynamic difference-in-differences design. We find little evidence that parental leave take-up has negative effects on firms and coworkers overall. This is because most firms are very effective in compensating for the worker on leave by hiring temporary workers and by increasing other employees’ hours. In contrast, we do find evidence that parental leave has negative effects on a small subsample of firms that are less able to use their existing employees to compensate for absent workers.

We document that the US marriage market is characterized by two systematic empirical patterns. First, there is a quantitatively large, strong, and persistent negative relationship between changes in cohort size and marriage rates of women. Second, the same negative correlation holds for men. We then establish the features a model should possess to generate these patterns. A standard matching model with search frictions is rejected by the data because it produces a negative relationship for women but a positive relationship for men. We generalize the standard model to show under what conditions it rationalizes both patterns.

We explore how much borrowers value student debt relief in the setting of the federal Teacher Loan Forgiveness program, which cancels between $5,000 and $17,500 in debt for teachers at high-need schools. Using both quasi-experimental evidence and a randomized controlled trial, we find that neither eligibility nor a targeted information intervention affects employment decisions. Information was found to increase application and receipt rates for teachers who had achieved eligibility. Evidence from contingent valuation surveys suggests that teachers do in general value debt relief. Incorporating qualitative evidence, we conclude that take-up may be constrained by program complexity and administrative barriers.

Economic shocks occur frequently and may cause individuals to reevaluate key life decisions in ways that have lasting consequences for themselves and the broader economy. These decisions are tied to life stages, and the effect of economic shocks may differ depending on when they occur. We exploit exogenous job separations to study the impact of adverse shocks across the life cycle on labor market outcomes and major life decisions: education, mobility, family structure, and retirement. We find significant heterogeneity across the life cycle and conclude that focusing on average effects among workers across the life cycle misses a great deal.

We analyze how skill transferability and the local industry mix affect the adjustment costs of workers hit by a trade shock. Using German administrative data and novel measures of economic distance, we construct an index of labor market absorptiveness that captures the degree to which workers from a particular industry are able to reallocate into other jobs. Among manufacturing workers, we find that the earnings loss associated with increased import exposure is much higher for those who live in the least absorptive regions. We conclude that the local industry composition plays an important role in the adjustment processes of workers.

In the late 1930s, the National Association for the Advancement of Colored People (NAACP) launched a campaign to equalize Black and white teacher salaries in the de jure segregated schools of the American South. We estimate the effect of teacher pay on educational attainment exploiting variation in Black salary gains over time across Southern counties with different Black enrollment shares and across states by whether subsequent policy reinforced or resisted court rulings favorable to the NAACP. Using newly collected county panel data, we find that Black teacher salary gains contributed to the large reductions in racial inequality in school enrollment and grade progression in the South at midcentury.

I study the long-term effects of landing a first job at a large firm versus a small one using Spanish administrative data. Size could be a relevant employer attribute for inexperienced workers since large firms are associated with greater productivity, wages, and training. The key empirical challenge is selection into first jobs based on unobserved worker characteristics. I develop an instrumental variable approach that, keeping business cycle conditions fixed, leverages variation in the composition of labor demand that labor market entrants face. Initially matching with a larger firm persistently improves long-term outcomes, even through subsequent jobs. Mechanisms suggest better skill development at large firms.

We study the link between firm productivity and the wages that firms pay. Guided by a search-matching model with large firms, worker and firm heterogeneity, and production complementarities, we infer firm productivity by estimating firm-level production functions. Using German data, we find that the most productive firms do not pay the highest wages. Worker transitions from high- to medium-productivity firms are on average associated with wage gains. Productivity sorting—that is, the sorting of high-ability workers into high-productivity firms—is less pronounced than the sorting into high-wage firms.