Knowledge that Transforms

A positive relation between parents’ schooling and child’s schooling does not necessarily reflect a causal relation. This article uses a new approach to identify intergenerational schooling effects: a nonparametric bounds analysis. By relying on relatively weak and in part testable assumptions, this article obtains informative bounds on the average causal impact of parents’ schooling. The tightest bounds, using monotone instrumental variables, show that increasing mother’s or father’s schooling to a college degree has a positive effect on child’s schooling that is significantly different from zero but substantially lower than the ordinary least squares estimates.

In labor markets, the ratchet effect refers to a situation where workers subject to performance pay choose to restrict their output, because they rationally anticipate that firms will respond to higher output levels by raising output requirements or by cutting pay. We model this effect as a multiperiod principal-agent problem with hidden information and study its robustness to labor market competition both theoretically and experimentally. Consistent with our theoretical model, we observe substantial ratchet effects in the absence of competition, which are nearly eliminated when competition is introduced; this is true regardless of whether market conditions favor firms or workers.

We analyze the impact on a firm’s profits and optimal wage rates, and on the distribution of workers’ earnings, when workers compare their earnings with those of coworkers. We consider a low-productivity worker who receives lower wage earnings than a high-productivity worker. When the low-productivity worker derives (dis)utility not only from his own effort but also from comparing his earnings with those of the high-productivity worker, his response to the sensing of relative deprivation is to increase the optimal level of effort. Consequently, the firm’s profits are higher, its wage rates remain unchanged, and the distribution of earnings is compressed.

This article examines how the increase in the incarceration of black men and the sex ratio imbalance it induces shape the behavior of young black women. Combining data from the Bureau of Justice Statistics and the Current Population Survey to match male incarceration rates with individual observations over two decades, I show that black male incarceration lowers the odds of black nonmarital teenage fertility while increasing young black women’s school attainment and early employment. These results can account for the sharp bridging of the racial gap over the 1990s for a range of socioeconomic outcomes among females.

This article investigates the sequential college attendance decision of young women and quantifies the effect of marriage expectations on their decision to attend and graduate from college. A dynamic choice model of college attendance, labor supply, and marriage is formulated and structurally estimated using panel data from the NLSY79. The model is used to simulate the effects of no marriage benefits and finds that the predicted college enrollment rate will drop from 58.0% to 50.5%. Using the estimated model, the college attendance behavior for a younger cohort from the NLSY97 is predicted and used to validate the behavioral model.

We analyze the relationship between charter high school attendance and educational attainment in Florida and in Chicago. Controlling for observed student characteristics and test scores, we estimate that among students who attended a charter middle school, those who went on to attend a charter high school were 7–15 percentage points more likely to earn a standard diploma than students who transitioned to a traditional public high school. Similarly, those attending a charter high school were 8–10 percentage points more likely to attend college. We find even larger effects when we treat high school choice as endogenous.

Workers competing in a tournament for a prize (e.g., a promotion) often perform sequentially in multiple stages. When the firm is privately informed about the workers’ performance, it can sharpen incentives by strategically disclosing the intermediate results. But the policies that enhance final-stage effort may dampen incentives at the intermediate stage. In our model, the optimal disclosure policy has a simple form: disclose only if all workers perform poorly. This result offers a novel justification for partial disclosure in performance feedback. Also, it contrasts with the existing literature that focuses on the extreme policies of full disclosure and no disclosure.

In this article, I present structural estimates of a search model that flexibly incorporates general human capital accumulation along with career and firm choice, where a career is empirically identified as a combination of industry and occupation. I use these estimates to empirically distinguish between the relative importance of various factors for generating wage growth over the life cycle. Evidence presented in the article highlights the importance of considering the two-stage search process that originates from the model. In particular, I demonstrate that previous instrumental variables methods dramatically underestimate the importance of firm-specific matches for wage growth.

This article establishes the cyclical properties of a novel measure of worker reallocation: long-distance migration rates within the United States. Combining evidence from a number of data sets spanning the entire postwar era, we find that internal migration within the United States is procyclical. This result cannot be explained by cyclical variation in relative local economic conditions, suggesting that the net benefit of moving rises during booms. Migration is most procyclical for younger labor-force participants. Therefore, cyclical fluctuations in the net benefit of moving appear to be related to conditions in the labor market and the spatial reallocation of labor.