Knowledge that Transforms

We analyze the long-term effects of a high school remedial education program almost two decades after its implementation. Treated students experienced an 11% increase in completed years of postsecondary schooling, a 4% increase in annual earnings, and a significant increase in intergenerational income mobility. These gains reflect improvement of students mainly from below-median-income families. We conclude that the program had gains beyond the short-term significant improvements in high school matriculation exams. A cost-benefit analysis of the program suggests that the government will recover its cost within 7–8 years, implying a very high rate of return.

Although from the viewpoint of social psychology task commitment is a driving force for intrinsic motivation in the workplace, this topic has been widely ignored in labor and personnel economics so far. Our paper reduces this gap in the literature by offering a theoretical analysis of worker empowerment and task commitment. This approach also helps to explain the observed variety of compensation schemes across workers and firms. By using a large-scale linked employer-employee panel data set, we present empirical evidence that is consistent with the predicted patterns of our theoretical model.

In a professional services firm, top management unexpectedly adjusted the pay of consultants in some divisions to the pay in other divisions. In this quasi experiment, fixed wages increased and bonuses decreased, reducing pay for the high performers and increasing it for the low performers. Individual outputs and efforts decreased by 30%, and attrition and absenteeism increased. The effects were driven by those who were rationally expecting to lose from the pay change. Observing a period of more than 3 years, we show long-term negative reciprocity of those affected but no negative selection effects of new hires.

I show that firm location decisions create barriers to accessing high-wage employers for students at distant universities. I collect office locations and campus recruiting strategies for more than 70 banking and consulting firms from 2000 to 2013. After firms open an office, students at nearby universities are nearly four times more likely to have on-campus access to the firm. Access increases for universities across a wide range of selectivity. Additional data from universities, LinkedIn, and mobility report cards suggest effects on hires and longer-run income success.

Uncompetitive contests for grades, promotions, retention, and job assignments, which feature lax standards and limited candidate pools, are often criticized for being unmeritocratic. We show that when contestants are strategic, lax standards and exclusivity can make selection more meritocratic. When many contestants compete for a few promotions, strategic contestants adopt high-risk strategies. Risk-taking reduces the correlation between performance and ability. Through reducing the effects of risk-taking, “Peter principle” promotion policies, which entail promoting some contestants that are unlikely to be worthy, can increase the overall correlation between selection and ability and thus further meritocracy.

During the 1940s, a substantial share of southern Black men moved from low-skilled to much better paying semiskilled jobs. Using newly digitized military data, I show that counties with higher World War II casualty rates among semiskilled White soldiers saw an increase in the share of semiskilled Black workers. These deaths opened new employment opportunities for Black southerners and, together with learning effects by employers, can explain 35% of the occupational upgrading at mid-century. I provide evidence that the casualty-induced labor shortages reduced racial barriers to entry, leading to a positive selection of Black workers into semiskilled employment.

This paper examines the impact of male casualties due to World War II on fertility and female employment in the United States. We rely on the number of casualties at the county level and use a difference-in-differences strategy. While most counties in the United States experienced a baby boom following the war, we find that the increase in fertility was lower in high-casualty-rate counties than in low-casualty-rate counties. Analyzing the channels through which male casualties could have decreased fertility, we provide evidence that county male casualties are positively related to 1950s female employment and household income.

We employ a revealed preference test to distinguish between wage posting and wage bargaining. Using a sample of dual jobholders in Washington State, we estimate the sensitivity of wages and separation rates to wage shocks in a secondary job. In lower parts of the wage distribution, improvements in the outside option lead to higher separations rates but not to higher wages, consistent with wage posting. In the highest wage quartile, improved outside options translate to higher wages but not higher separation rates, consistent with bargaining. In the aggregate, bargaining appears to be a limited determinant of wage setting.

Based on 2016–20 hourly wage rates of McDonald’s basic crew and Big Mac prices collected simultaneously from almost all US McDonald’s, we find that in 25% of instances of minimum wage increases, restaurants keep constant their wage premium above the increasing minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages. Minimum wage hikes lead to increases in real wages (expressed as how many Big Macs 1 hour of basic crew work can buy) that are one-fifth lower than the corresponding increases in nominal wages.

Empirical peer effects research often employs censored peer data. Individuals may list only a fixed number of links, implying mismeasured peer variables. I first document that censoring is widespread in network data. I then introduce an estimator and characterize its inconsistency analytically; an assumption on the ordering of peers implies that censoring causes attenuated peer effects estimates. Next, I demonstrate the effect of censoring in two data sets, showing that estimates with censored data underestimate peer influence. I discuss interpretation of estimates, propose methods for correction and bounding, and give implications for the design of network surveys.