Knowledge that Transforms

How does firm value change in response to a minimum wage hike? This paper exploits the announcement of a big change in the UK minimum wage that was both totally unanticipated and free of uncertainty. The stock market response to this is examined in an event study setting. The analysis uncovers significant falls in the stock market value of low-wage firms. In light of this finding, the paper concludes by discussing magnitudes of response, including longer-term modes of firm adjustment to the cost shock induced by the minimum wage hike.

This paper studies the labor market returns to higher-education quality for low-skilled students. Using a regression discontinuity design, we compare students who marginally pass and marginally fail the French high school exit exam on the first attempt. Threshold crossing leads to an improvement in quality but has no effect on quantity of higher education pursued. Specifically, students who marginally pass are more likely to enroll in STEM majors and postsecondary institutions with better peers. Marginally passing also increases earnings by 12.5% at the ages of 27–29.

Identifying policy-relevant treatment effects from randomized experiments requires the absence of spillovers between participants and nonparticipants (SUTVA) or variation in observed treatment levels. We find that SUTVA is violated for a Danish activation program for unemployed workers. Using a difference-in-differences model, we show that nonparticipants in the experiment regions find jobs more slowly after the introduction of the program than workers in other regions. We estimate an equilibrium search model to identify the policy-relevant treatment effect. A large-scale rollout of the program is shown to decrease welfare, while a standard partial microeconometric cost-benefit analysis concludes the opposite.

Previous studies report a range of estimates for the response of female labor supply and childcare attendance to childcare prices. We shed new light on these questions using a policy reform that raises the price of public day care. After the reform, children are 8 percentage points less likely to attend public day care, which implies a compensated price elasticity of −0.6. There is little labor supply response in the full sample, although there are declines for vulnerable subgroups. Spillover effects on older siblings and fertility decisions show that the policy affects the whole household, not just targeted family members.

Despite strong demand for attending high schools with better peers, there is mixed evidence on whether doing so improves academic outcomes. We estimate the cognitive returns to high school quality by comparing the college entrance exam scores of students in China who were barely above and below high school admission thresholds. Results indicate that while peer quality improves significantly across all sets of admission cutoffs, the only increase in performance occurs from attending tier 1 high schools. Further evidence suggests the returns to high school quality are driven by teacher quality rather than peer quality or class size.

We estimate the returns to college using administrative data on both college enrollment and earnings. Exploiting that colleges dismiss low-performing students on the basis of exact GPA cutoffs, we use a regression discontinuity design to estimate the earnings impacts of college. Dismissal leads to a short-run increase in earnings and tuition savings, but the future fall in earnings is sufficiently large that 8 years after dismissal, persisting students have already recouped their up-front investment with an internal rate of return of 4.1%. We provide a variety of evidence that manipulation of the running variable does not drive our results.

The use of affirmative action policies to promote female employment remains debated. Do affirmative action policies attract female applicants, and does that come at the expense of deterring highly qualified male applicants? In three field experiments in Colombia, we compare job seekers who are informed of affirmative action selection criteria before they apply with those who are told after applying. We find that the gains in attracting female applicants far outweigh the losses in male applicants. Moreover, our results indicate that affirmative action does not decrease the quality of the top 15th percentile of the pool of applicants.

We study the migration behavior of displaced workers and find that job displacement increases regional mobility. We find, however, that noneconomic factors, such as family ties, are very important for the migration decision and that there is strong heterogeneity in outcomes. We find large income losses for workers who move to regions where they have family or to rural areas, while, for example, rural to urban movers realize a significant long-term earnings increase. We also find that life events related to fertility, divorce, and new relationships correlate with mobility after job loss and may partly explain the large income losses.

This paper explores the relationship among health at birth, academic outcomes, and the potential role of parental investments using administrative panel data from Chile. Using detailed data on parental investments, we find that investments are compensatory regarding initial health, but not across twins. Twins fixed effects models estimate a persistent effect of birth weight on academic achievement, while ordinary least squares and siblings fixed effects models find this relationship to decline over time. We view these findings in the context of a model of human capital accumulation where parental investments respond to initial endowments and spill over to siblings.

We use a field experiment to show that referral-based hiring has the potential to disadvantage qualified women, highlighting another potential channel behind gender disparities in the labor market. Through a recruitment drive for a firm in Malawi, we look at men’s and women’s referral choices under different incentives and constraints. We find that men systematically refer few women, despite being able to refer qualified women when explicitly asked for female candidates. Performance pay also did not alter men’s tendencies to refer men. In addition, women did not refer enough high-quality women to offset men’s behavior.