Knowledge that Transforms

This paper investigates the sources of wage growth over the life cycle, determined by sectoral and firm mobility, unobserved ability, the accumulation of cognitive-abstract or routine-manual skills, and whether workers enroll in vocational training at the start of their career. Our analysis uses longitudinal administrative data over three decades and shows that routine-manual skills drive early wage growth, while cognitive-abstract skills become more important later. Moreover, job amenities are an important determinant of mobility decisions. Vocational training has long-term effects on career outcomes through various channels and generates returns for both the individual and society.

The Voting Rights Act of 1965 redefined race relations in the United States. Yet evidence on its effect on Black office holding remains scant. Using novel data on Black elected officials between 1962 and 1980, we assess the impact of the Voting Rights Act on the racial makeup of local governments in the Deep South. Exploiting predetermined differential exposure of Southern counties to the mandated federal intervention, we show that the latter fostered local Black office holding, particularly in the powerful county commissions, controlling local public finances. In the presence of election by district, covered counties experienced Black representation gains and faster capital spending growth.

We study informed persuasion, whereby a privately informed designer without ex ante commitment power chooses disclosure mechanisms to influence agents’ actions. We characterize the subset of Bayes-correlated equilibria yielding every designer type a payoff higher than what they could get from any disclosure mechanism with credible beliefs. This set of interim-optimal mechanisms is nonempty and tractable, and all its elements are perfect Bayesian equilibrium mechanisms of the informed-designer game. Interim-optimal mechanisms are characterized via belief-based approaches in pure persuasion settings. We identify single- and multiagent interactive environments in which ex ante–optimal mechanisms are interim optimal.

We study the welfare implications of personalized pricing implemented with machine learning. We use data from a randomized controlled pricing field experiment to construct personalized prices and validate these in the field. We find that unexercised market power increases profit by 55%. Personalization improves expected profits by an additional 19% and by 86% relative to the nonoptimized price. While total consumer surplus declines under personalized pricing, over 60% of consumers benefit from personalization. Under some inequity-averse welfare functions, consumer welfare may even increase. Simulations reveal a nonmonotonic relationship between the granularity of data and consumer surplus under personalization.