Knowledge that Transforms

We evaluate returns to General Educational Development (GED) certification for high school dropouts using state administrative data. We apply a fuzzy regression discontinuity method to account for test takers retaking the test. For women we find that GED certification has no statistically significant effect on either employment or earnings. For men we find a significant increase in earnings in the second year after taking the test but no impact in subsequent years. GED certification increases postsecondary school enrollment by 4–8 percentage points. Our results differ from regression discontinuity approaches that fail to account for test retaking.

I investigate how teamwork may reduce moral hazard by joint monitoring and management. I study two organizational systems differing in the extent to which physicians may mutually manage work: Physicians are assigned patients in a “nurse-managed” system but divide patients between themselves in a “self-managed” system. The self-managed system increases throughput productivity by reducing a “foot-dragging” moral hazard, in which physicians prolong patient stays as expected future work increases. I find evidence that physicians in the same location have better information about each other and that, in the self-managed system, they use this information to assign patients.

A key problem with solar energy is intermittency: solar generators produce only when the sun is shining, adding to social costs and requiring electricity system operators to reoptimize key decisions. We develop a method to quantify the economic value of large-scale renewable energy. We estimate the model for southeastern Arizona. Not accounting for offset carbon dioxide, we find social costs of $138.40 per megawatt hour for 20 percent solar generation, of which unforecastable intermittency accounts for $6.10 and intermittency overall for $46.00. With solar installation costs of $1.52 per watt and carbon dioxide social costs of $39.00 per ton, 20 percent solar would be welfare neutral.

This paper examines the temperature-mortality relationship over the course of the twentieth-century United States both for its own interest and to identify potentially useful adaptations for coming decades. There are three primary findings. First, the mortality impact of days with mean temperature exceeding 807F declined by 75 percent. Almost the entire decline occurred after 1960. Second, the diffusion of residential air conditioning explains essentially the entire decline in hot day–related fatalities. Third, using Dubin and McFadden’s discrete continuous model, the present value of US consumer surplus from the introduction of residential air conditioning is estimated to be $85– $185 billion (2012 dollars).

By exploiting a reform in the United Arab Emirates that relaxed restrictions on employer transitions, we provide new estimates of the monopsony power of firms over migrant workers. Our results show that the reform increased incumbent migrants’ earnings and firm retention. This occurs despite an increase in employer transitions and is driven by a fall in country exits. While the outcomes of incumbents improved, the reform decreased demand for new migrants and lowered their earnings. These results are consistent with a model of monopsony in which firms face upward-sloping labor supply curves for both new recruits in source countries and incumbent migrants.

We investigate how cognitive ability and character skills influence the evolution of play toward Nash equilibrium in repeated strategic interactions. We find that more cognitively able subjects choose numbers closer to equilibrium, earn more, and converge more frequently to equilibrium play. We estimate a structural model of learning based on level k reasoning and find a positive relationship between cognitive ability and levels. Furthermore, the average level of more cognitively able subjects responds positively to the cognitive ability of their opponents. More agreeable and emotionally stable subjects also learn faster, although the effect of cognitive ability is stronger than that of personality.

The flow opportunity cost of moving from unemployment to employment consists of forgone public benefits and the forgone consumption value of nonworking time. We construct a time series of the opportunity cost of employment using detailed microdata and administrative or national accounts data to estimate benefits levels, eligibility, take-up, consumption by labor force status, hours, taxes, and preference parameters. The opportunity cost is procyclical and volatile over the business cycle. The estimated cyclicality implies far less unemployment volatility in leading models of the labor market than that observed in the data, irrespective of the level of the opportunity cost.

We propose a theory of self-fulfilling unemployment fluctuations. When a firm increases its workforce, it raises demand and weakens competition facing other firms, as employed workers spend more and have less time to search for low prices than unemployed workers. These effects induce other firms to hire more labor in order to scale up their presence in the product market. The feedback between employment and product market conditions generates multiple equilibria—and the possibility of self-fulfilling fluctuations—if differences in shopping behavior between employed and unemployed are large enough. Evidence on spending, shopping, and prices suggests that this is the case.