Knowledge that Transforms

This article investigates gender differences in the job search process in the field and lab. Our analysis is based on rich information on initial job offers and acceptances from undergraduates of Boston University’s Questrom School of Business. We find (i) a clear gender difference in the timing of job offer acceptance, with women accepting jobs substantially earlier than men, and (ii) a sizable gender earnings gap in accepted offers, which narrows in favor of women over the course of the job search period. To understand these patterns, we develop a job search model that incorporates gender differences in risk aversion and overoptimism about prospective offers. We validate the model’s assumptions and predictions using the survey data and present empirical evidence that the job search patterns in the field can be partly explained by the greater risk aversion displayed by women and the higher levels of overoptimism displayed by men. We replicate these findings in a laboratory experiment that features sequential job search and provide direct evidence on the purported mechanisms. Our findings highlight the importance of risk preferences and beliefs for gender differences in job-finding behavior and, consequently, early-career wage gaps among the highly educated.

Reducing the emissions of greenhouse gases may be almost impossible without a green transition—a substantial transformation of consumption and production patterns. To study such transitions, we propose a dynamic model, which differs from the common approach in economics in two ways. First, consumption patterns reflect not just changing prices and taxes, but changing values. Transitions of values and technologies create a dynamic complementarity that can help or hinder a green transition. Second, and unlike fictitious social planners, policy makers in democratic societies cannot commit to future policy paths, as they are subject to regular elections. We show that market failures and government failures can interact to prevent a welfare-increasing green transition from materializing or make an ongoing green transition too slow.

We study differences in markups earned by Bangladeshi garment exporters across buyers with different sourcing strategies and make three contributions. First, we distinguish buyers with a relational versus a spot sourcing strategy and show that a buyer’s sourcing strategy is correlated across products and origins. Buyer fixed effects explain most of the variation in sourcing strategies, suggesting that these depend on organizational capabilities. Second, we use novel data that match quantities and prices of the two main variable inputs in the production of garments (fabric and labor on sewing lines) to specific export orders. We derive conditions under which these data allow measurement of within exporter-product-time differences in markups across orders produced for different buyers. Third, we show that exporters earn higher markups on otherwise identical orders produced for relational, as opposed to spot, buyers. A sourcing model with imperfect contract enforcement, idiosyncratic shocks to exporters, and buyers that adopt different sourcing strategies trading off higher prices and reliable supply rationalizes this and other observed facts in the industry. We discuss alternative explanations and policy implications.

We argue that modeling trade imbalances is crucial for understanding transitional dynamics in response to globalization shocks. We build and estimate a general equilibrium, multicountry, multisector model of trade with two key ingredients: (i) endogenous trade imbalances arising from households’ consumption and saving decisions; (ii) labor market frictions across and within sectors. We use our model to perform several empirical exercises. We find that the “China shock” accounted for 28% of the decline in U.S. manufacturing between 2000 and 2014—1.65 times the magnitude predicted from a model imposing balanced trade. A concurrent rise in U.S. service employment led to a negligible aggregate unemployment response. We benchmark our model’s predictions for the gains from trade against the popular ACR sufficient-statistics approach. We find that our predictions for the long-run gains from trade and consumption dynamics significantly diverge.

Close-kin marriage, by sustaining tightly knit family structures, may impede development. We find support for this hypothesis using U.S. state bans on cousin marriage. Our measure of cousin marriage comes from the excess frequency of same-surname marriages, a method borrowed from population genetics that we apply to millions of marriage records from the eighteenth to the twentieth century. Using census data, we first show that married cousins are more rural and have lower-paying occupations. We then turn to an event study analysis to understand how cousin marriage bans affected outcomes for treated birth cohorts. We find that these bans led individuals from families with high rates of cousin marriage to migrate off farms and into urban areas. They also gradually shift to higher-paying occupations. We observe increased dispersion, with individuals from these families living in a wider range of locations and adopting more diverse occupations. Our findings suggest that these changes were driven by the social and cultural effects of dispersed family ties rather than genetics. Notably, the bans also caused more people to live in institutional settings for the elderly, infirm, or destitute, suggesting weaker support from kin.

We estimate the push and pull factors involved in the outmigration of Jews facing persecution in Nazi Germany from 1933 to 1941. Our empirical investigation makes use of a unique individual-level data set that records the migration history of the Jewish community in Germany over the period. Our analysis highlights new channels, specific to violent contexts, through which social networks affect the decision to flee. We estimate a structural model of migration where individuals base their migration decision on the observation of persecution and migration among their peers. Identification rests on exogenous variations in local push and pull factors across peers who live in different cities of residence. Then we perform various experiments of counterfactual history to quantify how migration restrictions in destination countries affected the fate of Jews. For example, removing work restrictions for refugees in the recipient countries after the Nuremberg Laws (1935) would have led to an increase in Jewish migration out of Germany in the range of 12% to 20% and a reduction in mortality due to prevented deportations in the range of 6% to 10%.

We provide new evidence on how labor market dynamics vary with development. We build a new data set consisting of harmonized microdata from rotating panel labor force surveys covering 80 million people from 49 countries. Labor market flows, such as the job-finding or employment exit rate, are higher in developing economies. These higher flows largely reflect a slippery job ladder: workers transition frequently to and from marginal employment without climbing to or persisting in better-paying jobs. Subsistence self-employment and different patterns of selection for wage workers each play a role in our findings and are useful avenues for future theories of labor market frictions.

This article studies how innovation reacts to climate change and shapes its economic impacts, focusing on U.S. agriculture. We show in a model that directed innovation can either mitigate or exacerbate climate change’s potential economic damage depending on the substitutability between new technology and favorable climatic conditions. To empirically investigate the technological response to climate change, we measure crop-specific exposure to damaging extreme temperatures and crop-specific innovation embodied in new variety releases and patents. We find that innovation has redirected since the mid-twentieth century toward crops with increasing exposure to extreme temperatures. Moreover, this effect is driven by types of agricultural technology most related to environmental adaptation. We next show that U.S. counties’ exposure to induced innovation significantly dampens the local economic damage from extreme temperatures. Combining these estimates with the model, we find that directed innovation has offset 20% of potential losses in U.S. agricultural land value due to damaging climate trends since 1960 and that innovation could offset 13% of projected damage by 2100. These findings highlight the vital importance, but incomplete effectiveness, of endogenous technological change as a source of adaptation to climate change.

We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in one currency influences the foreign exchange rate between the two currencies, as well as bond term premia in both currencies. Our model matches several important empirical patterns, including the comovement between exchange rates and term premia, and the finding that central banks’ quantitative easing policies affect exchange rates. An extension of our model links spot exchange rates to the persistent deviations from covered interest rate parity that have emerged since 2008.

By constraining an individual’s choice during a search, housing discrimination distorts sorting decisions away from true preferences and results in a ceteris paribus reduction in welfare. This study combines a large-scale field experiment with a residential sorting model to derive utility-theoretic measures of renter welfare loss associated with the constraints imposed by discrimination in the rental housing market. Results from experiments conducted in five cities show that key neighborhood amenities are associated with higher levels of discrimination. Counterfactual simulations based on the sorting model suggest that discrimination imposes damages equivalent to 4.4% and 3.5% of the annual incomes for African American and Hispanic/Latinx renters, respectively. Damages are increasing in income for African American renters, such that effects become stronger for economically mobile households. Renters of color must make substantial investments in additional search to mitigate the costs of these constraints. We find that a naive model ignoring discrimination constraints yields biased estimates of willingness to pay for key neighborhood amenities.