Knowledge that Transforms

This paper provides new insights into the relationship between structural change and the fertility transition. We exploit the spread of an agricultural pest in the American South in the 1890s as plausibly exogenous variation in agricultural production to establish a causal link between earnings opportunities in agriculture and fertility. Households staying in agriculture reduced fertility because children are a normal good, while households switching to manufacturing reduced fertility because of the higher opportunity costs of raising children. The lower earnings opportunities in agriculture also decreased the value of child labor, which increased schooling, consistent with a quantity-quality model of fertility.

We offer a new explanation as to why international trade is so volatile in response to economic shocks. Our approach combines the uncertainty shock idea of Bloom (2009) with a model of international trade, extending the idea to the open economy. Firms import intermediate inputs from home or foreign suppliers, but with higher costs in the latter case. Due to fixed costs of ordering firms hold an inventory of intermediates. We show that in response to an uncertainty shock firms optimally adjust their inventory policy by cutting their orders of foreign intermediates disproportionately strongly. In the aggregate, this response leads to a bigger contraction in international trade flows than in domestic economic activity. We confront the model with newly-compiled monthly aggregate U.S. import data and industrial production data going back to 1962, and also with disaggregated data back to 1989. Our results suggest a tight link between uncertainty and the cyclical behavior of international trade.

We develop an instrumental variable approach for identification of dynamic treatment effects on survival outcomes in the presence of dynamic selection, noncompliance, and right-censoring. The approach is nonparametric and does not require independence of observed and unobserved characteristics or separability assumptions. We propose estimation procedures and derive asymptotic properties. We apply our approach to evaluate a policy reform in which the pathway of unemployment benefits as a function of the unemployment duration is modified. Those who were unemployed at the reform date could choose between the old and the new regime. We find that the new regime has a positive average causal effect on the job finding rate.

I identify significant effects of devaluation risk on interest rates and output using US silver coinage policy news between 1878 and 1900 as clean shocks to exchange rate expectations. The Free Silver movement heightened fears the United States would abandon the gold standard and depreciate the dollar. Because Congress, rather than a central bank, set silver coinage policy, silver policy news was likely uncorrelated with economic shocks. Corporate bonds exposed to dollar devaluation returned an additional 1 percent relative to safer bonds when silver risk decreased. Additionally, increased silver coinage risk is associated with an economically significant fall in industrial production.

Using a series of Pakistani tax reforms and administrative records, I document that taxable income responses induced by to-zero tax cuts are orders of magnitude larger than ones induced by similar-sized other cuts. This finding is remarkably robust to alternative specifications and holds for both the self-employed and wage earners. I explore salience, selective enforcement, and discontinuous evasion costs as explanations of the observed behavior. I find that the data favor the last explanation. The difference between the two sets of responses is primarily driven by a large, discrete tax evasion response, which is included in the former but not in the latter behavior. I estimate the difference as a lower bound on tax evasion, showing that at least 70% of the income of low- and middle-income self-employed and 1% of low-income wage earners goes unreported.

We propose a novel nonparametric method to empirically identify economies of scale in multiperson household consumption. We assume consumption technologies that define the public and private nature of expenditures through Barten scales. Our method (solely) exploits preference information revealed by a cross-section of household observations while accounting for fully unobserved preference heterogeneity. An application to data drawn from the US Panel Study of Income Dynamics shows that the method yields informative results on scale economies and intrahousehold allocation patterns. In addition, it allows us to define individual compensation schemes required to preserve the same consumption level in case of marriage dissolution or spousal death.

We study how career and wage incentives affect labor productivity through self-selection and incentive effect channels using a two-stage field experiment in Malawi. First, recent secondary school graduates were hired with either career or wage incentives. After employment, half of the workers with career incentives randomly received wage incentives, and half of the workers with wage incentives randomly received career incentives. Career incentives attract higher-performing workers than wage incentives do, but they do not increase productivity conditional on selection. Wage incentives increase productivity for those recruited through career incentives. Observable characteristics are limited in explaining selection effects of entry-level workers.

We show that academics with experience in government jobs generate spillovers for their early-career colleagues. Our template is the National Science Foundation rotation program in which the agency employs academics, called rotators, on loan from their university. Within two years after the rotator's return, fresh assistant professors in her department increase their research resources materially and are more likely to win small and medium-size grants compared to academics in three control groups. Consistent with evidence that the mechanism is mentoring from the rotator, the results suggest that access to individuals with insights gained outside academia propels scientific careers.

In the standard missing data model, data are either complete or completely missing. However, applied researchers face situations with an arbitrary number of strata of incompleteness. Examples include unbalanced panels and instrumental variables settings where some observations are missing some instruments. I propose a model for settings where observations may be incomplete, with an arbitrary number of strata of incompleteness. I derive a set of moment conditions that generalizes those in Graham's ( 2011 ) standard missing data setup. I derive the associated efficiency bound and propose efficient estimators. Identification can be achieved even if it fails in each stratum of incompleteness.

Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies. Despite its popularity, little attention has been paid to the statistical properties of the procedure. We develop a general framework for portfolio sorting by casting it as a nonparametric estimator. We present valid asymptotic inference methods and a valid mean square error expansion of the estimator leading to an optimal choice for the number of portfolios. In practical settings, the optimal choice may be much larger than the standard choices of five or ten. To illustrate the relevance of our results, we revisit the size and momentum anomalies.