Knowledge that Transforms

In 2001, Germany abolished public occupational disability insurance (ODI)—the second tier of its public DI system—for cohorts born after 1960. Using administrative data, we first document that, in the long run, overall DI inflows declined by roughly one-third. Second, using representative survey data, we document at best modest ODI insurance take-up responses in the private individual, risk-rated market, which lacks guaranteed issue. Third, an equilibrium model incorporating interactions between the public safety net, the first-tier public DI, and the private market reveals that coverage denials and weak insurance demand, driven by complementary social insurance, can explain the modest private ODI take-up response. Coverage gradients by income and health are thus substantial. Finally, counterfactual simulations highlight the limited scope of incremental reforms.

We examine firm responses to state hiring and investment subsidies. We leverage institutional features of the California Competes Tax Credit (CCTC), a large-scale business incentive program that incorporates best practices from prior job creation policies. The CCTC award selection procedure combines formula-based and discretionary components. Leveraging applicant score eligibility cutoffs in a regression discontinuity design and taking advantage of rich longitudinal microdata on establishments and their parent firms, we find that businesses expand employment in California in response to CCTC awards. There is little evidence that these expansions come at the expense of firms’ operations in other states. Our results suggest that targeted and audited hiring and investment subsidies can be effective in promoting local business expansions without inducing significant cross-state displacement effects.

We study how regional housing market disruptions spill over across US local markets through multimarket firm networks. Using granular barcode-level data linked to producer information, we exploit variation in firms’ exposure to local house price declines. A firm’s local sales respond more strongly to indirect housing price declines in its other markets than to direct local declines. The barcode-level data reveal a novel uniform product replacement mechanism: Firms respond to adverse shocks by replacing higher-value products with lower-value alternatives uniformly across all markets. This propagates regional demand shocks through the supply side, with new implications for regional economics.

We document that in response to intensified competition from China in the U.S., poor countries reduce their export prices relative to rich countries, consistent with conventional wisdom. Interestingly, however, the opposite is true for export quantities. To reconcile these facts, we develop and estimate a general equilibrium model of trade featuring (i) cross-country heterogeneity in the ability to produce high-quality goods and (ii) a two-dimensional Bertrand competition on price and quality. Our model explains the empirical facts by showing that rich countries have a comparative advantage in quality upgrading, whereas a nested model without quality cannot do so.

This paper investigates fairness perceptions of extreme income inequality generated in winner-take-all competitions. Two large-scale experiments with more than 7,000 participants from the general population of the U.S. show that extreme earnings inequality is widely accepted, even when the winner only slightly outperforms the runner-up. The effect of the winning margin on inequality acceptance is modest compared to the effect of shifting the source of inequality from luck to winning by the smallest possible margin. The experimental choices are systematically associated with broader fairness attitudes and policy preferences, including support for higher taxation of top earners and redistributive economic policy.

This paper examines how politically connected firms shape housing supply in U.S. cities. Using new data on campaign donations to U.S. mayors and a regression discontinuity design, I present three findings. First, developers connected to the mayor sell more new housing units. Second, more sales of new housing by connected developers coincide with higher local housing supply: cities where mayors received more developer donations issue nearly 70 percent more permits for new housing units. Third, differences in mayors’ pre-existing policy stances—rather than connections to developers—is a quantitatively larger determinant of local housing supply.

Can workplace contact with outgroup members affect attitudes towards that group? If so, can this spread to others within a social network? We randomly assigned Hindu job applicants in India either a Hindu or Muslim partner for training and placement in call center jobs. One year later, those applicants assigned Muslim partners expressed more positive attitudes towards Muslims, were more likely to say Muslims faced discrimination and had greater knowledge of Islamic practices. Close friends and family members of those workers also experience similar, though smaller, changes, despite reporting no additional direct contact with Muslims.

We study a panel data model with heterogeneous effects, allowing slopes to vary across individuals and time. To reduce dimensionality, we assume these slopes follow a factor structure, so slope matrices can be estimated via low-rank regularized regression. We propose a multi-step estimation procedure incorporating sample splitting and partialing-out to enable valid inference after penalized estimation. We establish the asymptotic normality of the resulting estimator, facilitating inference for individualtime- specific effects and their cross-sectional averages. The method’s performance is illustrated through simulations and an empirical application.

We analyze the labor market impact of CVS Health’s acquisition of Target’s pharmacy business in December 2015 using Lightcast job postings data. Using differencein- differences and triple-difference designs, we find meaningful negative effects of the merger on posted pay. In our preferred specification, we estimate that the acquisition reduced posted pay in affected labor markets by 2.9%. We test for heterogeneous merger effects by occupational characteristics, finding that the merger caused pay to fall by more in lower-paid occupations than in higher-paid occupations.

The production approach to markup estimation has recently attracted the attention of scholars and policymakers for its straightforward implementation and limited data requirements. Criticism has also been directed at the approach and validation of the approach is called for. This paper provides a novel empirical assessment of the approach using rich panel data on the complete population of Swedish firms across four sectors (1998-2019). I first estimate the markup of each firm using the production approach. Using two sources of identification, I then show that these estimates match the stylized fact that markups are higher on more concentrated local markets.