Knowledge that Transforms

Individuals with extensive debt may be granted debt relief in court. We provide a comprehensive evaluation of the Danish debt relief program with data from court records linked to nationwide register data. Using event-study methods and quasi-random assignment of applicants to court trustees with varying admission rates, we show that debt relief leads to a large increase in earned income, employment, assets, real estate, secured debt, home ownership, and wealth that persists for more than 25 years after a court ruling. The net transition of workers into employment accounts for two thirds of the increase in earned income.

Changes in the minimum wage may impact college enrollment and educational attainment. Using institutional data on college enrollment and program completion, we find that enrollment falls markedly among students at public two-year institutions in response to increases in the minimum wage. The largest enrollment effects are seen for those students who are enrolled part-time at community colleges. We find little evidence of negative effects on the attainment of certificates or degrees, suggesting that increases in the minimum wage are unlikely to divert students from degree attainment.

Research and development tax credits often aim to increase investment in experimentation, hoping that firms invent fundamentally new technologies that in turn generate positive spillovers. Since most policies require that companies make profits in order to claim credits, they might also shift investments towards less risky refinement and exploitation. Following the availability of credits, we demonstrate that firms do not experiment but deepen invention in areas of extant expertise. We observe stronger shifts for firms operating in uncertain markets where search failures are more likely to reduce credit eligibility.

Do more educated workers earn higher wages partly because they have access to high-paying firms and occupations? We rely on linked employer-employee data to combine the estimation of AKM models with the decomposition of the returns to schooling. We exploit exogenous variation in education driven by changes in compulsory education. We show that education provides access to better-paying workplaces and occupations: 30 percent of the overall return to education operates through the workplace channel and 12 percent through the occupation channel. The remainder is associated exclusively with the individual. Match quality plays a modest role in the returns to education.

We derive a new powerful, simple test for mediation. Testing for mediation is empirically important and the no-mediation hypothesis H0:θ1θ2=0 poses a theoretical problem, nonregular at the origin, where standard tests have extremely low rejection probabilities. We prove that a similar test only exists if 1/α∈N. It is unique, but with unfortunate properties. An innovative varying-g method is introduced to derive a nearly similar test, gopt, with power close to the envelope without these undesirable properties, and a second, less similar test, g1.2, with more empirical appeal. Results are illustrated in an educational setting.

This paper estimates a structural model of the solar photovoltaic (PV) installation market using detailed data from an online platform. The model incorporates households' solar installation choices and sellers' strategic bidding. Counterfactual simulations evaluate how equilibrium outcomes respond to changes in market structure and government subsidies, yielding two main results: (1) an increase from one to five bids through the platform reduces gross installation prices by $4,000 (15.5%), and (2) the U.S. Solar Investment Tax Credit increases total surplus on the platform by $1.35 per dollar of subsidy expenditure by mitigating market power and reducing pollution externalities.

Many democracies operate consumer debt relief programs. These are often implemented or adjusted during the election cycle, but their political effects are not well-understood. We investigate if debt relief can influence high-stakes elections. We utilize quasi-experimental variation generated by a very large privately-funded debt relief program enacted in the Republic of Georgia during the presidential election in 2018 that affected every sixth voter. We estimate that the program helped the incumbent candidate win that election, and that its effects persisted. Overall, we show how economic power can translate into political power in a democracy.

The effect of a treatment may depend on the intensity with which it is administered. We study identification of ordered treatment effects with a binary instrument, focusing on the effect of moving from the treatment's minimum to maximum intensity. With arbitrary heterogeneity across units, standard IV assumptions (Angrist and Imbens, 1995) do not constrain this parameter, even among compliers. We consider a range of additional assumptions and show how they can deliver sharp, informative bounds. We illustrate our approach with two applications, involving the effect of (1) health insurance on emergency department usage, and (2) attendance in an after-school program on student learning.

The low-frequency movements of economic variables play a prominent role in policy analysis and decision-making. We develop a robust estimation approach for these slow-moving trend processes which is guided by a judicious choice of priors and is characterized by sparsity. We present novel stylized facts from longer-run survey expectations that inform the structure of the estimation procedure. The general version of the proposed Bayesian estimator with a spike-and-slab prior accounts explicitly for cyclical dynamics. We show that it performs well in simulations against relevant benchmarks and report empirical estimates of trend growth for U.S. output and annual mean temperature.

How does persecution affect who migrates? We analyze migrants' self-selection out of the USSR and its satellite states before and after the collapse of Communism using census microdata. We find that migrants arriving before and around the time of the collapse (who were more likely to have moved because of persecution) were more educated and obtained better labor market outcomes than those arriving later. This change is not fully explained by the removal of Communist-era emigration restrictions. Instead, we show both theoretically and empirically that this pattern is consistent with more positive self-selection of migrants who are motivated by persecution.