Knowledge that Transforms

This paper shows that self-employment shapes labor market power in low-income countries, with implications for industrial development. Using Peruvian data, we find that wage-setting power increases with employer concentration but less so where self-employment is more prevalent. A general equilibrium model shows that in oligopsonistic labor markets, self-employment raises the supply elasticity of wage labor, weakening employer market power. However, by the same mechanism, procompetitive policies aimed at expanding wage employment and reducing reliance on self-employment may unintentionally strengthen labor market power, undermining their objectives.

Did credit drive the 2000s housing cycle? The existing literature’s findings range from credit having no effect to credit explaining most of the cycle. We show that these disparate results hinge on the extent to which landlords absorb credit-driven demand, which depends on the degree of housing market segmentation. We develop a model that nests cases between the extremes of no segmentation and perfect segmentation typically considered, estimate an elasticity that pins down the degree of segmentation, and use it to calibrate our model. We find credit standards played an important role, explaining 32 percent to 53 percent of the boom.

Firms expect to recover the fixed costs required to start production by earning positive operating profits in subsequent periods. We develop a dynamic competitive benchmark that accounts for start-up costs, showing that static markups overstate the rents attributable to market power in an electricity market where generators frequently stop and start production in response to rooftop solar output. We demonstrate that the large-scale expansion of solar capacity can lead to increases in the collective profitability of fossil fuel plants because competition softens at sunset—plants displaced by solar during the day must incur start-up costs to compete in the evening.

International migrants may facilitate the transmission of ideas across countries. We examine the impact of migrant exposure to reproductive health policies on origin-country fertility in the Philippines. We exploit temporal variation in destination-country reproductive health policies combined with spatial variation across Philippine provinces in their migration intensity and historical composition of migrant destinations. Migrant exposure to more liberalized reproductive health policies reduces origin-community fertility. This reduction is driven by increased adoption of modern contraceptives. Visible policy changes, such as commercial advertising of contraceptives, lead to this change in behavior. Firmly established family planning values moderate the fertility response.

We conduct a field experiment to quantify the impact of the lifting of the Saudi women's driving ban on women's employment by randomizing rationed spaces in driver's training. Treated women are 41 percent more likely to be employed yet are 19 percent less likely to be able to make purchases without family permission. Patterns of heterogeneous treatment effects reveal that these divergent impacts of access to driving are experienced by distinct subgroups of women. The results underscore the importance of intrahousehold responses that can counteract legal gains in women's freedoms.

We use the tools of mechanism design combined with the theory of risk measures to analyze how a cash-constrained owner of an asset with known, stochastic returns raises capital from a population of investors who differ in their risk aversion and budget constraints. The issuer partitions the asset’s cash flow into several asset-backed securities, one for each type of investor. The optimal partition conforms to the commonly observed practice of tranching into senior debt, junior debt, and equity. Tranching arises endogenously due to the differences in risk appetites among agents and in the budget constraints they face.

We study the Tutoring Online Program (TOP), where tutoring is entirely online and tutors are volunteer university students matched with underprivileged middle school students. We leverage random assignment to estimate effects during and after the pandemic (2020 and 2022), investigating channels of impact. Three hours of individual tutoring per week increased math performance by 0.22 SD in 2020 and 0.20 SD in 2022. Higher dosage yielded stronger effects, while group tutoring smaller effects. TOP enhanced students’ aspirations, socioemotional skills, and psychological well-being, but only during school closures. We also estimate the impact of TOP on tutors, finding an increase in empathy.

We use public finance sufficient statistic approaches to characterize the welfare effects of “nudges,” such as simplified information and warning labels, in markets with taxes and endogenous prices. While many studies focus on average effects, we show that welfare also depends on how the nudge affects the variance of choice distortions, and average effects become irrelevant with zero pass-through or optimal taxes. We implement the framework with experiments evaluating automotive fuel economy labels and sugary drink health labels. Labels decrease purchases of low-fuel economy cars and sugary drinks but may decrease welfare because they increase the variance of choice distortions.

School districts historically approached conflict resolution from the perspective that suspending disruptive students was necessary to protect their classmates, even if this caused harm to perceived offenders. Restorative practices (RP)—focusing on reparation, accountability, and shared ownership of disciplinary justice—are designed to address undesirable behavior without harming students. We study Chicago Public Schools’ adoption of RP and find that suspensions and arrests decreased, driven by effects for Black students. We find null effects on test score value added, ruling out meaningful average declines. We estimate a 15 percent decrease in out-of-school arrests, consistent with RP substantively changing student behavior.

We develop a bottom-up approach to estimate the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the real activity variable. Using quarterly micro data on prices, costs, and output, we estimate dynamic pass-through regressions that identify the slope as a function of primitive parameters. We find a high slope for the cost-based Phillips curve, which contrasts with the low estimates of the conventional output gap–based formulation found in the literature. We reconcile by showing that the output elasticity of marginal cost is low, at least during moderate inflation periods (e.g., pre-pandemic).