Knowledge that Transforms

This paper evaluates the effects of encouraging the selection of local politicians in India via community consensus, as opposed to a secret ballot election. Using village-level data on candidates, elected politicians, government budgets, and workfare employment, I show that incentives for consensus elections lead to politicians who are more educated but less likely to be drawn from historically marginalized castes and increase how regressively workfare employment is targeted. These results are supported by qualitative evidence that shows that consensus elections are prone to capture by the local elite, which may reduce the need for clientelistic transfers to the non-elite.

This paper shows the causal relationship between mutual religious association and the formation of social ties. We analyze dyadic relationships and show that joint attendance at a religious institution (RI) increases the probability of sharing information with and trusting a peer. We use a novel spatial instrumental variable strategy that combines insights from homestead inheritance institutions with triangular distances between peers and RI locations within villages in Kenya. We find that shared attendance at an RI increases the likelihood of receiving advice from a peer by 30 percentage points, demonstrating the strong impact of weak ties formed through social spaces.

Sectoral heterogeneity matters for monetary policy. Using CPI microdata, we estimate for 227 products a time-varying menu-cost model to investigate the quantitative relevance of this heterogeneity. We find a substantial degree of cross-sectoral heterogeneity in all structural parameters. Heterogeneity in the Calvo component of the pricing friction is, however, the main source of heterogeneity in price rigidity. Cross-sectoral heterogeneity amplifies the output effect of a monetary shock by a factor of about 2.5, compared to a single-sector model estimated with mean moments. Heterogeneity in the Calvo parameter plays a key role in this amplification.

Lump-sum job displacement policies (e.g., severance pay) are often presented as a better alternative to contingent policies (e.g., unemployment insurance) in the context of developing countries, under the rationale that the former are less harmful to formal employment as they do not incentivize substitution from formal to informal jobs. First, this paper provides original evidence on the employment effects of lump-sum income in the context of a developing country with high labor informality. A regression discontinuity (RD) design, using Brazilian data, shows that a transfer equivalent to fifteen days of earnings (a) increases the duration out of a formal job by 1.9 weeks, (b) reduces monthly earnings in the next job by 1.6%, and (c) reduces total earnings in the formal labor market by 3.6% over a three-year period. Second, the paper studies the impact of a one-month extension in unemployment insurance (UI) on a comparable sample of displaced workers. UI is shown to have a stronger impact on the duration out of a formal job compared with a lump-sum transfer. In addition, a novel exercise matching administrative and survey data shows that 57% of the decrease in formal employment caused by UI is compensated by an increase in the incidence of informal employment. However, workers receiving the UI extension partially recover the initial employment loss over time in such a way that the adverse impact on employment over a three-year period is similar compared with the lump-sum transfer. Moreover, UI is found to be less harmful to reemployment wages, possibly because it improves workers' bargaining power as it offers insurance against the duration of joblessness. Overall, the UI extension is less detrimental to total earnings in the formal labor market over a three-year period. Hence, although these findings indicate that contingent job insurance policies have a stronger impact on the initial duration out of a formal job and indeed incentivize informal employment, they do not support the notion that lump-sum policies are less harmful to formal employment and earnings in the medium term.

We present evidence consistent with time-varying risk preferences among automobile drivers. Exploiting a unique data set of agents' high-frequency driving behavior collected by a mobile phone application, we show that drivers drive more conservatively following near-miss accidents. In a preferred specification, a near-miss triggers a reduction in driving distance of 12.98 kilometers, in-car cell phone use by more than 100%, and highway use by 43.24%. Structural estimation results indicate that such changes in behavior are consistent with an increase in risk aversion of 10.54% to 43.77% and a reduction in annual insurance cost amounting to 2.04% to 3.31% of the average car insurance premium.

We identify earnings impacts of exposure to an infant health intervention in Sweden, using individual-linked administrative data to trace potential mechanisms. Leveraging quasi-random variation in eligibility, we estimate that exposure was associated with higher test scores in primary school for boys and girls. However, only girls were more likely to score in the top quintile. Subsequent gains, in secondary schooling, employment, and earnings, are restricted to girls. We show that the differential gains for women accrued from both skills and opportunities.

This paper shows robust effects of trade shocks on within-firm wage inequality through changes in firm hierarchies. It uses two distinct research designs—one considering firm-level shocks to foreign demand and transportation costs, the other analyzing the Muslim boycott of Danish exports after the 2006 “cartoon crisis.” Consistent with knowledge-based and incentive-based hierarchy models, trade shocks affect organizational choices through production scale. Adding a hierarchy layer increases inequality throughout the organization, particularly widening the 90-50 wage gap and pay differences between top and bottom layers. Delayering after the boycott leads to wage compression through wage cuts, demotions, and employee turnover.

In this study, we conduct a stated-choice experiment to analyze the decision to contribute to either a front- or back-loaded tax-preferred retirement savings account. Our experimental design includes a randomized financial education intervention that provides information on the tax implications of both types of account. Respondents who were exposed to the intervention have greater knowledge of these accounts and make contribution choices that increase their after-tax income. Using a well-defined benchmark, we show that on average, respondents who experienced the intervention increase their discounted welfare by about 4% of their contribution amount.

Identification via heteroskedasticity exploits variance changes between regimes to identify parameters in simultaneous equations. Weak identification occurs when shock variances change very little or multiple variances change close to proportionally, making standard inference unreliable. I propose an F-test for weak identification in a common simple version of the model. More generally, I establish conditions for validity of nonconservative robust inference on subsets of the parameters, which can be used to test for weak identification. I study monetary policy shocks identified using heteroskedasticity in high-frequency data. I detect weak identification, invalidating standard inference, in daily data, while intraday data provide strong identification.

Before the racial integration of schools in the southern United States, predominantly African American schools were staffed almost exclusively by African American teachers as well, and teaching constituted an extraordinarily large share of professional employment among southern Blacks. The large-scale desegregation of southern schools that occurred after passage of the 1964 Civil Rights Act represented a potential threat to this employment base, and this paper estimates how student integration affected Black teacher employment. Using newly assembled archival data from 759 southern school districts observed between 1960 and 1972, I estimate that a school district transitioning from fully segregated to fully integrated education, which approximates the experience of the modal southern district in this period, led to a 41.7% reduction in Black teacher employment. Additional results, including event-study specifications and models with extensive controls for concurrent policy changes, strongly suggest that these employment reductions were a causal effect of integration and not due to school district self-selection into desegregation. To study the broader impacts of reduced teaching employment, I estimate race-specific changes in occupations and earnings in the decennial Censuses and find that displaced southern Black teachers either entered lower skill occupations within the South or migrated out of the region to continue teaching and that integration-induced displacement led to substantial earnings reductions.