Knowledge that Transforms

I analyze the effects of short-duration paid parental leave on maternal labor supply. Using monthly longitudinal data from the Survey of Income and Program Participation, my event-study research design estimates impacts of paid leave laws in California and New Jersey on women's labor-force outcomes around childbirth. I find that paid leave laws are associated with a substantial increase in labor-force attachment in the months directly around birth. While US-style short-duration leave is unlikely to change prolonged exits from the labor force, my findings imply that paid leave laws induce some women stay more attached to jobs, particularly low-skill women.

In an effort to bring greater efficiency, equity, and transparency to the criminal justice system, statistical risk assessment tools are increasingly used to inform bail, sentencing, and parole decisions. We examine New York City's stop-and-frisk program, and propose two new use cases for personalized risk assessments. First, we show that risk assessment tools can help police officers make considerably better real-time stop decisions. Second, we show that such tools can help audit past actions; in particular, we argue that a sizable fraction of police stops were conducted on the basis of little evidence, in possible violation of constitutional protections.

This paper uses a quantitative dynamic ecosystem vegetation model to explore the potential impact of warming up to 9-12 degrees C on global ecosystems. The paper does not find evidence of a global collapse in terrestrial ecosystems but there is evidence of substantial changes. Temperate and tropical forests expand and replace boreal forests and forests shift to woodlands and parkland at high temperatures. Net primary productivity and standing forest biomass per hectare rise. These changes will affect dependent animal species. Further research is needed to measure the resulting benefits and damages to market and nonmarket services.

Eye tracking is a technology that tracks eye activity including how long and where a participant is looking. As eye tracking technology has improved and become more affordable its use has expanded. We discuss how to design, implement, and analyze an experiment using this technology to study economic theory. Using our experience fielding an experiment to study hiring decisions we guide the reader through how to choose an eye tracker, concerns with participants and set-up, types of outputs, limitations of eye tracking, data management and data analysis. We conclude with suggestions for combining eye tracking with other measurements.

Few if any issues in public policy are as muddled and contentious as international migration. There is no international regime that establishes standards and principles for national migration policies other than in the case of refugees (migrants escaping persecution). My aim here is to describe some economic and ethical principles that may underpin an international migration regime.

We show that differences in childhood environments shape gender gaps in adulthood by documenting three facts using population tax records for children born in the 1980s. First, gender gaps in employment rates, earnings, and college attendance vary substantially across the parental income distribution. Notably, the traditional gender gap in employment rates is reversed for children growing up in poor families: boys in families in the bottom quintile of the income distribution are less likely to work than girls. Second, these gender gaps vary substantially across counties and commuting zones in which children grow up. The degree of variation in outcomes across places is largest for boys growing up in poor, single-parent families. Third, the spatial variation in gender gaps is highly correlated with proxies for neighborhood disadvantage. Low-income boys who grow up in high-poverty, high-minority areas work significantly less than girls. These areas also have higher rates of crime, suggesting that boys growing up in concentrated poverty substitute from formal employment to crime. Together, these findings demonstrate that gender gaps in adulthood have roots in childhood, perhaps because childhood disadvantage is especially harmful for boys.

In recent years, central banks have increasingly turned to forward guidance as a central tool of monetary policy. Standard monetary models imply that far future forward guidance has huge effects on current outcomes, and these effects grow with the horizon of the forward guidance. We present a model in which the power of forward guidance is highly sensitive to the assumption of complete markets. When agents face uninsurable income risk and borrowing constraints, a precautionary savings effect tempers their responses to changes in future interest rates. As a consequence, forward guidance has substantially less power to stimulate the economy. (JEL E21, E40, E50)

This study evaluates the impact of medical expenditure risk on portfolio choice among the elderly. The risk of large medical expenditures can be substantial for elderly individuals and is only partially mitigated by access to health insurance. The presence of deductibles, copayments, and other cost-sharing mechanisms implies that medical spending risk can be viewed as an undiversifiable background risk. Economic theory suggests that increases in background risk reduce the optimal financial risk that an individual or household is willing to bear (Pratt and Zeckhauser 1987; Elmendorf and Kimball 2000). In this study, we evaluate this hypothesis by estimating the impact of the introduction of the Medicare Part D program, which significantly reduced prescription drug spending risk for seniors, on portfolio choice.

What determines risk-bearing capacity and the amount of leverage in financial markets? Using unique archival data on collateralized lending, we show that personal experience can affect individual risk-taking and aggregate leverage. When an investor syndicate speculating in Amsterdam in 1772 went bankrupt, many lenders were exposed. In the end, none of them actually lost money. Nonetheless, only those at risk of losing money changed their behavior markedly; they lent with much higher haircuts. The rest continued largely as before. The differential change is remarkable since the distress was public knowledge. Overall leverage in the Amsterdam stock market declined as a result. (JEL D12, D14, D83, G11, G21)

We exploit a unique data set, combining rich experimental data with high-quality administrative data, to study dropout from the college track in Norway, and why boys are more likely to drop out. The paper provides three main findings. First, we show that family background and personal characteristics contribute to explain dropout. Second, we show that the gender difference in dropout rates appears both when the adolescents select into the college track and after they have started. Third, we show that different processes guide the choices of the boys and the girls of whether to drop out from the college track.