Knowledge that Transforms

This paper shows that the wage assimilation of immigrants is the result of the intricate interplay between individual skill accumulation and dynamic labor market equilibrium effects. When immigrants and natives are imperfect substitutes, rising immigrant inflows widen the wage gap between them. Using a production function framework in which workers supply both general and host-country-specific skills, we show that this labor market competition channel explains about one-fifth of the large increase in the average immigrant–native wage gap across arrival cohorts in the United States since the 1960s. The results further reveal substantial heterogeneity across different groups of immigrants.

We introduce an empirical framework for valuing markets in environmental offsets. Using newly-collected data on wetland conservation and offsets, we apply this framework to evaluate a set of decentralized markets in Florida, where land developers purchase offsets from long-lived producers who restore wetlands over time. We find that offsets led to substantial private gains from trade, creating $2.4 billion of net surplus from 1995–2020 relative to direct conservation. Offset trading also generated new hydrological externalities. A locally differentiated Pigouvian tax would have prevented $1.6 billion of new flood damage while preserving more than two-thirds of the private gains from trade.

Conflict along transportation routes during Somalia’s al-Shabaab insurgency significantly increases maize prices at distant locations, decreasing food security, health, and education. Estimated conflict risk has strong price effects independently of realized conflict, highlighting the importance of safety concerns. A model of least-cost route choice in the presence of conflict reveals that more and shorter alternative routes to circumvent conflict can lower prices but their effectiveness diminishes as violence becomes more correlated across routes. Alternatively, securing key transportation routes would alleviate price increases. A market access approach suggests spatial spillovers of conflict also matter for prices of more general baskets of food and nonfood items.

Policy choices often create trade-offs between workers and consumers. I examine how foreign competition alters the consumer welfare and domestic employment effects of mergers. I construct a model incorporating consumer demand, endogenous product portfolios, and employment decisions. Applying the model to Whirlpool’s acquisition of Maytag in the appliance industry, I compare the observed merger to a counterfactual acquisition by a foreign buyer. Although Whirlpool’s acquisition decreased consumer welfare by $271 million annually, it preserved 797 domestic jobs. These jobs must therefore be valued at more than $344, 000 per year for the domestic employment benefits to offset the consumer harm.

Should optimal income taxation change when firms have market power? We analyze how the planner can optimally tax labor income of workers and profits of entrepreneurs. We derive optimal tax rates that depend on markups and identify four distinct components: the Mirrleesian incentive effect, the Pigouvian tax correction of the negative externality of market power, redistribution through altered factor prices, and reallocation of output toward the most productive firms. We quantify the optimal tax for the US economy and provide concrete proposals how to use income taxation to redistribute income while incentivizing production in the presence of market power.

Preschool-aged children get sick frequently and spread disease to other family members. Despite the universality of this experience, there is limited causal evidence on the magnitudes and consequences of these externalities, especially for infant siblings with developing immune systems and brains. We show in Danish administrative data that during infancy, younger siblings have two to three times higher hospitalization rates for respiratory conditions than older siblings. We combine birth order and within-municipality variation in respiratory disease prevalence among young children, finding lasting differential impacts of early-life respiratory disease exposure on younger siblings' earnings, educational attainment, chronic respiratory health, and mental health-related outcomes.

The implementation of evidence-based policies hinges on the dissemination of evidence to policymakers, a process influenced by the attributes of the sender. We conduct a country-wide RCT in which two ideologically opposite prominent think tanks, two major newspapers, and a research institution with nonsalient ideology communicate identical information about a low-cost, non-ideological, and effective policy based on published research findings to a large sample of Spanish local policymakers. We measure the impact of information directly on policy adoption and find heterogeneous effects. When the informing institution aligns ideologically with policymakers, communicating research results leads to a more than 65% increase in policy adoption compared to an uninformed control group, while informing from an opposite ideology does not lead to policy adoption. Our design also allows us to compare the impact of knowledge brokers, such as think tanks, and coverage in leading newspapers in adopting public policies. We find that, when ideologically aligned with policymakers, both are equally effective in increasing policy adoption. We propose a three-stage conceptual framework of policy adoption processes - selective exposure to information, belief updating, and policy implementation- and show that ideological alignment does not influence selective exposure to information. However, evidence from a post-intervention online experiment shows that ideological alignment affects belief updating regarding a recommended policy's effectiveness. Finally, we discuss the trade-offs between effectiveness and outreach when using ideologically aligned and nonsalient institutions to disseminate research evidence and comment on the economic impact of ideological alignment for policy implementation.

Why do health facilities in developing countries do so poorly? This paper examines the role of financial constraints. I describe an experiment in which we surprised health workers in randomly selected public health clinics in Nigeria with a N600,000 grant paid out in installments over one year. Its administration was left entirely to health workers. I show that the award led to large productivity gains. Using expenditure data combined with novel textual data I provide an explanation for these effects. I show that the award increased investments in physical and human capital, led to lower prices for patients and inspired health workers to do better.

Why is workplace sexual harassment chronically underreported? We hypothesize that employers coerce victims into silence through the threat of a retaliatory firing, and test this theory by estimating whether external shocks that reduce the value of a worker's outside options exacerbate underreporting. Under mild assumptions, a rise in the severity of formal complaints is indicative of increased underreporting. Combining this insight with an objective measure of the quality of charges filed with the Equal Employment Opportunity Commission (EEOC), we perform two analyses. First, we assess whether workers report sexual harassment more selectively during recessions, when outside labor market options are limited. We estimate the fraction of sexual harassment charges deemed to have merit by the EEOC increases by 0.5-0.7% for each one percentage point increase in a state-industry's monthly unemployment rate. The effect is amplified in industries employing a larger fraction of men and in establishments with a higher share of male managers. Second, we test whether less generous UI benefits create economic incentives for victims of workplace sexual harassment to remain silent. We find the selectivity of sexual harassment charges increases by more than 30% in response to a 50% cut to North Carolina's Unemployment Insurance (UI) program following the Great Recession.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,200 multinationals’ establishments across the world and linked employee-level data on their establishments in Brazil. Headquarters wage changes arising from minimum wage and exchange rate shocks are partially transmitted to workers employed in the same position abroad. Wage change transmission appears to be direct and results from firm-wide wage-setting procedures rather than associated technology or employment changes. “Anchored” wage setting is somewhat associated with particular characteristics of the job × employer × headquarters-establishment country-pair.