Knowledge that Transforms

Much attention has been given to the large increases in safety net spending during the Great Recession. We examine the relationship between poverty, the safety net, and business cycles historically and test whether there has been a significant change in this relationship. We find that post–welfare reform, Temporary Assistance for Needy Families did not respond during the Great Recession and extreme poverty is more cyclical than in prior recessions. Food Stamps and Unemployment Insurance are providing more protection—or no less protection—in the Great Recession, and there is some evidence of less cyclicality for 100% poverty.

Chile is unusual in having long-term experience with nationwide school vouchers. A key criticism of school voucher systems is that they make it easier for private schools to attract better teachers to the detriment of public schools. This paper uses longitudinal data from Chile to estimate a discrete choice dynamic programming (DCDP) model of teacher and nonteacher labor supply decisions and to explore how wage policies affect the composition of the teacher labor force in public and private schools. In the model, individuals first decide whether to get a teaching degree and then choose annually from among five work/home sector alternatives. Empirical results show that private voucher schools attract better teachers than public schools. However, the existence of the private voucher sector also draws higher-productivity individuals into the teaching profession.

We study employment reallocation across employers through the lens ofa dynamic job ladder model. Workers always agree on a ranking ofemployers at all points in time and search for better jobs both offand on the job. A parsimonious version of the model fits well the timeseries of gross worker flows by employer size from newly available USdata from the Job Openings and Labor Turnover Survey. Focusing on the US experience in and around the Great Recession, our evidence indicates that the job ladder stopped working then and has not fully resumed yet.

In many countries, grade retention is viewed as a useful tool for helping students who fall behind in their achievement. We show how the effect of grade retention varies by abilities, by timing of retention and as time since retention elapses. While existing studies of grade retention also recognize the importance of studying variation by abilities and timing, the existing methods are not well-equipped to deal with the possibility that students retained at different grades differ in unobservable abilities (dynamic selection) and the effects of retention also vary by the student's abilities and the time at which the student is retained. We extend existing factor analytic methods for identifying treatment effects to control for dynamic selection in our time-varying treatment effect setting. This approach can be understood as a hybrid between a control function and a generalization of the fixed effects approach. Applying our method to nationally-representative, longitudinal data, we find evidence of dynamic selection into retention and that the treatment effect of retention varies considerably across grades and unobservable abilities of students. Our strategy can be applied more broadly to many time-varying or multiple treatment settings.

We use linked employer-employee data from Italy to explore the relationship between exports and wages. Exploiting the 1992 devaluation of the lira, we show that exporting firms both pay a wage premium above what their workers would earn in the outside labor market (the “rent-sharing” effect) and employ workers whose skills command a higher price after the devaluation (the “skill composition” effect). The latter only emerges once we allow for the value of workers’ skills to differ in the pre- and post-devaluation periods. We also document that the export wage premium is larger for workers with more export-related experience.

There are persistent differences in self-reported subjective well-being across US metropolitan areas, and residents of declining cities appear less happy than others. Yet some people continue to move to these areas, and newer residents appear to be as unhappy as longer-term residents. While historical data on happiness are limited, the available facts suggest that cities that are now declining were also unhappy in their more prosperous past. These facts support the view that individuals do not maximize happiness alone but include it in the utility function along with other arguments. People may trade off happiness against other competing objectives.

This paper analyzes the effects of job displacement on fertility using Finnish longitudinal register data. We focus on couples where one spouse has lost a job due to a plant closure and follow them for several years before and following the job loss. The results show that female job loss decreases fertility. For every 100 displaced females, there are three fewer children born. Male job loss has no impact on fertility despite resulting in a stronger decrease in family income than female job loss. This indicates that the income effect is not the mechanism through which job displacement influences fertility.

Using 1979–2012 CPS data for the United States and 1975–2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed.

We explore the role of composition, duration dependence, and labor force nonparticipation in accounting for the sharp increase in the incidence of long-term unemployment (LTU) during the Great Recession. We show that compositional shifts account for very little of the observed increase in LTU. Using panel data from the Current Population Survey for 2002–7, we calibrate a matching model that allows for duration dependence in unemployment and transitions between employment, unemployment, and nonparticipation. The calibrated model accounts for almost all of the increase in LTU and much of the observed outward shift in the Beveridge curve between 2008 and 2013.

Pharmacy today is a highly remunerated female-majority profession with a small gender earnings gap and low earnings dispersion. Using extensive surveys of pharmacists, as well as the US Census, American Community Surveys, and Current Population Surveys, we explore the gender earnings gap, penalty to part-time work, demographics of pharmacists relative to other college graduates, and evolution of the profession during the last half-century. Technological changes increasing substitutability among pharmacists, growth of pharmacy employment in retail chains and hospitals, and related decline of independent pharmacies reduced the penalty to part-time work and contribute to the narrow gender earnings gap in pharmacy.