We examine evidence on omitted-ability bias in estimates of the economic return to schooling, using proxies for unobserved ability. We consider measurement error in these ability proxies and the potential endogeneity of both experience and schooling, and examine wages at labor market entry and later. Including ability proxies reduces the estimate of the return to schooling, and instrumenting for these proxies reduces the estimated return still further. Instrumenting for schooling leads to considerably higher estimates of the return to schooling, although only for wages at labor market entry. This estimated return generally reverts to being near (although still above) the OLS estimate if we allow experience to be endogenous. In contrast, for observations at least a few years after labor market entry, the evidence indicates that OLS estimates of the return to schooling that ignore omitted ability are, if anything, biased upward rather than downward.

Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment by David Neumark and William Wascher. Published in volume 90, issue 5, pages 1362-1396 of American Economic Review, December 2000

JEL No. J20,L25,L53 We use a new database, the National Establishment Time Series (NETS), to revisit the debate about the role of small businesses in job creation. Birch (e.g., 1987) argued that small firms are the most important source of job creation in the U.S. economy, but Davis et al. (1996a) argued that this conclusion was flawed, and based on improved methods and using data for the manufacturing sector they concluded that there was no relationship between establishment size and net job creation. Using the NETS data, we examine evidence for the overall economy, as well as for different sectors. The results indicate that small establishments and small firms create more jobs, on net, although the difference is much smaller than what is suggested by Birch's methods. However, the negative relationship between establishment size and job creation is much less clear for the manufacturing sector, which may explain some of the

The Interaction of Public Retirement Income Programs in the United States by Elizabeth T. Powers and David Neumark. Published in volume 93, issue 2, pages 261-265 of American Economic Review, May 2003

Hostile takeovers may reduce the prevalence of long-term employment contracts if they facilitate the opportunistic expropriation of extramarginal wage payments. Our tests of two versions of the expropriation hypothesis improve on existing research by using firm- and establishment-level data from an employer salary survey, and by performing both ex ante and ex post tests. First, we study the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity, and find little evidence of an expropriation motive. Then. since we observe wage and employment structures both before and after takeovers. we investigate whether proxies for extramarginal wages drop after hostile takeovers. The ex post experiments provide evidence consistent with one version of the expropriation hypothesis. In particular, such takeovers appear to reduce extramarginal wage payments to more-tenured workers, mostly through flattening wage-seniority profiles in firms with relatively senior work forces.

In Lazear's model of long‐term incentive contracts, age discrimina‐tion laws barring age‐ based involuntary terminations preclude such contracts, reducing efficiency. Alternatively, such laws may serve as precommitment devices for these contracts, without pre‐venting firms from offering strong financial incentives to induce retirement at specific ages. In this case, age discrimination laws may encourage Lazear contracts, hence increasing efficiency. We assess evidence on these alternative interpretations using variation in state and federal age discrimination laws. The evidence indicates that age discrimination laws steepen age‐earnings profiles for co‐horts entering the labor market, suggesting that these laws encour‐age the use of Lazear contracts.

We examine firm responses to state hiring and investment subsidies. We leverage institutional features of the California Competes Tax Credit (CCTC), a large-scale business incentive program that incorporates best practices from prior job creation policies. The CCTC award selection procedure combines formula-based and discretionary components. Leveraging applicant score eligibility cutoffs in a regression discontinuity design and taking advantage of rich longitudinal microdata on establishments and their parent firms, we find that businesses expand employment in California in response to CCTC awards. There is little evidence that these expansions come at the expense of firms’ operations in other states. Our results suggest that targeted and audited hiring and investment subsidies can be effective in promoting local business expansions without inducing significant cross-state displacement effects.

We study the relationships between ageist stereotypes - as reflected in the language used in job ads - and age discrimination in hiring, exploiting the text of job ads and differences in callbacks to older and younger job applicants from a resume (correspondence study) field experiment (Neumark, Burn, and Button, 2019). Our analysis uses computational linguistics and machine learning methods to examine, in a field-experiment setting, ageist stereotypes that might underlie age discrimination in hiring. In so doing, we develop methods and a framework for analyzing textual data, highlighting the usefulness of various computer science techniques for empirical economics research. We find evidence that language related to stereotypes of older workers sometimes predicts discrimination against older workers. For men, we find evidence that age stereotypes about all three categories we consider - health, personality, and skill - predict age discrimination, and for women, age stereotypes about personality predict age discrimination. In general, the evidence that age stereotypes predict age discrimination is much stronger for men, and our results for men are quite consistent with the industrial psychology literature on age stereotypes.

We design and implement a large-scale field experiment on age discrimination to address limitations of past research that may bias their results. One limitation is the practice of giving older and younger applicants similar experience in the job to which they are applying, to make them “otherwise comparable.” The second limitation is ignoring the likelihood of greater variation in unobserved differences among older workers owing to human capital investment. Based on evidence from over 40,000 job applications, we find robust evidence of age discrimination in hiring against older women, but considerably less evidence of age discrimination against older men.