Knowledge that Transforms

The Federal Pell Grant Program lowers the cost of higher education for low-income students. We estimate Pell’s average effect for the universe of federally aided students—the broadest swath of higher education studied to date. Exploiting discontinuities and kinks in the grant schedule, we find that the effect of Pell on completion rates and postcollege earnings is much smaller than the findings of recent prominent studies focused on specific states. We argue that interactions between Pell grants and state aid programs may explain this difference, underscoring the importance of understanding how the impact of financial aid depends on context.

Choosing where to apply to college is a complex problem with long-term consequences, but many students lack the guidance necessary to make optimal choices. I show that a technology that provides low-cost personalized college admissions information to more than 40% of high schoolers significantly alters college choices. Students shift applications and attendance to colleges for which they can observe information on schoolmates’ admissions experiences. Responses are largest when such information suggests a high admissions probability. Disadvantaged students respond the most, and information on in-state colleges increases their 4-year college attendance. Data features and framing, however, deter students from selective colleges.

We investigate the role of training in reducing the gender wage gap using the British Household Panel Survey. On the basis of a life-cycle model and using tax and welfare benefit reforms as a source of exogenous variation, we evaluate the role of formal training and experience in defining the evolution of wages and employment careers, conditional on education. Training is potentially important in compensating for the effects of children, especially for women who left education after completing high school, but does not fundamentally change the wage gap resulting from labor market interruptions following child birth.

We construct the first long-term comparison of cross-sectional and panel estimates of immigrant earnings assimilation in the United States from a single data source. Unlike previous results, we find that selective out-migration of higher-earning immigrants biases downward cross-sectional estimates for all education groups. Cross-sectional estimates dramatically understate earnings growth for high-skilled foreign-born workers. The bias stems from both selective out-migration and selective employment; among high-skilled immigrants, low earners find employment with a substantial delay, while high earners work immediately on arrival. We present suggestive evidence that the H-1B visa program may play a role in estimated immigrant earnings dynamics.

This paper examines the short and longer-term economic effects of the 1966 Fair Labor Standards Act (FLSA) which increased the national minimum wage to its highest level of the 20th Century and extended coverage to an additional 9.1 million workers. Exploiting differences in the "bite" of the minimum wage due to regional variation in the standard of living and industry composition, this paper finds that the 1966 FLSA increased wages dramatically but reduced aggregate employment only modestly. However, the disemployment effects were significantly larger among African-American men, forty percent of whom earned below the new minimum wage in 1966.

Noncognitive characteristics and personality traits can be strong predictors of economic and social outcomes of individuals. In this paper, using data on cognitive ability and psychologist-assessed “sociability” and “adaptability” linked to administrative data for the male 1932–33 birth cohort in Norway, we analyze how these three characteristics affect men’s probability to migrate across labor markets. We find that higher adaptability, the capacity to adjust to new environments and situations, and higher cognitive ability are significant predictors of the probability to migrate. Adaptability is a particularly strong migration predictor for individuals with low cognitive ability or low socioeconomic background.

This paper investigates the wage returns to schooling and actual early work experiences and how these returns have changed over the past 20 years. Using the NLSY surveys, we develop and estimate a dynamic model of the joint schooling and work decisions that young men make in early adulthood and quantify how they affect wages using a generalized Mincerian specification. Our results highlight the need to account for dynamic selection and changes in composition when analyzing changes in wage returns. In particular, we find that ignoring the selectivity of accumulated work experiences results in overstatement of the returns to education.

We estimate turnover costs in small retail sales teams using daily sales data and an advance notice requirement to address endogeneity concerns. In addition to short-staffing and onboarding costs, we identify two less familiar sources of turnover costs: incumbent workers’ recruitment activities and reductions in team morale after a departure is announced. Our estimates of total turnover costs are relatively modest, however: 10% higher turnover is about as costly as a 0.6% wage increase. We attribute these low costs to a set of complementary personnel policies that ensure that only 25% of departures result in a short-staffing spell.

Recent research suggests that the share of US households living on less than $2/person/day is high and rising. We reexamine such extreme poverty by linking SIPP and CPS data to administrative tax and program data. We find that more than 90% of those reported to be in extreme poverty are not, once we include in-kind transfers, replace survey reports of earnings and transfer receipt with administrative records, and account for ownership of substantial assets. More than half of all misclassified households have incomes from the administrative data above the poverty line, and many have middle-class measures of material well-being.

We document that individuals who grow up in high firm density areas are more likely to become entrepreneurs, given firm density in their current location, and to run businesses in the sector with the highest density when young. Firm density at an entrepreneur’s young age drives current firm profitability and is more important than current density for business performance. Results hold in a sample of movers, which allows addressing endogeneity concerns. These results are consistent with entrepreneurial skills being partly learnable through social contacts. Accordingly, entrepreneurs who grow up in high firm density areas adopt better managerial practices.