We use unique longitudinal data to document an economically and statistically significant positive correlation between the facial attractiveness of male high school graduates and their subsequent labor market earnings. There are only weak links between facial attractiveness and direct measures of cognitive skills and no link between facial attractiveness and mortality. Even after including a lengthy set of characteristics, including IQ, high school activities, proxy measures for confidence and personality, family background, and additional respondent characteristics in an empirical model of earnings, the attractiveness premium is present in the respondents' mid-30s and early 50s. Our findings are consistent with attractiveness being an enduring, positive labor market characteristic.

This paper examines the effects of Individual Retirement Accounts (IRAs) on private and national saving. We construct a formal model of dynamic utility maximization that generates closed-form equations for IRA and other saving. Our empirical estimates indicate that raising the annual IRA contribution limit between 1983 and 1986 would have resulted in little, if any, increase in national saving. Results from sensitivity analysis imply substantially smaller effects on national saving than most previous researchers have estimated. Our results are consistent with new evidence we present indicating considerable potential among IRA holders to shift taxable forms of saving into IRAs.

The main theme of David Card and Alan Krueger's book, Myth and Measurement: The New Economics of the Minimum Wage, is that the data do not support the view that minimum wages reduce employment. The most important chapter considers data for the fast food industry, where it is suggested that recent minimum wage increases may actually have increased employment, contrary to the standard theorem that labor demand curves slope down. A more reasonable view of the evidence, in this book and in many other studies going back to 1915, is that the employment effects of minimum wages are small, and difficult to detect in the noisy data available.

We solve each household’s optimal saving decisions using a life cycle model that incorporates uncertain lifetimes, uninsurable earnings and medical expenses, progressive taxation, government transfers, and pension and social security benefits. With optimal decision rules, we compare, household by household, wealth predictions from the life cycle model using a nationally representative sample. We find, making use of household‐specific earnings histories, that the model accounts for more than 80 percent of the 1992 cross‐sectional variation in wealth. Fewer than 20 percent of households have less wealth than their optimal targets, and the wealth deficit of those who are undersaving is generally small.

We discuss a simple model in which parents and children make investments in the children's education and investments for other purposes and parents can transfer cash to their children. We show that for an identifiable set of parent–child pairs, parents will rationally underinvest in their child's education. For these parent–child pairs, additional financial aid will increase educational attainment. The model highlights an important feature of higher education finance, the “expected family contribution” (EFC) that is based on income, assets, and other factors. The EFC is neither legally guaranteed nor universally offered: our model identifies the set of families that are disproportionately likely to not provide their full EFC. Using a common proxy for financial aid, we show, in data from the Health and Retirement Study, that financial aid increases the educational attainment of children whose families are more likely than others to underinvest in education. Financial aid has no effect on the educational attainment of children in other families. The theory and empirical evidence identifies a set of children who face quantitatively important borrowing constraints for higher education.

Welfare, Employment, and Income: Evidence on the Effects of Benefit Reductions from California by V. Joseph Hotz, Charles H. Mullin and John Karl Scholz. Published in volume 92, issue 2, pages 380-384 of American Economic Review, May 2002