RESEARCH PROJECTS

& PRESENTATIONS

LABOR MARKET INEQUALITY

 

* DENOTES NBER WORKING PAPER

JOB MARKET SIGNALING THROUGH OCCUPATIONAL LICENSING

WITH BOBBY CHUNG |  NBER WORKING PAPER | NBER LABOR STUDIES PRESENTATION

As a condition for legal employment, US state governments require occupational licenses of 25% of their workforce. We show that occupational licensing reduces the wage gap between black men and white men (by 43%), and the wage gap between women and white men (by 36%-40%). Black men benefit from licenses that signal non-felony status, whereas white women benefit from licenses with a human capital requirement, e.g., continuous education. Certification, a less distortionary alternative to licensing,  generates an equivalent wage premium to occupational licensing for white men, but lower wage premiums than licensing for women and black men.

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SKILLS, DEGREES, AND LABOR MARKET INEQUALITY

WITH DEBROY & HECK  |  NBER WORKING PAPER  |  PRESENTATION

Over the past four decades, income inequality grew significantly between workers with bachelor’s degrees and those with high school diplomas (often called “unskilled”). Rather than being unskilled, we argue that these workers are STARs because they are skilled through alternative routes—namely their work experience. Using the skill requirements of a worker’s current job as a proxy of their actual skill, we find that though both groups of workers make transitions to occupations requiring similar skills to their previous occupations, workers with bachelor’s degrees have dramatically better access to higher-wage occupations where the skill requirements exceed the workers’ observed skill. This measured opportunity gap offers a fresh explanation of income inequality by degree status and reestablishes the important role of on-the-job training in human capital formation.

OCCUPATIONAL LICENSING AND THE DIGITAL ECONOMY

WITH MISCHA FISHER |  NBER WORKING PAPER  |  PRESENTATION

We study the impact of occupational licensing restrictions on market clearing in the digital economy. Our administrative data of 20 million transactions captures realtime supply and demand on a large online marketplace in the $500B home services industry. Using a boundary discontinuity research design that exploits variation in occupational licensing laws across state borders, and a case study based on a differencein-differences research design that exploits a change in licensing regime within a state, we find that occupational licensing regulations increase the likelihood of a supply-demand imbalance by 14 percentage points or 24 percent.

A MODEL OF OCCUPATIONAL LICENSING AND STATISTICAL DISCRIMINATION

WITH BOBBY CHUNG |  NBER WORKING PAPER

We develop a model of statistical discrimination in occupational licensing. In the model, there is endogenous occupation selection and wage determination that depends on how costly it is to obtain the license and the productivity of the human capital that is bundled with the license. Under these assumptions, we find a unique equilibrium with sharp comparative statics for the licensing premiums. The key theoretical result in this paper is that the licensing premium is higher for workers who are members of demographic groups that face a higher cost of licensing. The intuition for this result is that the higher cost of licensing makes the license a more informative labor market signal. The predictions of the model can explain, for example, the empirical finding in the literature that occupational licenses that preclude felons close the racial wage gap among men by conferring a higher premium to black men than white men. Moreover, we show that in general the optimal cost of licensing is non-zero: an infinitely costly license screens out all workers while a cost less license is no screen at all.

HOW MUCH OF A BARRIER TO ENTRY IS OCCUPATIONAL LICENSING?

We exploit state variation in licensing laws to study the effect of licensing on occupational choice using a boundary discontinuity design. We find that licensing reduces equilibrium labor supply by an average of 17%-27%. The negative labor supply effects of licensing appear to be strongest for white workers and comparatively weaker for black workers.

DISENTANGLING PEER EFFECTS AND ECONOMIC INCENTIVES

IN CUSTOMER ACQUISITION

WITH CLARENCE LEE | CORNELL UNIVERSITY

We study the role of peer effects and economic incentives on customer adoption decisions using an unique panel from an university alumni reunion. The data consist of the alumni sign-up date, complete offline social graph (formed a decade prior), time-series airfare prices, demographics, and social media advertising efforts. We leverage the plausibly exogenous social graph and airfare prices faced by customers to separate the influence of peer decisions from the effect of economic costs on customer adoption. Our results have implications for the broader study and interaction of digital advertising with traditional pricing methods of new products and events.

THE EFFECT OF UN(IMPOSED) LABOR MARKET FLEXIBILITY ON

GENDER WAGE GAPS

WITH BEN POSMANICK |  2019 NBER LABOR STUDIES PAPER 

In this paper we document a new empirical fact about the U.S. labor market: over the past four decades, the gender wage gap among part-time workers was 10–30 percentage points smaller than the gender wage gap among full-time workers. This is a new empirical fact is predicted by the theory that increased labor market flexibility reduces gender wage gaps (Goldin, 2014). We refine this prediction by providing evidence that flexibility that is demanded endogenously, as is the case with pursuing part-time work, reduces gender wage gaps; by contrast flexibility that is supplied exogenously, specifically through state-mandated family leave policies like the Family and Medical Leave Act (1993) and its antecedents, are capitalized into slower wage growth for women when compared to men. Using an event-study design, we show that mandated family leave laws were partially responsible for the stagnation of women's wages in the mid 1990’s, bring resolution to an important puzzle in labor economics.

THE LABOR MARKET CONSEQUENCES OF EX-OFFENDER LICENSING LAWS

WITH MORRIS M. KLEINER & JASON HICKS |  UNIVERSITY OF MINNESOTA | UPJOHN INSTITUTE AND EQUITABLE GROWTH

This project will create a publicly available database of statutory and administrative laws governing the ability of ex-offenders to be granted an occupational license for all universally licensed occupations in the United States. The newly created time-series will be linked with Census microdata, including data from the American Community Survey, Current Population Survey, and Survey of Income and Program Participation. The research team will then use the changes in these ex-offender occupational licensing laws over time and across states to estimate the impact of these laws on the labor market outcomes of workers, with particular attention to the labor market outcomes of minorities. There are very few high-quality studies of the impacts of such licensing laws on employment and earnings among individuals with felonies. This research creates a new, detailed, and valuable dataset of state occupational licensing laws, which will allow both this research team and future researchers to study the impact of these laws on wage and employment outcomes.

WHY DON'T ELITE COLLEGES EXPAND SUPPLY? 

WITH KENT SMETTERS | WHARTON SCHOOL AT UNIVERSITY OF PENNSYLVANIA

As a condition for legal employment, US state governments require occupational licenses of 25% of their workforce. We show that occupational licensing reduces the wage gap between black men and white men (by 43%), and the wage gap between women and white men (by 36%-40%). Black men benefit from licenses that signal non-felony status, whereas white women benefit from licenses with a human capital requirement, e.g., continuous education. Certification, a less distortionary alternative to licensing,  generates an equivalent wage premium to occupational licensing for white men, but lower wage premiums than licensing for women and black men.

WHY DON'T ELITE COLLEGES EXPAND SUPPLY? 

WITH KENT SMETTERS | WHARTON SCHOOL AT UNIVERSITY OF PENNSYLVANIA

As a condition for legal employment, US state governments require occupational licenses of 25% of their workforce. We show that occupational licensing reduces the wage gap between black men and white men (by 43%), and the wage gap between women and white men (by 36%-40%). Black men benefit from licenses that signal non-felony status, whereas white women benefit from licenses with a human capital requirement, e.g., continuous education. Certification, a less distortionary alternative to licensing,  generates an equivalent wage premium to occupational licensing for white men, but lower wage premiums than licensing for women and black men.

WITH ELIJAH NEILSON | CLEMSON UNIVERSITY

Exploiting state variation in the adoption of unilateral divorce laws, we show that both women and men are less likely to report having a bachelor's degree in states that adopted unilateral divorce laws. This reduction in human capital investment occurs in states with community property laws, where the law requires an even split of the couple's assets in the event of a divorce and is most pronounced for white women and men. We find no distortionary effects of unilateral divorce laws on the human capital decisions of black men or black women, even in states with community property laws.

THE EFFECT OF SELECTIVE PROPERTY RIGHTS ON ECONOMIC DEVELOPMENT

PETER Q. BLAIR | WHARTON SCHOOL AT UNIVERSITY OF PENNSYLVANIA 

I estimate that per capita GDP in the Bahamas grew by an additional 2%-3% per year, for 12 years, in response to a law that limited the ability of non-natives to buy and sell land in the Bahamas. Using an instrumental variables approach and a variety of robustness checks, I show that this growth occurred in spite of a downturn in net foreign direct investment due to the passage of this law, which weakened the property rights of nonnative investors relative to those of native Bahamians. The results of this study highlight the economic importance of distinguishing between the protection of private property for natives and non-natives as separate channels through which institutions cause economic growth.

HIGHER EDUCATION & ECONOMIC DEVELOPMENT

 
 
 
 
 
 
 
 
 

RESIDENTIAL SEGREGATION AND LABOR

MARKET DISCRIMINATION

 

OUTSIDE OPTIONS (NOW) MORE IMPORTANT THAN RACE IN EXPLAINING TIPPING POINTS IN US NEIGHBORHOODS 

SOLO-AUTHORED | PETER BLAIR | HCEO WORKING PAPER

I develop a revealed-preference method for estimating neighborhood tipping points. I find that census tract tipping points have increased from 15%(1970) to 42%(2010). The corresponding MSA tipping points have also increased from 13%(1970) to 35%(2010). While tipping points are traditionally associated with the racial attitudes of white households, I find that cross-sectional differences in MSA tipping points, going from 1970-2010, depend less on differences in the racial attitudes of white households and more on the outside options faced by white households. These results support a continued role for place-based policies in mitigating residential segregation.

  • The Effect of Decentralized Racial Preferences on Segregation with Peter Blair and Patrick Bayer  

  • Using the Moving To Opportunity Experiment to Assess the Validity of Non-experimental Instruments for House Prices.

  • Why are Distinctively Black Names Associated with Positive Outcomes for Blacks in the Pre-Civil Rights Era and associated with negative outcomes for Blacks in the Post-Civil Rights Era? with Peter Blair and Jhacova Williams

  • The Effect of Merit-based Aid on Student Outcomes in India with Peter Blair and Smriti Bhargava

  • Federal Funding Premia for Elite Universities with Peter Blair and Michael Dinerstein

  • The Effect of Financial Incentives on Research Output of Faculty: Evidence from India

WORKS IN PROGRESS 

 
 
 

A NATIONAL STUDY OF SCHOOL SPENDING AND HOUSE PRICES

WITH BAYER & WHALEY |  NBER WORKING PAPER

We conduct the first national study of the causal impact of school spending and local taxes on housing prices by pairing variation induced by school finance reforms with 25 years of national data on housing prices. Our analysis speaks to two classic questions in economics: whether school spending matters and whether it is provided at efficient levels. The results indicate that households highly value school spending and, in particular, spending on the salaries of teachers and staff. Moreover, we find that salary spending is provided at inefficiently low levels throughout much of the United States, as increases in salary spending within a school district funded entirely by local taxes would generally raise house prices. Our analysis points to both the hiring of more teachers and increasing teacher pay as mechanisms for improving the efficiency of the provision of public schooling in the United States.