System Working Papers

Jesse Bricker and Geng Li

Chetty et al. (2022a) found that economic connectedness (EC), a social capital measure derived from Facebook friendships, predicted upward income mobility well. Bricker and Li (2017) proposed the average credit score of a community's residents as an indicator of local social trust. We show that the average credit scores are robustly correlated with EC, are negatively correlated with the friending-bias measure introduced in Chetty et al. (2022b), and predict economic mobility to a comparable extent after controlling for EC. The consistency and complementarity between these two indicators underscores trust as a crucial component of social capital.

Topics: Employment & labor markets

Sara Goldrick-Rab, Christine Baker-Smith, Travis T. York, Kallie Clark, Douglas Webber, and Christel Perkins

Universities are increasingly allocating “completion grants” to students who are nearing the finish line but facing financial challenges. We assess the impact of completion grants averaging $1,200 that were distributed to more than 14,000 students. We find that only two-thirds of eligible students graduated within the academic year. Receiving a completion grant did not improve that rate. However, nearly all eligible students graduated within three years or were still working on their degrees. We do not find evidence that completion grants exerted positive impacts for marginalized groups.

Topics: Higher education; Inequality

Kabir Dasgupta and Alexander Plum

During the pandemic, all states were approved to provide Emergency Allotments (EA) to households enrolled in the Supplemental Nutrition Assistance Program (SNAP). We use the Census Bureau’s Household Pulse Surveys to study whether the end of EA is associated with food-related challenges and economic hardships. Our findings indicate that EA termination is followed by a decrease in the likelihood that adult survey respondents had sufficient food for consumption and an increase in the probability of experiencing difficulty in paying usual household expenses.

Topic: Public policy; COVID-19

Rachel Cummings and María J. Luengo-Prado

We document the characteristics of children and young adults identified as having a learning disability and study whether legislative changes in diagnosis criteria have had a noticeable effect on determining who receives a diagnosis. We further document that individuals identified as having a learning disability experience less desirable outcomes early in life, including trouble with the police, drug use, violent behavior, incarceration, self-reported low levels of well-being, lower educational attainment, and less favorable labor market outcomes. We also find that the mothers of children diagnosed with learning disabilities are less likely than other mothers to participate in the labor market.

Topics: Employment & labor markets

Dionissi Aliprantis and Kristen Tauber

Black men who witnessed a shooting before turning 12 have household earnings that are 31 percent lower as adults than those who did not. We present evidence that this gap is causal and is most likely the result of toxic stress; it is not mediated by incarceration and is constant across neighborhood socioeconomic status. We also study exposure to violence and nurturing relationships during adolescence. Item-anchored indexes synthesize variables on these treatments better than summing positive responses, item response theory, or principal components. Providing adolescents with nurturing relationships is almost as beneficial as preventing their exposure to violence.

Topics: Wages, income, and wealth

Ben Ost, Weixiang Pan, and Douglas Webber

We provide the first evidence on the role of college networks in the re-employment of displaced workers. An extensive literature examines the consequences of layoffs, but the factors that facilitate re-employment are relatively under-studied. Using administrative data and a cross-cohort design, we find that network connections with actively hiring employers increase the re-employment rate. This result is driven by re-employment at contacts’ firms, suggesting that a stronger network does not improve worker quality more broadly. These results suggest that college has the potential to improve employment outcomes beyond improved human capital and signaling.

Topics: Employment & labor markets; Economic opportunity

Kristin F. Butcher, Patrick J. McEwan, and Akila Weerapana

Many observers argue that diversity in economics and STEM fields is critical. If increasing the rate of majoring in mathematically intensive fields among women is a worthy goal, then understanding whether women’s colleges causally affect that choice is important. Among all admitted applicants to Wellesley College, enrollees are 7.2 percentage points (94%) more likely to receive an economics degree than non-enrollees. Overall, 3.2 percentage points—or 44% of the difference between enrollees and non-enrollees—is explained by college exposure to female instructors and students, consistent with a wider role for women’s colleges in increasing female participation in economics.

Topics: Diversity & inclusion; Higher education

Fumiko Hayashi, Aditi Routh, and Ying Lei Toh

Using multi-year survey data, we conduct a regression model analysis to examine which types of unbanked households are more or least likely to open a bank account, using their prior banking status and interest in having a bank account. Households that are uninterested and didn’t previously have an account are less likely to open one, and tend to be less educated, be of a racial minority, be foreign born, lack access to digital technology, rely heavily on cash, and distrust banks. Advancing financial inclusion for this group will require strategies to increase their trust in the financial services industry.

Topic: Borrowing and lending

Morris Kleiner and Wenchen Wang

We examine the probability of an occupational licensed worker selecting into the public sector, while also measuring how licensing impacts key labor market outcomes, such as wages, hours worked, and employment. We find that having an occupational license increases the likelihood of working in the public sector, raises wages by about 6%, and increases hours worked, but reduces employment, even when controlling for other labor market institutions. Our estimates suggest that the social welfare effects of licensing in the public sector are like those for the whole sample, and they generally result in a welfare loss in the public sector.

Topics: Employment & labor markets

Allen N. Berger, Maryann P. Feldman, W. Scott Langford, and Raluca A. Roman

Specialization in lending based on a central mechanism of shared minority identity can yield an advantage in serving community needs through times of financial and economic crises. To test this proposition, we analyze individual banks in their local market context from 2006 to 2020. Results suggest minority-owned banks improved economic resilience in their communities during the global financial crisis (GFC) and the COVID-19 crisis through increased small business and household lending. At least 1.9 million more minority jobs would have been maintained post-GFC if all U.S. banks had behaved like minority-owned banks.

Topics: Borrowing and lending; Community & economic development; Recessions

Juan C. Córdoba, Anni T. Isojärvi, and Haoran Li

We endogenize bargaining weights in a life cycle search and matching model by replacing a standard Cobb-Douglas (CD) matching function with a general constant elasticity of substitution (CES) matching function to study the implications for the long-term labor share and bargaining power. The CES model explains 64 percent of the reported decline in the labor share since 1980, while the CD model explains only 28 percent of the decline. We then find that workers' bargaining power declined 11 percent between 1980 and 2007 because of a decline in tightness.

Topics: Employment & labor markets; Wages, income, and wealth

Sarena Goodman, Simona Hannon, Adam Isen, and Alvaro Mezza

The COVID-19 pandemic and resulting economic fallout likely posed financial strain on U.S. households with children, particularly those with a student loan payment. The CARES Act included provisions to curb the impacts of these payments, applied independent of need. We find that (1) families with children benefited more from the relief, but that relief was concentrated among higher-income and White families, and (2) there were larger improvements in overall credit health and an increased use of other credit among families with student loan debt that was eligible for relief relative to those with student loan debt that was not.

Topics: Inequality; COVID-19

Alex Combs, John Foster, and Erin Troland

This paper explores an under-studied channel for school finance inequality, property assessment. School districts have historically relied on local tax to fund schools, which can generate disparities in funding. States have passed school finance reforms that increase funding to poorer districts, but many have not adequately addressed property assessment inequality. We analyze a state government intervention to address property assessment inequities within and across school districts. Using difference-in-differences and county- and school district-level administrative data, we find the intervention boosted assessments by 32 percent, assessment equity improved substantially, and local property revenues temporarily increased by 17 percent.

Topics: Educational equity

Hie Joo Ahn, Bart Hobijn, and Ayşegül Şahin

Aggregate U.S. labor market dynamics are well approximated by a dual labor market—supplemented with a third, predominantly home-production segment. We uncover this structure by estimating a Hidden Markov Model. The different market segments are identified through (in)equality constraints on labor market transition probabilities. The combination of the aggregate and individual-level evidence we provide points to dualism in the U.S. labor market being an equilibrium division of labor, under labor market imperfections, that minimizes adjustment costs in response to predictable seasonal and unpredictable business cycle fluctuations.

Topics: Employment & labor markets

Sergey Chernenko, Nathan Kaplan, Asani Sarkar, and David Scharfstein

We use the 2020 Small Business Credit Survey to study the sources of racial disparities in use of the Paycheck Protection Program (PPP). We find that Black-owned firms are 8.9 percentage points less likely than observably similar White-owned firms to receive PPP loans. We also find that application behavior fully explains why Black-owned firms are less reliant on banks and more reliant on fintech leaders from PPP loans. Sorting by Black-owned firms away from banks and toward fintechs is significantly stronger in more racially biased counties, and the bank approval disparity is also larger in more racially biased counties.

Topics: Inequality; Banks; Payments & FinTech

Natalia Emanuel and Emma Harrington

How does remote work affect productivity, and how productive are workers who choose remote jobs? We study a U.S. Fortune 500 firm’s call centers that employed both remote and on-site workers in the same jobs. Prior to COVID-19, remote workers were less productive than on-site workers. After call center closures due to COVID-19, the productivity of formerly on-site workers declined by 4 percent relative to that of already-remote workers. Negative worker selection into remote work explains the 8 percent productivity gap. We also find indications that remote work degraded call quality and reduced workers’ promotion rates.

Topics: Economic growth & productivity; Workforce

Facundo Piguillem, Hernán Ruffo, and Nicholas Trachter

This paper analyzes the welfare effects of unemployment insurance in a life cycle model, focusing on partial versus general equilibrium effects. We study an OLG economy with learning-by-doing human capital accumulation. Agents can be employed or unemployed. While unemployed, agents’ search for new jobs is costly. We find that the life cycle model provides two key components crucial for welfare evaluation: it emphasizes workers' insurance needs by accurately reproducing the left tail of the wealth distribution and generates a realistic response of precautionary savings to transfers.

Topics: Insurance; Unemployment

DuckKi Cho, Lyungmae Choi, Michael Hertzel, and Jessie Jiaxu Wang

We show that the social capital embedded in employees’ networks contributes to firm performance. Using novel individual-level network data, we measure a firm’s social capital derived from employees’ connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being known by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors and provide evidence on the mechanisms.

Topics: Inequality; Economic growth & productivity

Tanya Byker, Elena Patel, and Shanthi Ramnath

We use Current Population Survey data to assess the efficacy of state-mandated paid sick leave policies on leave taking behavior. We find that these policies increase leave taking for care-giving for men by 10 to 20 percent, and this effect is strongest for men with young children in the household. We also find that Hispanic men and men without a bachelor’s degree are 20 to 25 percent more likely to take care-giving leave. We do not find evidence that these policies affect leave taking for own sickness for men or women, nor do we find evidence that these policies affect care-giving leave taking for women.

Topics: Public policy; Workforce

Jung Sakong and Alexander K. Zentefis

Low-income and Black households are less likely to visit bank branches than high-income and White households are, despite seemingly relying more on branches as means of bank participation. We assess whether unequal branch access can explain that disparity, by proposing a measure of bank branch access based on a gravity model of consumer trips to bank branches, estimated using mobile device geolocation data. We find that low-income communities have bank branch access, but that lower demand for products and services explains their lower branch use. In Black communities, worse access explains their entire drop-off in branch use.

Topics: Inequality; Banks; Low & moderate income

Dean Corbae, Andrew Glover, and Michael Nattinger

We develop a simple equilibrium model of rental markets for housing in which eviction occurs endogenously. Both landlords and renters lack commitment; a landlord evicts a delinquent tenant if they do not expect total future rent payments to cover costs, while tenants cannot commit to paying more rent than they would be able or willing to pay. Housing externalities widen the gap in housing access and quality between relatively high- and low-earning renters. Finally, government policies that restrict landlords’ ability to evict can improve welfare, though a full moratorium on evictions should be reserved for crises.

Topics: Housing; Public policy

Daniel G. Garrett and Ivan T. Ivanov

We study how regulation limiting environmental, social, and governance (ESG) policies distorts financial market outcomes. In 2021 Texas enacted laws prohibiting municipalities from contracting with banks with certain ESG policies, leading to the exit of five of the largest municipal bond underwriters from the state. Issuers face higher uncertainty and borrowing costs as a result. Texas issuers will incur $300–$500 million in additional interest on the $31.8 billion borrowed during the first eight months following enactment.

Topics: Borrowing & lending; Credit & financial markets; Banks

Chris de Mena, Suvy Qin, and Jing Zhang

Asian Americans experienced a disproportionately larger surge in unemployment rates than other racial and ethnic groups during the COVID-19 pandemic. While existing literature typically examines labor demand channels to explain this, we instead explore a labor supply channel. Our hypothesis is that Asian Americans are more cautious about COVID-19 infections and thus more selective about job opportunities. Analysis of cellphone data during the pandemic indicates that non-work mobility significantly decreased in areas with larger Asian populations, supporting our hypothesis.

Topics: Employment & labor markets; Public health; Unemployment

Gustavo de Souza

I study the effect of a quota for disabled workers on the labor market and on welfare. Using a task-based model, I show that the effect of a quota will depend on the productivity of disabled workers and their labor supply elasticity. I find that the quota increased the hiring of disabled workers, but it reduced wages and employment of non-disabled workers, suggesting that the quota reduced firms’ productivity. I also find that the quota for disabled workers decreased welfare by 0.33% and forced the government to increase marginal taxes.

Topics: Employment & labor markets; Public policy

Natee Amornsiripanitch

This paper uses data on millions of single-borrower mortgage applications to study the relationship between applicant age and mortgage application outcomes. Mortgage refinance applications submitted by older borrowers are associated with higher rejection probabilities, a pattern that holds within lender and across loan types. Age appears to be an equally important correlate of mortgage application outcomes as race and ethnicity. The results suggest that older individuals systematically face higher barriers to mortgage access.

Topics: Borrowing and lending; Housing; Inequality

Mark Bils, Marianna Kudlyak, and Paulo Lins

Typical measures of wages, such as average hourly earnings, fail to capture cyclicality in the effective cost of labor in the presence of (i) cyclical fluctuations in the quality of worker-firm matches, or (ii) wages being smoothed within employment matches. To address both concerns, we estimate cyclicality in labor’s user cost exploiting the long-run wage in a match to control for match quality. Using NLSY data for 1980 to 2019, we identify three channels by which hiring in a recession affects user cost. We find that labor’s user cost is highly procyclical, increasing by more than 4 percent for a 1 percentage point decline in the unemployment rate.

Topics: Recessions; Wages, income, and wealth; Employment & labor markets

Elin Halvorsen, Joachim Hubmer, Serdar Ozkan, and Sergio Salgado

We use Norwegian administrative panel data on wealth and income between 1993 and 2015 to study life cycle wealth dynamics, focusing on the wealthiest households. We find that on average, the wealthiest start their lives substantially richer than other households in the same cohort, own mostly private equity, earn higher returns, derive most of their income from dividends and capital gains, and save at higher rates. However, there are distinguishable groups among the wealthiest: one-fourth of them start with negative wealth but experience rapid wealth growth early in life, explained by even higher saving rates and higher labor income.

Topics: Wages, income, and wealth; Inequality

Lara Loewenstein and Paul S. Willen

We study the evolution of prices and rents of residential property. After constructing rent and price indices for renter- and owner-occupied properties, we decompose the change in the price of occupant-owned property into (1) changes in rent, (2) changes in the relative prices of investor- and occupant-owned properties, and (3) changes in the price–rent ratio. Via a simple model, we link our decomposition to different sources of variation in house prices. We argue that while the 2000s boom was plausibly driven by exuberant expectations, the boom of the 2020s more likely resulted from a preference shock.

Topics: Housing; Credit & financial markets

Kristen Broady, Darlene Booth-Bell, Anthony Barr, and Ryan Perry

The COVID-19 pandemic has accelerated trends in automation as many employers seek to save on labor costs amid widespread illness, increased worker leverage, and market pressures to onshore supply chains. This analysis updates earlier findings that Black and Hispanic workers continue to be overrepresented in the 30 occupations with the highest estimated risk of automation and underrepresented in the 30 occupations with the lowest estimated risk of automation. The paper also considers automation’s impact on wage structures, the broader implications of automation for global economics, and the potential interplay of automation with recent developments in artificial intelligence.

Topics: Technology & innovation; Inequality; Employment & labor markets

Daniel R. Carroll and Sewon Hur

We provide a quantitative analysis of the distributional effects of the 2018 tariff increases by the United States and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the tariff increases is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth households, while only wealthy households experience a welfare gain.

Topics: Trade & globalization; Taxes & tax policy; Inequality

Gizem Kosar and Wilbert van der Klaauw

In addition to realized earnings and employment shocks, forward-looking individuals are presumed to condition their consumption and labor supply decisions on their subjective beliefs about future labor market risks. This paper analyzes these perceptions of earnings and employment risks using rich monthly panel data. It documents considerable heterogeneity in individual expectations of earnings growth, voluntary job exit, and involuntary job exit. We examine how these expectations evolve over the working life and the business cycle, and how they co-vary with expectations about the macro economy.

Topics: Employment & labor markets; Wages, income, and wealth

James Bailey, Nathan Blascak, and Slava Mikhed

In July 2005, the state of Missouri implemented a series of cuts to its Medicaid program that removed about 100,000 Missourians from the program and reduced the value of the insurance for remaining enrollees. Using data from the Medical Expenditure Panel Survey, we show how these cuts increased out-of-pocket medical spending for individuals living in Missouri and led to increases in both credit card borrowing and debt in third-party collections.

Topics: Insurance; Public health; Credit & financial markets

Jeff Larrimore, Jacob Mortenson, and David Splinter

Using panel tax data, we follow the earnings of individuals over business cycles. Compared with those for prior recessions, the COVID policy response and recovery were far more progressive. Among workers starting in the bottom quintile, median real earnings including fiscal relief increased 66 percent in 2020 and earnings increases offset relief decreases in the 2021 recovery. After the prior two recessions, this measure had decreased by 24 percent.

Topics: Wages, income, and wealth; COVID-19; Public policy

Daniel Ringo

Does monetary policy influence who becomes a homeowner? Exploiting the timing of high-frequency observations of mortgage applicants locking in their interest rates around monetary policy shocks, I find that a 1-percentage-point, policy-induced increase in mortgage rates lowers the presence of low-income households in the population of home buyers by 1 percentage point, and of low- and moderate-income households by 2 percentage points. Effects are substantially stronger among first-time home buyers, and they persist for approximately one year.

Topics: Monetary policy; Housing

Sumit Agarwal, Andrea Presbitero, André F. Silva, and Carlo Wix

We study credit card rewards as an ideal laboratory to quantify redistribution between consumers in retail financial markets. Comparing cards with and without rewards, we find that, regardless of income, sophisticated individuals profit from reward credit cards at the expense of naive consumers. We then exploit bank-initiated account limit increases at the card level to show that reward cards induce more spending, leaving naive consumers with higher unpaid balances. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas, widening existing disparities.

Topics: Credit & financial markets

Daniel Hartley and Jonathan Rose

In a panel of census tracts across large cities in the postwar United States, we compare tracts subjected to blockbusting activity to similar neighboring tracts not subjected to blockbusting. We find that blockbusting caused substantially lower house values over the next few decades. Our analysis of property-level data in one neighborhood of Baltimore, Maryland, finds that new residents that purchased their properties through blockbusters were charged higher prices and had higher foreclosure rates than new residents that purchased directly from existing property owners.

Topics: Inequality; Wages, income, and wealth; Housing

Dean Corbae and Andrew Glover

We develop a framework to understand the effects of pre-employment credit screening in both labor and credit markets. People differ in both their propensity to default on debt and the profits they create for firms that employ them. In our calibrated economy, workers with a low default probability are highly productive and therefore generate more profits for their employers; thus, firms create more jobs for those with good credit. However, using credit reports to screen job applicants creates a poverty trap: an unemployed worker with poor credit has a low job-finding rate and cannot improve their credit without a job. Banning employer credit checks eliminates the poverty trap, but job seekers with good and bad credit now apply to the same jobs, which reduces matching efficiency. As a result, average job-finding rates fall 1.3 percent for high-productivity workers and rise by 1.7 percent for low-productivity workers.

Topics: Credit & financial markets

Jacob Goss, Daniel Mangrum, and Joelle W. Scally

We quantify the total stock of balances eligible for the 2022 federal student loan forgiveness policy and explore which groups benefit most. The borrowers who benefit most, as measured by the ratio of forgiven balances to balances held, are younger, have lower credit scores, and live in lower-income neighborhoods. Compared to other salient fiscal policies, the forgiveness policy distributes less benefit to lower-income ZIP codes than the Earned Income Tax Credit, but more benefit to lower-income ZIP codes than the 2019 Child Tax Credit and the 2019 education tax credits for higher education.

Topics: Public policy; Higher education; Consumer finance

Robert Collinson, John Eric Humphries, Nicholas Mader, Davin Reed, Daniel Tannenbaum, and Winnie Van Dijk

Policymakers at the federal, state, and local levels are increasingly pursuing policies to reduce the number of evictions, citing harm to tenants and high public expenditures related to homelessness. We document that prior to housing court, tenants experience declines in earnings and employment and increases in financial distress and hospital visits. We find that an eviction order increases homelessness and reduces earnings, durable consumption, and access to credit. Effects on housing and labor market outcomes are driven by impacts for female and Black tenants.

Topics: Housing; Public policy; Inequality

Joaquin Garcia-Cabo, Anna Lipinska, and Gaston Navarro

Unemployment insurance and wage subsidies are key tools to support labor markets in recessions. We develop a multi-sector search and matching model with on-the-job human capital accumulation to study labor market policy responses to sector-specific shocks. We find that after a temporary sector-specific shock, unemployment insurance improves both productivity and reallocation toward productive sectors at the cost of initially higher unemployment and, thus, human capital destruction. In the United States, unemployment insurance is preferred to wage subsidies when it does not distort job creation for too long.

Topics: Unemployment; Insurance; Public policy

Oz Shy and Joanna Stavins

Using detailed data from a 2021 representative diary survey of U.S. consumers, we investigate whether lower-income consumers and Black consumers are more likely to pay bank account or credit card fees. We find that the probability of paying several types of bank account and credit card fees is correlated with consumers’ demographic attributes and payment behavior. We find that lower-income consumers were significantly more likely to pay overdraft fees and Black consumers were significantly more likely to pay any bank account fee when we hold income and account balances constant in the regressions.

Topics: Borrowing & lending; Inequality

Barış Kaymak and Immo Schott

We document a strong empirical connection between corporate taxation and the manufacturing labor share in the United States and other OECD countries. Our estimates associate 30 percent to 60 percent of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor share by raising the market share of capital-intensive firms. Given the empirical distribution in the U.S. manufacturing sector, our quantitative analysis suggests that corporate tax cuts explain a significant part of the decline in the manufacturing labor share since the 1950s.

Topics: Manufacturing; Taxes & tax policy

Bharadwaj Kannan, Roberto B. Pinheiro, and Harry Turtle

We model an environment with overlapping generations of labor to show that policies restricting labor mobility increase a firm's monopsony power and labor turnover costs. Subsequently, firms increase capital expenditure, altering their optimal capital–labor ratio. We confirm this by exploiting the statewide adoption of the inevitable disclosure doctrine (IDD), a law intended to protect trade secrets by restricting labor mobility. After an IDD adoption, local firms increase capital by 3.5 percent. IDD adoptions do not spur investment in either R&D or growth options as intended.

Topics: Employment & labor markets

Claire Conzelmann, Arianna Salazar-Miranda, Toan Phan, and Jeremy S. Hoffman

Urban design can amplify the environmental risks of climate change through the well-known urban heat island and rainfall effects. Here, we use a boundary design to estimate the persistent causal effects of redlining on present-day exposure to climate change–exacerbated environmental risks in six large U.S. cities. Properties in areas assigned a lower credit grade by the Home Owners’ Loan Corporation in the 1930s have 3 percent higher exposure to flood risk and a 0.07◦F higher air temperature today compared to similar properties in higher-graded areas. We show that these differences are driven by lower tree canopy coverage and ground surface perviousness in lower-graded areas.

Topics: Climate; Inequality

Cynthia L. Doniger and Desmond Toohey

The design of U.S. unemployment insurance (UI) policy—which features benefits assigned as a percentage of past wages up to a cap—allows us to test whether policy changes impact job-search outcomes of workers who are not directly affected. We show that the documented pattern conforms with the predictions of a canonical model of information frictions: wage posting with random search. Our results provide novel evidence of information frictions in this market that are relevant both quantitatively and with respect to policy. Moreover, our estimates suggest that aggregate unemployment of insured individuals would decrease if the replacement rate were increased while holding the cap constant.

Topics: Unemployment; Public policy

Pinghui Wu, Vincent Fusaro, and H. Luke Shaefer

Leveraging novel data on consumer credit and debit card spending by Zip code, this study examines how the impact of government transfers on economic well-being varied by household type during the COVID-19 pandemic. Our findings indicate that pandemic transfers disproportionately benefited households with children, buffering them from earnings losses at the pandemic’s start and sustaining spending growth over time. Household essential spending increased proportionally with the delivery of cash transfers, while discretionary spending was influenced more by pandemic-specific factors beyond household income. These findings highlight the efficacy of government transfers in safeguarding household consumption during a period of large-scale job loss.

Topics: COVID-19; Public policy

Pinghui Wu

This article offers the first empirical evidence that labor force exit rates rise when workers’ relative earnings fall. The model takes into account that a job not only provides economic security but also affirms a worker’s social status, which is tied to their relative position in the labor market. The decline in relative earnings for non-college prime-age men over the last four decades is estimated to have raised their labor force exit propensity by 0.49 percentage points, accounting for 44 percent of the total growth in their labor force exit rate during this period.

Topics: Employment & labor markets; Inequality; Wages, income, and wealth

Patricia Cortès, Gizem Kosar, Jessica Pan, and Basit Zafar

This paper studies how peer beliefs shape individual attitudes toward maternal labor supply, using realistic hypothetical scenarios that elicit recommendations on the labor supply choices of a mother with a young child and an information treatment embedded within representative surveys. Across the scenarios, we find that individuals systematically overestimate the extent of gender conservativeness among the people around them. Exposure to information on peer beliefs leads to a shift in recommendations, driven largely by information-based belief updating.

Topics: Workforce

James N. Conklin, Kristopher Gerardi, and Lauren Lambie-Hanson

In recent years the amount of “tappable” home equity held by U.S. homeowners has reached historic levels. But more than one-quarter of recent applications for mortgage equity withdrawal (MEW) loan products were denied. For Black and Hispanic homeowners, their denial rates were 44 percent and 32 percent, respectively. Controlling for loan and borrower characteristics commonly used in the underwriting process significantly reduces the MEW disparities. Seemingly race-neutral underwriting criteria in the MEW product space explain large differences in the extent to which minority homeowners can access their home equity.

Topics: Inequality; Borrowing & lending

Neil Bhutta, Aurel Hizmo, and Daniel Ringo

We assess racial discrimination in mortgage approvals, using new data on mortgage applications. Minority applicants tend to have significantly lower credit scores and higher leverage, and they are less likely than White applicants to receive algorithmic approval from race-blind government automated underwriting systems (AUS). Observable applicant risk factors explain most of the racial disparities in lender denials.

Topics: Borrowing & lending; Credit & financial markets; Housing

Gustavo de Souza and André Victor D. Luduvice

In the United States, workers must satisfy two requirements to receive unemployment insurance (UI): a tenure requirement of a minimum work spell and a monetary requirement of a past minimum earnings. Using discontinuity of UI rules at state borders, we find that the monetary requirement decreases the number of employers and the share of part-time workers, while the tenure requirement has the opposite effect. In a quantitative model, the monetary requirement induces workers to search longer because low paying jobs are not covered by UI.

Topics: Insurance; Unemployment; Public policy

Bruce Fallick and Christopher L. Foote

Economists have studied the potential effects of shifts in the age distribution on the unemployment rate for more than 50 years. This paper uses state-level data to examine demographic effects across the entire age distribution rather than just the youth share of the population. We find that shifts in the age distribution move the unemployment rate in the direction that a mechanical shift-share model would predict. But these effects are larger than the mechanical model would generate, indicating the presence of amplifying indirect effects of the age distribution on unemployment.

Topics: Unemployment; Workforce

Barış Kaymak, David Leung, and Markus Poschke

We assess the empirical relevance of different macroeconomic modeling approaches to wealth concentration, using the joint distribution of earnings, capital income, and net worth in combination with an overlapping-generations model of household heterogeneity. We find large earnings disparities to be the primary source of wealth concentration in the United States. This reflects the fact that labor income from salaries as well as from entrepreneurship is a major income source for top income and wealth groups in the data. Bequests and differences in rates of return on capital together explain about half the holdings of the wealthiest of households, but much less for the rest.

Topics: Wages, income, and wealth

Fatih Guvenen, Gueorgui Kambourov, Burhanettin Kuruscu, Sergio Ocampo, and Daphne Chen

How does wealth taxation differ from capital income taxation? With return heterogeneity, the two tax systems typically have opposite implications for efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive and therefore generate more income pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones. In the simulated model parameterized to match U.S. data, replacing the capital income tax with a wealth tax in a revenue-neutral fashion delivers a significantly higher average welfare.

Topics: Taxes & tax policy

Victoria Gregory, Julian Kozlowski, and Hannah Rubinton

We incorporate race into an overlapping-generations spatial-equilibrium model with neighborhood spillovers. Race matters in two ways: (i) the Black-White wage gap and (ii) homophily, the preferences of individuals over the racial composition of their neighborhood. We find that these two forces generate a Black-White college gap of 22 percentage points, explaining about 80 percent of the college gap in the data for the St. Louis metro area. A policy of equalizing school funding across neighborhoods reduces the college gap by almost 10 percentage points and generates large welfare gains.

Topics: Higher education; Inequality; Spatial economics

Dionissi Aliprantis, Hal Martin, and Kristen Tauber

This paper studies how design features influence the success of Housing Mobility Programs (HMPs) in reducing racial segregation. Targeting neighborhoods based on previous residents’ outcomes does not allow for targeting race-specific outcomes, generates uncertainty when targeting income-specific outcomes, and generates bias in ranking neighborhoods’ effects. HMP success is aided by the ability to port vouchers across jurisdictions, access to cars, and relaxing supply constraints, perhaps by targeting lower-ranked neighborhoods.

Topics: Housing; Public policy; Diversity & inclusion

Amrita Kulka, Aradhya Sood, and Nicholas Chiumenti

An important way to ensure low rents and low house prices is to increase the housing supply, which in land-constrained metropolitan areas involves constructing denser forms of housing. This study looks at how different zoning regulations interact with each other to affect the supply of various types of housing and the prices of single-family homes and rents for multifamily apartments. This paper focuses on three regulations: multifamily zoning, maximum-height restrictions, and density restrictions.

Topics: Housing; Low & moderate income

Parag Mahajan, Dhiren Patki, and Heiko Stüber

Studies find that if a worker enters the labor market during an economic downturn versus a period of expansion, they likely will have more difficulty finding a high-paying job, because the availability of such jobs is strongly procyclical. The earnings penalty for starting a career during bad times is both substantial and persistent. But to what extent do non-pecuniary characteristics of jobs offset some of those earnings losses? This paper uses population-scale linked employer-employee administrative data from Germany to estimate both the pecuniary and non-pecuniary impact of entering the workforce during a recession.

Topics: Recessions; Employment & labor markets

Wenhua Di, Carla Fletcher and Jeff Webster

Parents taking out loans for their children’s college educations may face an excessive debt burden that jeopardizes their own financial security. We find that Parent Loan for Undergraduate Students (PLUS) borrowers are more likely to default if their children attend low-resource institutions. Although parent PLUS generally outperforms student loans, PLUS performance is sensitive to program costs during difficult economic times. In contrast, student outcomes depend more on educational outcomes. This study reveals the differing consequences of parent and student borrowing for higher education and the troublesome PLUS program design that poses challenges to certain borrowers.

Topics: Borrowing & lending; Higher education

Phillip Levine and Dubravka Ritter

We examine how the racial wealth gap interacts with financial aid in American higher education to generate a disparate impact on college access and outcomes. Retirement savings and home equity are excluded from the formula used to estimate the amount a family can afford to pay. We show that this treatment of assets provides an implicit subsidy worth thousands of dollars annually to students from families with above-median incomes. White students receive larger subsidies than Black students and Hispanic students with similar family incomes, and this gap in subsidies is associated with disadvantages in educational advancement and student loan levels.

Topics: Higher education; Inequality; Wages, income, and wealth

Lutz Hendricks, Tatyana Koreshkova, and Oksana Leukhina

College admissions are highly meritocratic in the U.S. today, but this is not the case in many other countries. What is the tradeoff? On one hand, meritocracy produces more human capital overall if higher-ability students learn more in college and if they learn more in higher-quality colleges. On the other hand, more meritocracy generates a higher degree of earnings inequality. In this paper, we quantify this efficiency-equality tradeoff.

Topics: Higher education; Inequality

Victoria Gregory

This paper identifies workers who experience a job separation during a recession and tracks their labor force status in the following year, using the Current Population Survey. Workers are classified as exiters if they leave the labor force shortly after their job loss and non-exiters if they do not. The pool of exiters is disproportionately female, less educated, and older. I find that changes in the likelihood of being re-employed as well as the composition of individuals out of work are important for understanding the differences between the labor market in the Great Recession and the pandemic recession.

Topics: Recession; Employment & labor markets

Natee Amornsiripanitch, Paul A. Gompers, George Hu, and Kaushik Vasudevan

We study immigrant founders of venture capital–backed firms. Immigrant founders have been critical to the entrepreneurial ecosystem, accounting for roughly 20 percent of all venture capital–backed founders over the past 30 years. Higher education has served as the primary entry channel for immigrant founders. Immigrant founders are likely to start their companies in the state in which they were educated, leading to potentially large local economic benefits associated with attracting foreign students. The results of this paper have important policy implications for the supply of entrepreneurial talent and efforts to promote entrepreneurial ecosystems.

Topics: Public policy; Immigration; Higher education

Nathan Blascak and Vyacheslav Mikhed

We study how health-insurance eligibility affects financial distress for young adults using the Affordable Care Act’s (ACA) dependent coverage mandate—the part of the ACA that requires private health-insurance plans to cover individuals up to their 26th birthday. Our estimates show that increasing access to health insurance lowers young adults’ out-of-pocket medical expenditures and debt in third-party collections. However, reductions in financial distress are transitory, as they diminish after an individual loses access to parental insurance when they age out of the mandate at age 26.

Topics: Insurance; Public health

Robert Rich and Joseph Tracy

This paper focuses on the implications of alternative methods of aggregating individual wage data for the behavior of economy-wide wage growth. The analysis is motivated by evidence of significant heterogeneity in individual wage growth and its cyclicality. Because of this heterogeneity, the choice of aggregation will affect the properties of economy-wide wage growth measures. We find that aggregation effects largely account for average hourly earnings growth being persistently lower and less cyclical than average wage growth over the period 1990–2015, with these effects reflecting a disproportionate weighting of high-earning workers.

Topics: Wages, income, and wealth

Axelle Ferriere, Philipp Grübener, Gaston Navarro, and Oliko Vardishvili

We study the optimal design of means-tested transfers and progressive income taxes. In a simple analytical model, we demonstrate an optimally negative relation between transfers and income-tax progressivity due to efficiency and redistribution concerns. Transfers are key to implementing higher progressivity in average tax-and-transfer rates than in marginal ones, achieving redistribution while preserving efficiency. Quantitatively, the left tail of the income distribution determines optimal transfers, whereas the right tail determines income-tax progressivity.

Topics: Taxes & tax policy

Kenneth P. Brevoort

Under the Community Reinvestment Act (CRA), banks can fulfill their affirmative obligation to meet local credit needs by lending in low-to-moderate-income (LMI) communities or by purchasing loans made by others. This paper evaluates whether giving CRA credit for purchases has had its intended effect of increasing LMI credit availability by making LMI loans more liquid. Analyses using a regression discontinuity design show that the CRA increases loan purchases without affecting LMI originations. Instead, banks purchase loans that are temporarily diverted from government sponsored enterprises, which provides little benefit to the communities the CRA is meant to help.

Topics: Community Reinvestment Act (CRA); Borrowing & lending; Low & moderate income

José Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent Meyer, and Emil Mihaylov

The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of U.S. employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. The amenity-values gains associated with the recent rise of remote work also lower labor's share of national income by 1.1 percentage points.

Topics: Wages, income, & wealth; Employment & labor markets

Kristen Broady, Darlene Booth-Bell, and Taylor Griffin

Using data from the 2019 Survey of Consumer Finances, the U.S. Census Bureau, and other sources, this paper presents seven economic facts about the racial wealth gap in the United States. We present data on racial disparities in income, employment, homeownership, education, access to credit, and retirement savings. While none of the economic factors listed fully explains the racial wealth gap, each factor, along with a history of racism and discrimination, has contributed to the extreme wealth inequality in America today.

Topics: Wages, income, & wealth; Inequality

Leah Brooks, Jonathan Rose, and Stan Veuger

We study the aftermath of the 1968 Washington, DC, civil disturbance to illuminate the mechanisms that drive urban redevelopment in the presence of low demand and racial tension. After establishing that civil disturbance property destruction was quasi-random within blocks, we show that destroyed lots were more likely than other lots on the same block to remain vacant for the next 30 years. We also show that destroyed lots have only recently converged in terms of structure value. Our theoretical framework suggests that the city sought to preclude for-profit land owners from leaving land vacant until demand conditions improved.

Topics: Community & economic development

Dionissi Aliprantis, Kyle D. Fee, and Mark E. Schweitzer

This paper quantifies the relationship between local opioid prescription rates and labor market outcomes in the United States between 2006 and 2016. In our preferred specification, a 10-percent-higher local prescription rate is associated with a lower prime-age labor force participation rate of 0.53 percentage points for men and 0.10 percentage points for women.

Topics: Public health; Employment & labor markets

Erik Hurst, Patrick J. Kehoe, Elena Pastorino, and Thomas Winberry

We develop a framework with rich worker heterogeneity, firm monopsony power, and putty-clay technology to study the distributional impact of the minimum wage in the short and long run. We find that in the short run, a large increase in the minimum wage has a small effect on employment and therefore increases the labor income of the workers who were earning less than the new minimum. In the long run, however, the minimum wage has perverse distributional implications in that it reduces the employment, income, and welfare of precisely the low-income workers it is meant to help. Existing transfer programs are more effective at improving long-run outcomes for workers at the low end of the wage distribution.

Topics: Minimum wage; Low & moderate income; Public policy

Donggyu Lee, Sebastian Doerr, and Thomas Drechsel

This paper shows that rising top income shares affect job creation at firms of different sizes. High-income households save relatively more in stocks and bonds and less in bank deposits. Exploiting variation in top incomes across U.S. states, we establish that an increase in the income share of the top 10 percent reduces the job creation rate at small, bank-dependent firms relative to the rate at large firms. Experiments in our model show that growing top incomes account for 16 percent of the decline in the employment share of small firms since 1980, and that ignoring the link between inequality and job creation understates the welfare effects of income redistribution.

Topics: Inequality; Employment & labor markets; Small business

W. Scott Frame, Ruidi Huang, Erik J. Mayer, and Adi Sunderam

We study links between the labor market for loan officers and access to mortgage credit. Using novel data matching the (near) universe of mortgage applications to loan officers, we find that minorities are significantly underrepresented among loan officers. Disparities in mortgage application rates, approvals, loan take-up, and default rates are significantly reduced when minority borrowers work with minority loan officers. Our results suggest that minority underrepresentation among loan officers has adverse effects on minority borrowers’ access to credit.

Topics: Borrowing & lending; Inequality

Brett R. Barkley and Mark E. Schweitzer

We apply data from the Federal Reserve’s Small Business Credit Survey from 2016 to 2020 to estimate disparities in access to small business financing through loan denials and discouragement. We find that substantial credit disparities continue to exist despite the growth of fintech lenders, which prior research shows have expanded the set of small businesses receiving credit. PPP loans represented an unprecedented support for small businesses, support that was not dependent on the creditworthiness of businesses, but minority-owned businesses are estimated to have received a smaller fraction of the funds they applied for from the program.

Topics: Credit & financial markets; Payments & FinTech; Inequality

Lauren Sartain, Riley Lewers, and Lisa Barrow

Urban school districts nationwide have increased within-district choice for families. In response, district policymakers are overhauling the systems for applying to and enrolling in schools, with the goal of making it easier and more equitable for students to enroll in schools that are a good fit for them. Using the implementation of such a system in Chicago Public Schools, we examine how applications to, offers from, and enrollment in different types of high schools (e.g., high-performing vs. low-performing schools, charter vs. neighborhood schools) changed. The largest gains appear to be from streamlining applications and offers, with students receiving a single-best offer and schools having more certainty around their incoming ninth-grade class.

Topics: K-12 education; Inequality

Marco Migueis, Michael Suher, and Jessie Xu

We assess whether minimum account balances to avoid fees, account maintenance fees, and non-sufficient funds charges are systematically different in low- and moderate-income communities (LMI) and in majority-minority communities. We find that they are generally higher. Differences in bank fees between LMI, majority-minority, and other communities result from various factors, including bank lending income, bank operating costs, and bank size.

Topics: Banks; Inequality; Low & moderate income

Byeongchan An, Robert Bushman, Anya Kleymenova, and Rimmy E. Tomy

This paper studies the role banking supervision plays in improving access to credit for minority groups by investigating how enforcement decisions and orders (EDOs) affect the bank borrower base. We find that after the resolution of an EDO, banks significantly increase residential mortgage lending to minority borrowers relative to lending to White borrowers, even when the enforcement order is not issued for violations of fair lending laws. Our findings highlight the indirect social benefits of bank enforcement and supervision.

Topics: Borrowing & lending; Banks; Inequality

David Ratner and Jae Sim

Conventional wisdom has it that sound monetary policy since the 1980s not only conquered the Great Inflation but also buried the Phillips curve. This paper provides an alternative explanation: labor market policies that have eroded worker bargaining power might have been the source of the demise of the Phillips curve. We show that a nearly 90 percent reduction in inflation volatility is possible even without any changes in monetary policy when the economy transitions from equal shares of power between workers and firms to a new balance in which firms dominate.

Topics: Monetary policy; trade unions

Samuel Dodini, Jeff Larrimore, and Anna Tranfaglia

This paper considers the credit response of individuals after the implementation of new work requirements for Supplemental Nutrition Assistance Program (SNAP) benefits, using a large nationally representative sample of credit records. We find that the new requirements lead more people to seek out new credit. New work requirements also result in an increase in total outstanding balances on bank and retail card accounts and increase the number of borrowers that are past due on these accounts. These findings suggest that some individuals are turning to credit and debt products to cover expenses after losing eligibility for SNAP benefits.

Topics: Public policy; Borrowing & lending

Daniel A. Dias and Joao B. Duarte

We show that monetary policy affects homeownership decisions and argue that this effect is an important and overlooked channel of monetary policy transmission. We first document that monetary policy shocks are a substantial driver of fluctuations in the U.S. homeownership rate and that monetary policy affects households' housing tenure choices. We show that the homeownership decision channel amplifies the redistributive effects of monetary policy, with contractionary shocks benefiting more outright homeowners and disadvantaging more renters and homeowners with a mortgage.

Topics: Monetary policy; housing

Juan Herreno and Mathieu Pedemonte

We study the differential regional effects of monetary policy, exploiting geographical heterogeneity in income across cities in the United States. We find that prices and employment in poorer cities react more to monetary policy shocks. The results for prices hold for a wide range of narrow consumer expenditure categories. We show that an increase in heterogeneity across cities amplifies the effect of monetary policy on prices and employment.

Topics: Monetary policy; Spatial economics

Victor Hernandez Martinez and Kaixin Liu

This paper argues that the value of unemployment insurance (UI) can be decomposed into a liquidity component and an insurance component. Using Spanish administrative data, we find that the liquidity component represents half of the value of UI, while the insurance component captures the remaining half. However, the relevance of each component is highly heterogeneous across different groups of workers. Both poorer and wealthier workers are similarly liquidity-constrained, but poorer workers place a higher value on UI because the insurance component is significantly more important for them.

Topics: Unemployment; public policy

Takushi Kurozumi and Willem Van Zandweghe

Should monetary policy offset the effects of labor supply shocks on inflation and the output gap? Motivated by weak labor force participation during the pandemic, we reexamine the question by introducing labor force entry and exit in an otherwise canonical model with sticky prices and wages. The entry decision generates an employment channel of monetary policy, and a labor supply shock to the value of nonparticipation in the labor market induces a policy trade-off between stabilization of the employment gap and wage growth.

Topics: Monetary policy; Employment & labor markets

Brad Hershbein and Bryan Stuart

This paper studies how U.S. local labor markets respond to employment losses after recessions. We find that following each recession between 1973 and 2009, areas that lose more jobs during the recession experience persistent relative declines in employment and population. These local labor markets also experience persistent decreases in the employment–population ratio and per capita earnings. Our results imply that limited population responses result in longer-lasting consequences for local labor markets than previously thought and that recessions are followed by persistent reallocation of employment across space.

Topics: Employment & labor markets; Recessions; Spatial economics

John Mondragon and Johannes Wieland

What explains record U.S. house price growth since late 2019? We show that the shift to remote work explains over one half of the 23.8 percent national house price increase over this period. Using variation in remote work exposure across U.S. metropolitan areas, we estimate that an additional percentage point of remote work causes a 0.93 percent increase in house prices after controlling for negative spillovers from migration. Our results imply a fundamentals-based explanation for the recent increases in housing costs over speculation or financial factors and that the evolution of remote work is likely to have large effects on the future path of house prices and inflation.

Topics: Housing

Alexander Bick and Adam Blandin

Economists have recently begun using independent online surveys to collect national labor market data. Questions remain over the quality of such data. This paper provides an approach to address these concerns. Our case study is the Real-Time Population Survey (RPS), a novel online survey built around the Current Population Survey (CPS). Our discussion contains practical suggestions for the design of novel labor market surveys and highlights other promising applications of our methodology.

Topics: Employment & labor markets; COVID-19

Paweł Doligalski, Abdoulaye Ndiaye, and Nicolas Werquin

Half of the jobs in the U.S. feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses when such labor contracts arise from moral hazard frictions within firms.

Topics: Taxes & tax policy

Daniel Aaronson, Bhashkar Mazumder, Daniel Hartley, and Martha Stinson

We estimate the long-run effects of the 1930s Home Owners Loan Corporation (HOLC) redlining maps by linking children in the 1940 Census to 1) the universe of IRS tax data in 1974 and 1979 and 2) the long-form 2000 Census. We find that children living on the lower-graded side of HOLC boundaries had significantly lower levels of educational attainment, reduced income in adulthood, and lived during adulthood in neighborhoods characterized by lower educational attainment, higher poverty rates, and higher rates of single-headed households.

Topics: Inequality

Gustavo de Souza and André Victor D. Luduvice

In the United States, unemployed workers must satisfy two requirements to receive unemployment insurance (UI): a tenure requirement that stipulates the minimum qualifying work spell and a monetary requirement that determines a past minimum wage. This paper develops a heterogeneous-agents model with history-dependent UI benefits in order to quantitatively obtain an optimal UI program design. We show that, because it mitigates moral hazard, the monetary requirement can generate higher welfare levels than an increase in the length of the tenure requirement.

Topics: Unemployment; Public policy

devin michelle bunten, Ellen Fu, Lyndsey Rolheiser, and Christopher Severen

How have the longer journeys to work faced by Black commuters evolved in the United States over the last four decades? Black commuters spent 50.3 more minutes commuting per week in 1980 than White commuters; this difference declined to 22.4 minutes per week in 2019. Two factors account for the majority of the difference: Black workers are more likely to commute by transit, and Black workers make up a larger share of the population in cities with long average commutes.

Topics: Inequality

Giulio Cornelli, Jon Frost, Leonardo Gambacorta, and Julapa Jagtiani

Recently, nonbank lenders have gained market share in the small-business lending market in the United States. Among nonbanks, fintech lenders have become particularly active, leveraging alternative data for their own internal credit scoring. Our results show that fintech SBL platforms lent more in zip codes with higher business bankruptcy filings and higher unemployment rates. Overall, fintech lenders have the potential to create a more inclusive financial system, allowing small businesses that were less likely to receive credit through traditional lenders to access credit and to do so at lower cost.

Topics: Borrowing & lending; Credit & financial markets; Payments & FinTech

Kimberly Bayard, Tomaz Cajner, Vivi Gregorich, and Maria D. Tito

This paper explores the factors behind differences in wages between manufacturing and other sectors. Using data from the Current Population Survey, we find that the manufacturing wage premium—the additional pay a manufacturing worker earns relative to a comparable nonmanufacturing worker—has disappeared in recent years. A decomposition of the premium by union membership status reveals that declines have been substantially larger across union members. Our findings suggest that the erosion of “good” manufacturing jobs has contributed to the increase in overall wage inequality and could accelerate the decline of the manufacturing sector.

Topics: Wages, income, and wealth; Manufacturing; Inequality

Elior Cohen

Housing First programs provide housing assistance without preconditions for homeless individuals as a platform for rehabilitation, but limited evidence exists on their effects on socioeconomic outcomes. Using a novel data set combining administrative records from multiple public agencies in Los Angeles County and a random case manager assignment design, I estimate that Housing First assistance reduces homelessness and crime, increases income and employment, and does not have a detectable effect on health care utilization. Cost-benefit analysis implies that these potential savings offset program costs within 18 months.

Topics: Public policy

Brad Hershbein and Bryan Stuart

This paper studies how government transfers respond to changes in local economic activity that emerge during recessions. Local labor markets that experience greater employment losses during recessions face persistent relative decreases in per capita earnings. However, these areas also experience persistent increases in per capita transfers, which offset 16 percent of the earnings loss on average. The increase in transfers is driven by unemployment insurance in the short run and medical, retirement, and disability transfers in the long run. Our results show that nominally place-neutral transfer programs redistribute considerable sums of money to places with depressed economic conditions.

Topics: Recessions; Public policy; Employment & labor markets

Elira Kuka and Bryan Stuart

This paper studies differences in receipt and take-up of unemployment insurance (UI) benefits among White and Black individuals. We combine state-level UI regulations with data containing detailed information on individuals’ work history and UI receipt. Black individuals who separate from a job are 24 percent less likely than White individuals to receive UI. The UI receipt gap stems primarily from lower take-up of UI benefits among likely eligible individuals rather than differences in benefit eligibility.

Topics: Unemployment; Inequality; Insurance

Xudong (Sean) An, Stuart A. Gabriel, and Nitzan Tzur-Ilan

We investigate the impact of 2020 COVID-19 rental eviction moratoria on household well-being. Analysis indicates that eviction moratoria reduced eviction filings and resulted in redirection of scarce household financial resources to immediate consumption needs, notably including food and grocery spending. We also find that eviction moratoria reduced household food insecurity and mental stress, with larger effects evidenced among African American households.

Topics: Public policy; COVID-19

Robert Calvert Jump and Adam Scavette

We examine the labor market effects of the Neighbourhood Renewal Fund, which targeted 88 of the most deprived areas in England during the early 2000s. The fund disbursed almost £3 billion for community safety, education, health care and worklessness, with supply-side interventions making up the bulk of the program's spending on worklessness. We find statistically significant impacts on local employment and out-of-work benefit claimants. Our results suggest that policy interventions to improve local labor supply can be a successful strategy for neighborhood renewal.

Topics: Community & economic development; Employment & labor markets; Public policy

You Suk Kim, Donghoon Lee, Tess Scharlemann, and James Vickery

We study the role of mortgage servicers in implementing the CARES Act mortgage forbearance program during the COVID-19 pandemic. Despite universal eligibility, around one-third of the nonperforming federally backed loans in our sample fail to enter into forbearance. The relative frequency of these "missing" forbearances varies significantly across servicers for observably similar loans, with small servicers and nonbanks having a lower propensity to provide forbearance. The incidence of forbearance-related complaints by borrowers is also higher for these servicers. We also use servicer-level variation to estimate the causal effect of forbearance on borrower outcomes.

Topics: Borrowing & lending; Public policy; COVID-19

Ning Jia, Raven Molloy, Christopher Smith, and Abigail Wozniak

We review developments in research on within-country migration, focusing on internal migration in the U.S. We begin by describing approaches to modelling individuals' migration decisions and equilibrium outcomes across local areas. Next, we summarize evidence regarding the impact of migration on individuals' outcomes, implications of migration for local labor market adjustment, and interactions between migration and housing markets. Finally, we discuss evidence on the efficacy of policies aimed at encouraging migration and conclude by highlighting important unanswered questions that are critical for informing migration-related policy.

Topics: Migration; Employment & labor markets

Elias Ilin, Samantha Shampine, and Ellyn Terry

We evaluate the effects of free pre-kindergarten (pre-K) programs on the labor force participation of mothers, using variation in pre-K rules across U.S. states. We find that access to free pre-K programs increases overall maternal labor force participation by 2.3 percentage points. Mothers with the following demographic characteristics significantly increase their labor supply as a result of access to free pre-K: those who are married, those who are college educated, residents of metropolitan areas, and those with income either below 200 percent or above 400 percent of the federal poverty level.

Topics: Early childhood education; Employment & labor markets

John Sabelhaus and Jeffrey P. Thompson

We present updated measures of racial disparities in wealth, using the most recent data from the Survey of Consumer Finances augmented by household-level estimates of defined benefit pension wealth. We find that racial wealth disparities are smaller than the numbers typically discussed in other research, but the disparities remain substantial. Differences in lifetime earnings, pension generosity, and a handful of other human capital and work-related variables explain three-quarters of the White-Black wealth gap and 80 to 90 percent of the White-Hispanic gap.

Topics: Wages, income, and wealth; Inequality

Jung Sakong

Wealth is distributed more unevenly than income, and one contributing factor might be that richer households earn higher portfolio returns. I uncover one channel that causes portfolio returns to be increasing in wealth: poorer households consistently buy risky assets in booms—when expected returns are low—and sell after a bust—when expected returns are high. The estimated dispersion in expected returns from this “buy high, sell low” channel is large: the interquartile-range difference is 60 basis points per year.

Topics: Wages, income, and wealth; Inequality; Recessions

Daniel R. Carroll and Sewon Hur

We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the U.S. and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce labor and capital income taxes and increase transfers, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth and low-income workers, while only wealthy households experience a welfare gain.

Topics: Trade & globalization; Inequality; Taxes & tax policy

Stephan D. Whitaker

Using the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, I estimate the distribution of changes in local labor market conditions experienced by people who move to a different labor market. Net migration favors local labor markets with lower unemployment and faster job growth, but gross flows toward weaker labor markets are almost as large as the flows toward stronger labor markets. There are not clear advantages or disadvantages for migrants to strong or weak labor market regions as measured by credit scores, consumption, bankruptcy, or foreclosure.

Topics: Migration; Employment & labor markets

Cavit Baran, Eric Chyn, and Bryan Stuart

This paper studies the impact of the first Great Migration on children. We use the complete-count 1940 census to estimate selection-corrected place effects on education for children of Black migrants. On average, Black children gained 0.8 years of schooling (12 percent) by moving from the South to the North. Many counties that had the strongest positive impacts on children during the 1940s offer relatively poor opportunities for Black youth today. Opportunities for Black children were greater in places with more schooling investment, stronger labor market opportunities for Black adults, more social capital, and less crime.

Topics: Migration; K-12 Education

Tristan Potter, Bart Hobijn, and Andre Kurmann

We study the efficiency of non-compete agreements (NCAs) in an equilibrium model of labor turnover. The model is consistent with empirical studies showing that NCAs reduce turnover, average wages, and wage dispersion for low-wage workers. But the model also predicts that NCAs, by reducing turnover, raise recruitment and employment. We show that optimal NCA policy (i) is characterized by a Hosios-like condition that balances the benefits of higher employment against the costs of inefficient congestion and poaching, and (ii) depends critically on the minimum wage, so that enforcing NCAs can be efficient with a sufficiently high minimum wage.

Topics: Minimum wage; Employment & labor markets

Bin Wei and Feng Zhao

This paper examines racial disparities in mortgage processing times prior to the Global Financial Crisis. We find that in the case of mortgages securitized by government-sponsored enterprises, Black borrowers are underrepresented and experience a longer processing time than White borrowers. At the same time, Black borrowers are overrepresented and face a similar processing time among privately securitized mortgages. Additionally, Black borrowers are strongly associated with the faster segments of mortgage markets, faster lenders within each segment, and the types of loan products that are processed faster, all of which subsequently experienced higher defaults.

Topics: Borrowing & lending; Inequality

Price Fishback, Jonathan Rose, Ken Snowden, and Thomas Storrs

We show that from its inception in the 1930s, the Federal Housing Administration (FHA) did not insure mortgages in low-income urban neighborhoods, where the vast majority of urban Black Americans lived. The FHA’s exclusionary practice predates the advent of the infamous maps later made by the Home Owners’ Loan Corporation (HOLC) and shows little change after the drafting of those maps. In contrast, the HOLC itself broadly loaned to such neighborhoods and to Black homeowners. We conclude that the HOLC’s redlining maps had little effect on the geographic distribution of either program’s mortgage market activity.

Topics: Borrowing & lending; Inequality; Housing

Daniel Carroll and Sewon Hur

We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the U.S. and its major trading partners. When tariff revenues are used to reduce labor and capital income taxes and increase transfers, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth and low-income workers; only wealthy households experience a welfare gain.

Topics: Trade & globalization; Taxes & tax policy; Inequality

Natee Amornsiripanitch

Among single-family homes that enjoy the same set of property tax–funded amenities and pay the same statutory property tax rate, owners of inexpensive houses pay almost 50 percent higher effective tax rates than owners of expensive houses because inexpensive houses are over-assessed relative to expensive houses. This pattern is attributed to measurement error in sale prices, tax assessors’ ignoring variation in priced house and neighborhood characteristics, and infrequent reappraisal.

Topics: Housing; Taxes & tax policy; Inequality

Fatih Karahan, Serdar Ozkan, and Jae Song

We study the determinants of lifetime earnings inequality in the U.S. by focusing on job ladder dynamics and on-the-job learning as sources of wage growth. We find that the vast differences across worker types in job ladder risk—job loss, job finding, and contact rates—account for 80 percent of wage growth differences among workers with below median lifetime earnings. We conclude that different economic forces are driving the inequality in different parts of the lifetime earnings distribution.

Topics: Wages, income, and wealth; Employment & labor markets; Inequality

Joaquin Garcia-Cabo, Anna Lipinska, and Gaston Navarro

Unemployment insurance and wage subsidies are key tools to support labor markets in recessions. We develop a multi-sector search and matching model with on-the-job human capital accumulation to study labor market policy responses to sector-specific shocks. We find that after a temporary sector-specific shock, unemployment insurance improves both productivity and reallocation toward productive sectors at the cost of initially higher unemployment and, thus, human capital destruction. In the United States, unemployment insurance is preferred to wage subsidies when it does not distort job creation for too long.

Topics: Unemployment; Insurance; Public policy

Oz Shy and Joanna Stavins

Using detailed data from a 2021 representative diary survey of U.S. consumers, we investigate whether lower-income consumers and Black consumers are more likely to pay bank account or credit card fees. We find that the probability of paying several types of bank account and credit card fees is correlated with consumers’ demographic attributes and payment behavior. We find that lower-income consumers were significantly more likely to pay overdraft fees and Black consumers were significantly more likely to pay any bank account fee when we hold income and account balances constant in the regressions.

Topics: Borrowing & lending; Inequality

Barış Kaymak and Immo Schott

We document a strong empirical connection between corporate taxation and the manufacturing labor share in the United States and other OECD countries. Our estimates associate 30 percent to 60 percent of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor share by raising the market share of capital-intensive firms. Given the empirical distribution in the U.S. manufacturing sector, our quantitative analysis suggests that corporate tax cuts explain a significant part of the decline in the manufacturing labor share since the 1950s.

Topics: Manufacturing; Taxes & tax policy

Lauren Sartain and Lisa Barrow

In 2017, Chicago Public Schools adopted an online universal application system for all high schools with the hope of providing more equitable access to high-performance schools. Despite the new system, Black students and students living in low-socioeconomic-status neighborhoods remained less likely than their peers to enroll in a high-performance high school. We characterize constraints that students and families may face in enrolling in a high-performance high school, including eligibility based on prior academic achievement, distance from high-performance options, and neighborhood and elementary school resources.

Topics: K-12 education; Public policy; Diversity & inclusion

Daniel Aaronson, Jacob Faber, Daniel Hartley, Bhashkar Mazumder, and Patrick Sharkey

We estimate the long-run effects of the 1930s Home Owners Loan Corporation (HOLC) redlining maps on census tract–level measures of socioeconomic status and economic opportunity from the Opportunity Atlas (Chetty et al. 2018). We find that the maps had large and statistically significant causal effects on a wide variety of outcomes measured at the census tract level for cohorts born in the late 1970s and early 1980s.

Topics: Housing; Inequality; Economic opportunity

Dionissi Aliprantis and Hal Martin

The Opportunity Atlas (OA) is an innovative data set that ranks neighborhoods according to children’s adult outcomes in several domains, including income. This paper shows that neighborhood sorting contributes to OA estimates. We document cases in which small sample sizes and changes over time can explain disagreements between OA rankings and those based on contemporaneous variables.

Topics: Economic opportunity; Public policy

Fumiko Hayashi, Marie-Hélène Felt, Joanna Stavins, and Angelika Welte

Using data from the United States and Canada, we quantify consumers’ net pecuniary cost of using cash, credit cards, and debit cards for purchases across income cohorts. We find that consumers in the lowest-income cohort pay the highest net pecuniary cost as a percentage of transaction value, while consumers in the highest-income cohort pay the lowest net cost.

Topics: Consumer economics; Wages, income, and wealth; Inequality

Marianna Kudlyak, Murat Tasci, and Didem Tuzemen

This paper estimates the impact of minimum wage increases on the quantity of labor demanded as measured by firms’ vacancy postings. We find that minimum wage increases during the 2005–18 period led to substantial declines in vacancy postings in occupations with a larger share of employment around the prevailing minimum wage. Our estimate implies that a 10 percent increase in the binding minimum wage level reduces vacancies by 2.4 percent in this group.

Topics: Minimum wage; Unemployment

Brooke Helppie-McFall and Joanne W. Hsu

Using data from the Survey of Consumer Finances, we describe the financial profiles of U.S. families whose workers were most vulnerable to coronavirus-related earnings losses in the spring of 2020, based on whether a particular worker was deemed "essential" and whether a worker's job could be conducted remotely. We find that families with workers not able to work remotely who were most vulnerable to layoff also had both demographic and financial profiles that are associated with greater vulnerability to income shocks: These families were more likely to be people of color and single wage earners and to have less savings.

Topics: COVID-19; Unemployment; Wages, income, and wealth

James Bailey, Nathan Blascak, and Slava Mikhed

In July 2005, a set of cuts to Medicaid eligibility and coverage went into effect in the state of Missouri. We show that the Medicaid reform led to increases in both credit card borrowing and debt in third-party collections. Our results suggest that there are important asymmetries in the financial effects of shrinking a public health insurance program compared with a public health insurance expansion.

Topics: Public health; Public policy; Insurance

Maria Marta Ferreyra, Carlos Garriga, Juan David Martin, and Angelica Maria Sanchez Diaz

To evaluate the potential effects of free college policies, we develop and estimate a dynamic model of college enrollment, performance, and graduation. Universal free college expands enrollment the most, but it does not affect graduation rates and has the highest per-graduate cost. Performance-based free college, in contrast, delivers a slightly lower enrollment expansion, yet a greater graduation rate at a lower per-graduate cost. Additional, complementary policies might be required to elicit the large effort increase needed to raise graduation rates.

Topics: Higher education; Public policy

Sitian Liu and Yichen Su

Prior studies have shown that women are more willing to trade off wages for short commutes than men. Our model shows that differential commuting choices account for about 16-21 percent of the gender wage gap on average, but the contribution varies widely across residential locations. The model also shows that policies that increase commute speed or density in the central city neighborhoods could moderately lower the gender wage gap.

Topics: Wages, income, and wealth; Inequality

John Coglianese and Brendan M. Price

Joblessness is highly seasonal. We show that an excess share of prime-age U.S. workers experience recurrent separations spaced exactly 12 months apart. We find that these workers incur large earnings losses during the off-season. Lost earnings are (1) driven mainly by repeated separations from the same employer; (2) not recouped at other firms; (3) partly offset by unemployment benefits; and (4) amplified by concurrent drops in partners' earnings.

Topics: Employment & labor markets; Unemployment; Insurance

Leland D. Crane, Ryan A. Decker, Aaron Flaaen, Adrian Hamins-Puertolas, and Christopher Kurz

We review official data on business exit in recent decades. Business exit is common in the U.S. and is countercyclical. We explore a range of alternative measures and indicators of business exit, including novel measures based on payroll events and phone-tracking data, and find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, and exiting businesses do not appear to represent a large share of U.S. employment.

Topics: Small business; COVID-19; Recessions

Kristopher Gerardi, Paul Willen, and David Hao Zhang

Black and Hispanic White borrowers pay more than 50 basis points higher interest rates than White borrowers in a large, representative sample of loans insured by Fannie Mae and Freddie Mac. The authors show that this disparity is primarily driven by the fact that White borrowers are more likely to exploit periods of falling interest rates by refinancing their mortgages or moving.

Topics: Inequality; Monetary policy; Borrowing & lending

Diego Comin, Ana Danieli, and Martí Mestieri

We propose a mechanism for labor-market polarization based on the nonhomotheticity of demand that we call the income-driven channel. Our mechanism builds on a novel empirical fact: Expenditure elasticities and production intensities in low- and high-skill occupations are positively correlated across sectors. Thus, as income grows, demand shifts toward expenditure-elastic sectors, and the relative demand for low- and high-skill occupations increases, causing labor-market polarization.

Topics: Employment & labor markets; Wages, income, and wealth; Low & moderate income

Alexander Ludwig, Alexander Monge-Naranjo, Ctirad Slavik, and Faisal Sohail

We estimate the effects that various financial deregulations in the U.S. have had on the country's income distribution. We find that the various reforms have moved inequality in drastically different directions.

Topics: Inequality; Low & moderate income; Financial regulation

Nicolas Petrosky-Nadeau

Job acceptance decisions weigh the value of a job against remaining unemployed. A reservation level of benefit payments exists in this dynamic decision problem at which an individual is indifferent between accepting and refusing an offer. Estimating the reservation benefit for a wide range of U.S. workers suggests that few would turn down an offer to return to work at the previous wage under the CARES Act expanded unemployment insurance payments.

Topics: Insurance; Unemployment; COVID-19

Lindsay Jacobs, Elizabeth Llanes, Kevin Moore, Jeffrey Thompson, and Alice Henriques Volz

Hannah Rubinton

Michele Battisti, Ryan Michaels, and Choonsung Park

J. Ignacio García-Pérez and Sílvio Rendon

François Gourio and Charles Fries

Pia Orrenius, Madeline Zavodny, and Stephanie Gullo

Brett Barkley and Mark E. Schweitzer

Robert E. Hall and Marianna Kudlyak

Rajashri Chakrabarti, Vyacheslav Fos, Andres Liberman, and Constantine Yannelis

Didem Tüzemen

Daniel Cooper, Karen Dynan, and Hannah Rhodenhiser

Sanghoon Lee, Seung Hoon Lee, and Jeffrey Lin

Bo Zhao

Rajashri Chakrabarti and Maxim Pinkovskiy

Katharine Bradbury

Eric Nielsen

Davide Melcangi

Matthew Jaremski and David C. Wheelock

Andrew M. Dumont

Didem Tüzemen and Willem Van Zandweghe

Donna Feir, Rob Gillezeau, and Maggie E.C. Jones

Samuel Antill and Asani Sarkar

Diego Daruich

Enrique Martínez-García and Valerie Grossman

Kimberly Bayard, Emin Dinlersoz, Timothy Dunne, John Haltiwanger, Javier Miranda, and John J. Stevens

Andreas Fuster, Greg Kaplan, and Basit Zafar

Jonathan Fisher, David Johnson, Timothy Smeeding, and Jeffrey Thompson

Jeffrey Thompson, Michael Parisi, and Jesse Bricker

Jack DeWaard, Janna E. Johnson, and Stephan D. Whitaker

Bill Dupor, Marios Karabarbounis, Marianna Kudlyak, and M. Saif Mehkari

Daniel Aaronson, Jonathan Davis, and Karl Schulze

Michael Sposi

Bruce Fallick and Pawel Krolikowski

Tomaz Cajner, Tyler Radler, David Ratner, and Ivan Vidangos

Ina Ganguli, Jeffrey Lin, and Nicholas Reynolds

Sarena F. Goodman, Alice Henriques Volz, and Alvaro Mezza

Brandyn Bok, Daniele Caratelli, Domenico Giannone, Argia Sbordone, and Andrea Tambalotti

Leonard Nakamura, Jon Samuels, and Rachel Soloveichik

M.M. Croce, A.G. Karantounias, S. Raymond, and L. Schmid

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, and Huiyu Li

Kartik Athreya, José Mustre-del-Río, and Juan M. Sánchez

Patrick Coate, Pawel Krolikowski, and Mike Zabek

Marco Bassetto and Wei Cui

Chi-Young Choi and Alexander Chudik

Keith Barnatchez, Leland D. Crane, and Ryan A. Decker

Arthur Acolin, Paul Calem, Julapa Jagtiani, and Susan Wachter

Amanda Bayer and David W. Wilcox

Daniel Aaronson, Rajeev Dehejia, Andrew Jordan, Cristian Pop-Eleches, Cyrus Samii, and Karl Schulze

Daniel Cooper, María José Luengo-Prado, and Jonathan A. Parker

Lei Ding and Leonard Nakamura

Randall Akee, Elton Mykerezi, and Richard M. Todd

R. Anton Braun, Karen A. Kopecky, and Tatyana Koreshkova

Jonathan Davis and Bhashkar Mazumder

Kelly D. Edmiston

Randal J. Verbrugge and Joshua Gallin

Anat Bracha and Mary A. Burke

Kristle Cortés, Andrew Glover, and Murat Tasci

Pedro Amaral

Dionissi Aliprantis

Andrew Hanson, Zackary Hawley, and Hal Martin

Pia Orrenius

William R. Emmons and Lowell R. Ricketts

Roberto Pinheiro and Murat Tasci

Daniel Aaronson and Brian J. Phelan

Economic Research Department

Jenny Schuetz, Arturo Gonzalez, Jeff Larrimore, Ellen A. Merry, and Barbara J. Robles

Sarena F. Goodman and Adam M. Isen

Katharine Bradbury

Jonathan Heathcote and Hitoshi Tsujiyama

Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak, and John Mondragon

Daniel Cooper and María José Luengo-Prado

Lisa Barrow, Lauren Sartain, and Marisa de la Torre

Steven Laufer and Andrew Paciorek