System Working Papers

Kabir Dasgupta and Keisha Solomon

The Medicaid continuous enrollment provision, which was implemented during the COVID-19 pandemic, ended in March 2023. Our analysis investigates whether Medicaid’s continuous enrollment provision, implemented from 2020 to 2023, led to an increase in the risk of becoming uninsured for adults under 65. Using state-month variation in the timing of the first round of disenrollments, we first document a 6–12 percent decline in total Medicaid enrollments after states resumed their standard renewal process. However, we do not find statistically relevant effects on the probability of being without any health coverage most adults younger than 65.

Topics: Insurance; Public policy; Public health

Giovanni Favara, Francesca Loria, and Egon Zakrajšek

We use zip code–level data from the Internal Revenue Service to measure the distribution of income within U.S. metropolitan areas from 1998 through 2019. Exploiting geographic variation in income distribution over time, we study how unanticipated changes in the monetary policy stance shape the subsequent dynamics of income inequality. The results show that monetary policy persistently affects labor income inequality and that these distributional effects are amplified significantly in weak local labor markets.

Topics: Inequality; Wages, income, and wealth

Vittoria Dicandia and Silvia Vannutelli

We use the entry of Bulgaria and Romania into the European Union to study how the change in migrants’ legal status impacted the Italian labor market. Firms exhibit an increase in the share of migrant workers at the expense of natives, not accompanied by a change in wage growth for either group. Migrant workers' gains are shown in increased job mobility and security. Despite growing in size, firms show a decrease in per capita business outputs. Our results indicate that the change in legal status led to a formalization of undocumented workers and had positive implications for the affected migrant workers.

Topics: Immigration; Employment & labor markets

Kyle D. Fee

This paper demonstrates how the relationship between income inequality and economic growth varies across geography. A positive relationship between inequality and per capita income growth is observed only in central metropolitan counties with high population density. In the other 95 percent of counties, inequality in the top half of the income distribution tends to have a negative relationship with growth. This analysis highlights the need for a research agenda focused on refining the growth model, along with incorporating new data sources and concepts of income inequality.

Topics: Inequality; Wages, income, and Wealth

Craig Sylvera

Do Black communities economically benefit from the election of a Black mayor? I find that relative to non-Black communities, majority-Black zip codes experience gains in all areas of economic activity following the first election of a Black mayor. Across industries, the number of establishments in majority-Black zip codes increases. In addition, before breakthrough elections, Black residents are less likely than white residents to identify as self-employed across all cities, but this difference is reduced after an election.

Topic: Inequality

Hadi Elzayn, Simon Freyaldenhoven, Ryan Kobler, and Minchul Shin

Black Americans are substantially more likely both to have their mortgage application rejected and to default on their mortgages than White Americans. Given these facts, how fair or unfair is the U.S. mortgage market? We show that the answer to this question depends on the definition of fairness. We consider six competing and widely used definitions of fairness and find that they lead to markedly different conclusions. To facilitate further exploration, an interactive online appendix allows the user to further examine our fairness measurements across both time and space.

Topics: Inequality; Housing; Borrowing & lending

Morten Bennedsen, Antoine Bertheau, Marianna Kudlyak, and Birthe Larsen

We use a 2021 Danish survey of firms to study why firms lay off workers instead of cutting wages. We find that layoffs are more prevalent than wage cuts, but wage cuts are not rare in firms experiencing revenue reduction. Employers are hesitant to cut wages in many instances because they see wage cuts as a poor substitute for layoffs. The reason is that wage cuts impact morale and quits and are unlikely to save jobs. Moreover, during a crisis firms face lower opportunity costs of restructuring, and layoffs are perceived as fairer. We find that firms that report such opportunistic layoffs are less likely to implement wage cuts.

Topics: Employment & labor markets; Unemployment

Oksana Leukhina and Guillaume Vandenbroucke

We use a human capital accumulation model to assess the role of gender differences in life cycle profiles of market time and occupation sorting in explaining the gender wage gap dynamics over the long run. Men’s aggregate hours profiles changed little across cohorts, but women’s profiles converged to those of men, especially in higher-paying occupations. Our model finds that changing time allocation patterns induced human capital investments that account for nearly all the gender wage gap dynamics.

Topics: Wages, income, and wealth; Inequality

David Fuller and Guillaume Vandenbroucke

We present a theory of intergenerational persistence in college attainment, which captures endogenous heterogeneity in time preferences, or patience, which can be taught by parents. Our model rationalizes the view that long-run family factors matter for educational attainment. Using our model, we implement a policy experiment in which a college subsidy is financed via a proportional tax on labor income. We find that the policy raises overall college attainment and its persistence; however, it lowers the likelihood of college attainment for individuals whose parents do not have a BA. This result differs from existing literature where college subsidies tend to reduce intergenerational persistence.

Topic: Higher education

Robert Kelchen, Dubravka Ritter, and Douglas Webber

We assemble a comprehensive data set on the characteristics of colleges and universities and develop a series of predictive models of financial distress. We show that modern machine learning techniques, combined with richer data, are more effective than linear probability models at predicting college closures, and considerably more effective than existing accountability metrics. Our model can significantly improve predictive accuracy and is particularly helpful for predicting instances of financial distress for institutions with spotty data. We conduct simulations showing that enrollment challenges resulting from an impending demographic cliff are likely to significantly increase annual college closures for reasonable scenarios.

Topic: Higher education

Shan Ge, Stephanie Johnson, and Nitzan Tzur-Ilan

As climate change exacerbates natural disasters, homeowner’s insurance premiums are rising dramatically. We examine the impact of premium increases on borrowers’ mortgage and credit outcomes. We find that higher premiums increase the probability of mortgage delinquency, as well as prepayment (driven mainly by relocation). The delinquency effect is greater for borrowers with higher debt-to-income ratios. We also find that higher premiums significantly raise the probability of credit card delinquency and worsen borrowers’ creditworthiness. Our findings unveil a channel through which climate change can threaten household financial health and potentially impact the stability of the financial system.

Topics: Climate; Borrowing & lending

Luis A. Lopez and Nitzan Tzur-Ilan

We leverage quasi-experimental wildfire smoke shocks to analyze the causal effect of air pollution (PM2.5) on rent prices. Our results indicate that the rent of homes that are not directly affected by wildfires but exposed to wildfire plumes declines by about -2.4 percent per one standard deviation increase in PM2.5. The response of home prices is more than threefold, highlighting a gap in the tolerance of poor air quality, which we find is driven by age-related differences between tenants and homeowners. We further show evidence that air pollution affects liquidity and search frictions in the rental market.

Topics: Climate; Housing

Simon Mongey and Michael E. Waugh

This paper studies household inequality and product market power. In our model, households’ price elasticities of demand endogenously vary with wealth. Heterogeneous firms set their price as oligopolistic competitors given the endogenous distribution of demand. A firm’s market power varies with the distribution of demand as households with different elasticities sort into high- and low-price varieties. Quantitatively, we find household heterogeneity to be a dominant source of markup variation across firms, and a one-time fiscal transfer of 1 percent of GDP to households leads to a 0.3 percentage point increase in the aggregate markup.

Topic: Inequality

Johannes Fleck, Jonathan Heathcote, Kjetil Storesletten, and Giovanni L. Violante

Combining survey and administrative data, we measure the progressivity of taxes and transfers at the U.S. federal and state level. We find that the federal tax and transfer system is progressive; however, there is substantial heterogeneity in tax levels and progressivity across states. Regressive states are funded mostly by sales and property taxes, feature lower average tax rates, and are concentrated in the South. States funded mostly by income taxes tend to have progressive tax systems and high average tax rates. In addition, we find including spending on public goods and services as a transfer has a large, positive impact on measured progressivity.

Topics: Taxes & tax policy

Philippe d’Astous, Slava Mikhed, Sahil Raina, and Barry Scholnick

Using wealth windfalls from lottery winnings and matched employer-employee tax files, we compare the effect of additional wealth on the entrepreneurial activity of older and younger individuals. We find that additional wealth leads older winners (aged 55 and older) to reduce business ownership and scale. In contrast, additional wealth leads younger winners to increase business ownership and performance. We also show that extra lottery wealth reduces the wage labor supply of both younger and older individuals. Thus, while younger lottery winners reduce wage labor to increase entrepreneurship, older lottery winners reduce both wage labor and entrepreneurship to retire.

Topics: Small business; Wages, income, and wealth

Paul Calem, Chris Henderson, and Jenna Wang

This paper conducts a detailed exploration of the factors associated with unbanked status among U.S. households and how these relationships evolved between 2015 and 2019. The analysis finds that income remained the most significant differentiator, although strong associations with race and ethnicity also persisted. New factors like the lack of digital access, noncitizen immigrant status, and poor financial literacy are associated with significantly higher likelihood of being unbanked. The findings suggest that continuation of recent efforts by policymakers to bridge the digital divide in rural and urban areas and to enhance financial literacy could help expand financial inclusion.

Topic: Inequality

Gaurav Khanna and Nicolas Morales

We study how U.S. immigration policy and the internet boom affected the tech boom in India. We show that changes in the U.S. H-1B cap induced changes in fields of study and occupation choice in India. We then estimate a quantitative model and find that high-skill migration raised the average welfare of workers in each country but had distributional consequences. The H-1B program induced Indians to switch to computer science occupations and helped drive the shift in IT production from the U.S. to India. We show that accounting for endogenous skill acquisition is key for quantifying the gains from migration.

Topics: Immigration; Workforce

Leila Bengali, Robert G. Valletta, and Cindy Zhao

After growing substantially during the 1980s through the early 2000s, the college wage premium more recently has been stagnant. We extend the canonical production function model of skill premiums to assess supply and demand contributions to the slowdown in the college wage premium, using annual CPS ASEC data. To account for the rising importance of women in the college educated workforce, we estimate a hybrid model that incorporates components that are disaggregated by age and gender. Our results suggest that the recent stagnation of the college wage premium primarily reflects demand factors—specifically, a slowdown in the pace of skill-biased technological change.

Topic: Higher education

Michael Gelman, Zachary Orlando, and Dhiren Patki

This paper studies how the payment frequency of transfer programs can affect the spending behavior of liquidity-constrained individuals. We exploit the shock to the timeliness of UI payments at the start of the COVID-19 pandemic, where a large influx of claims resulted in some claimants receiving their UI payments on a weekly basis while others received backdated payments in the form of large lump sums. The paper uses transaction-level data on income and spending for a sample of low-income individuals to identify UI claimants who experienced payment delays and compare their spending behavior with that of claimants who obtained their benefits in a timely manner.

Topics: Public policy; Unemployment

Christopher L. Foote

Over the past two years, the unemployment rate has risen slightly amid rapid hiring. A potential answer to how this occurred is that immigration has significantly increased population growth and thus has raised the number of available workers. Evidence of a surge in immigration has come from data from the Department of Homeland Security. These estimates are much larger than recent immigration estimates from the U.S. Census Bureau and the Social Security Administration. This paper uses data directly related to the labor market—immigrant applications for federal work permits—to further study immigration’s effect on U.S. employment.

Topic: Immigration

Ingrid Gould Ellen, Daniel Hartley, Jeffrey Lin, and Wei You

During the late 1960s, roughly half of U.S. states developed programs known as Fair Access to Insurance Requirements (FAIR), which offered residual property insurance to property owners denied in the private market. These plans inadvertently encouraged moral hazard through underwriting restrictions, risk pooling, and generous payouts. We use a triple-difference design to estimate FAIR’s impact, comparing pre- and post-FAIR participation periods, neighborhoods likely offered FAIR plans versus those not, and similar contrasts in non-participating states. FAIR plans led to significant housing disinvestment and declines in central neighborhood population and income in the late 1960s and 1970s.

Topics: Insurance; Housing

Munseob Lee, Claudia Macaluso, and Felipe F. Schwartzman

Our paper addresses the heterogeneous effects of monetary policy on households of different races that have differential exposure to fluctuations in employment and consumer prices. To evaluate the effects of policy, we propose a New Keynesian framework with heterogeneous exposure to employment and price volatility. We find that an accommodative monetary stance generates asymmetric outcomes within race groups. Differences are especially large among Black households. Reducing the volatility of unemployment by 1 percentage point engenders a 1.17 percentage point reduction in overall income volatility for poorer Black households but an increase of 0.6 percentage points in income volatility for richer Black households.

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

Alexander Bick, Adam Blandin, Aidan Caplan, and Tristan Caplan

This paper documents heterogeneity in work from home (WFH) across six U.S. data sets. These surveys agree that pre-pandemic differences in WFH rates by sex, education, and state of residence expanded following the COVID-19 outbreak. The surveys also show similar post-pandemic trends in WFH by firm size and industry. We show that an industry’s WFH potential was highly correlated with actual WFH during the first year or two of the COVID-19 pandemic, but this correlation was much weaker before and after the pandemic, suggesting that WFH potential is a necessary but not sufficient determinant in the decision to WFH.

Topics: Workforce; Employment & labor markets

Alexander Bick, Adam Blandin, Aidan Caplan, and Tristan Caplan

This paper documents the prevalence of work from home (WFH) in six different U.S surveys. All the surveys broadly agree about the trajectory of aggregate WFH since the COVID-19 outbreak and that WFH remains substantially above pre-pandemic levels. However, there is disagreement in the WFH levels among self-employed workers. We also highlight that full-time WFH drove most of the increase in aggregate WFH during and after the pandemic, but part-time WFH has become a more significant contributor since 2022. Finally, we validate findings from survey data by comparing self-reported commuting behavior to cell phone geolocation data from Google Workplace Visits.

Topics: Workforce; Employment & labor markets

Maxim L. Pinkovskiy, Xavier Sala-i-Martin, Kasey Chatterji-Len, and William Nober

Women continue to earn substantially less than men (20 percent less on average), despite a convergence in education and work experience; they remain underrepresented in high-paying sectors; and they are less likely to sort into higher-paying firms. While the relevant literature points to workplace flexibility, systemic discrimination, and career costs associated with having a family to explain the persistence of the gender pay gap, this paper approaches the topic from a different perspective. It examines, theoretically and empirically, how labor markets respond when factors behind the pay gap subside and the gap narrows, and whether that response itself can perpetuate gender inequities.

Topics: Inequality; Wages, income, and wealth

Deepa D. Datta and Nitzan Tzur-Ilan

To better understand the stalled progress of women in economics, we construct new data on women’s representation and research output in one of the largest policy institutions—the Federal Reserve System. We document a slight increase in women’s representation over the past 20 years, in line with academic trends. We also document a significant gender gap in research output, especially for years in which economists have greater domestic responsibilities, but nearly absent gender gaps in policy output and career progression. This work complements existing research on women in academia, allowing a more comprehensive examination of progress in the economics profession.

Topic: Inequality

Aditya Aladangady, Jacob Krimmel, and Tess Scharlemann

Rising interest rates in 2022 introduced large moving costs for homeowners with low fixed-rate mortgages. As market rates rise relative to those on borrowers' existing loans, likelihood of moving falls, and elasticity is highest among borrowers just "in the money." Our results suggest about 44 percent of the decline in moves among mortgage holders between 2021 and 2022 may be attributable to the widening gap between borrowers’ existing and market rates. While moves across labor market areas are rather unaffected, lock-in primarily reduces within-metro churn and moves up the housing ladder, leading to fewer real estate listings and greater house price growth.

Topics: Housing; Borrowing & lending

Kristin F. Butcher, Luojia Hu, and Ryan Perry

Use of public assistance by noncitizens is controversial. A new rule finalized in 2020 made participation in SNAP/food stamps and Medicaid relevant as evidence of whether immigrants were likely to become a “public charge” and therefore ineligible for citizenship. We examine whether participation in SNAP/food stamps and Medicaid among U.S.-born children—whose own eligibility for program participation should be unaffected by the new rule—has changed on the basis of the citizenship status of their parents. We find evidence that after the policy change, U.S.-born children with noncitizen parents are less likely than the children of U.S.-born parents to participate in these programs.

Topic: Public policy

Lisa Barrow, Sarah Komisarow, and Lauren Sartain

School districts across the U.S. have adopted funding policies designed to distribute resources more equitably across schools while increasing external fundraising efforts. We document both funding policies and fundraising efforts in Chicago Public Schools. We find that adoption of a weighted-student funding policy reallocated more dollars to schools with high shares of students eligible for free/reduced-price lunch. Further, most fundraised dollars concentrated in schools serving relatively affluent populations. We estimate that external fundraising offset the policy-induced per-pupil expenditure gap between schools enrolling the lowest and highest shares of FRL-eligible students by 23 –35 percent.

Topics: K-12 education; Inequality

Daniel R. Carroll, André Victor D. Luduvice, and Eric R. Young

The policy predictions of standard heterogeneous agent macroeconomic models are often at odds with observed policies. We use the 2021 General Social Survey to investigate the drivers of individuals' preferences over taxes and redistribution. We find that these preferences are more strongly associated with political identity than with economic status. We discuss the implications for quantitative macroeconomic models with endogenous policy determination.

Topics: Taxes & tax policy; Macroeconomics

Costas Cavounidis, Vittoria Dicandia, Kevin Lang, and Raghav Malhotra

We present a unified technological explanation of both the movement of workers across jobs using different skills and the changes in skill use within jobs. An envelope-theorem approach allows us to estimate relative skill-productivity growth from worker mobility using OLS while making minimal assumptions on each occupation's production function. Using six decades of data, we conclude that routine cognitive and finger-dexterity skill productivity grew rapidly and abstract and social skill productivity grew slowly—a form of "skill bias." These effects, along with our estimated relationships between skill inputs, also explain changes in skill use within occupations.

Topics: Technology & innovation; Workforce

Tucker Smith

This paper studies the effects of exposure to structural labor demand shocks during youth and adolescence on human capital accumulation and later-life earnings. I compare changes in outcomes across cohorts of students living in areas that were exposed to Chinese import competition. Students exposed to larger shocks were 4 percent more likely to enroll in college and 8 percent more likely to earn a bachelor’s degree. I provide evidence that these adjustments, along with shifts of fields of study away from those directly exposed to import competition in both high school and college, shielded students from more than 90 percent of the shock’s negative effects on later-life earnings.

Topics: Higher education; Wages, income, and wealth

Jaison R. Abel and Richard Deitz

We develop a measure of chronic joblessness among prime-age workers in the United States—termed the detachment rate—that identifies those who have been out of the labor force for more than a year. We show that the detachment rate has more than doubled for men since the early 1980s, though it is still consistently higher for women. We also show that the detachment rate increased more in places with weak local economies, which were more exposed to the impacts of globalization and technological change. Moreover, we find the rise in detachment was concentrated among older prime-age individuals and those without a college degree.

Topics: Workforce; Employment & labor markets

Katarína Borovičková and Robert Shimer

We develop a random search model with two-sided heterogeneity and match-specific productivity shocks to explain why high-productivity workers tend to work at high-productivity firms despite low-productivity workers gaining about as much from such matches. We find that selective job acceptance drives these patterns. We show that workers have a higher surplus from meeting firms of similar productivity, which generates assortative matching. We show that our findings are quantitatively consistent with recent empirical results. Our results imply that encouraging high-wage firms to hire low-wage workers may be less effective at reducing wage inequality than wage patterns suggest.

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

Serdar Birinci, Youngmin Park, and Kurt See

When estimating earnings losses upon job separations, existing strategies focus on mass-layoff separations to distinguish involuntary separations from voluntary separations. We revisit the measurement of the sources and consequences of involuntary separations, using Canadian job separation records. We refine existing strategies and find that only a quarter of mass-layoff separations are indeed layoffs. Isolating mass-layoff separations that reflect involuntary displacement, we find twice the earnings losses relative to existing estimates. We also uncover significant heterogeneity in losses for separations with different reasons and timing, ranging from 10 percent for quits after a mass layoff to 60 percent for layoffs before it.

Topics: Employment & labor markets; Workforce

Serdar Birinci and Kurt See

We digitize state-level and time-varying unemployment insurance (UI) laws on eligibility, payment amount, and payment duration and combine them with microdata to estimate UI eligibility, take-up, and replacement rates at the individual level. We document how income and wealth levels affect unemployment risk, eligibility, take-up, and replacement rates over the course of unemployment. We evaluate whether these findings are important for shaping UI policy design, using a general-equilibrium incomplete-markets model with a frictional labor market that matches our empirical findings. We show that a nested model that fails to match these findings yields a substantially less generous optimal UI policy.

Topics: Employment & labor markets; Public policy

Gizem Kosar, Davide Melcangi, Laura Pilossoph, and David Wiczer

Using micro data, we document that households, especially those with low net wealth-to-income ratios, often use "stimulus" checks to pay down debt. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest rates rise with debt, borrowers have increasingly larger incentives to use an additional dollar to reduce debt service payments rather than consume. Using our calibrated model, we then study whether and how this marginal propensity to repay debt (MPRD) alters the aggregate implications of fiscal transfers. We uncover a tradeoff between stimulus and insurance, as high-debt individuals gain considerably from transfers but consume relatively little immediately. We show how this mechanism can lower short-run fiscal multipliers but sustain aggregate consumption for longer.

Topics: Low & moderate income; Public policy; Wages, income, and wealth

Adam Looney

The rising cost of college and graduate school is often cited as a cause of rising student loan borrowing. This paper analyzes long-term trends in tuition and student financing, using data from the National Postsecondary Student Aid Study. While real top-line “sticker prices” have increased 114 percent since 1993, after accounting for increases in financial aid and tax benefits, we find that net tuition prices have not changed. Over the same period, student borrowing tripled. While certain groups, like graduate students and affluent undergraduates, have faced higher prices, aggregate increases in borrowing are hard to explain by average changes in net tuition prices.

Topics: Higher education; Borrowing & lending

Alexander Bick, Adam Blandin, and Richard Rogerson

We document large differences in lifetime hours of work and argue that these differences are an important source of inequality in lifetime earnings. To establish this, we develop a heterogeneous agent model of labor supply and human capital accumulation. Our model implies that almost 20 percent of the variance in lifetime earnings is accounted for by differences in lifetime hours of work, with 90 percent of this effect due to heterogeneity in preferences. Higher lifetime hours contribute to lifetime earnings via a direct production channel and an indirect human capital channel. Our model implies that policies that limit long hours have important effects on lifetime earnings.

Topics: Wages, income, and wealth; Inequality

Claire Greene, Fumiko Hayashi, Alicia Lloro, Oz Shy, Joanna Stavins, and Ying Lei Toh

U.S. households that lack digital means of making and receiving payments cannot participate fully in an increasingly digitized economy. The absence of a common definition of households that are underserved in digital payments makes it difficult to collect relevant data consistently and assess the scope of this problem. This paper aims to define households that are underserved in digital payments and define digital payments inclusion.

Topics: Inequality; Payments & FinTech

Gustavo de Souza, Jack Mannion, and Jacob S. Herbstman

We use a new data set with information on Brazilian programmers to study how the demand for programming skills has impacted inequality. We find high ability, high wage, and highly educated individuals in key technology hubs are more likely to become programmers. Creating software boosts both wages and career prospects of programmers, especially for those with specialized skills in AI and cybersecurity. These wage gains are concentrated among top programmers, increasing inequality within the profession. Therefore, increased demand for specialized skills in programming has contributed to wage inequality both within the programming field and between programmers and other occupations.

Topics: Inequality; Workforce; Wages, income and wealth

Anton Cheremukhin , Paulina Restrepo-Echavarria, and Antonella Tutino

We assess how online dating, demographic changes, and evolving societal norms influence mate choice and sorting trends in the U.S. Using a targeted search model, we analyze mate selection based on several socioeconomic and demographic factors. A view starting from 1960 reveals a trend toward preferences for similarity. We identify enhanced workforce participation and college attainment among women as the primary drivers of the U.S. marriage market transformation. Furthermore, we find that the corresponding changes in mate preferences and increased assortativeness by skill and education account for about half of the increased income inequality among households.

Topics: Inequality; Household economics

Anton Cheremukhin, Sewon Hur, Ronald Mau, Karel Mertens, Alexander W. Richter, and Xiaoqing Zhou

The U.S. experienced an extraordinary post-pandemic surge in unauthorized immigration. This paper combines administrative data on border encounters and immigration court records with household survey data to document two new facts about these immigrants: they tend to be hand-to-mouth consumers and low-skilled workers that complement the existing workforce. We build these features into a model with capital, household heterogeneity, and population growth to study the inflationary effects of this episode. Contrary to the popular view, we find little effect on inflation, as the increase in supply was largely offset by an increase in demand.

Topics: Immigration; Macroeconomics

Andrew Glover and José Mustre-del-Río

In the late 1990s, young college graduates who moved across state lines enjoyed a significant increase in earnings, relative to those of stayers. By the mid-2010s, mobility fell, and average earnings gains among movers fell as well. At the same time, debt increased among all young college graduates. We propose a model of geographic mobility with incomplete markets that can replicate these dynamics. We find that lower potential gains account for most of the decline in mobility. We find that tax-financed debt forgiveness policies generate higher mobility and earnings growth for low-wealth individuals and are, on average, welfare increasing.

Topics: Employment and labor markets; Wages, income, and wealth; Higher education

Elana Falcettoni, James A. Schmitz, and Mark L. J. Wright

We show that the first and only experiment of U.S. mass production of houses, in a factory-built home industry that became known as the Mobile Home industry, was a tremendous success. Mobile Home prices fell by two-thirds while both productivity and quality rose. State-wide building codes for Mobile Homes increased the size of the market and led to industry-induced productivity gains. Lessons from this industry give insights into the poor productivity performance of today's residential construction industry. Our forebears prior to 1950 wrote extensively about the sector's poor performance, attributing it to the failure to adopt factory-built housing. Our analysis supports this view.

Topic: Housing

Maxim L. Pinkovskiy, Xavier Sala-i-Martin, Kasey Chatterji-Len, and William Nober

We propose a procedure to adjust reported survey incomes for underreporting by estimating a model of misreporting. The main parameter of interest is the elasticity of regional national accounts income to regional survey income, which is closely related to the elasticity of underreporting with respect to income. We find this elasticity to be substantial but roughly constant over time, implying a large but relatively constant correction to survey-derived inequality estimates. We reconfirm the findings of the literature that global poverty and inequality declined dramatically between 1980 and 2019 and that within-country inequality is falling on average.

Topic: Inequality

Adam Looney

The rising cost of college and graduate school is often cited as a cause of rising student loan borrowing. This paper analyzes long-term trends in tuition and student financing, using data from the National Postsecondary Student Aid Study. While real top-line “sticker prices” have increased 114 percent since 1993, after increases in financial aid and tax benefits are accounted for, net tuition prices have not changed. Over the same period, student borrowing tripled. While certain groups, like graduate students and affluent undergraduates, have faced higher prices, aggregate increases in borrowing are hard to explain by average changes in net tuition prices.

Topics: Borrowing & lending; Higher education

Maximiliano A. Dvorkin and Brian Greaney

We study how the distribution of wealth in a country is shaped by the earnings across regions and mobility frictions. We develop a model of consumption, savings, location choice, incomplete markets, and heterogeneous agents facing persistent and transitory income shocks. We find that mobility frictions increase precautionary savings as workers hedge against fluctuations in consumption generated by their mobility decisions. The spatial distribution of wealth is driven primarily by the interaction between persistent income shocks, saving behavior, and worker sorting across locations. These results highlight the importance of accounting for worker mobility and regional heterogeneity in earnings dynamics when studying the spatial distribution of wealth.

Topics: Inequality; Wages, income, and wealth

Lutz Hendricks, Tatyana Koreshkova, and Oksana Leukhina

This paper studies how college admissions preferences for low-income students affect intergenerational earnings mobility. We develop a quantitative model of college choice with colleges that vary in their quality. We find that admissions preferences substantially increase low-income enrollment in top quality colleges and intergenerational earnings mobility. The associated losses of aggregate earnings are very small.

Topics: Higher education; Low & moderate income

Alexander Bick, Adam Blandin, and David J. Deming

Generative Artificial Intelligence’s (AI) impact on the economy depends on the speed and intensity of adoption. This paper reports results from the first nationally representative U.S. survey of generative AI adoption. In August 2024, 39 percent of the U.S. population age 18–64 used generative AI. More than 24 percent of workers used it at least once in the week before being surveyed, and nearly one in nine used it every workday. Historical data suggest that U.S. adoption of generative AI has been faster than adoption of the personal computer and the internet.

Topics: Technology & innovation

Serdar Birinci and Kurt See

We digitize characteristics of state-level and time-varying unemployment insurance (UI) laws and combine them with microdata on labor market outcomes. We then estimate UI eligibility, take-up, and replacement rates. We document how levels of income and wealth affect unemployment risk, eligibility, take-up, and replacement rates both upon job loss and over the course of unemployment spells. We evaluate whether these empirical findings are important for shaping UI policy design, using a general equilibrium model that matches our empirical findings. We show that a nested alternative model that fails to match these findings yields a substantially less generous optimal UI policy, compared with the one in the baseline model.

Topics: Public policy; Unemployment

Serdar Birinci, Yusuf Mercan, and Kurt See

We examine the extent to which mismatch unemployment—employment losses relative to the most efficient allocation—shaped labor market dynamics during and after the COVID-19 pandemic. We find that mismatch unemployment turned negative at the onset of the pandemic. We show that sectoral differences in job separations were the main driver behind this result, while differences in vacancies caused positive mismatch unemployment during the recovery episode. We further show that sectors with larger mismatch unemployment experienced higher employment cost growth during the pandemic recovery.

Topics: Employment & labor markets; Unemployment

Sarena Goodman, Gina Li, Kevin Moore, and Alice Henriques Volz

The COVID-19 pandemic caused severe disruptions to the U.S. labor market and economic activity. We establish connections between family experiences of the pandemic, their income under normal conditions, and their later economic well-being, using the 2022 Survey of Consumer Finances. By the time of their interview, one-third of families experienced net employment declines, one-third had teleworked, and one-fifth had significant health events related to COVID-19. These experiences strongly reflected families’ positions in the income distribution, with lower-income families bearing the brunt. They also tightly predict income and wealth after the initial disruptions, signifying that the pandemic economy likely amplified pre-pandemic differences and fostered new divides.

Topics: Covid-19; Wages, income, and wealth

Benjamin L. Collier, Daniel Hartley, Benjamin J. Keys, and Jing Xian Ng

We estimate the causal effect of emergency credit on households’ finances after a negative shock. To do so, we link application data from the U.S. Federal Disaster Loan Program, which provides loans to households that have uninsured damages from a federally declared natural disaster, to a panel of credit records before and after the shock. We exploit a discontinuity in the loan approval rules that led applicants with debt-to-income ratios below 40 percent to be differentially likely to be approved. Using an instrumented difference-in-differences research design, we find that credit provision at the time of a shock significantly reduces financial distress.

Topics: Borrowing & lending

Jeremy Greenwood, Nezih Guner, and Karen Kopecky

To analyze the opioid epidemic, we construct a model where individuals weigh recreational opioid use against the probabilities of addiction and death. The model is fit to estimated Markov chains from U.S. data that summarize the transitions into and out of opioid addiction and to a deadly overdose. We then examine the opioid epidemic's drivers, the impact of opioids on employment, and the impact of medical interventions. Lax prescribing practices and misinformation around addiction risk are important drivers of the first half of the epidemic. Falling prices for black-market opioids, combined with increased lethality, are important drivers during the second half.

Topic: Public health

Benjamin Lester, David A. Rivers, and Giorgio Topa

We develop a structural framework to quantify the effects of social and business networks on labor market outcomes. Our data allow us to distinguish between referrals from family and friends and those from business contacts. We find referrals from business contacts are used predominantly by more productive workers who receive offers through traditional channels relatively frequently. Workers who struggle to generate offers through traditional channels are more reliant on referrals from family and friends to find employment. An important implication is that referrals from business contacts exacerbate earnings inequality, while referrals from family and friends reduce inequality.

Topics: Employment & labor markets; Inequality

Valerie Bostwick and Christopher Severen

We provide evidence that graduated driver licensing (GDL) laws, originally intended to improve public safety, impact human capital accumulation. Many teens use automobiles to access both school and employment. Because school and work decisions are interrelated, the effects of automobile-specific mobility restrictions are ambiguous. Restricting teen mobility significantly increases short-run school going and long-run educational attainment while reducing teen employment. We develop a multiple discrete choice model that rationalizes unintended consequences and reveals that school and work are weak complements. Thus, improved educational outcomes reflect decreased access to leisure activities rather than reduced labor market access.

Topics: K-12 education; Employment & labor markets

Lora Dufresne and Mark M. Spiegel

Using U.S bank-level data, we examine longer-term effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility on small business (SME) lending. To identify a causal impact of program participation, we instrument based on historical bank relationships with the Small Business Administration and the Federal Reserve discount window prior to the onset of the pandemic. Elevated bank participation in both programs was positively associated with a substantial cumulative increase in small business lending growth; however, we find evidence that this may not be permanent. Additionally, we illustrate the importance of considering small- and medium-sized banks in evaluating SME lending programs.

Topics: Borrowing & lending; Small business

Marie Hogan, Laura E. Jackson, and Michael T. Owyang

To identify shocks in VARs using short-run sign or exclusion restrictions, high-frequency data are preferred. However, to study income inequality, data limitations often force researchers to choose between low-frequency data with many respondents or high-frequency data with relatively few respondents. To assess whether this approach might result in misleading conclusions, we combine two surveys and construct a set of quarterly frequency income quantiles that are scaled to the annual data but fluctuate according to the high-frequency survey data. We then use this data in two simple applications to show one obtains different conclusions about the permanence and/or the direction of the responses of income inequality.

Topics: Inequality; Wages, income, and wealth

Theodore F. Figinski, Sydney Keenan, Richard Sweeney, and Erin Troland

In response to the COVID-19 pandemic, Congress established the Emergency Rental Assistance (ERA) program, which provided nearly $45 billion to prevent evictions and increase housing stability. We examine the geographic distribution of ERA funds and the timing of ERA expenditures. We find that ERA sent more funds per renting household to census tracts with higher pre-pandemic eviction filing rates, poverty rates, shares of Black renters, shares of renting households with children, and shares of renting single mothers. Our results suggest that ERA was largely successful in reaching communities that were most likely to have the highest risk of eviction.

Topic: Housing

Donggyu Lee

This paper studies how quantitative easing (QE) affects household welfare across the wealth distribution using a Heterogenous Agent New Keynesian (HANK) model. I find that QE benefited all households by stimulating economic activity. QE widened the income and consumption gap between the top 10 percent and the rest of the wealth distribution by boosting profits and equity prices, shrank inequality within the lower 90 percent of the wealth distribution by lowering unemployment, and reduced overall wealth and income inequality. QE has weaker distributional consequences compared with conventional monetary policy. Forward guidance and an extended period of zero policy rates amplified the effects of QE.

Topics: Inequality; Monetary policy

Keyoung Lee and David Wylie

Institutional investment into single family homes has increased since the Great Recession. We leverage tax and deed transfer records and Multiple Listings Service (MLS) data for 2010–2021 to find that investor share is higher in markets with lower housing values and higher shares of Black and noncollege residents, but higher median income. We also find that investors raise rents at 60 percent higher rates than the average increase when first acquiring the property, and higher investor share in a neighborhood is correlated with faster rent increases for non-investor landlords. We do not find evidence that investor entry is associated with gentrification.

Topic: Housing

Jun Nie, B. Ravikumar, and Michael J. Sposi

We study the lifecycle aspect of within-country inequality. Our environment is a combination of a multicountry trade model and an overlapping generations model with production and capital accumulation. Trade liberalization increases total factor productivity, which increases the marginal product of capital and incentivizes capital accumulation. Higher capital stock and higher productivity raise wages. Inequality, measured by the ratio of old agents' income to that of the young, evolves over time due to capital accumulation during the transition from autarky to an open-economy world. Immediately after liberalization, inequality increases. Over time, capital accumulates at a diminishing rate and inequality declines.

Topics: Trade & globalization; Inequality

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

We use Norwegian administrative panel data from 1993 to 2015 to study how the wealthiest accumulate their fortunes over their life cycle. We show that, on average, the wealthiest start their lives substantially richer than other households in the same cohort. In addition, we find that the current wealthiest 0.1 percent have invested a substantially higher share of their portfolio in equity. Equity income (capital gains) constitutes 83 percent of total lifetime savings for this group. For households that began with little wealth but end up in the wealthiest 0.1 percent, higher savings rates and higher returns on net wealth are the largest contributors. A model with returns and preferences that vary with wealth is consistent with the facts we observe.

Topics: Wages, income, and wealth; Inequality; Taxes & tax policy

Ronan C. Lyons, Allison Shertzer, Rowena Gray, and David Agorastos

We construct the first consistent market rent and home sales price series for American cities across the 20th century, using newspaper real estate listings. Our findings revise stylized facts about U.S. housing markets. Real market rents did not fall during the 20th century for most cities. Instead, real rental price levels increased by about 20 percent from 1890 to 2006. There was also more growth in real housing sales prices from 1965 to 1995 than is commonly understood. The return to homeownership has varied considerably across cities and over time, but rental returns were historically much more important than capital gains in every city. We discuss the implications for the business cycle and the consumer price index.

Topics: Housing; Wages, income, and wealth

Christopher S. Carpenter, Kabir Dasgupta, Zofsha Merchant, and Alexander Plum

We study the relationship between financial well-being and sexual orientation in the United States, using Survey of Household Economics and Decisionmaking (SHED) data for 2019–2022. We document that people who are lesbian, gay, or bisexual (LGB) have more difficulty managing financially than similarly situated heterosexual individuals. Differences in partnership, financial assistance from parents, financial knowledge, and risk preferences cannot explain these differences. Instead, we document that social vulnerabilities such as exposure to discrimination and violence are differentially experienced by LGB people. Our results demonstrate that people who are LGB experience more financial insecurity than previously understood.

Topics: Credit & financial markets; Inequality

Robert G. Valletta and Mary Yilma

We assess the expansion of U.S. unemployment insurance (UI) payments during the COVID-19 pandemic. We document that UI payments almost completely offset the increase in household income inequality that otherwise would have occurred in 2020 and 2021. We also examine the impacts of the $600 increase in weekly UI benefit payments, available during part of 2020, on job search outcomes. We find that the search disincentive effects of the enhanced UI payments were limited and smaller for individuals from lower-income households. These results suggest that the pandemic UI expansions improved equity but had limited consequences for economic efficiency.

Topics: Low & moderate income; Insurance; Unemployment

Ben Hyman, Brian Kovak, and Adam Leive

Wage insurance provides income support to displaced workers who find reemployment at a lower wage. We analyze wage insurance in the context of the U.S. Trade Adjustment Assistance (TAA) program by merging linked employer-employee Census Bureau data to TAA petitions and leveraging a discontinuity in eligibility based on worker age. Wage insurance eligibility increases short-run employment probabilities and leads to higher long-run cumulative earnings. We find shorter non-employment durations largely drive increased long-term earnings among workers eligible for wage insurance. Our results are quantitatively consistent with a standard non-stationary partial equilibrium search model. The program is self-financing even under conservative assumptions.

Topics: Unemployment; Public policy

Carole Roan Gresenz, Jean M. Mitchell, Belicia Rodriguez, R. Scott Turner, and Wilbert van der Klaauw

We examine the effect of undiagnosed memory disorders on credit outcomes, using nationally representative credit reporting data merged with Medicare data. Years prior to eventual diagnosis, average credit scores begin to weaken, and payment delinquencies begin to increase, overall and for mortgage and credit card accounts specifically. Credit outcomes deteriorate over the quarters leading up to diagnosis. The harmful financial effects of undiagnosed memory disorders exacerbate the existing financial pressure households face upon diagnosis of a memory disorder. Our findings substantiate the possible use of credit reporting data for early identification of those at risk for memory disorders.

Topics: Credit & financial markets

Victor Hernandez Martinez

This paper tests the existence of capital-skill complementarity in the manufacturing sector, using quasi-experimental increases in the relative price of low-skill labor induced by the U.S. shale boom. In response to the shale boom, local manufacturing firms decreased their relative use of low-skill labor while increasing their capital expenditures. These changes in the input mix allowed manufacturers to maintain the value added, despite the increased price for low-skill labor. These results indicate that the degree of skill substitutable with capital in manufacturing has increased over the last several decades.

Topics: Employment & labor markets; Manufacturing

Alexander Bick, Adam Blandin, and Richard Rogerson

In 1979, the National Longitudinal Study of Youth 1979 (NLSY79) began following a group of U.S. residents born between 1957 and 1964 . This paper shows that after 40 years of data collection, the remaining NLSY79 sample continues to be broadly representative of their national cohorts regarding key labor market outcomes when compared with both the Current Population Survey and Social Security Administration data. Our results suggest that the NLSY79 can continue to provide useful data for economists and other social scientists studying life cycle and lifetime labor market outcomes, including earnings inequality.

Topics: Employment & labor markets

Calvin Ackley, Abe Dunn, Eli Liebman, and Adam Hale Shapiro

We examine whether Medicaid recipients receive the same health care services as Medicare recipients. We track medical services provided to the same individual as they age into Medicare from Medicaid. We find service provision increases by about 20 percent upon switching to Medicare. The average increase in utilization is larger in those states with lower Medicaid acceptance rates and higher Medicare acceptance rates. By contrast, we find relatively small increases in care from existing Medicaid providers. This analysis indicates that Medicaid’s smaller provider network plays a large role in limiting service provision.

Topics: Public health; Public policy

Brian Jonghwan Lee

I study how bankruptcy law firm advertisements affect the credit recovery of households in financial distress. Exploiting the border discontinuity strategy associated with the geographic unit in which local TV advertisements are sold, I empirically uncover bankruptcy filings and credit recovery related to exogenous variations in bankruptcy law firm advertisements. I first document a significant advertising effect on filing rates and show that advertising-induced filers are similar to existing filers. I then find a positive effect of advertisements on credit outcomes. I interpret these findings as evidence that lawyers address information frictions in households’ assessment of the bankruptcy option.

Topics: Credit & financial markets

Felipe Severino, Meta Brown, and Rajashri Chakrabarti

Increasing personal bankruptcy protection raises consumers’ desire to borrow and lenders’ cost of extending credit; the impact on equilibrium borrowing is ambiguous. Using bankruptcy protection changes between 1999 and 2005 across U.S. states, we find that borrowers respond to greater protection by increasing their unsecured debt. Border county estimates suggest that local economic conditions do not drive these results. Borrowers pay more for protection through higher interest rates, yet delinquency is unaffected. Remarkably, our results indicate that rising borrower demand outstripped decreasing supply. Increased protections did not reduce the aggregate level of household debt but affected the composition of borrowing.

Topics: Credit & financial markets; Borrowing & lending

Richard Audoly, Rory McGee, Sergio Ocampo, and Gonzalo Paz-Pardo

We use 25 years of tax records for the Norwegian population to study the mobility of wealth over people’s lifetimes. We group individuals with similar wealth rank histories to elicit mobility patterns, which provide evidence of segmented mobility. Over 60 percent of the population remains at the top or bottom of the wealth distribution throughout their lives. Mobility is driven by the remaining 40 percent, who move only within the middle of the distribution. Parental wealth is the key predictor of who is persistently rich or poor, while human capital is the main predictor for movement through the middle of the distribution.

Topics: Wages, income, and wealth; Inequality

Parag Mahajan, Nicolas Morales, Kevin Shih, Mingyu Chen, and Agostina Brinatti

We study how random variation in the availability of highly educated, foreign-born workers impacts firm performance and recruitment behavior. We utilize the administrative employer-employee matched data from the U.S. Census Bureau and firm-level information on the first large-scale H-1B visa lottery, which occurred in 2007. Using an event-study approach, we find that lottery wins lead to increases in firm hiring of college-educated immigrants, along with increases in firm revenue and survival . We find stronger effects in small, skill-intensive, and high-productivity firms. With certain caveats, we do not find evidence for displacement of native-born, college-educated workers at the firm level, on net.

Topic: Immigration

Morris Kleiner and Yun Taek Oh

Occupational licensing may influence how individuals transition to retirement. In this study, we use the Current Population Survey and Survey of Income and Program Participation to investigate how occupational licensing influences American later-career workers’ choice of retirement pathways. Our results show that licensed workers are less likely to choose to change careers but more likely to reduce work hours in transitioning out of the workforce. These results are consistent with the findings that licensed workers receive more benefits in the form of preferable retirement options, suggesting that these workers have better labor outcomes, even toward the end of their careers.

Topics: Employment & labor markets; Workforce

Leland D. Crane, Emily Green, Molly Harnish, Will McClennan, Paul E. Soto, Betsy Vrankovich, and Jacob Williams

We explore a new source of data on layoffs: timely 8-K filings with the Securities and Exchange Commission. We develop measures of both the number of reported layoff events and the number of affected workers. These series are highly correlated with the business cycle and other layoff indicators. Linking firm-level reported layoff events with Worker Adjustment and Retraining Notifications (WARNs) suggests that 8-K filings are sometimes available before WARNs, and preliminary regression results suggest our layoff series are useful for forecasting. We also document the industry composition of the data and specific areas where the industry shares diverge.

Topics: Employment & labor markets; Unemployment

Neil Bhutta, Aurel Hizmo, and Daniel Ringo

We assess racial discrimination in mortgage approvals, using confidential data on mortgage applications. Observable applicant risk factors, such as lower credit scores and higher leverage, explain most of the racial disparities in lender denials. Further, we exploit the race-blind, government-automated underwriting systems data to show there are risk factors we do not directly observe, and our analysis indicates that these factors explain at least some of the residual 1–2 percentage point denial gaps. Overall, we find that differential treatment has played a more limited role in generating denial disparities in recent years than suggested by previous research.

Topics: Borrowing & lending; Inequality

Sidhya Balakrishnan, Eric Bettinger, Michael S. Kofoed, Dubravka Ritter, Douglas A. Webber, Ege Aksu, and Jonathan S. Hartley

We conduct a survey-based experiment with 2,776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framing of downside protections. Emphasizing income insurance increased ISA uptake by 43 percent. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students for whom there is uncertainty both in the expected level of income and in its variability.

Topics: Borrowing & lending; Insurance; Higher Education

Rachel Schuh

I analyze the value workers ascribe to the gender composition of their workplace and the consequences of these valuations. Using the results of a hypothetical job choice experiment survey, I estimate a structural model of occupation choice to assess the influence of gender composition preferences. I find that workers’ composition valuations are not large enough to create tipping points, but they substantially reduce female employment in male-dominated occupations. Reducing segregation could improve welfare: making all occupations evenly gender balanced improves utility as much as a 0.4 percent wage increase for women and a 1 percent wage increase for men, on average.

Topics: Workforce; Inequality

Kabir Dasgupta, Linda Kirkpatrick, and Alexander Plum

The COVID-19 pandemic had disproportionate impacts on women’s employment, especially for mothers. New Zealand, where strict lockdown restrictions were combined with a wage subsidy scheme, presents a unique setting for studying these impacts. To do so, we compare employment patterns of similar parents in the pandemic and pre-pandemic period. For mothers with young children, we find a 1–2 percentage point decline in the likelihood of being employed in the first six months of the pandemic; for fathers, we see hardly any significant changes. We also find evidence that adverse labor market impacts were experienced by women in general, not just mothers.

Topics: Workforce; Employment & labor markets

Loukas Karabarbounis

As of 2022, the share of U.S. income accruing to labor was at its lowest level since the Great Depression. Updating previous studies with more recent observations, I document the continuing decline of the labor share for the United States, other countries, and various industries. I discuss how changes in technology and product, labor, and capital markets affect the trend of the labor share. I also examine its relationship with other macroeconomic trends, such as rising markups, higher concentration of economic activity, and globalization. I conclude by offering some perspectives on the economic and policy implications of the labor share decline.

Topic: Macroeconomics

Daniel Aaronson, Mark Borgschulte, Sunny Liu, and Bhash Mazumder

Does education lead to political engagement? The empirical literature is mixed. Theory suggests economic context matters. Individuals unable to take advantage of their education in the labor market are more likely to engage in political activity. We find support for this channel during the rapid expansion of NAACP branches in the South around WWII. Branch growth was stronger where Black workers were denied returns to schooling due to Jim Crow occupational discrimination. We further show that a pre-1931, large-scale school construction program caused greater NAACP activity during the 1940s and 1950s, when many former students were in their prime working years.

Topics: Educational equity; Inequality

Tomás Monarrez and Lesley J. Turner

Rising student loan debt provides a rationale for the broad class of “income-driven repayment” (IDR) plans for federal student loans. These plans link payments to income and provide forgiveness after a set repayment period. We estimate the causal effect of IDR payment burdens on loan repayment and schooling outcomes for several cohorts of first-time IDR applicants, using a regression discontinuity design. Federal student loan borrowers who are not required to make payments see short-run reductions in delinquency and default risk, but these effects fade or reverse in the longer run as some borrowers become disconnected from the student loan repayment system when not required to make payments.

Topics: Borrowing & lending; Higher education; Public policy

Katherine Lim and Mike Zabek

Changes in pay and benefits alone incorrectly predict self-assessed changes in overall job quality 30 percent of the time. Job changers place more emphasis on interest in their work than they do on pay and benefits. Parents particularly emphasize work-life balance, and we find indications that mothers value it more than fathers. Improvements in pay are highly correlated with improvements in other amenities for lower educated workers. This correlation implies that the difference in pay and benefits will understate differences in total job quality to a greater degree for workers with less education.

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

Kevin Corinth and Jeff Larrimore

By comparing post-tax-and-transfer real median household income to that of the previous generation at the same age, we find that each of the past four generations of Americans was better off than the previous one. However, compared with the silent generation and baby boomers, older millennials and Generation X experienced slower intergenerational growth. This can be explained by stalled growth in work hours. Progress for younger millennials has remained robust but is more reliant on their parents. We find that higher educational costs incurred by younger generations are outweighed by their lifetime income gains.

Topics: Wages, income, and wealth; Inequality

Kristen Broady, Anthony Barr, Darlene Booth-Bell, and Lucas Cain

The Federal Reserve System conducted the Survey of Consumer Finances (SCF) in 2019 and 2022. The SCF is one of the most detailed examinations of household wealth in the U.S. The SCF provides a valuable resource to explore wealth changes during the COVID-19 pandemic and recovery. This paper draws from the SCF and other important sources to present data on the racial wealth gap and socioeconomic factors that impact the racial disparity in net worth between households by race and ethnicity. We demonstrate that the racial wealth gap continues to worsen, despite increased educational attainment, business formation, and homeownership.

Topic: Wages, income, and wealth; Diversity & inclusion

Arthur Mendes, Wataru Miyamoto, Thuy Lan Nguyen, Steven Pennings, and Leo Feler

This paper provides new evidence on the macroeconomic impact of cash transfers in developing countries. Using a Bartik-style identification strategy, the paper documents that Brazil’s Bolsa Familia transfer program led to large and persistent increases in state-level GDP, formal employment, and informal employment.

Topics: Low & moderate income; Macroeconomics; Employment & labor markets

Richard Audoly

This paper studies the labor market risks associated with being self-employed, such as earnings fluctuations and frequent transitions into unemployment, using a calibrated search model with precautionary savings, work opportunities in paid employment and self-employment, and skill heterogeneity. This exercise suggests that extending the current U.S. unemployment insurance scheme to the self-employed would increase the transition rate from self-employment to unemployment and lead to an unequal benefits-to-contributions ratio across skill groups. The self-employed in the middle of the skill distribution would lose welfare.

Topics: Workforce; Public policy; Employment & labor markets

Federico S. Mandelman, Yang Yu, Francesco Zanetti, and Andrei Zlate

Beginning around 2007, the pace of low-skilled immigration slowed, which was associated with a subsequent rise in low-skilled wages and a decline in the skill premium. We develop and estimate a stochastic growth model with endogenous immigration and training. Lower immigration leads to higher wages for low-skilled workers but also to higher consumer prices and lower aggregate consumption. The decline in the skill premium reduces the incentive to train native workers and hurts aggregate productivity over time, which reduces welfare. During the COVID-19 pandemic, the shortage of low-skilled immigrant labor amplified the increase in consumer prices, partially eroding the effectiveness of the stimulus policies.

Topic: Immigration; Employment & labor markets

Maggie Isaacson, Cassie Marks, Lowell Ricketts, and Hannah Rubinton

During the COVID pandemic, there were shortfalls in immigration, coupled with a tight labor market. There are two reasons why we do not find evidence to support the hypothesis that the immigration shortfalls caused the tight labor market. First, the number of missing immigrant workers had largely recovered by February 2022, just as the labor market was becoming tight. Second, localities most impacted by the immigration restrictions did not have larger increases in labor market tightness.

Topic: Immigration; Employment & labor markets

Alexandre Gaillard, Christian Hellwig, Philipp Wangner, and Nicolas Werquin

We argue that canonical heterogeneous-agent economic models are unable to account for the observed concentration of consumption, labor income, wealth, and capital income at the top. We show that accounting simultaneously for these concentrations requires a combination of non-homothetic, wealth-dependent preferences and scale-dependent returns to capital, and we identify the strength of these two mechanisms from the values of the Pareto tail coefficients. Finally, matching all four tails matters for determining the long-run elasticity of savings that governs the revenue-maximizing capital tax rate.

Topics: Inequality; Taxes & tax policy; Wages, income, and wealth

Dirk Krueger, Egor Malkov, and Fabrizio Perri

We use panel data from the Italian Survey of Household Income and Wealth from 1991 to 2016 to document empirically what components of the household budget constraint change in response to shocks to household labor income. We show that shocks to labor income are associated with negligible changes in transfers and non-labor income components, modest changes in consumption expenditures, and large changes in wealth. After splitting the sample into households that do not own business or real estate wealth and those that do, we find that consumption responses are larger and wealth responses are much smaller in the first group.

Topics: Wages, income, and wealth

Nathan Blascak and Anna Tranfaglia

In this paper, we examine if there are gender differences in total bankcard limits by utilizing a data set that links mortgage applicant information with individual-level credit bureau data from 2006 to 2016. We document that after controlling for credit score, income, and demographic characteristics, male borrowers on average have higher total bankcard limits than female borrowers. We find that 87 percent of the gap is explained by differences in the effect of observed characteristics between male and female borrowers, while approximately 10 percent of the difference can be explained by differences in the levels of observed characteristics.

Topic: Credit & financial markets; Inequality

Hope Bodenschatz, Gerald E. Daniels Jr., and Jeffrey P. Thompson

Lifetime earnings are a particularly important measure of well-being but are under-studied in the context of racial disparities. We describe how the different components of lifetime earnings—including annual earnings of workers, number of working household members, and number of years of employment during the working life—vary by race. We then show that human capital–related variables account for most of the observed differences in lifetime earnings between White, Black, and Hispanic families.

Topics: Inequality; Wages, income, and wealth

Bradley Heim, Ithai Lurie, Elena Patel, and Shanthi Ramnath

We study the effect of the Affordable Care Act’s Medicaid expansion on coverage dynamics following the sudden loss of coverage from an employer plan. Using novel administrative data, we develop several stylized facts describing the postseparation coverage dynamics. In addition, we estimate the causal effect of Medicaid expansion on the duration of uninsurance following a separation from an employer plan. We find that Medicaid expansion increases the likelihood of finding coverage by 16% and reduces the duration of uninsurance by 12%.

Topics: Public policy; Insurance

Gustavo de Souza and Haishi Li

Using natural language processing and an instrumental variable approach, we discover that robots have led to a sizable decrease in the employment and wages of low-skill workers in operational occupations. However, tools—machines that complement labor—have led to an equally large reinstatement of these workers, increasing their employment and wages. We find that the lower prices of robots and tools over the last 20 years have reduced inequality and increased welfare without a significant effect on employment.

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

Mark E. Schweitzer and Angela Guo

This paper applies loan-level information from Paycheck Protection Program loans to analyze the coverage of this extraordinary lending program. We show that loans went to a large share of small businesses across most industries in the U.S., especially to industries that were most negatively impacted by COVID-19 stay-at-home orders. We geocode the loans and then identify that 2021 loans were more concentrated in low- and moderate-income communities, along with census tracts where minority residents are a majority of the population. The growth of nonemployer loans and fintech lending in the program were key components of the broadened reach of the program.

Topics: Public policy; Borrowing & lending

James Conklin, Kristopher Gerardi, and Lauren Lambie-Hanson

During the 2018–2021 period, Black homeowners’ mortgage equity withdrawal (MEW) product applications were rejected at almost double the rate of White homeowners (44% versus 23%), while Hispanic and Asian homeowners also experienced significantly higher denial rates (32% and 30%, respectively). Credit scores and debt-to-income ratios are the most important factors explaining the racial gaps. While there are numerous potential drivers of the residual disparities, we show that they tend to be larger in geographic areas characterized by more racial animus, which suggests that discriminatory forces may play a role.

Topics: Borrowing & lending; Inequality

Sumit Agarwal, Wenli Li, Raluca A. Roman, and Nonna Sorokina

We investigate how opioid abuse affects consumer credit supply in the U.S. We find that banks contract credit supply to consumers in counties highly exposed to opioid abuse by offering higher interest rates, lower credit card limits, fewer rewards, and fewer credit offers overall. Finally, we uncover the real effects associated with the opioid abuse–induced credit contraction: Local consumer spending significantly declines in the highly affected areas, with important macro-policy implications.

Topics: Credit & financial markets; Consumer economics; Public health

Joan Monras, Eduardo Polo-Muro, and Javier Vazquez-Grenno

This paper studies how fertility decisions respond to an improvement in job stability, using variation from the large and unexpected regularization of undocumented immigrants in Spain. This policy change substantially improved the labor market opportunities of affected men and women, many of whom left informal jobs for formal, higher paying jobs. Our findings suggest that gaining work permits leads to a significant increase in women’s fertility.

Topics: Workforce; Employment & labor markets

Isabel Cairó and Avi Lipton

Black workers experience a higher unemployment rate than White workers, a gap that is largely unexplained by observable characteristics. We develop a New Keynesian model with search and matching frictions in the labor market, endogenous separations, and employer discrimination against Black workers to explain these outcomes. We then use this model to assess the effects of the Federal Reserve's new monetary policy framework on racial inequality in the labor market. We find that shifting from a deviations interest rate rule to a shortfalls rule reduces the racial unemployment rate gap and the model-based measures of labor market discrimination but increases the average inflation rate.

Topics: Employment & labor markets; Inequality; Unemployment

Kristin Butcher, Lucas Cain, Camilo García-Jimeno, and Ryan Perry

Standard estimates based on the main household survey used to shed light on labor markets—the Current Population Survey (CPS)—suggest that after a significant drop during the pandemic, recent rapid growth has brought the foreign-born population back to, or above, levels predicted by the pre-pandemic trend. However, we document that the weighting factors used to make the CPS nationally representative have recently displayed some unusual movements and conclude that standard estimates of the foreign-born population may currently be too high. We also show that recent labor market indicators are inconsistent with increased foreign-born induced slack.

Topics: Employment & labor markets; Immigration

Zhifeng Cai and Jonathan Heathcote

How generous should social insurance be when quits account for a large share of transitions into non-employment? We address this question using a multi-sector directed search model extended to incorporate endogenous quits both to other jobs and to non-employment. Workers quit too often in the competitive equilibrium, and private markets co-ordinate on excessively high “efficiency” wages. Quantitatively, we find that unemployment insurance is optimally much less generous in an economy with quits than in one without. An extended Baily-Chetty formula is derived to illustrate the source of this difference.

Topic: Insurance; Unemployment

Xudong (Sean) An, Sadok El Ghoul, Omrane Guedhami, Ross Levine, and Raluca A. Roman

Using comprehensive mortgage-level data, we discover that the social capital of the community in which households live positively influences the likelihood of the approval of their mortgage applications, the terms of approved mortgages, and the subsequent performance of those mortgages. The results hold when conditioning on extensive household and community characteristics and a battery of fixed effects, including individual effects, data permitting, and when employing instrumental variables and propensity score matching to address identification and selection concerns. Concerning causal mechanisms, evidence suggests that social capital enhances lender screening and monitoring of borrowers and increases the social costs to borrowers of defaulting on their debts.

Topics: Borrowing & lending

Alan Chernoff and Julapa Jagtiani

Recently, there has been growth in partnership and collaboration between fintech firms and banks, which has allowed banks to access more information on consumers. We test whether banks are more likely to extend credit offers (by mail) and/or credit originations to consumers who would have otherwise been deemed high risk because of either low credit scores or lack of credit scores. Our results indicate that banks are more likely to offer credit cards and personal loans to the credit invisible and below-prime consumers—and are also more likely to grant larger credit limits to those consumers—after the partnership period.

Topics: Banks; Payments & FinTech; Economic opportunity

Daniel Aaronson, Joel Kaiyuan Han, Daniel Hartley, and Bhash Mazumder

Comparing adjacent neighborhoods with different creditworthiness based on cell phone records that track visits between them, we study the impact of the 1930s HOLC residential security maps on experienced segregation. Neighborhoods on the lower graded side of the border are associated with more visits to other historically lower graded destination neighborhoods. Today, these destination neighborhoods tend to have lower household income and, in some cases, lower educational attainment. We find that these disparities in visits are not driven by work commutes, very local visits, or differences in income. We also find similar disparities for incoming visits. We also study impact on non-residential segregation at the city level.

Topics: Inequality; Wages, income, and wealth

Jason P. Brown, Elior Cohen, and Alison Felix

We analyze the effects of legalizing recreational marijuana on state economic and social outcomes (2000–20) using difference-in-differences estimation robust to staggered timing and heterogeneity of treatment. We find moderate economic gains accompanied by some social costs. Post-legalization, average state income grew by 3 percent, house prices by 6 percent, and population by 2 percent. However, substance use disorders, chronic homelessness, and arrests increased by 17, 35, and 13 percent, respectively. Our findings suggest that the economic benefits of legalization are broadly distributed, while the social costs may be more concentrated among individuals who use marijuana heavily.

Topics: Public policy

James Best and Keshav Dogra

Wealthier individuals have stronger incentives to seek higher returns. We investigate the effect that this has on long-run wealth inequality. Incorporating capital management into a standard Ramsey-Cass-Koopmans model generates substantial long-run inequality. Counterintuitively, financial innovations or policies that reduce return differentials increase long-run wealth inequality. Egalitarian steady states may exist but are inefficient and unstable. Capital management introduces a novel equity-efficiency tradeoff: scale economies make it efficient for a few individuals to manage capital full time, but under laissez-faire, this generates substantial inequality.

Topic: Inequality; Wages, income, and wealth; Credit & financial markets

Yaa Akosa Antwi, Marion Aouad, and Nathan Blascak

We examine the financial consequences of the 2007 California Fair Pricing Law (FPL), a law that places a price ceiling on hospital bills for uninsured and financially vulnerable individuals. We find that the law reduces the medical and non-medical debt burden of individuals targeted by the law, with the likelihood of incurring non-medical debt in collections declining by 14.5 percent and the number of non-medical collections declining by 31 percent. The law also reduces the probability of having medical and non-medical debt balances between $1 and $1,000 in collections by 16.5 percent and 40 percent, respectively.

Topics: Public policy; Insurance

Milena Almagro, Eric Chyn, and Bryan Stuart

This paper studies one of the largest spatially targeted redevelopment efforts implemented in the United States: public housing demolitions sponsored by the HOPE VI program. Focusing on Chicago, we study welfare and racial disparities in the impacts of demolitions, using a structural model that features a rich set of equilibrium responses. Our results indicate that demolitions had notably heterogeneous effects, where welfare decreased for low-income minority households and increased for White households. Counterfactual simulations explore how housing policy mitigates negative effects of demolitions and suggest that increased public housing site redevelopment is the most effective policy for reducing racial inequality.

Topics: Inequality; Housing; Public policy

Brad Hershbein and Bryan Stuart

This paper studies how U.S. local labor markets respond to employment losses that occur during recessions. Following recessions from 1973 through 2009, we find that areas that lose more jobs during the recession experience persistent relative declines in employment and population. Most importantly, these local labor markets also experience persistent decreases in the employment–population ratio, earnings per capita, and earnings per worker. Our results imply that limited population responses result in consequences for local labor markets that last longer than previously thought and that recessions are followed by persistent reallocation of employment across space.

Topics: Employment & labor markets; Recessions

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: Education; Community & economic development

Eric Chyn, Kareem Haggag, and Bryan Stuart

This paper provides new evidence on the causal impacts of citywide racial segregation on intergenerational mobility. We use an instrumental variable approach that relies on plausibly exogenous variation in segregation due to the arrangement of railroad tracks in the 19th century. Our analysis finds that higher segregation reduces upward mobility for Black children from households across the income distribution and White children from low-income households. Moreover, segregation lowers academic achievement while increasing incarceration and teenage birth rates. An analysis of mechanisms shows that segregation reduces government spending, weakens support for anti-poverty policies, and increases racially conservative attitudes among White residents.

Topics: Community & economic development; Low & moderate income

Emin Dinlersoz, Timothy Dunne, John Haltiwanger, and Veronika Penciakova

We analyze the spatial disparity in the creation of business ideas and the formation of new employer startups from these ideas. Startups per capita exhibit enormous variation across granular units of geography. We decompose this variation into variation in ideas per capita and in their rate of transition to startups, and we find that both components matter. We find that the relationship of local conditions with ideas differs from that with transition rate in magnitude and, sometimes, in sign: certain conditions (notably, the African American share of the population) are positively associated with ideas but negatively with transition rates.

Topics: Economic growth

Lisa Barrow, Sarah Komisarow, and Lauren Sartain

School districts across the U.S. have adopted funding policies designed to distribute resources more equitably across schools. However, schools are also increasing external fundraising efforts to supplement district budget allocations. We document the interaction between funding policies and fundraising efforts in Chicago Public Schools (CPS). We find that adoption of a weighted-student funding policy successfully reallocated more dollars to schools with high shares of students eligible for free/reduced-price lunch. Further, almost all schools raised external funds over the study period, with most dollars raised concentrated in schools serving relatively affluent populations.

Topics: Educational equity; K-12 education

Adam Blandin, John Bailey Jones, and Fang Yang

Married men work substantially more hours than men who have never been married. Much of this gap is attributable to an increase in work in the years leading up to marriage. Two potential explanations for this increase are (i) men hit by positive labor market shocks are more likely to marry, and (ii) the prospect of marriage increases men’s labor supply. Our model implies that marriage substantially increases male labor supply. Counterfactual simulations suggest that if men were unable to marry, prime-age male work hours would fall by 7 percent.

Topic: Employment & labor markets; Workforce

Jonathan Heathcote, Fabrizio Perri, Giovanni L. Violante, and Lichen Zhang

This paper expands the analysis of Heathcote et al. (2010) and extends it to 2021. We find that since the early 2000s, the college wage premium has stopped growing, and the race wage gap has stalled. However, the gender wage gap has kept shrinking. Income pooling within the family and redistribution by the government have enormous impacts on the dynamics of household-level inequality. In particular, largely because of generous government transfers, the COVID recession has been the first downturn in 50 years in which inequality in disposable income and consumption actually declined.

Topics: Inequality; Wages, income, and wealth

Fatima Mboup

We observe empirical differences between races across macroeconomic variables for the White, Black, Asian, and Hispanic populations in the U.S. I treat nine macroeconomic variables as noisy indicators of economic activity and estimate an index that measures the economic activity of racial demographic groups, called Economic Activity by Race. The noise of the indicators motivates the use of Kalman filter estimation to extract a common component from the noisy indicator variables. My index suggests that there are empirical differences between Black and White economic activity, supporting the disparities found between races in racial stratification literature.

Topics: Inequality; Employment & labor markets; Unemployment

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

Christine L. Dobridge, Paul Landefeld, and Jacob Mortenson

This paper investigates how corporate tax changes affect workers’ earnings. We use a data set of U.S. worker-level W-2 filings matched with corporate tax returns and study the implementation of the Domestic Production Activities Deduction (DPAD). We find the DPAD tax rate reduction has a substantial effect on the distribution of annual wage earnings within a firm. We see no change in overall employment effects, but the number of employees rises at small firms and declines at large firms. Our paper has significant implications for assessing the progressivity of the U.S. tax code and for analyzing the effect of corporate tax policy changes on the U.S. income distribution.

Topics: Taxes & tax policy; Wages, income, and wealth

Osborne Jackson

This paper combines two components of the Current Population Survey to characterize the relationship between job displacement and sectoral mobility for long-tenured workers over the 1996–2019 period. While displacement negatively correlates with mobility over time, such job loss has a positive causal impact on mobility for displaced workers, compared with its effect on similar non-displaced workers. Education and industry structure facilitate post-displacement industry switching, and several factors, including business cycles, affect whether the alternative to sectoral mobility is likely to be same-industry employment or nonemployment.

Topics: Employment & labor markets; Sectoral mobility

Elin Halvorsen, Serdar Ozkan, and Sergio Salgado

Using administrative data from Norway, we investigate parents' role in childrens’ income dynamics. We find that children of high-income, high-wealth fathers enjoy steeper income growth over their life cycle and face more volatile but more positively skewed income changes, suggesting that they are more likely to pursue high-return, high-risk careers. Furthermore, the income dynamics of fathers and those of children are strongly correlated. In particular, children of fathers with steeper life cycle income growth, more volatile incomes, or higher downside risk also have income streams with similar properties.

Topics: Wages, income, and wealth; Inequality; Intergenerational mobility

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