This paper integrates the existing literatures on displacement and health by examining the enduring
effects of job dislocations that are induced by firm and individual shocks to employment. A joint estimation of
hourly wage rates and weekly hours illuminates the disparities in these economic outcomes
that exist between those who have reestablished themselves in the workplace subsequent to a layoff and
those who have returned to work following the onset of a disability relative to those with uninterrupted
job histories. As an extension of these ideas, employment transitions and workplace adjustments are
modeled to capture spousal reactions to these shocks. Multiple indicators of health from the Survey of
Income and Program Participation and Social Security Administrative benefits records are incorporated
into the analyses of those with impairments that prompted job loss. These measures allow knowledge
to be gleaned regarding the qualitative di'erences in the lasting impacts of job cessation resulting from
medically diagnosed illnesses as compared to estimates uncovered using survey data sources alone. By
considering time durations following these periods of separation in light of these indicators of well-being,
a more comprehensive understanding of the long-run repercussions of employee-employer separation is
acquired.
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Trends in Earnings Inequality and Earnings Instability among U.S. Couples: How Important is Assortative Matching?
January 2015
Working Paper Number:
CES-15-04
We examine changes in inequality and instability of the combined earnings of married couples over the 1980-2009 period using two U.S. panel data sets: Social Security earnings data matched to Survey of Income and Program Participation panels (SIPP-SSA) and the Panel Study of Income Dynamics. Relative to male earnings inequality, the inequality of couples' earnings is both lower in levels and rises by a smaller amount. We also find that couples' earnings instability is lower in levels compared to male earnings instability and actually declines in the SIPP-SSA data. While wives' earnings played an important role in dampening the rise in inequality and year-to-year variation in resources at the family level, we find that marital sorting and coordination of labor supply decisions at the family level played a minor role. Comparing actual couples to randomly paired simulated couples, we find very similar trends in earnings inequality and instability.
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Family Formation and the Great Recession
December 2020
Working Paper Number:
CES-20-42R
This paper studies how exposure to recessions as a young adult impacts long-term family formation in the context of the Great Recession. Using confidential linked survey data from U.S. Census, I document that exposure to a 1 pp larger unemployment shock in the Great Recession in one's early 20s is associated with a 0.8 pp decline in likelihood of marriage by their early 30s. These effects are not explained by substitution toward cohabitation with unmarried partners, are concentrated among whites, and are notably absent for individuals from high-income families. The estimated effects on fertility are also negative but imprecisely estimated. A back-of-the-envelope exercise suggests that these reductions in family formation may have increased the long-run impact of the Recession on consumption relative to its impact on individual earnings by a considerable extent.
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Did Vietnam Veterans Get Sicker in the 1990s? The Complicated Effects of Military Service on Self-Reported Health
August 2009
Working Paper Number:
CES-09-19
The veterans disability compensation (VDC) program, which provides a monthly stipend to disabled veterans, is the third largest American disability insurance program. Since the late 1990s, VDC growth has been driven primarily by an increase in claims from Vietnam veterans, raising concerns about costs as well as health. We use the draft lottery to study the long-term effects of Vietnam-era military service on health and work in the 2000 Census. These estimates show no significant overall effects on employment or work-related disability status, with a small effect on non-work-related disability for whites. On the other hand, estimates for white men with low earnings potential show a large negative impact on employment and a marked increase in non-work-related disability rates. The differential impact of Vietnam-era service on low-skill men cannot be explained by more combat or war-theatre exposure for the least educated, leaving the relative attractiveness of VDC for less skilled men and the work disincentives embedded in the VDC system as a likely explanation.
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Estimating the Relationship between Employer-Provided Health Insurance, Worker Mobility, and Wages
September 2002
Working Paper Number:
tp-2002-23
In this paper, a joint model of wages, hazard of a job ending, and
probability of holding employer-provided health insurance is estimated,
taking account of unobservable person and job characteristics. A unique
data source, the 1990 and 1996 SIPP Panels linked to SSA administrative
job histories, enables the identification of random person and job effects
and the correlation of these effects across the three equations. The explicit
modeling of this correlation produces consistent estimates of the
effect of tenure on wages and the effect of health insurance on mobility.
Substantial levels of job-lock and significant annual returns to seniority
are found. Increasing the job-specific probability of obtaining employerprovided
health insurance from 60% to 63%, or increasing the job-specific
hourly wage rate by $.80, are both associated with an equivalent decrease
in the hazard of the job ending. However, the dollar value of the wage
benefit is substantially higher.
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Estimating Measurement Error in SIPP Annual Job Earnings: A Comparison of Census Bureau Survey and SSA Administrative Data
July 2011
Working Paper Number:
CES-11-20
We quantify sources of variation in annual job earnings data collected by the Survey of Income and Program Participation (SIPP) to determine how much of the variation is the result of measurement error. Jobs reported in the SIPP are linked to jobs reported in an administrative database, the Detailed Earnings Records (DER) drawn from the Social Security Administration's Master Earnings File, a universe file of all earnings reported on W-2 tax forms. As a result of the match, each job potentially has two earnings observations per year: survey and administrative. Unlike previous validation studies, both of these earnings measures are viewed as noisy measures of some underlying true amount of annual earnings. While the existence of survey error resulting from respondent mistakes or misinterpretation is widely accepted, the idea that administrative data are also error-prone is new. Possible sources of employer reporting error, employee under-reporting of compensation such as tips, and general differences between how earnings may be reported on tax forms and in surveys, necessitates the discarding of the assumption that administrative data are a true measure of the quantity that the survey was designed to collect. In addition, errors in matching SIPP and DER jobs, a necessary task in any use of administrative data, also contribute to measurement error in both earnings variables. We begin by comparing SIPP and DER earnings for different demographic and education groups of SIPP respondents. We also calculate different measures of changes in earnings for individuals switching jobs. We estimate a standard earnings equation model using SIPP and DER earnings and compare the resulting coefficients. Finally exploiting the presence of individuals with multiple jobs and shared employers over time, we estimate an econometric model that includes random person and firm effects, a common error component shared by SIPP and DER earnings, and two independent error components that represent the variation unique to each earnings measure. We compare the variance components from this model and consider how the DER and SIPP differ across unobservable components.
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Agent Heterogeneity and Learning: An Application to Labor Markets
October 2002
Working Paper Number:
tp-2002-20
I develop a matching model with heterogeneous workers, rms, and worker-firm
matches, and apply it to longitudinal linked data on employers and employees. Workers
vary in their marginal product when employed and their value of leisure when unemployed.
Firms vary in their marginal product and cost of maintaining a vacancy. The
marginal product of a worker-firm match also depends on a match-specific interaction
between worker and rm that I call match quality. Agents have complete information
about worker and rm heterogeneity, and symmetric but incomplete information about
match quality. They learn its value slowly by observing production outcomes. There
are two key results. First, under a Nash bargain, the equilibrium wage is linear in a
person-specific component, a firm-specific component, and the posterior mean of beliefs
about match quality. Second, in each period the separation decision depends only on
the posterior mean of beliefs and person and rm characteristics. These results have
several implications for an empirical model of earnings with person and rm eects.
The rst implies that residuals within a worker-firm match are a martingale; the second
implies the distribution of earnings is truncated.
I test predictions from the matching model using data from the Longitudinal
Employer-Household Dynamics (LEHD) Program at the US Census Bureau. I present
both xed and mixed model specifications of the equilibrium wage function, taking
account of structural aspects implied by the learning process. In the most general
specification, earnings residuals have a completely unstructured covariance within a
worker-firm match. I estimate and test a variety of more parsimonious error structures,
including the martingale structure implied by the learning process. I nd considerable
support for the matching model in these data.
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The Parental Gender Earnings Gap in the United States
January 2017
Working Paper Number:
CES-17-68
This paper examines the parental gender earnings gap, the within-couple differences in earnings over time, before and after the birth of a child. The presence and timing of children are important components of the gender wage gap, but there is selection in both decisions. We estimate the earnings gap between male and female spouses over time, which allows us to control for this timing choice as well as other shared external earnings shifters, such as the local labor market. We use Social Security Administration Detail Earnings Records (SSA-DER) data linked to the Survey of Income and Program Participation (SIPP) to examine a panel of earnings from 1978 to 2011 for the individuals in the SIPP sample. Our main results show that the spousal earnings gap doubles between two years before the birth of the first child and the year after that child is born. After the child's first year of life the gap continues to grow for the next five years, but at a much slower rate, then tapers off and even begins to fall once the child reaches school-age.
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Maternal Labor Dynamics: Participation, Earnings, and Employer Changes
December 2019
Working Paper Number:
CES-19-33
This paper describes the labor dynamics of U.S. women after they have had their first and subsequent children. We build on the child penalty literature by showing the heterogeneity of the size and pattern of labor force participation and earnings losses by demographic characteristics of mothers and the characteristics of their employers. The analysis uses longitudinal administrative earnings data from the Longitudinal Employer-Household Dynamics database combined with the Survey of Income and Program Participation survey data to identify women, their fertility timing, and employment. We find that women experience a large and persistent decrease in earnings and labor force participation after having their first child. The penalty grows over time, driven by the birth of subsequent children. Non-white mothers, unmarried mothers, and mothers with more education are more likely to return to work following the birth of their first child. Conditional on returning to the labor force, women who change employers earn more after the birth of their first child than women who return to their pre-birth employers. The probability of returning to the pre-birth employer and industry is heterogeneous over both the demographics of mothers and the characteristics of their employers.
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Wage Dispersion, Compensation Policy and the Role of Firms
November 2005
Working Paper Number:
tp-2005-04
Empirical work in economics stresses the importance of unobserved firm- and person-level characteristics
in the determination of wages, finding that these unobserved components account for the overwhelming
majority of variation in wages. However, little is known about the mechanisms sustaining these wage di'er-
entials. This paper attempts to demystify the firm-side of the puzzle by developing a statistical model that
enriches the role that firms play in wage determination, allowing firms to influence both average wages as
well as the returns to observable worker characteristics.
I exploit the hierarchical nature of a unique employer-employee linked dataset for the United States,
estimating a multilevel statistical model of earnings that accounts for firm-specific deviations in average
wages as well as the returns to components of human capital - race, gender, education, and experience -
while also controlling for person-level heterogeneity in earnings. These idiosyncratic prices reflect one aspect
of firm compensation policy; another, and more novel aspect, is the unstructured characterization of the
covariance of these prices across firms.
I estimate the model's variance parameters using Restricted (or Residual) Maximum Likelihood tech-
niques. Results suggest that there is significant variation in the returns to worker characteristics across
firms. First, estimates of the parameters of the covariance matrix of firm-specific returns are statistically
significant. Firms that tend to pay higher average wages also tend to pay higher than average returns to
worker characteristics; firms that tend to reward highly the human capital of men also highly reward the
human capital of women. For instance, the correlation between the firm-specific returns to education for
men and women is 0.57. Second, the firm-specific returns account for roughly 9% of the variation in wages
- approximately 50% of the variation in wages explained by firm-specific intercepts alone. The inclusion of
firm-specific returns ties variation in wages, otherwise attributable to firm-specific intercepts, to observable
components of human capital.
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Female Executives and the Motherhood Penalty
January 2021
Working Paper Number:
CES-21-03
Childbirth and subsequent breaks from the labor market are a primary reason why the average earnings of women is lower than that of men. This paper uses linked survey and administrative data from the United States to investigate whether the sex composition of executives at the firm, defined as the top earners, affects the earnings and employment outcomes of new mothers. We begin by documenting that (i) the male-female earnings gap is smaller in industries in which a larger share of executives are women, and (ii) the male-female earnings gap has declined more in industries that have experienced larger increases in the share of executives who are female. Despite these cross-sectional and longitudinal correlations, we find no evidence that the sex composition of the executives at the firm has a causal effect on the childbirth and motherhood penalties that impact women's earnings and employment.
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