A common result from altering several fundamental assumptions of the neoclassical investment model with convex adjustment costs is that investment may occur in lumpy episodes. This paper takes a step back and asks "How lumpy is the investment?" We answer this question by documenting the distributions of investment and capital adjustment for a sample of over 33,000 manufacturing plants drawn from over 400 four-digit industries. We find that many plants do undergo large investment episodes, however, there is tremendous variation across plants in their capital accumulation patterns. This paper explores how the variation in capital accumulation patterns vary by observable plant and firm characteristics, and how large investment episodes at the plant level transmit into fluctuations in aggregate investment.
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Do SBA Loans Create Jobs? Estimates from Universal Panel Data and Longitudinal Matching Methods
September 2012
Working Paper Number:
CES-12-27
This pape reports estimates of the effects of the Small Business Administration (SBA) 7(a) and 504 loan programs on employment. The database links a complete list of all SBA loans in these programs to universal data on all employers in the U.S. economy from 1976 to 2010. Our method is to estimate firm fixed effect regressions using matched control groups for the SBA loan recipients we have constructed by matching exactly on firm age, industry, year, and pre-loan size, plus kernel-based matching on propensity scores estimated as a function of four years of employment history and other variables. The results imply positive average effects on loan recipient employment of about 25 percent or 3 jobs at the mean. Including loan amount, we find little or no impact of loan receipt per se, but an increase of about 5.4 jobs for each million dollars of loans. When focusing on loan recipients and control firms located in high-growth counties (average growth of 22 percent), places where most small firms should have excellent growth potential, we find similar effects, implying that the estimates are not driven by differential demand conditions across firms. Results are also similar regardless of distance of control from recipient firms, suggesting only a very small role for displacement effects. In all these cases, the results pass a "pre-program" specification test, where controls and treated firms look similar in the pre-loan period. Other specifications, such as those using only matching or only regression imply somewhat higher effects, but they fail the pre-program test.
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Does Firms' Financial Status Affect Plant-Level Investment and Exit Decisions?
January 1999
Working Paper Number:
CES-99-03
This paper investigates the influence of a firm's financial status on the within-firm allocation of funds, reflected in its plant-level investment and exit decisions. In the empirical analysis, financial status is measured by both standard measures and an indicator variable recently suggested by Kaplan and Zingales. Based on these firm-level financial variables and on planet-level investment and production data from the U.S. Census Bureau's Longitudinal Research Database(LRD), econometric models of plant operating regimes are estimated which summarize investment and exit decisions. The empirical evidence supports the view that firm-level financial status affects investments and market exit decisions observed at the plant level.
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Criminal court fees, earnings, and expenditures: A multi-state RD analysis of survey and administrative data
February 2023
Working Paper Number:
CES-23-06
Millions of people in the United States face fines and fees in the criminal court system each year, totaling over $27 billion in overall criminal debt to-date. In this study, we leverage five distinct natural experiments in Florida, Michigan, North Carolina, Texas, and Wisconsin using regression discontinuity designs to evaluate the causal impact of such financial sanctions and user fees. We consider a range of long-term outcomes including employment, recidivism, household expenditures, and other self-reported measures of well-being, which we measure through a combination of administrative records on earnings and employment, the Criminal Justice Administrative Records System, and household surveys. We find consistent evidence across the range of natural experiments and subgroup analyses of precise null effects on the population, ruling out long-run impacts larger than +/-3.6% on total earnings and +/-4.7% on total recidivism. Failure to find changes in outcomes undermines popular narratives of poverty traps arising from criminal debt but argues against the use of fines and fees as a source of local revenue and as a crime control tool.
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Air Quality, Human Capital Formation and the Long-term Effects of Environmental Inequality at Birth
May 2017
Working Paper Number:
carra-2017-05
A growing body of literature suggests that pollution exposure early in life can have substantial long term effects on an individual's economic well-being as an adult, however the mechanisms for these effects remain unclear. I contribute to this literature by examining the effect of pollution exposure on several intermediate determinants of adult wages using a unique linked dataset for a large sample of individuals from two cohorts: an older cohort born around the 1970, and a younger cohort born around 1990. This dataset links responses to the American Community Survey to SSA administrative data, the universe of IRS Form 1040 tax returns, pollution concentration data from EPA air quality monitors and satellite remote sensing observations. In both OLS and IV specifications, I find that pollution exposure at birth has a large and economically significant effect on college attendance among 19-22 year olds. Using conventional estimates of the college wage premium, these effects imply that a 10 'g/m3 decrease in particulate matter exposure at birth is associated with a $190 per year increase in annual wages. This effect is smaller than the wage effects in the previous literature, which suggests that human capital acquisition associated with cognitive skills cannot fully explain the long term wage effects of pollution exposure. Indeed, I find evidence for an additional channel working through non-cognitive skill -pollution exposure at birth increases high school non-completion and incarceration among 16-24 year olds, and that these effects are concentrated within disadvantaged communities, with larger effects for non-whites and children of poor parents. I also find that pollution exposure during adolescence has statistically significant effects on high school non-completion and incarceration, but no effect on college attendance. These results suggest that the long term effects of pollution exposure on economic well-being may run through multiple channels, of which both non-cognitive skills and cognitive skills may play a role.
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Soft Information and Investment: Evidence from Plant-Level Data
October 2010
Working Paper Number:
CES-10-38R
A reduction in travel time between headquarters and plants makes it easier for headquarters to monitor plants and gather 'soft' information--i.e., information that cannot be transmitted through non-personal means. Using a difference-in-differences methodology, I find that the introduction of new airline routes that reduce the travel time between headquarters and plants leads to an increase in plant-level investment of 8% to 9% and an increase in plants' total factor productivity of 1.3% to 1.4%. Consistent with the notion that a reduction in travel time makes it easier for headquarters to monitor plants and gather soft information, I find that my results are stronger: i) for plants whose headquarters are more time constrained; ii) for plants operating in soft-information industries; iii) during the earlier years of my sample period, when alternative, non-personal, means of monitoring and transmitting information were less developed; iv) for plants where information uncertainty is likely to be greater and soft information is likely to be more valuable, such as smaller plants and peripheral plants operating in industries that are not the firm's main industry.
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Universal Preschool Lottery Admissions and Its Effects on Long-Run Earnings and Outcomes
March 2023
Working Paper Number:
CES-23-09
We use an admissions lottery to estimate the effect of a universal (non-means tested) preschool program on students' long-run earnings, income, marital status, fertility and geographic mobility. We observe long-run outcomes by linking both admitted and non-admitted individuals to confidential administrative data including tax records. Funding for this preschool program comes from an Indigenous organization, which grants Indigenous students admissions preference and free tuition. We find treated children have between 5 to 6 percent higher earnings as young adults. The results are strongest for individuals from the lower half of the household income distribution in childhood. Likely mechanisms include high-quality teachers and curriculum.
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Creditor Control Rights and Resource Allocation within Firms
November 2015
Working Paper Number:
CES-15-39
We examine the within-firm resource allocation effects of creditor interventions and their relationship to performance gains at firms violating financial covenants. By linking firm-level data to establishment-level data from the U.S. Census Bureau, we show that covenant violations are followed by large reductions in employment and more frequent establishment sales and closures. These operational cuts are concentrated in violating firms' noncore business lines and unproductive establishments. We conclude that refocusing activities and improving productive efficiency are important mechanisms through which creditors enhance violating firms' performance.
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Peer Income Exposure Across the Income Distribution
February 2025
Working Paper Number:
CES-25-16
Children from families across the income distribution attend public schools, making schools and classrooms potential sites for interaction between more- and less-affluent children. However, limited information exists regarding the extent of economic integration in these contexts. We merge educational administrative data from Oregon with measures of family income derived from IRS records to document student exposure to economically diverse school and classroom peers. Our findings indicate that affluent children in public schools are relatively isolated from their less affluent peers, while low- and middle-income students experience relatively even peer income distributions. Students from families in the top percentile of the income distribution attend schools where 20 percent of their peers, on average, come from the top five income percentiles. A large majority of the differences in peer exposure that we observe arise from the sorting of students across schools; sorting across classrooms within schools plays a substantially smaller role.
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Measuring The Impact Of The Toxics Release Inventory: Evidence From Manufacturing Plant Births
March 2013
Working Paper Number:
CES-13-07
The Toxics Release Inventory was the first major initiative to take a disclosurebased approach to environmental regulation and has served as the model for several other disclosure-based environmental policies. Yet the magnitude of its direct impacts on industrial manufacturing outcomes has not been established. I use Census Bureau micro-data to estimate the impacts of the Toxics Release Inventory on the opening of new manufacturing plants. I find that on average, counties that were found to be among the dirtiest in the country, in terms of toxic emissions, experienced a decrease in 'dirty' plant births and an even larger increase in 'clean' plant births. Furthermore, the magnitude of this shift is closely related to per capita income in the affected coun- ties - the effect is strongest in high-income communities and is reversed in low-income communities. I discuss the implications for information-based environmental policies.
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Job Creation, Small vs. Large vs. Young, and the SBA
September 2015
Working Paper Number:
CES-15-24
Analyzing a list of all Small Business Administration (SBA) loans in 1991 to 2009 linked with annual information on all U.S. employers from 1976 to 2012, we apply detailed matching and regression methods to estimate the variation in SBA loan effects on job creation and firm survival across firm age and size groups. The estimated number of jobs created per million dollars of loans within the small business sector generally increases with size and decreases in age. The results suggest that the growth of small, mature firms is least financially constrained, and that faster growing firms experience the greatest financial constraints to growth. The estimated association between survival and loan amount is larger for younger and smaller firms facing the 'valley of death.'
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