-
The Economic Geography of Lifecycle Human Capital Accumulation: The Competing Effects of Labor Markets and Childhood Environments
November 2023
Working Paper Number:
CES-23-54
We examine how place shapes the production of human capital across the lifecycle. We ask: do those places that most effectively produce human capital in childhood also have local labor markets that do so in adulthood? We begin by modeling wages across place as driven by 1) location-specific wage premiums, 2) adult human capital accumulation due to local labor market exposure, and 3) childhood human capital accumulation. We construct estimates of location wage premiums using AKM style estimates of movers across US commuting zones and validate these estimates using evidence from plausibly exogenous out migration from New Orleans in response to Hurricane Katrina. Next, we examine differential earnings trajectories among movers to construct estimates of human capital accumulation due to labor market exposure. We validate these estimates using wage changes of multi-time movers. Finally, we estimate the impact of place on childhood human capital production using age variation in moves during childhood. Crucially, our estimates of location wage premiums and adult human capital accumulation allow us to construct estimates of the causal effect of place during childhood that are not confounded by correlated labor market exposure. Using these estimates, we show there is a tradeoff between those places that most effectively produce human capital in childhood and the local labor markets that do so in adulthood. We find that each 1-rank increase in earnings due to adult labor market exposure trades off with a 0.43 rank decrease in earnings due to the local childhood environment. This pattern is closely linked to city size, as adult human capital accumulation generally increases with city size, while childhood human capital accumulation falls. These divergent trajectories are associated with differences in both the physical structure of cities and the nature of social interaction therein. There is no tradeoff present in the largest cities, which provide greater exposure to high-wage earners and higher levels of local investment. Finally, we examine how these patterns are reflected in local rents. Location wage premia are heavily capitalized into rents, but the determinants of lifecycle human capital accumulation are not.
View Full
Paper PDF
-
Labor Market Segmentation and the Distribution of Income: New
Evidence from Internal Census Bureau Data
August 2023
Working Paper Number:
CES-23-41
In this paper, we present new findings that validate earlier literature on the apparent segmentation of the US earnings distribution. Previous contributions posited that the observed distribution of earnings combined two or three distinct signals and was thus appropriately modeled as a finite mixture of distributions. Furthermore, each component in the mixture appeared to have distinct distributional features hinting at qualitatively distinct generating mechanisms behind each component, providing strong evidence for some form of labor market segmentation. This paper presents new findings that support these earlier conclusions using internal CPS ASEC data spanning a much longer study period from 1974 to 2016. The restricted-access internal data is not subject to the same level of top-coding as the public-use data that earlier contributions to the literature were based on. The evolution of the mixture components provides new insights about changes in the earnings distribution including earnings inequality. In addition, we correlate component membership with worker type to provide a tacit link to various theoretical explanations for labor market segmentation, while solving the problem of assigning observations to labor market segments a priori.
View Full
Paper PDF
-
The Spillover Effects of Top Income Inequality
June 2023
Working Paper Number:
CES-23-29
Top income inequality in the United States has increased considerably within occupations. This phenomenon has led to a search for a common explanation. We instead develop a theory where increases in income inequality originating within a few occupations can 'spill over' through consumption into others. We show theoretically that such spillovers occur when an occupation provides non divisible services to consumers, with physicians our prime example. Examining local income inequality across U.S. regions, the data suggest that such spillovers exist for physicians, dentists, and real estate agents. Estimated spillovers for other occupations are consistent with the predictions of our theory.
View Full
Paper PDF
-
Same-Sex and Opposite-Sex Couples and the Child Penalty
May 2023
Working Paper Number:
CES-23-25R
Existing work has shown that the entry of a child into a household results in a large and sustained increase in the earnings gap between male and female partners in opposite-sex couples. We expand this analysis of the child penalty to examine within-couple dynamics in earnings for both opposite-sex and same-sex couples in the U.S. around the time their first child enters the household. Using linked survey and administrative data and event-study methodology, we confirm earlier work finding a child penalty for women in opposite-sex couples. We find this is true even when the female partner is the primary earner pre-parenthood, lending support to the importance of gender norms in opposite-sex couples. By contrast, in both female and male same-sex couples, earnings changes associated with child entry differ by the relative pre-parenthood earnings of the partners and tend towards equalization: secondary earners see an increase in earnings, while primary earners see a small decrease.
View Full
Paper PDF
-
Poach or Promote? Job Sorting and Gender Earnings Inequality across U.S. Industries
April 2023
Working Paper Number:
CES-23-23
I outline the sociological theory that would predict that external labor markets ' those in which more positions are filled with new hires rather from firm-internal promotions ' heighten gender based discrimination and contribute to earnings inequality. I test this theory by treating industries as miniature labor markets within the US with varying levels of gender inequality and different hiring practices. Using high quality administrative data from 1985 to 2013, including detailed work histories from this period, I compare the earnings of alike men and women across industries with different levels of reliance on external markets at different times. I find that men experience greater unexplained earnings relative to women ' unexplained in that it is not accounted for by work history or observable demographic characteristics ' when a greater share of earnings increase events occur outside the firm.
View Full
Paper PDF
-
Self-Employment Income Reporting on Surveys
April 2023
Working Paper Number:
CES-23-19
We examine the relation between administrative income data and survey reports for self-employed and wage-earning respondents from 2000 - 2015. The self-employed report 40 percent more wages and self-employment income in the survey than in tax administrative records; this estimate nets out differences between these two sources that are also shared by wage-earners. We provide evidence that differential reporting incentives are an important explanation of the larger self-employed gap by exploiting a well-known artifact ' self-employed respondents exhibit substantial bunching at the
first EITC kink in their administrative records. We do not observe the same behavior in their survey responses even after accounting for survey measurement concerns.
View Full
Paper PDF
-
The Matching Multiplier and the Amplification of Recessions
June 2022
Working Paper Number:
CES-22-20
This paper shows that the unequal incidence of recessions in the labor market amplifies aggregate shocks. Using administrative data from the United States, I document a positive covariance between worker marginal propensities to consume (MPCs) and their elasticities of earnings to GDP, which is a key moment for a new class of heterogeneous-agent models. I define the Matching Multiplier as the increase in the multiplier stemming from this matching of high MPC workers to more cyclical jobs. I show that this covariance is large enough to increase the aggregate MPC by 20 percent over an equal exposure benchmark.
View Full
Paper PDF
-
The impact of manufacturing credentials on earnings and the probability of employment
May 2022
Working Paper Number:
CES-22-15
This paper examines the labor market returns to earning industry-certified credentials in the manufacturing sector. Specifically, we are interested in estimating the impact of a manufacturing credential on wages, probability of employment, and probability of employment specifically in the manufacturing sector post credential attainment. We link students who earned manufacturing credentials to their enrollment and completion records, and then further link them to their IRS tax records for earnings and employment (Form W2 and 1040) and to the American Community Survey and decennial census for demographic information. We present earnings trajectories for workers with credentials by type of credential, industry of employment, age, race and ethnicity, gender, and state. To obtain a more causal estimate of the impact of a credential on earnings, we implement a coarsened exact matching strategy to compare outcomes between otherwise similar people with and without a manufacturing credential. We find that the attainment of a manufacturing industry credential is associated with higher earnings and a higher likelihood of labor market participation when we compare attainers to a group of non-attainers who are otherwise similar.
View Full
Paper PDF
-
Pay, Productivity and Management
September 2021
Working Paper Number:
CES-21-31
Using confidential Census matched employer-employee earnings data we find that employees at more productive firms, and firms with more structured management practices, have substantially higher pay, both on average and across every percentile of the pay distribution. This pay-performance relationship is particularly strong amongst higher paid employees, with a doubling of firm productivity associated with 11% more pay for the highest-paid employee (likely the CEO) compared to 4.7% for the median worker. This pay-performance link holds in public and private firms, although it is almost twice as strong in public firms for the highest-paid employees. Top pay volatility is also strongly related to productivity and structured management, suggesting this performance-pay relationship arises from more aggressive monitoring and incentive practices for top earners.
View Full
Paper PDF
-
Earnings Inequality and Immobility for Hispanics and Asians: An Examination of Variation Across Subgroups
September 2021
Working Paper Number:
CES-21-30
Our analysis provides the rst disaggregated examination of earnings inequality and immobility within the Hispanic ethnic group and the Asian race group in the U.S. over the period of 2005-2015. Our analysis differentiates between long-term immigrant and native-born Hispanics and Asians relative to recent immigrants to the U.S. (post 2005) and new labor market entrants. Our results show that for the Asian and Hispanic population aged 18-45, earnings inequality is constant or slightly decreasing for the long-term immigrant and native-born populations. However, including new labor market entrants and recent immigrants to the U.S. contributes significantly to the earnings inequality for these groups at both the aggregate and disaggregated race or ethnic group levels. These findings have important implications for the measurement of inequality for racial and ethnic groups that have higher proportions of new immigrants and new labor market entrants in the U.S.
View Full
Paper PDF
