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RANDOMIZED SAFETY INSPECTIONS AND RISK EXPOSURE ON THE JOB: QUASI-EXPERIMENTAL ESTIMATES OF THE VALUE OF A STATISTICAL LIFE
January 2014
Working Paper Number:
CES-14-05
Compensating wages for workplace fatality and accident risks are used to infer the value of a statistical life (VSL), which in turn is used to assess the benefits of human health and safety regulations. The estimation of these wage differentials, however, has been plagued by measurement error and omitted variables. This paper employs the first quasi-experimental design within a labor market setting to overcome such limitations in the ex-tant literature. Specifically, randomly assigned, exogenous federal safety inspections are used to instrument for plant-level risks and combined with confidential U.S. Census data on manufacturing employment to estimate the VSL using a difference-in-differences framework. The VSL is estimated to be between $2 and $4 million ($2011), suggesting prior studies may substantially overstate the value workers place on safety, and therefore, the benefits of health and safety regulations.
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Disentangling Labor Supply and Demand Shifts Using Spatial Wage Dispersion: The Case of Oil Price Shocks
November 2013
Working Paper Number:
CES-13-57
We separate changes in labor supply and demand through changes in higher-order moments of the wage distribution. We illustrate this idea in a study of the effects of oil price shocks, which generate a predictable labor demand adjustment across regions. Empirically, oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only shifts in labor supply can explain this latter fact.
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THE BRIGHT SIDE OF CORPORATE DIVERSIFICATION: EVIDENCE FROM INTERNAL LABOR MARKETS
August 2013
Working Paper Number:
CES-13-40
We estimate the labor market consequences of corporate diversification using worker-firm matched data from the U.S. Census Bureau. We find evidence that workers in diversified firms have greater cross-industry mobility. Displaced workers experience significantly smaller losses when they move to a firm in a new industry in which their former firm alsooperates. We also find more active internal labor markets in diversified firms. Diversified firms exploit the option to redeploy workers internally from declining to expanding industries. Though diversified firms pay higher wages to retain workers, their labor is also more productive than focused firms of the same size, age, and industry. Overall, internal labor markets provide a bright side to corporate diversification.
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WHY IMMIGRANTS LEAVE NEW DESTINATIONS AND WHERE DO THEY GO?
June 2013
Working Paper Number:
CES-13-32
Immigrants have a markedly higher likelihood of migrating internally if they live in new estinations. This paper looks at why that pattern occurs and at how immigrants' out-migration to new versus traditional destinations responds to their labor market economic and industrial structure, nativity origins and concentration, geographic region, and 1995 labor market type. Confidential data from the 2000 and 1990 decennial censuses are used for the analysis. Metropolitan and non-metropolitan areas are categorized into 741 local labor markets and classified as new or traditional based on their nativity concentrations of immigrants from the largest Asian, Caribbean and Latin American origins. The analysis showed that immigrants were less likely to migrate to new destinations if they lived in areas of higher nativity concentration, foreign-born population growth, and wages but more likely to make that move if they were professionals, agricultural or blue collar workers, highly educated, fluent in English, and lived in other new destinations. While most immigrants are more likely to migrate to new rather than traditional destinations that outcome differs sharply for immigrants from different origins and for some immigrants, particularly those from the Caribbean, the dispersal process to new destinations has barely started.
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INNOVATION, REALLOCATION AND GROWTH
April 2013
Working Paper Number:
CES-13-23
We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 53 of GDP reduces welfare by about 1.53 because it deters entry of new high-type firms. On the contrary, substantial improvements (of the order of 53 improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry.
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CAPITAL AND LABOR REALLOCATION INSIDE FIRMS
April 2013
Working Paper Number:
CES-13-22
We document how a plant-specific shock to investment opportunities at one plant of a firm ("treated plant") spills over to other plants of the same firm-but only if the firm is financially constrained. While the shock triggers an increase in investment and employment at the treated plant, this increase is offset by a decrease at other plants of the same magnitude, consistent with headquarters channeling scarce resources away from other plants and toward the treated plant. As a result of the resource reallocation, aggregate firm-wide productivity increases, suggesting that the reallocation is beneficial for the firm as a whole. We also show that-in order to provide the treated plant with scarce resources-headquarters does not uniformly "tax" all of the firm's other plants in the same way: It is more likely to take away resources from plants that are less productive, are not part of the firm's core industries, and are located far away from headquarters. We do not find any evidence of investment or employment spillovers at financially unconstrained firms.
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WHAT DO I TAKE WITH ME?: THE MEDIATING EFFECT OF SPIN-OUT TEAM SIZE AND TENURE ON THE FOUNDER-FIRM PERFORMANCE RELATIONSHIP
April 2013
Working Paper Number:
CES-13-17
Our study examines the mediating effect of spin-out team characteristics on the relationship between founder quality and parent and spin-out performance. Since the ability to transfer or recreate complementary assets is a critical determinant of performance, we theorize and show that founders with greater ability impact both parent firm and spin-out performance by assembling teams that represent strong complementary human capital. Using linked employee-employer US Census data from the legal services industry, we find founding team size and tenure mediate the founder quality effect. Our findings have practical implications for both managers of existing firms and aspiring founders as it relates to their human resource strategies: the factor most salient to performance is not the individual quality per se, but the manner in which it impacts the transfer and spillover of complementary human capital.
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DO HOUSING PRICES REFLECT ENVIRONMENTAL HEALTH RISKS? EVIDENCE FROM MORE THAN 1600 TOXIC PLANT OPENINGS AND CLOSINGS
April 2013
Working Paper Number:
CES-13-14
A ubiquitous and largely unquestioned assumption in studies of housing markets is that there is perfect information about local amenities. This paper measures the housing market and health impacts of 1,600 openings and closings of industrial plants that emit toxic pollutants. We find that housing values within one mile decrease by 1.5 percent when plants open, and increase by 1.5 percent when plants close. This implies an aggregate loss in housing values per plant of about $1.5 million. While the housing value impacts are concentrated within ' mile, we find statistically significant infant health impacts up to one mile away.
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Spillovers From Costly Credit
March 2013
Working Paper Number:
CES-13-11
Recent research on the effects of credit access among low- and moderate-income households finds that high-cost payday loans exacerbate, rather than alleviate, financial distress for a subset of borrowers (Melzer 2011; Skiba and Tobacman 2011). In this study I find that others, outside the borrowing household, bear a portion of these costs too: households with payday loan access are 20% more likely to use food assistance benefits and 10% less likely to make child support payments required of non-resident parents. These findings suggest that as borrowers accommodate interest and principal payments on payday loan debt, they prioritize loan payments over other liabilities like child support payments and they turn to transfer programs like food stamps to supplement the household's resources. To establish this finding, the analysis uses a measure of payday loan access that is robust to the concern that lender location decisions and state policies governing payday lending are endogenous relative to household financial condition. The analysis also confirms that the effect is absent in the mid-1990s, prior to the spread of payday lending, and that the effect grows over time, in parallel with the growth of payday lending.
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Product Quality and Firm Heterogeneity in International Trade
March 2013
Working Paper Number:
CES-13-08
I develop and implement a methodology for obtaining plant-level estimates of product quality from revenue and physical output data. Intuitively, firms that sell large quantities of output conditional on price are classified as high quality producers. I use this method to decompose cross-plant variation in price and export status into a quality and an efficiency margin. The empirical results show that prices are increasing in quality and decreasing in efficiency. However, selection into exporting is driven mainly by quality. The finding that changes in quality and efficiency have different impact on the firm's export decision is shown to be inconsistent with the traditional iceberg trade cost formulation and points to the importance of per unit transport costs.
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