Research by Topic

We estimate the effect of unplanned children on the careers of women identified from failures of long-acting reversible birth contraceptives. Using linked health and labor market data from Sweden, we find that unplanned pregnancies halt women's career progression resulting in income losses of 20% by five years after the initial contraceptive failure. The detrimental effects of unplanned pregnancies are larger for younger women and women enrolled in education, suggesting that unplanned births are particularly disruptive early in the career. In contrast, when we study the impact of children identified from quasi-random success of fertilization procedures, we find small impacts of children. Taken together, the results suggest that children can have large disruptive effects on careers, and by timing pregnancy women mitigate these disruptions.

This paper examines how high school specialization shapes college investment decisions and their subsequent returns through dynamic complementarities. Using Swedish administrative data, we estimate a dynamic Roy model that accounts for selection on multidimensional skills, family background, prior investments, and unobserved heterogeneity. We identify the model using rich skill measures and quasi-experimental variation in program popularity. For marginal students, STEM specialization in high school increases wages by 9%, with more than half this return attributed to dynamic complementarities that enhance the productivity of subsequent college investments. Consequently, we find that counterfactual policies encouraging high school STEM specialization generate twice the returns of equivalent college-level interventions. These findings demonstrate how the timing of specialized human capital investments matters during adolescence, with important implications for education policies that encourage or restrict specialization.

This paper investigates the dynamics of behavioral changes during a crisis. We study this in the context of the first year of the Covid-19 pandemic, where behavioral responses were important in mitigating the costs of the pandemic. To identify behavioral responses to unanticipated and transient health risk shocks, we combine high-frequency cellphone mobility data with detailed incidence data in Germany. Using an event-study design on local outbreaks, we find that county-level mobility immediately and significantly decreased by about 2.5% in response to an outbreak independent of non-pharmaceutical interventions. We also find that the reproduction rate decreased by about 17% in response to a local outbreak. Both behavioral responses are quite persistent even after the relative health risk has dissipated. By the time of the second wave, the behavioral response to a second or third shock is small or negligible. Our results demonstrate the importance of (1) integrating behavioral persistence in models used to study behavior and policies that change behavior, (2) the effectiveness of policies that provide high-frequency localized information on health risks, and (3) the potential persistence of behavioral changes after the Covid-19 pandemic has passed.

Why do many individuals remain stuck in poor mental health despite the availability of effective treatments? We propose and provide empirical evidence for a mental health trap driven by pessimistic beliefs about self-investment. In our dynamic human capital framework, deteriorating mental health generates pessimistic beliefs, reducing investment in mental health and social functioning and triggering further deterioration. Using the Danish VestLiv longitudinal cohort study—which tracks mental health, beliefs, and coping behaviors from adolescence through young adulthood—we document the self-reinforcing dynamics at the core of this mechanism. We find that both mental health status and beliefs independently predict investment behavior, that beliefs update in response to mental health, and that mental health exhibits high persistence while responding to investment choices. These findings support a belief-based mental health trap that operates even in a setting with universal healthcare and generous social insurance, suggesting a mechanism not driven by access or financial constraints.

There is a large gender wage gap among college graduates. This gender gap could be partially driven by differences in college major and prior skills. We use Swedish register data to study how much of the gender gap can be explained by differences in majors, skills, and skill prices. College majors explain 60 percent of the gender wage gap, but large gaps remain within majors. We find that within-major wage gaps are driven by neither differences in multidimensional skills nor returns to these skills. In fact, women are positively selected in terms of college preparation and skills in almost every major.

This paper develops a sufficient statistics approach for estimating the role of search frictions in wage dispersion and life-cycle wage growth. We show how the wage dynamics of displaced workers are directly informative of both for a large class of search models. Specifically, the correlation between pre- and post-displacement wages is informative of frictional wage dispersion. Furthermore, the fraction of displaced workers who suffer a wage loss is informative of frictional wage growth and job-to-job mobility, independent of the job-offer distribution and other labor-market parameters. Applying our methodology to US data, we find that search frictions account for less than 20% of wage dispersion. In addition, we estimate that between 40 to 80% of workers experience no frictional wage growth during an employment spell. Our approach allows us to estimate how frictions change over time. We find that frictional wage dispersion has declined substantially since 1980 and that frictional wage growth, while low, is more important toward the end of expansionary periods. We finish by estimating two versions of a random search model to show how at least two different mechanisms--involuntary job transitions or compensating differentials--can reconcile our results with the job-to-job mobility seen in the data. Regardless of the mechanism, the estimated models show that frictional wage growth accounts for about 15% of life-cycle wage growth.

We document gender differences in the booking of business air travel among similar workers within a firm. Women pay consistently less per ticket than men after accounting for a large set of covariates. A large proportion of the lower fares paid are explained by women booking earlier. We find that gender differences increase with age but find no deviation from this trend during the childbearing years. We also find that country-level gender differences in reciprocity are associated with the documented gender differences. The documented gender differences have important monetary implications for firms and suggest an important role for workers' morale.

Leveraging data from Sweden and Chicago, we study the educational pipeline for STEM and economics majors to better understand the determinants of the gender gap, and when these determinants arise. We present three findings. First, females are less likely to select STEM courses in high school, despite equal or better preparation. Second, there are important gender differences in preferences and beliefs, even conditional on ability. Third, early differences in preferences and beliefs explain more of the gaps in high school sorting than other candidate variables. High school sorting then explains a large portion of the gender difference in college majors.

This article uses networks to study price dispersion in seller-buyer markets where buyers with unit demand interact with multiple, but not all, sellers; and buyers and sellers compete on prices after they meet. The central finding of this article is that price dispersion is determined by the structure of the network. First, for any given network we characterize the pairwise stable matchings and the prices that support them. Second, we characterize the set of all graphs where price dispersion is precluded. Third, we use a theorem from Frieze (1985) to show that the graphs where price dispersion is precluded arise asymptotically with probability one in random Poisson networks, even as the probability of each individual link goes to zero. Finally, we calibrate our model to the documented price dispersion at the online trading platform eBay and show how counterfactual network structures at eBay would substantially decrease price dispersion.

This paper estimates returns to education using a dynamic model of educational choice that synthesizes approaches in the structural dynamic discrete choice literature with approaches used in the reduced form treatment effect literature. It is an empirically robust middle ground between the two approaches which estimates economically interpretable and policy-relevant dynamic treatment effects that account for heterogeneity in cognitive and non-cognitive skills and the continuation values of educational choices. Graduating college is not a wise choice for all. Ability bias is a major component of observed educational differentials. For some, there are substantial causal effects of education at all stages of schooling.

This paper analyzes the non-market benefits of education and ability. Using a dynamic model of educational choice we estimate returns to education that account for selection bias and sorting on gains. We investigate a range of non-market outcomes including incarceration, mental health, voter participation, trust, and participation in welfare. We find distinct patterns of returns that depend on the levels of schooling and ability. Unlike the monetary benefits of education, the benefits to education for many non-market outcomes are greater for low-ability persons. College graduation decreases welfare use, lowers depression, and raises self-esteem more for less-able individuals.

This paper develops robust models for estimating and interpreting treatment effects arising from both ordered and unordered multistage decision problems. Identification is secured through instrumental variables and/or conditional independence (matching) assumptions. We decompose treatment effects into direct effects and continuation values associated with moving to the next stage of a decision problem. Using our framework, we decompose the IV estimator, showing that IV generally does not estimate economically interpretable or policy relevant parameters in prototypical dynamic discrete choice models, unless policy variables are instruments. Continuation values are an empirically important component of estimated total treatment effects of education. We use our analysis to estimate the components of what LATE estimates in a dynamic discrete choice model.

Peters and Severinov (2006) (PS henceforth) characterize a perfect Bayesian equilibrium (PBE) in a competing auctions environment, where all buyers are linked to all the sellers. PS characterize a PBE using a simple bidding rule, whereby buyers select in which auction to bid. In this note we show that when buyers are linked with a subset of the sellers (i.e. when there are search frictions), the PS bidding rule is no longer guaranteed to be efficient nor a PBE of the competing auctions game of PS. Our results indicate that researchers should be cautious when using the PS bidding rule to make inference about the behavior of buyers and sellers in a market where frictions are present such as eBay.

The gap in wages between workers with and without a college degree has widened substantially since 1980. This change in observed wage patterns could have multiple explanations, including changes in the individual returns to college training, changes in the composition of workers at each schooling level, and changes in the returns to pre-schooling skill endowments. We estimate a robust dynamic model of educational choices and wages that incorporates all three possibilities. The methodology accounts for measurement error in latent abilities, imperfect proxies, and reverse causality. We find that most of the growth in the observed college premium from the late 1980s to 2015 can be attributed to changes in the causal effect of college. Changes in the composition of workers at each schooling level have offset some of the growth in the college premium.

Can surveys affect human capital investments? This paper examines whether individual education choices and outcomes are affected by a survey posing questions related to expectations and forward-looking behavior. We have administrative data for the whole Swedish population to which an extensive education survey was administered to randomly drawn samples of 3rd graders. The causal effect of the survey on both short- and long-term outcomes is generally not significantly different from zero. We find, however, that being surveyed increases educational attainment and job stability in the early career for those with low parental education.

Informed by new measurements of labor market dynamics, I develop and estimate an equilibrium search model of worker mobility. I first describe new facts about the dynamics of wages across involuntary unemployment spells in Denmark. This implies that the job-ladder search model cannot by itself explain all the observed movements of workers between firms. I construct a new model of worker mobility which combines search and human capital accumulation. Workers in the model accumulate skills via learning-by-doing which has decreasing returns for a given job. Workers must either be promoted or find a job at a new firm in order to continue learning new skills. I show that by including this incentive to change jobs, career development not only helps explain wage dispersion, but also contributes to a more complete understanding of labor market dynamics. I structurally estimate the job-ladder model using matched employer-employee data from Denmark. The estimates show that the job-ladder model explains less than 10% of the worker mobility seen in the data. In addition, worker heterogeneity explains about 65% of the wage variance for college graduates and about 45% for all other workers.

This paper presents a comprehensive empirical analysis of the impact of attending a child day care center on early childhood development (ECD) in Chile, examining child development from a multi-dimensional perspective. The potential endogeneity associated with the parental decision of sending children to day care centers (or preschools) is addressed. Additionally, unobserved heterogeneity is interpreted as (latent) abilities. This approach provides a unifying framework combining parental decisions, childrens endowments, and child care characteristics. The results of the study suggest that: (i) cognitive and socioemotional test scores from children younger than two are too noisy to be analyzed; (ii) analysis of enrollment in child care centers for children older than two reveals significant effects of family background, unobserved abilities, the local availability of centers, and local capacity; and (iii) enrollment in child care centers seems to boost cognitive development among children older than two.

Does the college major premium reflect returns to prior abilities or college education? We decompose the college major premium into labor market returns to multidimensional abilities (grit, interpersonal, and cognitive) and skills learned in college. This allows us to quantify how much of the college major premium is due to sorting on multi-dimensional abilities and how much is due to the differential labor market value of major-specific skills. We find that sorting on abilities accounts for 10-50% of the college major premium. We also provide novel estimates of complementarities and interaction effects between abilities and skills, since the returns to abilities vary significantly across college majors. We document that 40% of students who enter STEM degrees change major or drop out. We evaluate counterfactual policies to promote STEM degrees, accounting for the fact that many who start STEM degrees do not finish.