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Entrepreneurship, City Size, and Heterogeneous Human Capital |
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| Recent microfoundations for the relationship between city size and human capital emphasize talent externalities that arise from variety in the production of intermediates, and other theoretical work has emphasized the importance of human capital variety for entrepreneurial success. However, empirical work has yet to examine the implications of human capital variety for city size and entrepreneurship. This paper is a first attempt. I distinguish between college graduates employed in the left and right portions of the occupational skill distribution. I find that it makes sense to net out college graduates employed in education occupations when characterizing the human capital composition of cities. City size is strongly positively correlated with human capital intensity of occupations throughout the occupational skill distribution. College graduates employed in the left half of the occupational skill distribution (1) account for a substantial fraction of college graduates overall; (2) are more productive and more likely to be self-employed than their non-college counterparts; (3) add to the explanatory power of regressions of log city size on human capital composition; and (4) contribute positively to entrepreneurial activity as measured by incorporated self employment per worker. College graduates in the right portion of the occupational skill distribution dominate the city size-human capital relationship, but contribute positively to entrepreneurship only among college graduates. | download |
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The Effect of Career Displacement: A Task-Specific Human Capital Approach (with Mallika Pung) |
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| Most research finds that changes in occupational tasks between the lost and new job harm career outcomes of displaced workers. We devise a model and show empirically using data on skill, occupational wage percentile, and wages from the 1994-2018 Displaced Worker Surveys that such changes interact with rank on the lost job, harming workers displaced from higher-rank jobs, but can benefit workers displaced from lower-rank jobs. We deal with potential simultaneity bias using instruments derived from continuously employed workers. The success of those instruments suggests that the career transitions of displaced workers roughly mimic those of non-displaced workers. | download |
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Migration and Career Attainment of Power Couples, The Roles of City Size and Human Capital Composition |
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| Costa and Kahn (2000, The Quarterly Journal of Economics, 115: 1287–1315) documented that power couples tended to be located in large cities, postulating a need to solve a co-location problem peculiar to dual-career, highly educated spouses. Using data from the 2008 to 2014 American Community Surveys, I find that young full-power couples are more likely to move to larger, better-educated cities relative to couples in which just the husband has a college degree and wife-only power couples more likely than couples in which neither spouse has a college degree. I also present new evidence that larger, better-educated cities offer superior joint husband-and-wife career outcomes as measured by occupational attainment for wives and husbands with college degrees. | download |
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Sectoral Change and Unemployment During the Great Recession, In Historical Perspective |
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| I examine the effect of sectoral change on U.S. unemployment during the Great Recession. Relative to the mid 2000s, increased structural change explains 0.23 of the 1.3 percentage point rise in mean unemployment, and the increased estimated effect of sectoral change another 0.45 points. Despite the role of housing in the Recession, neither construction nor any other one sector can account for the results. Finally, the pace and role of structural change had returned to normal levels after the Great Recession passed, confirming the findings of others that explanations for the persistence of high unemployment and slow employment growth lie elsewhere. | download |
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The Virtues of Patience: Saving, Financial Well Being, and Awareness |
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| This paper uses Warner and Pleeter’s (2001) methodology to estimate the personal discount rate (PDR) for military personnel who were given the choice between receiving an immediate $30,000 bonus or increased retirement annuity. The estimated median PDR ranges from 2% for officers to 11% for enlistees, far less than the 7-31% rates estimated in the earlier study. We attribute the difference to the fact that individuals in the earlier study were involuntarily separating from the military while those in the current study are virtually guaranteed vesting in the pension of their choice. Unlike the earlier study, we are able to relate our estimated PDRs to a variety of other financial behaviors. We find that individuals with higher estimated PDRs tend to save less, prefer less risky investments, experience more financial problems, face higher borrowing interest rates, and are less financially aware. | download |
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Minimum Wages, Sickness Absenteeism, and Non-Sickness Absenteeism |
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| Absenteeism is a nonwage component of compensation valued by workers and costly for employers to provide. Higher minimum wages may cause employers to try to reduce worker absenteeism to reduce costs, but, from a labor supply perspective, higher minimum wages exert a substitution effect against absenteeism and an income effect towards it. This paper presents new evidence on the relationship between absenteeism and minimum wages using the limited panel aspect of data from the 1979-2007 Merged Outgoing Rotation Groups of the Current Population Survey. We estimate that higher minimum wages reduce overall absenteeism among young men and women, but not other demographic groups. We find that higher minimum wages are generally associated with lower rates of non-sickness absenteeism but higher rates of sickness absenteeism. The shift towards sickness absenteeism is notable in light of recent work showing that employers punish biologically based absenteeism differently than other types of absenteeism. | download |
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Absenteeism and Minimum Wages: Evidence from the CPS-MORG (with Laura Bucila) |
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| Some proponents of higher minimum wages cite reduced absenteeism as a positive side-effect. However, little evidence on the relationship between minimum wages and absenteeism exists for the United States. This paper examines the effect of minimum wages on absenteeism using data from the Merged Outgoing Rotation Groups of the Current Population Survey for the years 1979-2007 (CPS-MORG). We estimate a negative relationship between minimum wages and absenteeism for men, but a positive relationship for women. We consider three possible explanations for the positive estimated effects for women: selection, wage-constrained hedonic equilibrium, and differential costs of absenteeism. The evidence is inconsistent with the selection story, and most easily reconciled with the differential cost story. | download |
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Uncertainty about Job Match Quality and Youth Turnover: Evidence from U.S. Military Attrition (with John T. Warner) |
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| Between 1988 and 1988, about 15 percent of youth who signed US military enlistment contracts failed to enter service and 25 percent of entrants failed to complete two years of service. The propensity to quit is related to a number of personal attributes. This paper examines these differences from an information-theoretic perspective. We develop a simple, empirically motivated model in which some recruits are better at forecasting than others. The greater the degree of uncertainty, the more likely it is that a recruit who signs a military enlistment contract will quit. Our information-theoretic approach implies a panel probit structure of attrition. We estimate panel probit models for military attrition using data on all individuals who signed Army and Navy enlistment contracts and entered service over the period FY 1988-1998. The empirical analysis found considerable support for the model. | download |
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Cash Today or College Tomorrow? Enlistment Incentives and Intertemporal Choice in the Army and Navy (with John T. Warner) |
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| Human capital investment involves intertemporal tradeoffs. This paper examines the tradeoff by studying the choices of Army and Navy recruits between up-front cash bonuses and future college benefits. The likelihood of choosing the college benefit increases with the size of the college benefit relative to the bonus and with factors associated with future college benefit usage. Factors positively correlated with personal discount rates and with a greater likelihood of reenlistment reduce the likelihood of the college benefit. The estimates indicate that heterogeneity in individuals' underlying preferences remains an important determinant of the variation in economic outcomes. | download |
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The Supply Price of Commitment: Evidence from the Air Force Enlistment Bonus Program (with John T. Warner) Defence and Peace Economics |
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| In FY 1999, the Air Force introduced a bonus program designed to channel recruits into longer enlistment terms. This regime shift provides a unique opportunity to estimate the elasticity of labor supply at a new margin: the length of the employment contract. A $5,000 6-YO-4-YO bonus differential is estimated to increase the probability of choosing a 6-year enlistment by 30 percentage points. The program is cost-effective relative to other policies to increase man-years. The high elasticity of labor supplied likely reflects a combination of the taste for military service and the imperfect nature of capital markets faced by youth just embarking on their careers. | download |
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Do Higher Rents Discourage Fertility? Evidence from U.S. Cities, 1940-2000 (with Robert Tamura) (Regional Science and Urban Economics, January 2009) |
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| This paper documents the existence of a negative cross-sectional correlation between the price of living space and fertility using U.S. Census data over the period 1940-2000. This correlation is not spurious, nor does it reflect the tendency of larger families to locate within less expensive areas of a given metropolitan area. We examine the extent to which the results reflect the sorting of married couples across metropolitan areas on desired fertility. The relationship between the unit price of living space and fertility in fact tends to be more negative for households that have moved recently. However, the probability of migration between metropolitan areas is smaller for larger families, even those originating in more expensive cities. Moreover, Durbin-Wu-Hausman tests reveal only limited evidence of endogeneity. The weaker effects of the price of living space for less mobile couples seems to be at least in part a result of their choosing to live in less-expensive portions within a given metropolitan area. | download |