ASSA 2023 Round-up: Day 1
Yesterday was the first day of the 2023 annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The 3-day conference, held in person in New Orleans this year, features hundreds of sessions covering a wide variety of economics and other social science research. This year, Equitable Growth’s grantee network, Steering Committee, and Research Advisory Board and their research are well-represented throughout the program, featured in more than 80 different sessions of the conference.
Below are abstracts from some of the papers and presentations that caught the attention of Equitable Growth staff during the first day of this year’s conference and which relate to the research interests laid out in our current Request for Proposals. We also include links to the sessions in which the papers were presented.
Come back tomorrow morning for more highlights from day two, and Monday morning for highlights from day three.
“What’s in a Background Check? Evaluating the Impact of Limiting the Criminal Record Information”
Amanda Agan, Rutgers University; David Autor, Massachusetts Institute of Technology, Equitable Growth grantee and Research Advisory Board member; Emma Rackstraw, Harvard University
Abstract: Criminal histories used for employment screening serve as a barrier to employment for a large fraction of men, people of color, and workers without college degrees. To enable “fair chance” hiring, employers may filter which criminal background data are visible to hiring adjudicators, potentially suppressing minor or older charges and convictions. Theory and existing evidence point to potentially ambiguous effects of information suppression on hiring of workers with criminal histories, however, since decision-makers may compensate for the absence of information by using group characteristics to infer it. We have partnered with a background check company to study the effects of policies that alter the set of criminal records available to adjudicators. Using a quasi-experimental approach, we assess how suppressing a subset of the detailed criminal background data presented to adjudicators affects hiring of workers with and without criminal histories.
“Labor Market Impacts of Reducing Felony Convictions: Evaluating Observational Approaches with Quasi- and Randomized Experiments”
Amanda Agan, Rutgers University; Andrew Garin, University of Illinois at Urbana-Champaign, Equitable Growth grantee; Alexandre Mas, Princeton University, Equitable Growth contributing author; Crystal Yang, Harvard University; Dmitri Koustas, University of Chicago
Abstract: We study the labor market impacts of California’s Proposition 47, which reduced certain nonviolent felony convictions to misdemeanors. We use data from San Joaquin County, where agencies proactively implemented the law without informing affected individuals or requiring them to petition the court themselves, and administrative tax records. To estimate the effects of reductions on employment, we use quasi-random ordering of reductions and a field experiment in which we notified a subset of individuals about their proactive reduction.
“Wealth, Race, and Consumption Smoothing of Typical Income Shocks”
Peter Ganong, University of Chicago, Equitable Growth grantee; Damon Jones, University of Chicago, Equitable Growth grantee; Pascal Noel, University of Chicago, Equitable Growth grantee
Abstract: We study the consumption response to typical labor income shocks and investigate how these vary by wealth and race. First, we estimate the elasticity of consumption with respect to income using an instrument based on firmwide changes in monthly pay. While much of the consumption-smoothing literature uses variation in unusual windfall income, this instrument captures the temporary income variation that households typically experience. In addition, because it can be constructed for every worker in every month, it allows for more precision than most previous estimates. We implement this approach in administrative bank account data and find an average elasticity of 0.23, with a standard error of 0.01. This increased precision also allows us to address an open question about the extent of heterogeneity by wealth in the elasticity. We find a much lower consumption response for high-liquidity households, which may help discipline structural consumption models.
We use this instrument to study how wealth shapes racial inequality. An extensive body of work documents substantial racial and ethnic wealth gaps. However, less is known about how these gaps translate into differences in welfare on a month-to-month basis. We combine our instrument for typical income volatility with a new dataset linking bank account data with race and Hispanicity. We find that Black households cut their consumption 50 percent more, and Hispanic households cut their consumption 20 percent more, than White households when faced with a similarly sized income shock. Nearly all of this differential pass-through of income to consumption is explained in a statistical sense by differences in liquid wealth. Combining our empirical estimates with model, we show that temporary income volatility has a substantial welfare cost for all groups. Because of racial disparities in consumption smoothing, the cost is at least 50 percent higher for Black households and 20 percent higher for Hispanic households than it is for White households.
Note: This research was funded in part by Equitable Growth.
“Unionization, Employer Opposition, and Establishment Closure”
Samuel Young, Massachusetts Institute of Technology, Equitable Growth grantee; Sean Wang, Massachusetts Institute of Technology, Equitable Growth grantee
Abstract: We study the effect of private-sector unionization on establishment employment and survival. Specifically, we analyze National Labor Relations Board union elections from 1981–2005 using administrative Census data. Our empirical strategy extends standard difference-in-differences techniques with regression discontinuity extrapolation methods. This allows us to avoid biases from only comparing close elections and to estimate treatment effects that include larger margin-of-victory elections. Using this strategy, we show that unionization decreases an establishment’s employment and likelihood of survival, particularly in manufacturing and other blue-collar and industrial sectors. We hypothesize that two reasons for these effects are firms’ ability to avoid working with new unions and employers’ opposition to unions. We test this hypothesis for manufacturing elections and find that the negative effects are significantly larger for elections at multiestablishment firms. Additionally, after a successful union election at one establishment, employment increases at the firm’s other establishments. Both pieces of evidence are consistent with firms avoiding new unions by shifting production from unionized establishments to other establishments. Finally, we find larger declines in employment and survival following elections where managers or owners were likely more opposed to the union. This evidence supports new reasons for the negative effects of unionization we document.
“Small Business and the Minimum Wage”
Jesse Wursten, KU Leuven; Michael Reich, University of California, Berkeley, Equitable Growth grantee
Abstract: Discussions of minimum wages often take as axiomatic that they generate more difficult adjustment issues for small businesses. To test this assumption, we provide the first systematic causal examination of minimum wage effects on pay, employment, and hours throughout the relevant firm size distribution. Our study first examines effects by firm size in the private sector as a whole, using teens and low-education workers as proxies for affected workers. We then examine effects in the three three-digit industries with the highest percentages of low-wage workers: restaurants, grocery stores and lodging, as well as in other low-wage industries. Our data on the size of businesses come from the Quarterly Workforce Indicators, the Current Population Survey, and County Business Patterns. We exploit the variation generated by federal and state minimum wage changes between 1990 and 2019, and use three difference-in-differences specifications.
We find larger wage increases among smaller businesses. But we generally do not detect significant effects in any of our business size bins on employment, hours, or number of businesses. These results pertain both for the most-affected workers in the private sector as a whole and for each of the three low-wage industries. We are unable to detect wage or employment effects in other low-wage industries. Our results are not affected by pre-trends, and they pass multiple robustness tests. These findings cast doubt on the concerns of some small business advocates with regard to minimum wage policy and on the need for special tax provisions for small businesses when minimum wages are increased.
“New Frameworks to Define the Political Economy of Corporations”
Lenore Palladino, University of Massachusetts Amherst, Equitable Growth in Conversation interviewee
Abstract: It is critical to distinguish what a corporation is—an economic institution that has special attributes granted by the state that distinguish it from other businesses—from what a firm does: produce goods and services for consumption, some in a more innovative manner than others. The theory of the corporation as an innovative enterprise, engaged in productive innovation by producing higher-quality goods and services for lower unit costs, explains what makes corporations successful producers. Theories of the business corporation as a “real entity” or “enterprise entity” describe its attributes with reference to other types of structures. Shareholder primacy competes with the theory of the enterprise entity and stakeholder theory for a vision of what a corporation is and whose interests it should service but does not describe well what a corporation does—for that, we need a theory of innovation.
This article explores economic theories of production, innovation, and growth that are based on the elements of what has enabled corporations to succeed or fail and the social conditions that have enabled those dynamics to play out inside the walls of the business. I contrast theories of innovation with several strands of theories describing what the corporation is and therefore who should have power within it: shareholder primacy, rooted in the neoliberal theory of the markets, and stakeholder theory, as developed in progressive law and in business and management scholarship. While we focus on the theory of the innovative enterprise as the best framework for what a firm does, the theories of innovation as they were developed in the 20th century did not carefully consider the question of negative externalities—the pollution and resource extraction created by what the corporation does—from the periphery to the center.
“Incarcerating Race: The Incarceration Penalty and the Racial Wealth Gap ”
Aaron Colston, Duke University; William Darity, Duke University, Equitable Growth grantee and Research Advisory Board member; Raffi Garcia, Rensselaer Polytechnic Institute; Lauren Russell, Harvard University, 2021–22 Equitable Growth Dissertation Scholar; Jorge Zumaeta, Florida International University
Abstract: We investigate the impact of household exposure to incarceration on household income and wealth accumulation. While most research focuses on the direct financial impact of incarceration on an individual in the form of removal from the labor force or the penalty of a criminal record on subsequent employment, this study sheds light on the impact of incarceration on wealth accumulation. Our findings show a statistically significant racial gap in earnings and net worth and an incarceration penalty on earnings and wealth accumulation. Interestingly, the White-Black racial household income and wealth gaps disappear when the reference group is White people with incarceration exposure. This reveals that statistically speaking, the size of the racial gap is equivalent to the incarceration penalty. Our racial gap decompositions based on incarceration exposure also corroborate these results. We find no statistically significant difference in the earnings between Black people with and without incarceration exposure. These findings suggest that society’s association of Blackness with criminality has a similar wealth effect to that of the incarceration penalty.
“Intergenerational Mobility using Income, Consumption, and Wealth ”
Jonathan Fisher, Washington Center for Equitable Growth; David S. Johnson, National Academies of Sciences, Engineering, and Medicine, Equitable Growth grantee and Research Advisory Board member
Abstract: We use 50 years of the Panel Study of Income Dynamics to study the intergenerational correlation in income, consumption, and wealth for the same individuals to answer the question: Is intergenerational mobility similar across the three resource measures? Income exhibits the highest intergenerational correlation, or lowest mobility, followed closely by consumption and a larger difference for wealth. This primary result holds across three measures of the intergenerational correlation: the rank-rank slope, the intergenerational elasticity, and the Gini index of mobility. Our findings highlight the importance of using the same sample to study the three measures, as our consumption rank-rank slope is higher than the income rank-rank slope found in the literature, but our consumption rank-rank slope is lower than our own income rank-rank slope.
These results paint a more complete picture of intergenerational mobility. Relative mobility is lowest for income, followed by consumption and wealth. However, we find that high wealth in childhood supplements low income or low consumption in childhood, increasing upward mobility for those with low income or consumption in childhood. Thus, wealth acts as a buffer against low income or consumption as a child. We also look at differences between White children and Black children. We find that if all children experienced the level of intergenerational mobility that Black children experience, the United States would compare much more favorably to the high mobility experienced in Nordic countries.
“Fiscal Policy and Households’ Inflation Expectations: Evidence from a Randomized Control Trial”
Olivier Coibion, University of Texas at Austin, National Bureau of Economic Research; Yuriy Gorodnichenko, University of California, Berkeley, National Bureau of Economic Research; Michael Weber, University of Chicago, National Bureau of Economic Research, Equitable Growth contributing author
Abstract: Rising government debt levels around the world are raising the specter that authorities might seek to inflate away the debt. In theoretical settings where fiscal policy “dominates” monetary policy, higher debt without offsetting changes in primary surpluses should lead households to anticipate this higher inflation. Are household inflation expectations sensitive to fiscal considerations in practice? We field a large randomized control trial on U.S. households to address this question by providing randomly chosen subsets of households with information treatments about the fiscal outlook and then observing how they revise their expectations about future inflation, as well as taxes and government spending. We find that information about the current debt or deficit levels has little impact on inflation expectations but that news about future debt leads them to anticipate higher inflation, both in the short run and long run. News about rising debt also induces households to anticipate rising spending and a higher rate of interest for government debt.
“Mergers & Acquisitions under Common Ownership ”
Miguel Antón, IESE, Equitable Growth grantee; Florian Ederer, Yale University, Equitable Growth grantee; Bruno Pellegrino, University of Maryland, Equitable Growth grantee; Mireia Giné, IESE, Equitable Growth grantee
Abstract: We provide new facts about the cross-section and evolution of mergers and acquisitions for U.S. public firms. Using a general equilibrium model with a hedonic demand system and data on institutional ownership, we document the degree of product market competition and common ownership among merging and nonmerging firms. We then quantify how the effects of mergers on profits, consumer surplus, and total surplus are affected by common ownership and shareholder value maximization motives.
“Employment Shocks, Unemployment Insurance, and Caregiving”
Yulya Truskinovsky, Wayne State University, Equitable Growth contributing author
Abstract: Working Americans are increasingly taking on various caregiving roles for family members. Considering the COVID-19 pandemic, the impact of job loss and income support on the labor supply, economic well-being, and caregiving behavior of families with care needs is a pressing policy question. This paper considers caregiving during periods of (involuntary) unemployment and, specifically, the role of Unemployment Insurance on caregiving. Although caregiving increases following job separations, more generous UI benefits reduce the likelihood that workers who are laid off provide family care. The effect is the largest for adults between ages 40 and 65, for men, and for unmarried individuals. In the context of a rapidly aging U.S. population, this analysis provides knowledge about how social insurance policies that provide wage replacement support working families with growing long-term care needs.
“Closing the Racial Gap or Keeping Up Appearances? Labor Force Participation and Demographic Change”
Karl Boulware, Wesleyan University; Kenneth Kuttner, Williams College
Abstract: The gap between Black and White labor force participation has narrowed dramatically over the past 30 years, where post-pandemic Black participation has reached parity and even slightly surpassed that of White workers. This paper is the first to seek to understand why this has happened. We show that the apparent improvement is largely a function of demographic trends rather than improved labor market opportunities. Participation rates among the young of both sexes and prime-age Black males remain well below those of White workers. However, there has been some convergence in youth participation rates, particularly for young Black women.
“Impact of State-Level Changes in Paid Family Leave Policies: Evidence from New Jersey and New York”
Rachel M.B. Atkins, St. John’s University, 2021 Equitable Growth American Economic Association summer economics fellow; Tracy Freiburg, St. John’s University; Kier Hanratty, Pace University
Abstract: In this paper, we examine the impact of paid family and medical leave policies on entrepreneurship and employment outcomes. Our analysis exploits the variation in the timing of when the bordering states of New Jersey and New York implemented their PFML policies. We employ a difference-in-differences research design using census-tract level data from the American Communities Survey to evaluate whether these policies impacted employment and entrepreneurship (measured using self-employment levels). We also investigate whether the effects of the PFML programs varied by subgroups, including race and gender. Additionally, we explore whether there were differential effects on business owners and workers operating in low-income versus high-income neighborhoods or in high-margin industries versus low-margin industries. Overall, we seek to evaluate whether marginalized communities experienced positive or negative effects from PMFL programs.
“Climate Policy, Financial Frictions, and Transition Risk”
Garth Heutel, Georgia State University; Stefano Carattini, Georgia State University; Givi Melkadze, Georgia State University
Abstract: We study climate and macroprudential policies in an economy with financial frictions. Using a dynamic stochastic general equilibrium model, featuring both a pollution market failure and a market failure in the financial sector, we explore transition risk—whether ambitious climate policy can lead to macroeconomic instability. It can, but the risk can be alleviated through macroprudential policies—taxes or subsidies on banks’ assets. Then, we explore efficient climate and macroprudential policy in the long run and over business cycles. The presence of financial frictions affects the steady-state value and dynamic properties of the efficient carbon tax. A policy portfolio with both a carbon tax and macroprudential policies yields the efficient outcome.
The day before the 2023 ASSAs kicked off, Equitable Growth’s Director of Labor Market Policy and chief economist Kate Bahn organized a plenary session on reproductive and labor rights in the United States at the International Confederation of Associations for Pluralism in Economics conference. The session featured Bahn, alongside Mayra Pineda-Torres of the Georgia Institute of Technology, Yana van der Meulen Rodgers of Rutgers University, Paddy Quick of St. Francis College, and Nina Turner of the Institute for Race, Power, and Political Economy. The panelists discussed new approaches to our understanding of the intersection of economics and reproductive rights and ways to apply economics work to support movement building.