This study leverages administrative data from Colombia to estimate the impact of wealth taxes on reported wealth and on the use of tax-evasion strategies. In addition, Londoño-Vélez examines the impact of the Panama Papers, which sparked a change in public knowledge about tax evasion, on reported wealth. These results will help establish an evidence base on which to make the case for reforms to the taxation of capital income, and inform academics and policymakers on the appropriate role of wealth taxation in that mix.

Unemployment insurance was expanded several times during the Great Recession and its aftermath, with the maximum duration reaching up to 99 weeks in some states. Researchers have been debating the macroeconomic impact of those expansions on unemployment and employment, but little research exists on the macroeconomic effects of previous expansions. This project will fill this gap by looking at unemployment benefit expansions going back to 1976. Similar to previous research, the researchers will use “trigger notices” from the U.S. Department of Labor to see when programs were turned on. Their methodology, however, differs from previous research because rather than depending upon measurement error in the unemployment rate, their method allows them to look at the impacts when a program has multiple triggers. The researchers will then compare the effects of expansions during the Great Recession to previous expansions.

This project seeks to better understand the set of implicit and explicit rules that govern pay-setting within companies and explore how these policies interact with market forces to shape the earnings distribution. Using matched employer-employee data from the Longitudinal Employer-Household Dynamics, the project will investigate the source of differences in wages being paid to similar workers at different establishments, after accounting for individual differences. The research will quantify how sensitive wages are to local labor market conditions, including policies, and will assess the extent of centralization of firms’ wage policies. Importantly, the research will assess whether firms’ concentration in the relevant labor market affects wage premia. The project generally aims to further our understanding of the role of labor market frictions and organizational factors in determining earnings inequality.

Macroeconomists are increasingly looking at the interaction between economic inequality and macroeconomic policy. Past research has looked at the impact of monetary policy on the level of income or wealth inequality, but a new literature has started to focus on how the level of inequality changes the effectiveness of countercyclical monetary and fiscal policy. This project helps push that research frontier forward by investigating how differences in consumption baskets among households may affect the transmission of monetary policy. First, the researchers will document differences in consumption baskets across the income distribution. Using those data, they will measure the variation in price stickiness among U.S. households. If this heterogeneity varies significantly by income level, it’s possible that the upward shift of income over the past several decades may have significantly enhanced or reduced the effectiveness of monetary policy. Understanding the strength of monetary policy in an era of high economic inequality is critical for informing policymakers of the optimal strategy for fighting the next recession.

For more than a quarter of a century, one of the central questions in empirical academic and policy research on the U.S. labor market concerns the long-term decline in male employment rates. Existing research has documented patterns and trends in employment rates but almost entirely using cross-sectional data. A critical open question is what the decline in employment measured on an annual basis reflects in terms of an individual’s employment trajectory. This project tackles this question by incorporating longitudinal analysis (through the Panel Study of Income Dynamics) and pseudo-panel techniques (via cohort analysis using the Current Population Survey). By looking at the wages of the sometimes-nonemployed, this project will yield a better answer to the question of how much of the reduction in prime-age employment over recent decades can be explained by declining wages. This is critical to understanding the extent to which changes in labor demand (which have reduced wages for sets of workers) versus changes in labor supply elasticities (which have potentially lowered labor supply for a given wage) explain reductions in prime-age employment.

There is currently a debate in the literature about whether income volatility has increased or decreased over the past decade. To help resolve this, the researchers will link the Current Population Survey to the Social Security Administration’s detailed earnings records data. This unique data is essential for understanding earnings, as previous research demonstrates that earnings in household surveys differ from those measured in administrative data—especially at the top and bottom of the income distribution. Determining whether the recent increase in income volatility (as shown in papers using household survey data) also occurs in the administrative earnings data is important in evaluating the changing well-being of individuals and families. It also impacts the measures of inequality. Decreasing volatility may suggest decreasing inequality, which contradicts many recent estimates of the change in inequality in the United States. This work is critical to understanding the nature of inequality in the United States today and the level of income volatility Americans may be experiencing.