NBER Summer Institute 2021 Round-up: Week 3

On July 12, the National Bureau of Economic Research kicked off its summer institute, an annual 3-week conference featuring discussions and paper presentations on specific subfields of economics, including measuring poverty, the costs of climate change, and systemic discrimination among large employers. This year’s NBER event is being held virtually due to the coronavirus pandemic and is being livestreamed on YouTube.

We’re excited to see Equitable Growth’s grantee network, Steering Committee, and Research Advisory Board and their research well-represented throughout the program. Below are abstracts (in no particular order) of some of the papers that caught the attention of Equitable Growth staff during the third and final week of the conference. Click here for a round-up from week 1, and here for the week 2 round-up.

“New Frontiers: The Origins and Content of New Work, 1940–2018”
David Autor, Massachusetts Institute of Technology, NBER, Equitable Growth grantee
Anna Salomons, Utrecht University, IZA, Equitable Growth grantee
Bryan Seegmiller, Massachusetts Institute of Technology, Equitable Growth grantee

Abstract: Recent theory stresses the role of new job types (“new work”) in counterbalancing the erosive effect of task-displacing automation on labor demand. Drawing on a novel inventory of eight decades of new job titles linked to U.S. census microdata, we estimate that the majority of contemporary employment is found in new job tasks added since 1940, but that the locus of new task creation has shifted—from middle-paid production and clerical occupations in the first four post-WWII decades, to high-paid professional and, secondarily, low-paid services since 1980. We hypothesize that new tasks emerge in occupations where new innovations complement their outputs (“augmentation”) or market size expands, while conversely, employment contracts in occupations where innovations substitute for labor inputs (“automation”) or market size contracts. Leveraging proxies for output-augmenting and task-automating innovations built from a century of patent data and harnessing occupational demand shifts stemming from trade and demographic shocks, we show that new occupational tasks emerge in response to both positive demand shifts and augmenting innovations, but not in response to negative demand shifts or automation innovations. We document that the flow of both augmentation and automation innovations is positively correlated across occupations, yet these two faces of innovation have strongly countervailing relationships with occupational labor demand.

Note: This research was funded in part by Equitable Growth.

“Systemic Discrimination Among Large U.S. Employers”
Patrick M. Kline, University of California, Berkeley, Equitable Growth grantee
Evan K. Rose, University of Chicago
Christopher R. Walters, University of California, Berkeley

Abstract: We study the results of a massive nationwide correspondence experiment sending more than 83,000 fictitious applications with randomized characteristics to geographically dispersed jobs posted by 108 of the largest U.S. employers. Distinctively Black names reduce the probability of employer contact by 2.1 percentage points, relative to distinctively White names. The magnitude of this racial gap in contact rates differs substantially across firms, exhibiting a between-company standard deviation of 1.9 percentage points. Despite an insignificant average gap in contact rates between male and female applicants, we find a between-company standard deviation in gender contact gaps of 2.7 percentage points, revealing that some firms favor male applicants while others favor women. Company-specific racial contact gaps are temporally and spatially persistent, and negatively correlated with firm profitability, federal contractor status, and a measure of recruiting centralization. Discrimination exhibits little geographical dispersion, but two-digit industry explains roughly half of the cross-firm variation in both racial and gender contact gaps. Contact gaps are highly concentrated in particular companies, with firms in the top quintile of racial discrimination responsible for nearly half of lost contacts to Black applicants in the experiment. Controlling false discovery rates to the 5 percent level, 23 individual companies are found to discriminate against Black applicants. Our findings establish that systemic illegal discrimination is concentrated among a select set of large employers, many of which can be identified with high confidence using large-scale inference methods.

“Economic impacts of tipping points in the climate system”
Simon Dietz, London School of Economics and Political Science
James Rising, University of Delaware
Thomas Stoerk, London School of Economics and Political Science
Gernot Wagner, New York University, Equitable Growth grantee

Abstract: Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them, or represented them in highly stylized ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far, using a meta-analytic integrated assessment model, or IAM, with a modular structure. The model includes national-level climate damages from rising temperatures and sea levels for 180 countries, calibrated on detailed econometric evidence and simulation 1 modelling. Collectively, climate tipping points increase the social cost of carbon, or SCC, by around 25 percent in our main specification. The distribution is positively skewed, however. We estimate an approximately 10 percent chance of climate tipping points more than doubling the SCC. Accordingly, climate tipping points increase global economic risk. A spatial analysis shows that they increase economic losses almost everywhere. The tipping points with the largest effects are dissociation of ocean methane hydrates and thawing permafrost. Most of our numbers are probable underestimates, given some tipping points, tipping point interactions, and impact channels have not been covered in the literature so far, but our method of structural meta-analysis means that future modelling of climate tipping points can be integrated with relative ease, and we present a reduced-form tipping points damage function that could be incorporated in other IAMs.

“Collective Bargaining, the Minimum Wage, and the Racial Earnings Gap: Evidence from Brazil”
Ellora Derenoncourt, Princeton University, Equitable Growth grantee
François Gerard, Queen Mary University of London
Lorenzo Lagos, Brown University
Claire Montialoux, University of California, Berkeley, Equitable Growth grantee

Abstract: This paper studies how a national minimum wage and firm- and sector-specific wage floors affect racial earnings disparities. Our context is the Brazilian economy, characterized by persistently high racial disparities, a tradition of extensive sectoral bargaining, and the availability of detailed labor force surveys and administrative matched employer-employee data with information on race. We first analyze the effect of the large increase in the minimum wage that occurred between 1999 and 2009. Using a variety of research designs and identification strategies, we obtain three main findings. First, the increase in the minimum wage erased the racial earnings gap up to the 10th percentile of the national wage distribution and up to the 30th percentile in the poorest region, the Northeast. Second, there is no evidence of a significant reallocation of workers from the formal sector to the informal sector. This can be explained by the fact that the minimum wage is de facto binding in the informal sector (with the exception of agriculture, domestic workers, and the self-employed). Third, we do not find evidence of significant disemployment effects, or of Whites-non-Whites labor-labor substitution. As a result, the minimum wage increases of the 2000s led to a large decline in the economywide racial income gap in Brazil. The second part of the paper studies the effect of negotiated firm- and sector-specific wage floors. Our preliminary results suggest a more nuanced picture. First, within firms, non-White workers appear slightly more likely to be in occupations not covered by a wage floor. Second, we find significant dynamic effects of the introduction of wage floors on the composition of the workforce, with a growing employment share in occupations not covered by wage floors in subsequent years. Taken together, these results suggest that comprehensive and uniform labor standards such as the minimum wage may be among the most powerful labor market institutions to reduce racial earnings disparities.

Note: This abstract is from an earlier version of this paper. For updated details, please click here.

“The Signaling Role of Parental Leave”
Linh T. Tô, Boston University, Equitable Growth grantee

Abstract: This paper evaluates the hypothesis that, in setting wages, firms respond to costly signals by workers when such costs are informative of their values to the firms. For workers who become mothers, uncertainty about their future values can influence firms’ decisions to distribute career and promotion opportunities. Consequently, workers may forgo paid parental leave even when there is no human capital depreciation associated with taking leave. I build a signaling model with a continuous choice of leave period when such choice is restricted due to the maximum allowed paid leave duration. Using administrative data from Denmark and a parental leave policy extending the maximum allowed duration of parental leave, I show how a leave extension affects wages, hours, and promotion opportunities for workers whose signaling ability changes with the extension. In contrast to human capital theory, an individual can take longer leave but gain in wages when the larger choice set allows more workers to signal their type. The paper provides evidence of the labor market consequences of parental leave-taking due to signaling and the importance of asymmetric information in shaping parental leave choice.

Note: This abstract has been updated; we previously included an earlier version.

“Legal Representation in Disability Claims”
Hilary Hoynes, University of California, Berkeley, NBER, Equitable Growth Steering Committee member
Nicole Maestas, Harvard University, NBER
Alexander Strand, Social Security Administration

Abstract: Legal representatives play a large and growing role in the Social Security Disability Insurance adjudication process, earning fees totaling $1.2 billion in 2019. Long ubiquitous in appellate hearings, disability representatives—including attorneys and nonattorneys—have begun appearing more frequently at the beginning of cases, during the initial review. This development has raised questions about the motives of disability law firms, which are sometimes perceived to prioritize their own interests in response to incentives in the fee structure set by the Social Security Administration. At the same time, these concerns have revealed just how little is understood about the value of legal representation for claimants in disability cases. We comprehensively investigate the impact of legal representation on case outcomes when representatives are engaged from the initial stage. Our analysis is made possible by new administrative data identifying representatives appointed to disability claims at the initial and appellate levels. To address selection into representation, we instrument for initial representation using geographic and temporal variation in disability law firm market shares in the closely related but distinct appellate market. Among applicants on the margin of obtaining representation at the initial level, representation improves case outcomes and administrative efficiency across several metrics. Legal representation increases the probability of initial award by 23 percentage points, reduces the probability of appeal by 60 points, and induces no detectable change in the ultimate probability of award (including appeals). This pattern indicates that legal representation in the initial stage leads to earlier disability awards to individuals who would otherwise be awarded benefits only on appeal. Furthermore, by securing earlier awards and discouraging unsupported appeals, representation reduces total case processing time by nearly 1 year. Our analysis explores several mechanisms.

“The Economic Geography of Global Warming”
José-Luis Cruz, Princeton University
Esteban Rossi-Hansberg, University of Chicago

Abstract: Global warming is a worldwide and protracted phenomenon with heterogeneous local economic effects. In order to evaluate the aggregate and local economic consequences of higher temperatures, we propose a dynamic economic assessment model of the world economy with high spatial resolution. Our model features a number of mechanisms through which individuals can adapt to global warming, including costly trade and migration, and local technological innovations and natality rates. We quantify the model at a 1 degree × 1 degree resolution and estimate damage functions that determine the impact of temperature changes on a region’s fundamental productivity and amenities depending on local temperatures. Our baseline results show welfare losses as large as 19 percent in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms. We use the model to assess the impact of carbon taxes, abatement technologies, and clean energy subsidies. Carbon taxes delay consumption of fossil fuels and help flatten the temperature curve but are much more effective when an abatement technology is forthcoming.

“Firms and Unemployment Insurance Take-Up”
Marta Lachowska, W.E. Upjohn Institute for Employment Research, Equitable Growth grantee
Isaac Sorkin, Stanford University, NBER
Stephen A. Woodbury, Michigan State University, W.E. Upjohn Institute, Equitable Growth grantee

Abstract: This paper uses administrative data from Washington state to quantify the role of employers in the incomplete take-up of Unemployment Insurance, or UI. Consistent with previous literature, we find that nearly half of the workers who appear to be UI-eligible do not claim UI. Moreover, we also find a steep income gradient in claiming. Distinctively, we find substantial dispersion in both firm-level UI claim rates and appeals (of UI claims) rates. Firm-level claim and appeals rates are negatively correlated, which is consistent with a deterrent effect of firms’ appeals on workers’ claiming. We also find that claims and appeals rates are tightly related to workers’ pre-separation wage rates, and that firm fixed effects explain a large share of the income gradient in take-up and appeals. We show that if firms with below-median firm effects in claims rates had the median claims rate, then take-up would increase by about 6 percentage points. We estimate a simple model of experience rating and claims, and use it to discuss some targeting properties of UI and find the changes in experience rating that would achieve similar increases in take-up.  

“Pollution and acquisition: Emissions and distributional effects of mergers”
Irene Jacqz, Harvard University, Iowa State University

Abstract: I estimate the effect of corporate acquisitions on facility-level toxic air pollution and its firm-level distribution. I use event study designs that exploit variation in the timing of acquisition among target facilities, since acquisition is endogenous to the operation and emissions of polluting facilities. I find emissions fall dramatically in the years after an acquisition among Toxic Release Inventory-reporting facilities in the United States for the period 2001–2019 and suggest changes in plant-level operations drive observed decreases. I also find evidence of increased inequality in emissions among target plants after acquisition and shifts in pollution toward less-advantaged neighborhoods. These findings suggest consolidation in sectors with negative externalities may reduce levels of the externality but increase inequality in its exposure.

“The Intergenerational Transmission of Employers and the Earnings of Young Workers”
Matthew Staiger, University of Maryland, former Equitable Growth Dissertation Scholar

Abstract: This paper investigates how the earnings of young workers are affected by the intergenerational transmission of employers, which refers to individuals working for the same employer as a parent. My analysis of survey and administrative data from the United States indicates that 7 percent of young workers find their first stable job at the same employer as a parent. Using an instrumental variables strategy that exploits exogenous variation in the availability of jobs at the parent’s employer, I estimate that working for the same employer as a parent increases initial earnings by 31 percent. The earnings benefits are attributable to parents providing access to higher-paying employers. Individuals with higher-earning parents are more likely to work for the employer of their parent and experience greater earnings benefits conditional on doing so. Thus, the intergenerational transmission of employers amplifies the extent to which earnings persist from one generation to the next. Specifically, the elasticity of the initial earnings of an individual with respect to the earnings of their parents would be 10 percent lower if no one worked for the employer of a parent.

“Worker Beliefs About Rents and Outside Options”
Simon Jäger, Massachusetts Institute of Technology, Equitable Growth grantee
Christopher Roth,University of Cologne
Nina Roussille, London School of Economics and Political Science
Benjamin Schoefer, University of California,Berkeley, Equitable Growth grantee

Abstract: We measure workers’ beliefs about rents and outside options in a representative sample of German workers and compare these beliefs with proxies for actual outside options. While subjective worker rents are large—14 percent of salary, on average—they do not stem from workers’ subjective wage premia at their current firm, but are entirely derived from nonwage amenities. When comparing workers’ subjective outside options against objective measures of pay premia from matched employer-employee data, we find that many workers mistakenly believe their current wage is representative of the external labor market—objectively low-paid (high-paid) workers are overpessimistic (overoptimistic) about their outside options. If workers had correct beliefs about outside options, 13 percent of jobs would not be viable at current wages, concentrated in the low-wage segment of the labor market. Finally, we show that in an equilibrium model, misinformation about outside options gives employers monopsony power.

“What Drives Prescription Opioid Abuse? Evidence from Migration”
Amy Finkelstein, Massachusetts Institute of Technology, NBER, Equitable Growth grantee
Matthew Gentzkow, Stanford University, NBER
Dean Li, Massachusetts Institute of Technology
Heidi Williams, Stanford University, NBER, Equitable Growth grantee

Abstract: We investigate the role of person- and place-specific factors in the opioid epidemic by developing and estimating a dynamic model of prescription opioid abuse. We estimate the model using the relationship between cross-state migration and prescription opioid abuse among adults receiving federal disability insurance from 2006 to 2015. Event studies suggest that moving to a state with a 3.5 percentage point higher rate of opioid abuse (roughly the difference between the 20th and 80th percentile states) increases the probability of abuse by 1 percentage point on-impact, followed by an additional increase of 0.3 percentage points per subsequent year. Model estimates imply large place effects in both the likelihood of transitioning to addiction and the availability of prescription opioids to the addicted. Equalizing place-based factors would have reduced the geographic variation in opioid abuse by about 50 percent over our 10-year study period. Reducing place effects on addiction transitions to the 25th percentile would have twice the impact on opioid abuse after 10 years as the analogous reduction in place effects on availability to addicts, though the comparison is reversed in the first few years.

“The Great Migration and Educational Opportunity”
Cavit Baran, Princeton University
Eric Chyn, Dartmouth College, NBER, Equitable Growth grantee

Abstract: This paper studies the impact of the Great Migration on children. We use the complete count 1940 census to estimate selection-corrected place effects on education for children of Black migrants. On average, Black children gained 0.8 years of schooling (12 percent) by moving from the South to North. Many counties that had the strongest positive impacts on children during the 1940s offer relatively poor opportunities for Black youth today. Opportunities for Black children were greater in places with more schooling investment, stronger labor market opportunities for Black adults, more social capital, and less crime.