Yesterday was the second day of the 3-day annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The conference, held virtually again this year due to the ongoing coronavirus pandemic, 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 60 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 second 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 three, and click here to review the highlights from day one.

“When Opportunity Doesn’t Knock: The Relationship between Labor Market Opportunity and Necessity Entrepreneurship among Black Workers”

Rachel M.B. Atkins, New York University

Abstract: Literature on opportunity vs. necessity entrepreneurship debates the extent to which these categories should be considered dichotomous constructs. Fairlie and Fossen (2019) design a measure in which unemployed workers who subsequently report being self-employed are classified as necessity entrepreneurs and all others as opportunity entrepreneurs. Their construct operationalizes and builds upon the push-pull theoretical framework which posits that weak labor markets push workers into entrepreneurship while strong demand and abundant supply of financial capital pull workers into entrepreneurship. Given that Black workers face higher levels of unemployment, these theories would predict higher levels of necessity entrepreneurship among this group. However, substantial empirical evidence documents wide Black-White gaps in entrepreneurship. In this study, I examine whether Black-White gaps in entrepreneurship reflect the net effect of racial differences in opportunity vs. necessity entrepreneurship. Using data from the Panel Study of Income Dynamics, I begin with Fairlie and Fossen’s measure of opportunity and necessity entrepreneurship by looking at gaps in self-employment rates among Black and White workers who were previously unemployed or employed by someone else. I then extend their construct. I examine whether length of unemployment increases the likelihood of entering self-employment to assess whether unemployment duration is a better measure of labor demand than the dichotomous unemployment measure. Next, I examine whether the change in local unemployment rates, measured separately for Black and White residents, changes the likelihood of self-employment. Finally, I examine whether earnings from necessity entrepreneurship are comparable to labor market earnings and if earnings differences are the same across racial groups. This analysis will help policymakers and researchers identify the conditions in which rising entrepreneurship among disadvantaged communities produces positive outcomes worth promoting and the conditions under which rising entrepreneurship may be a sign of troubling underlying economic realities for Black workers.

“The Intergenerational Transmission of Employers and the Earnings of Young Workers”

Matthew Steiger, University of Maryland

Abstract: This paper investigates how the earnings of young workers are affected by individuals working for the same firm as their parent. My analysis of U.S. linked survey and administrative data indicates that 7 percent of young workers find their first stable job at a parent’s employer. Using an instrumental variables strategy that exploits exogenous variation in the availability of jobs at the parent’s employer, I estimate that working for a parent’s employer increases initial earnings by 31 percent. The earnings gains are attributable to parents providing access to higher-paying firms. Individuals with higher-earning parents are more likely to work for their parent’s employer and experience larger earnings gains when they do. Thus, the intergenerational transmission of employers increases the intergenerational persistence in earnings. Specifically, the elasticity of initial earnings with respect to parental earnings would be 10 percent lower if no one worked for their parent’s employer.

“Accounting for Racial Wealth Disparities and Reparation Policies in the U.S.”

Illenin Kondo, Federal Reserve Bank of Minneapolis; Teegawende H. Zeida, Brock University; William A. Darity Jr., Duke University; Samuel L. Myers Jr., University of Minnesota

Abstract: While there is a large empirical literature on ongoing racial discrimination and persistent socioeconomic disparities between Black and White households, far fewer contributions evaluate these disparities in the macroeconomics literature. We decompose the determinants of historically persistent and large racial wealth differences in the U.S. since 1950 through the lens of a standard heterogeneous-agents model that allows for group-based privileges or exclusions as wedges. We find that a wedge akin to wealth destruction risk for Black households is essential for generating the persistent and large racial wealth divide. We discuss the implications of these findings for modeling racial wealth disparities and reparations policies.

“Black Women, Black Men, and Occupational Crowding in Non-Standard Arrangements”

Ofronama Biu, New School for Social Research

Abstract: Alternative and contingent employment arrangements offer fewer protections, pay, and benefits. Occupational crowding measures the degree to which a group is over-, under-, or proportionally represented in an occupation, taking educational requirements and the group’s qualifications into account (Hamilton, 2006). Black workers have been systematically crowded into low-wage occupations. This work examines whether Black workers are also overrepresented in nonstandard work. This research expands on the crowding literature by comparing Black women, Black men, and White women to White men, the group with the most labor market advantage (King 1993). My analysis finds Black women and Black men are crowded into contingent work and some of the worst alternative arrangements (e.g., temp agency work) while White men are crowded into more desirable forms of work, such as contract arrangements.

“Changing income risk across the U.S. skill distribution: Evidence from a generalized Kalman filter”

Carter Braxton, University of Wisconsin; Kyle Herkenhoff, University of Minnesota; Jonathan L. Rothbaum, U.S. Census Bureau; Lawrence Schmidt, Massachusetts Institute of Technology

Abstract: For whom has earnings risk changed, and why? To answer these questions, we develop a filtering method that estimates parameters of an income process and recovers persistent and temporary earnings for every individual at every point in time. Our estimation flexibly allows for first and second moments of shocks to depend upon observables, as well as spells of zero earnings (i.e., unemployment) and easily integrates into theoretical models. We apply our filter to a unique linkage of 23.5m SSA-CPS records. We first demonstrate that our earnings-based filter successfully captures observable shocks in the SSA-CPS data, such as job switching and layoffs. We then show that despite a decline in overall earnings risk since the 1980s, persistent earnings risk has risen for both employed and unemployed workers, while temporary earnings risk declined. Furthermore, the size of persistent earnings losses associated with full year unemployment has increased by 50\%. Using geography, education, and occupation information in the SSA-CPS records, we refute hypotheses related to declining employment prospects among routine and low-skill workers, as well as spatial theories related to the decline of the Rust Belt. We show that rising persistent earnings risk is concentrated among high-skill workers and related to technology adoption. Lastly, we find that rising persistent earnings risk while employed (unemployed) leads to welfare losses equivalent to 1.8\% (0.7\%) of lifetime consumption, and larger persistent earnings losses while unemployed lead to a 3.3\% welfare loss.

“The Targeting and Impact of Paycheck Protection Loans to Small Businesses”

Alexander Wickman Bartik, University of Illinois at Urbana-Champaign; Zoe Cullen, Harvard University; Edward Glaeser, Harvard University; Michael Luca, Harvard University; Christopher Stanton, Harvard University

Abstract: What happens when vast public resources are allocated by private actors, whose objectives may be imperfectly aligned with public goals? We study this question in the context of the Paycheck Protection Program, which relied on private banks to rapidly disburse more than $500 billion of aid to small businesses. We present a model suggesting that such delegation is optimal if delay is very costly, the variance of the impact of funds across firms is small, and the correlation between public and private objectives is high. We then use firm-level data to measure heterogeneity in the impact of the PPP and to assess whether banks targeted loans to high-impact firms. Using an instrumental variables approach, we find that PPP loans increased business’s expected survival rates by 9 to 22 percentage points and modestly boosted employment. The potential for heterogeneous treatment effects suggests that targeting may have increased the overall program impact. Yet while banks did target loans to their preexisting customers, treatment effect heterogeneity is sufficiently modest and the correlation between bank loan allocations and public objectives seems sufficiently strong, so that delegation could still have been optimal given the high costs of delay.

“Racial Income Inequality in the American Incarcerated Workforce: A Descriptive Survey Analysis of Reported Earnings, 1972 – 2004”

Andrew Keefe, Harvard University

Abstract: Despite growing discussion of the unpaid and underpaid labor of incarcerated workers, little is known about how often inmates work, how often they are paid, or precisely how much. We describe the income of incarcerated workers by analyzing data on inmates’ reported earnings from prison and jail surveys. We find that a large share of workers work for no pay. We also find substantial rates of unpaid labor among nonconvicted workers who were incarcerated for pretrial detention. We also find large racial gaps in the wages. The median White incarcerated worker earned, on average, nearly twice as much as his Black counterpart and more than four times as much as his Hispanic counterpart in 2004. Between 1972 and 2004, these gaps seem to have widened more than they did in the general workforce. The findings from our study have four main implications. First, they illustrate just how poorly paid prison work is, for all incarcerated workers. Second, they show elevated racial inequality inside prisons. Third, our findings suggest that social scientists have hitherto mischaracterized the income distribution in the United States. This is because prior studies examining earnings either ignore incarcerated workers, impute their wages based on similar workers outside prison, or assume that they receive nothing for their work. This emphasizes the importance of conceiving of incarcerated workers as members of the formal economy. We suggest that social scientists must take the existence of “incarcerated workers” more seriously.

“Firms and Inequality”

Jan de Loecker, KU Leuven; Tim Obermeier, Institute for Fiscal Studies; John Van Reenen, London School of Economics

Abstract: Dramatic changes have been documented in the U.S. business landscape in the past few decades, including rising productivity dispersion between firms, higher aggregate mark-ups, the growing dominance of big companies, a fall in labor share and declining business dynamism. In this paper, we address several questions: (i) why should we care about such trends in firm inequality? (ii) have similar trends been occurring in the U.K.? (iii) what are the explanations for these trends? and (iv) what, if any, should be the policy responses? We conclude that most, but not all, of the same empirical trends seen in the United States have occurred in Britain since the mid-1990s, and the likely explanations are related to fundamental forces of technology and globalization rather than country-specific institutions. Over the long run, real wage growth in most countries has tended to follow productivity growth. Since the U.K. had little productivity growth since Global Financial Crisis, it is unsurprising that median and mean real wages had barely recovered to pre-crisis levels by the start of the pandemic. By contrast to the United States, labor shares do not seem to have fallen since 1980 in the U.K., so our key problem is less to do with a decoupling of wages from productivity, and more to do with the severe slowdown in productivity growth since 2007.

“Overeducation as Hiring Policy”

Guillaume Vermeylen, University of Mons; Alexandre Waroquier, University of Mons

Abstract: We provide first evidence regarding the direct effect of a hiring policy oriented through higher (over) education on firm productivity. Moreover, we put light on the moderating role of the working environment of the firm, qualified as high-tech/knowledge intensive. Using a detailed Belgian firm panel data, and computing a measure of overeducation hiring policy robust to sectorial bias, we show that firms that decide to implement a hiring policy of overeducation are found to be more productive than others which follow the hiring standards in terms of educational levels. Concerning the role of the technological environment, we show that high-tech firms may take advantage of additional skills provided by highly educated workers to a bigger extent, the overeducation hiring policy leading to even higher productivity improvements. Unlike much of the earlier literature (still essentially focused on workers’ wages, job satisfaction, and related attitudes and behaviors), our econometric estimates are based on direct measures of productivity. They are also robust to a range of measurement issues, such as time-invariant labor heterogeneity and firm characteristics.

“Older Workers Need Not Apply? Ageist Language in Job Ads and Age Discrimination in Hiring”

Ian Burn, University of Liverpool; Patrick Button, Tulane University; Luis Felipe Munguia Corella, University of California, Irvine; David Neumark, University of California, Irvine

Abstract: We study the relationships between ageist stereotypes—as reflected in the language used in job ads—and age discrimination in hiring, exploiting the text of job ads and differences in callbacks to older and younger job applicants from a resume (correspondence study) field experiment (Neumark, Burn, and Button, 2019). Our analysis uses methods from computational linguistics and machine learning to directly identify, in a field-experiment setting, ageist stereotypes that underlie age discrimination in hiring. The methods we develop provide a framework for applied researchers analyzing textual data, highlighting the usefulness of various computer science techniques for empirical economics research. We find evidence that language related to stereotypes of older workers sometimes predicts discrimination against older workers. For men, our evidence points to age stereotypes about all three categories we consider—health, personality, and skill—predicting age discrimination, and for women, age stereotypes about personality. In general, the evidence is much stronger for men, and our results for men are quite consistent with the industrial psychology literature on age stereotypes.

“The Racial Wealth Gap, 1860-2020”

Ellora Derenoncourt, Princeton University; Chi Hyun Kim, University of Bonn; Moritz Kuhn, University of Bonn; Moritz Schularick, University of Bonn

Abstract: The racial wealth gap is the largest of the economic disparities between Black and White Americans, with a White-to-Black per capita wealth ratio of 6-to-1. It is also among the most persistent. In this paper, we provide a new long-run series on White-to-Black per capita wealth ratios from 1860 to 2020, combining data from the U.S. decennial census, historical state tax records, and a newly harmonized version of the Survey of Consumer Finances (1949–2019). Using these data, we show that wealth convergence was rapid in the 50 years after Emancipation but slowed to a halt by 1950. A simple model of wealth accumulation by racial group reveals that even under equal conditions for wealth accumulation, convergence is a distant scenario, given vastly different starting conditions under slavery. Accounting for post-Emancipation differences in wealth accumulating opportunities indicates that the racial wealth gap is on track to arrive at a “steady state,” close to today’s levels. Our findings shed light on the importance of policies such as reparations, which address the historical origins of today’s persistent gap, as well as policies that reduce inequality and thereby improve the relative wealth position of Black Americans.

“Skilled Scalable Services: The New Urban Bias in Economic Growth”

Fabian Eckert, University of California, San Diego

Abstract: Since 1980, economic growth in the United States has been fastest in its largest cities. We show that a group of skill- and information-intensive service industries are responsible for all of this new urban bias in recent growth. We then propose a simple explanation centered around the interaction of three factors: the disproportionate reliance of these services on information and communication technology, or ICT, the precipitous price decline for ICT capital since 1980, and the preexisting comparative advantage of cities in skilled services. Quantitatively, our mechanism accounts for most of the urban biased growth of the U.S. economy in recent decades.

“Steering Technological Progress”

Anton Korinek, University of Virginia; Joseph E. Stiglitz, Columbia University

Abstract: Rapid progress in new technologies such as Artificial Intelligence has recently led to widespread anxiety about potential job losses. This paper asks how to guide innovative efforts so as to increase labor demand and create better-paying jobs. We develop a theoretical framework to identify the properties that make an innovation desirable from the perspective of workers, including its technological complementarity to labor, the factor share of labor in producing the goods involved, and the relative income of the affected workers. Examples of labor-friendly innovations are intelligent assistants who enhance the productivity of human workers. The paper discusses measures to steer technological progress in a desirable direction for workers, ranging from nudges for entrepreneurs to changes in tax, labor market, and intellectual property policies to direct subsidies and taxes on innovation. In the future, we find that progress should increasingly be steered to provide workers with utility from the nonmonetary aspects of their jobs.

Yesterday was the first day of the 3-day annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The conference, held virtually again this year due to the ongoing coronavirus pandemic, 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 60 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.

“Mitigating Bias in Algorithmic Hiring: Evaluating Claims and Practices”

Manish Raghavan, Harvard University; Solon Barocas, Microsoft Research; Jon Kleinberg, Cornell University; Karen Levy, Cornell University

Abstract: There has been rapidly growing interest in the use of algorithms in hiring, especially as a means to address or mitigate bias. Yet, to date, little is known about how these methods are used in practice. How are algorithmic assessments built, validated, and examined for bias? In this work, we document and analyze the claims and practices of companies offering algorithms for employment assessment. In particular, we identify vendors of algorithmic pre-employment assessments (i.e., algorithms to screen candidates), document what they have disclosed about their development and validation procedures, and evaluate their practices, focusing particularly on efforts to detect and mitigate bias. Our analysis considers both technical and legal perspectives. Technically, we consider the various choices vendors make regarding data collection and prediction targets, and explore the risks and trade-offs that these choices pose. We also discuss how algorithmic de-biasing techniques interface with, and create challenges for, anti-discrimination law.

“Price Effects of Vertical Integration and Joint Contracting between Physicians and Hospitals”

Anna Sinaiko, Harvard University; Meredith Rosenthal, Harvard University; Vilsa Curto, Harvard University

Abstract: Vertical integration in healthcare has recently garnered scrutiny by antitrust authorities and state regulators. We examined trends, geographic variation, and price effects of vertical integration and joint contracting between physicians and hospitals using physician affiliations and all-payer claims data from Massachusetts in 2013–2017. Vertical integration and joint contracting with small and medium systems rose from 19.5 percent to 32.8 percent for primary care physicians and from 26.1 percent to 37.8 percent for specialists; vertical integration and joint contracting with large systems slightly declined. Geographic variation in vertical integration and joint contracting with large systems increased. We found that vertical integration and joint contracting led to price increases of 2.1 percent to 12 percent for primary care physicians and 0.7 percent to 6 percent for specialists, with the greatest increases in large systems. These findings can inform policymakers seeking to limit growth in healthcare prices.

“Capital Investment and Labor Demand”

Mark Curtis, Wake Forest University; Daniel G. Garrett, University of Pennsylvania; Eric Ohrn, Grinnell College; Kevin A. Roberts, Duke University; Juan Carlos Suarez Serrato, Duke University

Abstract: We study how tax policies that lower the cost of capital impact investment and labor demand. Difference-in-differences estimates using confidential U.S. Census Data on manufacturing establishments show that tax policies increased both investment and employment, but did not lead to wage or productivity gains. Using a structural model, we show that the primary effect of the policy was to increase the use of all inputs by lowering overall costs of production. The policy further stimulated production employment due to the complementarity of production labor and capital. Supporting this conclusion, we find that investment is greater in plants with lower labor costs. Our results show that recent tax policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines. Note: This research was funded in part by Equitable Growth.

“Power and Dignity In the Low-Wage Labor Market: Theory and Evidence from Walmart Workers”

Arindrajit Dube, University of Massachusetts Amherst; Suresh Naidu, Columbia University; Adam Dalton Reich, Columbia University

Abstract: What is the value of workplace dignity to low-wage workers, and is it supplied efficiently? We present a methodology to elicit valuations of difficult-to-measure job characteristics under imperfect competition and use it to measure the value of workplace dignity to workers and its relationship to wages. We draw on extensive ethnographic work conducted with 87 Walmart workers to design and implement a survey experiment with over 10,000 Walmart workers recruited online. We first validate our experimental design by showing that our hypothetical quit elasticities are close to other estimates in the literature, and that subjects’ behavior (their likelihood of clicking on an outside job link) is consistent with their stated preferences and together imply a nontrivial degree of monopsony power. Next, we estimate workers’ valuations of different workplace amenities, from commuting and scheduling to more subjective measures of workplace dignity, including supervisor respect and self-expression at work. We find that workers value workplace dignity at approximately 6 percent of their current wage, making it comparable to amenities like commute time and more valuable than widely discussed amenities like control over one’s schedule. We find that workers’ experience of dignity at work is higher for White, older, and Southern workers, and is correlated with a measure of job rents. High-dignity jobs are also associated with a lower quit elasticity, but a higher bargaining elasticity, with no such heterogeneity by the nondignity job amenity values. Third, we use geographic variation in the bite of Walmart’s 2014 voluntary minimum wage policy to estimate the causal impact of higher wages on changes in dignity. Contrary to the theory of compensating differentials, we find that workplace dignity is not a substitute for wages, as reported dignity values do not decrease among those workers likely to have experienced a raise due to the voluntary minimum wage. Note: This research was funded in part by Equitable Growth.

“Central bargaining and spillovers in local labor markets”

Ihsaan Bassier, University of Massachusetts Amherst

Abstract: How does centralized bargaining affect the broader wage structure? And what does this tell us about the mechanisms that govern the wages and flows of labor? Using bargaining council contracts matched with firm- and worker-level data in South Africa, I show wages correspond sharply to large contracted wage increases especially in mid-wage and mid-size firms. A simple model of monopsonistic competition and strategic interaction predicts sizable cross-firm wage spillovers from such partially treated labor markets. To account for the overlapping and localized nature of labor markets, I show that a model-based measure of wage spillovers is proportional to worker flows between firms. Using observable worker-level flows, I isolate the empirically relevant labor market segment, and find a cross-wage elasticity of about 0.8. Previous estimates are lower, which is consistent with being based on less precise measures of spillovers. A microdata simulation suggests that accounting for these spillovers doubles the effect of contracted wage increases on the full wage distribution. Note: This research was funded in part by Equitable Growth.

“The Geography of Job Tasks”

Enghin Atalay, Federal Reserve Bank of Philadelphia; Sebastian Sotelo, University of Michigan, Ann Arbor; Daniel Tannenbaum, University of Nebraska-Lincoln

Abstract: Working in urban commuting zones (CZs) commands a large earnings premium, and this premium differs significantly by worker skill level. In this paper, we produce new descriptive evidence and introduce new measurement tools to understand the mechanisms behind the urban premium and why it differs by worker skill level. We use the near-universe of job vacancies and develop granular measures of job tasks—based on the natural language employers use, rather than survey-based categories—that allow for differences within occupations and across CZs. We find evidence for three mechanisms behind the earnings premium. First, jobs are more interactive and analytic in urban CZs, even within narrow occupation categories. Second, the computer software requirements of jobs are more intensive in urban CZs. Third, urban workers are more specialized, with less overlap in the sets of tasks performed, within occupations. Furthermore, these differences across CZs are more pronounced for college-educated workers than for noncollege workers. We show that job tasks and technologies account for a substantial portion of the urban CZ premium—even within occupations—and this relationship is stronger for white-collar occupations. Note: This research was funded in part by Equitable Growth.

“Wage Differentials and the Price of Workplace Flexibility”

Marshall Drake, Boston University; Neil Thakral, Brown University; Linh Tô, Boston University

Abstract: This paper introduces the use of a Bayesian Adaptive Choice Experiment, or BACE, a dynamic preference elicitation method. The method makes it possible to obtain individual-level willingness-to-pay estimates taking into account heterogeneity in inattention by using a dynamically chosen sequence of discrete choice scenarios that yields the largest information gain about preference parameters. We apply the method to understand differences in the values of job amenities by gender. The new data also allow us to estimate a new model of compensating differentials extending the Rosen (1986) framework to understand how workers trade off workplace flexibility.

“Market Power in Small Business Lending: A Two-Dimensional Bunching Approach”

Natalie Cox, Princeton University; Ernest Liu, Princeton University; Daniel Morrison, Princeton University

Abstract: Do government-funded guarantees and interest rate caps primarily benefit borrowers or lenders under imperfect competition? We study how bank concentration impacts the effectiveness of these policy interventions in the small business loan market. Using data from the Small Business Administration’s Express Loan Program, we estimate a tractable model of bank competition with endogenous interest rates, loan size, and take-up. We introduce a novel methodology that exploits loan “bunching” in the two-dimensional contract space of loan size and interest rates, utilizing a discontinuity in the SBA’s interest rate cap. In concentrated markets, we find that a modest decrease in the cap would increase borrower surplus by up to 1.5 percent, despite the rationing of some loans. In concentrated markets with a 50 percent loan guarantee, each government dollar spent raises borrower surplus by $0.64, boosts lender surplus by $0.34, and generates $0.02 of deadweight loss.

“Differential Effects of Labor Tightening on the Black-White Wage Gap the Role of the Minimum Wage”

Sarah AlHaif, Howard University

Abstract: A rising tide does not lift all boats equally. During the expansion from the Great Recession, Black wage growth lagged that of Whites. While lower unemployment rates and the increased transition of workers from unemployment to employment is correlated with rising wages, this effect is through the correlation of job-to-job transitions on wages that increase as the labor; the actual mechanism is the increase in job-to-job transitions. But the minimum wage is important as a reservation wage and because increases in the minimum wage cause wage compression within firms create wage pressures on job-to-job transitions. But these pressures have different results by race because of differences in job-to-job transitions and because differences between minimum wage increases occur by race; Black workers disproportionately live where minimum wages have not increased. This paper decomposes those different effects.

“Using Technology to Tackle Discrimination in Lending”

Rachel M.B. Atkins, New York University; Lisa Cook, Michigan State University and National Bureau of Economic Research; Robert Seamans, New York University

Abstract: We assess the role of FinTech firms in loans made through the Paycheck Protection Program. The PPP, created by the U.S. government as a response to the coronavirus pandemic, provides loans to small businesses so they can keep employees on their payroll. We argue that FinTech firms’ reliance on technology rather than relationship-banking approaches used by traditional banks helps to address discrimination in lending, at least in part. Using newly released data on the PPP, we find support for our arguments: While Black-owned businesses received loans that were approximately 50 percent lower than observationally similar White-owned businesses, the effect disappears when FinTechs are allowed to provide loans.

“Modelling Discrimination, Job Competition and Race: Locomotive Firemen, and the Railroad Industry 1880–1950 and Technological Advance”

William E. Spriggs, Howard University and AFL-CIO

Abstract: The dominant model of discrimination is to assume either barriers to entry, based on pre-market factors like schooling or distance to job locations, or discrimination in the market is viewed as client-, owner-, or worker-based discrimination. But the case of locomotive firemen in the late 19th and early 20th centuries, as the importance of the railroad grew, presents a more complex model of race and labor market discrimination. In the U.S. South, Blacks played a dominant role because the job of fireman on a steam locomotive was dirty and dangerous and was a servant role to the locomotive’s engineer. Their numbers were too large for White workers, seeking to exclude Blacks, for White railroad owners to agree to their exclusion. However, outside the South, Blacks were effectively barred from the job. This paper explores this complex setting and shows its relevance to understanding discrimination effects.

“The Effect of Washington DC Universal Pre-K Program on Maternal Labor Supply”

Yi Geng, District of Columbia Government; Daniel Muhammad, District of Columbia Government; Bradley Hardy, American University

Abstract: On May 6, 2008, Washington, DC passed the Pre-K Enhancement and Expansion Act of 2008 to provide all 3- and 4-year-olds in Washington universal access to high-quality pre-Kindergarten education. By school year 2018–19, around 80 percent of eligible children in Washington were served in a public pre-K program. While the primary goal of universal pre-K program is to invest in the human capital of children that low-income parents are unable to provide, the program is also justified by increasing low-income family pay and maternal labor supply. Using administrative data from the IRS and the District of Columbia, we designed a study to analyze the impact of the DC universal pre-K program on the labor supply of unmarried working mothers using a different-in-differences framework. Our results show that after the establishment of universal pre-K in Washington, single parents tended to work less before the child was eligible for the universal pre-K program and recover to pre-policy when the child was eligible for the program, when compared with earnings before the implementation of the universal pre-K policy and controlling other factors. This seems to imply that the city’s universal pre-K program produced income effects that significantly affected the labor supply for single parents in Washington with younger children eligible for universal pre-K program.

“The 2021 Paycheck Protection Program Reboot: Loan Disbursement to Employer and Nonemployer Businesses in Minority Communities”

Robert Fairlie, University of California, Santa Cruz; Frank M. Fossen, University of Nevada, Reno

Abstract: Was the $278 billion reboot of the $800 billion Paycheck Protection Program disbursed equitably to minority communities? This paper provides the first analysis of how PPP funds were disbursed to minority communities in the third and final round of the program, which was specifically targeted to underserved and disadvantaged communities. Using administrative microdata on the universe of PPP loans, we find a strong positive relationship between PPP flows, as measured by the number of loans per employer business or loan amounts per employee, and the minority share of the population or businesses in the third round. In contrast, the relationship was negative in the first round of 2020 and less positive in the second round of 2020. We find a stronger positive relationship between minority share and loan numbers or amounts to employer businesses for first draw loans than second draw loans in 2021. The patterns are similar for loan numbers and amounts to nonemployer businesses but with a similarly strong positive relationship with minority share for both first draw and second draw loans. In comparison, in 2020, there was a negative relationship with minority share in the first round and a much weaker positive relationship in the second round. The restarted PPP program that ran from January to May 2021 appears to have been disbursed to minority communities as intended.

“The Impact of Income Inequality on Police Contact and Crime”

Thomas H. Byrne, Boston University; Robynn Cox, University of Southern California; Jamein Cunningham, Cornell University; Benjamin F. Henwood, University of Southern California; Anthony W. Orlando, California State Polytechnic University, Pomona

Abstract: We explore the extent to which income inequality influences crime, police contact, and police-related fatalities. Recent research has shown that income inequality is associated with increases in police expenditures; however, this increase could be a desire to deal with the social ills typically correlated with rising inequality. We combine information on inequality and crime to examine the relationship between inequality and public safety outcomes. Using an instrumental variables approach, we find evidence that income inequality is associated with increases in police expenditures, reaffirming previous research from Boustan et. al (2013). However, counter to the prevailing literature, we find that inequality is negatively related to homicide victimization, crime, arrests, and police killings of civilians.

“Welfare Implications of Heat Waves”

Harrison Hong, Columbia University; Neng Wang, Columbia University; Jiangmin Xu, Peking University; Jinqiang Yang, Shanghai University of Finance and Economics

Abstract: Heat waves—periods of extreme heat spanning several days—damage regional productivity and are becoming more frequent in the age of climate change. We model their implications for welfare using a continuous-time growth model. The discrete arrival of heat waves leads to downward jumps in regional productivity. Firms can install cooling capital (e.g., air conditioners, refrigeration) which mitigate the fat-tail damage to productivity conditioned on the arrival of a heatwave. We apply our model to U.S. counties from 1960 to 2020. Our model can match regional economic moments, frequency of heatwave arrivals, and conditional loss distributions. We then use our model to generate regional estimates of capital formation, economic growth, and household welfare based on projected heat wave trends across counties.

“Why Do Blacks Suffer More in Recessions and Benefit More in Expansions?”

Karl David Boulware, Wesleyan University; Kenneth N. Kuttner, Williams College

Abstract: A well-established fact is that Blacks (and other historically disadvantaged groups) are disproportionately affected by recessions. However, the reasons for this are not well-understood. The goal of this paper is to measure the high sensitivity of Black unemployment to macro conditions using a unified time series (error correction) framework. We also explore the possible role of occupational mix in contributing to Black workers high employment “beta”. We find that Black (un)employment is much more cyclical than White, which explains why the racial “gap” widens during recessions and narrows during expansions. Moreover, the “catchup” is especially rapid during high-pressure labor markets, and the excess cyclicality of Black unemployment cannot be explained by occupational stratification.