For hire
Why You Can't Find a Taxi in the Rain and other Labor Supply Lessons from Cab Drivers
Henry Farber
Quarterly Journal of Economics, forthcoming
Abstract:
I replicate and extend the seminal work of Camerer, et al (QJE 1997), who find that the wage elasticity of daily hours of work for New York City (NYC) taxi drivers is negative and conclude that their labor supply behavior is consistent with reference dependence. In contrast, my analysis of the complete record of all trips taken in NYC taxi cabs from 2009-2013 shows that drivers tend to respond positively to unanticipated as well as anticipated increases in earnings opportunities. Additionally, using a discrete choice stopping model, the probability of a shift ending is strongly positively related to hours worked but at best weakly related to income earned. I find substantial heterogeneity across drivers in their elasticities, but the estimated elasticities are generally positive and rarely substantially negative. I find that new drivers with smaller elasticities are more likely to exit the industry while drivers who remain learn quickly to be better optimizers (have positive labor supply elasticities that grow with experience). These results are consistent with the neoclassical optimizing model of labor supply and suggest that consideration of gain-loss utility and income reference dependence is not an important factor in the daily labor supply decisions of taxi drivers.
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Changes in the Distribution of Earnings Volatility
Shane Jensen & Stephen Shore
Journal of Human Resources, Summer 2015, Pages 811-836
Abstract:
Recent research has documented a rise in the volatility of individual labor earnings in the United States since 1970. Existing measures of this trend abstract from within-group latent heterogeneity, effectively estimating an increase in average volatility for observable groups. We decompose this average and find no systematic rise in volatility for the vast majority of individuals. Increasing average volatility has been driven almost entirely by rising earnings volatility of those with the most volatile earnings, identified ex ante by large past earnings changes. We characterize dynamics of the volatility distribution with a nonparametric Bayesian stochastic volatility model from Jensen and Shore (2011).
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What Do Right-to-Work Laws Do? Evidence from a Synthetic Control Method Analysis
Ozkan Eren & Serkan Ozbeklik
Journal of Policy Analysis and Management, forthcoming
Abstract:
Using the case study of Oklahoma and a recently developed econometric technique, we examine the impact of right-to-work (RTW) laws on state-level labor market outcomes. Our results show that the passage of RTW laws in Oklahoma decreased private sector unionization rates. Several other state outcomes including total employment rate and private sector average wages, on the other hand, were not affected by RTW laws. The findings for the private sector generally carry over to the manufacturing sector.
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Who Needs a Fracking Education? The Educational Response to Low-Skill Biased Technological Change
Elizabeth Cascio & Ayushi Narayan
NBER Working Paper, July 2015
Abstract:
Over the past decade, a technological breakthrough - hydraulic fracturing or "fracking" - has fueled a boom in oil and natural gas extraction by reaching shale reserves inaccessible through conventional technologies. We explore the educational response to fracking, taking advantage of the timing of its widespread introduction and the spatial variation in shale oil and gas reserves. We show that local labor demand shocks from fracking have been biased toward low-skilled labor and males, reducing the return to high school completion among men. We also show that fracking has increased high school dropout rates of male teens, both overall and relative to females. Our estimates imply that, absent fracking, the male-female gap in high school dropout rates among 17- to 18-year-olds would have narrowed by about 11% between 2000 and 2013 instead of remaining unchanged. Our estimates also imply an elasticity of high school completion with respect to the return to high school of 0.47, a figure below historical estimates. Explanations for our findings aside from fracking's low-skill bias - changes in school inputs, population demographics, and resource prices - receive less empirical support.
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Do Completed College Majors Respond to Changes in Wages?
Mark Long, Dan Goldhaber & Nick Huntington-Klein
Economics of Education Review, forthcoming
Abstract:
In an analysis connecting labor market earnings to college major choices, we find statistically significant relationships between changes in wages by occupation and subsequent changes in college majors completed in related fields of college study between 1982 and 2012. College majors (defined at a detailed level) are most strongly related to wages observed three years earlier, when students were college freshmen. The responses to wages vary depending on the extent to which there is a strong mapping of majors into particular occupations. We also find that women, blacks, Hispanics, and students with low test scores are less likely to respond to wage changes. These findings have implications for policy interventions designed to align students' major choices with labor market demand.
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Estimating the Education-Earnings Equation Using Geographic Variation
William Doyle & Benjamin Skinner
Vanderbilt University Working Paper, August 2015
Abstract:
We expand on the literature on the causal impact of postsecondary education on earnings by introducing a richer set of location-based measures as instruments for years of education. Utilizing data from the National Longitudinal Study of Youth, 1997, we implement six different sets of instruments based on geographic variation: presence of a four-year or two-year college in the county, inverse log distance to in-state two-year colleges, distance-weighted tuition and distance-weighted enrollment at in-state two-year colleges, and inverse log distance to all colleges. We find that these alternative measures yield differing estimates of the impact of educational attainment on earnings. Using our preferred measure of geographic variation, one additional year of postsecondary attainment results in a 9.5% increase in yearly earnings. We find a larger impact of postsecondary attainment for women, and no measurable impact of postsecondary attainment for men.
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A Re-examination of the Impact of the UK National Minimum Wage on Employment
Richard Dickens, Rebecca Riley & David Wilkinson
Economica, forthcoming
Abstract:
Early work on the national minimum wage (NMW) suggested that policymakers in the UK had succeeded in raising the pay of low-paid workers without impairing their employment prospects. This paper shows that when we focus on the most vulnerable workers, part-time females, the NMW appears to be associated with reductions in employment retention. These negative impacts were evident when the NMW was introduced and also when it was increased faster than average wages in the mid-2000s. We also show that these falls in employment among part-time females are exacerbated by the recession.
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House Money and Entrepreneurship
Sari Pekkala Kerr, William Kerr & Ramana Nanda
NBER Working Paper, August 2015
Abstract:
We examine the relationship between house prices and entrepreneurship using micro data from the US Census Bureau. Increases in house prices are often thought to drive entrepreneurship through unlocking the collateral channel for bank loans, but this interpretation is challenged by worries regarding omitted variable biases (e.g., rising local demand) or wealth effects (i.e., that people with more valuable homes are more likely to enter entrepreneurship for reasons other than access to collateral). We construct an empirical environment that utilizes very localized price changes, exploits variations in initial home values across residents in the same zip code, and embeds multiple comparisons (e.g., owners vs. renters, homestead exemption laws by state). For the United States during the 2000-2004 period, the link of home prices to the rate of entrepreneurship through home equity channels is modest in economic magnitude. This is despite a focus on a time period that experienced the largest concentration of US home price growth over the last two decades. Even when we do connect home equity to entrepreneurship, part of the effect is linked to an increased demand for entrepreneurship. While housing collateral plays a role in the entry that we observe, it does not seem to be a major barrier to entrepreneurship in our context.
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Bombs, homes, and jobs: Revisiting the Oswald hypothesis for Germany
Nikolaus Wolf & Paul Caruana-Galizia
Economics Letters, forthcoming
Abstract:
Andrew Oswald (1996) hypothesized that homeownership restricts commercial development and labor mobility, increasing unemployment. Instrumenting homeownership with WWII Allied bombing for a German regional panel, we find homeownership has a large positive effect on unemployment, and homeownership decreases labour mobility.
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Performance Pay and Workplace Injury: Panel Evidence
Benjamin Artz & John Heywood
Economica, forthcoming
Abstract:
Using panel survey data, we show cross-sectional evidence of an elevated risk of workplace injury for those paid piece rates and bonuses. While consistent with Adam Smith's behavioural conjecture, this could simply reflect sorting across workers or firms. In response we successively control for a risk proxy, for worker fixed effects and for worker with employer match fixed effects. No previous examination has controlled for such fixed effects or examined US survey data. The estimates indicate that injury risk increases substantially when blue-collar (manual) workers become paid by piece rates and bonuses.
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The surprisingly low importance of income uncertainty for precaution
Scott Fulford
European Economic Review, forthcoming
Abstract:
While it is common to use income uncertainty to explain household saving decisions, there is much disagreement about the importance of precautionary saving. This paper suggests that income uncertainty is not an important motive for saving, although households do have other precautionary reasons to save. Using a question from the Survey of Consumer Finances that asks how much households want for precautionary purposes, this paper shows that expressed household preferences, and liquid savings, are much lower than predicted by standard modeling assumptions. Households rarely list unemployment as a reason to save. Perceived income uncertainty does not affect liquid savings or precautionary preferences. Neither does being in an occupation with higher income volatility. Instead, households seem very concerned with expenditure shocks.
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Geographic Mobility and the Costs of Job Loss
Nicholas Jolly
B.E. Journal of Economic Analysis & Policy, forthcoming
Abstract:
This paper uses data from the 1968 through 1997 survey waves of the Panel Study of Income Dynamics to analyze how the long-term costs of job loss vary by a worker's post-displacement migration status. Results from the analysis show that those individuals who move within the first 2 years after a job loss experience lower earnings losses, lower reductions in hours worked, and smaller increases in time unemployed when compared to a group of displaced workers who are not geographically mobile during the early years following this life event. Workers who move within the first 2 years after displacement face a lower probability of homeownership when compared to their non-mobile counterparts. However, this lower probability is short-lived.
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Todd Grindal et al.
Journal of Policy Analysis and Management, forthcoming
Abstract:
In February 2005, Illinois became the first U.S. state to grant home-based child care providers (HBCPs) the right to form a labor union in order to bargain collectively with the state government. This policy inspired similar efforts across the country and represents a potentially important direction for child care policy. To date, the implications of labor unions for the cost, type, and availability of subsidized child care have not been evaluated empirically. In this study, we examine the impact of granting Illinois HBCPs the right to form a labor union on (a) the type of child care (licensed vs. license-exempt/home-based vs. center-based) used by subsidy-receiving Illinois infants and toddlers; (b) the per-child cost of subsidized child care for infants and toddlers; and (c) the percentage of Illinois infants and toddlers who use child care subsidies. To conduct these analyses, we combine data from the Current Population Survey with Child Care and Development Fund administrative records on U.S. infants and toddlers whose families received child care subsidies during the period from 2002 to 2008. We use both a traditional difference-in-differences as well as a comparative case study with a "synthetic" control group approach. The synthetic control group approach improves on traditional comparative case studies by providing a transparent, empirical approach for constructing the counterfactual, documenting comparison units' contribution to the synthetically created control group and detailing the degree to which the synthetic control group is, or is not, similar to the treated unit on preintervention measures of the outcome as well as on other selected characteristics. We find that subsidy-receiving Illinois infants and toddlers spent an average of between 6.4 and 7 percentage points more hours in licensed care settings, as compared to license-exempt settings, in the three years following child care unionization. We also find that between 0.7 and 1.1 percentage points fewer Illinois infants and toddlers used child care subsidies following unionization.