why are there still so many jobs the history and future of workplace automation in this essay i begin by identifying the reasons that automation has not wiped out a majority of jobs over the decades and centuries automation does indeed substitute for labor as it is typically intended to do however automation also complements labor raises output in ways that leads to higher demand for labor and interacts with adjustments in labor supply journalists and even expert commentators tend to overstate the extent of machine substitution for human labor and ignore the strong complementarities between automation and labor that increase productivity raise earnings and augment demand for labor changes in technology do alter the types of jobs available and what those jobs pay in the last few decades one noticeable change has been a polarization of the labor market in which wage gains went disproportionately to those at the top and at the bottom of the income and skill distribution not to those in the middle however i also argue this polarization is unlikely to continue very far into future the final section of this paper reflects on how recent and future advances in artificial intelligence and robotics should shape our thinking about the likely trajectory of occupational change and employment growth i argue that the interplay between machine and human comparative advantage allows computers to substitute for workers in performing routine codifiable tasks while amplifying the comparative advantage of workers in supplying problem solving skills adaptability and creativity

the great reversal in the demand for skill and cognitive tasks this paper argues that several of the poor labor market outcomes observed in the great recession can be traced back to a change in the demand pattern for skilled workers that started with the tech bust of 2000 in particular we show that around the year 2000 the demand for cognitive tasks underwent a reversal in response high skilled workers moved down the occupational ladder and increasingly displaced lower educated workers in less skill intensive jobs while these effects were present before the financial crisis of 2008 they became more obvious after jobs associated with the housing bubble disappeared

labor market returns to two and four year college the paper examines labor market returns to a two and four year college education analysis of the 1972 national longitudinal survey of youth observation that the average person who attended a two year college earned about 10 percent more than those without any college education comparison with the wages of those who attended a four year college education

maternal education home environments and the development of children and adolescents we study the intergenerational effects of maternal education on children s cognitive achievement behavioral problems grade repetition and obesity we address endogeneity of maternal schooling by instrumenting with variation in schooling costs when the mother grew up using matched data from the female participants of the national longitudinal survey of youth 1979 nlsy79 and their children we can control for mother s ability and family background factors our results show substantial intergenerational returns to education for children aged 7 8 for example our iv results indicate that an additional year of mother s schooling increases the child s performance on a standardized math test by almost 0 1 of a standard deviation and reduces the incidence of behavioral problems our data set allows us to study a large array of channels which may transmit the effect of maternal education to the child including family environment and parental investments at different ages of the child we find that income effects delayed childbearing and assortative mating are likely to be important and we show that maternal education leads to substantial differences in maternal labor supply we investigate heterogeneity in returns and we present results focusing both on very early stages in the child s life as well as adolescent outcomes we present a falsification exercise to support the validity of our instruments and our results are found to be robust in a sensitivity analysis we discuss policy implications and relate our findings to intergenerational mobility

understanding the mechanisms through which an influential early childhood program boosted adult outcomes a growing literature establishes that high quality early childhood interventions targeted toward disadvantaged children have substantial impacts on later life outcomes little is known about the mechanisms producing these impacts this paper uses longitudinal data on cognitive and personality traits from an experimental evaluation of the influential perry preschool program to analyze the channels through which the program boosted both male and female participant outcomes experimentally induced changes in personality traits explain a sizable portion of adult treatment effects

job polarization and task biased technological change evidence from sweden 1975 2005 this paper shows that between 1975 and 2005 sweden exhibited a pattern of job polarization with expansions of the highest and lowest paid jobs compared to middle wage jobs the most popular explan

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

estimating the production function for human capital results from a randomized controlled trial in colombia we examine the channels through which a randomized early childhood intervention in colombia led to significant gains in cognitive and socio emotional skills among a sample of disadvantaged children aged 12 to 24 months at baseline we estimate the determinants of material and time investments in these children and evaluate the impact of the treatment on such investments we then estimate the production functions for cognitive and socio emotional skills the effects of the program can be explained by increases in parental investments which have strong effects on outcomes and are complementary to both maternal skills and child s baseline skills

inequality in socio emotional skills a cross cohort comparison abstract we examine changes in inequality in socio emotional skills very early in life in two british cohorts born 30 years apart we construct comparable scales using two validated instruments for the measurement of child behaviour and identify two dimensions of socio emotional skills internalising and externalising using recent methodological advances in factor analysis we establish comparability in the inequality of these early skills across cohorts but not in their average level we document for the first time that inequality in socio emotional skills has increased across cohorts especially for boys and at the bottom of the distribution we also formally decompose the sources of the increase in inequality and find that compositional changes explain half of the rise in inequality in externalising skills on the other hand the increase in inequality in internalising skills seems entirely driven by changes in returns to background characteristics lastly we document that socio emotional skills measured at an earlier age than in most of the existing literature are significant predictors of health and health behaviours our results show the importance of formally testing comparability of measurements to study skills differences across groups and in general point to the role of inequalities in the early years for the accumulation of health and human capital across the life course

firm specific human capital a skill weights approach the theory of human capital is agnostic on what constitutes firm specific skills the theory specifies that specific skills contribute to productivity only at the current firm a broader approach lets all skills be general but firms use them with different weights attached for example computer programming economics and accounting are general skills but there may be only one firm that wants workers trained in all three one implication is that wage profiles and the split of human capital costs depend on thickness of the market another is that firms pay for what appears to be general training

thinking fast and slow some field experiments to reduce crime and dropout in chicago we present the results of three large scale randomized controlled trials rcts carried out in chicago testing interventions to reduce crime and dropout by changing the decision making of economically disadvantaged youth we study a program called becoming a man bam developed by the nonprofit youth guidance in two rcts implemented in 2009 2010 and 2013 2015 in the two studies participation in the program reduced total arrests during the intervention period by 28 35 reduced violent crime arrests by 45 50 improved school engagement and in the first study where we have follow up data increased graduation rates by 12 19 the third rct tested a program with partially overlapping components carried out in the cook county juvenile temporary detention center jtdc which reduced readmission rates to the facility by 21 these large behavioral responses combined with modest program costs imply benefit cost ratios for these interventions from 5 to 1 up to 30 to 1 or more our data on mechanisms are not ideal but we find no positive evidence that these effects are due to changes in emotional intelligence or social skills self control or grit or a generic mentoring effect we find suggestive support for the hypothesis that the programs work by helping youth slow down and reflect on whether their automatic thoughts and behaviors are well suited to the situation they are in or whether the situation could be construed differently jel codes c91 c93 d03 d1 i24 i3 i32 k42

the determinants of earnings a behavioral approach we survey the determinants of earnings and propose a framework for understanding labor market success we suggest that the advantages of the children of successful parents go considerably beyond the benefits of superior education the inheritance of wealth or the genetic inheritance of cognitive ability we suggest that noncognitive personality variables such as attitudes towards risk ability to adapt to new economic conditions hard work and the rate of time preference affect both earning and the transmission of economic status across generations

the increasing complementarity between cognitive and social skills abstract data linking 1972 and 1992 adolescent skill endowments to adult outcomes reveal increasing complementarity between cognitive and social skills in fact previously noted growth in demand for cognitive skills affected only individuals with strong endowments of both social and cognitive skills these findings are corroborated using census and cps data matched with dictionary of occupational titles dot job task measures employment in and earnings premia to occupations requiring high levels of both cognitive and social skill grew substantially compared with occupations that require only one or neither type of skill and this emerging feature of the labor market has persisted into the new millennium

a divisible search model of fiat money this paper extends the kiyotaki wright search model of fiat money to allow for divisible money and goods the extension allows me to examine the standard issues in monetary economics such as the neutrality and superneutrality of money by severing the artificial link in the kiyotaki wright model between the money supply and the number of money holders it is shown that money is neutral but not superneutral money growth generates a trading opportunity effect it changes the fraction of different agents in the economy and hence changes the probability with which agents have a successful match in addition money growth has a negative effect on the real money balance that is familiar in walrasian monetary models the balance of the two effects can imply a positive optimal money growth rate

sorting in the labor market do gregarious workers flock to interactive jobs this paper tests a central implication of the theory of equalizing differences that workers sort into jobs with different attributes based on their preferences we present evidence from four new time use data sets for the united states and france suggesting that workers who are more gregarious as revealed by their behavior when they are not working tend to be employed in jobs that involve more social interactions we also find that workers report substantially higher levels of job satisfaction and net affect while at work if their jobs entail frequent interactions with coworkers and other desirable working conditions

a nation of gamblers real estate speculation and american history the great housing convulsion that buffeted america between 2000 and 2010 has historical precedents from the frontier land boom of the 1790s to the skyscraper craze of the 1920s but this time was different there was far less far less real uncertainty about fundamental economic and geographic trends making the convulsion even more puzzling during historic and recent booms sensible models could justify high prices on the basis of seemingly reasonable projections about stable or growing prices the recurring error appears to be a failure to anticipate the impact that elastic supply will eventually have on prices whether for cotton in alabama in 1820 or land in las vegas in 2006 buyers don t appear to be irrational but rather cognitively limited investors who work with simple heuristic models instead of a comprehensive general equilibrium framework low interest rates rarely seem to drive price growth under priced default options are a more common contributor to high prices the primary cost of booms has not typically been overbuilding but rather the financial chaos that accompanies housing downturns

labor market regulation the diversity of knowledge and skill and national innovation performance abstract the diversity of knowledge and skill is an important element of a national system of innovation we propose a theory of how certain labor market institutions affect diversity and through that route affect levels of innovation specifically unemployment protection up encourages diversity by reducing the risk burden of a broad range of learning or human capital investment for that reason up fosters innovation employment protection ep reduces the risk burden of a much narrower range of learning for this reason it will not enhance diversity to the extent up does and it may actually depress overall diversity and innovation our approach differs from previous research on labor market insurance and skill formation much of which has dealt with a distinction between general and specific skills and which has treated the effects of up and ep as similar estimating the effects of up and ep on patenting for 25 oecd countries over 24 years we find a positive effect from up a negative effect from ep and evidence that the up effect is mediated by diversity of skill

structural transformation and the rise of information technology abstract has the emergence of information technology changed the structure of employment and earnings in the us we propose a new index of occupation level it intensity and document several long term changes in the occupational landscape over the past decades using census and us klems micro data we show that i the bulk of productivity growth after 1950 is concentrated in it intensive sectors ii the share of workers in it jobs has expanded significantly with little or no pause and it jobs enjoy a large and growing earnings premium even after controlling for general task requirements e g cognitive non routine and iii the rise of the it intensive employment share is closely associated with declines in the manufacturing employment share while earnings premia for college educated and cognitive non routine workers have flattened in the aggregate since 2000 we show that they continued growing in it intensive jobs and that these jobs have played a key role in accounting for the surge of high tech service labor productivity we also use our it intensity index to estimate industry specific elasticities of substitution between it and non it intensive labor finding values of 1 6 in manufacturing and 1 3 in services finally we revisit a long standing question about the relationship between technological progress and productivity and provide evidence that occupation level it intensity is positively associated with output growth especially in the services sector

a simple state contingent pricing rule for complex intertemporal externalities abstract some externalities such as global warming involve complex relationships between emissions and an environmental state variable with effects over lags of uncertain length coming up with theoretically motivated and practical policy options in such cases has proven difficult deterministic intertemporal general equilibrium models yield what appear to be feasible optimal price paths but only by assuming away many key uncertainties nor do they specify how the possibility of new information should affect the policy path bayesian models allow limited uncertainty and optimal learning based on observed effects of policy changes but suggest a discouraging delay before optimal policy can be identified a full insurance model suggests that risk aversion and fat tailed probabilities of catastrophe imply an implausibly or at least impractically large risk premium implying that practical policy decisions depend so critically on uncertain parameters as to be unavoidably arbitrary this paper proposes an entirely new approach based on the observation that the situation giving rise to a complex intertemporal externality also yields an observable state variable that contains information relevant to the identification of the optimal policy path i derive a simple transformation by which the state variable can yield a good approximation to the optimal externality price i outline assumptions sufficient to yield the transformation and present numerical examples that illustrate its ability to follow linear and nonlinear first best price paths a specific application to greenhouse gases is proposed

the changing roles of education and ability in wage determination this study examines changes in returns to formal education and cognitive skills over the past 20 years using the 1979 and 1997 waves of the national longitudinal survey of youth we show that cognitive skills had a 30 50 larger effect on wages in the 1980s than in the 2000s returns to education were higher in the 2000s these developments are not explained by changing distributions of workers observable characteristics or by changing labor market structure we show that the decline in returns to ability can be attributed to differences in the growth rate of technology between the 1980s and 2000s

the polarization of the u s labor market this paper analyzes a marked change in the evolution of the u s wage structure over the past fifteen years divergent trends in upper tail 90 50 and lower tail 50 10 wage inequality we document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years since 1980 wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987 but it has ceased growing and for some measures actually narrowed since the late 1980s furthermore we find that occupational employment growth shifted from monotonically increasing in wages education in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage education distribution in the 1990s we characterize these patterns as the u201cpolarization u201d of the u s labor market with employment polarizing into high wage and low wage jobs at the expense of middle wage work we show how a model of computerization in which computers most strongly complement the non routine abstract cognitive tasks of high wage jobs directly substitute for the routine tasks found in many traditional middle wage jobs and may have little direct impact on non routine manual tasks in relatively low wage jobs can help explain the observed polarization of the u s labor market this abstract was borrowed from another version of this item

negotiating a better future how interpersonal skills facilitate intergenerational investment using a randomized controlled trial we study whether a negotiation skills training can improve girls educational outcomes in a low resource environment we find that a negotiation training given to eighth grade zambian girls significantly improved educational outcomes over the next three years and these effects did not fade out to better understand mechanisms we estimate the effects of two alternative treatments negotiation had much stronger effects than an informational treatment which had no effect a treatment designed to have more traditional girls empowerment effects had directionally positive but insignificant educational effects relative to this treatment negotiation increased enrollment in higher quality schooling and had larger effects for high ability girls these findings are consistent with a model in which negotiation allows girls to resolve incomplete contracting problems with their parents yielding increased educational investment for those who experience sufficiently high returns we provide evidence for this channel through a lab in the field game and follow up survey with girls and their guardians jel codes d13 i24 j16 o15

the stern review a dual critique the stern review described as the most comprehensive review ever carried out on the economics of climate change was published on 30 october 2006 the twin papers from a combined team of scientists and economists present a critique in two parts of the stern review part i focuses on scientific issues and their treatment in the review it forms the point of departure for part ii which deals with economic aspects each paper has its own list of authors in relation to both scientific and economic issues the authors question the accuracy and completeness of the stern review s analysis and the objectivity of its treatment they conclude that the review fails to present an accurate picture of scientific understanding of climate change issues and will reinforce ill informed alarm about climate change two interrelated features of the stern review are that it greatly understates the extent of uncertainty as to possible developments in highly complex systems that are not well understood over a period of two centuries or more and its treatment of sources and evidence is persistently selective and biased these twin features have combined to make the review a vehicle for speculative alarmism in the judgement of the authors of the dual critique the stern review mishandles data gives too little attention to actual observation and evidence as distinct from the results of model based exercises and takes no account of the failures of due disclosure and the chronic limitations of peer reviewing that have been characteristic of work relating to climate change which governments have commissioned and drawn on as to specifically economic aspects the authors note among other weaknesses that the review systematically overstates projected costs of climate change partly though by no means wholly as a result of its failure to acknowledge the scope for long term adaptation to possible global warming underestimates the likely cost including to the world s poor of the drastic global mitigation programme that it calls for and proposes worldwide adoption of a specially low rate of interest for discounting the costs and benefits of mitigation on the basis of inadequate analysis and without regard for the problems and risks that would result so far from being an authoritative guide to the economics of climate change the stern review is deeply flawed it does not provide a basis for informed and responsible policies

lowering standards to wed spouse quality marriage and labor market responses to the gender wage gap this paper examines the effect of the female to male wage ratio relative wage on women s spouse quality marriage and labor supply over three decades exploiting task based demand shifts as a

the scandinavian fantasy the sources of intergenerational mobility in denmark and the us this paper examines the sources of differences in social mobility between the us and denmark measured by income mobility denmark is a more mobile society but not when measured by educational mobility there are pronounced non linearities in income and educational mobility in both countries greater danish income mobility is largely a consequence of redistributional tax transfer and wage compression policies while danish social policies for children produce more favorable cognitive test scores for disadvantaged children they do not translate into more favorable educational outcomes partly because of disincentives to acquire education arising from the redistributional policies that increase income mobility

regression toward mediocrity in economic stature this paper provides estimates of the correlation in lifetime earnings between fathers and sons intergenerational data from the national longitudinal survey are used earlier studies conducted for the united states report elasticities of children s earnings with respect to parent s earnings of 0 2 or less suggesting extensive integenerational mobility these estimates however are biased downward by error contaminated measures of lifetime economic status estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0 4 this suggests considerably less intergenerational mobility than previously believed jel j62

the industrial mobility of displaced workers this article uses a two industry model of unemployment duration and job search to estimate rates of transition of displaced workers from unemployment to employment distinguishing between employment in a worker s previous industry and in other industries the competing risks model allows inferences about search strategies to be drawn from data concerning employment outcomes and allows tests of some fundamental implications of search theory there is evidence that improvements in the prospects for employment in their previous industry induce displaced workers to reduce search intensity or increase reservation wages in other industries

an economic approach to social capital a standard optimal investment model can be used to analyse an individual s decision to accumulate social capital we analyse six facts that support the predictions of this individual based approach 1 social capital first rises and then falls with age 2 social capital declines with expected mobility 3 social capital rises in occupations with greater returns to social skills 4 social capital is higher among homeowners 5 social connections fall sharply with physical distance 6 people who invest in human capital also invest in social capital we fail to find robust evidence that social capital investments fall with the value of time or that geographic religious groups generate social capital complementarities

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

educational expansion skills diffusion and the economic value of credentials and skills examining the economic value of education has been a central research agenda of social scientists for decades however prior research inadequately accounts for the discrepancy between educational

computerisation and wage dispersion an analytical reinterpretation the rich countries have recently seen a dramatic rise in income inequality all the more surprising because the long term trend had been toward equality this paper examines one of the leading explanations computerisation in the workplace i offer a theory of computers impact on white collar work which goes far toward explaining the timing form and locus of recent labour market changes the theory looks at the bureaucratic and organisational applications of computers that have been first largest and most influential they have two effects on firms demand for labour at different skill levels

the importance of bundling in a gorman lancaster model of earnings the idea that the labor market of individuals can be decomposed into payments to separate productive attributes has an enduring appeal in economics assuming that demographic groups differ only in their endowments of productive characteristics it is possible to rationalize observed demographic earnings differentials without invoking the arguments that characteristics specific to a particular demographic group are direct objects of employer demand by aggregating skills over all demographic groups it is possible to produce a theory of the market determination of the prices of skills held in different amounts by different demographic groups this paper considers conditions under which characteristics are uniformly priced across sectors of a multisector economy the paper presents empirical evidence that rejects uniform pricing of characteristics as a description of the us labor market bundling may account for this evudence but other hypotheses do as well authors

lessons from the bell curve this paper examines the argument presented in the bell curve a central argument is that one factor g accounts for correlation across test scores and performance in society another central argument is that g cannot be manipulated these arguments are combined to claim that social policies designed to improve social performance cannot be effective a reanalysis of the evidence contradicts this story the factors that explain wages receive different weights than the factors that explain test scores more than g is required to explain either other factors besides g contribute to social performance and they can be manipulated

the veteran wage differential there is debate in the literature as to whether military service is rewarded in the economy and the extent to which veterans receive either a wage premium or penalty in this paper we take a new a

is the test score decline responsible for the productivity growth decline the test score decline between 1967 and 1980 was large about 1 25 grade level equivalents and historically unprecedented new estimates of the trends in academic achievement of the effect of academic achievement on productivity and of trends in the quality of the work force are developed the test score decline did not cause the post 1965 productivity growth slowdown but it did contribute to its perpetuation if test scores had continued to grow after 1967 at the rate prevailing in the previous quarter century labor force quality would have been 2 9 percent 86 billion greater in 1987 5 5 percent greater in 2000 and 6 7 percent greater in 2010 copyright 1989 by american economic association

sorting multidimensional types theory and application this article studies multidimensional matching between workers and jobs workers differ in manual and cognitive skills and sort into jobs that demand different combinations of these two skills to study this multidimensional sorting problem i develop a theoretical framework that generalizes the unidimensional notion of assortative matching and sufficient conditions on the technology under which sorting obtains i derive the equilibrium in closed form and use this explicit solution to study biased technological change the main finding is that an increase in worker job complementarities in cognitive relative to manual inputs leads to more pronounced sorting and wage inequality across cognitive relative to manual skills this can trigger wage polarization and boost aggregate wage inequality i then estimate the model for the u s and identify sizable technology shifts during the last two decades worker job complementarities in cognitive inputs strongly increased whereas complementarities in manual inputs decreased in addition to this bias in complementarities there has been a cognitive skill bias in production counterfactual exercises suggest that these technology shifts as opposed to changes in skill supply and demand can account for observed changes in worker job sorting wage polarization and a significant part of the increase in u s wage dispersion

skills signals and employability an experimental investigation abstract because most skills of labor market entrants are not directly observed by employers individuals acquire skill signals to study which signals are valued by employers we randomize several skill signals on resumes of fictitious applicants among which we ask a large representative sample of german human resource managers to choose we find that signals in both studied domains cognitive and social skills have significant effects on being invited for a job interview consistent with their relevance expectedness and credibility different signals are effective for apprenticeship applicants and college graduates while gpas and social skills are significant for both genders females are particularly rewarded for it and language skills older hr managers value school grades less and other signals more hr managers in larger firms value college grades more

inequality and the organization of knowledge since the seminal work of lawrence f katz and kevin m murphy 1992 the study of wage inequality has taken as its starting point a neoclassical constant elasticity of substitution production function using as inputs capital and lowand high skill labor this approach assumes that the organization of production is fixed and determined by a particular specification of technology and it ignores both the source of the interaction between workers and the organizational aspects of this interaction these shortcomings are particularly important in light of growing empirical evidence that points first to the importance of decreases in the cost of processing and communicating information and second to the complementarity between organizational change and adjustments in the distribution of wages e g timothy f bresnahan et al 2002 this paper argues that theories that seek to guide empirical research on these areas must put knowledge and information at the center of the analysis of organizations and link the organizational structure with aggregate variables via equilibrium frameworks in garicano and rossi hansberg 2003 we present a model of this kind it determines the patterns of organization as manifested by the communication and specialization patterns and the implied wage structure that result from different costs of acquiring and communicating information here we present a simple variant of this theory that allows us to focus on one of the main aspects of that framework the sorting of agents into teams and the wage and organizational structure that accompanies that sorting we use this simple model to analyze the changes in organization and wages that result from a very specific type of technological change a reduction in the cost of communicating knowledge or information this model allows us to consider the effect on within class wage inequality and the impact of information technology on the creation and form of organizations e g size distribution of hierarchies however because knowledge is exogenously given and agents cannot invest in learning an important margin of the model in garicano and rossi hansberg 2003 is fixed namely the degree of decentralization or the extent to which problems are solved at lower levels that model allows the simultaneous study of the acquisition of knowledge spans of control and matching in equilibrium moreover it goes beyond the current analysis in that it allows for organizations with an unconstrained number of layers and in that it studies two aspects of the impact of information technology communication technology like here and the technology to acquire knowledge or information e g processing power through cheaper database access

correlation consumption confusion or constraints why do poor children perform so poorly the economic and social mobility of a generation may be largely determined by the time it enters school given early developing and persistent gaps in child achievement by family income and the importance of adolescent skill levels for educational attainment and lifetime earnings after providing new evidence of important differences in early child investments by family income we study four leading mechanisms thought to explain these gaps an intergenerational correlation in ability a consumption value of investment information frictions and credit constraints in order to better determine which of these mechanisms inf uence family investments in children we evaluate the extent to which these mechanisms also explain other important stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills

accounting for intergenerational income persistence noncognitive skills ability and education we analyse in detail the factors that lead to intergenerational persistence among sons where this is measured as the association between childhood family income and later adult earnings we seek to account for the level of income persistence in the 1970 bcs cohort and also to explore the decline in mobility in the uk between the 1958 ncds cohort and the 1970 cohort the mediating factors considered are cognitive skills non cognitive traits educational attainment and labour market attachment changes in the relationships between these variables parental income and earnings are able to explain over 80 of the rise in intergenerational persistence across the cohorts

the impact of the london bombings on the well being of adolescent muslims we exploit the timing of the london bombings coinciding with a large scale national survey of adolescents to identify the impact of extremist islamic terror attacks on the well being of adolescent muslims our analysis reveals interesting gender differences we find evidence of a decline in the happiness of muslim teenage girls after the bombings which is also accompanied by a rise in expectations of facing discrimination in the labour market these findings are robust to several falsification tests on the other hand we fail to uncover compelling evidence of any impact of the bombings on muslim teenage boys

changes in the characteristics of american youth implications for adult outcomes we examine changes in the characteristics of american youth between the late 1970s and the late 1990s with a focus on characteristics that matter for labor market success the current generation is more skilled than the previous one blacks and hispanics have gained relative to whites and women have gained relative to men however the skill distribution has widened overall shifts in parental education generate many of the observed changes we also provide speculative estimates suggesting that if recent trends in technology and the supply of human capital continue wage inequality will increase substantially by 2025

comment on the distribution of money balances and the nonneutrality of money by aleksander berentsen gabriele camera and christopher waller an example is constructed to illustrate some points about the berentsen camera waller article followed by some comments

putting tasks to the test human capital job tasks and wages using original representative survey data we document that analytical routine and manual job tasks can be measured with high validity vary substantially within and between occupations are significantly related to workers characteristics and are robustly predictive of wage differences between occupations and among workers in the same occupation we offer a conceptual framework that makes explicit the causal links between human capital endowments occupational assignment job tasks and wages which motivate a roy model of the allocation of workers to occupations we offer two simple tests of the model s gross predictions for the relationship between tasks and wages both of which receive qualified empirical support

how does your kindergarten classroom affect your earnings evidence from project star in project star 11 571 students in tennessee and their teachers were randomly assigned to classrooms within their schools from kindergarten to third grade this article evaluates the long term impacts of star by linking the experimental data to administrative records we first demonstrate that kindergarten test scores are highly correlated with outcomes such as earnings at age 27 college attendance home ownership and retirement savings we then document four sets of experimental impacts first students in small classes are significantly more likely to attend college and exhibit improvements on other outcomes class size does not have a significant effect on earnings at age 27 but this effect is imprecisely estimated second students who had a more experienced teacher in kindergarten have higher earnings third an analysis of variance reveals significant classroom effects on earnings students who were randomly assigned to higher quality classrooms in grades k 3 as measured by classmates end of class test scores have higher earnings college attendance rates and other outcomes finally the effects of class quality fade out on test scores in later grades but gains in noncognitive measures persist

the determinants of human capital formation during the early years of life theory measurement and policies in this paper i discuss a research agenda on the study of human capital accumulation in the early years with a particular focus on developing countries i discuss several methodological issues from the use of structural models to the importance of measurement and the development of new measurement tools i present a conceptual framework that can be used to frame the study of human capital accumulation and view the current challenges and gaps in knowledge within such an organizing structure i provide an example of the use of such a framework to interpret the evidence on the impacts of an early years intervention based on randomized controlled trial

what predicts a successful life a life course model of well being policy makers who care about well being need a recursive model of how adult life satisfaction is predicted by childhood influences acting both directly and indirectly through adult circumstances we estimate such a model using the british cohort study 1970 we show that the most powerful childhood predictor of adult life satisfaction is the child s emotional health followed by the child s conduct the least powerful predictor is the child s intellectual development this may have implications for educational policy among adult circumstances family income accounts for only 0 5 of the variance of life satisfaction mental and physical health are much more important

the firm as a communication network this paper analyzes how organizations can minimize costs of processing and communicating information communication is costly because it takes time for an agent to absorb new information sent by others agents can reduce this time by specializing in the processing of particular types of information when these returns to specialization outweigh costs of communication it is efficient for several agents to collaborate within a firm it is shown that efficient networks involve centralization that individuals delegate tasks to subordinates only if they are overloaded and that the number of transits to the top tends to be equalized across individual information items

information learning and wage rates in low income rural areas in this essay we present evidence that employers in rural areas of developing countries have imperfect information with regard to the productivity of heterogeneous workers in addition to obtaining direct measures of the completeness of employer information we consider the implications of information asymmetries for the structure of casual labor markets we then evaluate the extent to which casual labor markets do in fact exhibit these attributes we find that 1 there is adverse selection out of the time rate labor market 2 employers discriminate statistically given two workers with different observed characteristics but the same actual productivity the worker from the group with the higher average productivity will have a higher wage 3 employers exhibit learning over time the extent of employer ignorance is negatively related to labor market exposure on the part of the workers and 4 calorie consumption affects productivity but is not rewarded in the time rate labor market in concluding we argue that an analysis of wage and employment patterns and the implications of these patterns for human capital investment in rural areas of developing countries that ignored the role of information problems could yield misleading conclusions

fertility at work children and women s labor market outcomes in urban ghana abstract while it is commonly assumed that fertility decreases female labor supply i show theoretically that fertility can increase female labor supply if returns to financial inputs in children are sufficiently high compared to returns to time investments using six rounds of a panel survey from urban ghana i find evidence of countervailing effects behind a net zero effect of young children on women s hours of work labor supply on the extensive margin drops but women who remain in the labor force increase their hours in response to a child women s labor supply particularly increases in response to a young child if there are older siblings or other adults in the household by contrast men s labor supply does not change in response to young children

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

two sides of the same coin u s residual inequality and the gender gap abstract we show that the narrowing gender gap and the growth in earnings inequality are consistent with a simple model in which skills are heterogeneous and the growth in skill prices has been particularly strong for skills with which women are well endowed empirical analysis of dot cps and nlsy79 data finds evidence to support this model a large increase in the prices of cognitive and people skills skills with which women are well endowed and a decline in the price of motor skills account for up to 40 percent of the rising inequality and 20 percent of the narrowing gender gap

on efficient distribution with private information this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers each of whom is subject to private idiosyncratic taste shocks we propose a recursive method for finding feasible allocations that are incentivecompatible and that are pareto optimal within this set the method is applied to several parametric examples we find that in an efficient allocation the degree of inequality continually increases with a diminishing fraction of the population receiving an increasing fraction of the resources we discuss the extent to which these allocations can be decentralized via market arrangements this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with private information the economy we study has a constant endowment flow of a single non storable consumption good which is to be allocated each period among a large number of consumers each period these consumers experience unpredictable idiosyncratic privately observed taste shocks affecting their marginal utility of current consumption efficiency dictates that more resources be allocated to those consumers who in any given period have a high marginal utility of current consumption

the payoff to skill in the third industrial revolution1 is the third industrial revolution indeed driven by rising payoffs to skill this simple but important question has gone unanswered because conventional models of earnings inequality are based on exceedingly weak measurements of skill by attaching occupational skill measurements to the 1979 2010 current population surveys it becomes possible to adjudicate competing accounts of the changing returns to cognitive creative technical and social skill the well known increase in between occupation inequality is fully explained when such skills are taken into account while returns to schooling prove to be quite stable once correlated changes in workplace skills are parsed out the most important trend however is a precipitous increase in the wage payoff to synthesis critical thinking and related analytic skills the payoff to technical and creative skills often touted in discussions of the third industrial revolution is shown to be less substantial

globalisation and the market for team mates the globalisation of firms is explored at theoretical and empirical levels the idea is that a global firm is a multi cultural team the existence of a global firm is somewhat puzzling combining workers who have different cultures legal systems and languages imposes costs on the firm that would not be present were all workers to conform to one standard in order to offset the costs of cross cultural dealing there must be complementarities between the workers that are sufficiently important to overcome the costs the search for the best practice is analysed and empirical support from an examination of trading patterns is provided

information aggregation in a prediction market for climate outcomes abstract two forms of uncertainty in climate policy are the wide range of estimated marginal costs and uncertainty over credibility of rival information sources we show how a recently proposed solution to the first problem also helps address the second the policy is an emissions tax tied to average temperatures coupled with permits that exempt the emitter from paying the tax in a future year it has been shown that the resulting tax path will be correlated with future marginal damages it has been conjectured that the permit prices will yield unbiased forecasts of the climate which if true would address the second uncertainty we confirm the conjecture by describing a trading mechanism that converges on unbiased forecasts if traders are risk neutral risk aversion slows down but does not prevent convergence we also show that the forecasts are more likely to be sufficient statistics the stronger the consensus on climate science

growth in women s relative wages and in inequality among men one phenomenon or two although increased wage inequality among men during the past three decades has received more attention the growth in women s wages has been equally remarkable in fact by one measure of inequality the ninth decile median ratio the proportional growth in inequality has moved in exact proportion with the female male wage ratio it is suggested that both result from expansion in the value of brains relative to brawn there is no way of knowing the full story of growth in women s relative wages and it is important not to dismiss the import of changing career patterns as is evident in the panel data increasing labor market participation must be important so too are the implications that follow the movement of women from the home to the job

competitive search equilibrium with multidimensional heterogeneity and two sided ex ante investments abstract we analyze a competitive price taking search model where workers and firms make costly investments e g in education and physical capital respectively before they enter the labor market the environment features transferable utility and symmetric information a key novelty with respect to existing work is that we allow for multidimensional heterogeneity on both sides of the market the probabilities of finding and filling different jobs and the corresponding wages are determined endogenously in equilibrium we show that constrained efficient allocations can be determined as optimal solutions to a linear programming problem whereas the prices supporting these allocations and the associated expected payoffs for workers and firms correspond to the solutions of the dual of that linear program we use this characterization to show that an equilibrium exists and is constrained efficient under very general conditions the fact that linear programming techniques are used for the structural estimation of frictionless matching models suggests that our framework is potentially useful for empirical studies of labor markets and other markets where search frictions are prevalent

bayesian learning growth and pollution abstract environmental problems such as climate change have great uncertainties current expectations are that uncertainties about climate change will be resolved quickly we examine this hypothesis theoretically and computationally we consider bayesian learning about the relationship between greenhouse gas levels and global mean temperature changes a key uncertainty learning is non trivial because of a stochastic shock to the realized temperature we find theoretically the expected learning time which is related to the variance of the shock and the emissions policy implying a tradeoff between the benefits of controlling emissions and information we imbed the learning model into an optimal growth model with a climate sector and solve the resulting dynamic program we find computationally that learning takes on average over 90 yr far longer than currently believed

changes in college skills and the rise in the college wage premium the college wage premium for new labor market entrants rose sharply during the 1980s we ask how much of this change arose from changes in the skill level of the typical college graduate we find that skills attained prior to college as measured by standardized test scores and high school grades had no effect on the change in the college wage premium for men in contrast the returns to math ability rose considerably for women failing to account for math skills thus substantially overstates the growth in the female college wage premium skills acquired in college as reflected in the distribution of students across majors had important effects on the relative wages of men the trend away from low skill subjects such as education and toward high skill subjects such as engineering accounts for one fourth of the rise in the male college wage premium

the rising college premium in the eighties return to college or return to unobserved ability the changes in the distribution of earnings during the 1980s have been studied extensively the two most striking characteristics of the decade are a a large increase in the college high school wage gap and b a substantial rise in the variance of wage residuals while this second phenomenon is typically implicitly attributed to an increase in the demand for unobserved skill most work in this area fails to acknowledge that this same increase in demand for unobserved skill could drive the evolution of the measured college premium in its simplest form if higher ability individuals are more likely to attend college then the increase in the college wage premium may be due to a increase in the relative demand for high ability workers rather than an increase in the demand for skills accumulated in college this paper develops and estimates a dynamic programming selection model in order to investigate the plausibility of this explanation the results are highly suggestive that an increase in the demand for unobserved ability could play a major role in the growing college premium the changes in the distribution of earnings during the 1980s have been studied extensively the two most striking characteristics of the decade are a a large increase in the college high school wage gap and b a substantial rise in the variance of wage residuals while this second phenomenon is typically implicitly attributed to an increase in the demand for unobserved skill most work in this area fails to acknowledge that this same increase in demand for unobserved skill could drive the evolution of the measured college premium in its simplest form if higher ability individuals are more likely to attend college then the increase in the college wage premium may be due to an increase in the relative demand for high ability workers rather than an increase in the demand for skills accumulated in college this paper develops and estimates a dynamic programming selection model in order to investigate the plausibility of this explanation the results are highly suggestive that an increase in the demand for unobserved ability could play a major role in the growing college premium there are at least two reasons to be interested in this topic first for policy makers intent on helping the american workforce adjust to the changing wage structure this distinction is crucial if the value added of attending college truly rises they may consider policies aimed at subsidizing the skills learned in college however if it results from an increase in the payoff to other types of skills then policies focused on skill acquisition earlier in life would be more appropriate second it will also aid in understanding the

the declining fortunes of the young since 2000 abstract we document that successive cohorts of college and post college degree graduates experienced an increase in the probability of obtaining cognitive jobs both at the start of their careers and with time in the labor market in the 1990s however this pattern reversed for cohorts entering after 2000 profiles of the proportion of a cohort in cognitive occupations since school completion fall and become flatter with successive cohorts since cohort wage profiles display a similar pattern these findings appear to fit with a strong increase in demand for cognitive tasks in the 1990s followed by a decline in the 2000s

returns to talent and the finance wage premium to study the role of talent in finance workers pay we exploit a special feature of the french higher education system wage returns to talent have been significantly higher and have risen faster since the 1980s in finance than in other sectors both wage returns to project size and the elasticity of project size to talent are also higher in this industry last the share of performance pay varies more for talent in finance these findings are supportive of finance wages reflecting the competitive assignment of talent in an industry that exhibits a high complementarity between talent and scale received october 11 2017 editorial decision september 4 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

a note on some limitations of crra utility abstract in a standard environment for choice under uncertainty with constant relative risk aversion crra the existence of expected utility is fragile with respect to changes in the distributions of random variables changes in prior information or the assumption of rational expectations

the growing importance of social skills in the labor market the labor market increasingly rewards social skills between 1980 and 2012 jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the u s labor force math intensive but less social jobs including many stem occupations shrank by 3 3 percentage points over the same period employment and wage growth were particularly strong for jobs requiring high levels of both math skill and social skills to understand these patterns i develop a model of team production where workers trade tasks to exploit their comparative advantage in the model social skills reduce coordination costs allowing workers to specialize and work together more efficiently the model generates predictions about sorting and the relative returns to skill across occupations which i investigate using data from the nlsy79 and the nlsy97 using a comparable set of skill measures and covariates across survey waves i find that the labor market return to social skills was much greater in the 2000s than in the mid 1980s and 1990s

time preference noncognitive skills and well being across the life course do noncognitive skills encourage healthy behavior a number of prominent diseases are influenced by health behaviors for example it is well known that the decision to smoke comes with considerable risks of developing smoking related ailments such as lung cancer emphysema and heart disease obesity is another health condition that can be costly it is associated with increased risk for diseases such as coronary heart disease and diabetes centers for disease control 2009 nationally it is estimated that about one third of the u s population is obese and estimates suggest that obesity costs society anywhere from 27 to 47 billion in health care expenditures annually centers for disease control 2009 national center for health statistics 2008 research suggests that changing individuals diets and getting them to exercise would help to reduce the prevalence of obesity in society melayne mcinnes and judith shinogle 2009 smoking and obesity provide just two examples of cases in which the nation s burden of disease is influence by behaviors that its citizens engage in because the united states spends a large share of gdp on health care each year understanding the determinants of health behaviors is important as it may allow scholars to identify ways to reduce these costs this paper examines the relationship between individuals health behaviors and the non cognitive skills that individuals possess in the past decade the economics discipline has seen a burst of interest in human capabilities that contribute to labor market productivity beyond the usual foci of attention levels of education and learning by doing the collection of personality traits soft skills incentive enhancing preferences and socio emotional factors that economists are now studying has been loosely grouped together under the heading non cognitive skills 1 while the term may be something of a misnomer because many of the worker attributes that the authors writing in this subfield are interested in require reasoning or cognition the skills of interest have been found to be important determinants of labor market success james heckman jora stixrud and sergio urzua 2006 samuel bowles herbert gintis and melissa osborne 2001 2james heckman 2007 has stated that these socio emotional attributes as non cognitive skills are sometimes called are also likely to affect health behaviors this paper tests this hypothesis it provides a theoretical and an empirical analysis of the connection between socio emotional attributes and the choices that individuals make about health it uses data from a large nationally representative dataset to analyze the relationships

the climate change learning curve abstract the purpose of this paper is to confront economic models of climate change with the reality that limited information exists with which to form expectations about the evolution of the climate a key element in the tension between those who believe we should impose aggressive climate change mitigation policies and those who do not is the question of if we are merely in a long period of shock induced above average temperatures or if observed increases in temperature are a result of carbon emissions this paper characterizes learning dynamics resulting from the use of observations of temperature to update beliefs about two key characteristics of global climate the persistence of natural trends and the sensitivity of temperature to atmospheric carbon levels this paper shows that contrary to predictions in the literature that uncertainty may be resolved very quickly the time to learn the true processes may be in the order of thousands of years further this paper shows the effects of uncertainty on the likelihood that observations from the statistical record lead to important estimate and policy errors

bargaining sorting and the gender wage gap quantifying the impact of firms on the relative pay of women there is growing evidence that rm specic pay premiums are an important source of wage inequality these premiums will contribute to the gender wage gap if women are less likely to work at high paying rms or if women negotiate worse wage bargains with their employers than men using longitudinal data on the hourly wages of portuguese workers matched with balance sheet information for rms we show that the wages of both men and women contain rm specic premiums that are strongly correlated with employer productivity we then show how the impact of these rm specic pay dierentials on the gender wage gap can be decomposed into a combination of bargaining and sorting eects consistent with the bargaining literature we nd that women receive only 90 of the rm specic pay premiums earned by men notably we obtain very similar estimates of the relative bargaining power ratio from our analysis of between rm wage premiums and from analyzing changes in

the education health gradient in this paper we determine the role played by early cognitive noncognitive and health endowments we identify the causal effect of education on health and health related behaviors we develop an empirical model of schooling choice and post schooling outcomes where both schooling and the outcomes determined in part by schooling are influenced by measured early family environments and latent capabilities cognitive noncognitive and health we show that family background characteristics and cognitive noncognitive and health endowments developed by age 10 are important determinants of labor market and health disparities at age 30 not properly accounting for personality traits overestimates the importance of cognitive ability in determining adult health selection on factors determined early in life explains more than half of the observed difference by education in poor health depression and obesity education has an important causal effect in explaining differences in many adult outcomes and healthy behaviors we uncover significant gender differences we go beyond the current literature which typically estimates mean effects to compute distributions of treatment effects we show how the health returns to education can vary among individuals who are similar with respect to their observed characteristics and how a mean effect can hide gains and losses for different individuals our research highlights the important role played by the early years in producing health

the evolution of wage gaps between stem and non stem graduates in a technological following economy based on the assumption that the set of skills characterizing different fields of study do not match the new technologies in the same way we focus on the evolution of wage gaps between university

the division of labor coordination costs and knowledge this paper considers specialization and the division of labor a more extensive division of labor raises productivity because returns to the time spent on tasks are usually greater to workers who concentrate on a narrower range of skills the traditional discussion of the division of labor emphasizes the limitations to specialization imposed by the extent of the market we claim that the degree of specialization is more often determined by other considerations especially emphasized are various costs of coordinating specialized workers who perform complementary tasks and the amount of general knowledge available