This paper investigates the role played by informational frictions in college and the workplace. We estimate a dynamic structural model of schooling and work decisions, where individuals have imperfect information about their schooling ability and labor market productivity. We take into account the heterogeneity in schooling investments by distinguishing between two- and four-year colleges, graduate school, as well as science and non-science majors for four-year colleges. Individuals may also choose whether to work full-time, part-time, or not at all. A key feature of our approach is to account for correlated learning through college grades and wages, whereby individuals may leave or re-enter college as a result of the arrival of new information on their ability and productivity. Our findings indicate that the elimination of informational frictions would increase the college graduation rate by 9 percentage points, and would increase the college wage premium by 32.7 percentage points through increased sorting on ability.
I examine the extent to which the returns to college majors are influenced by selective migration and occupational choice across locations in the US. To quantify the role of selection, I develop and estimate an extended Roy model of migration, occupational choice, and earnings where, upon completing their education, individuals choose a location in which to live and an occupation in which to work. In order to estimate this high-dimensional choice model, I make use of machine learning methods that allow for model selection and estimation simultaneously in a non-parametric setting. I find that OLS estimates of the returns to business and STEM majors relative to education majors are upward biased by 15% on average and by as much as 30%. Using estimates of the model, I characterize the migration behavior of different college majors and find that migration flows are twice as sensitive to occupational concentration as they are to wage returns. This finding has important implications for local governments seeking to attract or retain skilled workers.
I examine mechanisms that differentially influence migration behavior in response to labor market shocks between employed and unemployed workers in the US. Over the period of the Great Recession, overall migration rates in the US remained close to their respective long-term trends. However, migration evolved differently by employment status with unemployed workers being more likely to migrate during the recession and employed workers less likely. I estimate a dynamic non-stationary search model of migration, focusing on the role of employment frictions, earnings, and amenities on migration decisions. My results show that employed workers are faced with a large job queuing penalty when moving locations, which results in differing migration incentives for the two groups when faced with adverse labor market shocks. I also find that migration rates were muted because of the national scope of the Great Recession. I show that moving subsidies aimed at mitigating local unemployment are greatly hindered by workers' preferences for amenities.
The U.S. Immigration Act of 1990 increased the in-flow and stock of foreign STEM workers, potentially altering the desirability of STEM degree fields and occupations for natives. We examine effects of the Act utilizing spatial and temporal variation in natives’ exposure to foreign STEM with a novel identification strategy focused on age-18 cohorts immediately before and after the policy change. We find that the Immigration Act changed natives’ skill investment and utilization by pushing black males out of STEM majors, pushing white male STEM graduates out of STEM occupations, and pushing white female STEM graduates out of the workforce.
This paper investigates the wage returns to schooling and early work experiences and how these returns have changed across several recent cohorts of men. Much has been written about the growing importance of the wage returns to additional years of schooling and degree attainment. Most of these studies give little attention to the returns to the types and actual amounts of work experience young adults acquire and their influence on wages. This paper examines the returns to both school and work for men from three birth cohorts, using longitudinal data from the 1979 and 1997 panels of the National Longitudinal Survey of Youth. We develop and estimate a dynamic model of the schooling and work choices these men make in early adulthood and how they affect wage growth. We find that (i) ignoring the selectivity of accumulated work experiences results in sizable overstatements of the wage returns to schooling or degree attainment; (ii) with few exceptions, the returns to schooling and work experiences have trended downward over time; and (iii) decomposing the changes in the returns to skill reveals a downward trend in the level of unobserved ability of workers who acquire in-school work experience or who obtain formal educational degrees.
Works in Progress
Understanding Migration Aversion Using Elicited Expectations and Counterfactuals
Migration within the United States has been declining for decades across all demographic subgroups, despite overwhelming evidence of benefits to moving out of a location that is in economic or population decline. At the same time, existing studies find substantial monetary and psychic costs to moving. To better understand the the determinants of individuals’ migration aversion, I analyze data that elicits preferences for one’s current location and probabilities of moving to another location under a set of counterfactual scenarios. These scenarios include employment prospects, social interactions, and financial considerations. I find that the loss of one’s own job or spouse’s job negatively impacts migration beliefs by 10 percentage points. On the other hand, receiving a similar or much better job in a new location positively impacts migration beliefs by 20 percentage points. Equally important to migration beliefs are the ability to move with one’s social network, and having the financial costs of the move paid for. These results point to the joint importance of job lock, social interactions, and monetary costs in explaining migration aversion. The findings are especially informative to policy that seeks to induce migration out of declining areas.
How Substitutable are Native- and Foreign-born Workers? Wage Effects from STEM In-flow with John V. Winters.
We study heterogeneity in the effect of immigrant labor supply on native wages in the United States using quasi-experimental variation induced by the Immigration Act of 1990. The Act quickly and substantially increased the number of immigrant workers in STEM occupations. Using CPS data, we find short-run policy effects of reduced wages for more substitutable workers but increased wages for more complementary workers. We analyze long-term effects of the policy using administrative earnings data and find smaller long-run effects.
Are There Benefits to Participating in High School Athletics? with Michael R Ransom.
We examine the extent to which participation in high school athletics has positive effects on future education and labor market outcomes. Due to the scarcity of plausible instruments for athletics participation, we use recently developed methods that relate selection on observables with selection on unobservables to bound the educational and labor market effects of high school athletics participation. Using three separate nationally representative longitudinal datasets that link high school athletics participation with higher education and the labor market, we find little evidence of any individual economic benefit to athletes: once accounting for selection, high school athletes are no more likely to attend college, earn higher wages, or participate in the labor force.