AEA Weekly Digest

This paper shows that the wage assimilation of immigrants is the result of the intricate interplay between individual skill accumulation and dynamic labor market equilibrium effects. When immigrants and natives are imperfect substitutes, rising immigrant inflows widen the wage gap between them. Using a production function framework in which workers supply both general and host-country-specific skills, we show that this labor market competition channel explains about one-fifth of the large increase in the average immigrant–native wage gap across arrival cohorts in the United States since the 1960s. The results further reveal substantial heterogeneity across different groups of immigrants.

Using linked employer-employee data from Brazil, we document a significant gender pay gap, which is largely attributed to women working at lower-paying employers. To interpret this fact, we develop an equilibrium search model with endogenous firm pay, amenities, and hiring. We provide a constructive proof of identification of all model parameters. The estimated model suggests that amenities are important for both men and women, and that compensating differentials account for half of the gender pay gap. Equal treatment policies partly close gender gaps but are not output- or welfare-improving.

We use Danish administrative data to examine the effects of parental death on labor market outcomes. Leveraging the timing of sudden, first parental deaths and a matched-control difference-in-differences strategy, we find that men's earnings decline by 2 percent, while women's earnings decline by 3 percent following a parental death. Both women and men experience mental health deterioration, leading to increased use of psychological assistance and prescriptions for mental health conditions and opioids. Women with young children experience a comparatively larger earnings decline (around 4 percent) likely due to the loss of informal childcare.

The influence of on-the-job training and supervisors, especially in high-stakes settings like policing, is poorly understood. Examining a central behavior in the debate surrounding police reform, we investigate the impact of a field training officer (FTO) on a recruit's use of force. Leveraging a setting with conditional as-good-as-random assignment, we demonstrate a causal link between FTO and recruit use of force. A 1 standard deviation increase in FTO force propensity leads to a 14 to 18 percent rise in recruit force, persisting for at least two years. This underscores field training's impact and reveals a promising avenue for reform.

We compare physician incomes using tax data from the United States, Canada, Sweden, and the Netherlands. Physicians are concentrated in the top percentiles of the income distribution in all four countries, especially in the United States and certain specialties. Physician incomes are highest in the United States, and a decomposition shows that this mainly reflects differences in overall income distributions, rather than physicians' locations in those distributions. This suggests that broader labor market differences, and thus physicians' outside options, drive absolute incomes. Shifting US physicians' incomes to match relative positions in other countries' distributions would only marginally reduce health care spending.

We document employment preferences of workers at the margin of informality using open-ended questions and discrete choice experiments in Brazil's largest favela complex. Stated preferences emphasize pay and tangible job attributes rather than meaning or purpose. Stated complaints center on management, customers, and inflexible schedules. Workers exhibit high willingness to pay for unemployment insurance, parental leave, and learning opportunities, but none for termination notice or shorter commutes. We find larger willingness to accept to forgo amenities than willingness to pay to obtain them, consistent with preference-based sorting or endowment effects.

Do exclusionary norms unravel as outsiders become insiders? Using a randomized trial in Burundian labor markets generating exogenous skill acquisition, we find incumbent insiders' attitudes remain largely stable while newly skilled workers rapidly adopt exclusionary beliefs resembling incumbents. New insiders become substantially less likely to view skilled workers as responsible for teaching or actively excluding outsiders, instead blaming the unskilled themselves. We interpret these shifts as motivated belief formation to reconcile one's current status with their past, suggesting that group expansion may reinforce rather than erode exclusionary norms.

Previous experimental research had shown that financial incentives to training providers could improve skill acquisition and earnings outcomes for trainees in an apprenticeship program in Ghana. However, it is unclear if these short-run impacts persist or fade away. In this paper, we conduct a seven-year follow-up and find that individuals who trained with incentivized trainers continue to earn more than their counterparts in the longer run. We use causal mediation analysis to explore potential mechanisms underlying the persistence result and conclude that further research will be needed to better understand the factors driving this result.

Over the last two decades, the number of higher education institutions in low- and middle-income countries has grown rapidly. In this paper we study how the opening of a university affects employment and education outcomes in small cities across Uganda. We find that the first opening of a college or university leads to shifts in employment away from agriculture and toward services. We also find improvements in secondary school completion and literacy among local youth. These patterns suggest that expanding the higher education sector acts as a form of place-based investment that has short-term benefits for nearby communities.

Organizations are often viewed as information processors, and an efficient, robust information architecture can be a source of competitive advantage. However, measuring the content and flow of information is challenging. We describe three metrics for capturing aspects of these products and processes, analyzing intraorganizational email data from the perspectives of production, consumption, and pure novelty. We then leverage a field experiment to determine how the structure of work—specifically, hybrid work arrangements—affects these metrics, finding that workers who split their time between home and the office may be particularly effective at transmitting information their audiences find useful and new.

Women are underrepresented in highly paid "greedy jobs" (Goldin 2014). Could flexibility over where to work narrow this gender gap? Our evidence suggests yes. Using hypothetical choice data from Maestas et al. (2023a), we show that women view work from home (WFH) as more complementary with long hours than men do. The gender difference in WFH preferences is driven by people working over 40 hours per week. In these long-hour jobs, women are willing to forgo 15.9 percent of their pay for WFH, compared to 2.4 percent for men. Women also choose longer hours when they can WFH.

We establish three facts about work from home (WFH) in the United States. First, employees WFH more often at younger firms—almost twice as often at firms founded after 2015 than before 1990. Second, employees working under younger CEOs have higher levels of WFH. The average WFH rate is 1.4 days per week when the CEO is under 30, compared to 1.1 days when the CEO is 60 or older. Third, self-employed workers WFH more than twice as often as wage and salary employees. These facts highlight the importance of organizational and managerial practices for the prevalence of WFH.

Using the Gallup Workplace Panel, a nationally representative longitudinal survey of full-time US workers from 2019 to 2025, this paper measures gross flows across on-site, hybrid, and fully remote work arrangements. Estimated transition matrices show high persistence in all modes, with hybrid work comparatively more transitory and remote work not absorbing. Decomposing transitions by job changes versus job staying indicates that re-sorting across employers amplifies movement across arrangements, while within-employer adjustments remain substantial. These moments provide calibration targets for amenity-based search-and-matching models.

Multiple studies document a local bias of entrepreneurship (LBE) in recent decades, where self-employed entrepreneurs are systematically more likely than wage workers to operate in their region of birth. This paper documents an important new fact: The LBE has been declining in the United States since 1970. The LBE is still present for white men engaged in self-employment, but it no longer exists for the overall US-born workforce. We connect that decline to the transformation of self-employment away from high startup capital sectors and the reduced opportunity for local self-employed entrepreneurs to achieve high incomes compared to wage work.

This paper uses microdata on US mutual fund and ETF portfolios from SEC Form N-PORT to study American investment in Chinese Renminbi (RMB)–denominated bonds. We show that, even as total foreign holdings of Chinese bonds rebounded in 2024, US holdings of RMB bonds fell sharply and that most of this decline reflects funds exiting RMB positions entirely. These patterns point to a shift in the composition of China's foreign investor base away from US institutional investors and illustrate how publicly available microdata can inform work on the geopolitics of international currency use.

We discuss the conditions under which global imbalances, such as China being a large foreign creditor and the United States being a large foreign debtor, might also generate power imbalances. We highlight possible theoretical channels and empirical measures that the future literature could investigate in a full treatment of this topic.

After registering a 3 percent annual rate from 1948 to 2010, the growth of labor productivity in US manufacturing since 2010 has come to a cold stop, with a zero 2010–2025 annual growth rate. What caused the disappearance of productivity growth in the core of the US economy? We point to the channels by which an invasion of imports, led by China in the 2000–2010 decade, eroded the competitiveness of US producers. Imports competed away sales, closed plants, cut capacity utilization, slashed profits and investment, postponed installation of modern technology, and diverted resources from R&D and innovation.

I study how firm market power and worker bargaining power shape wages and welfare. Using French micro-data, I document patterns linking wages and firm market power that existing models cannot explain. A model in which firms produce vertically differentiated goods and share profits with workers explains those patterns. The model (a) reveals new challenges in estimating monopsony and bargaining power, proposing an alternative approach; (b) shows that the passthrough of firm-specific shocks to wages depends on the type of shock; (c) explains how markups shape firm wage premia; and (d) formalizes how strengthening worker bargaining power affects wages and welfare.

Policy choices often create trade-offs between workers and consumers. I examine how foreign competition alters the consumer welfare and domestic employment effects of mergers. I construct a model incorporating consumer demand, endogenous product portfolios, and employment decisions. Applying the model to Whirlpool's acquisition of Maytag in the appliance industry, I compare the observed merger to a counterfactual acquisition by a foreign buyer. Although Whirlpool's acquisition decreased consumer welfare by $271 million annually, it preserved 797 domestic jobs. These jobs must therefore be valued at more than $345,000 per year for the domestic employment benefits to offset the consumer harm.

We introduce dynamic incentive contracts into a model of unemployment fluctuations. Our main result is that wage cyclicality from incentives does not affect the response of unemployment to productivity shocks. The response of unemployment is the same, to a first-order, in two economies: one with flexible incentive pay, and another with exogenously fixed wages. This equivalence is due to movements in effort. Under the optimal incentive contract, firms' profits do not change when wages fall, because the effort of the worker falls too.

We estimate the impact of unionization on the wage distribution of Canadian university faculty using longitudinal administrative data on salaries and exploiting the staggered rollout of unionization across institutions. We find that unionization compressed salaries: wages at the bottom of the unconditional distribution increased by roughly 10 percent while wages at the top were unaffected. Our evidence suggests that these distributional impacts were driven by the introduction of contractual salary floors. We also estimate little impact of unionization on faculty employment. Instead, our results suggest that the increase in universities' wage bills was financed by an increase in student enrollment.

There has been a dramatic rise in disability employment since the pandemic. At the same time, work from home (WFH) has risen four-fold. This paper asks whether the two are causally related. Controlling for compositional changes and labor market tightness, a 1 percentage point increase in WFH increases full-time employment by 1.0% for individuals with a physical disability. The postpandemic increase in working from home explains 68%-85% of the rise in full-time employment. Wage data suggests that WFH increased the supply of workers with a physical disability, likely by reducing commuting costs and enabling better control of working conditions.

We provide new evidence of forward-looking labor supply responses to changes in pension wealth. We exploit a 2014 German reform that increased pension wealth for mothers by an average of 4.4% per child born before January 1, 1992. Using administrative data on the universe of working histories, we implement a difference-in-differences design comparing women who had their first child before versus after January 1, 1992. We document significant reductions in labor earnings, driven by intensive margin responses. Our estimates imply that, on average, an extra euro of pension wealth reduces unconditional labor earnings by 54 cents.

We analyze mandatory retirement in Sweden which eliminates entirely employment protection at age 67. Employment falls by about 10 percent and total average earnings by about 20 percent immediately at age 67. 8 percent of jobs separate immediately due to loss of protection, with effects stemming from jobs with stronger initial employment protection (long tenure, firms subject to "last in, first out" rules), and those in the public sector. We examine effects on continuing jobs. While wages appear rigid, we uncover novel, sizable intensive-margin hours reductions, resulting in an 8 percent drop in earnings conditional on staying on the job.

U.S. firms hiring foreign workers in low-skill nonfarm jobs face a binding quota on the 'H-2B' visa, allocated in part through a randomized lottery. We evaluate the quota's marginal impact using the lottery, a novel firm survey, and a pre-analysis plan. Firms exogenously employing more H-2B workers in low-skill jobs increase production (elasticity 0.20–0.22), investment (1.5–2.1), and profits (0.15). The elasticity of substitution between H-2B and U.S. workers is very low (0.8–2.2). Thus the effect on U.S. employment is zero or positive overall, and positive in rural areas. Forensic analysis suggests similarly low substitutability of black-market labor.

This paper provides new causal evidence on the effects of grade retention on educational attainment, behavioral outcomes, and labor market performance by analyzing Texas's reading test-based retention policy. Using a fuzzy regression discontinuity design, I find that thirdgrade retention significantly reduces annual earnings at age 26 by $3,477 (19%). While temporarily improving test scores, retention increases absenteeism, violent behavior, and juvenile crime, and reduces the likelihood of high school graduation. Moreover, retained students exhibit higher community college enrollment but lower public university attendance, though neither estimate is statistically significant.

We evaluate a nationwide zero-cost intervention to reduce teacher sorting, where lower-income students are more likely to attend understaffed schools with less qualified teachers. Our approach was grounded in an insight from behavioral economics known as order effects. In the treatment arm, the teacher job application platform showed hard-to-staff schools first, while in the control group, schools were displayed alphabetically. Treated teachers were more likely to apply to hard-to-staff schools, ranking them their highest priority. Inattentive or less-qualified teachers did not influence the results. The intervention helped to reduce the unequal distribution of qualified teachers across schools.

Each year, about a thousand public schools in the US close, displacing hundreds of thousands of students. I examine the impact of public school closures on displaced students using linked schooling and labor market data from Texas. Using within-school across-time/cohort variation in exposure to school closures, I implement difference-in-differences strategies to identify causal effects. I find that school closures decrease test scores, increase absenteeism, and lead to more disciplinary actions. Furthermore, school closures decrease high school completion, college attainment, employment, and earnings at ages 25–27. These impacts are larger for secondary school students and those from economically disadvantaged backgrounds.

Minority workers tend to be disproportionately harmed by negative economic shocks. Indeed, we show that Hispanic populations experienced worse employment losses due to import competition from China, relative to whites, largely due to lower education levels. In contrast, Black-white employment and wage gaps actually narrowed due to relative growth in non-manufacturing sectors. We show that Black workers were less attached to manufacturing by 2000, compared to whites, and were therefore more poised to take advantage of China shock induced reallocation to services. The lasting negative impacts of the China shock on exposed communities were primarily driven by white workers.

We investigate whether removing a previously-obtained criminal record improves employment outcomes. We estimate the causal impact of criminal record remediation laws that have been widely enacted with the goal of improving employment opportunities for millions of individuals with records. We find consistent evidence that removing an existing record does not improve labor market outcomes, on average. A notable exception is participation in gig work through online platforms, which often screen workers based on their records but not their employment histories. The evidence is consistent with records initially scarring labor market trajectories in a way that is difficult to undo later.

This paper assesses the effects of corporate tax cuts on small firms and their workers. Following a reform in Quebec, Canada, firms receiving tax cuts expand and their workers' earnings increase compared to workers and firms without tax cuts. We estimate that overall workers bear 35 percent of the tax burden, with larger incidence falling on those with ownership in the companies they work through increased profits. Additionally, workers across each tercile of the within-firm earnings distribution benefit from tax cuts, possibly because fair-wage concerns matter when after-tax profits rise due to close interactions among workers in small corporate environments.

China's CO2 emissions trading system, the world's largest, aims to significantly reduce CO2 emissions. The system is a tradable performance standard (TPS), differing from cap and trade (C&T). We provide a dynamic general equilibrium assessment that uniquely considers institutional and fiscal features of China that affect policy costs and distributional impacts. Key findings: the TPS's environmental benefits exceed its costs by a factor of five or more. Interactions with the fiscal system reduce or eliminate the TPS's cost disadvantage relative to C&T. Introducing auctioning as a complementary source of allowance supply can reduce costs by 30%.

Unofficial non-tariff barriers were responsible for 50% of the reduction in Chinese imports from the U.S. during the 2018-2019 trade war. We infer NTBs from the change in imports of U.S. products relative to imports from other countries of the same HS6 product, after controlling for the change in the relative price of U.S. imports. NTBs were imposed on a small number of agricultural products, did not apply to state-owned importers, and larger for products with a high share of state importers. NTBs are more costly compared to tariffs because they only apply to some importers do not generate revenues.

Black workers experience higher, more volatile unemployment than white workers, a racial disparity unexplained by observables. A New Keynesian model with a frictional labor market, endogenous separations, and employer discrimination explains these outcomes. We use the model to assess how alternative monetary policy strategies affect labor market outcomes by race. Switching to a monetary policy rule where interest rates respond to shortfalls of employment from its maximum level instead of deviations raises inflation and does not reduce the racial unemployment gap. A monetary policy rule where interest rates respond to the racial unemployment gap also fails to reduce the gap.

We present a model in which efficient long-term employment relationships are sustained by wage adjustments prompted by productivity shocks and outside job offers. These wage adjustments occur only sporadically, due to the presence of renegotiation costs. The model is amenable to analytical solution, yielding new insights for several labor market phenomena, including: (1) key features of empirical distributions of changes in pay among job stayers; (2) a near-"memorylessness" property in wage dynamics whereby hiring wages have only limited influence on later wages and allocation decisions; and (3) a crucial role for recruitment and retention bonuses in sustaining efficient employment relationships.

This paper studies entrepreneurship and firm creation through the lens of serial entrepreneurs – entrepreneurs who establish more than one firm. Using data covering the universe of Chinese firms, we document key facts about serial and non-serial entrepreneurs and develop a theory rationalizing how their behavior is shaped by ability, endowments, and capital market frictions. Serial entrepreneurs have higher average productivity and lower return on capital than non-serial entrepreneurs. However, this premium conceals significant heterogeneity, with a majority of serial entrepreneurs underperforming relative to non-serial entrepreneurs. We link these differences to capital market frictions favoring some, but not all, entrepreneurs.

Employment protections often create two-tiered labor markets with substantial differences in job security. I estimate the effects of removing these protections using a quantitative life-cycle model, where younger workers are more likely to select into precarious jobs. Workers accumulate human capital when employed and face the possibility of human capital losses in unemployment. Because workers with greater job security experience fewer unemployment spells, they tend to accumulate more human capital over their careers. I show that reducing employment protections boosts younger workers' job-finding rates but lowers human capital, GDP, and employment. The impacts of these policies differ significantly by age.

Using county-level and ZIP-code-level data from the United States during 1998–2018, we document: (1) increased flood risk has a large negative impact on firm entry, employment, and output in the long run; and (2) flood events reduce output in the short run while their impact on firm entry and employment is limited. We then develop a quantitative spatial model to characterize how flood risk shapes firms' location choices and workers' employment. We find that flood risk reduced U.S. aggregate output by 0.53% in 2018, 23% of which stemmed from direct damages and 77% from long-run adjustments of firms and workers.

A society reserves certain jobs for members of a politically dominant social group to maximize the wages of workers in that group. Through an appropriate choice of reserved jobs, the dominant group chooses both the size of the set of reserved jobs and the elasticity of substitution between reserved and unreserved jobs. Optimal discrimination endogenously creates categories of "good" and "bad" jobs and assigns workers from different social groups into these different categories. The relative scarcity of labor determines whether discrimination or free labor markets are optimal. I apply the model to apartheid South Africa and other discriminatory societies.