Labor Studies

April 2, 2010
David Card, Organizer

Catherine Weinberger, University of California, Santa Barbara
The Increasing Complementarity between Cognitive and Social Skills

Weinberger points out that in two cohorts of male high school seniors, data linking early skill endowments to later outcomes suggests increasing complementarity between cognitive and social skills. In fact, the well-documented growth in the demand for cognitive skills during the 1980s and 1990s only affected those individuals with strong endowments of both social and cognitive skills. She corroborates her findings using Census and CPS data matched with DOT job task measures. Earnings premiums to occupations requiring high levels of both cognitive and social skill grew substantially through the 1980s and 1990s relative to occupations requiring only one or neither type of skill, and this emerging feature of the labor market has persisted into the new decade.

Michael F. Lovenheim, Cornell University, and Kevin J. Mumford, Purdue University
Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust

Lovenheim and Mumford investigate how changes in housing wealth affect fertility,using the wealth variation supplied by the recent housing boom and bust to generate exogenous variation in household wealth. They first conduct a state-level aggregate analysis to investigate how the birth rate is related to housing prices, using differences in the timing and size of the housing market boom and bust across various states over time. Then they conduct an analysis using restricted-use data from the Panel Study of Income Dynamics (PSID) that allows them to track how women's fertility behavior is related to individual-level housing price growth. The demographic and geographic controls in the PSID allow them to control for any confounding effects driven by household selection across different cities or neighborhoods. They find that for homeowners, a $10,000 increase in real housing wealth causes a 0.07 percent increase in fertility. They find little effects of MSA-level housing price growth on the fertility of renters, which supports their identification strategy. That increases in housing wealth are strongly associated with increases in fertility is consistent with some recent work showing a positive income effect on births. These estimates suggest that the large recent variation in the housing market could have sizeable demographic effects that are driven by the positive effect of housing wealth on fertility.

Alexander M. Gelber, University of Pennsylvania and NBER, and Joshua W. Mitchell, Harvard University
Taxes and Time Allocation: Evidence from Single Women (NBER Working Paper No. 15583)

Hundreds of papers have investigated how incentives and policies affect hours worked in the market. Gelber and Mitchell examine how income taxes affect time allocation in the other two-thirds of the day. Using the Panel Study of Income Dynamics from 1975 to 2004, they analyze the response of single women's housework, labor supply, and other time to variation in tax and transfer schedules across income levels, number of children, states, and time. They find that when the economic reward to participating in the labor force increases, market work increases and housework decreases. The decrease in housework accounts for approximately two-thirds of the increase in market work. Analysis of repeated cross-sections of time diary data from 1975 to 2004 shows that changes in "home production" account for at least half of the increase in market hours of work in response to policy changes. Data from the Consumer Expenditure Survey from 1980 to 2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to a greater incentive to join the labor force. The baseline estimates imply that the elasticity of substitution between consumption of home and market goods is 2.43.

Rucker C. Johnson, University of California, Berkeley
Long-Run Impact of School Desegregation and School Quality on Adult Health

Johnson investigates the extent and ways in which school quality during childhood causally influences later-life health outcomes. He analyzes the health trajectories of children born between 1950 and 1975, and followed through 2007, using Panel Study of Income Dynamics (PSID) data linked with multiple data sources that describe neighborhood attributes and school quality prevailing when these children were growing up. He specifically estimates the long-run impacts of court-ordered school desegregation plans on later-life health by exploiting quasi-random variation in the timing and scope of the implementation of these plans during the 1960s, 1970s, and 1980s. He finds that school desegregation significantly narrowed black-white adult health disparities for the cohorts exposed to integrated schools during childhood. Difference-in-differences estimates and sibling-difference estimates indicate that school desegregation and the accompanying increases in school quality resulted in significant improvements in adult health for blacks. The results further suggest that the mechanisms through which school desegregation led to beneficial health outcomes in adulthood for blacks include improved access to school resources reflected in reductions in class size and increases in per-pupil spending. These results highlight the significant effects of educational attainment on future health status, and point to the importance of school quality in influencing socioeconomic mobility prospects, which in turn have far-reaching impacts on health. Taken together, the study finds that racial differences in adult health can be accounted for by childhood family, neighborhood, and school quality factors.

Nicholas Bloom, Stanford University and NBER; Carol Propper, CMPO University of Bristol; Stephen Seiler, London School of Economics; and John Van Reenen, London School of Economics and NBER
The Impact of Competition on Management Quality: Evidence from Public Hospitals

Bloom, Propper, Seiler, and Van Reenen examine the causal impact of competition on management quality. They analyze the hospital sector where geographic proximity is a key determinant of competition, and English public hospitals where political competition can be used to instrument for market structure. Since almost all major English hospitals are run by the government, closing hospitals in areas where the governing party has only a small majority is rare because of the fear of electoral punishment. The researchers develop a new survey tool to measure management quality and implement this in 61 percent of all acute hospitals. Their measure of management quality is strongly correlated with financial and clinical outcomes (for example, survival rates from heart attacks). More importantly, they find that higher competition (as indicated by a greater number of neighboring hospitals) is positively correlated with increased management quality, and this relationship strengthens when they instrument with local political competition. Adding three more rival hospitals increases the index of management quality by more than one standard deviation, which is associated with a 6 percent reduction in heart-attack mortality rates.