Labor Studies Program Meeting

October 28, 2011
David Card of the University of California, Berkeley, Organizer

Olivier Deschenes, University of California, Santa Barbara and NBER; Michael Greenstone, MIT and NBER; and Joseph Shapiro, MIT

Defending Against Environmental Insults: Drugs, Emergencies, Deaths, and the NOx Emission Markets

In theoretical models of health behavior, individuals undertake a wide range of actions to protect themselves from risk or harm. It is widely believed that these actions constitute a significant portion of the costs of harms, but there is little research establishing their empirical importance. Deschenes, Greenstone, and Shapiro provide an opportunity to measure these activities in the context of air pollution. Specifically, they examine the impact of a large U.S. emissions trading market - the NOx Budget Trading Program - on pollution emissions, ambient air quality, purchases, hospital admissions, and mortality. Using variation across time and space in the implementation of the emissions market and real world data -- rather than relying on chemistry, engineering, or epidemiological models -- they find that the reductions in NOx emissions decreased the number of summer days with harmful ozone levels by about 25 percent. These improvements in air quality produced substantial short-run health benefits. Drug expenditures decreased by about 1.6 percent (2.4 percent for respiratory drugs), nearly as much as an upper bound estimate of the NOx Budget Trading Program's abatement costs. Additionally, the summer mortality rate declined by approximately 0.4 percent, indicating that there were about 2,100 fewer premature deaths per summer, mainly among individuals 75 and older. Models that aim to uncover the loss of life expectancy associated with these premature deaths lack statistical power. Several placebo tests support the research design: the market had no effect on non-regulated pollutants or on health conditions that are plausibly unrelated to air quality.

Janice Compton, University of Manitoba, and Robert Pollak, Washington University and NBER
Family Proximity, Childcare, and Women's Labor Force Attachment

Compton and Pollak show that close geographical proximity to mothers or mothers-in-law has a substantial positive effect on the labor supply of married women with young children, and they argue that the mechanism through which proximity increases labor supply is the availability of childcare. They interpret availability broadly enough to include not only regular scheduled childcare during work hours but also an insurance aspect of proximity (that is., a mother or mother-in-law who can to provide irregular or unanticipated childcare). Using two large datasets, the National Survey of Families and Households and the public use files of the U.S. Census, they find that the predicted probability of employment and labor force participation is 4-10 percentage points higher for married women with young children living in close proximity to their mothers or their mothers-in-law compared with those living further away.

Joseph G. Altonji, Yale University and NBER, and Richard K. Mansfield, Cornell University
The Contribution of Family, School and Community Characteristics to Inequality in Education and Labor Market Outcomes

Altonji and Mansfield examine the impact of high school quality on three subsequent outcomes of concern to economists and policymakers: high school graduation, college enrollment, and adult wages. They isolate the causal impact of school/neighborhood combinations from student sorting among schools by exploiting panel data from three national longitudinal surveys. They decompose each of their three outcomes into the within- and between-school contributions of both observed and unobserved student and family characteristics, as well as the contributions of observed and unobserved school and neighborhood variables that vary only across schools. Instead of attempting to disentangle school averages of individual-level unobservable inputs from school-level unobservable inputs, they estimate upper and lower bounds on the contribution of school quality to student outcomes. On the one hand, the vast majority of the variation in students' outcomes can be attributed to some combination of student inputs, parent inputs, and quality of schooling prior to high school. On the other hand, the small fraction of the variance attributable to differences in school quality translates into substantial impacts on high school graduation and college enrollment, since large numbers of students seem to be near the decision margin. The lower bound estimates of the average increase in the probability of graduation from moving a student from a school at the 10th percentile of the quality distribution to a school at the 90th percentile range from .06 to .13, with the corresponding lower bound estimates for college enrollment ranging from .14 to .23. The upper bound estimates are a few points higher. The authors also find a substantial effect of schools on adult wage rates. Finally, they find that the impact of attending a high quality school on college enrollment increased between 1972 and 1988, but remained stable between 1988 and 2000.

Claudia Olivetti, Boston University and NBER, and Barbara Petrongolo, London School of Economics

Gender Gaps across Countries and Skills: Supply, Demand and the Industry Structure (NBER Working Paper No. 17349)

The gender wage gap varies widely across countries and across skill groups within countries. Interestingly, there is a positive cross-country correlation between the unskilled-to-skilled gender wage gap and the corresponding gap in hours worked. Based on a canonical supply and demand framework, this positive correlation would reveal the presence of net demand forces shaping gender differences in labor market outcomes across skills and countries. Olivetti and Petrongolo use a simple multi-sector framework to illustrate how differences in labor demand for different inputs can be driven by both within-industry and between-industry factors. The main idea is that, if the service sector is more developed in the United States than in continental Europe, and if unskilled women tend to be over-represented in this sector, then unskilled women will suffer a relatively large wage and/or employment penalty in the latter than in the former. The researchers find that, overall, the between-industry component of labor demand explains more than half of the total variation in labor demand between the United States and the majority of countries in their sample, as well as one-third of the correlation between wage and hours gaps. The between-industry component is relatively more important in countries where the relative demand for unskilled females is lowest.

Alberto Abadie and Guido Imbens, Harvard University and NBER, and Fanyin Zheng, Harvard University

Robust Inference for Misspecified Models Conditional on Covariates (NBER Working Paper No. 17442)

It is common in empirical work in economics to report standard errors that are robust against general misspecification. In a regression setting, these standard errors are valid for the parameter that minimizes the squared difference between the conditional expectation and the linear approximation in the population, averaged over the population distribution of the covariates. In nonlinear settings, a similar interpretation applies. Abadie, Imbens, and Zheng discuss an alternative parameter which corresponds to the approximation of the conditional expectation based on minimization of the squared difference averaged over the sample, rather than the population, distribution of a subset of the variables. They argue that in some cases this may be a more interesting parameter. They derive the asymptotic variance for this parameter, and propose a consistent estimator for the asymptotic variance.

Melissa Schettini Kearney, University of Maryland and NBER, and Phillip B. Levine, Wellesley College and NBER

Early Non-Marital Childbearing and the "Culture of Despair"(NBER Working Paper No. 17157)

Kearney and Levine borrow from the tradition of other social sciences in considering the impact that "culture" (broadly defined as the economic and social environment in which the poor live) plays in determining early, non-marital childbearing. They reinterpret the ethnographic literature that emphasizes the role of despair and hopelessness into a parsimonious economic framework that captures the concept of "despair" with an individual's perception of economic success. They further propose that this perception is based in part on the level of income inequality where a woman lives. Using individual-level data from the United States and a number of other developed countries, they empirically investigate the role played by inequality across states in determining the early childbearing outcomes of low socioeconomic status (SES) women. They find that low SES women are more likely to give birth at a young age and outside of marriage when they live in higher inequality locations, all else equal. Less frequent use of abortion is an important determinant of this behavior. The researchers calculate that differences in the level of inequality are able to explain a sizable share of the geographic variation in teen fertility rates both across U.S. states and across developed countries.

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