Firms differ substantially in the wages they pay to similar workers. Standard models of the labor market assume that workers have accurate beliefs about the differences in wages across firms, including in bargaining models and wage posting models with search. While this fundamental assumption remains untested, its violation—in the form of worker misperceptions about the […]
Equilibrium Effects of Pay Transparency
Francis Bacon coined the famous phrase “knowledge is power.” This simple idea is used to champion pay transparency to empower women and minority workers. Advocates argue that workers don’t know what their employer is willing to pay, and more information about coworker pay allows for renegotiations, which raise up and equalize wages, especially those of […]
The case for scaling auctions when spending on infrastructure
Project uncertainty can be costly to the contractors that do the work – a lot of their business is often centered on public works – and to the government. The extent to which contractors are exposed to risk depends not only on the project design, but also on how contracts are allocated. Contracts with […]
Violence Against Women at Work
The international #MeToo movement demonstrated the prevalence of between-colleague violence, and especially violence against women at work. Yet evidence was lacking on the impacts of workplace violence on perpetrators and victims, how these impacts may depend on power and gender differences, and the impacts on the broader firm. Our research harnesses unique Finnish administrative data […]
Beyond Health: Nonhealth Risk and the Value of Disability Insurance
In the United States, the Social Security Disability Insurance and Supplemental Security Income programs together provide access to health insurance and $200 billion annually in cash benefits to nearly 13 million Americans. This support is provided primarily as assistance for people who cannot work because of severe health conditions. Some have attributed the expansion of […]
The social safety net as a long-term investment
Social safety net programs are designed to help people with low incomes meet their food, housing, and healthcare needs. Dating to President Lyndon B. Johnson’s War on Poverty in the US, the objective of these programs is “not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.” […]
Informality, Consumption Taxes, and Redistribution
Rich countries achieve significant redistribution via broad-based income taxes, but the income tax base covers only a fraction of the income distribution in developing countries, due in part to enforceability constraints (Jensen, 2022). Instead, developing countries rely primarily on indirect consumption taxes to collect revenue, such as the value-added tax (VAT), which are perceived as […]
Connecting to power: How political connections can reduce innovation
Recently, researchers and policymakers have become concerned about the growing dominance of large firms, declining business dynamism, and slower productivity growth in the US and other OECD member countries (Decker et al. 2016; De Loecker and Eeckhout 2018). At the same time, political “rent-seeking” has increased (Zingales 2012; Bessen 2016). In the research we summarize […]
Reshaping Global Trade: The Immediate and the Long-Term Effects of Bank Failures
International trade patterns are highly stable and understood to be shaped by slow-moving forces of comparative advantage such as differences in technologies, endowments, and institutions. In most trade frameworks, transient shocks like financial crises can only have temporary effects. Yet models with multiple equilibria stress that large shocks can dislodge the economy from a given […]
Auctions versus negotiations in the real world
Asset owners often need to identify and choose between potential contracting partners to monetize their asset’s value. For example, companies that are acquisition targets may have multiple potential acquirers, and research institutions looking to commercialize intellectual property often decide among several interested parties. Many land transactions also look like this. How should an owner go […]
