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Series:Opportunity and Inclusive Growth Institute Working Papers 

Working Paper
The City Paradox: Skilled Services and Remote Work

Large cities in the US are the most expensive places to live. Paradoxically, this cost is paid disproportionately by workers who could work remotely, and live anywhere. The greater potential for remote work in large cities is mostly accounted for by their specialization in skill- and information-intensive service industries. We highlight that this specialization makes these cities vulnerable to remote work shocks. When high-skill workers begin to work from home or leave the city altogether, they withdraw spending from local consumer service industries that rely heavily on their demand. As a ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 43

Working Paper
Sectoral Impact of COVID-19: Cascading Risks

Workers are unequal in the face of the COVID-19 pandemic: Those who work in essential sectors face higher health risk whereas those in non-essential social-consumption sectors face greater economic risk. We study how these health and economic risks cascade into other sectors through supply chains and demand linkages. In the U.S., we find the cascading effects account for about 25-30% of the exposure to both risks. The cascading effect increases the health risk faced by workers in the transportation and retail sectors, and it increases the economic risk faced by workers in the textile and ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 31

Working Paper
Human Capital and Development Accounting: New Evidence from Wage Gains at Migration

We use new data on the pre- and post-migration wages of U.S. immigrants to measure the importance of human capital for development accounting. Wages increase at migration, but by less than half of the gap in GDP per worker. This finding implies that human capital accounts for a large share of cross-country income differences. Wage gains decline with education, consistent with imperfect substitution between skill types. We bound the human capital share in development accounting to between one-half and two-thirds; additional assumptions lead to an estimate of 60 percent. We also provide results ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 1

Working Paper
Optimal Need-Based Financial Aid

We study the optimal design of student financial aid as a function of parental income. We derive optimal financial aid formulas in a general model. For a simple model version, we derive mild conditions on primitives under which poorer students receive more aid even without distributional concerns. We quantitatively extend this result to an empirical model of selection into college for the United States that comprises multidimensional heterogeneity, endogenous parental transfers, dropout, labor supply in college, and uncertain returns. Optimal financial aid is strongly declining in parental ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 14

Working Paper
Nonlinear Pricing in Village Economies

This paper examines the price of basic staples in rural Mexico. We document that nonlinear pricing in the form of quantity discounts is common, that quantity discounts are sizable for typical staples, and that the well-known conditional cash transfer program Progresa has significantly increased quantity discounts, although the program, as documented in previous studies, has not affected on average unit prices. To account for these patterns, we propose a model of price discrimination that nests those of Maskin and Riley (1984) and Jullien (2000), in which consumers differ in their tastes and, ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 23

Working Paper
Wage Inequality and Job Stability

How much wage inequality in Brazil is caused by firing costs? To answer this question, I develop and estimate a general equilibrium search and matching model with heterogeneous layoff rates among firms. Using matched employer-employee data from Brazil, I estimate the model, and I find that it replicates the observed residual wage inequality in the data. I simulate a counterfactual removal of existing firing costs, and I find that residual wage inequality drops by 26% as measured by wage variance and by 4.4% as measured by the p95-p5 ratio among 25- to 55-year-old males working in the private ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 5

Working Paper
Income and Wealth Inequality in America, 1949-2016

This paper introduces a new long-run dataset based on archival data from historical waves of the Survey of Consumer Finances. The household-level data allow us to study the joint distributions of household income and wealth since 1949. We expose the central importance of portfolio composition and asset prices for wealth dynamics in postwar America. Asset prices shift the wealth distribution because the composition and leverage of household portfolios differ systematically along the wealth distribution. Middle-class portfolios are dominated by housing, while rich households predominantly own ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 9

Working Paper
The Assessment Gap: Racial Inequalities in Property Taxation

We use panel data covering 118 million homes in the United States, merged with geolocation detail for 75,000 taxing entities, to document a nationwide "assessment gap" which leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities. We show that holding jurisdictions and property tax rates fixed, black and Hispanic residents nonetheless face a 10-13% higher tax burden for the same bundle of public services. This assessment gap arises through two channels. First, property assessments are less sensitive to neighborhood attributes than market prices are. ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 34

Working Paper
Optimal Income Taxation: An Urban Economics Perspective

We derive an optimal labor income tax rate formula for urban models in which tax rates are determined by traditional forces plus a new term arising from urban forces: house price, migration and agglomeration effects. Based on the earnings distributions and housing costs in large and small US cities, we find that in a benchmark model (i) optimal income tax rates are U-shaped, (ii) urban forces serve to raise optimal tax rates at all income levels and (iii) adopting an optimal tax system induces agents with low skills to leave large, productive cities. While agglomeration effects enter the ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 51

Working Paper
Monetary Policy and Racial Inequality

This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 45

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