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Working Paper
Revisiting Capital-Skill Complementarity, Inequality, and Labor Share
Orak, Musa; Shen, Shihan; Ohanian, Lee E. (2021-05-19)
This paper revisits capital-skill complementarity and inequality, as in Krusell, Ohanian, Rios-Rull and Violante (KORV, 2000). Using their methodology, we study how well the KORV model accounts for more recent data, including the large changes in the labor's share of income that were not present in KORV. We study both labor share of gross income (as in KORV), and income net of depreciation. We also use nonfarm business sector output as an alternative measure of production to real GDP. We find strong evidence for continued capital-skill complementarity in the most recent data, and we also find ...
International Finance Discussion Papers , Paper 1319

Journal Article
What Happens When the Minimum Wage Rises? It Depends on Monetary Policy
Glover, Andrew; Mustre-del-Rio, Jose (2021-09-02)
Andrew Glover and José Mustre-del-Río examine how monetary policy may amplify or dampen the response of employment and inflation to an increase in the minimum wage. Their model-based analysis suggests a minimum wage increase has expansionary effects on the economy if the central bank is relatively unresponsive to current inflation, and contractionary effects if the central bank responds more aggressively (more than one-for-one) to current inflation. More generally, their framework suggests that if an increase in the minimum wage engenders contractionary effects, the central bank can ...
Economic Review , Volume 106 , Issue no.3 , Pages 5-24

Journal Article
Do the benefits of college still outweigh the costs?
Abel, Jaison R.; Deitz, Richard (2013)
In recent years, students have been paying more to attend college and earning less upon graduation?trends that have led many observers to question whether a college education remains a good investment. However, an analysis of the economic returns to college since the 1970s demonstrates that the benefits of both a bachelor?s degree and an associate?s degree still tend to outweigh the costs, with both degrees earning a return of about 15 percent over the past decade. The return has remained high in spite of rising tuition and falling earnings because the wages of those without a college degree ...
Current Issues in Economics and Finance , Volume 20

Working Paper
Changing Income Risk across the US Skill Distribution: Evidence from a Generalized Kalman Filter
Braxton, John Carter; Herkenhoff, Kyle F.; Rothbaum, Jonathan; Schmidt, Lawrence (2021-12-15)
For whom has earnings risk changed, and why? To answer these questions, we develop a filtering method that estimates parameters of an income process and recovers persistent and temporary earnings for every individual at every point in time. Our estimation flexibly allows for first and second moments of shocks to depend upon observables as well as spells of zero earnings (i.e., unemployment) and easily integrates into theoretical models. We apply our filter to a unique linkage of 23.5m SSA-CPS records. We first demonstrate that our earnings-based filter successfully captures observable shocks ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 55

Discussion Paper
Exposure to Generative AI and Expectations About Inequality
Emanuel, Natalia; Harrington, Emma (2024-10-02)
With the rise of generative AI (genAI) tools such as ChatGPT, many worry about the tools’ potential displacement effects in the labor market and the implications for income inequality. In supplemental questions to the February 2024 Survey of Consumer Expectations (SCE), we asked a representative sample of U.S. residents about their experience with genAI tools. We find that relatively few people have used genAI, but that those who have used it have a bleaker outlook on its impacts on jobs and future inequality.
Liberty Street Economics , Paper 20241002

Journal Article
On the Aggregate Implications of Removing Barriers to Formality
Hamann, Franz; Granda Carvajal, Catalina (2020-05)
This article examines the aggregate implications of several policies aimed at removing barriers to formality. To this end, we build a dynamic equilibrium model in which heterogeneous agents choose to work for a wage or operate a technology in the formal or informal sector, based on the costs and benefits associated with these occupational choices.
Review , Volume 102 , Issue 2 , Pages 203-220

Working Paper
Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice
Davis, Steven J.; Willen, Paul S. (2013-10-24)
This paper develops and applies a simple graphical approach to portfolio selection that accounts for covariance between asset returns and an investor's labor income. Our graphical approach easily handles income shocks that are partly hedgeable, multiple risky assets, multiple risky assets, many periods, and life cycle considerations.
Working Papers , Paper 13-9

Working Paper
Earnings Business Cycles: The Covid Recession, Recovery, and Policy Response
Splinter, David; Larrimore, Jeff; Mortenson, Jacob (2023-01-06)
Using a panel of tax data, we follow the earnings of individuals over business cycles. Compared to prior recessions, the Covid policy response and recovery were far more progressive. Among workers starting in the bottom quintile, median real earnings including fiscal relief increased 66 percent in 2020 and earnings increases offset relief decreases in the 2021 recovery. After the prior two recessions, this measure had decreased by 24 percent. Among those starting in the top quintile, median and average real earnings were approximately unchanged. This difference from prior recessions is ...
Finance and Economics Discussion Series , Paper 2023-004

Journal Article
Trends in the Labor Share Post-2000
Tuzemen, Didem; Tran, Thao; Marsh, W. Blake (2018-12-06)
The labor share of income declined sharply in the United States from 2000 to 2010 but seems to have stabilized since 2010. We examine aggregate trends in the labor share and show that the 2000?10 decline was driven by declines in the fraction of income paid to workers in all industries. The stabilization in the labor share after 2010 mostly reflects an increased share of services industries income paid to workers.
Macro Bulletin , Issue December 6, 2018 , Pages 1-4

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