Every Monday, the National Bureau of Economic Research, a nonprofit organization made up of some of North America’s most respected economists, releases its latest batch of working papers. The papers aren’t peer-reviewed, so their conclusions are preliminary (and occasionally flat-out wrong). But they offer an early peek into some of the research that will shape economic thinking in the years ahead. Here are a few of this week’s most interesting papers.
Title: “Firming Up Inequality”
Authors: Jae Song, David J. Price, Fatih Guvenen, Nicholas Bloom
What they found: CEOs and other high-paid managers earn more today than they did 30 years ago, but not relative to the average worker at their companies. More broadly, income inequality is driven more by differences among companies than inequality within companies.
Why it matters: That U.S. income inequality has been rising over the last three decades is nearly indisputable. But it’s unclear what is behind this trend. This paper disentangles inequality among firms from inequality within firms. The researchers use a massive administrative data set on all U.S. firms from 1978 to 2012 to create an employee-employer match database and find that shifts within firms have not changed much in 30 years. The bigger driver of inequality, then, is that companies are becoming more specialized: Some employ mostly high-paid workers, and others mostly low-paid ones.
Key quote: “Although individuals in the top one percent in 2012 are paid much more than the top one percent in 1982, they are now paid less, relative to their firms’ mean incomes, than they were three decades ago. Instead of top incomes rising within firms, top-paying firms are now paying even higher wages. This may tend to make inequality more invisible, as individuals do not see rising inequality among their peers.”
Data they used: Master Earnings File, compiled and maintained by the U.S. Social Security Administration.
Authors: Alison Evans Cuellar, Dhaval M. Dave
What they found: Youth in the juvenile justice system who receive intensive mental health treatment have improved academic success during and after their time in the system — there are fewer dropouts and more graduates.
Why it matters: About 1.6 million youth, mostly 16- and 17-year-olds, are in the juvenile justice system. Those with significant mental health problems could be enrolled in an intensive intervention program, such as multisystemic therapy (MST) or functional family therapy (FFT). This paper studies what effects these programs have on academic success. By tapping into an administrative data set from Washington state, and using semi-random enrollment rules, the authors were able to isolate the effect of the MST/FFT programs while avoiding the selection bias of the juveniles predisposed to seek out treatment. After controlling for individual and family characteristics, the authors calculated that participation in the FFT program reduced dropout rates by 10 percentage points, and participation in an MST program lowered dropout rates by 24 percentage points (MST costs about 2.5 times more per enrollee than FFT). The effects were largest for girls and those youth with the highest chance of dropping out.
Key quote: “The results of this study are important because they suggest that interventions for youth in the justice system have broad societal benefits outside the health care and juvenile justice sectors. Consequently, a strong argument could be made for making these interventions much more widely available through education-system investments.”
Data they used: Administrative data from Washington state.
Authors: Matthew E. Kahn, Kyle Barron
What they found: Suburban voters are less likely to support publicly funded pre-K programs. Minority voters, renters and those who are poor or live in a dense urban neighborhood, on the other hand, are likely to support pre-K expansion.
Why it matters: With low costs and high reported benefits, pre-K programs would seem to be low-hanging policy fruit, but some voters oppose their expansion. This paper tries to get at why. Using data from three California voter referendums on pre-K expansion, the researchers develop an index of voter support for publicly funded pre-K based on suburbanization, homeownership and political ideology. Suburban parents are unlikely to support such programs. The authors find that being poor, living near a city center, being a minority or being a renter all make someone more likely to vote in favor of publicly funded pre-K. But even after controlling for those factors, the authors found that Republican voters are still likely to oppose it. They hope to use a similar methodology to test whether Republican voters would support a private, voucher-based pre-K expansion.
Key quote: “Suburban parents are likely to already have access to quality pre-K and some mothers may choose not to work to invest in their children. Others in the suburbs may view the public provision to be of lower quality than the child care they already can access. Other suburbanites may oppose pre-K because it will raise their taxes and the benefits will be spatially concentrated in improving the lives and the neighborhoods of predominantly center city residents.”
Data they used: California voter referendums on pre-K funding from 1998, 2006 and 2012.