New NBER working papers I plan on reading


Workplace Heterogeneity and the Rise of West German Wage
by David Card, Joerg Heining, Patrick Kline  –  #18522 (EFG ITI LS PE PR)

Abstract: We study the role of establishment-specific wage premiums in
generating recent increases in West German wage inequality.  Models
with additive fixed effects for workers and establishments are fit in
four distinct time intervals spanning the period 1985-2009.  Unlike
standard wage models, specifications with both worker and plant-level
heterogeneity components can explain the vast majority of the rise in
wage inequality.  Our estimates suggest that the increasing
variability of West German wages results from a combination of rising
heterogeneity between workers, rising variability in the wage
premiums at different establishments, and increasing assortativeness
in the matching of workers to plants.  We use the models to decompose
changes in wage gaps between different education levels, occupations,
and industries, and in all three cases find a growing contribution of
plant heterogeneity and rising assortativeness between workers and

The U.S. Employment-Population Reversal in the 2000s: Facts and
by Robert A. Moffitt  –  #18520 (EFG LS PE)

Abstract: The decline in the employment-population ratios for men and women
over the period 2000-2007 prior to the Great Recession represents an
historic turnaround in the evolution of U.S. employment.   The
decline is disproportionately concentrated among the less educated
and younger groups within the male and female populations and, for
women, disproportionately concentrated among the unmarried and those
without children.  About half of men’s decline can be explained by
declines in wage rates and by changes in nonlabor income and family
structure influences, but the decline among women is more difficult
to explain and requires distinguishing between married and unmarried
women and those with and without children, who have each experienced
quite different wage and employment trends.  Neither taxes nor
transfers appear likely to explain the employment declines, with the
possible exception of the Supplemental Nutrition Assistance Program.
Other influences such as the minimum wage or health factors do not
appear to play a role, but increases in incarceration could have
contributed to the decline among men.

And if you aren’t familiar with Saez’s optimal taxation work, you shouldn’t miss this paper:

Optimal Labor Income Taxation
by Thomas Piketty, Emmanuel Saez  –  #18521 (PE)

Abstract: This paper reviews recent developments in the theory of optimal labor
income taxation.  We emphasize connections between theory and
empirical work that were initially lacking from optimal income tax
theory.  First, we provide historical and international background on
labor income taxation and means-tested transfers.  Second, we present
the simple model of optimal linear taxation.  Third, we consider
optimal nonlinear income taxation with particular emphasis on the
optimal top tax rate and the optimal profile of means-tested
transfers.  Fourth, we consider various extensions of the standard
model including tax avoidance and income shifting, international
migration, models with rent-seeking, relative income concerns, the
treatment of couples and children, and non-cash transfers.  Finally,
we discuss limitations of the standard utilitarian approach and
briefly review alternatives.  In all cases, we use the simplest
possible models and show how optimal tax formulas can be derived and
expressed in terms of sufficient statistics that include social
marginal welfare weights capturing society’s value for
redistribution, behavioral elasticities capturing the efficiency
costs of taxation, as well as parameters of the earnings
distribution.  We also emphasize connections between actual practice
and the predictions from theory, and in particular the limitations of
both theory and empirical work in settling the political debate on
optimal labor income taxation and transfers.


About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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