Abstract: We study the history and geography of wealth accumulation in the US, using newly collected historical property tax records since the early 1800s. The property tax in the US was a comprehensive tax on all kinds of properties (real estate, personal property, and financial wealth), making it one of the first “wealth taxes.” Drawing on a multitude of historical records, we construct wealth series at the city, county, and state levels over time offering a consistent, high-frequency, and long-term database of wealth in the US. We first document the long-term evolution of household wealth in the US since the early 1800s, showing that the US experience an extraordinary spur of wealth accumulation after the Civil war and until the Great Depression. Before the Civil war, enslaved people were assessed as personal property of the enslavers, which is both morally abhorrent and implies wrongly counting forced labor income flows as capital. The regional distribution of wealth and the effects of the Civil war look very different if we do not count enslaved people as property. Second, we study the spatial inequality in the US over the long run. The initial distribution of property and subsequent growth over 60 years are strongly correlated with geographic, economic, and demographic factors. In particular, wealth inequality has a robust negative correlation with growth in property over the long run. Finally, we study the role of public policy, specifically the property tax (i.e., a “wealth tax”) on local capital accumulation, using the large and long variation in property tax rates across more than 300 municipalities. We find significant elasticities on the intensive and extensive (migration) margins, as well as evidence for tax competition between cities.

Abstract: This paper leverages consumption data to evaluate the distributional effects of pension reforms. Using administrative data from Sweden, we show that on average workers who retire earlier have lower consumption while retired, experience larger drops in consumption around retirement, and show higher marginal propensities to consume out of wealth shocks. These findings imply that reforms incentivizing later retirement, as many countries have recently done, incur a substantial consumption smoothing cost. Accounting for selection on health and life expectancy further increases the redistributive cost of such reforms. Turning to other features of pension policy, we find that reforms that redistribute on the basis of early career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.

Abstract: Do family policies reduce gender inequality in the labor market? We contribute to this debate by investigating the joint impact of parental leave and child care, using administrative data covering the labor market and birth histories of Austrian workers over more than half a century. We start by quasi-experimentally identifying the causal effects of all family policy reforms since the 1950s, including the introduction of maternal leave benefits in 1961, on the full dynamics of male and female earnings. We then use these causal estimates to compute gender inequality series for counterfactual scenarios regarding the evolution of family policies. Our results show that the enormous expansions of parental leave and child care subsidies have had virtually no impact on gender convergence.

Abstract: Short time work (STW) policies provide subsidies for hour reductions to workers in firms experiencing temporary shocks. They are the main policy tool used to support labor hoarding during downturns, and have been used aggressively since the start of the COVID-19 pandemic. Yet, very little is known about their employment and welfare consequences. This paper leverages unique administrative social security data from Italy during the Great Recession and quasi-experimental variation in STW policy rules to offer evidence of the effects of STW on firms’ and workers’ outcomes. Our results show large and significant negative effects of STW treatment on hours, but large and positive effects on headcount employment. We then analyze whether these positive employment effects are welfare enhancing, distinguishing between temporary and more persistent shocks. We first provide evidence that liquidity constraints and bargaining frictions make labor hoarding inefficiently low absent STW. Then, we show that adverse selection of low productivity firms into STW creates significant negative reallocation effects when the shock is persistent.

Abstract: What is the most efficient way to respond to recessions in the labor market? To this question, policymakers on both sides of the pond gave two diametrically opposed answers during the recent crisis. In the US, the focus was on insuring workers, by aggressively increasing the generosity of unemployment insurance. In Europe, to the contrary, policies were concentrated on saving job matches, with the massive use of labor hoarding subsidies through short-time work programs, on which so little is actually known. So who got it right? Should we insure workers or jobs during recessions? In this article, we show that far from being substitutes, unemployment insurance and short-time-work policies exhibit strong complementarities. They provide insurance to different types of workers, and against different types of shocks. Short-time-work can be an effective way to reduce socially costly layoffs against large temporary shocks but is less effective against more persistent shocks that require reallocation across firms and sectors. Overall, we conclude that short-time-work is an important and useful addition to the labor market policy-toolkit during recessions, which should be used alongside unemployment insurance.

Abstract: This chapter is concerned with the differences between men and women in all activities that can be labelled as ‘work’ – that is, the time and energy that people devote to producing things of value. Work thus encompasses the production of market goods and service as well as the time spent doing household chores, childcare or care of the elderly. Data from the UK and other high-income countries reveal a sharp, if unsurprising, divide: men do more paid work outside the house, women do more unpaid work inside. Moreover, when doing paid work, women are paid less. This pattern has remained stable in the past quarter of a century. Gender differences in the sharing of unpaid work – including the sharing of childcare, other care work, and housework – shape much of the unequal outcomes we see in the labour market; a deeply uneven division of unpaid work makes it hard to achieve equal outcomes in paid work. Do these differences in labour market outcomes between men and women matter? In this chapter, we explore their many consequences and contend that there are several important reasons why they do: gender disparities in the amount of work individuals do, the types of work they do, and the rewards they get for doing that work are all central determinants of broader gender inequalities in social status, well-being and poverty. First off, work (both paid and unpaid) can be intrinsically important for well-being and life satisfaction. Second, different types of work bring different extrinsic rewards. Particularly important here is the distinction between paid and unpaid work. While unpaid work, such as housework and care work, is crucial for the functioning of the economy and society, the fact that it does not bring monetary rewards can leave people who do not work for pay vulnerable to economic hardship and poverty. This is the case both in the short and longer run, if the absence of paid work in the present reduces work opportunities and earnings in the future. Inequalities in paid work may also translate into broader inequalities in well-being if individual contributions to family income bring with them influence in important family decisions, reflecting how paid work can be directly connected to agency and autonomy. At the level of the whole economy, gender inequalities may hamper aggregate efficiency and reduce the overall quantity of the goods and services (both market and non-market) produced. The amount of output that an economy can produce for a given level of resources is largest when the skills and talents of individuals are allocated to the activities where their return is largest. If women face higher barriers to participating in paid work (or, similarly, men face higher barriers to participating in domestic and care work), this will result in women’s (respectively men’s) talents not being put to their best use and will reduce overall efficiency. A corollary here is that such inefficiencies will reduce government tax revenue, which is an important point since it implies that even costly policies that succeed in putting women’s and men’s talents to better use in the labour market may ultimately pay for themselves.

Abstract: We use anonymised transaction and bank data from France to document the evolution of consumption and savings dynamics since the onset of the pandemic. We find that consumption has dropped very severely during the nation-wide lock- down but experienced a strong and steady rebound during the Summer, before faltering in late September. This drop in consumption with met with a significant increase in aggregate households' net financial wealth. This excess savings is extremely heterogenous across the income distribution: 50% of excess wealth accrued to the top decile. Households in the bottom decile of the income distribution experienced a severe decrease in consumption, a decrease in savings and an increase in debt. We estimate marginal propensities to consume and show that their magnitude is large, especially at the bottom of the income and liquidity distributions.

Abstract: Should choice be offered in social insurance programs? The paper presents a conceptual framework that identifies the key forces determining the value of offering choice, reviews some existing evidence on these forces, and aims to guide further empirical research in different insurance domains. The value of offering choice is higher the larger the variation in individual valuations, but gets reduced by both selection on risk and selection on moral hazard. The implementation of choice-based policies is further challenged by the presence of adverse selection and choice frictions or the obligation to offer basic uncompensated care. These inefficiencies can be seen as externalities, which do not rationalize the absence of providing choice per se, but point to the need for regulatory policies and the potential value of corrective pricing à la Pigou

Abstract: This paper investigates if the impact of children on the labor market trajectories of women relative to men — child penalties — can be explained by the biological links between mother and child. We estimate child penalties in biological and adoptive families using event studies around the arrival of children and almost forty years of adoption data from Denmark. Long-run child penalties in earnings and its underlying determinants are virtually identical in biological and adoptive families. This implies that biology is not important for child-related gender gaps. Based on additional anal- yses, we argue that our results speak against the importance of specialization based on comparative advantage more broadly.

Abstract: This paper studies whether adverse selection can rationalize a universal mandate for unemployment insurance (UI). To date no direct evidence exists in the UI context and the desirability of a UI mandate has been untested. Building on the unique institutional setting of Sweden, where workers can buy supplemental UI coverage above a minimum mandate, we provide the first direct evidence for adverse selection in UI and derive its implications for UI design. We find that workers who buy the supplemental coverage face higher unemployment risk (with semi-elasticities above 1), even after controlling for a rich set of observables. Exploiting unique variation in risk and in prices to control for moral hazard, we show how this correlation is driven by substantial risk-based selection. Despite the severe adverse selection, we find that allowing for choice welfare-dominates mandating the supplemental coverage. We also show that a large subsidy for supplemental coverage is optimal and complementary to the minimum mandate.

Abstract: Due to the absence of unemployment insurance (UI) choices, the traditional approach to estimating the value of UI is to infer it from the observed consumption response to job loss under some assumption on risk preferences. Exploiting the rich data and unique policy context in Sweden, we propose two alternative approaches that relax this assumption and we implement all three methods on the same sample of workers. The first approach considers the difference in marginal propensity to consume (MPC) when unemployed vs. employed, which allows to identify the difference in prices to smooth consumption in the respective states. The second approach exploits UI choices embedded in the Swedish UI system in a Revealed Preference approach. While the drop in consumption expenditures is relatively small (∼ 13 percent), we find that the MPC is around 25 percent higher when unemployed than employed, translating into a marginal value of transfers that is at least 60 percent higher when unemployed than employed. This high value of UI is confirmed by our RP estimates and indicates substantial risk aversion given the relatively small drop in consumption expenditures.

Abstract: In this article, we review a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss its policy implications. We start by laying out the empirical challenges that prevented progress in this area until recently, and then discuss how recent work have made use of new data sources and quasi-experimental approaches to credibly estimate migration responses. This body of work has shown that certain segments of the labor market, especially high-income workers and professions with little location-specific human capital, may be quite responsive to taxes in their location decisions. When considering the implications for tax policy design, we distinguish between uncoordinated and coordinated tax policy. We highlight the importance of recognizing that mobility elasticities are not exogenous, structural parameters. They can vary greatly depending on the population being analyzed, the size of the tax jurisdiction, the extent of tax policy coordination, and a range of non-tax policies. While migration responses add to the efficiency costs of redistributing income, we caution against over-using the recent evidence of (sizeable) mobility responses to taxes as an argument for less redistribution in a globalized world.

Abstract: This paper measures consumption expenditures using registry data on income and asset holdings in Sweden. We show how a registry-based measure complements traditional survey measures of consumption and can alleviate some critical limitations. We describe the construction of our measure, which builds on prior work and exploits the identity coming from the household budget constraint between consumption expenditures and income net of savings. We demonstrate the value of the registry-based measure to study consumption responses to shocks, also relative to surveyed consumption. In our application to health shocks, we find that Swedish household experience permanent earning drops, but generous social transfers provide substantial consumption smoothing. We document important heterogeneity in consumption responses and the limited role for private means.

Abstract: This paper provides evidence on child penalties in female and male earnings in different countries. The estimates are based on event studies around the birth of the first child, using the specification proposed by Kleven et al. (2018). The analysis reveals some striking similarities in the qualitative effects of children across countries, but also sharp differences in the magnitude of the effects. We discuss the potential role of family policies (parental leave and child care provision) and gender norms in explaining the observed differences.

Abstract: Despite considerable gender convergence over time, substantial gender inequality persists in all countries. Using Danish administrative data from 1980-2013 and an event study approach, we show that most of the remaining gender inequality in earnings is due to children. The arrival of children creates a gender gap in earnings of around 20% in the long run, driven in roughly equal proportions by labor force participation, hours of work, and wage rates. Underlying these ''child penalties'', we find clear dynamic impacts on occupation, promotion to manager, sector, and the family friendliness of the firm for women relative to men. Based on a dynamic decomposition framework, we show that the fraction of gender inequality caused by child penalties has increased dramatically over time, from about 40% in 1980 to about 80% in 2013. As a possible explanation for the persistence of child penalties, we show that they are transmitted through generations, from parents to daughters (but not sons), consistent with an influence of childhood environment in the formation of women's preferences over family and career.

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Abstract: This paper provides a simple, yet robust framework to evaluate the time profile of benefits paid during an unemployment spell. We derive sufficient-statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell. Our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare-improving changes in the benefit profile that account for all relevant arguments jointly. For the empirical implementation, we use administrative data on unemployment, linked to data on consumption, income and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that, if anything, the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. In trading off insurance and incentives, our analysis suggests that the flat benefit profile in Sweden has been too generous overall. However, both from the insurance and the incentives side, we find no evidence to support the recent introduction of a declining tilt in the profile.

Abstract: This paper develops a theory of optimal unemployment insurance (UI) in matching models. The optimal replacement rate is the conventional Baily-Chetty replacement rate, which solves the tradeoff between insurance and job-search incentives, plus a correction term, which is positive when an increase in UI pushes labor market tightness toward its efficient level. Labor market tightness is generally inefficient because in matching models, most wage mechanisms do not ensure efficiency. The effect of UI on tightness depends on the model: UI may raise tightness by alleviating a rat race for jobs or lower tightness by increasing wages through bargaining.

[WSJ Blog]

Abstract: In the United States, unemployment insurance (UI) is more generous when unemployment is high. This paper examines whether this policy is desirable. The optimal UI replacement rate is the Baily-Chetty replacement rate plus a correction term measuring the effect of UI on welfare through labor market tightness. Empirical evidence suggests that tightness is inefficiently low in slumps and inefficiently high in booms, and that an increase in UI raises tightness. Hence, the correction term is positive in slumps but negative in booms, and optimal UI is indeed countercyclical. Since there remains some uncertainty about the empirical evidence, the paper provides a thorough sensitivity analysis.

[WSJ Blog]

Abstract: In this paper we document the evolution of gender inequality in labor market outcomes ( earnings, labor supply, and wage rates) across levels of economic development, and discuss the main reasons for the observed patterns. To this end, we have created a micro database that compiles 248 surveys from 53 countries between 1967-2014, covering a wide range of per capita income levels. There is large convergence in the earnings of men and women across levels of development, driven by female labor force participation and wage rates. We argue that the single most important factor behind this covergence is demographic transition: the effects of children on gender gaps ("child penalties") are large at both low and high levels of development, but fertility declines drastically over the growth process and thus reduces the aggregate implications of children. We also document gender convergence in educational attainment and consider its effects on earnings inequality, which are significant but less dramatic than the effects of fertility. Finally, we document striking changes in the values or norms surrounding the role of women with children, arguing that such changes may serve as a reinforcing mechanism for gender convergence.

Abstract: Optimal tax formulas expressed in ``sufficient statistics'' are usually calibrated under the assumption that the relevant tax elasticities are unaffected by other available policy instruments. In practice though, tax authorities have many more instruments than the mere tax rates and tax elasticities are functions of all these policy instruments. In this paper we provide evidence that tax elasticities are extremely sensitive to a particular policy instrument: the level of tax enforcement. We exploit a natural experiment that took place in France in 1983, when the tax administration tightened the requirements to claim charitable deductions. The reform led to a substantial drop in the amount of contributions reported to the administration, which can be credibly attributed to overreporting of charitable contributions before the reform, rather than to a real change in giving behaviours. We show that the reform was also associated with a substantial decline in the absolute value of the elasticity of reported contributions. This finding allows us to partially identify the elasticity of overreporting contributions, which is shown to be large and inferior to -2 in the lax enforcement regime. We further show using bunching of taxpayers at kink-points of the tax schedule that the elasticity of taxable income also experienced a significant decline after the reform. Our results suggest that optimizing the tax rate for a given tax elasticity when other policy instruments are not optimized can lead to misleading conclusions when tax authorities have another instrument that could set the tax elasticity itself at its optimal level as in Kopczuck & Slemrod [2002]

Abstract This paper offers quasi experimental evidence of the existence of spillover effects of UI extensions using a unique program that extended unemployment benefits drastically for a subset of workers in selected regions of Austria. We use non-eligible unemployed in treated regions, and a difference-in-difference identification strategy to control for preexisting differences across treated and untreated regions. We uncover the presence of important spillover effects: in treated regions, as the search effort of treated workers plummets, the job finding probability of untreated workers increases, and their average unemployment duration and probability of long term unemployment decrease. These effects are the largest when the program intensity reaches its highest level, then decrease and disappear as the program is scaled down and finally interrupted. We use this evidence to assess the relevance of different assumptions on technology and the wage setting process in equilibrium search and matching models and discuss the policy implications of our results for the EUC extensions in the US.

Abstract: I show how, in the tradition of the dynamic labor supply literature, one can identify the moral hazard effects and liquidity effects of unemployment insurance (UI) using variations along the time profile of unemployment benefits brought about by exogenous variations in the benefit level as well as in the benefit duration. I use this strategy to investigate the anatomy of partial equilibrium labor supply responses to unemployment insurance (UI) in the US. I use administrative data on the universe of unemployment spells in five states from the late 1970s to 1984, and non-parametrically identify the effect of both benefit level and potential duration in the regression kink (RK) design using kinks in the schedule of UI benefits. I provide various tests for the robustness of the RK design, and assess its validity to overcome the traditional issue of endogeneity in UI benefit variations on US data. My results suggest that the response of search effort to UI benefits is driven almost as much by liquidity effects as by moral hazard effects, with an estimated ratio of liquidity to moral hazard effect of 88%. I then use these estimates to calibrate the welfare effects of an increase in UI benefit level and in UI potential duration.

Abstract: This paper analyzes the effects of income taxation on the international migration and earnings of top earners using a Danish preferential foreigner tax scheme and population- wide Danish administrative data. This scheme, introduced in 1991, allows new immigrants with high earnings to be taxed at a preferential at rate for a duration of three years. We obtain three main results. First, the scheme has doubled the number of highly paid foreigners in Denmark relative to slightly less paid ineligible foreigners, which translates into a very large elasticity of migration with respect to the net-of-tax rate on foreigners, between 1.5 and 2. Hence, preferential tax schemes for highly paid foreign workers could create severe tax competition between countries. Second, we find compelling evidence of a negative effect of scheme-induced increases in the net-of-tax rate on pre-tax earnings at the individual level. This finding cannot be explained by the standard labor supply model where pay equals marginal productivity, but it can be rationalized by a matching frictions model with wage bargaining where there is a gap between pay and marginal productivity. Third, we find no evidence of positive or negative spillovers of the scheme-induced influx of high-skilled foreigners on the earnings of highly paid natives.

Abstract: We analyze the effects of top tax rates on international migration of football players in 14 European countries since 1985. Both country case studies and multinomial regressions show evidence of strong mobility responses to tax rates, with an elasticity of the number of foreign (domestic) players to the net-of-tax rate around one (around .15). We also find evidence of sorting effects (low taxes attract high ability players who displace low ability players) and displacement effects (low taxes on foreigners displace domestic players). Those results can be rationalized in a simple model of migration and taxation with rigid labor demand.

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Abstract: This paper estimates the effect of tax incentives for charitable contributions in France. We focus on two tax reforms, which took place in 2003 and 2005, that increased the non refundable tax credit rate for charitable contributions by 32%. We use a difference-in- difference identification, comparing the evolution of contributions for groups of households with similar income but different taxable status due to differences in family size. We control for censoring issues and investigate distributional effects using a three-step censored quantile regression estimator. We find that the elasticity of contributions with respect to tax subsidy is relatively small, between -0.2 and -0.6. We also show that the response to tax incentive tends to increase with the level of gifts.