Adam Smith alleged that employers sometimes secretly collude to reduce labor earnings. This paper examines an important case of such behavior: illegal no-poaching agreements through which information-technology companies agreed not to compete for each other's workers. Exploiting the plausibly exogenous timing of a US Department of Justice investigation, I estimate the effects of these agreements using a difference-in-differences design. Data from Glassdoor permit the inclusion of rich employer- and job-level controls. On average the no-poaching agreements reduced salaries at colluding firms by 4.8 percent, consistent with considerable employer market power. Stock bonuses and job satisfaction were also negatively affected. (IZA DP 14843) (IZA Policy Paper 182; non-technical) (IZA World of Labor Commentary; non-technical) (IZA Newsroom; non-technical)

Press: Liberation (in French)

(w/Husnain Ahmad, Fatiq Nadeem, Sanval Nasim, Arman Rezaee) Scarce information and human capital may make it difficult for residents of developing countries to produce accurate forecasts, limiting responses to uncertain future events like air pollution. We study two randomized interventions in Lahore, Pakistan: 1) provision of air pollution forecasts; 2) general training in forecasting. Both reduced subjects’ own air pollution forecast errors; the training effect suggests that modest educational interventions can durably improve forecasting skills. Forecast receipt increased demand for protective masks and increased the responsiveness of outdoor time to pollution. Forecast recipients were willing to pay 60 percent of the cost of mobile internet for continued access. (IZA DP 15931)

(w/Zachary Breig & Jeffrey Shrader) Research has shown that procrastination has significant adverse effects on individuals, including lower savings and poorer health. Procrastination is typically modeled as resulting from present bias. In this paper we study an alternative: excessively optimistic beliefs about future demands on an individual's time. The models can be distinguished by how individuals respond to information on their past choices. Experimental results refute the hypothesis that present bias is the sole source of dynamic inconsistency, but they are consistent with optimism. The findings offer an explanation for low takeup of commitment and suggest that personalized information on past choices can mitigate procrastination. (IZA DP 13060; revision requested)

(w/Gregory Casey & Stephie Fried) Existing climate-economy models assume climate change has equal impacts on the productivity of firms that produce consumption and investment goods. We develop a model of structural change to show that the split between damage to consumption and investment productivity matters. When investment is more vulnerable to climate, we find smaller short-run consumption losses than leading models suggest, but larger long-run consumption losses. We quantify these effects for the climate damage from heat stress in the US and find that accounting for heterogeneous damages increases the welfare cost of climate change by approximately 4 to 24%, depending on the discount factor. (IZA DP 14974) (Equitable Growth blog) (LSE Business Review) (IZA Award for Innovative Research in the Economics of Climate Change)


(w/Teevrat Garg & Fanglin Sun) How do people in developing countries reallocate time in response to extreme temperatures? Using individual-level panel data over two decades and relying on plausibly exogenous variation in weather, we estimate responses in China. Extreme temperatures reduce time spent working, and there is no evidence of offsetting substitution across either time or spouses. Work reductions are larger for farmers and women. Hot days reduce time spent on household chores by women, but not by men. Finally, hot days greatly reduce time spent on childcare in households without cooling technologies. (Journal of Economic Behavior and Organization) (IZA DP 12372)

(w/Jamie Mullins) Applying a difference-in-differences framework to a census of residential property transactions in New York City 2003-2017, we estimate the price effects of three flood risk signals: 1) the Biggert-Waters Flood Insurance Reform Act, which increased premiums; 2) Hurricane Sandy; and 3) new floodplain maps reflecting three decades of climate change. Estimates are negative for all three signals and some are large: properties included in the new floodplain after escaping flooding by Sandy experienced 11 percent price reductions. We investigate possible mechanisms, including selection of properties into the market and residential sorting. Finding no evidence for these, we develop a parsimonious theoretical model that allows decomposition of our reduced-form estimates into the effects of insurance premium changes and belief updating. Results suggest the new maps induced belief changes comparable to those from insurance reform. (Journal of the Association of Environmental and Resource Economists) (IZA DP 13553)

Press: Pacific Standard

Environmental regulations may cause firms to re-optimize over pollution inputs. By regulating air emissions in particular counties, the Clean Air Act (CAA) gives firms incentives to substitute: 1) toward polluting other media, like waterways; and 2) toward pollution from plants in other counties. I test these hypotheses using the EPA Toxic Release Inventory (TRI). Regulated plants increase their ratio of water to air emissions by 177 percent (102 log points) and their level of water emissions by 105 percent (72 log points). Regulation of an average plant increases air emissions at unregulated plants within the same firm by 11 percent. (The Review of Economics and Statistics)

(w/Jeffrey Shrader) We investigate how the single largest use of time—sleep—affects labor productivity. Motivated by a theoretical model, we provide empirical evidence that sleep is complementary to work in the short run and complementary to home production for non-employed individuals in both the short and long run. Using time use diaries from the United States, we show that later sunset time reduces worker sleep and earnings. After investigating these relationships and ruling out alternative hypotheses, we implement an instrumental variables specification that provides the first causal estimates of the impact of sleep on earnings. A one-hour increase in location-average weekly sleep increases earnings by 1.1% in the short run and 5% in the long run. (The Review of Economics and Statistics)

Press: NYT Upshot | WSJ | Huffington Post | Freakonomics | Marketplace | The World Bank | Australian Broadcasting Corporation | LA Times | NY Magazine | Marginal Revolution | Washington Post | Daily Mail | Guardian

(w/Prashant Bharadwaj, Joshua Graff Zivin & Christopher Neilson) This paper examines the impact of fetal exposure to air pollution on 4th grade test scores in Santiago, Chile. We rely on comparisons across siblings which address concerns about locational sorting (for non-movers) and all other time-invariant family characteristics that can lead to endogenous exposure to poor environmental quality. We also exploit data on air quality alerts to help address concerns related to short-run time-varying avoidance behavior, which has been shown to be important in a number of other contexts. We find a strong negative effect from fetal exposure to carbon monoxide (CO) and correlated pollutants (like PM10) on math and language skills measured in 4th grade. These effects are economically significant and our back of the envelope calculations suggest that the 50% reduction in CO in Santiago between 1990 and 2005 increased lifetime earnings by approximately 100 million USD per birth cohort. (Journal of the Association of Environmental and Resource Economists)

Press: FiveThirtyEight

(w/Maria Carnovale) Exploiting the natural experiment created by an unanticipated court injunction, we evaluate driver responses to road pricing. We find evidence of intertemporal substitution toward unpriced times and spatial substitution toward unpriced roads. The effect on traffic varies with public transit availability. Net of these responses, Milan's pricing policy reduces air pollution substantially, generating large welfare gains. In addition, we use long-run policy changes to estimate price elasticities. (Journal of Urban Economics)

Press: Seattle Times | Citylab from The Atlantic | BU Transportation Nudges (non-technical, w/video)