Andrew Johnston

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Andrew Johnston Economics

Andrew Johnston

Assistant Professor of Economics, University of California at Merced

Ph.D. in Applied Economics from The Wharton School, University of Pennsylvania

Fields: Public Economics, Labor Economics, Econometrics, Personnel Economics

Interests: Unemployment Insurance, Taxation, Compensation, Teacher Quality, Parent Absence

Contact: acjohnston (at) ucmerced.edu

Curriculum vitae

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Working Papers:

Unemployment Insurance Taxes, Labor Demand, and Recovery (Job Market Paper), Submitted [link here]

Unemployment insurance (UI) taxes penalize firms that lay off workers. While labor-demand models suggest that this tax regime reduces layoffs and depresses labor demand, empirical evidence is thin. I examine the countervailing effects of UI tax penalties with full-population administrative data. Leveraging a discontinuity and kinks in tax schedules, I come to two conclusions: (1) tax penalties, surprisingly, do not deter firms from laying off workers, and (2) the resulting higher taxes decrease employment by reducing hiring. These responses are consistent with a model of cash-constrained firms, which is plausible if firms lay off workers to reduce costs when cash-constrained. The results highlight unanticipated costs to UI provision and significant distortions that delay labor-market recovery.

Potential Unemployment Insurance Duration and Labor Supply: Evidence from a Benefit Cut (with Alexandre Mas), Accepted for publication at Journal of Political Economy[link here]

In this paper we examine how an unanticipated cut in potential unemployment insurance (UI) duration, which reduced maximum duration in Missouri by 16 weeks, affected the search behavior of UI recipients and the aggregate labor market. Using a regression discontinuity design (RDD), we estimate that a one-month reduction in maximum duration is associated with 15 fewer days of UI receipt and 8.6 fewer days of nonemployment. We use the estimated change in the UI survivor function to simulate the change in the time path of the unemployment rate, assuming that moves from UI into employment do not displace other jobseekers, or lead to other spillover effects. The simulated response closely approximates the estimated change in the unemployment rate following the benefit cut, suggesting that even in a period of high unemployment, the labor market was able to absorb this influx of workers without crowding out other jobseekers. 

Publications:

The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013 (with David Card, Pauline Leung, Alexandre Mas, and Zhuan Pei), American Economic Review: P&P, 2015. [link here]

We provide new evidence on the elasticity of unemployment insurance weekly benefit amount on unemployment insurance spells based on administrative data from the state of Missouri covering 2003-2013.  Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule.  We find that unemployment durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity of about 0.9 as compared to 0.35 pre-recession.

Coming Soon:

Teacher Utility, Compensating Differentials, and Separating Equilibria

Many observers have remarked that teacher compensation may not be efficiently allocated, overpaying in benefits and underpaying in salary.  To learn teacher preferences over compensation form, working conditions, and student characteristics, I deploy a conjoint survey to K-12 school teachers, asking them to choose between offers from hypothetical schools.  Because job offers are rarely observable and local labor markets have little independent variation in school characteristics, real-world data are both infeasible and uninformative.  I merge the teacher responses to teacher evaluations including a value-add measures to test whether high-performing teachers have distinct preferences that could be used to generate a separating equilibrium.  The subjective value of various compensation vehicles, working conditions and student qualities is estimated. 

Parent Absence and Human Capital Formation: Evidence from Quasi-Random Deployments (with Richard Patterson and David Lyle)

The share of children born to single parents has increased eight-fold in the last half century. This remarkable shift in family institutions may have profound implications if parental involvement is an important input. Researchers have struggled to measure how parent absence affects human capital formation and long-run outcomes since family structure is endogenous and highly related with other predictive attributes. To address selection and simultaneity, we leverage exogenous deployments to estimate the effect of parent absence on long-run measures of human capital formation including college attendance, graduation, adult employment, and earnings. We find that a one-year parent absence decreases the odds that a child will enroll and complete a university degree. Because the rise of parent absence is concentrated among low-income, black, and Hispanic families, our results have important consequences for the intergenerational transmission of disadvantage.

The Competitive Advantage of Nonprofits (with Carla Johnston) [available on request]

Contrary to popular belief, nonprofit workers earn more than their for-profit counterparts. We leverage workers who transition to and from nonprofit employment to decompose the wage differential into demand-side and supply-side factors using full-population, administrative wage data from Florida. On average, nonprofits employ higher-earning individuals and pay them almost exactly what they would receive in a typical for-profit setting. An insignificant average difference, however, masks significant heterogeneity. Workers in traditional nonprofit settings like religious, social, or civic groups pay less while nonprofit workers in traditional for-profit settings like healthcare, insurance, and finance pay more than their for-profit peers. We explore the role of nonprofit productivity, for-profit taxation, and the non-distribution constraint in generating nonprofit wage premia in these settings.

The Effect of Increased Teacher Pay on Teacher Quality: Evidence from a Regression Discontinuity

Teacher compensation constitutes over $304 billion in yearly expenditure but we know little about how compensation structure and generosity affects teacher quality, retention, and student achievement.  To address this question, I exploit a discontinuity in a federal program that offers loan-forgiveness to teachers at schools beyond a low-income threshold.  A modest, one-time, average $3,100 compensation increase improves student achievement (by 0.04 standard deviations in mathematics, 0.02 standard deviations in reading), corresponding to a 0.3 standard deviation increase in teacher quality.  The compensation increases teacher retention by 18 percent, but only in the year of loan forgiveness.  These results suggest delayed compensation tools are less effective in promoting retention, but that raising starting salaries would significantly improve student achievement.

Who Pays Corporate Taxes?: Evidence from Banks

The incidence of corporate taxes is not well understood, in part due to immense complexity, an absence of detailed firm data, and the scarcity of random variation.  Banks, however, can operate c-corps and pay the corporate tax rate, s-corps and effectively pay the individual tax rate, or credit unions and pay no tax rate.  I compare banks in the same local markets who have different tax changes owing to their legal type to estimate the short-run, partial equilibrium effect of corporate income taxes on employment, wages, profits, prices, consumption, and investment.  I also investigate whether individual taxes have the same effect on pass-through corporations that corporate taxes have on corporations.  To begin to study general equilibria effects, I compare the estimated effect in counties with high- and low-densities of c-corporations. 


Johnston Wharton Graduation Economics



 

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