Research

Publications:

Did the Fiscal Stimulus Work for Universities? (with Caroline Hoxby, Jonathan Meer, Pablo Villanueva)

in How the Financial Crisis and Great Recession Affected Higher Education, Jeffrey Brown and Caroline Hoxby, eds. University of Chicago Press, 2014. 

We investigate how stimulus-motivated federal funding directed to universities affected their revenues, expenditures, employment, tuition, student aid, endowment spending, and receipt of state government appropriations. We also investigate how these funds affected the economies of the counties in which the institutions are located. To overcome the potential endogeneity of federal funds (for instance, federal student aid rising when students become poorer), we employ: (i) an instrument that applies nation-wide rates of increase in research funding by agency to universities whose initial dependence on these agencies differs; and (ii) an instrument that applies the change in the maximum Pell Grant to institutions with varying initial numbers of students eligible for the maximum grant. Our results suggest that federal funds induced private universities to increase research, reduce tuition, raise student aid, spend slightly more on many categories of expenditure, and slightly reduced endowment spending rates. These results are consistent with private universities maximizing objectives that require them to allocate funds over a broad array of activities. Our results suggest that public universities used federal funds as leverage to gain independence from state governments--gaining the ability to set tuition and other prices closer to market-based rates but losing state appropriations in the bargain. Overall, the stimulus apparently caused universities to increase their investments in research and human capital. We find no evidence that federal funds directed to universities propped up aggregate demand or generated local economic multipliers in the class Keynesian sense, but this is not surprising because only a small share of the federal funds "stuck where they hit."

Consumer Price Search and Platform Design in Internet Commerce (with Liran Einav, Jonathan Levin, Neel Sundaresan) 

American Economic Review, 108(7), July 2018, 1820-1859.

Online Appendix and Data and Programs (data set is available with AER subscription only)

The platform design -- the process that helps potential buyers on the internet navigate toward products they may purchase -- plays a critical role in reducing search frictions and determining market outcomes. We study a key trade-off associated with two important roles of efficient platform design -- guiding consumers to their most desired product while also strengthening seller incentives to lower prices. We use simple theory to illustrate this, and then combine detailed browsing data from eBay and an equilibrium model of consumer search and price competition to quantitatively assess this trade-off in the particular context of a change in eBay's marketplace design.

Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya (with Lauren Falcao Bergquist)

American Economic Review, 110(12), December 2020, 3705-3747. [lead article]

Online Appendix and Data and Programs

Press: The Economist; VoxDev

African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39%. Exogenously-induced firm entry has negligible effects on prices, and low take-up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82% of total surplus.

Quantifying the Supply Response of Private Schools to Public Policies (with Troy Smith) 

American Economic Review, 111(10), October 2021, 3376-3417.

Online Appendix and Data and Programs

School policies that cause a large demand shift between public and private schooling may cause some private schools to enter or exit the market. We study how the policy effects differ under a fixed versus changing market structure in the context of a public school funding reform in New York City. We find evidence of a reduction in private schools in response to the reform. Using a model of demand for and supply of private schooling, we estimate that 20% of the reform's effect on school enrollments came from increased private school exit and reduced private school entry.

Human Capital Depreciation and Returns to Experience (with Rigissa Megalokonomou, Constantine Yannelis)

American Economic Review, 112(11), November 2022, 3725-3762.

Online Appendix and Data and Programs

Human capital can depreciate if skills are unused. But estimating human capital depreciation is challenging, as worker skills are difficult to measure and less productive workers are more likely to spend time in non-employment. We overcome these challenges with new administrative data on teachers' assignments and their students' outcomes, and quasi-random variation from the teacher assignment process in Greece. We find significant losses to output, as a one-year increase in time without formal employment lowers students' test scores by 0.09 standard deviations. Using a simple production model, we estimate a skill depreciation rate of 4.3% and experience returns of 6.8%.

Debt Moratoria: Evidence from Student Loan Forbearance (with Constantine Yannelis, Ching-Tse Chen)

American Economic Review: Insights, 6(2), June 2024, 196-213.

Online Appendix and Data and Programs

Press: Brookings; Washington Post; Marginal Revolution; NASFAA; Yahoo Finance; The Economist; Time; The Pie Podcast; The New York Times 1; The New York Times 2; The Wall Street Journal; NBER Digest; Five Thirty-Eight

We evaluate the effects of the 2020 student debt moratorium that paused payments for student loan borrowers. Using administrative credit panel data, we show that the payment pause led to a sharp drop in student loan payments and delinquencies for borrowers subject to the debt moratorium, as well as an increase in credit scores. We find a large stimulus effect, as borrowers substitute increased private debt for paused public debt. Comparing borrowers whose loans were frozen with borrowers whose loans were not frozen due to differences in whether the government owned the loans, we show that borrowers used the new liquidity to increase borrowing on credit cards, mortgages, and auto loans rather than avoid delinquencies. The effects are concentrated among borrowers without prior delinquencies, who saw no change in credit scores, and we see little effects following student loan forgiveness announcements. The results highlight an important complementarity between liquidity and credit, as liquidity increases the demand for credit even as the supply of credit is fixed.

Working Papers:

Screening with Multitasking: Theory and Empirical Evidence from Teacher Tenure Reform (with Isaac Opper)

Revise and resubmit, Journal of Political Economy

What happens when employers screen their employees but only observe a subset of output? We specify a model with heterogeneous employees and show that their response to the screening affects output in both the probationary period and the post-probationary period. The post-probationary impact is due to their heterogeneous responses affecting which individuals are retained and hence the screening efficiency. We show that the impact of the endogenous response on both the unobserved outcome and screening efficiency depends on whether increased effort on one task increases or decreases the marginal cost of effort on the other task. If the response decreases unobserved output in the probationary period then it increases the screening efficiency, and vice versa. We then assess these predictions empirically by studying a change to teacher tenure policy in New York City, which increased the role that a single measure -- test score value-added -- played in tenure decisions. We show that in response to the policy teachers increased test score value-added and decreased output that did not enter the tenure decision. The increase in test score value-added was largest for the teachers with more ability to improve students' untargeted outcomes, increasing their likelihood of getting tenure. We estimate that the endogenous response to the policy announcement reduced the screening efficiency gap -- defined as the reduction of screening efficiency stemming from the partial observability of output -- by 28%, effectively shifting some of the cost of partial observability from the post-tenure period to the pre-tenure period.

Teacher Labor Market Policy and the Theory of the Second Best (with Michael Bates, Andrew Johnston, Isaac Sorkin)

Revise and resubmit, Quarterly Journal of Economics

For more on efficiency, see "Teacher Labor Market Equilibrium and the Distribution of Achievement": NBER Working Paper 29728

The teacher labor market is a two-sided matching market where the effects of policies depend on the actions of both sides. We specify a matching model of teachers and schools that we estimate with rich data on teachers' applications and principals' ratings. Both teachers' and principals' preferences deviate from those that would maximize the achievement of economically disadvantaged students: teachers prefer schools with fewer disadvantaged students, and principals' ratings are weakly related to teacher effectiveness. In equilibrium, these two deviations combine to produce a surprisingly equitable current allocation where teacher quality is balanced across advantaged and disadvantaged students. To close academic achievement gaps, policies that address deviations on one side alone are ineffective or harmful, while policies that address both deviations  could substantially increase disadvantaged students' achievement.

Work in Progress:

Equilibrium Effects of Public Provision in Education Markets (with Daniel Morales, Christopher Neilson, Sebastian Otero)

The Boundaries of a School: The Channels Explaining Charter School Network Growth (with Esperanza Johnson)

Relying on Unregulated Firms to Achieve Public Health Goals: Evidence from Pharmacies in Kenya (with Anne Karing, Emma Yan, Younggeun Yoo)

Demand Shocks and Firm Dynamics: Evidence from Government Procurement (with Marvin Cardoza, Christopher Neilson, Sebastian Otero)

Materials provided are for Educational Use Only. All articles are the sole copyright of their respective publishers.