Research

Abstract 

The rise of platform gig work in recent years has meant more workers have self-employment earnings, which are not subject to tax withholding but generally covered by information reporting on 1099 returns. In 2017, many gig workers suddenly and unexpectedly stopped receiving a 1099 for their work activity, providing an opportunity to study the impact of third-party reporting on tax compliance for gig workers. We first exploit exogenous variation in receiving a 1099 information return using a border-county design in two states where all workers continued to receive a 1099. We find no impact of receiving a 1099 on whether one files a tax return, but find that each dollar reported on a 1099-K increases self-reported profits by 17 cents. We then use the state-level filings to impute the size of the national online platform workforce in 2017 and 2018. We estimate that 770,000 gig workers did not receive information returns due to the change in third-party reporting practices by online platforms and that $560 million in profits went unreported on income tax filings as a result.

Abstract 

The rise of platform gig work in recent years has meant more workers have self-employment earnings, which are not subject to tax withholding but generally covered by information reporting on 1099 returns. In 2017, many gig workers suddenly and unexpectedly stopped receiving a 1099 for their work activity, providing an opportunity to study the impact of third-party reporting on tax compliance for gig workers. We first exploit exogenous variation in receiving a 1099 information return using a border-county design in two states where all workers continued to receive a 1099. We find no impact of receiving a 1099 on whether one files a tax return, but find that each dollar reported on a 1099-K increases self-reported profits by 17 cents. We then use the state-level filings to impute the size of the national online platform workforce in 2017 and 2018. We estimate that 770,000 gig workers did not receive information returns due to the change in third-party reporting practices by online platforms and that $560 million in profits went unreported on income tax filings as a result.

Abstract 

We use administrative data to document a high degree of migration across neighborhoods and neighborhood types defined in terms of poverty rate and median income. Neighborhood quality increases over an individual’s life cycle, and people also move to better neighborhoods in response to earnings improvements. We then develop several implications of these initial facts for high-poverty neighborhoods. First, resident turnover in these areas is rapid. Second, among the people living in a poor neighborhood at a point in time, the distribution of future concentrated poverty exposure is bimodal. Young people, renters, and those with children tend to spend fewer than half of the next ten years in similar neighborhoods, while older people and homeowners are unlikely to exit concentrated poverty. Third, poor neighborhoods tend to remain poor because of a dynamic process in which initial residents experience high earnings growth but disproportionately out-migrate when earnings improve, contrasting with a pure “poverty trap” understanding of persistent concentrated poverty.

Abstract 

We investigate whether removing a previously-obtained criminal record improves employment outcomes. We estimate the causal impact of criminal record remediation laws that have been widely enacted with the goal of improving employment opportunities for millions of individuals with records. We find consistent evidence that removing an existing record does not improve labor market outcomes, on average. A notable exception is participation in gig work through online platforms, which often screen workers based on their records but not their employment histories. The evidence is consistent with records initially scarring labor market trajectories in a way that is difficult to undo later.

Abstract 

We document the dynamics of tax-based measures of work mediated by online platforms from 2012 through 2021. We present a measurement framework to account for high reporting thresholds on some information returns using returns from states with lower reporting thresholds to provide a more complete estimate of total platform work. Updating data through 2021 allows us to provide the most comprehensive estimates of the COVID-19 pandemic on tax filing behavior. We find that the number of workers receiving information returns not subject to the 1099-K gap increased dramatically during the pandemic, with least 5 million individuals receiving information returns from platform gig work by 2021, nearly all from transportation platforms. We present evidence that the availability of expanded unemployment insurance benefits resulted in many individuals who were platform workers in 2019 not reporting any self-employment income in 2020-2021. At the same time, other services done by platform gig workers increased dramatically by at least 3.1 million people between 2019 and 2021. Interestingly, the broader 1099-contract economy follows a different trend, declining during this period, suggesting the challenges for tax administration are largely concentrated among platform gig workers, at least through 2021.

Abstract 

Rising self-employment rates in U.S. tax data that are absent in survey data have led to speculation that tax records capture a rise in new “gig” work that surveys miss. Drawing on the universe of IRS tax returns, we show that increases in the share of workers reporting self employment to the IRS are not associated with changes in firm-reported payments to “gig” and other contract workers after 2005 and are rather driven primarily by self-reported earnings of individuals in the EITC phase-in range. We isolate pure reporting responses from real labor supply responses by examining births of workers’ first children around an end-of-year cutoff for credit eligibility that creates exogenous variation in tax rates at the end of the tax year after labor supply decisions are already sunk. We find that exposing workers with sunk labor supply to negative marginal tax rates results in large increases in their propensity to self-report self-employment—only a small minority of which leads to bunching at kink-points. Consistent with pure strategic reporting behavior, we find no impact on reporting among taxpayers with no incentive to report additional income and no effects on firm-reported payments of any kind. Moreover, we find these reporting responses have grown over time as knowledge of tax incentives has become widespread. Quantification exercises suggest that changes in taxpayer reporting behavior are a major driver of discrepancies between self-employment trends in self-reported and third-party reported data. Our findings suggest caution is warranted before deferring to self-reported tax data over other data sources when measuring labor market trends.

Abstract 

We study the effect of incarceration on wages, self-employment, and taxes and transfers in North Carolina and Ohio using two quasi-experimental research designs: discontinuities in sentencing guidelines and random assignment to judges. Across both states, incarceration generates short-term drops in economic activity while individuals remain in prison. As a result, a year-long sentence decreases cumulative earnings over five years by 13%. Beyond five years, however, there is no evidence of lower employment, wage earnings, or self-employment in either state, as well as among defendants with no prior incarceration history. These results suggest that upstream factors, such as other types of criminal justice interactions or pre-existing labor market detachment, are more likely to be the cause of low earnings among the previously incarcerated, who we estimate would earn $5,000 per year on average if spared a prison sentence.

Abstract 

This paper studies the long-run effects of government-led construction of manufacturing plants on the regions where they were built and on individuals from those regions. Specifically, we examine publicly financed plants built in dispersed locations outside of major urban centers for security reasons during the United States' industrial mobilization for World War II. Wartime plant construction had large and persistent impacts on local development, characterized by an expansion of relatively high-wage manufacturing employment throughout the postwar era. These benefits were shared by incumbent residents; we find men born before WWII in counties where plants were built earned $1,200 (in 2020 dollars) or 2.5 percent more per year in adulthood relative to those born in counterfactual comparison regions, with larger benefits accruing to children of lower-income parents. The balance of evidence suggests that these individuals benefited primarily from the local expansion of higher-wage jobs to which they had access as adults, rather than because of developmental effects from exposure to better environments during childhood.

Abstract 

We study the labor market impacts of retroactively reducing felonies to misdemeanors in San Joaquin County, CA, where criminal justice agencies implemented Proposition 47 reductions in a quasi-random order, without requiring input or action from affected individuals. Linking records of reductions to administrative tax data, we find employment benefits for individuals who (likely) requested their reduction, consistent with selection, but no benefits among the larger subset of individuals whose records were reduced proactively. A field experiment notifying a subset of individuals about their proactive reduction also shows null results, implying that lack of awareness is unlikely to explain our findings.

Abstract

Do firms adjust wages in response to changes in their own demand level, or to changes in competitive pressure from rival employers? We study how exporters adjust wages in response to unexpected product demand shocks during the 2008–2009 Great Recession. Using rich data on Portuguese firms’ pre-recession export shipments, we measure firm-level shocks to export demand during the Recession. We show that shocks constructed at the firm level are not necessarily firm-specific and can be decomposed into a common component affecting all producers in a product market and an idiosyncratic component affecting individual firms within markets based on the locations of their pre-Recession customers. We demonstrate that while both components impact firms’ output and their workers’ wages, the common component spills over from firms to their labor market rivals, whereas the idiosyncratic component does not. We find that 10-15% of firms’ idiosyncratic demand passes through to their employees' wage growth with no effect on retention rates, implying significant dependence of wages on noncompetitive quasi-rents. Moreover, we find that wages respond primarily to shifts in internal labor demand when labor markets are thin, but they respond more to competition from other employers when labor markets are fluid. These results indicate that employers' ability to set wages hinges on the underlying competitiveness of the labor market.

Abstract 

This paper documents the extent and growth of gig work in the United States using IRS tax records. We discuss advantages of using tax data to learn about gig work and address several important methodological considerations. We find that around 12 percent of the 2018 workforce participated in contract-based gig work. Apart from the emergence of platform-based transportation work—typically is a secondary earnings source for participants—the overall share of the workforce relying on gig work as a primary job has remained relatively constant over time. We document key differences in the work done by high- and low-income individ- uals.

Abstract

The rise of freelance work in the online platform economy (OPE) has received considerable media and policy attention in recent years, but freelance work is by no means a new phenomenon. In this paper, we draw on IRS tax records to identify instances when workers begin doing online platform work versus other freelance/independent contractor “gig” work for firms. We find gig work occurs around major reductions in outside income and document usage over the lifecycle. Our results provide suggestive evidence on motivations for entering into each type of work.

Abstract

Is infrastructure construction an effective way to boost employment in distressed local labor markets? Using new geographically detailed data on highway construction that wasfunded by the American Recovery and Reinvestment Act, I study how road construction projects affect local employment growth. The method for allocating funds across space facilitates a plausible selection-on-observables strategy. I find that highway funding impacted construction employment at the county level: A dollar of additional Recovery Act spending on local construction increased local construction payrolls by thirty cents during the five years after the Act's passage. The magnitude of this effect matches the national labor share of construction revenues, suggesting that targeted spending did not crowd out other local construction. These effects are most pronounced in counties with smaller populations and smaller shares of residents that commute to outside counties for work. However, when testing for general equilibrium effects on local employment and payroll aggregates, I find effects close to zero, with very wide confidence intervals across all specifications. Although the Recovery Act was an intervention significant enough to have a sizable impact on the construction sector in counties with low mobility, these findings suggest that the local variation in highway spending was too small relative to baseline regional volatility to detect a “local multiplier” effect impacting jobs outside of manufacturing.

Abstract 

Abstract 

We examine the universe of tax returns in order to reconcile seemingly contradictory facts about the rise of alternative work arrangements in the United States. Focusing on workers in the “1099 workforce,” we document the share of the workforce with income from alternative, non-employee work arrangements has grown by 1.9 percentage points of the workforce from 2000 to 2016. More than half of this increase occurred over 2013 to 2016 and can be attributed almost entirely to dramatic growth among gigs mediated through online labor platforms. We find that the rise in online platform work for labor is driven by earnings that are secondary and supplemental sources of income. Many of these jobs do not show up in self-employment tax records: approximately 44 percent of the overall growth in the 1099 economy comes from people who do not file self-employment taxes. Examining the relationship between 1099s and self-employment tax records more generally, we find that the previously documented increases in self-employment tax filings since 2007 are largely driven by workers without 1099s. We discuss implications of these findings for tax administration and measurement of alternative work using tax data.