RESEARCH

Summaries: NBER Digest, VoxEU, The Project on Workforce 

Press / Policy: Reuters, NPR: Planet Money, Psychology Today, Speech by Fed Governor Lisa Cook , Harvard Gazette, The Economist, CNET, International Energy Agency (IEA), Marketplace, Barron's (feature), Barron's, Congressional Budget Office, Barron's, Inter-Governmental AI Safety Report, Bloomberg, Bloomberg, Slow Boring, Yahoo! Finance, Forbes 

Abstract. Generative artificial intelligence (AI) is a potentially important new technology, but its impact on the economy depends on the speed and intensity of adoption. This paper reports results from a series of nationally representative U.S. surveys of generative AI use at work and at home. As of late 2024, nearly 40 percent of the U.S. population age 18-64 uses generative AI. 23 percent of employed respondents had used generative AI for work at least once in the previous week, and 9 percent used it every work day. Relative to each technology’s first mass-market product launch, work adoption of generative AI has been as fast as the personal computer (PC), and overall adoption has been faster than either PCs or the internet. Generative AI and PCs have very similar early adoption patterns by education, occupation, and other characteristics. Between 1 and 5 percent of all work hours are currently assisted by generative AI, and respondents report time savings equivalent to 1.4 percent of total work hours. This suggests that substantial productivity gains from generative AI are possible.

Abstract.  We document large differences in lifetime hours of work using data from the NLSY79 and argue that these differences are an important source of inequality in lifetime earnings. To establish this we develop and calibrate a rich heterogeneous agent model of labor supply and human capital accumulation that allows for heterogeneity in preferences for work, initial human capital and learning ability, as well as idiosyncratic shocks to human capital throughout the life-cycle. Our calibrated model implies that almost 20 percent of the variance in lifetime earnings is accounted for by differences in lifetime hours of work, with 90 percent of this effect due to heterogeneity in preferences. Higher lifetime hours contribute to lifetime earnings via two channels: a direct channel (more hours spent in production at given productivity) and a human capital channel (more hours spent investing in human capital, which increases future productivity). Between a third and a half of the effect of lifetime hours on lifetime earnings is due to the human capital channel. Our model implies that policies that limit long hours have important effects on both the mean and variance of lifetime earnings.

Press: Bloomberg 

Abstract.  Interstate migration by working-age adults in the US declined substantially during the Great Recession and remained subdued through 2019. We document that interstate migration rose sharply following the 2020 Covid-19 outbreak, nearly recovering to pre-Great recession levels, and provide evidence that this reversal was primarily driven by the rise in work from home (WFH). Before the pandemic, interstate migration by WFH workers was consistently 50% higher than for commuters. Since the Covid-19 outbreak, this migration gap persisted while the WFH share tripled. Using quasi-panel data and plausibly exogenous changes in employer WFH policies, we address concerns about omitted variables or reverse causality and conclude that access to WFH induces greater interstate migration. An aggregate accounting exercise suggests that over half of the rise in interstate migration since 2019 can be accounted for by the rise in the WFH share.  Moreover, both actual WFH and pre-pandemic WFH potential, based on occupation shares, can account for a sizable share of cross-state variation in migration.

Abstract.  Married men work substantially more hours than men who have never been married, even after controlling for observables. Panel data reveal that much of this gap is attributable to an increase in work in the years leading up to marriage. Two potential explanations for this increase are: (i) men hit by positive labor market shocks are more likely to marry; and (ii) the prospect of marriage increases men's labor supply. We quantify the relative importance of these two channels using a structural life-cycle model of marriage and labor supply. Our calibration implies that marriage substantially increases male labor supply. Counterfactual simulations suggest that if men were unable to marry, prime-age male work hours would fall by 7%, and if marriage rates fell to the extent observed, men born around 1980 would work 2% fewer hours than men born around 1960.

Summaries: Dallas Fed Economics, VoxEU

Press: 2021. VCU News, Washington Post, Wall Street Journal, Politico, Reuters, Reuters, Forbes, Profile in Richmond Magazine, Richmond Times-Dispatch, 2020. Politico, Politico, Wall Street Journal , NBC Richmond, NBC News, Wall Street Journal, Bloomberg, Wall Street Journal, Wall Street Journal, Wall Street Journal, New York Times, Wall Street Journal, Business Insider, AP, Forbes, Philadelphia Inquirer, Wall Street Journal, Washington Post, Politico, Star Tribune

Blogs: MacroBusiness, The Big Picture, Grumpy Economist, Supply and Demand, Supply and Demand, EPI, Barraud 

Podcasts: Richmond Fed's "Speaking of the Economy" 

Abstract.  This project aims to provide labor market data several weeks ahead of official statistics via a national online labor market survey of a sample representative of the US working age population. We refer to the survey as the Real-Time Population Survey (RPS). Core questions in the RPS closely follow the official US labor market survey (the CPS), which allows us to construct estimates consistent with theirs. The RPS was conducted twice monthly from March through October, and since then is conducted monthly.

Summaries: Dallas Fed blog post

Press: Bloomberg, Houston Chronicle, Business Insider,  Boston Globe, Forbes 

Blogs: Nielson 

Abstract.  Based on novel survey data, we document the evolution of commuting behavior in the U.S. over the course of the COVID-19 pandemic. Work from home (WFH) increased sharply and persistently after the outbreak, and much more so among some workers than others. Using theory and evidence, we argue that the observed heterogeneity in WFH transitions is consistent with potentially more permanent changes to work arrangements in some occupations, and not just temporary substitution in response to greater health risks. Consistent with increased WFH adoption, many more---especially higher-educated---workers expect to WFH in the future.

Press: ABC Action News, Politico, Bloomberg, Fortune, LA Times 

Abstract.  Economists have recently begun using independent online surveys to collect national labor market data. Questions remain over the quality of such data. This paper provides an approach to address these concerns. Our case study is the Real-Time Population Survey (RPS), a novel online survey of the US built around the Current Population Survey (CPS). The RPS replicates core components of the CPS, ensuring comparable measures that allow us to weight and rigorously validate our results using a high-quality benchmark. At the same time, special questions in the RPS yield novel information regarding employer reallocation during the COVID-19 pandemic. We document that 26% of pre-pandemic workers were working for a new employer one year into the COVID-19 outbreak in the US, at least double the rate of any previous episode in the past quarter century. Our discussion contains practical suggestions for the design of novel labor market surveys and highlights other promising applications of our methodology.

Abstract. We document two robust features of the cross-sectional distribution of usual weekly hours and hourly wages. First, usual weekly hours are heavily concentrated around 40 hours, while at the same time a substantial share of total hours come from individuals who work more than 50 hours. Second, mean hourly wages are non-monotonic across the usual hours distribution, with a peak at 50 hours. We develop and estimate a model of labor supply to account for these features. The novel feature of our model is that earnings are non-linear in hours, with the extent of nonlinearity varying over the hours distribution. Our estimates imply significant wage penalties for individuals that deviate from 40 hours in either direction, leading to a large mass of individuals that work 40 hours and are not very responsive to shocks. This has important implications for the role of labor supply as a mechanism for self-insurance in a standard heterogeneous agent-incomplete markets model and for empirical strategies designed to estimate labor supply parameters.

Abstract.  From 1995 to 2015, the aggregate college completion rate in the US increased from 22.9% to 33.5%. Yet, completion trends differed markedly for individuals from different family backgrounds. This paper considers the extent to which trends in college preparedness contributed to the growth in aggregate completion, as well as the variation in completion trends across family backgrounds. We first document parallel empirical patterns in pre-college investments, college preparedness, and college completion. We then evaluate the quantitative importance of pre-college investments and preparedness for completion trends in a structural model of intergenerational human capital investment with heterogeneous families. Within the model the human capital investment channel generates half of the empirical increase in college completion; shifts in the composition of family types over time are also important. Finally, we use our model to show that subsidizing pre-college investment for low resource families has a larger impact on college completion and lifetime earnings compared to alternative interventions like tuition subsidies or cash transfers.

Abstract.  This paper assesses the revenue potential of removing the Social Security payroll tax cap. I do so within an OLG model featuring heterogeneous agents who endogenously invest in risky human capital. Removing the tax cap leads to a sizable increase in Social Security revenues, but also leads to a decrease in federal income tax revenues. Taking both Social Security and income taxes into account, removing the tax cap does not raise sufficient revenues to offset looming demographic changes. One factor limiting revenue gains is that removing the tax cap reduces aggregate output, with reduced human capital investment playing a central role.

Abstract.  This paper shows that in a life-cycle framework the optimal tax on capital depends crucially on how human capital is accumulated. We focus on three cases common to the macroeconomic literature: (i) LearningBy-Doing (LBD), (ii) Learning-Or-Doing (LOD), and (iii) exogenous accumulation. First, we show analytically in a simple two-period model that endogenizing human capital introduces novel motives for the government to tax capital when it cannot directly condition taxes on age, and moreover that these motives differ depending on whether LBD or LOD is assumed. We then quantify differences in optimal capital taxes using a rich life-cycle framework that features heterogeneity in learning ability and initial human capital. With proportional taxes the optimal capital tax is 12pp higher with LBD than with exogenous accumulation, but 16pp lower with LOD than with exogenous accumulation.  We show that  heterogeneity in learning ability strengthens the novel channels introduced by human capital, resulting in a larger gap in capital taxes between LBD and LOD relative to a case with homogeneous workers.  Finally, we show that although allowing the government to make labor taxes progressive reduces the gap in optimal capital taxes, a sizeable gap still persists.

Abstract.  Many government policies affect incentives to acquire human capital. Two workhorse models dominate the literature analyzing these policies: Learning by Doing (LBD) and Ben-Porath (BP). This paper makes two novel findings related to these models. First, LBD and BP generate different predictions for life-cycle earnings growth. BP predicts that the heterogeneity in earnings growth rates across workers should disappear over the life-cycle because the workers stop investing as they age. The LBD model cannot replicate this feature because workers accumulate human capital automatically throughout the life-cycle. Second, the same model features that generate different life-cycle predictions between BP and LBD also generate different implications for policies that affect the payoff to human capital accumulation. To illustrate this quantitatively, I show that increasing marginal labor tax rates for top earners depresses human capital accumulation more under BP. As a result, the Laffer curve for top marginal income tax rates is flatter, and peaks 10 percentage points lower, with BP versus LBD.

Abstract.  We develop an equilibrium concept in the Debreu (1954) theory of value tradition for a class of adverse selection economies which includes the Spence (1973) signaling and Rothschild-Stiglitz (1976) insurance environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.

Abstract.  This paper documents heterogeneity in work from home (WFH) across six U.S. data sets. These surveys agree that pre-pandemic differences in WFH rates by sex, education, and state of residence expanded following the Covid-19 outbreak. The surveys also show similar post-pandemic trends in WFH by firm size and industry. We show that an industry’s WFH potential was highly correlated with actual WFH during the first year or two of the Covid-19 pandemic, but that this correlation was much weaker before and after the pandemic, suggesting that WFH potential is a necessary but not sufficient determinant in the decision to WFH.

Abstract.  This paper documents the prevalence of work from home (WFH) in six U.S. datasets. These surveys measure WFH using different questions, reference periods, samples, and survey collection methods. Once we construct samples and WFH measures that are comparable across surveys, all surveys broadly agree about the trajectory of aggregate WFH since the Covid-19 outbreak. The most important source of disagreement in the level of WFH across surveys is in WFH by self-employed workers; by contrast, surveys closely agree on rates of WFH among employees. All surveys agree that in 2024 WFH remains substantially above pre-pandemic levels. We also highlight that full-time WFH drove most of the increase in aggregate WFH during and after the pandemic but part-time WFH has become a more significant contributor since 2022. Finally, we validate findings from survey data by comparing self-reported commuting behavior to cellphone geolocation data from Google Workplace Visits.

Abstract.  In 1979, the National Longitudinal Study of Youth 1979 (NLSY79) began following a group of US residents born between 1957 and 1964. It has continued to re-interview these same individuals for more than four decades. Despite this long sampling period, attrition remains modest. This paper shows that after 40 years of data collection, the remaining NLYS79 sample continues to be broadly representative of their national cohorts with regard to key labor market outcomes. Life-cycle profiles of employment, hours worked, and earnings tightly track those in the Current Population Survey for the same cohorts. Moreover, average lifetime earnings over the age range 25 to 55 closely align with the same measure in Social Security Administration data for the same cohorts. Our results suggest that the NLSY79 can continue to provide useful data for economists and other social scientists studying life-cycle and lifetime labor market outcomes, including earnings inequality.

Press: Reuters 

Abstract.  We argue that hours per worker are at least as important as employment rates when it comes to projecting future labor market trends and potential output. Based on data for 18 European countries and the US over the two decades prior to the COVID-19 pandemic, we document that hours worked per person fell in most countries, driven by a uniform decline in hours per worker. By contrast, employment rates increased in most countries. We present a stylized model in which a decrease in the fixed costs of working rationalizes the pattern of decreasing hours per worker and increasing employment rates. Although the COVID-19 pandemic increased the fixed costs of working in the short run, recent survey evidence from the US suggests that changing work arrangements since the pandemic had the opposite effect and are likely to persist into the future.