Scholarly Publications

Peer-reviewed articles and books from affiliated faculty and IRLE Center staff.


2011
Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data
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Industrial Relations: A Journal of Economy and Society 50(2):205-240. April 2011.

Abstract
Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state- and year-fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long-run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.
Constrained after college: Student loans and early-career occupational choices
and   –  Scholarly Publications

Journal of Public Economics 95(1-2):149-163. February 2011.

Abstract
In the early 2000s, a highly selective university introduced a “no-loans” policy under which the loan component of financial aid awards was replaced with grants. We use this natural experiment to identify the causal effect of student debt on employment outcomes. In the standard life-cycle model, young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings; the presence of debt has only income effects on investment decisions. We find that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid “public interest” jobs. We also find some evidence that debt affects students’ academic decisions during college. Our estimates suggest that recent college graduates are not life-cycle agents. Two potential explanations are that young workers are credit constrained or that they are averse to holding debt. We find suggestive evidence that debt reduces students’ donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year; we argue this result is more likely consistent with credit constraints than with debt aversion.
Review of ‘Learning About Teaching: Initial Findings from the Measures of Effective Teaching Project
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Think Tank Review, National Education Policy Center, Boulder Colorado. January 2011.

Abstract
The Bill & Melinda Gates Foundation’s “Measures of Effective Teaching” (MET) Project seeks to validate the use of a teacher’s estimated “value-added”—computed from the year-on-year test score gains of her students—as a measure of teaching effectiveness. Using data from six school districts, the initial report examines correlations between student survey responses and value- added scores computed both from state tests and from higher-order tests of conceptual understanding. The study finds that the measures are related, but only modestly. The report interprets this as support for the use of value-added as the basis for teacher evaluations. This conclusion is unsupported, as the data in fact indicate that a teacher’s value-added for the state test is not strongly related to her effectiveness in a broader sense. Most notably, value-added for state assessments is correlated 0.5 or less with that for the alternative assessments, meaning that many teachers whose value-added for one test is low are in fact quite effective when judged by the other. As there is every reason to think that the problems with value-added measures apparent in the MET data would be worse in a high-stakes environment, the MET results are sobering about the value of student achievement data as a significant component of teacher evaluations.
Are Mixed Neighborhoods Always Unstable? Two-Sided and One-Sided Tipping
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Neighborhood and Life Chances: How Place Matters in Modern America, Harriet B. Newburger, Eugenie Birch and Susan Wachter, eds. University of Pennsylvania Press. 2011.

Abstract
A great deal of urban policy depends on the possibility of creating stable, economically and racially mixed neighborhoods. Many social interaction models – including the seminal Schelling (1971) model – have the feature that the only stable equilibria are fully segregated. These models suggest that if home-buyers have preferences over their neighborhoods’ racial composition, a neighborhood with mixed racial composition is inherently unstable, in the sense that a small change in the composition sets off a dynamic process that converges to either 0% or 100% minority share. Card, Mas, and Rothstein (2008) outline an alternative “one-sided” tipping model in which neighborhoods with a minority share below a critical threshold are potentially stable, but those that exceed the threshold rapidly shift to 100% minority composition. In this paper we examine the racial dynamics of Census tracts in major metropolitan areas over the period from 1970 to 2000, focusing on the question of whether tipping is “two-sided” or “one-sided”. The evidence suggests that tipping behavior is one-sided, and that neighborhoods with minority shares below the tipping point attract both white and minority residents.
2010
Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties
, and   –  Working Papers

Review of Economics and Statistics, 92(4):945-964. November, 2010.

Abstract
We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county pairs in the United States that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long-term effects of minimum wage changes.
The Composition of the Unemployed and Long-Term Unemployed in Tough Labor Markets
and   –  Scholarly Publications

Monthly Labor Review, 133(10):3-18. US Bureau of Labor Statistics. October 2010.

Abstract
The share of unemployment accounted for by long-term unemployment has risen higher following the 2007–09 recession than following any other recent recession, and the makeup of the labor force, the unemployed, and the long-term unemployed has changed substantially since 1983
The Value of School Facility Investments: Evidence from a Dynamic Regression Discontinuity Design
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Quarterly Journal of Economics, 125 (1):215-261. February 2010.

Abstract
Despite extensive public infrastructure spending, surprisingly little is known about its economic return. In this paper, we estimate the value of school facility investments using housing markets: standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices. Our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow mar- gins. We extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices, student achievement, and district composition. Our results indicate that California school districts underinvest in school facilities: passing a referendum causes immedi- ate, sizable increases in home prices, implying a willingness to pay on the part of marginal homebuyers of $1.50 or more for each $1 of capital spending. These effects do not appear to be driven by changes in the income or racial composition of homeowners, and the impact on test scores appears to explain only a small portion of the total housing price effect.
Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence
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American Economic Journal: Economic Policy, 2(1):177-208. February 2010.

Abstract
The Earned Income Tax Credit (EITC) is intended to encourage work. But EITC-induced in- creases in labor supply may drive wages down, shifting the intended transfer toward employers. I simulate the economic incidence of the EITC under a range of plausible supply and demand elasticities. In all of the scenarios that I consider, a substantial portion of the intended transfer to low income single mothers is captured by employers through reduced wages. The transfer to employers is borne in part by low skill workers who are not themselves eligible for the EITC and are therefore made strictly worse off by its existence. I contrast the EITC with a traditional Negative Income Tax (NIT). The NIT discourages work, and so induces large transfers from employers of low skill labor to their workers. With my preferred parameters the EITC increases after-tax incomes by $0.73 per dollar spent, while the NIT yields $1.39.
Teacher Quality in Educational Production: Tracking, Decay, and Student Achievement
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Quarterly Journal of Economics 125(1):175-214. February 2010.

Abstract
Growing concerns over the inadequate achievement of U.S. students have led to proposals to reward good teachers and penalize (or fire) bad ones. The leading method for assessing teacher quality is “value added” modeling (VAM), which decomposes students’ test scores into components attributed to student heterogeneity and to teacher quality. Implicit in the VAM approach are strong assumptions about the nature of the educational production function and the assignment of students to classrooms. In this paper, I develop falsification tests for three widely used VAM specifications, based on the idea that future teachers cannot influence students’ past achievement. In data from North Carolina, each of the VAMs’ exclusion restrictions is dramatically violated. In particular, these models indicate large “effects” of fifth grade teachers on fourth grade test score gains. I also find that conventional measures of individual teachers’ value added fade out very quickly and are at best weakly related to long-run effects. I discuss implications for the use of VAMs as personnel tools.
Reading Stories of Crisis and Recovery: What Next for the American City?
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Berkeley Planning Journal, 23(1):166-177. 2010.

Abstract
Economic crisis makes for compelling stories: coming back from lunch to find the office emptied out, planting backyard vegetable gardens, walking away from their foreclosed homes. The crisis thus becomes a series of tales of individual suffering, resilience, hard luck and fresh starts.

Such narratives of crisis permit certain kinds of discourse to become normalized: discourses about the need for wholesale change, for desperate measures, for painful adjustment, for facing reality. As their plots reveal conventional ideas about the roots of the crisis, they also become stories about particular forms of recovery. Such stories help to justify, frame, and naturalize arguments about what the future holds and what responses are necessary. As a planner, I find myself wondering which pieces of this conventional wisdom will be quoted in urban plans and development pitches. How will these stories shape discourse about what’s necessary for American cities to “win”?

2009
Student Sorting and Bias in Value Added Estimation: Selection on Observables and Unobservables
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Education Finance and Policy, 4(4):537-571. Fall 2009.

Abstract
Nonrandom assignment of students to teachers can bias value-added estimates of teachers’ causal effects. Rothstein (2008, 2010) shows that typical value-added models indicate large counterfactual effects of fifth- grade teachers on students’ fourth-grade learning, indi- cating that classroom assignments are far from random. This article quantifies the resulting biases in estimates of fifth-grade teachers’ causal effects from several value- added models, under varying assumptions about the assignment process. If assignments are assumed to de- pend only on observables, the most commonly used specifications are subject to important bias, but other feasible specifications are nearly free of bias. I also con- sider the case in which assignments depend on unob- served variables. I use the across-classroom variance of observables to calibrate several models of the sort- ing process. Results indicate that even the best feasible value-added models may be substantially biased, with the magnitude of the bias depending on the amount of information available for use in classroom assignments.
Selection Bias in College Admissions Test Scores
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Economics of Education Review, 28(3):295-307. June 2009.

Abstract
Data from college admissions tests can provide a valuable measure of student achievement, but the non-representativeness of test-takers is an important concern. We examine selectivity bias in both state-level and school-level SAT and ACT averages. The degree of selectivity may differ importantly across and within schools, and across and within states. To identify within-state selectivity, we use a control function approach that conditions on scores from a representative test. Estimates indicate strong selectivity of test-takers in “ACT states,” where most college-bound students take the ACT, and much less selectivity in SAT states. To identify within- and between-school selectivity, we take advantage of a policy reform in Illinois that made taking the ACT a graduation requirement. Estimates based on this policy change indicate substantial positive selection into test participation both across and within schools. Despite this, school-level averages of observed scores are extremely highly correlated with average latent scores, as across-school variation in sample selectivity is small relative to the underlying signal. As a result, in most contexts the use of observed school mean test scores in place of latent means understates the degree of between-school variation in achievement but is otherwise unlikely to lead to misleading conclusions.
2008
Tipping and the Dynamics of Segregation
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Quarterly Journal of Economics, 123(1):177-218. February 2008.

Abstract
Schelling (“Dynamic Models of Segregation,” Journal of Mathematical Sociology 1 (1971), 143–186) showed that extreme segregation can arise from social interactions in white preferences: once the minority share in a neighborhood exceeds a “tipping point,” all the whites leave. We use regression discontinuity methods and Census tract data from 1970 through 2000 to test for discontinuities in the dynamics of neighborhood racial composition. We find strong evidence that white population flows exhibit tipping-like behavior in most cities, with a distribution of tipping points ranging from 5% to 20% minority share. Tipping is prevalent both in the suburbs and near existing minority enclaves. In contrast to white population flows, there is little evidence of nonlinearities in rents or housing prices around the tipping point. Tipping points are higher in cities where whites have more tolerant racial attitudes.
Down and Out: Economists Assess the Teacher Pay Disadvantage
, and   –  Scholarly Publications

California Public Employee Relations Journal, 128:13-21. February 2008.

Abstract
As public employees, elementary and secondary school teachers have the enormous responsibility of educating our youth,and much hinges on their success.Teacher quality is the most important input schools contribute to the academic success of their students.1 The ability of school officials to recruit and retain highly effective classroom teachers is a struggle in many school districts throughout the United States. For decades now, a small and declining fraction of the most cognitively skilled graduates choose to become teachers,2 while rigorous national standards and school-based accountability for student performance have pushed the demand for talented teachers to an all-time high.

Prolific career opportunities have made it increasingly difficult to attract the best and the brightest into the profession. Professional women, historically afforded limited choices outside of teaching, have increasingly diverse career prospects. Attractive pay and compensation structures are part of the appeal of these ever- expanding opportunities. For this reason, it is important to ask whether teacher pay has kept up with that of other professions available to college graduates today. This article presents empirical evidence from several sources that documents relative teacher pay in a present and historical context.

2007
Racial Segregation and the Black-White Test Score Gap
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Journal of Public Economics, 91(11-12):2158-2184. December 2007.

Abstract
Racial segregation is often blamed for some of the achievement gap between blacks and whites. We study the effects of school and neighborhood segregation on the relative SAT scores of black students across different metropolitan areas, using large microdata samples for the 1998-2001 test cohorts. Our models include detailed controls for the family background of individual test-takers, school-level controls for selective participation in the test,and city-level controls for racial composition, income, and region. We find robust evidence that the black-white test score gap is higher in more segregated cities. Holding constant family background and other factors, a shift from a highly segregated city to a nearly integrated city closes about one- quarter of the raw black-white gap in SAT scores. Specifications that distinguish between school and neighborhood segregation suggest that neighborhood segregation has a consistently negative impact while school segregation has no independent effect, though we cannot reject equality of the two effects. Additional tests indicate that much of the effect of neighborhood segregation operates through neighbors’ incomes, not through race per se. Data on enrollment in honors courses suggest that within-school segregation increases when schools are more highly integrated, potentially offsetting the benefits of school desegregation and accounting for our findings.
The Economic Impacts of a Citywide Minimum Wage
, and   –  Working Papers

Industrial and Labor Relations Review 60(4):522-543. July 2007. Cornell University, School of Industrial & Labor Relations.

Abstract
This paper presents the first study of the economic effects of a citywide minimum wage— San Francisco’s adoption of a minimum wage, set at $8.50 in 2004 and $9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fast-food and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.
2006
Good Principals or Good Peers: Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Incentive Effects of Competition Among Jurisdictions
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American Economic Review, 96(4):1333-1350. September 2006.

Abstract
School choice may improve productivity if parents choose well-run schools, but not if parents primarily choose schools for their peer groups. Theoretically, high income families cluster near preferred schools in housing market equilibrium; these need only be effective schools if effectiveness is highly valued. If it is, “effectiveness sorting” will be more complete in markets offering more residential choice. Although effectiveness is unobserved to the econometrician, I test for an observable implication of effectiveness sorting. I find no evidence of a choice effect on sorting, indicating a small role for effectiveness in preferences and suggesting caution about choice’s productivity implications.
Basic Family Budgets: Working Families: Incomes Often Fail to Meet Living Expenses Around the United States
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International Journal of Health Services 36(3):443–454. 2006.

Abstract
The ability of families to meet their most basic needs is an important measure of economic stability and well-being. While poverty thresholds are used to evaluate the extent of serious economic deprivation in our society, family budgets—that is, the income a family needs to secure safe and decent-yet-modest living standards in the community in which it resides—offer a broader measure of economic welfare. Basic family budgets take into account differences in both geographic location and family type. In total, this report presents basic budgets for more than 400 U.S. communities and six family types (either one or two parents with one, two, or three children). That the budgets differ by location is important, since certain costs, such as housing, vary significantly depending on where one resides. This geographic dimension of family budget measurements offers a comparative advantage over using poverty thresholds, which only use a national baseline in their measurements.
Race, Income, and College in 25 Years: The Continuing Legacy of Segregation and Discrimination
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American Law and Economics Review, 8(2):282-311. Summer 2006.

Abstract
In Grutter v. Bollinger, Justice O’Connor conjectured that in 25 years affirmative action in college admissions will be unnecessary. We project the test score distribution of black and white college applicants 25 years from now, focusing on the role of black–white family income gaps. Economic progress alone is unlikely to narrow the achievement gap enough in 25 years to produce today’s racial diversity levels with race-blind admissions. A return to the rapid black–white test score convergence of the 1980s could plausibly cause black representation to approach current levels at moderately selective schools, but not at the most selective schools.
2005
2004
College Performance Predictions and the SAT
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Journal of Econometrics, 121(1-2):297-317. July-August 2004.

Abstract
The methods used in most SAT validity studies cannot be justified by any sample selection assumptions and are uninformative about the source of the SAT’s predictive power. A new omitted variables estimator is proposed; plausibly consistent estimates of the SAT’s contribution to predictions of University of California freshman grade point averages are about 20% smaller than the usual methods imply. Moreover, much of the SAT’s predictive power is found to derive from its correlation with high school demographic characteristics: The orthogonal portion of SAT scores is notably less predictive of future performance than is the unadjusted score.
2003
Living Wage Ordinances in California
  –  Scholarly Publications

In The State of California Labor 2003, Ruth Milkman, ed. 199-226. Cleveland: Brothers Printing Company. 2003.

Abstract
Living wage mandates legislate minimum hourly wages that are considerably higher than minimum wage rates. Since 1994 living wage ordinances have been passed and, in varying degrees, implemented in over ninety-five local governmental entities in the United States; among them are twenty-one California cities. The author presents a summary of the living wage ordinances in California, including their wage mandate levels and their coverage. He discusses how the minimum wage and the federal poverty standard have failed to keep up with increased living costs, especially in California’s cities, and reviews arguments for and against living wage policies. The author also surveys older academic studies on minimum wage and living wages and then discusses a new generation of research studies on the impacts of living wages. This new set of studies, which includes detailed analyses of Los Angeles and San Francisco, provides a more careful and complete understanding than was previously available. Using before-and-after surveys of employers and workers and more sophisticated methodology, they reveal that living wage policies increase pay for their intended beneficiaries without creating disemployment effects. Living wage policies also reduce employee turnover and absenteeism and improve worker performance, thereby creating some employer savings in the short run and generating incentives for productivity growth in the long run. The policies’ costs to employers and taxpayers are considerably smaller than some have projected. The author concludes by discussing recent developments in living wage campaigns that may lead to greater impacts in the future.