Abstract
We use newly linked tax records to show that the large responses of UK company owner-managers to personal taxes are due to intertemporal income shifting and not to reductions in real business activity. Around half of this shifting is short-term and helps prevent volatile incomes being taxed more heavily under progressive personal taxes. The remainder reflects systemic profit retention over long periods to take advantage of lower tax rates, including preferential treatment of capital gains. We find no evidence that this tax-induced retention increases business investment. It does, however, substantially reduce the tax revenue raised from high income business owners. Author Archives: The Review of Economics and Statistics Current Issue
Spending Response to a Predictable Increase in Mortgage Repayments: Evidence from Expiring Interest-Only Loans
Abstract
We study how homeowners' consumption responds to a negative and anticipated disposable income shock: the beginning of the amortization period on interest-only mortgages. We identify spending behavior through an event study approach, by matching loan-level data that covers the universe of Danish mortgages to detailed administrative registries on borrowers. In response to an average increase in installments worth 9% of income, consumption drops by 3% of income, when amortization begins. The reduction in expenditure is persistent. Borrowers who fail to smooth consumption are highly leveraged and likely to be denied a new interest-only loan, upon expiration. Do Academically Struggling Students Benefit from Continued Student Loan Access? Evidence from University and Beyond
Abstract
We estimate the effects of student loan access on educational attainment and labor market returns in New Zealand. We exploit the introduction of a national policy mandating a 50% pass rate for student loan renewals using a regression discontinuity design. Retaining loan access increases reenrollment for students around the threshold, and a majority eventually graduate with a bachelor's degree within seven years. We find that retaining student loan access leads to large labor market returns for struggling students. The additional debt from further borrowing is small relative to the earnings returns and declines quickly due to faster repayment. Credible School Value-Added with Undersubscribed School Lotteries
Abstract
We introduce two empirical strategies harnessing the randomness in school assignment mechanisms to measure school value-added. The first estimator controls for the probability of school assignment, treating take-up as ignorable. We test this assumption using randomness in assignments. The second approach uses assignments as instrumental variables (IVs) for low-dimensional models of value-added and forms empirical Bayes posteriors from these IV estimates. Both strategies solve the underidentification challenge arising from school undersubscription. Models controlling for assignment risk and lagged achievement in Denver and New York City yield reliable value-added estimates. Estimates from models with lower-quality achievement controls are improved by IV. Jam-Barrel Politics
Abstract
This paper studies the executive-legislative exchange of centrally allocated benefits (jam) for legislative support in Colombia using data from road building projects, legislative roll-call votes, and a leaked database which uncovered the assignment of road contracts to individual legislators. We draw hypotheses from a model in which an executive spreads jam to sway legislators. We document that assigned projects had excess costs, legislators targeted were more likely to be swing voters in congress, and legislators increased their support for the executive after their contracts were signed. The results are driven by legislators representing remote regions and constituencies with weaker political institutions. Same-Sex Marriage Recognition and Taxes: New Evidence about the Impact of Household Taxation
Abstract
The U.S. income tax code encourages marriage for some and discourages marriage for others, but same-sex couples were only recently exposed to these incentives. We estimate marriage responses by exploiting variation in the recognition of same-sex marriages for tax purposes versus earlier papers leveraging smaller changes. Using the American Community Survey, which reports cohabitation and marriage, we estimate a significant though very small marriage elasticity, with further analysis suggesting a higher (though still small) elasticity for low-earning households and in response to federal taxes specifically. Our estimates imply that the 2018 tax reform will increase marriage among high-earning cohabiting couples. How Does Improvement in Commuting Affect Employees? Evidence from a Natural Experiment
Abstract
We collect worker month-level panel data from two companies in Beijing for a two-year period before and after the opening of a nearby subway station, which significantly improved public transportation commutes for some workers. We find a significant difference-in-differences increase (12.6% of the standard deviation) in bonus pay, which is strongly correlated to worker-level performance measures, for affected workers relative to unaffected coworkers. We find no evidence that the improved performance is a result of affected workers spending extra time at the workplace. We find suggestive evidence for a relative decline in turnover, consistent with a gain in utility for affected workers. How to Attract Physicians to Underserved Areas? Policy Recommendations from a Structural Model
Abstract
This paper exploits location choices of all generalist physicians who graduated in Brazil between 2001 and 2013 to study policies aimed at increasing the supply of physicians in underserved areas. We set up and estimate a supply and demand model for physicians. We estimate physicians' locational preferences using a random coefficients discrete choice model. The demand has private establishments competing for physicians with private and public facilities around the country. Policy counterfactuals indicate that quotas in medical schools for students born in underserved areas and the opening of vacancies in medical schools in deprived areas are more cost-effective than financial incentives. Medical Worker Migration and Origin-Country Human Capital: Evidence from U.S. Visa Policy
Abstract
We exploit changes in U.S. visa policies for nurses to measure the origin-country human capital response to international migration opportunities. Combining data on all migrant departures and postsecondary institutions in the Philippines, we show that nursing enrollment and graduation increased substantially in response to greater U.S. demand for nurses. The supply of nursing programs expanded. Nurse quality, measured by licensure exam pass rates, declined. Despite this, for each nurse migrant, nine additional nurses were licensed. New nurses switched from other degree types but graduated at higher rates than they would have otherwise, increasing the human capital stock in the Philippines. Gentrification and Pioneer Businesses
Abstract
Little is known about where hotspots of gentrification emerge within a city and the role that some types of businesses play in the process. We develop a method to detect the sectors whose presence heralds the process of gentrification in a neighborhood. We show that these sectors, mostly found in cultural and creative industries, help to anticipate neighborhood change and that their predictive power complements that of traditional gentrification determinants. We also examine mechanisms related to amenities, worker characteristics, and signaling that are consistent with these results. The analysis illustrates the importance of businesses in the sociodemographic dynamics of neighborhoods.