The Price-Marginal Cost Markup and its Determinants in U.S. Manufacturing

This paper estimates the price-marginal cost markup for US manufacturing using a new methodology. Most existing techniques of estimating the markup are a variant on Hall's (1988) framework involving the manipulation of the Solow Residual. However this paper argues that this notion is based on the unreasonable assumption that labor can be costlessly adjusted at a fixed wage rate. By relaxing this assumption, we are able to derive a generalized markup index, which when estimated using manufacturing data is highly countercyclical and decreasing in trend since the 1960s. When we then seek to explain what causes the manufacturing markup to behave in this way, the most important determinant is the share of imported goods in the industry. Thus, increasing foreign competition in manufacturing has led to a decline in the industry's markup over time.Markup; Marginal Cost

Family resources and college enrollment

This article reviews the literature on the effects of family income and tuition costs on college and enrollment and finds mixed evidence in support of tuition subsidies. The author also presents new evidence showing that college enrollment is especially sensitive to income for families with modest amounts of wealth, suggesting that borrowing constraints may be a factor in limiting access to higher education.College costs ; Income

Analyzing income mobility over generations

Income

New evidence on labor market dynamics over the business cycle

Using data from the U.S. Census Bureau’s Survey of Income and Program Participation, the author investigates how much of the cyclicality in unemployment is due to variation in the job finding rate versus the job separation rate. In addition, the article explores how employment dynamics have differed by demographic subgroups.Labor market ; Demography ; Business cycles

How did unemployment insurance extensions affect the unemployment rate in 2008–10?

During recessions, it is common for the federal government to extend the standard unemployment insurance (UI) program. Many economic studies have shown that workers who receive UI extensions tend to take longer to find new employment, leading to a somewhat longer average duration of unemployment among all workers.Unemployment ; Employment (Economic theory)

The mis-measurement of permanent earnings: new evidence from Social Security earnings data

This study investigates the reliability of using short-term averages of earnings as a proxy for permanent earnings in empirical research. An earnings dynamics model is estimated on a large sample of men covering the period from 1983 to 1997 following the cohort-based methodology of Baker and Solon (1999). The analysis uses a unique dataset that matches men in the 1984, 1990 and 1996 Surveys of Income and Program Participation (SIPP) to the Social Security Administration's Summary Earnings Records (SER). The results confirm that using a short-term average of earnings can lead to spurious estimates of the effect of lifetime earnings on a particular outcome. In addition, the transitory variance appears to vary considerably over the lifecycle. The share of earnings variance due to transitory factors is higher among blacks and the persistence of transitory shocks appears to be greater for this group as well. Finally, the transitory variance appears to be a more important factor in explaining the overall earnings variance of college educated men than those without college.Income ; Social security ; Wages

Revised estimates of intergenerational income mobility in the United States

Solon’s (1992) landmark study estimated the intergenerational elasticity (IGE) in income between fathers and sons to be 0.4 or higher. This dramatically changed the consensus view of the U.S. as a highly mobile society. In this comment, I show both analytically and empirically how Solon and others have actually underestimated this parameter by about 30 percent, suggesting that the IGE is actually close to 0.6 and that the U.S. appears to be among the least mobile countries. There are two key measurement issues that lead researchers to underestimate the IGE. First, the use of short-term averages of fathers’ earnings is a poor proxy for lifetime economic status due to highly persistent transitory shocks. Second, the variance of transitory fluctuations to earnings varies considerably by age causing a “lifecycle” bias when samples include measures of fathers’ earnings when they are especially young or old. In this comment Solon’s results are replicated and then re- estimated using a new technique that is able to address these issues using the same PSID sample. The results confirm that the intergenerational elasticity is likely to be around 0.6.Income

Does education improve health? A reexamination of the evidence from compulsory schooling laws

This article analyzes the impact of compulsory schooling laws early in the twentieth century on long-term health. The author finds no compelling evidence for a causal link between education and health using this research design. Further, the results suggest that only a small fraction of health conditions are affected by education, and several of those are conditions, such as sight and hearing, where economic theories don’t appear to be relevant.Education - Economic aspects ; Health