The 10 most-cited articles in The Quarterly Journal of Economics, 2021

Abstract Does flexible pay increase the gender wage gap? To answer this question, we analyze the wages of public school teachers in Wisconsin, where a 2011 reform allowed school districts to set teachers’ pay more flexibly and engage in individual negotiations. Using quasi-exogenous variation in the timing of the introduction of flexible pay, driven by the expiration of preexisting collective-bargaining agreements, we show that flexible pay lowered the salaries of women compared with men with the same credentials. This gap is larger for younger teachers and smaller for teachers working under a female principal or superintendent. Survey evidence suggests that the gap is partly driven by women engaging less frequently in negotiations over pay, especially when the counterpart is a man. The gap is unlikely to be driven by observable gender differences in job mobility or teacher ability, although the threat of moving and a high demand for male teachers could exacerbate it. Our results suggest that pay discretion and wage bargaining are important determinants of the gender wage gap and…

Abstract U.S. income inequality has varied inversely with union density over the past 100 years. But moving beyond this aggregate relationship has proven difficult, in part because of limited microdata on union membership prior to 1973. We develop a new source of microdata on union membership dating back to 1936, survey data primarily from Gallup (N ≈ 980,000), to examine the long-run relationship between unions and inequality. We document dramatic changes in the demographics of union members: when density was at its mid-century peak, union households were much less educated and more nonwhite than other households, whereas pre-World War II and today they are more similar to nonunion households on these dimensions. However, despite large changes in composition and density since 1936, the household union premium holds relatively steady between 10 and 20 log points. We use our data to examine the effect of unions on income inequality. Using distributional decompositions, time series regressions, state-year regressions, as well as a new instrumental-variable strategy based on the 1935…

Abstract We investigate the wage, employment, and reallocation effects of the introduction of a nationwide minimum wage in Germany that affected 15% of all employees. Based on identification designs that exploit variation in exposure across individuals and local areas, we find that the minimum wage raised wages but did not lower employment. It also led to the reallocation of low-wage workers from smaller to larger, from lower- to higher-paying, and from less to more productive establishments. This worker upgrading accounts for up to 17% of the wage increase induced by the minimum wage. Moreover, at the regional level, average establishment quality increased in more affected areas in the years following the introduction of the minimum wage.

Abstract This article sheds new light on the long-run evolution of political cleavages in 21 Western democracies. We exploit a new database on the socioeconomic determinants of the vote, covering more than 300 elections held between 1948 and 2020. In the 1950s and 1960s, the vote for social democratic, socialist, and affiliated parties was associated with lower-educated and low-income voters. It has gradually become associated with higher-educated voters, giving rise in the 2010s to a disconnection between the effects of income and education on the vote: higher-educated voters now vote for the “left,” while high-income voters continue to vote for the “right.” This transition has been accelerated by the rise of green and anti-immigration movements, whose distinctive feature is to concentrate the votes of the higher-educated and lower-educated electorates. Combining our database with historical data on political parties’ programs, we provide evidence that the reversal of the education cleavage is strongly linked to the emergence of a new “sociocultural” axis of political conflict.

Abstract I study how people understand, reason, and learn about two major tax policies: income taxation and estate taxation. Using large-scale social economics surveys issued to representative U.S. samples and associated experiments, I elicit respondents’ factual knowledge about tax policy and the income or wealth distributions. Most important, I study their understanding of the mechanisms of tax policy and the reasoning that underlies their policy views. In decomposing policy views, I find that support for income and estate taxes is most strongly correlated with social preferences, that is, the perceived benefits of redistribution and concerns around the fairness of inequality and taxation, as well as with broader views of the government. Efficiency concerns play a more minor role. These correlational patterns are confirmed by the experimental approach, which shows people instructional videos that explain the workings and consequences of one of the aspects of tax policy (the Redistribution and the Efficiency treatments) or that bring the two together and focus on the trade-off (the…

Abstract We use large-scale federal survey data linked to administrative death records to investigate the relationship between Medicaid enrollment and mortality. Our analysis compares changes in mortality for near-elderly adults in states with and without Affordable Care Act Medicaid expansions. We identify adults most likely to benefit using survey information on socioeconomic status, citizenship status, and public program participation. We find that prior to the ACA expansions, mortality rates across expansion and nonexpansion states trended similarly, but beginning in the first year of the policy, there were significant reductions in mortality in states that opted to expand relative to nonexpanders. Individuals in expansion states experienced a 0.132 percentage point decline in annual mortality, a 9.4% reduction over the sample mean, as a result of the Medicaid expansions. The effect is driven by a reduction in disease-related deaths and grows over time. A variety of alternative specifications, methods of inference, placebo tests, and sample definitions confirm our main result.

Abstract We present a theory of identity politics that builds on two ideas. First, when policy conflict renders a certain social divide—economic or cultural—salient, a voter identifies with her economic or cultural group. Second, the voter slants her beliefs toward the stereotype of the group she identifies with. We obtain three implications. First, voters’ beliefs are polarized along the distinctive features of salient groups. Second, if the salience of cultural policies increases, cultural conflict rises, redistributive conflict falls, and polarization becomes more correlated across issues. Third, economic shocks hurting conservative voters may trigger a switch to cultural identity, causing these voters to demand less redistribution. We discuss U.S. survey evidence in light of these implications.

Abstract Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their true economic location in official statistics. We associate the universe of traded securities issued by firms in tax havens with their issuer's ultimate parent and restate bilateral investment positions to better reflect the financial linkages connecting countries around the world. Bilateral portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly $600 billion. Further, we demonstrate how offshore issuance in tax havens affects our understanding of the currency composition of external portfolio liabilities and the nature of foreign direct investment. Finally, we provide additional restatements of bilateral investment positions, including one based on the geographic distribution of sales.

Abstract The labor share in U.S. manufacturing declined from 61% in 1967 to 41% in 2012. The labor share of the typical U.S. manufacturing establishment, in contrast, rose by over 3 percentage points during the same period. Using micro-level data, we document five salient facts: (i) since the 1980s, there has been a dramatic reallocation of value added toward the lower end of the labor share distribution; (ii) this aggregate reallocation is not due to entry/exit, to “superstars” growing faster, or to large establishments lowering their labor shares, but is instead due to units whose labor share fell as they grew in size; (iii) low labor share (LL) establishments benefit from high revenue labor productivity, not low wages; (iv) they also enjoy a product price premium relative to their peers; and (v) they have only temporarily lower labor shares that rebound after five to eight years. This transient pattern has become more pronounced over time, and the dynamics of value added and employment are increasingly disconnected. Taken together, we interpret these facts as pointing to a…

Abstract This article studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We build a panel of the universe of inventors who patented since 1920, and a historical state-level corporate tax database with corporate tax rates and tax base information, which we link to existing data on state-level personal income taxes and other economic outcomes. Our analysis focuses on the effect of personal and corporate income taxes on individual inventors (the micro level) and on states (the macro level), considering the quantity and quality of innovation, its location, and the share produced by the corporate rather than the noncorporate sector. We propose several identification strategies, all of which yield consistent results. We find that higher taxes negatively affect the quantity and the location of innovation, but not average innovation quality. The state-level elasticities to taxes are large and consistent with the aggregation of the individual-level responses of innovation produced and cross-state mobility. Corporate taxes tend to…