Cohort Effects: Sources and Implications
Sunday, Jan. 7, 2018 10:15 AM - 12:15 PM
- Chair: Wenlan Qian, National University of Singapore
The Making of Hawks and Doves: Inflation Experiences on the FOMC
AbstractWe show that personal experiences of inflation strongly influence the hawkish or dovish leanings of central bankers. For all members of the Federal Open Market Committee (FOMC) since 1951, we estimate an adaptive learning rule based on their lifetime inflation data. The resulting experience-based forecasts have significant predictive power for members’ FOMC voting decisions, the hawkishness of the tone of their speeches, as well as the heterogeneity in their semi-annual inflation projections. Averaging over all FOMC members present at a meeting, inflation experiences also help to explain the federal funds target rate, over and above conventional Taylor rule components.
Who Needs a Fracking Education? The Educational Response to Biased Technological Change
AbstractWe explore the educational response to fracking, a recent technological breakthrough in the oil and gas industry, taking advantage of the timing of its diffusion and spatial variation in shale reserves. We show that fracking has significantly increased demand for less-educated male labor and high school dropout rates of male teens, both overall and relative to females. Our estimates imply that, absent fracking, the male-female gap in teen dropout rates in affected states would have narrowed by nearly 40% between 2000 and 2013 instead of by only a tenth. Fracking did not reduce the return to high school for men by enough to plausibly explain the full effects, suggesting the importance of a rising opportunity cost of enrollment for the findings. Other explanations, like changes in school inputs or family income, receive less empirical support.
The Effect of Superstar Firms on College Major Choice
AbstractWe study the effect of superstar firms on an important human capital decision -- college students’ choice of major. Past salient, extreme events in an industry, as proxied by cross-sectional skewness in stock returns (or in favorable news coverage), are associated with a disproportionately larger number of college students choosing to major in related fields, even after controlling for the average industry return. This tendency to follow the superstars, however, results in a temporary over-supply of human capital. Specifically, we provide evidence that the additional labor supply due to salient, extreme events lowers the average wage earned by entry-level employees when students enter the job market. At the same time, employment size and employee turnover stay roughly constant in related industries, consistent with the view that labor demand is relatively inelastic in the short run. In the longer term, firms cope with the supply increase by gradually expanding the number of positions that require prior experience.
- A1 - General Economics
- J0 - General