Labor and Public Economics

With strong senior and junior faculty, Yale has a diverse and vibrant group in labor and public economics. The faculty in labor economics are active in research on traditional topics such as the development of individual careers and human capital accumulation, as well as newer areas such as the labor market implications of health care reform, financial literacy, and behavioral economics. The faculty in public economics come together from several other sub-fields in the Economics Department. These include macro faculty who do theoretical public finance, environmental faculty who work on policies to address climate change, and health economists who work on health care policy. Several of our labor and development faculty also work on public policy issues.

The Cowles Foundation provides a uniquely supportive environment for work in labor and public economics. In addition to providing direct research support for faculty and graduate students, the Cowles Foundation funds a regular influx of short term and long term academic visitors, postdocs, and doctoral students from other institutions, who contribute to the research atmosphere in labor and public economics.

Seminars and Conferences

The Labor and Public Economics Program hosts two regular seminars. The Labor/Public Economics Workshop hosts top scholars from around the world who present their latest research. The Labor/Public Economics Prospectus Workshop is a more informal workshop designed primarily for graduate students working in labor economics and public finance to present research in progress. Faculty and visitors also use the workshop to present work in its early stages.

Every year, the Labor and Public Economics Program hosts a summer conference to bring together top economists in the field to present new research. Recent research topics have included the origins of the US opioid epidemic, the development of new tools to measure the tolerance of political regimes, the role of inheritances in the determination of wealth inequality, and the fiscal policy response to the COVID-19 pandemic, with a focus on the impact of expanded unemployment benefits on labor markets and household spending.

For more information about the Labor and Public summer conferences, see the Cowles Conferences and Workshops page.

Graduate Teaching and Research

The Department offers a two-semester sequence in Labor Economics (630 and 631). The first semester of the sequence includes topics such as static and dynamic approaches to demand, human capital and wage determination, wage income inequality, unemployment and minimum wages, matching and job turnover, implicit contract theory, and the efficiency wage hypothesis. The second semester covers static and dynamic models of labor supply, firm-specific training, compensating wage differentials, discrimination, household production, bargaining models of household behavior, intergenerational transfers, and mobility.

The Department also offers a two-semester sequence in Public Finance (680 and 681). The sequence covers theories of government provision of public goods, moral hazard, and adverse selection. Empirical methodologies vary from standard reduced-form techniques to structural estimation. Substantive areas include health economics, taxation, social security, and non-health components of government spending.

For detailed field descriptions, please see the Department’s PhD Program Page.

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Abstract

This paper examines the impact of early childcare on academic achievement for children in grade 5 and grade 9, based on a 2003 policy expansion that created quasi-random variation in slot availability for children aged 1–2. Starting childcare one year earlier increases math scores by 9.7% of a standard deviation (SD) in grade 9. Children whose mothers do not hold a high school diploma benefit by a significant 28% of a SD at grade 9, reducing the math achievement gap from children of higher-educated mothers by about one third. We also present evidence of strong improvements for children of immigrants.

Abstract

I estimate the effect of trade on local labor market concentration and its implications for wages using employer-employee linked data and tariff shocks from Brazil’s trade liberalization. Trade increased concentration by 7%, an effect driven by firm exit and worker flows to surviving import-competing firms. Increased concentration reduced wage take-home shares—estimated at 50 cents on the dollar pre-shock—enough to offset small wage gains from reallocation, but did not meaningfully reduce wages on net. Most of the wage declines attributed to Brazil’s trade liberalization resulted instead from reductions in the marginal revenue product of labor. Incorporating informality reveals substantial regional heterogeneity.

Abstract

We develop a new approach to estimating earnings, job, and employment dynamics using subjective expectations data from the NY Fed Survey of Consumer Expectations. These data provide beliefs about future earnings offers and acceptance probabilities, offering direct information on counterfactual outcomes and enabling identification under weaker assumptions. Our framework avoids biases from selection and unobserved heterogeneity that affect models using realized outcomes. First-step fixed-effects regressions identify risk, persistence, and transition effects; second-step GMM recovers the covariance structure of unobserved heterogeneities such as ability, mobility, and match quality. We find lower risk and persistence of the individual productivity component than in prior work, but greater heterogeneity in ability and match quality. Simulations show that reduced-form estimates overstate persistence and volatility on individual-level productivity due to job transitions and sorting. After accounting for heterogeneity, volatility declines and becomes flat across the earnings distribution. These results underscore the value of expectations data.

Abstract

Doctors often treat similar patients differently, which affects health outcomes and medical spending. We assess the recent literature on doctor decision-making through the lens of a model that incorporates diagnostic and procedural skills, beliefs, incentives, and differences in patient pools. Decision-making is affected by beliefs, training, experience, peer effects, financial incentives, and time constraints. Interventions to improve decision-making include providing information, guidelines, and technologies like electronic medical records and algorithmic decision tools. Economists have made progress in understanding doctor decision-making, but applications of that knowledge to improving health care are still limited.

Abstract

Since the late 1980s, extreme poverty has declined sharply, life expectancy and schooling have increased, and electoral democracy has expanded. However poverty reduction has slowed in recent years, particularly following the COVID-19 pandemic, amid intensifying conflict, fragility, climate risks, democratic backsliding, and the erosion of global trends—including trade integration and geopolitical stability—that once supported growth. These dynamics raise three interrelated questions: what barriers impede further progress; where will future growth in lower-income countries come from; and how can growth be broadly shared. Taking stock of 15 chapters forthcoming in Volume 6 of the Handbook of Development Economics, we discuss how external conditions, state capacity and policy choices shape development; analyze the shifting growth drivers, including trade, technology and the rise of services; discuss persistent inequality and distributional tensions; and conjecture that investing in institutions and people pays off.