Institute for the Study of Labor

About: Institute for the Study of Labor is a nonprofit organization based out in Bonn, Germany. It is known for research contribution in the topics: Wage & Unemployment. The organization has 2039 authors who have published 13475 publications receiving 439376 citations.

Bidding for industrial plants : does winning a "million dollar plant" increase welfare?

Abstract: Author(s): Moretti, Enrico | Abstract: Increasingly, local governments compete by offering substantial subsidies to industrial plants to locate within their jurisdictions. This paper uses a novel research design to estimate the local consequences of successfully bidding for an industrial plant, relative to bidding and losing, on labor earnings, public finances, and property values. Each issue of the corporate real estate journal Site Selection includes an article titled "The Million Dollar Plant" that reports the county where a large plant chose to locate (i.e., the 'winner'), as well as the one or two runner-up counties (i.e., the 'losers'). We use these revealed rankings of profit-maximizing firms to form a counterfactual for what would have happened in the winning counties in the absence of the plant opening. We find that the plant opening announcement is associated with a 1.5% trend break in labor earnings in the new plant's industry in winning counties, as well as increased earnings in the same industry in counties that neighbor the winner. Further, there is modest evidence of increased expenditures for local services, such as public education.Property values may provide a summary measure of the net change in welfare, because the costs and benefits of attracting a plant should be capitalized into the price of land. If the winners and losers are homogeneous, a simple model suggests that any rents should be bid away. We find a positive, relative trend break of approximately 1.1-1.7% in property values. Since the winners and losers have similar observables in advance of the opening announcement, the property value results may be explained by heterogeneity in subsidies from higher levels of government (e.g., states) and/or systematic underbidding. Overall, the results undermine the popular view that the provision of local subsidies to attract large industrial plants reduces local residents' welfare.

Female Labor Supply and Parental Leave Benefits: The Causal Effect of Paying Higher Transfers for a Shorter Period of Time

Abstract: We study the labor supply effects of a change in child-subsidy policy designed to both increase fertility and shorten birth-related employment interruptions. The reform yields most of the intended effects.

Peer Effects, Social Multipliers and Migrants at School: An International Comparison

Abstract: This article analyses the school performance of migrants dependent on peer groups in different international schooling environments. Using data from the international OECD PISA test, we consider social interaction within and between groups of natives and migrants. Results based on social multipliers (Glaeser et al. 2000, 2003) suggest that both native-to-native and migrant-to-migrant peer effects are higher in ability-differencing school systems than in comprehensive schools. Thus, non-comprehensive school systems seem to magnify the prevailing educational inequality between students with a low parental socioeconomic migration background and children from more privileged families.

Do Fiscal Rules Matter

Abstract: Fiscal rules are laws aimed at reducing the incentive to accumulate debt, and many countries adopt them to discipline local governments. Yet, their effectiveness is disputed because of commitment and enforcement problems. We study their impact applying a quasi-experimental design in Italy. In 1999 the central government imposed fiscal rules on municipal governments, and in 2001 relaxed them below 5,000 inhabitants. We exploit the before/after and discontinuous policy variation, and show that relaxing fiscal rules increases deficit and lowers taxes. The effect is larger if the mayor can be reelected, the number of parties is higher, and voters are older.

How the Human Capital Model Explains Why The Gender Wage Gap Narrowed

Abstract: This paper explores secular changes in women's pay relative to men's pay. It shows how the human capital model predicts a smaller gender wage gap as male-female lifetime work expectations become more similar. The model explains why relative female wages rose almost unabated from 1890 to the early-1990s in the United States (with the exception of about 1940-1980), and why this relative wage growth tapered off since 1993. In addition to the US, the paper presents evidence from nine other countries using data gleaned from the Luxembourg Income Study (LIS).