Government Programs Can Improve Local Labor Markets, But Do They? A Re-Analyses of Ham, Swenson, Imrohoroğlu, and Song (2011)

David Neumark and Timothy Young

November 30, 2017 

Research on the effects of enterprise zones – especially state programs – has generally failed to find evidence of beneficial effects such job growth or poverty reduction.  In contrast, Ham, Swenson, Imrohoroğlu, and Song (2011, hereafter HSIS) present evidence that state and federal enterprise zones (EZs) established in the 1990s substantially reduced poverty.  However, their estimates of the effects of EZs in reducing poverty are badly overstated for two reasons.  First, HSIS have a substantial error in their data on poverty rates by Census tract, which accounts for most of the estimated impact of state EZs that they find.  Second, their estimates of the effects of federal Empowerment Zones (EMPZs) and Enterprise Communities (ENTCs) appear to be strongly influenced by selection of areas that experienced negative shocks.  An estimator based on comparing federally designated zones to more-comparable areas that applied for and were rejected as zones, or became zones in the future, yields much smaller estimates than those in HSIS.  And the large poverty-reduction effects of ENTCs that HSIS found are largely spurious – not surprisingly, given that ENTCs received meager benefits and had no hiring credits.

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The Minimum Wage and the Great Recession: A Response to Zipperer and Recapitulation of the Evidence 

Jeffrey Clemens

June 14, 2017 

Clemens and Wither (2014) find that minimum wage increases contributed to employment declines among low-skilled individuals during the Great Recession. Zipperer (2016) argues that Clemens and Wither’s estimates are biased. This paper assesses what underlies the difference between Zipperer’s estimates and Clemens and Wither’s estimates. I first show that Zipperer’s control sets significantly attenuate the relationship between Clemens and Wither’s “treatment indicator” variables and states’ minimum wage rates. Scaling for this dilution of the underlying treatment accounts for nearly half of the difference between Zipperer’s estimates and Clemens and Wither’s estimates. Second, I show that the within-region variation on which Zipperer focuses attention biases his estimates towards positive values. Employment and income aggregates, as well as housing and construction indicators, reveal that within-region comparisons are prone to considerable upward bias. Florida, for example, experienced a far more severe housing decline than the regional neighbors for which several of Zipperer’s specifications use it as the primary control. I show that Zipperer’s estimates are quite sensitive to removing states with extreme housing crises from the sample, while the original Clemens and Wither estimates are not. I further show that Zipperer’s specifications have implausible implications for the minimum wage’s “effects” on employment within high skilled population groups. I conclude by recapitulating the basic facts underlying Clemens and Wither’s assessment of the evidence.

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Pitfalls in the Development of Falsification Tests: An Illustration from the Recent Minimum Wage Literature 

Jeffrey Clemens

June 14, 2017 

This paper examines a “falsification test” from the recent minimum wage literature. The analysis illustrates several pitfalls associated with developing and interpreting such exercises, which are increasingly common in applied empirical work. Clemens and Wither (2014) present evidence that minimum wage increases contributed to the magnitude of employment declines among low-skilled groups during the Great Recession. Zipperer (2016) presents regressions that he interprets as falsification tests for Clemens and Wither’s baseline regression. He interprets his results as evidence that Clemens and Wither’s estimates are biased. In this paper, I demonstrate that Zipperer’s falsification tests are uninformative for their intended purpose. The properties of clustered robust standard errors do not carry over from Clemens and Wither’s baseline specification (27 treatment states drawn from 50) to Zipperer’s falsification tests (3 or 5 “placebo treatment” states drawn from 23). Confidence intervals calculated using a setting-appropriate permutation test extend well beyond the tests’ point estimates. Further, I show that the sub-samples to which Zipperer’s procedure assigns “placebo treatment status” were disproportionately affected by severe housing crises. His test’s point estimates are highly sensitive to the exclusion of the most extreme housing crisis experiences from the sample. An inspection of data on the housing market, prime aged employment, overall unemployment rates, and aggregate income per capita reveals the test’s premise that regional neighbors form reasonable counterfactuals to be incorrect in this setting.

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Additional Evidence and Replication Code for Analyzing the Effects of Minimum Wage Increases Enacted During the Great Recession 

Jeffrey Clemens and Michael Wither

June 14, 2017 

In previous work (Clemens and Wither, 2014), we reported evidence that minimum wage increases contributed to declines in low-skilled individuals’ employment during the Great Recession. Because this work has generated both interest and disagreement, we use the current paper to present the code underlying our baseline estimates and to present supplemental results. Our supplemental analysis focuses on choices that arise when processing wage and earnings data from the Survey of Income and Program Participation to isolate samples of “low-skilled” individuals. We further assess the relevance of several alternative approaches to sample selection. We show that these data processing and sample selection margins have little effect on the qualitative implications of our estimates. We present additional evidence that minimum wage increases had a negative effect on employment entry among individuals who were unemployed throughout our baseline period.

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Working 9 to 5? Unionization and Work Variability, 2004-2013

Ryan Finnigan and Jo Mhairi Hale

January 8, 2017 

Millions of workers in the United States experience irregular and unpredictable weekly working hours, particularly following the Great Recession. This work variability brings greater economic insecurity and work-life conflict, particularly for low-wage workers. In the absence of strong and widespread policies regulating ‘precarious work,’ labor unions may significantly limit work variability. However, any benefits with union membership could depend crucially on union density, which varies widely between states. This paper analyzes the relationship between unionization and two measures of work variability among hourly workers using data from the 2004 and 2008 panels of the Survey of Income and Program Participation. The results show union members were significantly less likely to report a varying number of hours from week to week, but only in states with relatively high unionization rates. In contrast, union members were more likely to report irregular schedules, but not in states with the highest unionization rates. This paper finds that the monthly earnings penalty for work variability is significantly weaker among union members than non-members. Altogether, the paper’s results demonstrate some of the continued benefits of unionization for workers, and some of its limitations.

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Do State Earned Income Tax Credits Increase Participation in the Federal EITC?

David Neumark and Katherine E. Williams

November 29, 2016

In recent years, many states and some local governments implemented or expanded their own, supplemental Earned Income Tax Credit (EITCs).  The expansion of state EITCs may have stemmed in large part from wanting to provide a more generous program than the federal program, because state EITCs increase transfer payments to the low-income recipients who qualify.  However, state and local governments can also benefit from maximizing participation of their constituents in the federal EITC, and there are several reasons why state or local EITCs could increase participation in the federal EITC program.  We find evidence that state EITCs increase federal EITC program participation.  The effects are qualitatively consistent with what we would expect given theoretical predictions of the effects of an increase in state EITC generosity on labor supply.

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The Effect of State Mandated Sex Education on Sexual Behaviors and Health

Brittany Bass

November 27, 2016

The debate over school based sex education in the United States is centered on two major questions: do schools have a responsibility to teach students about issues related to sex, and if schools do teach sex education, what type of information should be presented? In the mid-1980s, once it was recognized that AIDS could be spread via sexual intercourse, Surgeon General Everett Koop called for increased sex education in schools beginning as early as third grade. Using data from multiple sources, including the Youth Risk Behavioral Surveys, National Vital Statistics, and the CDC’s Wonder statistics on STDs, this study presents the first examination of the effect of state-level sex education mandates on teenage sexual behavior, STDs, and birth rates.

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Marijuana Decriminalization and Labor Market Outcomes

Timothy Young

October 27, 2016

This paper uses marijuana decriminalization laws, passed in 21 states over the last 40 years, to analyze the differences in earnings and employment that result from being arrested. A differences-in-differences model is used to exploit the state-by-year variation in arrests resulting from marijuana decriminalization laws. Data from the FBI’s Uniform Crime Reporting statistics and the Current Population Survey allow for age, gender and race specific estimates, which is critical considering the heterogeneity in rates of arrests across these delineations. Labor market outcomes in the CPS allow for an analysis of whether decriminalization laws affect extensive and intensive margins. Decreased penalties for marijuana possession are positively correlated with the probability of employment, although the results are imprecise. Additionally, there are non-trivial increases in weekly earnings for individuals living in states with decreased penalties, with the effects being greatest for black adults. This result is consistent with existing literature that suggests black adults, especially men, stand to benefit the most from removing these penalties.

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