Abstract: This paper studies how firm-level investment and labor demand respond to a reduction in capital cost in the automation process. Using the bonus depreciation policy in the recent U.S. tax reform as an exogenous variation in capital cost, we find that the policy-driven reduction in capital cost lowers labor demand while increasing investment. The positive policy effect on investment is observed only for the eligible capital: machinery and equipment. Using detailed firm-level information on skill and patent compositions, we also find that the reduction in labor demand concentrates in job positions with few software skills and firms with high automation-related technologies, supporting the displacement effect of automation. We illuminate the mechanisms and welfare implications behind the empirical results by introducing a model of automation based on the task-based framework. Linking the reduced-form estimates and the model, we recover capital-labor substitution elasticity by skill and technology levels and find that the task displacement effect of automation accounts for the parameter's heterogeneity. Our results support the public concern that automated capital could replace some types of workers and show that investment stimulus for machinery and equipment accelerates automation.
Abstract: This paper examines how the labor market effects of import competition vary across Black, Hispanic, and white populations. For a given level of exposure to imports from China, we find no evidence that minority workers are relatively more harmed than white workers in terms of their manufacturing employment. However, exposure to trade shocks varies greatly across groups. Black workers are less likely to live in areas or work in industries facing import competition, resulting in less negative effects of the China shock on manufacturing employment relative to whites. Black workers also benefit disproportionately from the shift towards non-manufacturing employment resulting from the China shock, partially due to their overrepresentation in services at baseline. In contrast, Hispanic workers are overrepresented in exposed industries, though not in exposed geographic areas, meaning that on net they face greater manufacturing employment losses relative to whites. In addition, they experience relative losses in non-manufacturing employment, largely due to their lower educational attainment and baseline industry mix. Overall, the China shock increased the Hispanic-white employment gap by about 5%, though these effects are short lived and converge later in the time period we study. However, the China shock narrowed the Black-white employment gap by about 15%. While many labor market trends in recent decades have served to exacerbate Black-white gaps, import competition is a modest offsetting force.
Abstract: In this paper, we show that the election of a new school board member causes home values in their neighborhood to rise. This increase is identified using narrowly-decided contests and is driven by non-Democratic members, whose neighborhoods appreciate about 4% on average relative to those of losing candidates. We find that student test scores in the neighborhood public schools of non-Democratic winners also relatively increase, but this effect is driven by changing student composition, including via the manipulation of attendance zones, rather than improvements in school quality (as measured by test score value-added). Notably, we detect no differential changes when comparing neighborhood or scholastic outcomes between winning and losing Democratic school board candidates. These results suggest that partisan affiliation is correlated with private motivations for seeking public office.
Abstract: This paper evaluates the impact of high-tech clusters on inequality by focusing on a Chinese placed-based industrial policy called Made in China 2025. Exploiting the staggered roll-out of the policy across pilot cities and the representative online job posting data, we conduct an event-study analysis to investigate the effects of high-tech clusters on labor demand, wages, and living costs across occupations and regions. We find that the pilot cities experience a significant increase in online job vacancies and offered wages relative to non-pilot cities. At the same time, the wage gap between non-routine and routine occupations widens. On the contrary, this policy lowers labor demand and wages in neighboring areas of the pilot cities. Combining the labor market effects with increasing living costs in the pilot cities, we demonstrate that the welfare of non-routine job workers and workers in the neighboring areas disproportionately declines with the construction of high-tech clusters. Our results suggest that policymakers should be cautious about occupational and regional inequalities when constructing high-tech clusters.