Ben Hyman

American Economic Association: Papers & Proceedings, 111: 491–495, May 2021.

Abstract. Wage insurance provides income support to displaced workers who find reemployment at a lower wage. We study the effects of the wage insurance provisions of the U.S. Trade Adjustment Assistance (TAA) program using administrative data from the state of Virginia. The program includes an age-based eligibility cutoff, allowing us to compare earnings and employment trajectories for workers whose ages at the time of displacement make them eligible or ineligible for the program. Our findings suggest that wage insurance eligibility increases short-run employment probabilities and that wage insurance and TAA training may yield similar long-run effects on employment and earnings.

Abstract. What is the value of liquidity for municipalities that try to smooth cash flow disruptions during periods of fiscal stress, natural disasters, or recessions? The COVID-19 pandemic left state and local governments to simultaneously manage health, economic and financial crises, necessitating greater borrowing in the context of dysfunctional municipal bond markets. In response, the Fed intervened in the primary municipal bond market for the first time since the 1930s by establishing the Municipal Liquidity Facility (MLF). Using a regression discontinuity that exploits MLF lending eligibility population cutoffs, we estimate the option value of liquidity that was offered through the facility. We find that while the liquidity option improved overall municipal bond market functioning, lower-rated IG bonds with MLF access traded at higher prices and were issued more frequently. This suggests a potential credit-risk sharing channel on top of the Fed's role as liquidity-provider of last resort. By contrast, local governments retained a large share of employees in response to liquidity interventions, but retention was only sustained for higher-rated municipalities. Despite low MLF take-up and a "primary only" approach which contrasted corporate bond market interventions, both financial and employment outcomes responded strongly.

Abstract. Wage insurance provides income support to displaced workers who find reemployment at a lower wage. We analyze wage insurance in the context of the U.S. Trade Adjustment Assistance (TAA) program by merging linked employer-employee Census data to TAA petitions and leveraging a discontinuity in eligibility based on worker age. Wage insurance eligibility increases short-run employment probabilities and leads to higher long-run cumulative earnings. We find shorter non-employment durations largely drive increased long-term earnings among workers eligible for wage insurance, rather than changes in job quality, industry, or location. Our results are quantitatively consistent with a calibrated non-stationary partial equilibrium search model with duration dependence in wage offers. Even under conservative assumptions, the program is self-financing.

Abstract. We examine firm responses to state hiring and investment subsidies. We leverage institutional features of the California Competes Tax Credit (CCTC), a large-scale business incentive program that incorporates best practices from prior job creation policies. The CCTC award selection procedure combines formula-based and discretionary components. Leveraging applicant score eligibility cutoffs in a regression discontinuity design and taking advantage of rich longitudinal microdata on establishments and their parent firms, we find that firms expand activity in California in response to CCTC awards. We also find little evidence that these expansions come at the expense of firms' operations in other states. Our results suggest that targeted and audited hiring and investment subsidies can be effective in promoting local business expansions without inducing significant cross-state displacement effects.

Abstract. The extent to which workers adjust to labor market disruptions in light of increasing pressure from trade and automation commands widespread concern. Yet little is known about efforts that deliberately target the adjustment process. This project studies 20 years of worker-level earnings and re-employment responses to Trade Adjustment Assistance (TAA)—a large social insurance program that couples retraining incentives with extended unemployment insurance (UI) for displaced workers. I estimate causal effects from the quasi-random assignment of TAA cases to investigators of varying approval leniencies. Using employer-employee matched Census data on 300,000 workers, I find TAA-approved workers have $50,000 greater cumulative earnings ten years out—driven by both higher incomes and greater labor force participation. Yet annual returns fully depreciate over the same period. In the most disrupted regions, workers are more likely to switch industries and move to labor markets with better opportunities in response to TAA. Combined with evidence that sustained returns are delivered by training rather than UI transfers, the results imply a potentially important role for human capital in overcoming adjustment frictions.      

Abstract. There are two commonly accepted views about command-and-control (CAC) environmental regulation. First, CAC delivers environmental outcomes at very high cost. Second, in a developing country with weak regulatory institutions, CACs may not even yield environmental benefits: regulators can force firms to install pollution abatement equipment, but cannot ensure that they use it. We examine India’s experience and find evidence that CAC policies achieved substantial environmental benefits at a relatively low cost. Constructing an establishment-level panel from 1998 to 2009, we find that the CAC regulations imposed by India’s Supreme Court on 17 cities improved air quality with little effect on establishment productivity. We document a strong effect of deterred entry of high-polluting industries into regulated cities; however little effect on the overall level of manufacturing output, employment, or productivity in those cities. We also find sustained reductions in within-establishment coal use, with no evidence of leakage into other fuels. To benchmark our results, we use variation in coal prices to compare the CAC policies to price incentives. We show that CAC regulations were primarily effective at reducing coal consumption of large urban polluters, while a coal tax is likely to have a broader impact across all establishment types. Our estimated coal price elasticity suggests that a 15-30% excise tax would be needed to generate reductions in coal consumption equivalent to those produced by these CAC policies.

Abstract. This paper considers how input market liberalization affects host country productivity spillovers from multinational corporation (MNC) investments. The standard “Backward Linkage” measure used to estimate technology and learning spillovers to local upstream suppliers---pioneered by Javorcik (2004) and replicated across several influential papers---implicitly assumes domestic and foreign firms share the same input structure. I show that this assumption constitutes an omitted variable bias of imported inputs in TFP spillover estimation. Using a novel Colombian firm panel that isolates imported from domestic inputs, mean backward linkage productivity spillovers reduce in half when the share of locally sourced inputs is adjusted to reflect MNCs’ observably higher propensity to import inputs. However in some industries, productivity spillovers increase in response to the adjustment. I demonstrate that the sign and magnitude of this bias are proportional to the elasticity of substitution between imported and domestic inputs. The results highlight how input market liberalization (usually associated with increased FDI inflows) can have important feedback effects on local productivity spillovers from MNCs.