Raj Chetty's research while affiliated with Harvard University and other places

Publications (106)

Article
Full-text available
Social capital—the strength of an individual’s social network and community—has been identified as a potential determinant of outcomes ranging from education to health1–8. However, efforts to understand what types of social capital matter for these outcomes have been hindered by a lack of social network data. Here, in the first of a pair of papers9...
Article
Full-text available
Low levels of social interaction across class lines have generated widespread concern 1–4 and are associated with worse outcomes, such as lower rates of upward income mobility 4–7 . Here we analyse the determinants of cross-class interaction using data from Facebook, building on the analysis in our companion paper ⁷ . We show that about half of the...
Article
Economics does not attract as broad or diverse a pool of talent as it could. For example, women comprise less than one-third of economics bachelor’s degree recipients, significantly lower than in math or statistics. The authors present a case study of a new introductory economics course that enrolled 400 students, achieved nearly 50–50 gender balan...
Article
Full-text available
We construct publicly available statistics on parents’ incomes and students’ earnings outcomes for each college in the United States using deidentified data from tax records. These statistics reveal that the degree of parental income segregation across colleges is very high, similar to that across neighborhoods. Differences in postcollege earnings...
Preprint
There has been an increase in interest in experimental evaluations to estimate causal effects, partly because their internal validity tends to be high. At the same time, as part of the big data revolution, large, detailed, and representative, administrative data sets have become more widely available. However, the credibility of estimates of causal...
Article
Full-text available
We study the sources of racial disparities in income using anonymized longitudinal data covering nearly the entire U.S. population from 1989 to 2015. We document three results. First, black Americans and American Indians have much lower rates of upward mobility and higher rates of downward mobility than whites, leading to persistent disparities acr...
Article
We develop a simple method to reduce privacy loss when disclosing statistics such as OLS regression estimates based on samples with small numbers of observations. We focus on the case where the dataset can be broken into many groups (“cells”) and one is interested in releasing statistics for one or more of these cells. Building on ideas from the di...
Article
Many countries provide financial incentives to spur innovation, ranging from tax incentives to research and development grants. In this paper, we study how such financial incentives affect individuals’ decisions to pursue careers in innovation. We first present empirical evidence on inventors’ career trajectories and income distributions using deid...
Article
Building on insights from the differential privacy literature, we develop a simple noise-infusion method to reduce privacy loss when disclosing statistics such as OLS regression estimates based on small samples. Although our method does not offer a formal privacy guarantee, it outperforms widely used methods of disclosure limitation such as count-b...
Article
Full-text available
We characterize the factors that determine who becomes an inventor in the United States, focusing on the role of inventive ability (“nature”) versus environment (“nurture”). Using deidentified data on 1.2 million inventors from patent records linked to tax records, we first show that children’s chances of becoming inventors vary sharply with charac...
Article
Many countries provide financial incentives to spur innovation, ranging from tax incentives to research and development grants. In this paper, we study how such financial incentives affect individuals’ decisions to pursue careers in innovation. We first present empirical evidence on inventors’ career trajectories and income distributions using deid...
Article
We show that the neighborhoods in which children grow up shape their earnings, college attendance rates, and fertility and marriage patterns by studying more than 7 million families who move across commuting zones and counties in the United States. Exploiting variation in the age of children when families move, we find that neighborhoods have signi...
Article
Full-population administrative tax data collected for program administration holds potential for facilitating statistical work that previously had been infeasible. This article describes a framework - the SOI databank - for that facilitation. The Databank is a statistical database that comprises income and tax information from income tax returns an...
Article
Rothstein (2017) successfully replicates Chetty, Friedman, and Rockoff's (2014a, b)—henceforth, CFR's—results using data from North Carolina, but raises concerns about CFR's methods. We show that Rothstein's methodological critiques are invalid by presenting simulations and supplementary empirical evidence which show that (i) his preferred imputati...
Article
We estimated rates of "absolute income mobility"-the fraction of children who earn more than their parents-by combining data from U.S. Census and Current Population Survey cross sections with panel data from de-identified tax records. We found that rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for ch...
Article
Earlier this year, the three of us, along with several colleagues, published new research on the relationship between income and life expectancy in the United States, drawing on population-level data drawn from tax and Social Security records.(1) As part of that research, we created new, publicly available data sets with estimates of (1) life expec...
Article
In Reply Dr Fiscella notes that there was a negative correlation between discharges for ambulatory care–sensitive conditions and life expectancy at the county level, as reported in the supplemental appendix in our study. Fiscella correctly notes that this finding is worthy of further investigation. We were concerned about placing too much weight on...
Article
Value-added (VA) models measure the productivity of agents such as teachers or doctors based on the outcomes they produce. The utility of VA models for performance evaluation depends on the extent to which VA estimates are biased by selection, for instance by differences in the abilities of students assigned to teachers. One widely used approach fo...
Article
We show that differences in childhood environments play an important role in shaping gender gaps in adulthood by documenting three facts using population tax records for children born in the 1980s. First, gender gaps in employment rates, earnings, and college attendance vary substantially across the parental income distribution. Notably, the tradit...
Article
Importance: The relationship between income and life expectancy is well established but remains poorly understood. Objectives: To measure the level, time trend, and geographic variability in the association between income and life expectancy and to identify factors related to small area variation. Design and setting: Income data for the US pop...
Article
The Moving to Opportunity (MTO) experiment offered randomly selected families housing vouchers to move from high-poverty housing projects to lower-poverty neighborhoods. We analyze MTO's impacts on children's long-term outcomes using tax data. We find that moving to a lower-poverty neighborhood when young (before age 13) increases college attendanc...
Article
Full-text available
Estimating the long-term effects of treatments is of interest in many fields. A common challenge in estimating such treatment effects is that long-term outcomes are unobserved in the time frame needed to make policy decisions. One approach to overcome this missing data problem is to analyze treatments effects on an intermediate outcome, often calle...
Article
Full-text available
We analyze linear models with a single endogenous regressor in the presence of many instrumental variables. We weaken a key assumption typically made in this literature by allowing all the instruments to have direct effects on the outcome. We consider restrictions on these direct effects that allow for point identification of the effect of interest...
Article
The debate about behavioral economics--the incorporation of insights from psychology into economics--is often framed as a question about the foundational assumptions of economic models. This paper presents a more pragmatic perspective on behavioral economics that focuses on its value for improving empirical predictions and policy decisions. I discu...
Article
In a recent statement, the American Statistical Association (ASA) discusses the use of value-added measurement to evaluate teacher quality. We present our views on the issues raised by the ASA, in light of research we and others have done on this subject. We highlight areas of agreement with the ASA statement, clarify which issues raised by the ASA...
Article
We use administrative records on the incomes of more than 40 million children and their parents to describe three features of intergenerational mobility in the United States. First, we characterize the joint distribution of parent and child income at the national level. The conditional expectation of child income given parent income is linear in pe...
Article
Using 41 million observations on savings for the population of Denmark, we show that the effects of retirement savings policies on wealth accumulation depend on whether they change savings rates by active or passive choice. Subsidies for retirement accounts, which rely on individuals to take an action to raise savings, primarily induce individuals...
Article
Are teachers' impacts on students' test scores (value-added) a good measure of their quality? This question has sparked debate partly because of a lack of evidence on whether high value-added (VA) teachers improve students' long-term outcomes. Using school district and tax records for more than one million children, we find that students assigned t...
Article
Are teachers' impacts on students' test scores (value-added) a good measure of their quality? One reason this question has sparked debate is disagreement about whether value-added (VA) measures provide unbiased estimates of teachers' causal impacts on student achievement. We test for bias in VA using previously unobserved parent characteristics and...
Article
We evaluate policies to increase prosocial behavior using a field experiment with 1,500 referees at the Journal of Public Economics. We randomly assign referees to four groups: a control group with a six-week deadline to submit a referee report; a group with a four-week deadline; a cash incentive group rewarded with $100 for meeting the four-week d...
Article
We present new evidence on trends in intergenerational mobility in the United States using administrative earnings records. We find that percentile rank-based measures of intergenerational mobility have remained extremely stable for the 1971-1993 birth cohorts. For children born between 1971 and 1986, we measure intergenerational mobility based on...
Article
Do retirement savings policies – such as tax subsidies or employer-provided pension plans – increase total saving for retirement or simply induce shifting across accounts? We revisit this classic question using 45 million observations on wealth for the population of Denmark. We find that a policy's impact on wealth accumulation depends on whether i...
Article
We survey the literature on social insurance, focusing on recent work that has connected theory to evidence to make quantitative statements about welfare and optimal policy. Our review contains two parts. We first discuss motives for government intervention in private insurance markets, focusing primarily on selection. We review the original theore...
Article
We develop a new method of estimating the impacts of tax policies that uses areas with little knowledge about the policy's marginal incentives as counterfactuals for behavior in the absence of the policy. We apply this method to characterize the impacts of the Earned Income Tax Credit (EITC) on earnings using administrative tax records covering all...
Article
Full-text available
This paper provides new evidence on the eects of cash-in-hand on household be- havior. Using sharp discontinuities in eligibility for severance pay and extended unem- ployment bene…ts in Austria, combined with data on over one-half million job losers, we reach three main …ndings: (1) a lump-sum severance payment equal to two months of wages lowers...
Article
Full-text available
Balanced budget requirements lead to substantial pro-cyclicality in state government spending, with the stringency of a state's rules driving the pace at which it must adjust to shocks. We show that fiscal institutions can generate natural experiments in deficit-financed spending that are informative regarding fiscal stabilization policy. Alternati...
Article
In Project STAR, 11,571 students in Tennessee and their teachers were randomly assigned to classrooms within their schools from kindergarten to third grade. This article evaluates the long-term impacts of STAR by linking the experimental data to administrative records. We first demonstrate that kindergarten test scores are highly correlated with ou...
Article
Are teachers’ impacts on students’ test scores (“value-added”) a good measure of their quality? This question has sparked debate largely because of disagreement about (1) whether value-added (VA) provides unbiased estimates of teachers’ impacts on student achievement and (2) whether high-VA teachers improve students’ long-term outcomes. We address...
Article
In Project STAR, 11,571 students in Tennessee and their teachers were randomly assigned to classrooms within their schools from kindergarten to third grade. This article evaluates the long-term impacts of STAR by linking the experimental data to administrative records. We first demonstrate that kindergarten test scores are highly correlated with ou...
Article
Full-text available
Who pays the cost of the business cycle? Consumption fluctuates in the tails way more than in the middle of the distribution. Further, top and bottom of the distribution do not move with the middle and are negatively related to each other. Consumption responses to fiscal and financial shocks are quite heterogeneous as financial shocks only affect t...
Article
Macroeconomic calibrations imply much larger labor supply elasticities than mi-croeconometric studies. The most well known explanation for this divergence is that indivisible labor generates extensive margin responses that are not captured in micro studies of hours choices. We evaluate whether existing calibrations of macro models are consistent wi...
Article
It is well known that unemployment insurance (UI) benefits raise unemployment durations. This result has traditionally been interpreted as a substitution effect caused by a reduction in the price of leisure relative to consumption, generating a deadweight burden. This paper questions the validity of this interpretation by showing that UI benefits c...
Article
We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms. We develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs. We present evidence supporting three predictions of this model by ana...
Article
Full-text available
We evaluate whether state-of-the-art macro models featuring indivisible labor are consistent with modern quasi-experimental micro evidence by synthesizing evidence on both the intensive and extensive margins. We find that micro estimates are consistent with macro estimates of the steady-state (Hicksian) elasticities relevant for cross-country compa...
Article
How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utili...
Article
Full-text available
Macroeconomic calibrations imply much larger labor supply elasticities than microeconometric studies. One prominent explanation for this divergence is that indivisible labor generates extensive margin responses that are not captured in micro studies of hours choices. We evaluate whether existing calibrations of macro models are consistent with micr...
Article
In an influential paper, Friedman (1953) showed that even countercyclical fiscal or monetary policies can be destabilizing if they are weakly correlated with the state of the economy. I show that this surprising conclusion is sensitive to the way in which uncertainty is measured. If the size of fluctuations are measured using mean absolute deviatio...
Article
A large theoretical literature predicts that housing has substantial effects on financial markets, but empirical evidence on these effects remains limited. We estimate the causal effect of changes in mortgages and home equity on portfolio allocations using two empirical strategies. First, we use two instruments -- average house prices in an individ...
Article
Full-text available
We propose a new identi…cation strategy to measure the causal impact of govern-ment spending on the economy. Our methodology isolates exogenous cross-sectional variation in government spending using a novel instrument. We use the fact that a large number of federal spending programs depend on local population levels. Every ten years, the Census pro...
Article
In Project STAR, 11,571 students in Tennessee and their teachers were randomly assigned to different classrooms in their schools from kindergarten to 3rd grade. Researchers learned that kindergarten test scores are highly correlated with such outcomes as earnings at age 27, college attendance, home ownership, and retirement savings. Students who we...
Article
Recent evidence on the effect of dividend taxes on firm behavior is inconsistent with neoclassical theories of dividend and corporate taxation. We develop a simple agency model in which managers and shareholders have conflicting interests to explain the evidence. In this model, dividend taxation induces managers to undertake unproductive investment...
Article
We build a theory of reference-dependent preferences based on adjustment costs in consump-tion. The main contribution of the theory is that it endogenizes the evolution of the reference point. The reference point generated by our model exhibits several features exogenously as-sumed in existing theories: it (1) reects recent expectations, (2) depend...
Article
This paper analyzes the role of biased perceptions for insurance design. The analysis focuses on unemployment insurance and the perceptions of job seekers about their employment prospects. Biased risk perceptions change the perceived value of insurance and the perceived returns to avoiding this risk. They make policies implementing standard reduced...
Article
We argue that the development and expansion of direct, secure access to administrative micro-data should be a top priority for the NSF. Administrative data offer much larger sample sizes and have far fewer problems with attrition, non-response, and measurement error than traditional survey data sources. Administrative data are therefore critical fo...
Article
How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utili...
Article
Using two strategies, we show that consumers underreact to taxes that are not salient. First, using a field experiment in a grocery store, we find that posting tax-inclusive price tags reduces demand by 8 percent. Second, increases in taxes included in posted prices reduce alcohol consumption more than increases in taxes applied at the register. We...
Article
This paper tests whether providing information about the Earned Income Tax Credit (EITC) affects EITC recipients' labor supply and earnings decisions. We conducted a randomized experiment with 43,000 EITC recipients at H&R Block in which tax preparers gave simple, personalized information about the EITC schedule to half of their clients. Tracking s...
Article
This paper studies the identi…cation of price elasticities in an environment where agents face optimization frictions such as adjustment costs or inattention. I show that even when one is uncertain about how such frictions enter the agent's decision problem, one can obtain simple bounds on the price elasticity of interest. Agents are permitted to d...
Article
Full-text available
In 2003, Congress introduced new legislation to subsidize prescription drug insurance for Medicare recipients; Medicare "Part D" will cost nearly $1 trillion over the next ten years. In this paper, I analyze the incidence of this subsidy by inferring producer surplus from the stock market returns to pharmaceutical firms. I first obtain a measure of...
Article
This paper evaluates a pilot program run by a company called OPOWER, previously known as Positive Energy, to mail home energy reports to residential utility consumers. The reports compare a household’s energy use to that of its neighbors and provide energy conservation tips. Using data from randomized natural field experiment at 80,000 treatment an...
Article
Full-text available
Do liquidity constraints prohibit individuals from making optimal consumption and in-vestment decisions over the life cycle? I test for the existence of short-run credit constraints surrounding the decision to invest in college, which is of particular concern given the large re-cent increases in the real cost of college attendance. I add to the lit...
Article
Full-text available
This paper tests whether providing information about the work incentives created by the Earned Income Tax Credit (EITC) ampli…es its e¤ects on labor supply. We conducted a randomized …eld experiment with 43,000 EITC claimants at H&R Block in which half the clients were provided simple, personalized information about the EITC schedule. We obtain thr...
Article
This paper characterizes the welfare gains from redistributive taxation and social insurance in an environment where the private sector provides partial insurance. We analyze stylized models in which adverse selection, pre-existing information, or imperfect optimization in private insurance markets create a role for government intervention. We deri...
Article
Since Feldstein (1999), the most widely used method of calculating the excess burden of income taxation is to estimate the effect of tax rates on reported taxable income. This paper reevaluates the taxable income elasticity as a measure of excess burden when individuals can evade or avoid taxes. In many cases, part of the cost of evasion and avoida...
Article
This paper presents new evidence on why unemployment insurance (UI) benefits affect search behavior and develops a simple method of calculating the welfare gains from UI using this evidence. I show that 60 percent of the increase in unemployment durations caused by UI benefits is due to a "liquidity effect" rather than distortions on marginal incen...
Article
This paper evaluates a pilot program run by a company called OPOWER, previously known as Positive Energy, to mail home energy reports to residential utility consumers. The reports compare a household’s energy use to that of its neighbors and provide energy conservation tips. Using data from randomized natural field experiment at 80,000 treatment an...
Article
Full-text available
In this paper, we review the literature on the spike in unemployment exit rates around benefit exhaustion, and present new evidence based on administrative data for a large sample of job losers in Austria. We find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion, both in existing studies a...
Article
Many households devote a large fraction of their budgets to “consumption commitments”—goods that involve transaction costs and are infrequently adjusted. This paper characterizes risk preferences in an expected utility model with commitments. We show that commitments affect risk preferences in two ways: (1) they amplify risk aversion with respect t...
Article
Full-text available
This paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market. We estimate the excess sensitivity of job search behavior to cash-on-hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance (UI) benefits in Austria. Ana...
Article
This paper studies the effect of interest rates on investment in an environment where firms make irreversible investments with uncertain pay-offs. In this setting, changes in the interest rate affect both the cost of capital and the cost of delaying investment to acquire information. These two forces combine to generate an aggregate investment dema...
Article
Recent studies argue that the spread-adjusted Taylor rule (STR), which includes a response to the credit spread, replicates monetary policy in the United State. We show (1) STR is a theoretically optimal monetary policy under heterogeneous loan interest rate contracts in both discretionay and commitment monetary policies, (2) however, the optimal r...
Article
I study a budget-constrained, private-valuation, sealed-bid sequential auction with two incompletely-informed, risk-neutral bidders in which the valuations and income may be non-monotonic functions of a bidder's type. Multiple equilibrium symmetric bidding functions may exist that differ in allocation, efficiency and revenue. The sequence of sale a...
Article
This paper shows that existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model. I derive a formula for the coefficient of relative risk aversion (g) in terms of (1) the ratio of the income elasticity of labor supply to the wage elasticity and (2) the degree of complementarity between consumptio...
Article
Studies of risk in developing economies have focused on consumption fluctuations as a measure of the value of insurance. A common view in the literature is that the welfare costs of risk and benefits of social insurance are small if income shocks do not cause large consumption fluctuations. We present a simple model showing that this conclusion is...
Article
The 2003 dividend tax reform has generated renewed interest in understanding the economic effects of dividend taxation. The reform intro- duced favorable tax treatment of individual div- idend income, whereby dividends are taxed at a rate of 15 percent instead of facing the regular progressive individual income tax schedule with a top rate of 35 pe...
Article
I show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model. I derive a formula for the coefficient of relative risk aversion (γ) in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor. I bound the degree...
Article
It is well known that unemployment benefits raise unemployment durations. This result has traditionally been interpreted as a substitution effect caused by a distortion in the price of leisure relative to consumption, leading to moral hazard. This paper questions this interpretation by showing that unemployment benefits can also affect durations th...
Article
This paper examines the welfare consequences of social safety nets in developing economies relative to developed economies. Using panel surveys of households in Indonesia and the United States, we find that food consumption falls by approximately ten percent when individuals become unemployed in both countries. This finding suggests that introducin...
Article
Full-text available
This paper investigates the effects of capital gains and dividend tax rates on excess returns around announcements of dividend increases and ex-dividend days for U.S. cor-porations. We find that, consistent with standard models, the ex-dividend day premium increased from 2002 to 2004 when the dividend tax rate was cut. Consistent with the signallin...