Constantine Yannelis

Income Changes and Consumption: Evidence from the 2013 Federal Government Shutdown

We use the 2013 federal government shutdown and rich data set from an online personal finance website to study the effects of changes in income on changes in consumption. The 2013 shutdown represented a significant and unanticipated income shock for federal government workers, with no direct effect on permanent income. We exploit both the differences between unaffected state employees and affected federal employees as well as between federal employees required to remain at work and those required to stay at home. Furthermore, we are able to discern various detailed types of household spending with widely varying elasticities. We find strong evidence for excess sensitivity of consumption patterns, violating the permanent income hypothesis. We demonstrate that this decline in spending can be largely explained by credit constraints, increased home production, and changes in time allocation. The results demonstrate the importance of liquidity and behavioral responses when constructing stimulus or social insurance policy.

Indiscriminate Discrimination: A Correspondence Test for Ethnic Homophily in the Chicago Labor Market

Numerous field experiments have demonstrated the existence of discrimination in labor markets against specific minority groups. This paper uses a correspondence test to determine whether this discrimination is due to prejudice against specific groups, or a general preference for the majority group. Three groups of identical fabricated resumes are sent to help-wanted advertisements in Chicago newspapers: one with Anglo-Saxon names, one with African-American names, and one with fictitious foreign names whose ethnic origin is unidentifiable to most Americans. Resumes with Anglo-Saxon names generate nearly one third more call-backs than identical resumes with non Anglo-Saxon ones, either African-American or Foreign. We take this as evidence that discriminatory behavior is part of a larger pattern of unequal treatment of any member of non-majority groups, ethnic homophily.

Managerial Ownership and Firm Performance: Evidence from the 2003 Tax Cut

Evidence on the causal effect of managerial ownership on firm performance is elusive due to lack of within-firm variations and credible empirical designs. We identify this causal effect by exploiting the 2003 Tax Cut as a natural experiment, which increased the net-of-tax effective managerial ownership. Consistent with predictions from agency theory, our difference-in-difference empirical design uncovers a significant and hump-shaped improvement in firm performance with respect to the level of managerial ownership. The increase in performance is more pronounced for firms subject to more severe agency problems as well as firms under weak alternative governance mechanisms, further demonstrating managerial ownership incentive as the underlying channel for our results.

Students in Distress: Labor Market Shocks, Student Loan Default, and Federal Insurance Programs

The collapse in home prices during the Great Recession triggered a sharp drop in consumer demand by households, leading to massive employment losses. This paper examines the implications of these labor market shocks for the dramatic rise in student loan defaults, which originated during this time period. Linking administrative student loan data at the individual borrower level to de-identified tax records and exploiting Zip code level variation in home price changes, we show that the drop in home prices during the Great Recession accounts for approximately 24 to 32 percent of the increase in student loan defaults. Consistent with a labor market channel, we find a strong relationship between home prices, employment losses, and student loan defaults at the individual borrower level, which is concentrated among low income jobs. Comparing the default responses of home owners and renters, we find no evidence of a direct liquidity effect of home prices on student loan defaults. Lastly, we show that the Income Based Repayment (IBR) program introduced by the federal government in the wake of the Great Recession reduced both student loan defaults and their sensitivity to home price fluctuations, thus providing student loan borrowers with valuable insurance against adverse income shocks.

Debt and Human Capital: Evidence from Student Loans

This paper investigates the effects of college tuition on student debt and human capital accumulation. We exploit data from a random sample of undergraduate students in the United States and implement a research design that instruments for tuition with relatively large changes to the tuition of students who enrolled at the same school in different cohorts. We �?nd that

Indiscriminate discrimination: A correspondence test for ethnic homophily in the Chicago labor market

10,000 in higher tuition causally reduces the probability of graduating with a graduate degree by 6.2 percentage points and increases student debt by

The Minimum Wage and Employment Dynamics: Evidence from an Age Based Reform in Greece ⇤

2,961. Higher tuition also reduces the probability of obtaining an undergraduate degree among poorer, credit-constrained students. Thus, the relatively large increases in the price of education in the United States in the past decade can affect the accumulation of human capital.