Department of Economics

Economics 350, Winter 2023: Problem Sets

Problem Set Submission Instructions:

Please feel free to submit your problem sets in groups of up to 4 people. Write the names of all of your collaborators at the top of your problem set.
Please submit typed solutions. Number or label the question or the part of the question you are answering.
Only one person from each group needs to submit a problem set. Please submit via Canvas.

Problem Set I

For Students and Auditors

Assigned:
Due: January 10, 2023 to TAs
Related Reading:
- Gramm, Phil, Robert Ekelund, and John F. Early. (2022). The Myth of American Inequality: How Government Biases Policy Debate. New York, NY: Rowman and Littlefield.
- Saez, Emmanuel, and Gabriel Zucman. (2020). “The Rise of Income and Wealth Inequality in America: Evidence from Distributional Macroeconomic Accounts.” Journal of Economic Perspectives, 34(4):3-26.

Empirical Problem Set I

Assigned: January 11, 2023
Due: January 24, 2023 to TAs
Related Resources:
- You may download the .zip file from Canvas, which contains all the data and relevant documentation required to answer the questions. The easiest way to open the dataset is to execute the .do file included in the folder, first specifying the appropriate path name.
- If you prefer, you are also welcome to download the data directly from the source, found at this link:
  https://simba.isr.umich.edu/data/data.aspx. Note that you will be required to register for a free account. Contact the TAs for any questions.

Problem Set II

Assigned: January 11, 2023
Due: January 17, 2023 to TAs
Related Resources:
- Eisenhauer, Philipp, James J. Heckman, and Stefano Mosso. (2015). “Estimation of Dynamic Discrete Choice Models by Maximum Likelihood and the Simulated Method of Moments,” International Economic Review, 56(2): 331-357.
  - Handout: Rate of Return Continuation Values and Option Values in a Simple Dynamic Model, Eisenhauer, Heckman, and Mosso (2015)
- Heckman, James J.; Lochner, Lance J. and Todd, Petra E. (2006). “Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond.” in Handbook of the Economics of Education, E. A. Hanushek, and F. Welch, eds. Amsterdam: North-Holland. pp. 307-458.
  - Handout: The Rate of Return to Schooling: The Mincer Equation and Beyond
- Cossa, Ricardo, James J. Heckman, and Lance Lochner. (2003). “Learning-by-Doing versus On-the-Job Training: Using Variation Induced by the EITC to Distinguish between Models of Skill Formation.” In Designing Inclusion: Tools to Raise Low-End Pay and Employment in Private Enterprise, edited by Edmund S. Phelps, 74-130. New York, NY: Cambridge University Press.
  - Handout: Evidence on Learning-by-doing vs. On-the-job Training: Using variation induced by the EITC to test between models of skill formation, Cossa, Heckman, and Lochner
- Johnson, William R. (1978). “A Theory of Job Shopping,” Quarterly Journal of Economics, 92( 2): 261-278
  - Handout: Notes on “A Theory of Job Shopping”

Problem Set III

Assigned: January 24, 2023
Due: January 27, 2023 to TAs
Related Resources:
- Two Interpretations of the Mincer Equation Learning-by-doing vs. On-the-job Training, Heckman, Lochner, and Cossa
- Heckman, James J., Lance Lochner, and Christopher Taber. (1998). “General-Equilibrium Treatment Effects: A Study of Tuition Policy.” The American Economic Review, 88(2):381-386.
- Johnson, William R. (1978). “A Theory of Job Shopping,” Quarterly Journal of Economics, 92( 2): 261-278
  - Handout: Notes on “A Theory of Job Shopping”

Problem Set IV

Assigned: February 9, 2023
Due: February 16, 2023 to TAs
Related Resources:
- Problem 1
  - Genetics and Economic Outcomes, Kevin Thom (2023)
  - Bowles, Samuel and Herbert Gintis. (2002). “The Inheritance of Inequality,” Journal of Economic Perspectives 16(3): 3-30.
  - Heritability
- Problem 2
  - Lamadon, Thibaut, Magne Mogstad, and Bradley Setzler. (2022). “Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market.” American Economic Review, 112(1):169-212. Appendix. Replication Package.
  - Card, David, Ana Rute Cardoso, Joerg Heining, and Patrick Kline. (2018). “Firms and Labor Market Inequality: Evidence and Some Theory.” Journal of Labor Economics, 36(S1):S13-S70.
  - The Race Between Demand and Supply: Tinbergen’s Pioneering Studies of Earnings Inequality
- Problem 3
  - PSID data
  - MaCurdy, Thomas E. (1982). “The use of time series processes to model the error structure of earnings in a longitudinal data analysis.” Journal of Econometrics, 18(1):83-114.
  - Hause, John C. (1980). “The Fine Structure of Earnings and the On-the-Job Training Hypothesis.” Econometrica, 48(4):1013-1029.
  - Meghir, Costas and Luigi Pistaferri. (2011). “Earnings, Consumption and Life Cycle Choices,” In: Orley Ashenfelter and David Card, eds., Handbook of Labor Economics, Vol. 4, Part B. Amsterdam: Elsevier. pp. 773-854.
  - Abowd, John M., and David Card. (1989). “On the Covariance Structure of Earnings and Hours Changes.” Econometrica, 57(2):411-445.
  - Guvenen, Fatih. (2009). “An empirical investigation of labor income processes.” Review of Economic Dynamics, 12(1):58-79.
  - Hryshko, Dmytro. (2012). “Labor income profiles are not heterogeneous: Evidence from income growth rates.” Quantitative Economics, 3(2):177-209.
- Problem 4
  - Derenoncourt, Ellora. (2022). “Can You Move to Opportunity? Evidence from the Great Migration.” American Economic Review, 112(2):369-408.
- Problem 5
  - Preferences, Personality Psychology, and Economics: Some New Results EXTRACT

Take Home Exam

Assigned: March 3, 2023
Due: March 11, 2023, at midnight, to TAs
Instructions:
- Send completed exam through the Canvas portal (if you have any issues up-loading there, please send via email to hugolopez@uchicago.edu , pmonagan@uchicago.edu , and jjh@uchicago.edu . Exams can be handwritten or typed. However, if handwritten, they must be printed and not in cursive. I will not read bad handwriting.
Related Resources:
- Bond, Timothy N., and Kevin Lang. (2018). “The Black–White Education Scaled Test-Score Gap in Grades K-7.” Journal of Human Resources, 53(4):891-917.
- Burkhauser, Richard V., Keven Corinth, James Elwell, and Jeff Larrimore. (2022). “Evaluating the Success of President Johnson’s War on Poverty: Revisiting the Historical Record Using an Absolute Full-Income Poverty Measure.” Journal of Political Economy, Under revision.
- Cawley, John, James Heckman, and Edward Vytlacil. (1999). “On Policies to Reward the Value Added by Educators.” The Review of Economics and Statistics, 81(4):720-727.
- Chetty, et al.
  - Chetty, Raj. (2021). “Improving Equality of Opportunity: New Insights from Big Data.” Contemporary Economic Policy, 39(1):7-41.
  - Chetty, Raj, John N. Friedman, Nathaniel Hendren, Maggie R. Jones, and Sonya R. Porter. (2020a). “The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility.” Unpublished manuscript, Harvard University.
  - Chetty, Raj, and Nathaniel Hendren. (2018a). “The Impacts of Neighborhoods on Intergenerational Mobility I: Childhood Exposure Effects.” Quarterly Journal of Economics, 133(3):1107-1162.
  - Chetty, Raj, and Nathaniel Hendren. (2018b). “The Impacts of Neighborhoods on Intergenerational Mobility II: County-Level Estimates.” Quarterly Journal of Economics, 133(3):1163-1228.
  - Chetty, Raj, Nathaniel Hendren, and Lawrence F. Katz. (2016). “The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment.” American Economic Review, 106(4):855-902.
  - Chetty, Raj, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez. (2014). “Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States.” Quarterly Journal of Economics, 129 (4): 1553-1623.
  - Chetty, Raj, Nathaniel Hendren, Maggie R Jones, and Sonya R Porter. (2020b). “Race and Economic Opportunity in the United States: an Intergenerational Perspective.” The Quarterly Journal of Economics, 135(2):711-783.
  - Opportunity Insights Website.
    - Opportunity Atlas.
- Cunha, Flavio, James J. Heckman and Susanne Schennach. (2010). “Estimating the Technology of Cognitive and Noncognitive Skill Formation,” Econometrica, 78(3): 883-931.
- Eshaghnia, Sadegh, Slides: Is Zip Code Destiny? Re-visiting Long-run Neighborhood Effects
- Harding, David J., Lisa Sanbonmatsu, Greg J. Duncan, Lisa A. Gennetian, Lawrence F. Katz, Ronald C. Kessler, Jeffrey R. Kling, Matthew Sciandra, and Jens Ludwig. 2021. “Evaluating Contradictory Experimental and Non-Experimental Estimates of Neighborhood Effects on Economic Outcomes for Adults.” Becker Friedman Institute Working Papers. 2021-22.
- Lamadon, Thibaut, Magne Mogstad, and Bradley Setzler. (2022). “Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market.” American Economic Review, 112(1):169-212. Appendix. Replication Package.
- Pinto, Rodrigo. (2022). “Beyond Intention-to-Treat: Using the Incentives of Moving to Opportunity to Identify Neighborhood Effects.” Journal of Political Economy, Under revision. Appendix.
  - Slides: Exploiting Incentives of the Moving to Opportunity Experiment
- Sattinger, Michael. (1979). “Differential Rents and the Distribution of Earnings.” Oxford Economic Papers, 31(1):60-71.
  - Slides: Notes on “Differential Rents and the Distribution of Earnings”
- Tinbergen slides: The Race Between Demand and Supply: Tinbergen’s Pioneering Studies of Earnings Inequality