Roy's Model Research Articles

Social Networks and Migration

The frictions that restrict migration are among the largest sources of inefficiency in the global economy. The first step in designing policies to address these frictions is to understand the fundamental forces that drive migration. However, the Roy model—the workhorse model of migration in economics—does a poor job of explaining many important features of this phenomenon. This limitation can be rectified by adding migrant networks to the Roy model. A rich qualitative literature in the social sciences has documented the role played by social networks in supporting migrants in their new locations. Economists have advanced this literature by identifying and quantifying the contribution of these networks to migration. Although much progress has been made over the past two decades, important gaps in the literature remain: Migrant assimilation has received little theoretical or empirical attention, and a richer characterization of the social interactions that support these networks is needed to tie research on migration to the economic literature on networks.

Impact of bias and redshift-space modelling for the halo power spectrum: testing the effective field theory of large-scale structure

We study the impact of different bias and redshift-space models on the halo power spectrum, quantifying their effect by comparing the fit to a subset of realizations taken from the WizCOLA suite. These provide simulated power spectrum measurements between kmin = 0.03 h/Mpc and kmax = 0.29 h/Mpc, constructed using the comoving Lagrangian acceleration method. For the bias prescription we include (i) simple linear bias; (ii) the McDonald & Roy model and (iii) its coevolution variant introduced by Saito et al.; and (iv) a very general model including all terms up to one-loop and corrections from advection. For the redshift-space modelling we include the Kaiser formula with exponential damping and the power spectrum provided by (i) tree-level perturbation theory and (ii) the Halofit prescription; (iii) one-loop perturbation theory, also with exponential damping; and (iv) an effective field theory description, also at one-loop, with damping represented by the EFT subtractions. We quantify the improvement from each layer of modelling by measuring the typical improvement in χ2 when fitting to a member of the simulation suite. We attempt to detect overfitting by testing for compatibility between the best-fit power spectrum per realization and the best-fit over the entire WizCOLA suite. For both bias and the redshift-space map we find that increasingly permissive models yield improvements in χ2 but with diminishing returns. The most permissive models show modest evidence for overfitting. Accounting for model complexity using the Bayesian Information Criterion, we argue that standard perturbation theory up to one-loop, or a related model such as that of Taruya, Nishimichi & Saito, coupled to the Saito et al. coevolution bias model, is likely to provide a good compromise for near-future galaxy surveys operating with comparable kmax.

Reconciling Changes in Wage Inequality with Changes in College Selectivity Using a Behavioral Model

We estimate a structural dynamic Roy model of education, labor supply and earnings on the 1979 and 1997 cohorts of males taken from the National Longitudinal Survey of Youth (NLSY) and evaluate to what extent changes in education and labor supply decisions across cohorts have been explained by changes in i) the college premium, ii) the utility of attending higher education, iii) grade progression standards, and iv) the value of non-market time. We quantify the evolution of the relative and absolute qualities of both college graduates and college attendants (associates). We find that it is impossible to rationalize changes in observed schooling decisions without appealing to a large increase in intrinsic taste for education, despite a doubling of the cost of college and its impact on debt-load. The population distribution of the college premium has shifted to the right, going from 50% to 58%, while the premium of actual college graduates has shifted to the left, going from 72% to 54%, thereby pointing toward a reduction of the relative quality of college graduates. The absolute quality (human capital) of college graduates has however remained stable. For college attendants (associates), both relative and absolute quality dropped. One implication of the relative flattening of age earnings profiles is the removal of the negative effect of late college graduation on early life-cycle wages. Our estimates indicate it moved from a 4% penalty per year of delay to an insignificant quantity by the early 2000's.

Migration costs and observational returns to migration in the developing world

Recent studies find that observational returns to rural-urban migration are near zero in three developing countries. We revisit this result using panel tracking surveys from six countries, finding higher returns on average. We then interpret these returns in a multi-region Roy model with heterogeneity in migration costs. In the model, the observational return to migration confounds the urban premium and the individual benefits of migrants, and is not directly informative about the welfare gain from lowering migration costs. Patterns of regional heterogeneity in returns, and a comparison of experimental to observational returns, are consistent with the model’s predictions.

ENTREPRENEURSHIP OVER THE LIFE CYCLE: WHERE ARE THE YOUNG ENTREPRENEURS?

AbstractMost individuals do not start a business and, if they do, they start well into their 30s. To explain these stylized facts, I estimate a dynamic Roy model with experience accumulation, risk aversion, and imperfect information about ability using the Panel Study of Income Dynamics. Information frictions and income risk reduce entrepreneurship by up to 40% and 35%, respectively. Entry costs and information frictions explain most of the delayed entry. Results from counterfactual policies targeting delayed entry suggest that entrepreneurship education can yield higher returns than subsidies. Fostering young entrepreneurship yields higher returns than fostering old entrepreneurship.

On the Use of Outcome Tests for Detecting Bias in Decision Making

The decisions of judges, lenders, journal editors, and other gatekeepers often lead to disparities in outcomes across affected groups. An important question is whether, and to what extent, these group-level disparities are driven by relevant differences in underlying individual characteristics, or by biased decision makers. Becker (1957) proposed an outcome test for bias leading to a large body of related empirical work, with recent innovations in settings where decision makers are exogenously assigned to cases and vary progressively in their decision tendencies. We carefully examine what can be learned about bias in decision making in such settings. Our results call into question recent conclusions about racial bias among bail judges, and, more broadly, yield four lessons for researchers considering the use of outcome tests of bias. First, the so-called generalized Roy model, which is a workhorse of applied economics, does not deliver a logically valid outcome test without further restrictions, since it does not require an unbiased decision maker to equalize marginal outcomes across groups. Second, the more restrictive Roy model, which isolates potential outcomes as the sole admissible source of analyst-unobserved variation driving decisions, delivers both a logically valid and econometrically viable outcome test. Third, this extended Roy model places strong restrictions on behavior and the data generating process, so detailed institutional knowledge is essential for justifying such restrictions. Finally, because the extended Roy model imposes restrictions beyond those required to identify marginal outcomes across groups, it has testable implications that may help assess its suitability across empirical settings.

The price of polarization: Estimating task prices under routine‐biased technical change

This paper proposes a new approach to estimate task prices per efficiency unit of skill in the Roy model. I show how the sorting of workers into tasks and their associated wage growth can be used to identify changes in task prices under relatively weak assumptions. The estimation exploits the fact that the returns to observable talents will change differentially over time depending on the changes in prices of those tasks that they predict workers to sort into. In the generalized Roy model, also the average non‐pecuniary amenities in each task are identified. I apply this approach to the literature on routine‐biased technical change, a key prediction of which is that task prices should polarize. Empirical results for male workers in U.S. data indicate that abstract and manual tasks' relative prices indeed increased during the 1990s and 2000s.

Output Costs of Education and Skill Mismatch

We propose a simple theory of under- and over-employment. Individuals of high type can perform both skilled and unskilled jobs, but only a fraction of low-type workers can perform skilled jobs. People have different non-pecuniary values over these jobs, akin to a Roy model. We calibrate two versions of the model to match moments of 17 OECD economies, considering separately education and skills mismatch. The cost of mismatch is 3% of output on average but varies between -1% to 9% across countries. The key variable that explains the output cost of mismatch is not the percentage of mismatched workers but their wage relative to well-matched workers.

Estimation of a Roy/Search/Compensating Differential Model of the Labor Market

In this paper, we develop a model that captures key components of the Roy model, a search model, compensating differentials, and human capital accumulation on‐the‐job. We establish which components of the model can be non‐parametrically identified and which ones cannot. We estimate the model and use it to assess the relative contribution of the different factors for overall wage inequality. We find that variation in premarket skills (the key feature of the Roy model) is the most important component to account for the majority of wage variation. We also demonstrate that there is substantial interaction between the other components, most notably, that the importance of the job match obtained by search frictions varies from around 4% to around 29%, depending on how we account for other components. Inequality due to preferences for non‐pecuniary aspects of the job (which leads to compensating differentials) and search are both very important for explaining other features of the data. Search is important for turnover, but so are preferences for non‐pecuniary aspects of jobs as one‐third of all choices between two jobs would have resulted in a different outcome if the worker only cared about wages.

Selective Migration, Occupational Choice, and the Wage Returns to College Majors

I examine the extent to which the returns to college majors are influenced by selective migration and occupational choice across locations in the US. To quantify the role of selection, I develop and estimate an extended Roy model of migration, occupational choice, and earnings where, upon completing their education, individuals choose a location in which to live and an occupation in which to work. In order to estimate this high-dimensional choice model, I make use of machine learning methods that allow for model selection and estimation simultaneously in a non-parametric setting. I find that OLS estimates of the returns to business and STEM majors relative to education majors are biased upward by 15% on average. Using estimates of the model, I characterize the migration behavior of different college majors and find that migration flows are twice as sensitive to occupational concentration as they are towage returns.

Quantifying The Incidence Of A Global Oil Price Shock In Nigeria: A Roy Model With Non-Homothetic Preferences And Endogenous Transfers

In this paper, I explore the distributional effects of a negative terms-of-trade shock to an oil-exporting country. Specifically, I begin by developing a computable Roy model of the Nigerian economy with non-homothetic preferences, after-tax income effects, and government endogenous transfers through oil subsidies. I then use this model to simulate the impact of the global oil price shock that hits the Nigerian economy in 2016. In doing so, I focus on differential impacts across workers due to their different skills, locations, and comparative advantages. I find that the oil shock led to a reverse Dutch disease characterized by increases of real output, relative wage and labor in the manufacturing and agricultural sectors. Further, the combination of the shock and subsidies removal affected poor and rich income groups differently, in accordance with their labor specialization patterns across sectors and differences in the consumption bundles they consumed. More precisely, I show that the shock causes aggregate welfare losses that are concentrated in high-income groups, as they tend to specialize in the crude oil and service sectors, the most hit by the shock. Next, using a series of government budget-balancing tax policy counterfactuals, I first show that the removal of the subsidies was the best response to the shock regarding the welfare outcomes of low-income workers. Second, I show that while removing the subsidies, the government can use fiscally neutral progressive tax redistribution schemes to lessen the extent of the welfare losses, particularly on the poor populations. Finally, I show that not accounting for heterogeneity in the expenditure behavior would introduce biases in the magnitude of the welfare changes.

Productivity gains from reallocation of talent in Brazil and India

This paper investigates labor market outcomes and their effects on aggregate productivity in Brazil and India. The empirical evidence points to the inefficient allocation of talent across occupations in both countries. Two main factors are identified as causes of the inefficiency: frictions in human capital accumulation and frictions in the labor markets. The resulting distribution of talent negatively affects aggregate productivity, which is examined by using an augmented Roy model. The model predicts that the elimination of barriers to human capital accumulation and in the labor markets in Brazil and India increases the output on average by 22–52% and 38–53%, respectively.

Roy-model bounds on the wage effects of the Great Migration

Summary This paper combines a Roy model of migration and counterfactual wages with racial differences in migration rates during the Great Migration to recover lower bounds on black–white differences in the wage impacts of northward migration. Identification is predicated on the idea that, when migration is more selective for whites, regional wage differentials for whites will be more contaminated with selection bias. In this case, the black–white difference in North–South wage differentials bounds the racial difference in wage impacts from below. Furthermore, as long as the impact of migration on whites’ wages is nonnegative, a lower bound on the black–white difference in wage impacts is also a lower bound on the impact itself for blacks. Applying the identification result, I find that northward migration increased blacks’ wages by at least 36% more than whites’, and hence by at least 36%, on average between 1940 and 1970.

Filters in the coping process of people with schizophrenia: A constructivist grounded theory study.

WHAT IS KNOWN ON THE SUBJECT?: In the nursing perspective of Roy's adaptation model, to be adapted means to have positive interactions with one's environment. The ability to use effective coping strategies is an essential ingredient of mental health recovery. However, coping difficulties are often a problem for people with a diagnosis of schizophrenia spectrum disorder, especially those who have inadequate social support. WHAT THE PAPER ADDS TO EXISTING KNOWLEDGE?: "Filters in the coping process" is a grounded theory of coping in people with a diagnosis of schizophrenia spectrum disorder. A filter effect impairs their ability and limits their opportunities to use effective coping strategies. These filters are as follows: to have been helped, to understand in one's own way, to act despite limited freedom and to modulate the process of self-disclosure. "Surface coping" is the product of the effect of these filters on coping attempts and possibilities. It does not reflect the person's real potential. WHAT ARE THE IMPLICATIONS FOR PRACTICE?: By offering an alternative, holistic nursing perspective, the filter model provides the nurse with factors to consider when assessing clients with a diagnosis of schizophrenia spectrum disorder, so as to plan interventions towards improving their coping capacity. By allowing for the presence of surface coping, the nurse will have less tendency to form negative judgments about clients with a diagnosis of schizophrenia spectrum disorder. ABSTRACT: Introduction Numerous studies confirm the coping difficulties of people diagnosed with schizophrenia spectrum disorder, especially those with limited social support. Further, the coping process is itself poorly understood. Aim Starting from a conceptualization of the adaptation of Roy's model, the aim of this study was to describe the coping process of people with schizophrenia spectrum disorder in the context of an inadequate social support. Method A constructivist grounded theorization was performed with a sample of 30 persons with schizophrenia spectrum disorder. Results The results are a model named: "Filters in the coping process of people with a diagnosis of schizophrenia spectrum disorder who have inadequate social support." The type of coping strategies used evolves over time and in accordance with the filters. The consequence of the process is "surface coping." Discussion The coping potential of people with schizophrenia spectrum disorder is affected by environmental factors as well as factors inherent to the disorder itself. The filter model provides a holistic perspective, as opposed to merely focusing on behaviours. Implication for practice The findings of this study could improve nursing interventions through a better understanding of impediments to coping: what they are, how they arise and the nature of their effects.

Sociocultural background and choice of STEM majors at university

This article proposes a generalized Roy model to examine the role of students’ sociocultural background for choosing a STEM major at university. We combine survey data on Swiss university graduates with rich municipality level information. We use a principal component analysis to construct an indicator capturing progressive attitudes in a student’s home environment. Our structural approach allows directly comparing the importance of sociocultural background with that of pecuniary returns and costs in the choice of college major. Identification exploits individual differences in the relative cost of studying STEM that are unrelated to the local economic environment. Male students from conservative backgrounds are more likely to study STEM, whereas women are unaffected by sociocultural background besides majority language. The effect of the progressivism indicator for males is about half of the effect of the earnings return to STEM and twice as large as the effect of the relative monetary cost.

Climate-smart agricultural practices and welfare of rural smallholders in Ethiopia: Does planting method matter?

The purpose of this study is to provide empirical evidence on the impact of a climate-smart agricultural practice (row planting) on the welfare of rural households. Data collected from 260 households in Gubalafto woreda of Amhara region in Ethiopia were analyzed using Propensity Score Matching (PSM) and a Semi-parametric Local Instrumental Variable (LIV) version of the generalized Roy model. The results from the PSM model revealed that adoption of row planting technology has a positive and significant impact on per capita consumption and on crop income per hectare. Covariates are well balanced and the impact estimate is insensitive to unobserved selection bias indicating that the estimates are a pure effect of the row planting technology. Marginal benefit of row planting is increasing with higher propensity of the farmer to adopt the climate smart planting technology. Therefore, scaling up the technology will significantly contribute to farmers’ resilience against the adverse effects of climate change through enhancing household’s income and food security.

How Skills and Parental Valuation of Education Influence Human Capital Acquisition and Early Labor Market Return to Human Capital in Canada

Using the Youth in Transition Survey, we estimate a Roy model with a three-dimensional latent factor structure to consider how parental valuation of education, cognitive skills, and noncognitive skills influence endogenous schooling decisions and subsequent labor market outcomes. We find that the effect of cognitive skills on adult incomes arises by increasing the likelihood of obtaining further education. Furthermore, we find that both noncognitive skills and parental valuation for education play a larger role in determining income at age 25 than cognitive skills. Last, our analysis uncovers striking differences between men and women in several of the estimated relationships.

Habit Formation and the Misallocation of Labor: Evidence from Forced Migrations

We examine the long-term effects of resettling 11% of the Finnish population during World War II. Entire rural communities were moved to locations that resembled the origin areas and displaced farmers were given farms similar to those they had lost. Despite this policy of reconstructing the pre-war situation, we find that forced migration increased the likelihood of leaving agriculture, which in turn led to a large increase in long-term income among the displaced rural population. By contrast, being displaced decreased the income of the resettled urban population. We examine the extent to which these effects can be explained by the impact of forced migration on farm quality, education, networks, learning, and discrimination, but find only limited support for the relevance of these mechanisms. Instead, we argue that a Roy model augmented with habit formation for residential location provides the most compelling rationalization for these results.

Sharp Bounds on the MTE With Sample Selection

I propose a Generalized Roy Model with sample selection that can be used to analyze treatment effects in a variety of empirical problems. First, I decompose, under a monotonicity assumption on the sample selection indicator, the MTR function for the observable outcome when treated as a weighted average of (i) the MTR on the outcome of interest for the always-observed sub-population and (ii) the MTE on the observable outcome for the observed-only-when-treated sub-population, and show that such decomposition can provide point-wise sharp bounds on the MTE of interest for the always-observed sub-population. Moreover, I impose an extra mean dominance assumption and tighten the previous bounds. I, then, show how to point-identify those bounds when the support of the propensity score is continuous. After that, I show how to (partially) identify the MTE of interest when the support of the propensity score is discrete. At the end, I estimate bounds on the MTE of the Job Corps Training Program on hourly wages for the always-employed sub-population and find that it is decreasing with the likelihood of attending the program for the Non-Hispanic group. For example, I find that the ATT is between $.38 and $1.17 while the ATU is between $.73 and $3.14.

The Allocation of Talent and U.S. Economic Growth

In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly‐skilled occupations have occurred throughout the U.S. economy during the last 50 years. Given that the innate talent for these professions is unlikely to have changed differently across groups, the change in the occupational distribution since 1960 suggests that a substantial pool of innately talented women and black men in 1960 were not pursuing their comparative advantage. We examine the effect on aggregate productivity of the convergence in the occupational distribution between 1960 and 2010 through the prism of a Roy model. Across our various specifications, between 20% and 40% of growth in aggregate market output per person can be explained by the improved allocation of talent.