Horatio Alger Meets the Mobility Tables

The question of how entrepreneurship relates to income mobility is cogent given the current public debate about the sources of income inequality and mobility in United States society. We examine how experience with entrepreneurship has affected an individual's place in the earnings distribution. Our basic tack is to follow individuals' positions in the income distribution over time, and to see how their mobility (or lack thereof) was affected by involvement with entrepreneurship. Our main finding is that for low-income individuals there is some merit to the notion that the self-employed moved ahead in the earnings distribution relative to those who remained wage earners. On the other hand, for those at the upper end of the earnings distribution, those who became self-employed often advanced less in the earnings distribution than their salaried counterparts.     

Spatial productivity spillovers from public infrastructure: Evidence from state highways

Is public-sector infrastructure a key determinant of productivity? Traditional, project-based analyses of benefits and costs typically do not find large rates of return. Proponents of infrastructure spending instead point to regressionbased analyses of the links between private productivity and public infrastructure that imply large productivity effects from public spending. The disparity in estimated returns is often attributed to geographic spillovers in productivity benefits that are not captured by disaggregated analyses. We examine the degree to which state highways provide productivity benefits beyond the narrow confines of each state's borders. Despite the fact that state highways-especially the interstate highway system-are designed at least in part with interstate linkages in mind, we find no evidence of quantitatively important productivity spillovers.     

Public Policy Toward Entrepreneurship

There is widespread support for tax policies providing special treatment for small businesses. This paper reviews standard efficiency and equity criteria for such tax-subsidies, and finds they provide little support for such policies. The review highlights a central empirical void requiring further research: the "optimal" business failure rate. Entrepreneurs do struggle, and small businesses frequently merge and nearly as frequently fail. But we do not know enough to determine which firms to target for success or failure.     

Fundamental Tax Reform and Residential Housing

The impact of consumption-based, fundamental Federal tax reform on the housing market has been a controversial and difficult topic. We employ a dynamic, numerical simulation model of the aggregate housing market to augment our understanding of the key forces at work in the short-run and over longer periods. This approach suggests that integrating the short-run and long-term impacts of tax reform leads to the possibility that there will be relatively modest impacts on the nominal values of existing housing. The results indicate that an important topic for future research is the elasticity of housing supply in the short run and long run.     

Policy uncertainty and the economic outlook

A large cloud of uncertainty hangs over the economic outlook, particularly the outlook for productivity growth and the long-term trend growth of output. This uncertainty stems from three sources: (a) the fiscal outlook, (b) the policy agenda shifting from campaign promises to partisan opportunity, and (c) the large reliance on executive branch actions. I discuss the foundations and likely evolution of policy uncertainty over the initial months of the Trump Administration.     

Federal deductibility and local property tax rates

Recent econometric work has suggested that federal deductibility of state and local taxes has raised the proportion of these taxes—especially property taxes—in local budgets. This paper lends additional support to these earlier findings by showing that one channel through which deductibility leads to higher local property tax revenues is by increasing the rate of local property taxation. Specifically, we find that if deductibility were eliminated, the mean property tax rate in our sample would fall by 0.00715 ($7.15 per $1000 of assessed property), or 21.1% of the mean tax rate.