INEQ Research Seminar

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Co-Authors: Attila Lindner, Graham Mizen and Jon Piqueras

While much prior research finds modest employment effects from minimum wage increases, standard monopsony models predict nonlinear outcomes: small--even positive--effects at low wage levels, but more sizable job losses once the minimum wage is raised high enough. This paper examines whether such a ``turning point'' has been reached. We use an event-based empirical strategy to analyze 60 U.S. state-level minimum wage increases from 1980 to 2019. Our approach covers traditional groups like restaurant workers and teens and also uses a machine learning model to identify a broader group of likely low-wage workers. We estimate event-specific treatment effects using a difference-in-differences framework and examine potential heterogeneity across several measures of minimum wage ``bite,'' including the real minimum wage level, its ratio to the median wage, and the size of the increase. We find no clear evidence of a turning point: even among the largest increases (with the minimum wage reaching around 60 percent of median wage), overall employment effects remain small or positive, and typically statistically indistinguishable from zero. These findings are relevant for policymakers considering further experimentation. They also raise questions about recent theoretical model calibrations that predict large job losses. We develop a model based on monopsonistic competition in the labor market, and calibrate the model to match the observed heterogeneity in the data, and discuss welfare implications. 

Why do children of more skilled and educated mothers tend to achieve better outcomes? We propose to answer this question using a novel empirical strategy and unique data from the Netherlands. By exploiting donor-conceived children raised in two-mother families, we are able to disentangle the influences of biological and social motherhood. We find that children’s test scores are more strongly associated with the education level of their biological mother than that of their co-mother. Strikingly, even within the same family (where children are raised by the same two mothers)  those with the more highly educated biological mother perform substantially better. Our estimates capture the combined effects of genetic endowments, in utero conditions, and early mother-child interactions. Using standard measures of infant health, we find no evidence that children of more educated mothers are healthier at birth. Moreover, leveraging plausibly exogenous variation in early mother–child interactions, we find no clear evidence that these children receive greater maternal investments in early childhood. Taken together, these results point to a prominent role for education-related heritable factors in explaining intergenerational differences in child outcomes.

Corporate philanthropy has been increasing in Western democracies in recent decades, a rise often explained by the development of tax policies offering substantial incentives to donate to charities. Yet, corporate philanthropy is also increasingly perceived as a means to influence politics. In this paper, we estimate the tax price elasticity of corporate donations, and investigate how it differs depending on the recipients' purposes and the donors' characteristics. To do so, we use an exhaustive administrative panel dataset on firms' tax returns in France from 2013 to 2024, including the identity of the charities that benefit from the donations, from which we recover their purpose using state-of-the-art NLP methods. Exploiting two reforms that affect the price of donations for firms, we document significant bunching around major regulatory thresholds, with estimated diff-in-bunching elasticities of 0.391 (2019 reform, €10,000 ceiling) and 0.461 (2020 reform, €20,000 ceiling). We then show that the tax-price elasticity varies significantly depending on the type of beneficiaries.

Co-Autorin: Isabel Micó-Millán (Bank of Spain)

We study the causal effect of first-home gifts - tax-favoured parental transfers earmarked for a child's first home purchase - on wealth accumulation and its distribution across parental income backgrounds. Our new dataset links the universe of inter vivos gift tax returns in Catalonia, Spain, to a panel of parent and child income, wealth, and property records. Comparing recipients to otherwise similar first-time buyers without a gift, a difference-in-differences design shows that both cash and house gifts generate large and lasting net-wealth gains, driven primarily by higher-value housing: cash recipients buy in more expensive locations without reducing their borrowing, whereas house recipients obtain a larger home in sole ownership and bypass the mortgage market. Gains are largest for children of top-income families, for two reasons. First, these children receive larger gifts. Second, the composition of the effect differs by parental background. The housing wealth effects are similar across the parental income ladder, but the financing of the purchase is not: lower-income recipients hold as much mortgage debt as buyers without gifts, whereas recipients at the top substitute the gift for borrowing, so their housing gains pass through to net wealth. Taken together, our results show that first-home gifts translate parental resources into higher net wealth through better housing, widening wealth inequality at the point in life when accumulation begins.

Co-Authors: Jeanne Bomare und Ignacio Orueta
Inheritance tax is levied on the estate observed at death, but death is usually anticipated and anticipated transfers of wealth can be moved beyond the reach of the tax. We quantify how much this anticipatory planning erodes the tax base, using the first wave of the COVID-19 pandemic as an exogenous mortality shock that occurred before individuals could rearrange their estate. Linking UK inheritance tax returns to high-frequency mortality data, we compare unexpected deaths with observationally similar pre-pandemic decedents. Unexpected death raises the reported estate by £350,000 and the effective tax rate by 5 percentage points. Across taxpaying estates, this implies £3-4.5 billion in forgone revenue annually, 57-110 percent of receipts. The erosion runs almost entirely through inter-vivos transfers rather than within-estate restructuring: gifts made within seven years of death are pulled back into the taxable base. The effective inheritance tax base is, to a first order, a matter of timing and reforms to raise revenue and progressivity could target inter-vivos transfers, not just the estate at death.

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Co-Authors: Arun Advani (University of Warwick), Claire Crawford (UCL, CEPEO)

Local human capital raises wages, but through what channels, and for whom? We estimate human capital spillovers at both neighbourhood and local labour market scales, separately for high- and low-skilled workers, using administrative data on the near-universe of workers entering the English labour market. A parsimonious model maps the reduced-form coefficients into four structural parameters: absorptive capacity and interaction geography for each skill group. Instrumenting local skill shares with cohort-size-driven predicted inflows of tertiary-educated workers, we find that a 1 percentage point increase in the local share of graduates raises average wages by 1.4%. Total spillover intensity is roughly twice as large for high-skilled workers, but low-skilled workers draw a 25% larger share of their spillovers from the immediate neighbourhood. Across the urban hierarchy, total spillover intensity declines only moderately with density, but its geography shifts sharply: spillovers operate through the labour market in major conurbations and almost entirely through the neighbourhood in rural areas. The results imply that the social return to education depends not only on how many graduates an economy produces but also on where they settle and who lives nearby.

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