This paper analyzes the changes in wealth inequality between college graduates and high-school graduates between 1989 and 2007. The college/high-school net worth gap first narrowed from 1989 to 1995 but then increased thereafter. The wealth gap between the two groups reflects the earnings gap as the evolution in the wealth gap follows the changes in the college premium in income during the samp...

This paper provides a dynamic rational expectations equilibrium model in which investors have heterogeneous information and investment opportunities. Informed investors privately receive advance information about future earnings that is unrelated to current earnings. In response to good advance information, stock prices increase and informed investors act as trend chasers, increasing their inve...

This article develops a model of intellectual labour augmentation to explain both the marriage wage premium and educational assortative mating. We suggest that husbands and wives are complementary factors of production where a spouse’s education and skills augment their partner’s productivity and earnings potential. We test this proposition using data from the 2000 US Census of Population and t...

The well-known association between height and earnings is often thought to reflect factors such as self esteem, social dominance, and discrimination. We offer a simpler explanation: height is positively associated with cognitive ability, which is rewarded in the labor market. Using data from the US and the UK, we show that taller children have higher average cognitive test scores, and that thes...

This paper documents a dramatic increase in the college enrollment rate of women from 1955 to 1980 and asks a quantitative question: to what extent can such increase be accounted for by the change in the female cohort-specific college wage premium? I develop and calibrate an overlapping generations model with discrete schooling choice. I find that changes in the life-cycle earnings differential...

Mincer wage equations focus on the earnings premium associated with additional schooling for a cross section of individuals of different ages but generally fail to account for changes in education quality over time. More fundamentally, school attainment is an inadequate proxy of individual skills, when both family inputs and ability affect cognitive skills. We combine quality-adjusted measures ...

We model conditional market beta and alpha as flexible functions of state variables identified via a formal variable selection procedure. In the post-1963 sample, beta of the value premium comoves strongly with unemployment, inflation, and price-earnings ratio in a countercyclical manner. We also uncover a novel nonlinear dependence of alpha on business conditions: It falls sharply and becomes ...

In a seminal paper, Lena Edlund and Evelyn Korn (2002) introduce a puzzling stylized fact— that prostitution is “low-skilled, labor intensive, female, and well paid’’—and offer a provocative explanation: sex workers draw a compensating differential due to the foregone opportunity to “sell’’ their fertility in the marriage market. In so doing, they not only provide the first formal model of occu...

We study how the arrival of macro-news affects stock market's ability to incorporate information in firm-level earnings announcements. Existing theories suggest that macro and news are attention substitutes; announcements crowd out attention, causing less efficient processing find opposite: sensitivity announcement returns is 17% stronger, post-earnings drift 71% weaker, on days. This suggests ...