Julien Grenet

We study how students adjust their early career choices in response to economic crises, and how this behavioral response affects their long-run labor market outcomes. We specifically examine the context of the severe recession that struck Sweden in the early 1990s, which disproportionally affected the manufacturing and construction sectors. We find that students who experienced paternal job loss in these heavily affected sectors were more likely to choose high school programs linked to sectors less impacted by the recession. As a result, these individuals achieved better labor market outcomes in adulthood, including higher employment rates and career earnings. Our findings are consistent with informational frictions being a key obstacle to structural change, and we identify career choice as an important mechanism through which recessions reshape labor markets in the very long run.

Electronic monitoring (EM) has emerged as a popular tool for curbing the growth of large prison populations. Evidence on the causal effects of EM on criminal recidivism is, however, limited and it is unclear how this alternative to incarceration affects the labor supply of offenders and the outcomes of their family members. We study the countrywide expansion of EM in Sweden in 1997 wherein offenders sentenced to up to three months in prison were granted the option to substitute incarceration with EM. Our difference-in-differences estimates, which compare the change in the prison inflow rate of treated offenders to that of non-treated offenders with slightly longer sentences, show that the reform significantly decreased the number of incarcerations. Our main finding is that EM not only lowers criminal recidivism but also increases labor supply. Additionally, EM improves the educational attainment and early-life earnings of the children whose parents were exposed to the reform. The primary mechanisms through which EM operates appear to involve the preservation of offenders’ ties to the labor market, by reducing the barriers to both finding a job and changing employers. Our calculations suggest that the social benefits stemming from EM are about seven times larger than the fiscal savings associated with reduced prison expenditures, implying that the welfare gains from EM could be much greater than previously acknowledged.

Electronic monitoring (EM) has emerged as a popular tool for curbing the growth of large prison populations. Evidence on the causal effects of EM on criminal recidivism is, however, limited and it is unclear how this alternative to incarceration affects the labor supply of offenders and the outcomes of their family members. We study the countrywide expansion of EM in Sweden in 1997 wherein offenders sentenced to up to three months in prison were granted the option to substitute incarceration with EM. Our difference-in-differences estimates, which compare the change in the prison inflow rate of treated offenders to that of non-treated offenders with slightly longer sentences, show that the reform significantly decreased the number of incarcerations. Our main finding is that EM not only lowers criminal recidivism but also increases labor supply. Additionally, EM improves the educational attainment and early-life earnings of the children whose parents were exposed to the reform. The primary mechanisms through which EM operates appear to involve the preservation of offenders’ ties to the labor market, by reducing the barriers to both finding a job and changing employers. Our calculations suggest that the social benefits stemming from EM are about seven times larger than the fiscal savings associated with reduced prison expenditures, implying that the welfare gains from EM could be much greater than previously acknowledged.

We study the earnings responses to six large payroll tax and income tax reforms in France. We find evidence of full pass-through to workers in cases where there is a strong and clear relationship between contributions and expected benefits. By contrast, we find a limited pass-through of employer payroll taxes to workers for reforms with no tax-benefit linkage, and close to full pass-through to workers for income tax reforms nominally incident on employees. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage matters for incidence of payroll taxes, a claim long made by the literature but not backed by empirical evidence to date. Absent tax-benefit linkage, our results suggest that the individual-level incidence of payroll taxes aligns with their statutory incidence.