Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence

A large literature in cognitive science studies the puzzling "Flynn effect" of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort's mix of skills is determined by different skills' relative returns in the labor market and by the technology for producing skills. Combining Swedish data from exams taken at military enlistment with earnings records, we document an increase in the labor market return to logical reasoning skill relative to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 37 percent of the measured increase in reasoning skill, and can also explain the decline in knowledge. A survey of parents as well as analyses of school curricula and occupational characteristics show evidence of increasing emphasis on reasoning relative to knowledge.

Adoption of Medical Innovations Across Hospitals and Socioeconomic Groups: Evidence from Sweden

We study the adoption of innovations in the context of healthcare using Swedish data on 58 novel medicines for 47 conditions. We find significant variation in adoption rates across hospitals and socioeconomic groups, with a positive correlation between patient income rank and adoption rates. Using a novel antiplatelet drug as a case study in a back-of-the-envelope calculation, we find that equalizing adoption rates between top and bottom income deciles could have reduced the gap in 12-month survival rates by 1.2 percent among first-time heart attack patients.

Unemployment Insurance Generosity and Health: Evidence from Sweden

We study how the generosity of unemployment insurance (UI) affects benefit recipients' healthcare use using Swedish administrative data. Our measure of healthcare use accounts for inpatient and outpatient care visits and drug purchases and measures full system costs, not just out-of-pocket expenses. Exploiting caps in the amount of daily benefits in a regression kink design, we find little evidence that more generous unemployment benefits affect the total costs of recipients' healthcare use. This finding holds across gender and age groups as well as short-term and long-term benefit recipients.

Family-Level Stress and Children's Educational Choice: Evidence from Parent Layoffs

We analyze the effect of parental layoffs on the educational outcomes of their children. Using Swedish administrative data, we exploit shocks to firm labor demand to estimate the age-specific impact of parental layoffs on high school graduation rates. We find that parental layoffs have a significant impact on high school completion rates and that the effect is strongest in the year of application to high school (age 15). We then exploit variation in the fine timing of the layoff to link this effect to a short window before a student chooses where to apply to high school. A parental layoff in the month before the school choice deadline decreases the likelihood that the child will finish high school on time by 9 percentage points relative to a layoff in the same school semester but after the deadline. The effect is higher for families with less information about high school choice, consistent with the hypothesis that family stress, even if temporary and without financial effects, may disrupt educational choice.