The Education Finance Conference gathered experts to discuss student loans, financial aid, & policy, highlighting new research & challenges in higher education financing. Org. by @mikedinerstein.bsky.social, @dkoust.bsky.social, @lesleyturner.bsky.social, & Constantine Yannelis: ow.ly/eYxz50VWx2X

Teacher Labor Market Policy and the Theory of the Second Best* Abstract. We estimate a matching model of teachers and elementary schools with rich data on teachers' applications and principals' ratings from a large, ur

#QJE May 2025, #11, “Teacher Labor Market Policy and the Theory of the Second Best,” by Bates, Dinerstein (@mikedinerstein.bsky.social), Johnston, and Sorkin: doi.org/10.1093/qje/...

Tagging Dmitri Koustas correctly this time: @dkoust.bsky.social

The paper has more results and interpretation. Feedback welcome! 13/13

Focusing on borrowers subject to primarily a wealth shock (no change in payments due), we test and fail to reject the PIH. Borrowers do smooth as predicted, mostly through labor supply! 12/13

Are these responses surprising? The permanent income hypothesis (PIH) predicts borrowers would “smooth” the wealth shock over time. 11/13

We use novel survey data on borrowers’ expectations of forgiveness to translate the effects into an MPC of 0.27 and an MPE of -0.49. Size of labor supply response stands out. 10/13

CONSUMPTION? We find sharp increases in mortgage, auto and credit card spending following loan forgiveness ($0.09 per $1 of forgiveness). 9/13

Results consistent with wealth effects and job lock. Estimated labor supply response similar to responses to lottery wins. 8/13

Effects stronger among hourly workers, 50% coming through reduced wages, 50% reduced hours. We also see increases in industry switching and leaving public service. 7/13

Causal effect on LABOR SUPPLY: Over 6 mos post-forgiveness, borrowers earn $44 less (2%), effect growing over time. 6/13

Biden’s (blocked) proposal would have been much less regressive, mostly because of earnings cutoffs. 5/13

On targeting, forgiven borrowers earn more than other borrowers, largely due to being older. But even at same age, they earn $115 more per month ($1,240 more than those without college). 4/13

We look at the (1) targeting and (2) causal effects of forgiveness. 3/13

Note: This was not the broad forgiveness plan that was struck down by the Supreme Court. Instead, it came through a variety of admin. reforms and expansions. 2/13

Excited about this new paper with Sam Earnest, @dkoust, and Constantine Yannelis. We study the recent forgiveness of 7% (!) of student loan debt in the US 1/13

Recently accepted by #QJE, “Teacher Labor Market Policy and the Theory of the Second Best,” by Bates, Dinerstein (@mikedinerstein.bsky.social), Johnston, and Sorkin: doi.org/10.1093/qje/...

Congratulations!!