“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
AI Summary.30% of US adults have literacy skills typical of a 10-year-old, yet US workers scoring at that low level earn an average of nearly $30 an hour and two-thirds are employed, compared with about $20 and fewer than half employed in Britain. The author argues this reflects stronger economic growth rather than vocational education policy.
John Burn-MurdochFinancial Times
Date Posted:
Is Database:
Database
Is Important:
Important
Using OECD skills data and the Luxembourg Income Study, Burn-Murdoch finds US workers at the lowest levels of literacy and numeracy earn ~ on par with British workers scoring a 2, ~ a mean score.
Does economic growth matter more than education policy for low-skilled workers' pay?
Core argument: 30% of US adults have literacy skills typical of a 10-year-old, yet US workers scoring that low earn an average of almost $30 per hour and two-thirds of them are employed.
30% of US adults have literacy skills typical of a 10-year-old. The same proportion of US workers who score stunningly low on literacy earn an average of almost $30 per hour, and two-thirds of them are in work. Their British counterparts make the equivalent of $20 and fewer than half are employed. This all looks more like the fruits of years of stronger growth than vocational education policy. We should view education as creating potential that a strong economy unleashes (and a weak one disappoints).
Takeaways by Macro Roundup® AI
30% of US adults have literacy skills typical of a 10-year-old, yet US workers scoring that low earn an average of almost $30 per hour and two-thirds of them are employed.
British workers with similarly low literacy scores earn the equivalent of $20 per hour and fewer than half are employed, a gap the author attributes to years of stronger US growth rather than vocational education policy.
The author argues that education should be viewed as creating potential that a strong economy unleashes and a weak one disappoints.
Related Articles:
Do Adults Have the Skills They Need to Thrive in a Changing World?— An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts— The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.
Cognitive Skills Beyond Childhood— Wages at age 50 rise more steeply with cognitive skills measured at age 16 than with cognitive skills measured at age 50; for women, moving from average to two standard deviations above average raises expected hourly wages from £11 to £22 using age-16 skills, versus £12 to £15 using age-50 skills.
AI Summary.A meta-study of 79 causal estimates finds an average 8.2% earnings gain per year of education, matching earlier work, but also finds evidence of publication bias favoring statistically significant and positive estimates. Correcting for these biases implies an average causal return in the 0%–3% range.
Gregory Clark and Christian Alexander Abildgaard NielsenKyklos
Date Posted:
Is Database:
Database
Is Important:
Important
Clark and Nielsen replicate the ~8% estimates of the return to education obtained by standard methods, but find evidence of selection biases in favor of high estimated returns. After correcting for these biases, they calculate returns on the order of 3%.
Do publication biases inflate estimated earnings returns to education?
Core argument: A meta-study of 79 causal estimates of education's effect on earnings, drawn from school-leaving age mandates and child labor bans, reports an 8.2% earnings gain per year of education, similar to the earlier Ashenfelter et al. study.
In this meta-study of 79 estimates of the causal effects of education on earnings (derived from increases of the mandated school-leaving age or legislation banning child labor under certain ages), we report a similar effect to [the classic] earlier study (Ashenfelter, et al): an 8.2% gain in earnings for each year of education. We also find clear evidence of significant publication biases. Studies passing the filter of publication were more likely to have coefficients statistically significantly greater than 0, and we observe strong evidence that studies with returns estimated at less than 0 were more difficult to publish. There is strong suggestive evidence of the first publication bias in the data. Figure 6 shows that the average estimated return rises substantially where the standard error is larger. This suggests a greater likelihood of an estimate being published when it was statistically significantly different from 0. If all estimates were published independent of the estimated return, we would not expect there to be such a gradient. Correcting the first publication bias by looking at the average return on the studies with the lowest standard errors would suggest an average causal return to education of no more than 3%, compared to the reported 8.2%. Independent of this, correcting for the omission of returns less than 0 implies an overall causal return to education only in the 0%–3% range.
Takeaways by Macro Roundup® AI
A meta-study of 79 causal estimates of education's effect on earnings, drawn from school-leaving age mandates and child labor bans, reports an 8.2% earnings gain per year of education, similar to the earlier Ashenfelter et al. study.
Average estimated returns to education rise substantially where standard errors are larger, which suggests estimates were more likely to be published when statistically significantly different from 0.
Correcting for publication bias by using the studies with the lowest standard errors would suggest an average causal return to education of no more than 3%, while correcting for omitted negative estimates implies a 0%–3% range.
Related Articles:
Standardized Test Scores and Academic Performance at Ivy-Plus Colleges— An analysis of admissions and transcript records at Ivy-Plus colleges finds standardized test scores predict first-year college grades with a normalized slope 4x greater than high school grade point average, controlling for race, gender, and socioeconomic status. The authors find no evidence test scores underpredict college performance for students from less advantaged backgrounds.
Do Adults Have the Skills They Need to Thrive in a Changing World?— An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
Military Officer Quality in the All-Volunteer Force— The authors find a steady decline in U.S. Marine Corps officers' General Classification Test scores, which is statistically associated with the expansion of college attendance and explains 96% of the measured change. They also find a positive association between African American officers and mean test scores, arguing affirmative action has not lowered officer quality.
AI Summary.Registered disability rates among undergraduates have risen at elite US universities, reaching 38% at Stanford and 21% at Harvard, both up from 5% in 2009, with similar increases across 19 European countries. In the poorest US school districts, 1% of young people are on special-support plans, unchanged, while the share in the richest areas tripled from 2% to 6%.
John Burn-MurdochFinancial Times
Date Posted:
Is Database:
Database
Is Important:
Important
In 2025, 38% of Stanford and 21% of Harvard undergrads were registered as having a disability — up from 5% in 2009; 6% of youth from the richest US school districts, and 1% from the poorest, are now in special support programs.
Are rising student disability rates concentrated among the wealthiest families?
Core argument: Research by Rose Horowitch for The Atlantic found 38% of Stanford undergraduates and 21% of Harvard undergraduates are registered as having a disability, both up from 5% in 2009.
In the US, research by Rose Horowitch for the Atlantic magazine found that 38% of undergraduates at Stanford this year are registered as having a disability, as are 21% at Harvard — both up from 5% in 2009. My analysis of data from 19 European countries finds similar trends, with health impairments among students doubling on average over the past decade. In 2010, 1% of American young people from the poorest school districts were on plans that provide special support, and today that figure is unchanged. But among those in the richest areas, it has tripled from 2 to 6%.
Takeaways by Macro Roundup® AI
Research by Rose Horowitch for The Atlantic found 38% of Stanford undergraduates and 21% of Harvard undergraduates are registered as having a disability, both up from 5% in 2009.
An analysis of data from 19 European countries finds health impairments among students doubled on average over the past decade.
Among American young people in the richest school districts, the share on plans providing special support tripled from 2% to 6% since 2010, while the share in the poorest districts remained at 1%.
Related Articles:
Military Officer Quality in the All-Volunteer Force— The authors find a steady decline in U.S. Marine Corps officers' General Classification Test scores, which is statistically associated with the expansion of college attendance and explains 96% of the measured change. They also find a positive association between African American officers and mean test scores, arguing affirmative action has not lowered officer quality.
Do Adults Have the Skills They Need to Thrive in a Changing World?— An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
Twelfth-Grade Math and Reading Scores in U.S. Hit New Low— U.S. twelfth-graders' average math and reading scores on the National Assessment of Educational Progress fell to their lowest levels on record, with math the worst since that test began in 2005 and reading below any point since 1992. The share rated proficient slid 2 percentage points to 35% in reading and 22% in math.
AI Summary.Declines in U.S. college enrollment are concentrated in community colleges, with four-year institutions maintaining stable enrollments and over one-third of the apparent community college drop stemming from administrative reclassification. The authors estimate that stronger labor markets explain 60% of the community college enrollment decline over 2009-19.
Joshua Goodman and Joseph WinkelmannNational Bureau of Economic Research
Date Posted:
Is Database:
Database
Is Important:
Important
First-time undergraduate enrollment in public 4-year colleges has ~ doubled since 1990. In public 2-year and for-profit institutions, enrollment has ~ halved. Stronger labor markets explain 60% of the drop in enrollment in two-year colleges.
Do stronger labor markets explain falling community college enrollment?
Core argument: Strengthening labor markets explain 60% of the decline in U.S. community college enrollment from 2009–19 and nearly 50% of the decline through 2023, according to the authors.
We demonstrate that widely discussed declines in U.S. college enrollment reflect patterns concentrated in community colleges rather than a broad crisis in higher education. We show that: four-year institutions have maintained stable enrollments; over one-third of apparent community college declines stem from administrative reclassification; community college enrollments are strongly countercyclical; strengthening labor markets explain 60% of the community college enrollment decline from 2009-19 (and nearly 50% of the decline through 2023); and students on the margin between community college enrollment and employment appear unlikely to complete a degree. Figure 3 overlays six decades of first-time enrollment data with gray bars indicating years when the national unemployment rate was increasing. Of the last six such recessionary periods, all but the most recent pandemic-related rise in unemployment show local maxima in community college enrollments. Unemployment rates seem less clearly related to enrollments in public four-year colleges over this time period, or to enrollment in private four-year and for-profit colleges during the last three decades.
Takeaways by Macro Roundup® AI
Strengthening labor markets explain 60% of the decline in U.S. community college enrollment from 2009–19 and nearly 50% of the decline through 2023, according to the authors.
Over one-third of the apparent community college enrollment decline stems from administrative reclassification, while four-year institutions have maintained stable enrollments.
Of the last six periods of rising national unemployment, all but the pandemic-related rise coincide with local maxima in community college first-time enrollment, with less clear relationships for public four-year, private four-year, and for-profit colleges.
Related Articles:
The Unexpected Compression: Competition at Work in the Low Wage Labor Market— Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
Are Young College Graduates Losing Their Edge in the Job Market?— Among unemployed workers aged 22–27, the rate of exiting unemployment for college graduates trended upward from 1976 to 2000 and then declined sharply, while the rate for high school graduates was stable until 2008 and now sits near its long-run average. The gap between the two groups narrowed after 2000 and closed entirely around 2019.
Military Officer Quality in the All-Volunteer Force— The authors find a steady decline in U.S. Marine Corps officers' General Classification Test scores, which is statistically associated with the expansion of college attendance and explains 96% of the measured change. They also find a positive association between African American officers and mean test scores, arguing affirmative action has not lowered officer quality.
AI Summary.The authors find a steady decline in U.S. Marine Corps officers' General Classification Test scores, which is statistically associated with the expansion of college attendance and explains 96% of the measured change. They also find a positive association between African American officers and mean test scores, arguing affirmative action has not lowered officer quality.
Matthew Cancian and Michael KleinNational Bureau of Economic Research
Date Posted:
Is Database:
Database
Is Important:
Important
A sharp and steady decline in the GCT scores of Marine Corps officers occurred btw 1980 and 2014. 96% of this is explained by the widening (and weakening) of the applicant pool due to increased college participation. Affirmative action played no role.
Has expanded college attendance lowered military officer test scores?
Core argument: Marine Corps officers' General Classification Test scores declined steadily since 1980, and the coefficient on college participation is negative and significant at better than the 99 percent level, explaining 96 percent of the actual percentage change in GCT scores.
This paper analyzed the intelligence of the officers of the Marine Corps, and found a relevant and steady decline in intelligence, as measured by General Classification Test (GCT) scores, since 1980. This decline was closely associated with an expansion of the pool of young college graduates during the same time period, which potentially diminished the overall intellectual quality of that pool. If the pool of those wanting to become Marine officers is representative of the pool of college attendees, and if there is a positive, monotonic relationship between intelligence and GCT scores, then the expansion of the pool of college students will be associated with lower average GCT scores. The coefficient [of GCT scores] on college participation is negative and significant at better than the 99 percent level, and explains 96% of the actual percentage change in the GCT over this period. Our results also support those who argue that affirmative action has not had a negative impact on the quality of the officer corps. We find, in fact, a positive association between African American officers and mean GCT score, perhaps because recruitment efforts by the Marine Corps have attracted minority officers who are more qualified than the typical college graduate.
Takeaways by Macro Roundup® AI
Marine Corps officers' General Classification Test scores declined steadily since 1980, and the coefficient on college participation is negative and significant at better than the 99 percent level, explaining 96 percent of the actual percentage change in GCT scores.
The authors associate the decline in Marine officer GCT scores with an expansion of the pool of young college graduates over the same period, which potentially diminished that pool's overall intellectual quality.
The authors find a positive association between African American officers and mean GCT score, supporting those who argue affirmative action has not harmed officer corps quality, perhaps because Marine Corps recruitment attracted minority officers more qualified than the typical college graduate.
Related Articles:
The Extreme Shortage of High IQ Workers— Semiconductor manufacturing requires workers of above-average intelligence, with the most demanding roles needing IQs in the top 1 in 1,000 — a pool of about 164,000 people in the US, of whom perhaps 100,000 can be placed in such professions. The author argues this scarcity explains reliance on high-IQ workers abroad and on smarter tools and non-human intelligence.
Boeing Battles Brain Drain As Engineers Chase the Allure of Space— The average tenure of a Boeing engineer has fallen from 16.4 years to 12.6 years, according to data from the union representing 12,000 Boeing engineers, with tenure shortening in almost every age bracket. Analysts, recruiters and union officials describe this "brain drain" as a drag on operations that could make launching a new plane harder.
Do Adults Have the Skills They Need to Thrive in a Changing World?— An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
AI Summary.An analysis of 87 identical-twin pairs raised apart with individual IQ and biographical data finds that pairs with similar schooling had an average IQ gap of 5.8 points and a correlation of 0.87, while educationally dissimilar pairs averaged a 12.8-point gap and a 0.75 correlation.
Jared Horvath and Katie FabricantActa Psychologica
Date Posted:
Is Database:
Database
Is Important:
Important
“Educationally similar” monozygotic (MZ) twins raised apart [TRA] have a mean IQ delta of 5.8 points, ~ the same as those raised together. “Educationally dissimilar” MZ TRA have a delta of 12.8 points, closer to non-twin siblings than twins reared together.
How much do schooling differences affect IQ gaps between separated twins?
Core argument: Among 87 twins-reared-apart pairs with individualized IQ and biographical data, the 52 with similar schooling show an intraclass correlation of 0.87 ± 0.02 and an absolute IQ gap of 5.8 points (SD = 6.7), nearly indistinguishable from identical twins reared together.
We gathered data from every available TRA [Twins Raised Apart] case published in the academic literature over the last century that included both individualized IQ and biographical data. This data set (which we believe represents the entirety of the non-amalgamated TRA field; the vast majority embodied in existing studies are amalgamated) consists of 87 pairs. We split these pairs into three groups: similar, somewhat dissimilar, and very dissimilar schooling. Of the 87 pairs, 52 experienced a similar type and duration of schooling within a similar location. In fact, 25 of these pairs attended the same school for some period of time. One would be correct in questioning whether these twins truly meet the criteria of ‘reared apart;’ eyebrows should certainly be raised over how varied researchers have defined the term. Analysis revealed that ‘Educationally Similar’ TRA pairs have an ICC of 0.87 ± 0.02 (n = 52) and an absolute IQ differential of 5.8 points (SD = 6.7). This makes this group nearly indistinguishable from MZ twins reared together. Further analysis of the 35 ‘educationally dissimilar’ TRA pairs shows an ICC of 0.75 ± 0.04 (n = 32) and an absolute IQ differential of 12.8 points (SD = 7.3). The correlation is 0.12 lower than the ‘educationally similar’ TRAs and the IQ differential places this group closer in stature to non-twin siblings than MZ or even dizygotic twins reared together.
Takeaways by Macro Roundup® AI
Among 87 twins-reared-apart pairs with individualized IQ and biographical data, the 52 with similar schooling show an intraclass correlation of 0.87 ± 0.02 and an absolute IQ gap of 5.8 points (SD = 6.7), nearly indistinguishable from identical twins reared together.
The 35 educationally dissimilar twins-reared-apart pairs show an intraclass correlation of 0.75 ± 0.04 (n = 32) and an absolute IQ differential of 12.8 points (SD = 7.3), placing them closer to non-twin siblings than to identical or fraternal twins reared together.
Of the 52 educationally similar twins-reared-apart pairs, 25 attended the same school for some period, raising the question of whether those twins meet the criteria of "reared apart" and how varied researchers' definitions of the term have been.
Related Articles:
The Inheritance Of Social Status: England, 1600 to 2022— Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
A Chip Off the Old Block? Genetics and the Intergenerational Transmission of Socioeconomic Status— Linking Dutch genetic data to tax records, the authors estimate that moving a person 10 percentiles higher in a genetic index raises their own income by 0.9 percentiles and their child's by 0.7 percentiles. They attribute about 50% of this to transmitted genes and the rest to environmental pathways.
For Whom the Bell Curve Tolls: A Lineage of 400,000 English Individuals 1750-2020 Shows Genetics Determines Most Social Outcomes— A study of 402,000 English individuals across 1750–2020 estimates an intergenerational occupational status correlation of 0.88 and a genetic correlation between spouses of 0.76, which the authors interpret as a strong genetic basis for the persistence of social status. The authors argue that highly assortative mating around status genetics limits what policy can do to raise social mobility.
AI Summary.Students from the bottom third of parental income now earn less than half the college enrollment wage premium of top-third students. The authors attribute this mainly to the rising relative value of research universities, lower-income students' diversion to community and for-profit colleges, and their shift from computer science and engineering into humanities.
Zachary Bleemer and Sarah QuincyNational Bureau of Economic Research
Date Posted:
Is Database:
Database
Is Important:
Important
Enrollment in teaching colleges instead of increasingly valued research universities and moves out of computer science and engineering led students with parental incomes in the bottom ⅓ to now “earn less than ½ the enrollment wage premium” of the top ⅓.
Why do lower-income students now earn a smaller college wage premium?
Core argument: Students from the bottom parental income tercile earn less than half the college enrollment wage premium received by top-tercile students, a gap driven more by sector and field of study than by access to high-quality universities or net tuition costs.
Lower-income students have become less likely to enroll in the traditional 4-year university sector than their peers, experienced declines in the relative value of the public teaching oriented universities where they have long enrolled, and become less likely to study high-value fields like computer science. These forces– more than changes in high-quality university access or net tuition costs– now lead students from the bottom parental income tercile [i.e. third] to earn less than half the enrollment wage premium received by top-tercile students. The relative decline in higher education’s value for lower-income Americans can largely be explained by three factors: the rising relative value of higher-income students’ research-oriented universities, lower-income students’ increasing diversion to community and for profit colleges, and lower-income students’ redirection out of computer science and engineering into the shrinking humanities disciplines within four-year universities. Differential selection into college, reallocation of students within the four-year sector, and changes in the value of different college majors have played minimal roles, especially in recent years.
Takeaways by Macro Roundup® AI
Students from the bottom parental income tercile earn less than half the college enrollment wage premium received by top-tercile students, a gap driven more by sector and field of study than by access to high-quality universities or net tuition costs.
The relative decline in higher education's value for lower-income Americans can largely be explained by the rising relative value of higher-income students' research-oriented universities, lower-income students' diversion to community and for-profit colleges, and their redirection out of computer science and engineering into the shrinking humanities.
Differential selection into college, reallocation of students within the four-year sector, and changes in the value of different college majors have played minimal roles, especially in recent years.
The Inheritance Of Social Status: England, 1600 to 2022— Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
For Whom the Bell Curve Tolls: A Lineage of 400,000 English Individuals 1750-2020 shows Genetics Determines Most Social Outcomes— A study of 402,000 English individuals across 1750–2020 estimates an intergenerational occupational status correlation of 0.88 and a genetic correlation between spouses of 0.76, which the authors interpret as a strong genetic basis for the persistence of social status. The authors argue that highly assortative mating around status genetics limits what policy can do to raise social mobility.
AI Summary.Only 17% of firms are "transformative" entrepreneurs, defined as those hiring a research-and-development worker at some point; higher IQ and educational attainment strongly predict transformative entrepreneurship, though the likelihood of becoming an entrepreneur overall declines with IQ. The authors argue education subsidies address financial constraints more effectively than uniform startup or research subsidies.
Ufuk Akcigit, Harun Alp, Jeremy Pearce and Marta PratoNational Bureau of Economic Research
Date Posted:
Is Database:
Database
Is Important:
Important
Danish data show that the probability of becoming either an R&D worker or a “transformative entrepreneur” who hires R&D workers and pursues innovation is highly correlated with IQ. Non-transformative entrepreneurship often reflects family background.
What predicts which entrepreneurs innovate and drive economic growth?
Core argument: Only 17% of firms in the authors' data are transformative, defined as hiring an R&D worker at some point in the firm's life cycle; subsistence entrepreneurs maintain their business without attempting to grow or innovate.
Subsistence entrepreneurs focus on maintaining their business but do not attempt to grow or innovate. The other types of entrepreneurs are transformative: they attempt to grow and contribute to technological progress. In our data, we define transformative entrepreneurs as those who hire an R&D worker at some point during the life cycle of the firm. Only 17% of firms in our data are transformative. We show that while the likelihood of becoming an R&D worker rises with IQ, the likelihood of becoming an entrepreneur declines with it. However, for transformative entrepreneurs—those who actively hire R&D workers and pursue innovation—IQ and educational attainment are strongly predictive. Parental background remains a powerful determinant of entrepreneurship in general, but talent and education appear to be key filters for the most growth-oriented entrepreneurs. Financial constraints in access to education limit the development of both the supply of innovative workers and the demand from transformative entrepreneurs. Education subsidies are more effective in addressing [this] than uniform startup or incumbent R&D subsidies.
Takeaways by Macro Roundup® AI
Only 17% of firms in the authors' data are transformative, defined as hiring an R&D worker at some point in the firm's life cycle; subsistence entrepreneurs maintain their business without attempting to grow or innovate.
The likelihood of becoming an R&D worker rises with IQ while the likelihood of becoming an entrepreneur declines with it, yet IQ and educational attainment are strongly predictive of becoming a transformative entrepreneur.
Financial constraints in access to education limit both the supply of innovative workers and demand from transformative entrepreneurs, and the authors argue education subsidies address this more effectively than uniform startup or incumbent R&D subsidies.
Related Articles:
On the Nature of Entrepreneurship— Using US administrative tax data on pass-through business owners, who account for over 50% of US business net income, the authors find little evidence of inordinate risk, high startup costs, or non-pecuniary motives in self-employment, and steeper average income growth than comparable paid employees.
Immigrant Entrepreneurship: New Estimates and a Research Agenda— Immigrants account for about a quarter of new employer businesses in the United States, and firms with immigrant owners are more likely to hold patents and hold more patents per employee. This higher propensity toward innovation is only partly explained by differences in owners' education levels and fields of study.
The Economics of Inequality in High-Wage Economies— Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.
