Damon Jones

My research in public economics focuses on income taxes and cash transfers, particularly those affecting low-income households. In one recent paper (2022), my coauthor and I investigated how unconditional cash transfers impact labor market outcomes. These impacts are of central interest to policymakers designing taxes, means-tested transfers, and social insurance programs. We looked at the case of the Alaska Permanent Fund, which has paid out an annual dividend to every resident of the state since 1982, making it one of the rare guaranteed income programs in the world. In the figure below, we compare Alaska workers to those in a set of matched control states and do not find compelling evidence that full-time employment rates declined because of the dividend. Our findings suggest that the labor supply disincentives caused by universal transfers may be offset by an increase in labor demand induced by higher spending. 

In another example (2020), my coauthors and I implemented a method that allowed us to estimate the cost of adjusting earnings and how sensitive labor supply is to after tax earnings. We found that older workers work fewer hours in response to the Social Security Earnings Test and face frictions in adjusting their earnings. This is demonstrated by (1) the spike in earnings just below where the effective marginal tax rate on current earnings increases and (2) the fact that this “bunching” remains at ages where the marginal tax rate increase no longer applies. These findings indicate that adjustment costs are a salient factor that individuals face when effective marginal tax rates change. This insight, for instance, can help policymakers better evaluate the efficiency of proposed tax policies.

A related line of inquiry in my research concerns how transfers like refundable tax credits can generate ‘lumpy’ cash flows for households and how households respond to this structure. My research suggests that low-income taxpayers, especially, adjust their consumption significantly in response to default income tax withholding rules, pointing to a potential avenue for shifts in federal policy. Another policy-relevant example includes a recent study (2024) examining the Teacher Loan Forgiveness program, which finds that the administrative burden of the program can reduce uptake, offering lessons for improving its efficiency.

Selected Publications

• Enriquez, Brandon, Damon Jones, and Ernie Tedeschi. 2023. “The Short-Term Labor Supply Response to the Expanded Child Tax Credit.” AEA Papers and Proceedings, Vol. 113, May 2023: 401-405

• Gelber, Alexander M, Damon Jones, Daniel W Sacks, and Jae Song. 2021. “Using Non-Linear Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Earnings Test.” American Economic Journal: Applied Economics 13 (4): 1–49. 

• Gelber, Alexander M, Damon Jones, and Daniel W Sacks. 2020. “Estimating Adjustment Frictions Using Nonlinear Budget Sets: Method and Evidence from the Earnings Test.” American Economic Journal: Applied Economics 12 (1): 1–31. 
  
• Jones, Damon, and Ioana Marinescu. 2022. “The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund.” American Economic Journal: Economic Policy, 14 (2): 315-340.

In addition to papers above that look at the effects of tax and transfer policies on labor supply, I have research that focuses on within-firm human resource dynamics. For example, my coauthors and I published a paper (2019) that analyzed the effectiveness of workplace wellness programs, which have become increasingly popular following the passage of the Affordable Care Act. We designed and implemented a randomized controlled trial at the University of Illinois Urbana-Champaign with nearly five thousand participants. We made two important discoveries: first, people who chose to participate were healthier overall than those who chose not to, and second, most of our outcomes (medical spending, absenteeism, etc.) were not significantly affected by the treatment after 24 to 30 months. Our results are summarized in the figure below: here we plot the estimates of workplace wellness effects on medical spending and absenteeism from 112 prior studies. We also include our experimental estimates and their confidence intervals (in orange). In total, 94 of the 112 prior studies fall outside of our confidence intervals. Our null estimates are therefore meaningfully precise, and the potential for selection bias in prior, observational studies appears to bear out in this comparison. Our findings suggested that the effectiveness of these programs is limited, and observational studies may suffer from selection bias.

In ongoing work (2025), my coauthors and I explore the concept of internal labor markets, the allocation of workers across different “jobs” within a firm. In these cases, where wages are not typically used to sort workers across jobs, other mechanisms must be used. We study the use of so-called strategy-proof mechanisms, in particular the Deferred Acceptance (DA) mechanism, which uses workers’ rankings of different jobs and managers’ rankings of different workers to assign workers to jobs. In our setting, the US Army, officers of specific rank and occupation are assigned every few years to new units and jobs. We study the results of randomly assigning a subset of these markets to be allocated using DA, and find that the algorithm reduces administrative costs and increases certain measures of match quality. However, the impact on longer-term outcomes, such as officer retention and job performance are modest. We find that the impacts could be limited by strategic behavior by officers and units that undermine the properties of the DA mechanism. We do find that in markets where officers would otherwise be assigned by inexperienced HR managers, DA does have improvement in retention and job performance.

Selected Publications

• Davis, Jonathan M, Kyle Greenberg, and Damon Jones. 2025. “An Experimental Evaluation of Deferred Acceptance: Evidence from Over 100 Army Officer Labor Markets.” Conditionally Accepted, Econometrica
• Jones, Damon, David Molitor, and Julian Reif. 2019. “What Do Workplace Wellness Programs Do? Evidence from the Illinois Workplace Wellness Study.” The Quarterly Journal of Economics 134 (4): 1747–91.
• Goda, Gopi Shah, Damon Jones, and Colleen Manchester. 2017. “Retirement Plan and Employee Mobility: The Role of Selection and Incentive Effects.” Journal of Human Resources, 52(3), Summer: 654-679.
• Reif, Julian, David Chan, Damon Jones, Laura Payne, and David Molitor. 2020. “Effects of a Workplace Wellness Program on Employee Health, Health Beliefs, and Medical Use.” JAMA Internal Medicine. 180 (7): 952–960.

My research in household finance examines how households smooth consumption in the short term in the presence of income fluctuations, how they manage the financing and debt associated with higher education, and how they plan longer-term savings goals like retirement. In one key study (2025), my co-authors and I estimate the sensitivity of household spending to month-to-month labor income fluctuations. We use a data set that merges together administrative bank account transactions and data on income flows and liquid assets. We innovate on prior methods to isolate temporary shocks to income, and find that household spending is significantly affected by these temporary shocks. Moreover, we find a sharp decrease in this sensitivity as a household’s liquid assets increase. We are able to estimate this gradient with much more precision than prior studies. The Figure below demonstrates this key pattern.

In two related studies, my co-authors and I explore how the financing of higher education and the subsequent debt accumulation affect educational and career decisions. In a first study (2016), my co-author and I ask whether students are more likely to remain living in their state of birth when that state offers generous scholarships for in-state education. We find that, on average, student’s ultimate migratory patterns are not strongly impacted by these policies. In a second study, my co-authors and I ask whether loan forgiveness programs can affect teacher’s decisions of where to teach. We find that teachers who are eligible for loan forgiveness, provided that they remain teaching in their current school, are no more likely to be retained relative to teachers who are not. The figure below shows that teachers in schools just above and below a threshold that triggers loan forgiveness eligibility have similar rates of turnover. We further find that teachers may lack awareness of these programs and also face significant administrative cost to accessing the loan forgiveness.

Selected Publications

• Jacob, Brian, Damon Jones, and Ben Keys. 2024. “The Value of Student Debt Relief and the Role of Administrative Barriers: Evidence from the Teacher Loan Forgiveness Program.” Journal of Labor Economics 42 (S1): S261–S292.
• Goda, Gopi Shah, Damon Jones, and Shanthi Ranmath. 2022. “Temporary and Permanent Effects of Withdrawal Penalties on Retirement Savings Accounts.” Journal of Public Economics 215: 104734. 
• Ganong, Peter, Damon Jones, Pascal Noel, Fiona Greig, Diana Farrell, and Chris Wheat. 2020. “Wealth, Race, and Consumption Smoothing of Typical Income Shocks.” NBER Working Paper, no. w27552.
• Jones, Damon. 2012. “Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds.” American Economic Journal: Economic Policy 4 (1): 158–85.