National Bureau of Economic Research

Cecile Gaubert, Gordon H. Hanson, and David Neumark, editors. After decades of skepticism about place-based policies, recent initiatives including Opportunity Zones and some elements of the Inflation Reduction Act signal renewed policy interest in targeting economically distressed areas.

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. During the preparation of this work the authors used Anthropic Claude to assist with analysis code development, data diagnostics, and manuscript formatting. After using this tool, the authors reviewed and edited the content as needed and take full responsibility for the content of the published article.

The NBER Japan Project will hold its annual research conference on the Japanese economy in Tokyo on August 3–4, 2027. The meeting is co-sponsored by the National Bureau of Economic Research (NBER), the Australia-Japan Research Centre at the Australian National University, the Center for Advanced Research in Finance at the University of Tokyo, and the Center on Japanese Economy and Business at Columbia University. The conference has no set theme.

We thank Treb Allen, Luca De Benedictis, Jean Hindriks, Ohyun Kwon, Giulia Nevi, Constantinos Syropoulos, Gonzague Vannoorenberghe, and participants at the Philadelphia Trade Group Workshop, 2025, LIDAM Economics Seminar, Louvain-la-Neuve, Mons, 2026, ESB Seminars, Universitas Mercatorum, 2026, for helpful comments on an earlier draft. Claude Code assisted with writing and compressing the original 104-page draft. All errors are our own.

A previous version of the paper was circulated with the title “How Variational Are Earnings Dynamics?” We thank the Editor Joe Altonji, two anonymous referees, and our discussant Manuel Arellano, as well as the audience of the 2025 Yale conference in honor of Costas Meghir, for helpful comments. This research was supported in part by the Pythia computing cluster at the University of Chicago Booth School of Business, which is funded by the Office of the Dean.

This research was originally supported by US National Science Foundation Grant SES-1658670 (Sweeting) and National Natural Science Foundation of China Grant 72673107 (Tao). Xinlu Yao collaborated on this project when she was a graduate student at the University of Maryland, and we are very grateful for Xinlu's excellent work and insights, and Mario Leccese was a critical collaborator on complementary work in Leccese, Sweeting and Tao (2025).

We are grateful to Cheungeun Koo, Joonyoung Seo, Jong-sung You, and the Korean National Health Insurance Service for access to the National Health Insurance Service data (approval no. NHIS-2023-1-821), and to Adriana Lleras-Muney, Hannah Wunsch, and participants at the Junior-ish Health Economics Conference and the Opportunity Insights Conference on Economic Mobility for helpful comments. Jaeyoung Baak, Gayeon Kim, and Cheieun Im provided excellent research assistance.

We thank Federico Bandi, Dacheng Xiu, and Kangying Zhou and participants at EFMA “AI and Asset Management” Special Session for valuable comments and suggestions. We thank Xinran Feng for his excellent research assistance. AQR Capital Management is a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described herein. The views expressed here are those of the authors and not necessarily those of AQR.

We thank Jason Abrevaya, Daniel Bias, Tom Chemmanur, Emanuele Colonnelli, Adolfo de Motta, Mike Ewens, Slava Fos, Paolo Fulghieri, Charlie Hadlock, Helyoth Hessou, Kilian Huber, Ivan Ivanov, Kose John, Steve Kaplan, Anil Kashyap, Philipp Krueger, Borja Larrain, Zack Liu, Michelle Lowry, Yueran Ma, Andrey Malenko, Nadya Malenko, Simon Mayer, Amrita Nain, Scott Nelson, Aaron Pancost, Lubos Pastor, Gordon Phillips, Raghu Rajan, Jay Ritter, Phil Strahan, Amir Sufi and conference and seminar...

Thank you to Chupei Zhang for excellent research assistance. This work is supported by the Becker Friedman Institute at the University of Chicago, the True North Endowment Fund, and the Robert King Steel Fund at the University of Chicago Booth School of Business. This study was approved by the IRB at the University of Chicago (protocol number IRB20-1351).