Promotion and compensation policies are essential for attracting, retaining, and incentivizing public-sector workers. Typically, promoted employees receive significant pay raises as they assume greater responsibilities. This paper leverages novel micro-level data and quasi-experimental variation to study how credit utilization and household labor supply respond to earnings increases resulting from promotions. We exploit the sharp discontinuity in the allocation of promotions among early-career police officers in Colombia to compare the outcomes of nearly identical individuals. We find that four years after being promoted, officers' debt reaches nearly 170 percent of their annual earnings premium. Most of this response is caused by officers investing in housing and taking out personal loans. Moreover, household data reveals a significant reduction in wives' employment after their police husbands receive a promotion. This effect is more pronounced among couples with young children, but not explained by changes in fertility decisions. These findings suggest that households adjust their time and consumption allocation in response to a permanent pay increase.

We study how signaling skills that are specific to college majors affect labor market outcomes of college graduates. We rely on census-like data and a regression discontinuity design to study the impacts of a well-known award given to top performers on a mandatory nationwide exam in Colombia. The award allows students to signal their high level of specific skills when searching for a job. These students earn 7 to 12 percent more than otherwise identical students lacking the signal. This positive return persists five years after graduation. The signal mostly benefits workers who graduate from low-reputation colleges, and allows workers to find jobs in more productive firms and in sectors that better use their skills. We rule out that the positive earnings returns are explained by human capital. The signal favors mostly less advantaged groups, implying that reducing information frictions about students' skills could potentially shrink earnings gaps. Our results imply that information policies like those that formally certify skills can improve the efficiency in talent allocation of the economy and, at the same time, level the playing field.

This paper investigates the impact of college financial aid on tuition prices and explores how colleges allocate additional revenues. We leverage exogenous variation from a large-scale aid program in Colombia, where loan recipients can only enroll at high-quality colleges. Using a difference-in-differences strategy and data for all colleges in the country, we find that tuition increased by about 5.8 percent after the government launched the aid policy. We present evidence that colleges likely face capacity constraints in the short term, as they cannot entirely expand to meet the upward shift in demand caused by the aid program. We also study how colleges respond in the medium run to the increase in revenues. Our findings indicate that colleges maintain their focus on education quality, as evidenced by a constant student-to-faculty ratio amidst a growing student body. This is achieved by hiring additional faculty, including individuals holding doctoral degrees. Finally, we show that colleges expand their supply by creating new undergraduate programs and hiring new personnel.