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Abstract: My dissertation consists of three applied studies in the area of public finance and labor economics. In the first chapter, "The effect of financial aid and tax policies on educational choices", I build and estimate a structural dynamic life-cycle model of education choices, labor force participation, and saving decisions by young men in the United States. The model is estimated with the method of simulated moments using a longitudinal sample of white, black, and Hispanic young men from the 1997 panel of the National Longitudinal Survey of Youth. The model incorporates unobservable abilities, tuition costs, and the main features of the U.S. federal income tax. In particular, it takes into account the structure of the Lifetime Learning Tax Credit. I use the estimated model to simulate the impact of a number of education policy changes. I find a sizeable effect on college enrollment from a general tuition reduction as well as a large increase in graduate school attendance from making the Lifetime Learning Tax Credit refundable. In the second chapter, "Aggregate wage dynamics and labor supply: an application to the U.S.", I estimate labor supply elasticities using the change in the return to skills over time as a source of exogenous variation in gross wages. The last few decades have seen a tremendous amount of change in the U.S. labor market: female labor force participation rates have risen, while the wage premium for college education and wage inequality have increased because of an higher demand for skilled labor. The number of hours worked is found to react weakly to changes in the offered wage. In the third chapter, "Labor supply effects of tax-based income-support mechanisms", I build and estimate a static discrete choice model of labor supply for single women in the United States. It incorporates the main features of the federal income tax. I estimate the model using cross-sectional data, and I use it to simulate hypothetical reforms to the tax and benefit system, which is found to have a large effect on the labor force participation decision of single individuals.
This dissertation explores the business cycle dynamics of the aggregate labor market. In two essays I advance the theoretical modelling of these markets and examine whether the new theory does quantitatively better at accounting for empirical evidence than existing models. Both essays examine models where market incompleteness faced by workers implies that long term wage contracts play a role in providing consumption smoothing to workers. The terms of these state contingent contracts depend on: (1) the preferences of the contracting parties, (2) whether parties can commit to contracts. The essays embed such optimal dynamic contracting problems into a Mortensen-Pissarides style model of labor market flows with aggregate shocks, contributing to the theoretical modelling of wage determination in this model framework. I find that market incompleteness has quantitatively only limited ability to explain the volatility puzzle facing existing models: unemployment varies strongly over the business cycle, while labor productivity varies much less. Whether the models are consistent with wage data hinges both on the preferences of contracting parties: entrepreneurs versus workers, as well as constraints on contracting.
Aquesta tesi estudia les interaccions entre les dinàmiques del mercat laboral i l'estructura de les famílies, i com aquestes interaccions afecten les polítiques públiques. Als EUA, s'observen patrons molt diferents pel que fa a participació laboral, ocupació i desocupació entre les persones casades i solteres. Fins i tot un cop es controla per la distinta composició dels dos grups, encara apareixen comportaments molt diferents entre casats i solters en termes del mercat de treball. L'explicació proposada en aquesta tesi és simple: la gent es comporta de manera diferent quan forma part d'una família comparat amb quan està sola. A partir d'aquesta premissa, la tesi explora dues qüestions fonamentals. La primera és analitzar quina part de les diferencies que observem a les dades és deguda a l'efecte de la família. La segona tracta d'entendre com canvien les implicacions d'una política bàsica del mercat laboral, com és l'assegurança d'atur, quan introduïm la família en l'anàlisi. En el primer capítol, escrit amb en Sekyu Choi, documentem una diferència remarcable i estable entre la taxa d'atur de la gent casada i la soltera, als EUA. A través d'una descomposició estàndard de les transicions laborals, trobem quins són els canals que expliquen millor les diferències tant en termes de gènere com a d'estructura familiar. Després, construïm un model simple del mercat laboral, on els agents presenten diferències en termes de xocs d'ingressos, béns, gènere i estat civil. A través del model, demostrem que la família genera dos efectes de signe oposat sobre la taxa d'atur. Per una banda, actua completant els mercats i, per tant, reduint els incentius per treballar, el que genera una menor ocupació i, ceteris paribus, major taxa d'atur. Per altra banda, augmenta la inclinació dels agents a sortir de l'atur a través de no participar en el mercat laboral, cosa que redueix la taxa d'atur. En el segon capítol, escrit amb en Nezih Guner i na Yuliya Kulikova, estudiem les transicions conjuntes de les parelles en el mercat laboral. La literatura empírica existent s'ha centrat en analitzar els moviments entre ocupació i atur, ignorant la participació. Una altre característiques de la literatura existent és que analitza individus, en canvi, nosaltres focalitzem en nostre anàlisi en parelles. Els homes i les dones casades son diferents pel que fa a les seves dinàmiques en el mercat laboral. Les transicions entre atur i inactivitat tenen un paper més important per a les dones que per als homes. Per tant, tenir en compte el marge de participació és clau per entendre les dinàmiques laborals de les parelles. Els nostres resultats mostren que el component de coordinació per explicar els moviments de les parelles a través dels estats laborals és fonamental. En el tercer capítol, estudio un programa d'assegurança d'atur, semblant al que està en marxa als EUA, en un entorn on la principal font d'heterogeneïtat entre els agents és el tipus de llar on viuen: alguns viuen sols mentre els altres viuen amb la seva parella formant una família. La principal conclusió, es que l'assegurança d'atur beneficia als solters però no als casats. Aquest resultat no depèn de les diferents característiques entre solters i casats. Fins i tot si els solters formessin una família amb els seus clons, no es beneficiarien de l'assegurança. En canvi, si els casats visquessin sols, si que la valorarien. Per tant, la principal raó per la qual els casats no es beneficien de l'assegurança és que la família, amb els seus dos treballadors, és un mecanisme suficient de suport.
The dissertation consists of three essays. The first essay examines a dynamic effect of diabetes on employment. The second essay uses a broader measure of health and investigates its interaction with employment. The third essay explores a dynamic effect of education on hourly wage. The first essay investigates the diabetes effect on employment in Canada. The data is taken from the National Population Health Survey and men and women between age 25 and 64 are analysed separately. In contrast to the previous static studies on the effect of diabetes on labour market outcomes, this essay uses a dynamic model to identify the impacts of diabetes on employment in Canada. Results show that diabetes has a positive but insignificant effect on employment for men. The effect of diabetes on employment for women is negative and significant. The results confirm the signs and significance of diabetes coefficients estimated by static studies; however, the numbers are much smaller. Particularly, precise estimates of diabetes effect on employment would be helpful for policy makers to know the economic burden and design the appropriate policies. The second essay uses a broader measure of health to explore the relationship with employment. In contrast to previous static Canadian studies on the impact of health on labour market outcomes, this essay estimates a dynamic model using simultaneous equations to obtain more precise model specification for the interaction of health and labour market outcome. Results show that there is a high state dependency in employment and health for both men and women. Moreover, there is a highly significant and positive effect of health on employment for both men and women. As a result, health policies that have positive and direct effects on health can have positive and indirect effects on employment. The third essay investigates the return to education using a dynamic approach in Canada. This essay uses the longitudinal Survey of Labour and Income Dynamics and estimates the dynamic model for men and women between the age of 25 and 64 separately. In contrast to the previous static Canadian studies on the return to education, this essay estimates a dynamic Mincer model through a system GMM method to obtain more precise model specification for the return to education. Results demonstrate that the hourly wage is highly persistent for both men and women between age 25 and 64. The results also show that the return to schooling is increasing at the beginning of the working life for both men and women compared to a constant return to schooling by static Mincer function. Identifying the return to education can be useful for policy makers to decide on education expenditures and finance schooling programs.
This dissertation seeks to understand two main issues. The first issue concerns changes in the gender gaps in college attendance and choice of majors between 1960 and 2010. The second main issue concerns changes in the marriage rate in the US since the early twentieth century. The main objective of Chapters 1 and 2 is to answer the following two questions about educational choices: Why do women today invest in a college education at much higher rates than men, whereas fifty years ago men graduated more frequently? And given their high college attendance rates today, why do women continue to select disproportionately into lower-paying majors, with almost no gender convergence along this margin since the mid-1980s? In Chapter 1, I document first that changes in returns to skill over time and gender differences in wage premiums across majors cannot explain the observed gender gaps in educational choices. I then provide reduced-form evidence that two factors help explain the observed gender gaps: first, college degrees provide insurance against very low income for women, especially in case of divorce; second, majors differ substantially in the degree of "work-family flexibility" they offer, such as the size of wage penalties for temporary reductions in labor supply. Based on this reduced-form evidence, in Chapter 2 I construct and estimate a dynamic structural model of marriage, educational choices, and lifetime labor supply. I use the model to analyze the contribution of changes in wages and changes in the marriage market to the observed educational investment patterns over time. I estimate that the insurance value of the college degree for women in case of divorce is equivalent to about 31\% of the college wage premium. I also estimate that the share of women choosing high-return science and business majors would increase from 34\% to 45\% if wage penalties for labor supply reductions were equalized across occupations. Finally, I test the effects of two sets of policies on individuals' choice of major: a differential tuition policy that charges less for science and technical majors, as has been proposed in some states; and interventions intended to improve work-family flexibility. My results show that some family-friendly policies increase the share of women in science and business majors substantially, while others further widen both college gender gaps. Chapter 3, joint work with Maurizio Mazzocco, analyzes changes in U.S. marriage rates over nearly a century. We propose an explanation for these changes in three stages. First, we show that changes in cohort size alone can account for around 50 to 70\% of the variation in marriage rates since the 1930s for both black and white populations. Specifically, increases in cohort size reduce marriage rates, whereas declines in cohort size have the opposite effect. Using plausibly exogenous variation in access to oral contraceptives, and consequently the number of births, across states we provide evidence that the relationship between changes in cohort size and changes in marriage rates is causal. Next, we develop a dynamic search model of the marriage market that qualitatively generates this observed relationship, and derive a testable implication about cohort size's effect on spouses' age differences. Finally, we estimate the model and investigate its consistency with the data. We fail to reject it using the derived implication, and find that it can quantitatively explain much of the observed variation in marriage rates.