Date of Award
Spring 2023
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Economics
First Advisor
Meghir, Costas
Abstract
Labor earnings account for almost the totality of household earnings for most families. In the United States in 2019, salaries and wages correspond to 68.3% of the total income reported to the Internal Revenue Service. Labor market choices are dynamic decisions often chosen in an environment with substantial uncertainty. Various risks are associated with and influence labor market choices. Business cycle fluctuations can have long-lasting effects, particularly when hitting individuals in key stages of their professional careers. During their time in the labor market, individuals are exposed to considerable employment, productivity, and health shocks. Even after retirement, individuals continue to be exposed to shocks, and their ability to mitigate them is partially related to their labor market history. This dissertation investigates how labor market choices depend on the institutional settings of the labor markets, exposure to several risks, and eligibility for different insurance programs. Drawing evidence from different countries, I analyze key determinants of individual labor market choices in distinct career stages, spanning the entire labor market trajectory, from labor market entrance until retirement. In the first chapter, I analyze employment and savings choices in an environment with large labor market informality, as in most developing countries. Informal workers are not covered by social insurance programs, including pensions and unemployment insurance (UI), depriving them of a key mechanism for mitigating risks. To address this important social issue, governments offer noncontributory benefits, such as minimum pensions. The design of these programs has implications for employment choices and savings. To understand how policy can affect these life cycle choices, I develop a life-cycle model of savings and formal and informal employment. The model features how formal employment gives access to a bundle of public insurance programs, while informal workers have more limited access. The model also takes into account how the informal sector is highly heterogeneous. Informal workers can be informal employees working informally for firms or self-employed individuals that use capital to produce. I estimate the parameters of the model using longitudinal survey data linked with administrative data from Chile and exploiting policy reforms to the pension system. The estimates suggest that the role of savings as self-insurance, the presence of borrowing constraints, and job amenities are important drivers of employment decisions. I also show evidence of complementarities between pensions and UI in terms of incentives for participation in the formal sector. In counterfactual simulations, I show how the pension design affects formality decisions. The second chapter focuses on gender differences in employment decisions for parents of young kids in a setting with labor market informality. My co-authors and I analyze labor market and insurance choices by exploring an event study analysis around the birth of the first child, using longitudinal survey data from Chile. We document that women are more likely to work as self-employed after the first child's birth. This effect is larger for highly educated women. These switches are associated with less cognitive-intensive occupations, which may explain the observed fall in wages. Finally, we explore the effects of the 2008 Chilean pension system reform on formal work decisions. We observe that women who had children after 2008 are less likely to leave formal employment compared to women who had children before the reform was implemented. These results show how social policy can affect the labor market decisions of young mothers. The third chapter analyzes unemployment generosity and labor market outcomes in times of distress. My co-author and I test whether the substantial increase in unemployment insurance (UI) benefit generosity as a response to the Covid-19 pandemic in the United States is associated with differential employment outcomes under the distinct conditions of the pandemic. We use high-frequency data from a time clock software company and exploit heterogeneity in the replacement rates coming from individual earnings, State level generosity in UI, and the changes from the policy variation. While we observe a negative association between UI generosity and employment, we show that the relative employment gap arises before the change was instituted, decreases in magnitude when the augmented benefits were in place, and does not change when the benefits expansion expires. In the final chapter, I analyze how local labor market conditions may affect the timing of graduation for college students and, therefore, the timing of labor market entrance. Previous studies have shown how college students graduating in a recession face large and persistent negative effects on their earnings, health, and other outcomes. In this chapter, I investigate whether students delay graduation to avoid these effects. Using data on the universe of students in higher education in Brazil and leveraging variation in labor market conditions across time, space, and chosen majors, I find that students in public institutions delay graduation to avoid entering depressed labor markets. The delaying effect is larger for students with higher scores, in higher-earnings majors, and from more advantaged backgrounds. This has important implications for the distributional impact of recessions.
Recommended Citation
Finamor, Lucas, "Essays on Labor Economics" (2023). Yale Graduate School of Arts and Sciences Dissertations. 891.
https://elischolar.library.yale.edu/gsas_dissertations/891
