Four Empirical Essays On Demographic Change And The Labor Market

Author : Maxwell Chenming Rong
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (138 download)

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Download or read book Essays in Labor and Family Economics written by Maxwell Chenming Rong and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four essays on labor economics with a particular focus on the causes and consequences of major life cycle choices such as marriage, occupational choice, and retirement. How do the consequential decisions that individuals make in these dimensions affect the kinds of risks they will face throughout their life, and how can they insure themselves against them? I study these questions with a mix of survey and administrative data, using a variety of structural and reduced-form methods. In the first chapter I study how sharing a workplace with one's spouse can affect the dynamics of household income growth and risk, shedding light on the relationship between worker mobility and monopsony power in the labor market. There has been a large empirical literature documenting rent sharing between workers and firms: firms pass through performance shocks to the earnings of their employees, a fact inconsistent with perfectly competitive labor markets. This fact can be rationalized by monopsonistic models of labor markets where firm market power arises from imperfect worker mobility. An untested implication of these models is that firms should use the information available to them to infer differences in mobility for their workers and engage in price discrimination, resulting in differences in rent sharing. In this paper I provide novel evidence for this prediction by studying coworking couples: married couples who share an employer. Using Norwegian administrative data, I quantify differences in the pass-through of idiosyncratic firm shocks to coworking couples, and find that women in coworking couples experience less generous rent sharing: at any given level of firm performance, they have lower income growth than their non-coworking counterparts. These differences result in large differences in household income dynamics: coworking couples face lower average income growth and higher income risk, with substantial consequences for welfare. Firms exploit the fact that coworking couples are less mobile in order to engage in less generous rent sharing agreements, which explain a substantial fraction of the observed difference in income growth and risk. In the second chapter, I study the importance of liquid savings for smoothing consumption in the face of income shocks. I take advantage of a unique institutional feature of certain US retirement accounts, including Individual Retirement Accounts (IRAs): prior to the age of 59.5, withdrawals from these accounts are subject to an additional 10\% tax penalty to discourage early withdrawal. Thus, IRAs undergo a sharp and predictable change in liquidity at age 59.5. Using survey data from the Health and Retirement Study (HRS), I document 3 facts. First, annual withdrawals from IRAs increase sharply by \$1,500 on average after age 59.5. Second, households with low liquid wealth in the form of checking and savings deposits have the largest proportional increases in withdrawals. Finally, IRA withdrawals increase in response to falls in income, but only for those with low liquid wealth. Using consumption data from the CAMS supplement to the HRS, I quantify how the increased liquidity of IRAs after age 59.5 helps households insure consumption against income shocks. In the third chapter, I study how workers of different skill levels are differentially affected by sudden job displacement events. Through a framework of general and occupation-specific human capital, I study the potential labor market consequences of a technology shock such as AI which displaces workers in high-skill occupations. Workers with high general human capital can partially insure themselves against job loss by switching occupations, but they also tend to be employed in occupations with high returns to specific human capital, meaning that their potential losses are much larger. To evaluate the relative size of these two forces, I specify and estimate a dynamic model of occupational choice, and use it to analyze the impact of a hypothetical job-destroying technology shock to high-skill occupations. Despite finding substantial ability of high skill workers to cushion the shock by switching occupations, the model predicts that a 40\% increase in the job destruction rate in high skill occupations results in average earnings losses of 2.4 to 5.4\% for workers in these occupations. These losses are substantially larger than the losses from an analogous shock in low skill occupations. In the fourth chapter, I document and seek to explain a novel fact about gender differences in the cyclicality of unemployment. Using historical Current Population Survey data, I show that after 1979, male unemployment became significantly more cyclical than female. I hypothesize that the reason for this increase is the drastic decline in male unionization rates from the 1980s to the present. I leverage the passage of right-to-work laws in 7 states that weakened the power of unions to test this hypothesis, and find mixed results. However, I also take advantage of the limited panel dimension of the CPS to directly compare the unemployment cyclicality of unionized and non-unionized workers. I show that due to the drastic decrease in male unionization relative to female, even a small difference in union cyclicality can explain a great deal of the gender unemployment cyclicality gap.