Three essays in labor economics

Chen, Yuci

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https://hdl.handle.net/2142/108697 Copy

Description

Title

Three essays in labor economics

Author(s)

Chen, Yuci

Issue Date

2020-07-15

Director of Research (if dissertation) or Advisor (if thesis)

Albouy, David

Doctoral Committee Chair(s)

Albouy, David

Committee Member(s)

• Borschulte, Mark
• Fullerton, Don
• Marx, Ben

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• minimum wage
• youth idleness

Abstract

This dissertation has three chapters that discuss issues regarding the U.S. labor market. The first chapter investigates how establishments adjust their production on various margins when wage rates rise. Exploiting state-by-year variation in minimum wage laws, I analyze U.S. manufacturing plants’ responses over a 23-year period using restricted-access Census Microdata. A one-percent increase in production workers’ hourly wages reduces total production worker hours by 0.7 percent and increases capital investment on machines by 2.7 percent. Manufacturing plants reduce average hours per production worker more than number of production workers. The elasticity of substitution between capital and labor is 0.85. In addition, when wage rates increase, manufacturing plants are also more likely to exit. Finally, suggestive evidence shows that when minimum wage laws increase wages paid by some of the establishments in a firm, the firm also increases the wages paid at its other establishments. The second chapter studies idleness---time spent out of work and school---among young men in the first 10 years after graduating from high school in the United States. We begin by documenting new facts regarding the distribution of idleness spells and cumulative exposure to idleness.These facts motivate a dynamic model of the school-to-work transition that allows for movement between work, idleness, and two levels of schooling. We find evidence of an idleness trap, a causal effect of idleness on future idleness. Our estimates also reveal that low-commitment school options, such as community college, provide a meaningful stepping stone to further schooling but not to work. We then use the model's characterization of individual heterogeneity to identify the effects of youth idleness on employment and earnings when young men are in their early thirties. We find that idleness reduces employment and earnings for such men in their early 30's. We estimate that an additional six-month period in idleness lowers the share of time employed by 1.6 percent and earnings by 5.4 percent. The third chapter builds two analytical general equilibrium (GE) models of the U.S. economy to evaluate efficiency impacts and other effects of the minimum wage on labor. First, we couple the GE framework with a search model and competitive markets to highlight a potential but underappreciated source of inefficiency: a higher minimum wage can increase unproductive search time of unemployed workers. In a second model, we assume a monopsony labor market. The analytical models allow us to solve explicit equations for outcomes in GE and to derive testable hypotheses. We compare the testable hypotheses from the two models and use them to guide our empirical work.

Graduation Semester

2020-08

Type of Resource

Thesis

Permalink

http://hdl.handle.net/2142/108697

Copyright and License Information

Copyright 2020 Yuci Chen

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