Essays in Macro and Labor Economics

Abstract

This dissertation consists of three essays at the intersection of labor economics and macroeconomics. It covers three different topics at this intersection, the concern of labor market outcomes and the empirical approach are the common denominators. The first essay (Chapter 2) relates labor market polarization and intergenerational mobility. The former describes to the decline in routine middle-income occupations and the simultaneous rise of low- and high-skilled labor due to rising automation. The latter is associated with the importance of parental background on the children?s outcome. To better understand the relationship between both phenomena, the essay first builds an overlapping-generations model incorporating three occupational groups and spatial heterogeneity. A large literature analyzed the impact of labor market polarization on current workers, but this paper focuses on the children of workers and their labor market outcomes. In particular, it investigates the decision for educational attainment, intergenerational elasticity and upward mobility. The first model prediction is more polarized educational attainment of young labor market entrants. The model also predicts stronger intergenerational elasticity for children whose parents work in either high- or low-skill occupations due to less intergenerational transitions out of these occupations. For children with parents in routine occupations, which are negatively affected by automation, elasticity is lower as they are more likely to transition into either low- or high-paying occupations. The final prediction relates to limited upward mobility for children from low-income parents. The essay then takes the predictions to the data, and the empirical evidence using various data sources for the United States, confirm the model predictions. The second essay (Chapter 3) examines the gender wage gap across 21 European countries between 2002 and 2014 using harmonized employer-employee matched data. The empirical approach allows the paper to compute the firms? contribution to the gender wage gap with the help of gender-specific firm pay differentials. Further, this approach allows the essay to disentangle the firms? contribution into a within- and between-firm component. The essay shows that the slow decline of the gender pay gap is due to a decline in the within-firm component, whereas the between-firm component drives the evolution of the gender wage gap across the life cycle. Finally, the essay relates each component to institutional settings, the former to wage bargaining and the latter to family policy. The findings show that a more decentralized wage bargaining tends to reduce the gender pay gap, and that family policies, in particular expenditure in services, enrolment and shorter maternity leave, tend to reduce the between-firm component after family formation. The third essay (Chapter 4) determines whether workers in the manufacturing sector face a different employment response due to rising import competition from China if the degree of labor market frictions varies across European regions. The first finding indicates that a higher degree of labor market frictions proxied by involuntary flows between unemployment and temporary employment increase the detrimental impact of Chinese import competition. The second finding implies that the public sector encompassing health and education occupations largely absorbed the adverse shock to manufacturing workers.