Essays in labor economics
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Abstract
This dissertation consists of three chapters in labor economics.
The first chapter explains why the wage gap between black and white Americans has stalled since 1980, after a period of significant narrowing during the 1960s and 1970s. I argue that routine-biased technological change (RBTC) dampened wage gap convergence in 1980-2000. It had a differential impact across races at different parts of the wage distribution. I present new evidence on occupational patterns by race and on determinants of wage disparities along the wage distribution and rationalize them with an RBTC model in which firms engage in statistical discrimination. I show that, surprisingly, the share of employment in routine-intensive occupations has increased for black workers, in contrast with a significant decrease for white workers. I decompose the wage gap changes using the Oaxaca-RIF method. I show that differences in occupational sorting increased wage disparities, thwarting wage convergence between races at the bottom of the wage distribution. Together, these new empirical findings and model allow us to better understand the mechanisms behind racial disparities at the end of the 20th century.
The second chapter (with Costas Cavounidis, Kevin Lang, and Raghav Malhotra) develops a tractable general equilibrium model to explain within- and between-occupation changes in skill use over time. We apply the model to skill-use measures from the third, fourth, and revised fourth editions of the Dictionary of Occupational Titles and data from the 1960, 1970, and 1980 Censuses and March Current Population Surveys. We recover changes in skill productivity by exploiting between-occupation movements. We conclude that finger-dexterity productivity grew rapidly while abstract-skill productivity lagged, a form of ‘skill bias.’ Together with substitutability between abstract and routine inputs, these results explain changes in skill use within occupations.
In the third chapter (with Silvia Vannutelli), we exploit the enlargement of the European Union in 2007 to study the consequences for the Italian labor market of the permanent legalization of immigrants from Romania and Bulgaria. We use a unique administrative employer-employee dataset covering the universe of Italy’s private sector workers. We study firms’ responses in terms of personnel choices. We find short-term effects on firm-level employment. Employment increased for EU07 migrants at the expense of natives, accompanied by a rise in hirings and separations for the former. We provide evidence that the findings are mainly driven by the migrants’ change of legal status rather than by the arrival of new workers in the country. We also observe a reduction in per-capita revenues and operative added value, confirming that the legalization of previously undocumented workers likely drives the effects.