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On determinants and consequences of economic inequality
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Florence : European University Institute, 2025
EUI; ECO; PhD Thesis
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REICHLIN, Yannick, On determinants and consequences of economic inequality, Florence : European University Institute, 2025, EUI, ECO, PhD Thesis - https://hdl.handle.net/1814/78301
Abstract
This thesis contains three essays on the economics of inequality. The first two chapters focus on two key determinants of income inequality: the decisions of where to work and what to study. Both chapters study how these discrete choices respond to exogenous shifts in individuals’ budget constraints. In Chapter 1, I use the case of energy price increases to identify the pass-through of costof- living shocks into earnings. Combining 20 years of German employer-employee data with a representative household expenditure survey, the empirical approach relies on regional differences in energy expenditure patterns to show that income adjustments offset between 36 and 42% of yearly cost increases and fully compensate employees over five-year horizons. The empirical results suggest that labor supply responses are a significant factor in understanding the consequences of price shocks for consumption inequality more broadly. Chapter 2, co-authored with Adriano De Falco, uses administrative data from Chile to analyze whether financing higher education through student loans or grants affects the college major choices of prospective students. We exploit institutional arrangements that allocate either type of financing based on a standardized test to identify exogenous variation in access to financial aid. Students who are marginally eligible for grants are more likely to enroll in STEM fields, highlighting that policies designed to encourage college enrollment also have implications along the margin of the field of study. The third chapter instead focuses on the consequences of inequality and studies the role of relative comparisons on risk-taking behavior. Together with Dietmar Fehr, we embed an experiment in a representative survey in Germany and find that respondents who are induced to perceive their relative wealth standing as low display more tolerance towards risk when choosing between lotteries. As inequality widens wealth gaps between individuals, we should expect an increase in relatively poorer individuals’ inclination to take risks when inequality rises.
Table of Contents
-- Chapter 1: Labor Market Dynamics after Cost-of-Living Shocks
-- Chapter 2: Grants vs. Loans: the Role of Financial Aid in College Major Choice
-- Chapter 3: Are Risk Preferences Shaped by Status Concerns?
-- Appendices
Additional Information
Defence date: 16 April 2025
Examining Board: Prof. Andrea Ichino (European University Institute, Supervisor); Prof. Alexander Monge-Naranjo (European University Institute, Co-supervisor); Prof. Lance Lochner (University of Western Ontario); Prof. Jan Stuhler (Universidad Carlos III de Madrid)
Examining Board: Prof. Andrea Ichino (European University Institute, Supervisor); Prof. Alexander Monge-Naranjo (European University Institute, Co-supervisor); Prof. Lance Lochner (University of Western Ontario); Prof. Jan Stuhler (Universidad Carlos III de Madrid)