Essays in economics of education, labor, and gender economics

Abstract

This thesis contains three independent essays that focus on economics of education, labor, and gender economics. The first chapter, joint with Russell Cooper, studies the impact of education mismatch on labor market outcomes. Across our sample of OECD countries, there is evidence of mismatch in educational attainment, defined by a lack of assortative matching on ability in terms of education levels. Labor market outcomes are not independent of education mismatch. Our framework for analysis is a dynamic choice model, focusing on education and training decisions. The key model parameters are estimated using a simulation method of moments. From the structural estimation, the main factor explaining education mismatch is dispersion across individuals in the perceived value of education. The estimated model is used to determine both the magnitude of the output loss from education misallocation and the transfer needed to compensate those whose educational attainment is independent of their tastes. From simulations of lifecycle dynamics and counterfactual experiments, among four key countries, we find that education undermatch in Japan is sustained through labor market mechanisms while in Germany, Italy and the US, it is largely resolved in that these individuals are eventually employed at skilled jobs. Training plays a key role in these dynamics. In the second chapter, which is also a joint work with Russell Cooper, we document and exploit potential explanations to gender gaps in education and labor market compensation across the same group of OECD countries. In most of them, college attainment rates and college premium are higher for women, despite a wage gap. The paper explores potential explanations for these patterns. The first step of our approach is to estimate the parameters of a dynamic model of education choice and labor market outcomes that allows for information frictions. We then decompose gender gaps through a series of counterfactual exercises and find that they are driven mainly by gender differences in the average compensation at unskilled jobs. The estimated lower compensation for non-college educated women generates for them larger college premia and higher incentives to attend college relative to men. The outcome is that women have a higher college rate despite being paid less for both college and non-college jobs. For Germany and Italy, where the college premium is higher for men, the gaps are largely explained through taste shocks capturing the influence of family and peers. The third and final chapter focuses on isolating the role of statistical discrimination in explaining the gender gaps in education and labor market outcomes observed in the data, and in evaluating the effects of non-discriminatory labor market policies. Using a simplified version of the model presented in chapter 2, I show that gender differences in the informativeness of the labor market signal and in average compensation at unskilled jobs alone can generate moments and gender gaps associated to the education decision fairly close to those observed in the data. However, the model does a poorer job in matching moments related to labor market outcomes. I then use the model estimation from chapter 2 to examine the effects of a blind application policy experiment where employers cannot discriminate based on gender when forming their expectations about workers productivity. The findings suggest the wage gap would only be reduced in Japan and that changes in returns to college would decrease the college rate gap in Germany, Italy, and the US.