1,277 research outputs found
Essays on human capital, sorting, and wages
This thesis is composed of three chapters that study vital linkages in the labour market; the accumulation of human capital on the job, the sorting between workers and firms and the wages that arise through these processes.
In Chapter 1, I develop a dynamic model of sorting between workers and firms in which it is possible to endogenously invest in the worker's human capital. The capability of a worker-firm pair to produce both tradeable output and further human capital may depend non-parametrically on both the worker's current human capital and firm type. Supermodularity of the technology with respect to the types does not suffice for strict positive assortative matching (PAM) in the competitive equilibrium; much stronger assumptions must be imposed. If high-productivity firms are better at training and production is concave in human capital, then PAM is not guaranteed even if production is supermodular in the types. In particular, with enough concavity, the importance of getting low-skilled workers paired with the best firms may outweigh the effects of supermodularity. With simple examples, it is shown that randomisation in the matching process may be an endogenous outcome, even in the absence of search or informational frictions. I prove that under weaker conditions, it is sometimes possible to determine whether the correlation between worker and firm type will be positive or negative, without any knowledge of the distribution of types. Furthermore, I prove that under some conditions, workers sort in a manner such that the highest skilled workers see their wages increase at the fastest rate, giving firms a highly active role in the dispersion of wages and inequality over the life cycle.
Chapter 2 builds off the ideas of the first chapter but uses a data-driven, quantitative approach. This is done by adding some more realistic features i.e. search frictions and firm-specific human capital, and taking this model to the data. I document employer-provided training for full-time employed workers in the UK using an "effective training" measure that weighs off different types of self-reported work-related training. This form of training tends to be higher in already highly educated workers and is provided in greater amounts at larger firms. Moreover, occupations and industries that tend to pay higher wages also tend to provide more training; this is consistent with the idea that training enhances the productivity of the worker and that workers with high earning ability may sort into high training environments. In conjunction with these findings, I develop a search model of the labour market that includes heterogeneity in both workers and firms. Workers vary in their level of human capital and firms vary in productivity. Worker-firm pairs can increase the worker's human capital at the cost of losing output. I show that this framework can replicate key facts from the data; namely, higher educated workers receive more training throughout their lifetime and earn more, and that the firms that pay higher wages also provide more training. Finally, the model features inefficiently low human capital investment due to the social returns not being fully internalised under random search; a policy of subsidising low-skilled young workers covered by income taxation is shown to improve aggregate welfare and social mobility in the model.
In Chapter 3, which is a co-authored project with Andy Snell, Heiko Stüber, and Jonathan Thomas, we document distinctive empirical features of wage pass-through in Germany that are consistent with a Thomas-Worrall wage contracting framework in the presence of both idiosyncratic and nonstationary aggregate productivity components. These empirical features are hard to reconcile with the
predictions of search models based on period-by-period Nash bargaining over
match surplus and with the predictions of financial models where risk-neutral
firms may costlessly shield risk-averse workers from idiosyncratic shocks
(Guiso, Pistaferri et al. 2005)
A Partial Order on Preference Profiles
We propose a theoretical framework under which preference profiles can be
meaningfully compared. Specifically, given a finite set of feasible allocations
and a preference profile, we first define a ranking vector of an allocation as
the vector of all individuals' rankings of this allocation. We then define a
partial order on preference profiles and write "", if there
exists an onto mapping from the Pareto frontier of onto the
Pareto frontier of , such that the ranking vector of any Pareto efficient
allocation under is weakly dominated by the ranking vector of the
image allocation under . We provide a characterization of the
maximal and minimal elements under the partial order. In particular, we
illustrate how an individualistic form of social preferences can be maximal in
a specific setting. We also discuss how the framework can be further
generalized to incorporate additional economic ingredients
Single-Crossing Differences in Convex Environments
An agent's preferences depend on an ordered parameter or type. We
characterize the set of utility functions with single-crossing differences
(SCD) in convex environments. These include preferences over lotteries, both in
expected utility and rank-dependent utility frameworks, and preferences over
bundles of goods and over consumption streams. Our notion of SCD does not
presume an order on the choice space. This unordered SCD is necessary and
sufficient for ''interval choice'' comparative statics. We present applications
to cheap talk, observational learning, and collective choice, showing how
convex environments arise in these problems and how SCD/interval choice are
useful. Methodologically, our main characterization stems from a result on
linear aggregations of single-crossing functions
Equality conditions for the fractional Brunn-Minkowski-Lyusternik inequality in one-dimension
While studying set function properties of Lebesgue measure, Franck Barthe and
Mokshay Madiman proved that Lebesgue measure is fractionally superadditive on
compact sets in . In doing this they proved a fractional
generalization of the Brunn-Minkowski-Lyusternik (BML) inequality in dimension
. In this article a complete characterization of the equality conditions
for the fractional BML inequality in one-dimension will be given. It will be
shown that aside from some trivial cases, that for a fractional partition
and non-empty compact sets
equality holds if and only if for each
the set is either an interval with
positive measure or consists of exactly one point
Urban-biased structural change
Using firm-level data from France, we document that the shift of economic activity from manufacturing to services over the last few decades has been urban-biased: structural change has been more pronounced in areas with higher population density. This bias can be accounted for by the location choices of large services firms that sort into big cities and large manufacturing firms that increasingly locate in suburban and rural areas. Motivated by these findings, we estimate a structural model of city formation with heterogeneous firms and international trade. We find that agglomeration economies have strengthened for services but weakened for manufacturing. This divergence is a key driver of the urban bias, but it dampens aggregate structural change. Rising manufacturing productivity and falling international trade costs further contribute to the growth of large services firms in the densest urban areas, boosting services productivity and services exports, but also land prices
Reputation Effects with Endogenous Records
A patient firm interacts with a sequence of consumers. The firm is either an
honest type who supplies high quality and never erases its records, or an
opportunistic type who chooses what quality to supply and may erase its records
at a low cost. We show that in every equilibrium, the firm has an incentive to
build a reputation for supplying high quality until its continuation value
exceeds its commitment payoff, but its ex ante payoff must be close to its
minmax value when it has a sufficiently long lifespan. Therefore, even a small
fraction of opportunistic types can wipe out the firm's returns from building
reputations. Even if the honest type can commit to reveal information about its
history according to any disclosure policy, the opportunistic type's payoff
cannot exceed its equilibrium payoff when the consumers receive no information
Linking Mechanisms: Limits and Robustness
Quota mechanisms are commonly used to elicit private information when agents
face multiple decisions and monetary transfers are infeasible. As the number of
decisions grows large, quotas asymptotically implement the same set of social
choice functions as do separate mechanisms with transfers. We analyze the
robustness of quota mechanisms. To set the correct quota, the designer must
have precise knowledge of the environment. We show that, without transfers,
only trivial social choice rules can be implemented in a prior-independent way.
We obtain a tight bound on the decision error that results when the quota does
not match the true type distribution. Finally, we show that in a multi-agent
setting, quotas are robust to agents' beliefs about each other. Crucially,
quotas make the distribution of reports common knowledge
LIPIcs, Volume 261, ICALP 2023, Complete Volume
LIPIcs, Volume 261, ICALP 2023, Complete Volum
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