Understanding the city size wage gap

In 2000, wages of full time full year workers were more than 30 percent higher in metropolitan areas of over 1.5 million people than rural areas. The monotonic relationship between wages and city size is robust to controls for age, schooling and labor market experience. In this paper, we decompose the city size wage gap into various components. We propose an on-the-job search model that incorporates latent ability, search frictions, firm-worker match quality, human capital accumulation and endogenous migration between large, medium and small cities. Counterfactual simulations of the model indicate that variation in returns to experience and differences in wage intercepts across location type are the most important mechanisms contributing to the overall city size wage premium. Steeper returns to experience in larger cities is more important for college graduates while differences in wage intercepts is more important for high school graduates. Sorting on unobserved ability within education group and differences in labor market search frictions and distributions of firm-worker match quality contribute little or slightly negatively to observed city size wage premia in both samples

Identification of dynamic latent factor models of skill formation with translog production

In this paper, we highlight an important property of the translog production function for the identification of treatment effects in a model of latent skill formation. We show that when using a translog specification of the skill technology, properly anchored treatment effect estimates are invariant to any location and scale normalizations of the underlying measures. By contrast, when researchers assume a CES production function and impose standard location and scale normalizations, the resulting treatment effect estimates vary with the chosen normalizations. Access to age-invariant measures does not solve this problem since arbitrary scale and location restrictions are still imposed in the initial period. We theoretically prove the normalization invariance of the translog production function and then complete several empirical exercises illustrating the effects of location and scale normalizations for different technologies and types of skills measures

Essays on public policies using city neighborhoods variation.

Thesis (Ph. D.)--University of Rochester. Department of Economics, 2019.This dissertation studies public policies focused on improving the lives of citizens residing in large urban areas. The interventions studied relate to economics in that they potentially improve the economic welfare of citizens. This consequently fosters human capital development and the equality of opportunities. This dissertation measures the impact of three public policy programs. For each assessment I use plausible identification strategies which in general take advantage of variation in exposure to the programs across city neighborhoods. The first chapter assesses the Safe Passage program implemented in the city of Chicago. This intervention employs people from local communities to look after children as they are walking to and leaving public schools. The goal is to protect students from criminal incidents initiated either other students or outside criminal elements. To estimate the program's effect on crime I take advantage of staggered timing in the program's implementation. Specifically, streets treated later on are used as control group for streets treated earlier. I find that the intervention decreases crime along high school safe routes while it is in effect. There is no evidence of temporal displacement. However, geographic spillovers do occur: the nearest neighbors of designated streets also see a drop in crime, while streets farther away experience a slight increase. In the second chapter I examine the impact of a program that provides housing investment in distressed urban areas on several economic outcomes such as private investment, housing market indicators, and criminal activity. The Micro-Market Recovery Program (MMRP), implemented in the city of Chicago in 2011, provides a fix amount in down payment assistance to eligible owner-occupants and also offers forgivable loans to help current owners with home repairs. Using detailed block-level data between 2006 and 2018 and employing a strategy that accounts for differences in pre-treatment characteristics of treated and non treated areas, I find that small incentives for home improvement and ownership does indeed stimulate local private investments. The program increases the number of building permit for new construction or renovation by 32 percent and reduces the amount of vacant houses by two percentage points. In addition to improving housing conditions, the program also decreases burglaries and robberies in the treated areas. Finally the last chapter studies the effect of formal childcare use on maternal labor market outcomes using 2010 population census data combined with administrative information on wait lists for public childcare in S~ao Paulo, Brazil. To address endogeneity problems, I exploit variation in the excess demand for public childcare across age cohorts within city neighborhoods. The strategy compares observationally equivalent mothers living in the same neighborhood who differ only in their chances of obtaining a public daycare slot because their children differ in age and therefore face distinct wait list lengths. I find that using center-based care increases the probability of maternal employment by 44 percentage points, makes mothers more likely to work full time, and makes mothers more likely to work in the formal sector. I then estimate a discrete choice model to analyze counterfactual policies. The choice model accurately reproduces the estimated local average treatment effect of formal childcare use. I conclude that there are alternative daycare allocation policies that provide overall and distributional gains in maternal employment and childcare use by shifting public slots to less educated mothers who otherwise lack access to outside care