The thesis 'Essays in Labor Economics and Labor Market Policy' contributes to the existing literature by advancing our understanding of the forces that have shaped labor market outcomes in recent decades. It consists of three independent research papers, which zoom in on the effects of financial frictions, routine-biased technical change, and judge ideology, respectively. My coauthors and I employ both empirical and analytical methods to analyze the underlying mechanisms and discuss appropriate policy implications.
Chapter 2 of this thesis explores the joint role of imperfections in labor and financial markets for the cyclical adjustment of the labor market. I show that jobless recoveries emerge when, upon exiting a recession, firms are faced with deteriorating credit conditions. On the financial side, collateral requirements affect the cost of borrowing for firms. On the employment side, hiring frictions and wage rigidity increase the need for credit, making the binding collateral constraint more relevant. In a general equilibrium business cycle model with search and matching frictions, I illustrate that tightening credit conditions calibrated from data negatively affect employment adjustments during recovery periods. Wage rigidity substantially amplifies this mechanism, generating empirically plausible fluctuations in employment and output.
In Chapter 3 of this thesis, using state-level labor market data, Anna Hartmann and I document a positive relationship between the two phenomena in the U.S.: the decrease in unionization rates has been significantly more pronounced in states with a higher employment share in routine-intensive occupations. Contrary to conventional wisdom, deunionization is mainly driven by large within-industry and within-occupation changes in union membership rates and not only by compositional effects. Building on this observation, we argue that the commonly assumed driver of polarization, routine-biased technical change, is also the main driving force behind the decline in union membership rates. In a model with search and matching frictions where workers choose occupations and endogenously form unions, we illustrate that shifts in the structure of labor demand in favor of low- and high-skill occupations worsen the bargaining position of unions and make participation in collective bargaining less attractive for workers. The ensuing within-industry and within-occupation decline in unionization rates in turn provides incentives for middle-wage workers to switch to low-wage occupations, which further amplifies job market polarization.
In Chapter 4 of this thesis, Christian Bredemeier, Anna Hartmann, and I provide evidence on the systematic labor market effects of ideological tendencies of the judiciary, employing broad data on court rulings and labor market outcomes. Our identification strategy uses heterogenous effects of ideological shifts of the U.S. Supreme Court on U.S. district court rulings, which we derive from a theoretical model of judge decision making and document empirically. Exploiting this heterogeneity, we find that an increase in the share of conservative rulings substantially increases the employment rate and promotes labor market fluidity but also contributes to wage stagnation, job market polarization, deunionization, and rising income inequality. Our main empirical results can be rationalized in a search and matching model with wrongful-termination lawsuits
