Economics
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Item Essays on Self-Employment and Entrepreneurship(2009) Rasteletti, Alejandro Gabriel; Haltiwanger, John; Shea, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation consists of three chapters studying different issues related to self-employment and entrepreneurship. The first chapter studies the effects of labor market frictions and credit constraints in an economy with self-employment. Two types of self-employed workers emerge in the model: (i) entrepreneurs and (ii) workers using self-employment as a stopgap. I show that labor market frictions generate a motive not to transition into self-employment, by making selfemployment a choice that takes time to reverse. At the aggregate level, these frictions also reduce the average size of entrepreneurs' businesses. Meanwhile, even if credit constraints are of particular importance for entrepreneurs, they also affect the stopgap self-employed. When credit constraints are tighter, fewer vacancies are posted, which increases the number of workers using self-employment as a stopgap in equilibrium. In the second chapter, I use data from the PSID to study the characteristics of workers using selfemployment as a stopgap while searching for another job, vis-à-vis those of other self-employed workers. The data reveals that stopgap self-employment is relatively high among young workers and those who experienced unemployment. Furthermore, the probability of entering self-employment increases monotonically with wealth for those not using self-employment as a stopgap, while it has an inverted U shape for those using self-employment as a stopgap. I also find that being unemployed increases the probability of becoming stopgap self-employed, but has no effect on the probability of becoming self-employed for other reasons. The third chapter examines the impact of exogenous technological growth on entrepreneurship and unemployment. The model developed in that chapter predicts that in the absence of labor market frictions, technological growth has an effect on entrepreneurship if and only if it affects an entrepreneur's capacity to manage workers. When labor market frictions are present, technological growth may have a positive or negative impact on entrepreneurship and unemployment. The desirable outcome of an increase in the rate of technological growth enhancing entrepreneurship and dampening unemployment is more likely to be obtained when the interest rate does not increase significantly with growth, technological change is disembodied, and growth enhances entrepreneurial ability at managing workers.Item THE EFFECTS OF UNINSURANCE ON HOSPITALS AND PATIENT HEALTH(2009) Daysal, Meltem; Hellerstein, Judith; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)During the past few decades, the United States health care market has experienced dramatic changes. One feature of the health care market that has stayed constant is the persistently large number of Americans who lack health insurance coverage. To date, research has primarily focused on how lack of insurance affects an individual's own health outcomes, health care utilization and economic well-being. Little is known about how the uninsured affect the provision of care to insured patients. In this dissertation, I aim to increase our understanding of the community effects of uninsurance in two distinct but closely related areas: patient health outcomes and hospital treatment patterns. In the first essay, I examine the impact of uninsured patients on the health of the insured, focusing on one health outcome — the in-hospital mortality rate of insured heart attack patients. Overall, my results indicate that uninsured patients have an economically significant effect that increases the mortality rate of insured heart attack patients. I show that these results are not driven by unobserved characteristics of insured heart attack patients or hospitals and that they are robust to a host of specification checks. In the second essay, I examine the impact of the uninsurance rate in the health care market of a hospital on its uncompensated care burden and on the provision of care to heart attack patients. My analysis suggests that the defaulted payments by uninsured patients impose a large fiscal burden on hospitals. I also find that hospitals make changes to their provision of care to heart attack patients when faced with higher uninsurance rates. In particular, my results suggest that hospitals are more likely to use intensive procedures and less likely to conduct these procedures in an inpatient setting when market uninsurance rates increase.Item Firm Owners and Workers: An Analysis of Immigrants and Ethnic Concentration(2009) Garcia-Perez, Monica I.; Haltiwanger, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation consists of three chapters examining the important role of firm and coworker characteristics, as well as the use of social networks, in labor markets. The first paper investigates the effect of firm owners and coworkers on hiring patterns and wages. Immigrant-owned firms are more likely to hire immigrant workers. This prevalence is especially strong for Hispanic and Asian workers. We also find that the probability that a new hire is a Hispanic is higher for immigrant firms. On wage differentials, the results illustrate that much of the difference between the log annual wages of immigrants and natives can be explained by immigrants' propensity to work in non-native owned firms, which pay the lowest average wages. Interestingly, though, native workers holding a job in immigrant firms are paid less than immigrant workers. The last section examines the potential mechanisms for these findings. It explores the importance of job referral and use of networks for migrants in labor markets. We consider the theoretical implications of social ties between owners and workers in this context. Firms decide whether to fill their vacancies by posting their offers or by using their current workers' connections. Next, we explore the patterns of immigrant concentration relative to native workers at the establishment level in a sample of metropolitan areas. Immigrants are much more likely to have immigrant coworkers than are natives, and are particularly likely to work with others from the same country of origin, even within local markets. The concentration of immigrants is higher for recent immigrants and interestingly for older immigrants. We find large differences associated with establishment size that cannot be explained solely by statistical aggregation. Exploring the mechanisms that underlie these patterns, we find that proxies for the role of social networks, as well as the importance of language skills in the production process, are important correlates of immigrant concentration in the workplace.Item The effect of same-sex marriage laws on different-sex marriage: Evidence from the Netherlands(2009) Trandafir, Mircea; Hellerstein, Judith K; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)It has long been argued that the legalization of same-sex marriage would have a negative impact on marriage. My dissertation examines what happened to different-sex marriage in the Netherlands after the enactment of two laws: in 1998, a law that provided all couples with an institution almost identical to marriage—registered partnership, and in 2001, a law that legalized same-sex marriage for the first time in the world. The first chapter provides a brief description of the same-sex marriage debate and of the legal background in the Netherlands. In the second chapter, I analyze the marriage decision at the individual level. I construct a unique data set covering the period 1995-2005 by matching individuals from the Dutch Labor Force Survey with their marriage and residence history from official records. I estimate the first-marriage decision using a discrete-time hazard model with unobserved heterogeneity and I find that the marriage rate rose after the registered partnership law but fell after the same-sex marriage law. In the third chapter, I study the evolution of the marriage rate in the aggregate. I construct a synthetic control for the Netherlands as a weighted average of OECD member countries over the period 1988-2005. A comparison of the marriage rates in the Netherlands and the synthetic control confirms the findings from the individual-level analysis: the different-sex marriage rate rose after the registered partnership law and then fell after the same-sex marriage law. I also conduct a placebo test that supports the validity of the results. Finally, I examine the evolution of the different-sex union (marriages and registered partnerships) rate and I find that the different-sex union rate returns to its long-term trend after the same-sex marriage law. My results could be explained by the combination of two effects. First, couples may learn over time about registered partnership and gradually switch from marriage to the new institution. Second, the same-sex marriage law may have caused some couples to turn away from marriage.Item Effects of In-Group Bias in a Gift-Exchange Transaction: A Theory of Employee Ownership and Evidence from a Laboratory Experiment(2009) Bergstresser, Keith David; Sanders, Seth G.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation presents a behavioral model of employee ownership and an experimental examination of the model. Chapter 1 reviews literature on employee ownership, gift-exchange, social preferences in experimental economics, and in-group bias. The model of employee ownership, presented in Chapter 2, incorporates in-group bias into a gift-exchange framework. Predictions of the model include higher productivity, higher profits, higher wages, and greater worker satisfaction in employee owned firms relative to otherwise identical publicly traded or private firms with no employee ownership. Chapter 3 presents the results of a laboratory experiment designed to test both the assumptions and the predictions of the model described in Chapter 2. In-group bias is found to affect the giving and trusting behavior, but not the reciprocal behavior of the subjects in the experiment.Item Empirical Essays in Health Economics(2009) Garthwaite, Craig Loren; Duggan, Mark; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Chapter 1: The Economic Effects of Medical Innovations: Vioxx and Labor Supply Despite dramatic improvements in medical technology over time, comparatively little attention has been paid to the effect of these innovations on economic outcomes. This study uses seven overlapping panels of the Medical Expenditure Panel Survey to estimate the labor supply effects of Vioxx--a selective non-steroidal anti-inflammatory drug intended for individuals with chronic pain. Fixed effect estimates analyzing the effect of individuals choosing to start and stop taking Vioxx indicates that use of the drug is associated with greater labor force participation. This paper also exploits the removal of Vioxx from the market in 2004 as an exogenous source of variation in utilization. Both methods show that Vioxx use is associated with statistically and economically significant increases in the labor supply of near elderly individuals with joint conditions. An effect is also found for usual weekly hours worked. There is no labor supply effect for other expensive medications used for chronic conditions, suggesting that a desire to work in order to obtain employer-provided health insurance is not driving the estimated effect of Vioxx. These results suggest a role for improving medical technology in explaining recent increases in the labor force participation rate of older workers. Chapter 2: The Effect of In-Utero Conditions on Long Term Health: Evidence from the 1918 Spanish Flu Pandemic The fetal origins hypothesis posits that in-utero stress increases the incidence of chronic conditions later in life. Utilizing 21 years of National Health Interview Survey data, this study estimates the health effect of in-utero exposure to the 1918 Spanish Flu pandemic. Exploiting the fact that people were exposed to the flu at different points during fetal development, the model tests precise predictions from the medical literature about when exposure to in utero insults should damage organs later in life. The pattern of results demonstrates the necessity of using a short duration event as a source of variation in fetal conditions and helps explain previously mixed evidence regarding the fetal origins hypothesis.Item ESSAYS ON INTERNATIONAL TRADE AND INEQUALITY(2009) Paz, Lourenco Senne; Limao, Nuno; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation I assess the impact of developing country trade liberalization on their wage inequality by focusing on two possible channels, namely job formality and inter-industry wage premium. Informal workers are a large share of the workforce, more than 30% in Brazil and Colombia, and this share within manufacturing has increased in some countries that underwent trade liberalization. In chapter one I develop a theoretical model that endogenously generates informal jobs due to a payroll tax, and in which domestic and foreign import tariffs affect the industry-level share of informal workers and the formal-informal wage gap. My model predicts that a decrease in import tariffs increases both the informality share and the formal-informal wage gap, whereas a decrease in foreign tariffs has the opposite effect. In chapter two I verify if these predictions are supported by data from the Brazilian trade liberalization episode (1989-2001), which contain information about workers' employment, demographic characteristics, and payroll tax compliance. To avoid endogeneity concerns I employ an instrumental variables technique. I find that a percentage point decrease in import tariffs leads to a 0.8 percentage point increase in the informality share and a 0.4 percentage point increase in the wage gap. A percentage point reduction in foreign tariffs implies a decrease of 0.35 percentage point in the informal share and a 0.17 percentage point decrease in the wage gap. In chapter three I investigate the inter-industry wage premium channel by focusing on two aspects ignored by the existing literature. The first is whether trade policy affects wage premium for tradable and non-tradable industries differently. The second aspect is if productivity determines both the wage premium and import tariffs, then its omission will generate inconsistent estimates of the effect of import tariffs. Using late 1980s data from the Colombian trade liberalization episode, I find that only the tradable and manufacturing industries wage premia are sensitive to changes in import tariffs. Furthermore, productivity is an important determinant of the wage premium and the import tariff (as an included instrument). Its omission generates a 100% larger estimated impact of trade liberalization impact on the wage premium.Item Women's Labor Supply and the Family(2008-06-01) Morrill, Melinda Sandler; Hellerstein, Judith K.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The past century has seen a tremendous rise in female labor force participation. My dissertation addresses aspects of how the American family has shaped and has been shaped by rising levels of female labor supply. The first chapter provides an introduction and discussion. The second chapter describes the impact of maternal employment on children's health. While most prior research has found little effect, I argue that a woman's choice to work may reflect unobservable characteristics of the mother or child which complicates the measurement of the causal effect. I utilize exogenous variation in each child's youngest sibling's eligibility for kindergarten as an instrument for maternal employment. I find robust evidence that maternal employment increases a child's probability of having had an overnight hospitalization, injury or poisoning, or asthma episode. The third and fourth chapters analyze two possible sources of increased female labor force participation. In the third chapter, co-authored with Judith Hellerstein, we consider the role that fathers play in their daughters' occupational choices. We demonstrate that over the past century fathers have increasingly transmitted occupation-specific human capital to their daughters in response to the changing opportunities for women in the labor market. In the fourth chapter, I investigate work first published by Fernandez et al. (2004) and find evidence that contradicts their central conclusions. Their paper suggests a mechanism by which working mothers endow sons with a preference for having a working wife, which in turn leads women to choose to work more in order to attract these men. The key empirical results in their paper show a strong conditional correlation between a woman's labor supply and that of her mother-in-law when her husband was young and no similar relationship between a woman's labor supply and that of her own mother. While I confirm the former relationship in my own analysis, I find that a woman's choice to work is also highly correlated with her own mother's labor supply. While their model provides an interesting hypothesis for women's motivation to work, I find that the data do not support their conclusions.Item USING LINKED EMPLOYER-EMPLOYEE DATA TO UNDERSTAND LABOR MARKETS AND IMPROVE DATA PRODUCTS(2007-08-02) Benedetto, Gary; Haltiwanger, John C.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This thesis is comprised of three chapters. The first chapter (joint with John Haltiwanger, Julia Lane, and Kevin McKinney) explores a new way of capturing dynamics: following clusters of workers as they move across administrative entities. Information on firm dynamics is critical to understanding economic activity, yet fundamentally difficult to measure. The worker flow approach is shown to improve linkages across firms in longitudinal business databases. The approach also provides conceptual insights into the changing structure of businesses and employer-employee relationships. Many worker-cluster flows involve changes in industry -- particularly movements into and out of personnel supply firms. Another finding, that a nontrivial fraction of firm entry is associated with such flows, suggests that a path for firm entry is a group of workers at an existing firm starting a new firm. The second chapter makes use of linked employer-employee data from the U.S. Census Bureau's Longitudinal Employer-Household Dynamics (LEHD) Program and matches it to data on business acquisitions from the Federal Trade Commission to examine labor market outcomes of employees at firms undergoing mergers. Earnings and employment can be observed over time for workers at both the acquired firm and the acquiring firm. The findings suggest that while wages tend to be about the same or higher for workers at these restructuring firms, turnover is significantly higher, and the costs of job-loss are large and long lasting. The third chapter (joint with John Abowd and Martha Stinson) provides technical documentation for a project undertaken by the US Census Bureau, the Social Security Administration, and the Internal Revenue Service to explore a potential method of providing the public a valuable new dataset without compromising confidentiality. The underlying database was created by merging the respondents from the Census' own SIPP with administrative data on earnings and benefits from the IRS and SSA. The administrative variables combined with the detailed survey responses from the SIPP offer the potential to do interesting research especially in the areas of retirement, benefits, and lifetime earnings; however, they also add extensive new information for malicious data users to potentially reidentify SIPP respondents. This final chapter develops a cutting edge new technique for providing a micro-dataset that looks, in structure, just like the underlying confidential data. This "partially synthetic" database aims to preserve as many of the complex covariate relationships in the confidential data without posing any significant new risk to disclosure protection.Item Topics on Wage Differences Across Local Labor Markets(2007-08-06) Michaelides, Marios; Sanders, Seth; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)It is well established that average wages differ across local labor markets. Researchers have found that this is partially explained by differences of worker ability, as reflected in observable dimensions of worker skill, such as education and labor market experience. However, the classical human capital explanation only partially explains differences in wages across metropolitan areas. In my dissertation, I consider two variations from this framework to explain why wage differentials across observably homogeneous workers persist. First, I consider the role of unobserved dimensions of worker skill and the level of location amenities. I do this in the context of professional basketball, where worker skill and non-pecuniary employer characteristics are unusually well measured. I find strong evidence in support of the compensating differentials theory in this context. The analysis also demonstrates that when important measures of worker skill are omitted from the specification, the quality of the results is distorted and inference on the validity of the theory is misleading. The work also suggests that certain specifications are sensitive to when we do not control for important portions of worker skills. The partially linear and the classic linear regression models outperform the Box-Cox alternatives in matching the hedonic estimates produced in the "full" specification case. Second, I ask whether firms in a local market can exploit individual mobility costs and offer workers wages that are lower than the competitive rate. I describe a wage renegotiation model in which firms use information on worker mobility and on local labor market competition. The model predicts that workers with positive mobility costs receive lower wages, while the ability of firms to exploit these costs declines in the intensity of local competition. To test this model, I construct measures of individual mobility costs and occupation-specific measures of local labor market competition. I find that individual mobility costs have a negative effect on wages and that this effect gets weaker the more competitive is the local labor market. Finally, the negative effect of mobility costs on wages is significantly lower for workers in highly unionized occupations, where individual wage renegotiation is less likely to occur.