Essays in Macroeconomic effects of Labor Market Heterogeneity and Impact of Public Policies on Labor outcomes.

Abstract

My dissertation explores the macroeconomic implications of heterogeneity in labor markets and the role of public policy in improving labor market efficiency. First, I aim to shed light on the importance of individual and firm level decisions in determining aggregate labor market outcomes such as the level of mismatch in worker skills and job requirements. Second, I analyze the role of public policy in affecting these decisions and hence, the economy wide aggregates.

The first chapter analyzes the relationship between age and the skill requirements of jobs performed by workers. I document that the proportion of college degree holders working in occupations that do not require a college degree is U-shaped over the life cycle and that there is a rise in transitions to non-college jobs among prime age college workers. The downward trend at initial stages of the life cycle is consistent with workhorse models of labor mobility, however, the rising trend at middle stages of the career is not. Such movements down the occupation ladder are also accompanied by average wage losses of 10% from the previous year. I develop an equilibrium model of frictional occupation matching featuring skill accumulation and depreciation along with worker and firm heterogeneity that can match the life cycle profile of downward occupational mobility. The model shows that skill depreciation is the key driver of transitions to low skill jobs with age. Using the model, I simulate the impact of different types of structural change in the labor market and find that the welfare consequences of long term changes depend on the interaction of the life cycle and human capital investment dimension.

The second chapter, coauthored with Adriana Kugler, examines whether greater Medicaid generosity encourages people to switch towards riskier but also better quality occupations. Exploiting variation in Medicaid eligibility expansions across states during the 1990s and 2000s, we find that moving from a state in the 10th to the 90th percentile in terms of Medicaid generosity increased occupational mobility by 5.2%. Higher Medicaid generosity also increased mobility towards occupations with greater wage spreads and higher median wages, and towards occupations with higher educational requirements. By contrast, a decrease in Medicaid generosity in Tennessee in the 2000s decreased occupation switches and increased mobility towards low quality occupations.

The third chapter, coauthored with Shaiza Qayyum, uses the change in health insurance options made available to young adults under the age of 26 under the Affordable Care Act in March 2010 to analyze the effects on their labor market outcomes. The key selling point of the ACA dependent coverage law was that young adults would not be locked into jobs for employer-provided health insurance, and would be willing to shop jobs or be willing to start new ventures. The aim of this paper is to see to what extent the ACA delivered on its promise to young adults, and how it affected the long-term career of these individuals. We find that young adults were more likely to get health insurance as dependents, be less likely to be employed and more likely to be self-employed. We also find that individuals aged 19-21 were more likely to be enrolled in school. Conditional on being employed, young adults exposed to the law earned lower wages and exhibited increased job mobility. In the long-run, self-employment among 24 year olds in 2010, exposed to the law for two years, increased by 31% and employment among this group increased by 2.5%. Conditional on being employed, young adults were also less likely to switch occupations in the long-run, suggesting that after the initial job shopping, young adults were better able to match with their desired occupations.