This dissertation studies different Unemployment Insurance (UI) systems and how critical design and institutional features affect individual behavior. In the first chapter, I analyze the UI system in Chile, whose benefits are primarily financed by work- ers’ own savings in Individual Savings Accounts (ISA). In 2002 Chile implemented a mandatory savings system for the formal labor sector. Every worker accumulates funds to be withdrawn in future unemployment spells, accompanied by a Solidarity Fund (SF) that may provide benefit extensions in case of low savings balances. Using administrative records of the Chilean formal labor market, I exploit the SF extension’s eligibility conditions to identify its effect on nonemployment duration. I estimate a Regression Discontinuity Design (RDD) that uses the eligibility for SF extension as an instrument for its take-up. Results show that an additional potential monthly installment financed by the SF extension increases nonemployment durations by 11.4 days, similar to what the literature documents for other developing economies. The second chapter builds on the previous one by empirically examining the im- pact of an additional monthly installment of UI benefits financed by ISAs. I implement a dynamic panel data model with individual fixed effects controlling for time-invariant unobserved heterogeneity. Using this empirical strategy, I find that nonemployment durations, on average, increase by 5.1 days when the unemployed have an additional monthly payment financed by their savings. Finally, I combine these two reduced-form outcomes to perform a decomposition of the disincentive effect of a more generous UI system funded by general taxes. Job search effort is depressed via a substitution effect when UI benefits increase (moral hazard). Still, there is also an incentive to exert less effort because the household’s consumption is sensitive to cash-on-hand (liquidity effect). I extend the existing literature by proposing a ratio pertinent to a system based on ISA that measures the liquidity effect over the total disincentive effect. Results show that around one-third to one-half of the negative impact of a UI extension on job search effort can be attributed to moral hazard, which this design of UI system eliminates. In the 1990s, Germany saw a massive rise in unemployment of workers in their late 50s compared to younger workers. In the third chapter (joint with Matthew Gudgeon, Johannes Schmieder, Simon Trenkle, and Han Ye), we show that a large share of this increase can be explained by the interaction of UI and the retirement system, where UI benefits affect labor supply by inducing individuals to leave employment. We show considerable bunching in UI inflows at age thresholds that allow for using UI as a bridge to early retirement. The bunching mass moves as the age threshold moves due to reforms of the UI system. To quantify the impact of this channel on labor supply, we use our reduced-form evidence to estimate a dynamic lifecycle model of labor supply that endogenizes unemployment and retirement transitions. We show that the increase in potential benefit durations in the late 1980s increased unemployment rates for workers aged 55-59 by around three percentage points (or about a 30 percent increase), playing a significant role in the large increases in unemployment rates for older workers.

The persistence of wage differentials--differentials that are inconsistent with both human capital theory and conventional Marxian theories of the working class--has led economists to reexamine the structure and historical development of labor markets and the labor process in the U.S. The central thesis of this dissertation is that such economic divisions result from differences in (implicit and explicit) bargaining power, and are the basis for the unequal returns to human capital that characterize segmented labor markets. In this dissertation, three forms of bargaining power are identified: (1) implicit individualistic power based on institutional attributes such as firm-specific human capital, (2) implicit collective power based on solidarity along lines of race, ethnicity and gender, and (3) explicit collective power exercised via unions. These forms of bargaining power are closely associated with occupation. Theoretical models are developed that identify the relationship between workers' power and wage determination. The models, which combine efficiency wage theory with non-cooperative game theory, show that the return to human capital is a function of bargaining power. Thus, groups of occupations with different degrees of bargaining power will exhibit unequal returns to human capital, i.e. they exhibit the characteristics of segmented labor markets. These models provide an explanation of labor segmentation that is microfounded in the process of wage determination. The theoretical wage models are tested econometrically, using wage data for individuals in 1970. The results substantiate the hypothesis that power-based occupational groups constitute distinct segments of the labor market. Limitations on U.S. wage data preclude a direct test of this hypothesis in the pre-War period. As an alternative, data from Massachusetts in the 1900s is used to econometrically demonstrate that occupational power attributes are good predictors of occupational earnings. Statistics identifying divisions among U.S. wage earners are constructed for 1870, 1910, 1950 and 1980. The resulting quantitative history of workers' power differs significantly from previous historical works, which posit labor segmentation as a characteristic of the post-World War II period. The results show that power-based divisions among wage earners existed in 1910, and strongly suggest that labor segmentation is a fundamental characteristic of the modern U.S. economy.

This thesis investigates an understudied question in the economics literature: how does sexual harassment experienced in and around public transportation affect labor market outcomes for women? Previous research suggests that access to public transport can improve labor market outcomes and that women's use of public transportation is sometimes limited by their experience of sexual harassment. It follows that when harassment is particularly widespread or severe – as is the case in much of South Asia – it may lead women who depend on public transportation for travel to make different labor market choices or not to work at all. If this effect exists, then it holds important implications for policymakers who aim to boost economic development and social equality by increasing women's labor force participation. I analyze the case of Lahore, Pakistan using data from the Lahore Urban Transport Master Plan Household Interview Survey. I present a descriptive analysis of women's transportation usage, safety onboard transport, and employment in Lahore. I then use ordinary least squares and logistic regression analysis to assess the relationship between proxy variables for harassment and women's odds of employment, use of public transportation, and price and time of day of commute. Results do not support the hypothesis that sexual harassment on transportation affects labor market outcomes for women. Important limitations and suggestions for further research are discussed.

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This thesis is composed of three essays. The first essay studies price setting behavior by sales agents of an electrical wholesale company following a change in their compensation contract. Originally, agents received a fixed share of the revenues from their sales. Under the new scheme, commission rates increase with the price-cost margin of the sale. The reform was enacted at different times in different stores, enabling measurement of its impact by difference-in-differences. Commissions on 95% of goods increase but agents do not raise prices on all these products. Despite the stronger financial incentives, the price of 18% of goods decreases and increases for the rest, suggesting agents reallocate effort among products. The second essay explores the importance of employee-customer relationships as an incentive and price discriminating tool. The model assumes that customers differ in their valuations and in their probability of returning (q). The distribution of valuations and q are known, and in each interaction the sales agent exerts effort to learn the customer’s valuation. The agent earns a commission based on the client’s payment and has full pricing flexibility. The two main insights are that, when the valuation is unknown, effort is increasing in q and the effect of a commission raise has an inverted-U relation with customers’ probability of returning. Prices should be increasing in effort. Using administrative data from an electrical company, I show evidence supporting the theoretical insights. The third essay analyses the determinants of teachers’ occupational choice and how changes in financial incentives modify individuals’ occupation choices. Among college graduates, teachers have both low average Armed Forces Qualification Test scores (AFQT) and high average risk aversion. Using a dynamic optimization model with unobserved heterogeneity, we find that were it possible to make teacher compensation mimic the return to skills and riskiness of the non-teaching sector, overall compensation in teaching would increase. Moreover, such a shift would substantially reduce the utility of many current teachers, making the process of reform challenging. Importantly, the results of policy exercises are very sensitive to the degree of heterogeneity included in the model.

Diss. Univ. Frankfurt am Main, 2006.

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