Essays in labor economics

• Main Author: Bellou, Andriana
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01.01.2009
• Subjects: Bias; Couples; Economic theory; Economics; Employment; Internet access; Labor economics; Studies; Wage differential; Women
• ISBN: 9781109424683; 110942468X

The effect of technology on the functioning of marriage and labor markets has long been a core concern for economists. This dissertation contributes to this long standing literature by exploring the implications of two major technological phenomena on two distinct outcomes of interest: (i) marriage formation and dissolution and (ii) racial differences in unemployment. In particular, chapter one studies the link between the trends in male wage inequality and marital instability. Rising inequality is argued to be predominantly caused by the adoption of computer technology and the associated Skill Biased Technological Change (SBTC), and divorce is claimed to have a number of financial, physical and emotional implications for children and single mothers. Using a discrete time duration model and focusing on the incidence of first marriage, I show that growing inequality has a significant stabilizing effect on the marital relationship primarily in the divorce-prone years after the 5th anniversary. This finding only applies to women with children. Quantitatively, a marginal (one unit) increase in inequality in the 14th relative to the first year of marriage implies approximately an 11% fall in the separation hazard. To interpret these findings, I consider seven plausible mechanisms. The results are consistent with a theory of "on-the-marriage search", whereby women interpret growing inequality as an increase in the dispersion of potential husband quality and therefore search longer while married for alternative mates. Children further increase the odds of on-the-marriage search by influencing the costs of exiting the partnership. I additionally assess the importance of six other channels: changes in female wage inequality, labor supply and household specialization, assortative matching, real estate prices, income uncertainty and social capital. However, I do not find strong quantitative support that these mechanisms primarily drive my findings. In the second and third chapters, I examine the impact of another technological revolution, the advent of the Internet, on age at first marriage and reemployment. More specifically, a leading explanation for the higher unemployment durations of young African Americans relative to white workers has been their limited knowledge of job opportunities due to spatial mismatch and lack of appropriate networks. In chapter two, I readdress these theories by studying the impact of Internet diffusion on black and white youth unemployment durations and the associated racial gap. Exploiting regional and time variation in broadband deployment between December 2000 and December 2004 in a fixed effects setting, I estimate that broadband diffusion has led to a decline in the racial gap of 15% to 20%. Moreover, virtually all this decline is due to the positive effect of improved Internet availability on the reemployment prospects of young African American job seekers. I show that greater Internet penetration significantly increases the use of friends and relatives by African Americans in their job search, suggesting that the latter may utilize the Internet to develop their network of contacts. My findings provide support to the hypothesis that the Internet helps to relax the informational constraints that reportedly impede reemployment for this population group. Lastly, applying the same empirical strategy as in chapter two and using the same source of variation in the pattern of broadband rollout, in chapter three I quantify how much Internet penetration has influenced marriage propensities among white women 21 to 30 years old. The timing of family formation is particularly important for this demographic group since this event is critically tied to women's human capital accumulation and career considerations. The estimates suggest that growing Internet availability, as measured by the increase in the number of high-speed lines per capita by state between 2000 and 2004, has led to an increase in the age-specific marriage propensities of approximately 14%. This finding is in line with a theory of marital search. On the one hand, the Internet improves the chances of finding a partner. However, it also expands the choice set of potential mates and therefore raises the option value of continued search as single. The results are consistent with the former dominating the effects of the later thus leading to an increase in the marital hazard.