http://hdl.handle.net/1842/4446 2013-05-25T04:35:35Z 2013-05-25T04:35:35Z Antrup, Andreas Hermann http://hdl.handle.net/1842/6460 2012-09-26T15:00:16Z 2012-06-26T00:00:00Z

Title: Three essays on the economic theory of mating and parental choice Authors: Antrup, Andreas Hermann Abstract: Chapter 1: Relative Concerns and the Choice of Fertility Empirical research has shown that people exhibit relative concerns, they value social status. If they value their children's status as well, what effect will that have on their decisions as parents? This paper argues that parents and potential parents are in competition for status and rank in the generation of their children; as a consequence richer agents may cut back on the number of children they have and invest more in each child to prevent children of lower income agents from mimicking their own children. This effect need not be uniform so that equilibrium fertility may e.g. be a U-shaped function of income, even when agents would privately like to increase fertility when they receive greater income. These findings have wide ramifications: they may contribute to our understanding of the working of the demographic transition; they also suggest that the low fertility traps seen in some developed countries are rather strongly entrenched phenomena; and they o er a new explanation for voluntary childlessness. Chapter 2: Relative Concerns and Primogeniture While pervasive in the past, differential treatment of children, i.e. different levels of attention and parental investments into children of the same parent, has become rare in modern societies. This paper offers an explanation based on technological change which has rendered the success of a child more uncertain for a parent who is deciding on how much to invest into each of his children. Within a framework of concerns for social status (or relative concerns), agents decide on how many children to have and how much to invest in each child. When their altruism towards each child is decreasing in the total number of children, it is shown that they may solve the trade-off between low investment, high marginal return children (that come in large numbers and hence hurt parental altruism) and high investment, low marginal return children (that come in low numbers) by demanding both types and hence practice differential treatment. Uncertainty over status or rank outcomes of children reduces the range of equilibrium investment levels intro children so that the difference in the numbers they come in is reduced. Eventually the concern for return dominates and differential treatment disappears. Chapter 3: Co-Evolution of Institutions and Preferences: the case of the (human) mating market This paper explores the institutions that may emerge in response to mating preferences being constrained in their complexity in that they can only be conditioned on gender not other characteristics of the carrier of the preferences. When the cognitive capacity of the species allows a sophisticated institutional setup of one gender proposing and the other accepting or rejecting to be adopted, this setup is shown to be able to structure the mating allocation process such that preferences evolve to forms that, conditional on the setup, are optimal despite the constraint on complexity. Nature can be thought of as delegating information processing to the institutional setup. In an application to humans it is shown that the mechanism of the model can help explain why men and women may exhibit opposed preferences in traits such as looks and cleverness. The anecdotal fact that women do not marry down while men do can be interpreted as a maladaptation of female preferences to modern marriage markets.

2012-06-26T00:00:00Z Li, Jing http://hdl.handle.net/1842/6413 2012-09-14T13:53:44Z 2012-06-26T00:00:00Z

Title: Three essays on flexible working arrangements and labour market outcomes Authors: Li, Jing Abstract: This thesis looks at the effects of flexible working arrangements on workers' labour market outcomes. The particular type of flexible working arrangement analysed in this thesis is called "flexitime". This is an arrangement which gives workers the freedom to choose when to start and end their work. Flexitime provides workers with a new way to cater to their domestic responsibilities and in turn may reduce the costs of participating in the labour market. Therefore, it is closely connected with workers' compensation structure, human capital accumulation process, labour supply and job mobility. The effects of flexitime on workers' labour market outcomes are analysed from three aspects: wage, labour supply, and job mobility. The first chapter gives an introduction and overview of the thesis. The second chapter is a study on the compensating wage differentials associated with flexitime. In general I do not find convincing evidence showing the existence of compensating wage differentials associated with flexitime. One possible reason might be that flexitime brings additional benefits to firms (such as increased productivity and reduced turnover rate) so that firms may not necessarily need to reduce actual wages in exchange for flexitime provision.In the third chapter, I develop a model describing how flexitime may affect workers' labour supply decisions. The main finding of the model is that flexitime will increase workers' labour supply when the benefit associated with flexitime (increased child care production efficiency) is high relative to the cost of wage reduction (prediction 1). Meanwhile, the model also predicts that flexitime causes high human capital workers to increase their labour supply more than low human capital workers (prediction 2). Empirical findings show that flexitime is positively associated with working mothers' labour market hours, which confirms model prediction 1. However, there is arguably insufficient empirical evidence verifying model prediction 2. The fourth chapter considers the relationship between flexitime and workers' job satisfaction and job mobility. Flexitime is associated with high job satisfaction levels for both male and female workers. It also reduces the probability of quitting for female workers with young children. Male workers' job mobility decisions are not significantly affected by flexitime. The fifth chapter gives the conclusion of the thesis.

2012-06-26T00:00:00Z Ruan, Feng http://hdl.handle.net/1842/6308 2012-08-22T13:34:11Z 2012-06-26T00:00:00Z

Title: Essays on market structure Authors: Ruan, Feng Abstract: Some of the most important work in the development of economic theory is associated with the study of market structure. In essence, most markets are two-sided. For example, product markets connect tens of thousands of product brands to tens of millions of consumers; marriage markets couple the single men and women who would otherwise suffer from a lonely heart; and labour markets link the job candidates to their preferred employers and positions. Apart from the two-sidedness, we have explored another important common aspect of these market structures, i.e. interconnection/competition of the segments within one side of the market. Under this common thread, the three essays in this thesis are freshly formulated in a loosely related manner, covering topics in three different areas. Chapter 2 is motivated by strategic transitions of many marketplaces (e.g. Amazon.com). From the perspective of a platform owner, when it owns part of the business on one side of the market, there is no straightforward answer as to whether having the rest of business owned by others is advantageous or not. The argument is that, on the one hand, the platform welcomes more third-party business as it boosts revenue in terms of membership fees; on the other hand the business owned by the platform dislikes the incoming competitors whose participation drives down pro t margins. We propose a novel framework in this chapter to explore the trade-off between the two. Here, the intermediary can decide to be either a "merchant" or a "two-sided platform", or a hybrid one in between. Our analysis shows that in hybrid mode the platform extracts all the surplus from the producers of the merchandised brands, and the merchandised brands always charge a price premium compared to the directly retailed ones. We also show that as the platform absorbs an existing directly retailed brand into the self-brand portfolio, the equilibrium prices of both brand types are increased. We find that only the directly retailed brands dominate the market when the platform s capacity is relatively small; and both brand types coexist in the marketplace when the capacity is relatively large. Furthermore, we find a backward bending proportion plus a vertical proportion of the "contract curve" in comparative statics. That is, the self-brand portfolio always expands while the third-party-brand portfolio shrinks until it reaches a certain level, when the platform increases its capacity. It helps us to gain some ideas on the dynamics of brand portfolio management for the platform. Lastly, taking into account of indirect network effect which is the common feature in the two-sided market, it is shown that the platform is better o¤ when consumers have positive expected surplus. Chapter 3 is much motivated by the Chinese experience. China has witnessed the largest rural to urban labour ow (among which the majority are male) in the world s history over the last three decades. We propose an idea that the grand migration can also be attributed to the unbalanced sex ratio between rural and urban areas. This chapter develops a two-sided matching model of two linked marriage markets with homogeneous agents, non-transferable utility and search friction. We extend the one-market model of the previous literature into a two-market one, allowing the agents to migrate between the markets at a fixed cost. The analysis focuses on the unmatched as well as the migrating population, which is induced by the different sex ratios in the two geographically isolated marriage markets. We find that imperfections in the matching technology leads to the enlarged gap of sex ratio of the unmatched population compared to that of the unbalanced inflows. We are interested in the question of how the migrating costs affect the migration between rural and urban areas, and under what conditions a subsidy covering migrating costs might benefit a party in the marriage markets. We characterise the equilibrium set in the parameter space of migrating costs, and find that a full subsidy of migrating costs does not necessarily benefit those who receive it but always benefits the opposite sex, if they are the short sides of both markets. Chapter 4 explains the migration of labour force from a different angle. Here, the migration is of workers to jobs. Motivated by the distinction of public and private sector, we consider a spatial oligopsony model in which forms (two co-locating small firms with recruiting capacity constraints and a large firm without such limit) are competing for workers along a "strip" market. The capacity issue that is extensively discussed in the Chapter 2 again plays an important role in this model, though in a very different context. It is shown that the recruiting capacity affects the intra-group competition and hence the inter-group competition in wage- posting strategies. Additionally, we show that, as recruiting limits expand, the expected wages offered by the small firms increase while the wage offered by the big firm decreases, which helps to explain the recent trend of the wage disparity between public and private jobs. We also characterise the equilibrium wages and the size (direction) of the migration in the three-stage game (i.e. the workers decide whether to relocate in the first stage, then the big firm decides its wage offer, and lastly, the two co-locating firms simultaneous set wages), which helps us to understand better the inter-sector mobility in a changing environment of economy. We investigate the issues of interconnection and competition in three different markets. It is always of interest for a researcher of economics to have some ideas on the same issue from different perspectives. Remember that whilst this is a collection of essays on economic theory, it is nonetheless compared to empirical observation. And it will surely serve as a starting point for the author to further the research on market structure.

2012-06-26T00:00:00Z Speigner, Bradley James http://hdl.handle.net/1842/6284 2012-08-20T15:40:57Z 2012-06-26T00:00:00Z

Title: Essays on equilibrium unemployment dynamics Authors: Speigner, Bradley James Abstract: This thesis is a collection of three essays in which the behaviour of unemployment is studied in different dynamic environments. Throughout, unemployment is understood to be involuntary, arising due to the uncoordinated nature of trade in the labour market as viewed from the perspective of the Diamond-Mortensen-Pissarides equilibrium matching model. It goes without saying that the fundamental motivation for pursuing this line of research is provided by the untold consequences, both human and economic, of otherwise capable people remaining involuntarily idle. An attempt, therefore, is made to contribute to the understanding of how various aspects of macroeconomic policy can influence unemployment outcomes. The approach maintained throughout is to combine general equilibrium modelling with simulation techniques in order to provide not only qualitative inferences but also quantitative descriptions of equilibrium dynamics. The dynamic environments considered cover both the business cycle (the first two chapters) and the life cycle (the third chapter). In the first chapter, Structural Tax Reform and the Cyclical Behaviour of the Labour Market, we build a real business cycle model with frictional unemployment and distortionary tax rates which are increasing in individual taxable labour income. The cyclical aspects of tax reform that are addressed in this chapter are distinct from the stationary state distributional issues that have garnered most of the attention in the existing literature on structural tax reform. Estimating the tax code parameters from federal income tax return data for the U.S., we find that a reduction in the progressivity of the tax system is associated with a significant increase in the volatility of hours per worker. The intuition is simply that the greater the extent to which marginal tax rates fluctuate in response to shocks, the smaller the incentive to adjust working hours. But in a frictional labour market in which it is costly for forms to issue vacancies, the behaviour of hours - i.e. intensive adjustment, or adjustment in the intensive margin - is a determining factor of job creation - i.e. extensive adjustment. We then explain how the dynamic behaviour of hours along the adjustment path to an aggregate productivity shock generates o¤setting incentives for job creation, with the result that tax reform has little impact on unemployment fluctuations. The welfare cost of the business cycle is also computed under different tax regimes. It is found that although business cycles are more costly under a flat tax, the overall welfare implications are quantitatively negligible regardless of the tax system. Having described the effects of the tax system on equilibrium dynamics when perturbed by a productivity disturbance, we then consider business cycle adjustment to an aggregate demand shock in the form of fiscal stimulus. In light of recent fiscal developments in the U.S. and Europe, the ability of expansionary fiscal policy to stimulate output has gained renewed interest in the business cycle literature. We contribute to the analysis by assessing whether the efficacy of government expenditure in reducing unemployment depends on the structure of the tax system. It is demonstrated that a less progressive tax policy increases the ability of expansionary fiscal policy to stimulate output due to a larger response in hours, but this comes at the cost of a smaller unemployment multiplier. Tax reform therefore causes a compositional shift in labour market adjustment in response to aggregate demand shocks, with relatively more adjustment occurring in the intensive margin and less adjustment in the extensive margin the flatter the tax schedule is. The reason why this compositional shift occurs for a demand shock but not a supply shock is that the adjustment path of hours is qualitatively dependent on the type of disturbance. In particular, we describe how equilibrium undershooting in hours occurs only in response to an aggregate productivity (supply) shock, whereas the negative wealth effects arising from increased government expenditure exert sustained upward pressure on hours along the entire adjustment path, thus providing a significant incentive for firms to substitute away from job creation. The second chapter, Monetary Policy and Job Creation in a New Keynesian Model, is motivated by the work of Cooley and Quadrini (1999) and Krause and Lubik (2007). These studies indicate that a typical monetary business cycle model with frictional unemployment and endogenous job destruction tends to encounter difficulty in generating a rise in job creation in response to expansionary monetary policy, rendering the model inconsistent with the downward sloping Beveridge curve that appears in the data and implying only a limited policy role for inflationary job creation. Matching frictions in the labour market congest the job creation process so that firms tend to skew adjustment to shocks towards the job destruction margin. In recognition of the assertion put forth but unpursued by Cooley and Quadrini (1999) that fluctuations in the size of the labour force may ease labour market congestion and therefore amplify cyclical job creation, in Chapter II we extend a New Keynesian model with unemployment to feature an endogenous labour market participation decision. However, a baseline model with a standard degree of risk aversion tends to exhibit countercyclical labour force participation, which is inconsistent with the data. In order to address this issue, we propose the notion of labour market participation as a social consideration, which we demonstrate to be capable of generating procyclical participation incentives. The basic idea is that agents will tend not to exit the labour force during booms in order to "keep up with the Joneses". We then find that plausible fluctuations in the size of the labour force do not exert a quantitatively significant effect on job creation. In light of this result, we search for alternative mechanisms which may overturn the conclusion that inflationary policy is incapable of incentivising job creation. The approach taken involves switching focus to the characteristics of aggregate demand dynamics along the adjustment path to a monetary shock. It is well known that standard New Keynesian models fail to deliver the gradual, hump-shaped adjustment path to monetary policy shocks that is observed in the data. We argue that if aggregate demand experiences a persistent increase in response to a monetary shock instead of peaking on impact, the incentive for firms to create jobs becomes amplified. The intuition is that, since the job creation decision is forward-looking due to the presence of matching frictions, aggregate demand must rise persistently even after the shock takes place so that firms anticipate a further increase in aggregate demand in order for the time consuming process of issuing a vacancy to be justified. To demonstrate this, it is shown that, by altering the dynamics of aggregate demand, time-inseparability in the utility function can significantly improve the ability of expansionary monetary policy to increase job creation, allowing the model to generate a downward sloping Beveridge curve conditional on monetary shocks. In the appendix to Chapter II, we lend further credence to this hypothesis by describing how the manner in which monetary policy it- self is specified may give rise to hump-shaped adjustment dynamics and, consequently, amplify inflationary job creation. Finally, in Chapter III on Equilibrium Matching and Age Discrimination Policy, we abstract from business cycle issues and concentrate instead on the life cycle. Federal legislation prohibiting the discrimination of workers on the basis of age has been in place in the United States since the 1967 Age Discrimination in Employment Act. Yet empirical studies which aim to estimate the employment effects of such legislation have yielded inconclusive results. We approach the issue from a different perspective by deriving quantitative predictions of equilibrium unemployment theory to investigate how age anti-discrimination legislation impacts labour market performance. We do not seek to measure the impact of a particular episode of legislative reform, but aim to quantitatively explore the general equilibrium consequences of restricting the ability of employers to hire on the basis of age. The main conclusion is that an equilibrium matching model of the life cycle predicts a moderately positive effect on the employment rate of workers very close to retirement, but the overall impact of age discrimination policy on the life cycle pattern of employment is quantitatively small. This occurs because in a frictional matching equilibrium, the incentive to discriminate against workers closer to retirement is offset by labour market congestion, preventing the demand for older workers from falling excessively even when it is possible to discriminate on the basis of age. If the demand for workers of a particular age were to fall sharply, the rate at which a given vacancy is matched with a worker of that age cohort increases, allowing firms to capitalise on quick vacancy transition rates stemming from weak competition in hiring. The model thus suggests that the extent to which the effect of a finite horizon is offset by labour market congestion is quantitatively significant, implying a modest role for age discrimination policy in shaping the life cycle pro le of employment. Welfare issues are also addressed. In particular, we demonstrate that an age- dependent inefficiency arises in the labour market participation decision of finitely-lived agents when firms are not able to discriminate in the hiring process on the basis of age. The intuition is that older workers, for whom only a relatively short productive time horizon remains, do not internalise the negative effect that their participation decision has on the age distribution of the aggregate pool of searchers. However, the size of this externality is quantitatively negligible. It is emphasised that the analysis in Chapter III concerns solely the macroeconomic implications of age discrimination policy as separate and distinct from the issue of fairness which naturally arises in this context. Although the economic impact of age discrimination policy on employment is argued to be quite small, this does not of course imply that such policy does not have significant merit with respect to its assurance of the basic tenet of equal opportunity for all.

2012-06-26T00:00:00Z