ESSAYS ON LABOR ECONOMICS

Abstract

Changes in the labor market environment can alter how the market allocates and compensates labor forces. This dissertation examines the impact and relevance of employment protection and local demand on employment and wage by focusing on the employment at-will exceptions and the housing net worth channel. Employment relationship in the U.S. deviated from its at-will tradition over 1980’s by recognizing three major exceptions to the at-will doctrine across states. The First chapter of this dissertation investigates the impact of the at-will exceptions on wage and employment by focusing on the implied contract exception. Using data from a Panel Study of Income Dynamics (PSID) and difference in differences estimation strategy, the analysis identifies the negative impact of the adoption of implied contract exceptions on both employment and wage among the head of household, and the increased return to tenure compensates for the negative impact on wages. Subsample analyses reveal that the negative impact is typically more substantial for the younger age group, non-unionized occupations, and high school graduates without a college diploma. More relevant occupations and industries preserving the main results are classified by keeping the complement group to have insignificant results. Short-lived effects concentrated within the early adoption cohort suggest a non-market response of employers to legal adoption. The main results are robust to a more restricted control group setting and alternative estimation strategy excluding already treated samples from the control group. The second chapter of this dissertation examines the employment consequence of the local housing net-worth channel by separating tradable and non-tradable employment. Using the state-level tradable and non-tradable employment data from 1990:M1-2019:M12, a stronger relevance is observed between the local housing price and the non-tradable employment relative to the tradable employment. Estimation using the panel VAR shows a stronger and more persistent impact of house price shock on employment relative to personal income or building permits. The response to the house price shock is more distinctive for non-tradable employment by reflecting the local demand channel associated with the local housing market. Out-of-sample forecasting analysis translates the in-sample asymmetry to asymmetric out-of-sample forecasting performance between tradable and non-tradable employment. Including house prices improves the forecasting performance in predicting non-tradable employment, and the performance gain for predicting tradable employment is minimal. This forecasting performance gap is typically more significant for states with inelastic housing supply and volatile house prices.