| dc.description.abstract | This dissertation examines how institutional and behavioral frictions shape aggregate economic outcomes. Combining quasi-experimental methods from applied microeconomics with theoretical frameworks from macroeconomics, I analyze three dimensions of how labor market policies and norms influence employment dynamics and macroeconomic fluctuations.
The first chapter investigates how labor market institutions affect the propagation of nominal shocks in inflationary environments. Conventional wisdom suggests that inflation can "grease" labor market adjustments by facilitating real wage changes, but institutional wage-setting may alter this mechanism. We address this question by studying Brazil's annually indexed minimum wage in a high-inflation context. Using administrative data, we show that workers exposed to the policy experience fewer month-to-month wage increases before indexation events, and that firms anticipate the policy by rigidifying wages of workers who will be newly bound. We evaluate the macroeconomic implications of these features by introducing a cost-push shock to a New Keynesian model with heterogeneous labor and an indexed minimum wage. While staggered indexation amplifies the inflation-as-grease mechanism by introducing nominal rigidities, anticipation dampens it via intertemporal substitution. Overall, amplification dominates since cost-push shocks have a stronger "greasing" effect compared to a setting where the minimum wage indexes every period. Our findings demonstrate that even in high-inflation environments, the institutional structure of wage-setting fundamentally shapes how shocks propagate through the economy.
The second chapter broadens the analysis of how institutions shape middle-income country's labor markets, focusing on informality. We analyze the Venezuelan refugee crisis in Colombia to separately identify the effect of informal immigration and work permit policies on labor markets. Using a Synthetic Instrumental Variables design, we find that the informal labor supply shock displaced native workers in both the informal and formal sectors, indicating high substitutability between worker types (elasticity approximately 11). Using a triple difference-in-differences design, we find that work permits reduced competition in the informal sector while increasing it in the formal sector. Using a model, we estimate this created 24,440 new formal jobs and approximately $43 million in annual tax revenue. Our results also suggest that work permits create productivity spillovers through reduced skill mismatch, providing economic rationale for immigrant integration policies.
The third chapter investigates whether gender norms lead to inefficient resource reallocation following employment shocks. Leveraging rich longitudinal data from the UK on couples' employment, time use, and self-reported gender norms, we test whether gender norms prevent households from achieving income-maximizing arrangements after negative employment shocks. We find that after a layoff, men are more likely than women to return to work in the long run. This asymmetry is fully explained by women who subscribe to traditional gender norms: progressive women have the same labor market response to layoffs as men. These findings reveal how deeply embedded behavioral norms can generate persistent labor market frictions with macroeconomic consequences.
Together, these chapters demonstrate how institutional design and behavioral patterns create frictions that fundamentally alter aggregate outcomes, providing policy-relevant insights for middle-income economies and beyond.
JEL Codes: E24, E26, E31, J16, J61, O54 | |
