Giovanni Gallipoli

This thesis consists of three chapters that study various aspects of the interaction between macroeconomics, family economics, and labor economics, with a primary focus on the economic linkage between parents and children. Chapter 2 presents a theoretical study contributing to the literature on intergenerational occupational persistence. I develop an occupational choice model characterized by information friction and intergenerational transmission of ability to analyze the relationship between parents' and children's occupational choices and the consequence on workers' earnings over their lifetimes. In this model, workers enter the labor market with imperfect information about their innate abilities, learn their abilities from working, and optimize their occupational choices. The model is calibrated to a unique employer--employee-matched data source from Germany to match observed empirical moments and investigate how the information friction could improve the occupation-talent allocation in the labor force through a counterfactual experiment.In Chapter 3, I document a set of novel empirical facts characterizing occupational persistence across generations by using both survey and administrative-level panel data from Germany. The pattern of intergenerational occupational persistence against occupations' wage-premia ranking is identified as U-shaped: a worker is more likely to work in the same occupation as their father if their father's occupation is associated with a high or low wage premium. This U-shaped pattern can be consistently explained by the theory discussed in Chapter 2. The information friction regarding ability plays a critical role in delaying workers' learning processes and leads to occupation-talent mismatches, especially when workers are in their early career stages. Chapter 4 investigates how the one-child policy affects household-level saving and spending behaviors as well as aggregate-level savings and human capital accumulation in China. To answer this question, I propose a life-cycle model with intergenerational transfers and human capital accumulation. This life-cycle model provides channels to understand households' responses to fertility restrictions and the corresponding impact on savings and investments in per-child education. The present theory also provides a feasible approach based on demographic composition changes to understand the linkage between the household-level dynamics and the evolution of savings and human capital accumulation at the aggregate level.

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Matching processes are at the heart of many economic interactions: in the labor market workers match with occupations; migration is a form of geographic matching; singles match in marriage markets to form households. Matching processes are the common theme across the three essays composing this thesis.The first two essays study the joint determination of migration and marriage of households. They examine the effects of geographic heterogeneity in occupational returns on marriage and divorce, and the impact of family formation on the geographic allocation of labor. The first essay documents that geographically mismatched workers -- those living in a location that pays relatively lower wages in their occupation -- are less likely to marry and more likely to divorce. Moreover, conditional on marrying, mismatched workers are more likely to be married to similarly mismatched partners. To account for these observations, in the second essay, we develop an equilibrium model of migration and family formation, and we estimate it using microdata for the US. Through counterfactual experiments, we assess the implications of joint marriage and location choices. We find that, while at the individual level entering a marriage reduces wage growth, in aggregate the presence of marriage markets and the endogeneity of marriage market conditions enhance productivity by attracting workers to high return locations.In the third essay we characterize the distribution of worker-job surplus in the U.S. economy for different decades, and document extensive heterogeneity in the pecuniary and non-pecuniary rewards that workers derive from similar jobs. This heterogeneity is associated with compensating differentials, especially in non-college occupations and among women in college-level jobs. Estimates of worker-job match values are employed to recover technology parameters such as the productivity of different occupation-demographic matches and the substitutability of broad occupation groups in production. We use the latter to quantify the extent to which technological progress, as opposed to shifts in the heterogeneous valuations of jobs, accounts for structural change in the labor market. We find that, while employment patterns are the by-product of changes in both technology and preferences, the evolution of wages can almost entirely be explained by technological progress.

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For nearly four decades in the post-War United States, productivity rose during economic booms and fell in recessions. The first chapter of this thesis studies how increased labour market flexibility because of rapid de-unionization since the early 1980s can explain the sudden vanishing of this procyclicality of productivity, the so-called 'productivity puzzle'. Falling costs of hiring and firing workers, due to the decline in union power, prompted by firms to rely more on employment adjustment (extensive margin) instead of changing workers' effort through labour hoarding (intensive margin). High dependence on labour hoarding explains productivity's historical procyclicality, and its reduced importance in recent decades explains why productivity is now less procyclical. Increased hiring and firing of workers also imply a rise in the relative volatility of employment. I show that U.S. states and industries with a larger drop in union density experienced a deeper fall in the procyclicality of productivity and a larger increase in the relative volatility of employment. Simultaneous to the productivity puzzle in the mid-1980s, there were other important structural changes in the U.S. economy, namely, the rise of the service sector, increased use of intangible capital, more accommodative monetary policy, and the decline in the volatility of shocks during Great Moderation. The second chapter shows that none of these structural changes can explain the productivity puzzle. However, allowing the hiring cost to decline between pre- and post-1980s in an otherwise standard New Keynesian model with endogenous effort can match almost all the fall in cyclical productivity correlations and the rise in the relative volatility of employment. The third chapter characterizes the joint evolution of cross-sectional inequality in permanent income and consumption among parents and children in the U.S. We use a model of intra-family persistence across generations to estimate the parameters determining inequality of consumption and income within a generation. In accounting for cross-sectional dispersion, we find that idiosyncratic heterogeneity is quantitatively more important than inequality arising from family factors. This suggests that parents provide limited insurance against idiosyncratic life-cycle risk, even though the levels of permanent income and consumption exhibit significant persistence across generations.

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This dissertation studies how households adjust their consumption and labor supply in response to idiosyncratic shocks.In the first chapter, I propose an empirical strategy for measuring consumption allocations within households over time. The strategy consists of imputing gender-specific consumption data from a cross-sectional dataset to a panel. I apply it on two publicly available datasets in the US: the Consumer Expenditure Survey and the Panel Study of Income Dynamics. The generated panel allows researchers to investigate questions such as how the sharing rule shifts in response to various shocks.The second chapter studies how households insure themselves against idiosyncratic wage shocks and how this insurance interacts with intra-household bargaining. I set up an intertemporal household model and examine two channels of insurance, self-insurance and family labor supply adjustment. I consider two alternative specifications of this model: a unitary version in which I restrict sharing rules to be fixed within households, and a non-unitary one in which I allow sharing rules to change. I estimate the model using a panel that has information on consumption allocations within households. I find that intra-household allocations respond strongly to fluctuations in individual wages. Removing the restriction of fixed sharing rules does not reduce the extent of consumption smoothing within a household, but it significantly changes the relative importance of different channels. In particular, the relative contribution of family labor supply to household consumption smoothing decreases from roughly 60% in the unitary model to 30% in the non-unitary model. This is because the added worker effect -- the increase in spousal labor supply following an adverse shock to a partner -- is much milder in the non-unitary specification. Non-stationary income processes are standard in quantitative life-cycle models, prompted by the observation that within-cohort income inequality increases with age. The last chapter generalizes Tauchen's (1986) and Rouwenhorst's (1995) discretization methods to non-stationary AR(1) processes. We evaluate the performance of both methods in the context of a canonical finite-horizon, income-fluctuation problem with a non-stationary income process. We find that the generalized Rouwenhorst's method performs extremely well even with a small number of states.

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This dissertation studies the effects of technological change on workers' occupational choices and wages, as well as the human capital costs associated with occupational transitions. The first part of the dissertation focuses on the interaction between technological change and tasks. Over the past three decades technological improvements have led to a dramatic reduction in the employment share of occupations with a high content of routine tasks in the United States and other developed countries. This dissertation provides a novel perspective on this phenomenon by focusing on the individual-level effects of this type of technological change in terms of occupational switching patterns and wage changes. I formalize the predicted effects within the context of a model of occupational sorting based on comparative advantage, and I test them using data from the Panel Study of Income Dynamics (PSID) from 1976 to 2007. Consistent with the predictions of the model, I find strong evidence of selection on ability in the occupational mobility patterns of workers in routine occupations, with those of relatively high (low) ability switching to non-routine cognitive (non-routine manual) occupations. In terms of wage growth, also consistent with the prediction of the model, workers in routine jobs experience significant declines in their wage premia relative to workers in any other type of occupation. Switchers from routine to either type of non-routine job (cognitive or manual) experience significantly higher wage growth than stayers over long-run horizons. The second portion of the dissertation analyzes the role of the task content of occupations. I develop a measure of task distance between occupation pairs and study its impacts from two different perspectives: At a microeconomic level, I analyze the wage changes for workers experiencing occupational transitions of different distances. At a macroeconomic level, I analyze the impacts of task distance on the aggregate flows of workers across occupations. The aggregate-level evidence suggests that the cost of switching occupations is increasing in distance, but only for switches occurring across broad occupation groups. The individual-level evidence suggests that there is a negative correlation between wage changes and distance, but only for certain subsets of workers.

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Less developed countries typically exhibit lower output per worker and too fewmedium firms compared to developed economies. The purpose of this thesis is toisolate the distortions driving this misallocation of resources and examine their efficiencyimplications. Using firm-level data, we show that the probability of beingaudited for taxes increases significantly around a size threshold of 30 employees inUganda. This results in a break in the density of firm size around this size thresholdand in significantly higher [lower] capital-labour ratios [growth rate] for firmsbelow the size threshold. We argue that entrepreneurs on the verge of having amedium firm hide below the size threshold to avoid a rise in expected regulationcosts. They can then substitute capital for labor to scale-up production and wait fora productivity shock that will offset the cost of growing. Other explanations suchas a differential in technology or in factor prices due to inefficient credit markets donot reconcile the patterns observed in the data. Based on these empirical evidencewe extend Hopenhayn [1992a]’s model with heterogeneous firms to include the taxand credit environment observed in Uganda. Under some simplifying assumptionswe solve the model analytically and derive comparative statics for the parametersof interest. We finally revert to the full-blown version of the model and estimate itby Indirect Inference. The calibration strategy consists in choosing a set of structuralparameters such that the model generates endogenous patterns in capital-laborratios, growth of output and firm size density similar to the data. We show that themodel does a reasonable job at explaining the data along several dimensions usinga set of over-identifying restrictions. We conduct a positive analysis by comparingthe effect of the uneven auditing scheme and credit constraints. Finally, we suggest policy interventions to improve efficiency in Uganda.

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