Date of Award

2017

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Graduate Group

Economics

First Advisor

Hanming Fang

Abstract

This dissertation consists of two papers. In the first paper, I study the employment and welfare effects of short-time work in Germany during the recession between 2008 and 2010. Short-time work is a government program that subsidizes part-time work during economic downturns. Using administrative data, I document that (i) take-up of short-time work is increasing in experience and tenure, (ii) almost all short-time workers return to full-time work, and (iii) short-time work is not associated with a long-term loss in earnings. I develop a model that is consistent with these facts. The model features search frictions, aggregate and idiosyncratic shocks, human capital, and an intensive margin. Productivity shocks differ in duration and magnitude, and when hit by an adverse temporary productivity shock, firms can curtail their losses by reducing working hours. Using the estimated model, I find that short-time work was important in reducing job loss during the recession. However, the welfare gains are modest, because workers who would have been laid off without short-time work are workers for whom the earnings loss associated with unemployment is low.

In the second paper, I investigate how policy expectations interact with the employment effects associated with minimum wage increases. I provide evidence from federal and state minimum wage increases in the U.S. that minimum wage increases result in substantial negative employment effects when the increases are unanticipated and no employment effects when they are anticipated. The effects of unanticipated increases are further exacerbated when the increases are indexed to inflation. I then develop an equilibrium search model in which workers and firms have rational expectations of the future evolution of the minimum wage. Using the estimated model, I show that policy expectations are quantitatively important to understand the impact of minimum wage increases on employment.

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Economics Commons

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