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Title: Four Essays in Empirical Macro and Labor Economics
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Keane, Michael P. |
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Four Essays in Empirical Macro and Labor Economics Ph.D. Dissertation, Brown University, 1990 Cohort(s): Young Men Publisher: UMI - University Microfilms, Bell and Howell Information and Learning Keyword(s): Business Cycles; Industrial Sector; Inflation; Modeling, Fixed Effects; Wages This thesis is composed of four essays examining the effects of real and nominal shocks on the economy, in particular the oil price shocks of the 1970s. Microdata from the NLS Young Men were used to analyze the impact of these shocks and of the business cycle on real offer wages, sectoral location probabilities, employment probabilities, and the interindustry wage differentials. The first essay develops a practical extension of McFadden's Method of Simulated Moments estimator to the panel data case and to selectivity models. A selectivity model is estimated to determine the true effect of the business cycle on real offer wages. After correcting for selection bias and a complex pattern of serial correlation, real wages are found to be weakly procyclical. The second essay uncovers substantial effects of real oil price shocks on aggregate and sectoral real offer wages. The results are inconsistent with the predictions of equilibrium sectoral models, because the price shocks reduced respondents' location probability in sectors where relative wages increased. Nominal contract based theories of unemployment predicting inflation surprises should be negatively correlated with real offer wages. The third essay finds a positive correlation which is robust to controls for real shocks. Analysis shows substantial bias stemming from the shock's effect on labor force composition; low-wage workers tend to become employed following positive inflation shocks, masking the positive correlation between real offer wages and inflation. Using a fixed effects estimator on a long panel, the final essay obtains more efficient estimates of interindustry wage differentials than those contained in the existing literature. Individual fixed effects account for eighty-four percent of the variance of log wages across industries. Since unobserved job characteristics may account for the remaining sixteen percent, these results are consistent with competitive theories of w age determination. The interindustry wage structure is found to be highly responsive to real shocks, suggesting that relative wage movements may be important for our understanding of business cycle phenomena. [UMI ADG91-01788] |
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Bibliography Citation
Keane, Michael P. Four Essays in Empirical Macro and Labor Economics. Ph.D. Dissertation, Brown University, 1990. |