Three essays on labor market disparities and inequality

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Isojaervi, Anni T
Major Professor
Cordoba, Juan C
Bhattacharya, Joydeep
Bunzel, Helle
Singh, Rajesh
Zhylyevskyy, Oleksandr
Committee Member
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This dissertation studies labor market disparities and inequality in the United States. The focus is to investigate the determinants of gaps in various labor market outcomes over the life cycle between different demographic groups and to study whether the increased earnings inequality over the past decades has been connected with another macroeconomic trend, increased concentration of production. In Chapter 2, I examine the determinants of the gaps in wages, labor market participation, and other labor market outcomes between men and women over the life cycle. Using a search and matching model and data on the U.S. labor markets, I show that wage gaps arise mainly because of women's lower productivity level at the beginning of their careers as well as women's more frequent career breaks. Firms' actions matter too: firms' are less willing to hire workers with a higher likelihood of career breaks which leads to lower negotiated wages. Chapter 3 builds on the analysis in Chapter 2 and uses a structural model to decompose the labor market outcome gaps between all the major demographic groups in the U.S. labor markets including genders, races, ethnicities, skill levels, and age groups. Chapter 3 focuses specifically on studying the role of discrimination in generating disparities in the outcomes. Using 1998–-2018 U.S. data, we find that differences in initial human capital, returns to experience, and job separation rates account for most of the demographic disparities; wedges in matching efficiencies play a secondary role. Our results suggest a minor aggregate impact of taste-based discrimination in hiring and an important role for statistical discrimination affecting particularly female groups and Black males. In Chapter 4, I examine the relationship between two recent trends: increasing firm concentration and rising earnings inequality. Using an assignment model with heterogeneous firms and workers and data on earnings variance components in the U.S., I show that increased price elasticity of demand has been the most important driver of both earnings inequality and firm concentration in the past few decades. An increase in both earnings and sales concentration has also been significantly impacted by a shift in the skill distribution of workers. Skill distribution has now a thicker tail, shifting both production and earnings towards the best workers and firms.
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