Essays in applied microeconomics : signaling, marriage hazard rates, and ability sorting

Abstract

This dissertation consists of three independent empirical examinations of the effects of information and earnings on individual behavior. The first essay examines the effects of information about the quality of previous performance on contemporaneous performance evaluation. I adapt a model of statistical discrimination to incorporate a signal that indicates whether previous performance exceeded some criterion, and I test the model's predictions using a regression discontinuity design and a policy change at the United States Military Academy involving insignias of academic awards on cadet uniforms. I estimate the signaling effects of an award indicating placement on the Dean's List on senior year GPA to be 0.05 grade points. The second essay examines the relationship between male economic conditions and female marriage rates. I overcome problems of endogeneity and spurious correlation by using the oil boom and bust in Texas from 1970 to 1990 to instrument for average male earnings in Texas counties. I estimate that a 10% increase in male earnings results in a 15% increase in the hazard rate of never married young women into marriage, which does not indicate a significantly large contribution of changes in male economic status to the decline in marriage rates over the past several decades. The third essay examines how pay spreads in tournament compensation schemes may induce higher ability individuals to sort themselves into tournaments with higher pay spreads. I exploit variation in the promotion rates of different military occupations resulting from the downsizing of the Army in the 1990s, and I find modest evidence that higher ability soldiers are more likely to reenlist when the effective pay spreads are higher.