Essays on the macroeconomics of the labor markets

Abstract

In Chapter 1, I study the efficiency properties of competitive search equilibria in economies with informational asymmetries. Employers and workers are both risk-neutral and ex-ante homogeneous. I characterize an equilibrium where employers post contracts and workers direct their search towards them. When a match is formed, the disutility of labor is drawn randomly and observed privately by the worker. An employment contract is an incentive-compatible mechanism that satisfies a participation constraint on the worker's side. I first show that in a static setting the competitive search equilibrium is constrained efficient, that is, it cannot be Pareto improved by a Social Planner subject to the same informational and participation constraints faced by the decentralized economy. I then show that in a dynamic setting, on the contrary, the equilibrium can be constrained inefficient. The crucial difference between the static and the dynamic environment is that the worker's outside option is exogenously given in the former, while in the latter it is endogenously determined as the equilibrium continuation utility of unemployed workers. Inefficiency arises because the worker's outside option affects the ex-ante cost of information revelation, generating a novel externality which is not internalized by competitive search.

(cont.) In Chapter 2, I explore whether match-specific heterogeneity, with or without full information, can amplify the responsiveness of unemployment rate and market tightness to productivity shocks. On the contrary, I show that heterogeneity can dampen the response of market tightness to productivity, once one calibrates the model to match two main facts: the finding rate and the finding rate elasticity to market tightness. First, I show a theoretical result for the steady state analysis in the extreme case of no aggegate shock. Then, I report the calibration exercise for alternative specification of the idiosyncratic shocks distribution. Chapter 3 is the product of joint work with Daron Acemoglu and constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share (despite the equilibrium reallocation of capital and labor away from that sector). We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb-Douglas production functions in each sector.

(cont.) In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. We investigate whether for realistic parameter values, the model generates transitional dynamics that are consistent with both the more rapid growth of some sectors in the economy and aggregate balanced growth facts. Finally, we construct and analyze a model of "non-balanced endogenous growth," which extends the main results of the paper to an economy with endogenous and directed technical change. This model shows that non-balanced technological progress will generally be an equilibrium phenomenon.