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Three essays in empirical labour economics : wage determination in local labour markets Sand, Benjamin MacLean

Abstract

This dissertation consists of three empirical essays that examine different aspects of wage determination in local labour markets. The first essay investigates whether or not there are human capital externalities or spill-overs from education. I find that the fraction of college graduates in U.S. cities is associated with higher wages in the 1980s but not in the 1990s. To rationalize this pattern, I empirically investigate a model of structural change by Acemoglu (1999) and find considerable support for it in a number of dimensions. Consistent with the notion that there has been a structural change in the labour market, increases in the supply of skilled labour in the 1990s induce a change in the composition of jobs, increase inequality, unemployment, the return to education, and the wages of high-skill workers and harm low-skill workers. The second essay, which is co-authored with Paul Beaudry and David Green, develops a multi-sector search and matching model of the labour market that illustrates a mechanism through which changes in local industrial composition can cause changes in wages in all sectors of the local economy. We empirically test this model using geographical variation in industrial composition across U.S. metropolitan areas from 1970 to 2000 and find that shifts in industrial composition that favor high-paying industries impact wages in other sectors in a manner that is consistent with the model. The third chapter, co-authored with Christopher Bidner, extends the model developed in chapter two to examine the impact of changes in industrial composition on the relative wages of men and women. We find that men lost representation in high-paying industries relative to women and that these losses can account for a substantial portion of the `unexplained' gender pay gap. All three essays use data from the U.S. decennial Censuses and take U.S. metropolitan areas as local labour markets.

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