| This dissertation consists of three essays in labor economics and contract theory.;The first essay examines whether one's wage is based on information about the performance of one's personal contacts. I study wage determination under two assumptions about belief formation: individual learning, under which employers observe only one's own characteristics, and social learning, under which employers also observe those of one's personal contacts. Using data on siblings in the NLSY79, I test whether a sibling's characteristics are priced into one's wage. If learning is social, then an older sibling's test score should typically have a larger adjusted impact on a younger sibling's log wage than vice versa. The empirical findings support this prediction. Furthermore, I perform several exercises to rule out other potential factors, such as asymmetric skill formation, human capital transfers, and role model effects.;The second essay analyzes the influence of macroeconomic conditions during childhood on the labor market performance of adults. Based on Census data, I document the relationship of unemployment rates in childhood to schooling, employment, and income as an adult. In addition, a sample from the PSID is used to study how the background attributes of parents raising children vary over the business cycle. Finally, information from the NLSY79-CH is examined in order to characterize the impact of economic fluctuations on parental caregiving. Overall, the evidence is consistent with a negative effect of the average unemployment rate in childhood on parental investments in children and the stock of human capital in adulthood.;The third essay studies the bilateral trade of divisible goods in the presence of stochastic transaction costs. The first-best solution requires each agent to transfer all of her good to the other agent when the transaction cost reaches a certain threshold value. However, in the absence of court-enforceable contracts, such a policy is not incentive compatible. We solve for the unique maximal symmetric subgame-perfect equilibrium, in which agents can realize some gains from trade by transferring their goods sequentially. Several comparative statics are derived. In some cases, the first-best outcome can be approximated as the agents become infinitely patient. |
