Three essays on labor economics: The equilibrium job search approach

This dissertation applies an equilibrium job search model to examine wage differentials and impacts of minimum wage and unemployment insurance. It emphasizes equilibrium effects that arise from reactions of employers to exogenous changes in workers' behavior and public policies. The existence of wage-posting firms and job search by workers with different reservation wages generates wage dispersion that gives firms monopsonistic power, causing search unemployment.; The first essay distinguishes two main effects of a minimum wage increase. An “exclusion effect” happens because the lowest productivity firms cannot pay the new minimum wage and exit the market. A “switching strategies effect” occurs because offering a higher wage becomes more profitable for some firms, given the shorter gap between wages. Both effects imply employment and welfare gains that cannot be analyzed with alternative models.; The essay on unemployment insurance (UI) examines the “entitlement effect” of changes in the UI benefit on non-insured unemployed workers. This essay incorporates entitlement and equilibrium effects that have not been considered jointly in previous studies. The simulations performed show that the impact of more generous UI policies on employment and social welfare are ambiguous and cannot be determined theoretically as standard models of the labor market claim.; The third essay examines wage determinants using three structural equations to{09} model the wage offer distribution, the process of selection into employment and the determinants of the reservation wage. It uses NLSY79 data for 1986–1987, which has actual reservation wages. The essay estimates alternative models: with and without selection, partial or equilibrium effects, different search periods and reduced or structural forms. The model with selection, duration and equilibrium effects gives different results than the human capital model. The estimations confirm that employers consider reservation wages to set their wage offers, demonstrating that the earnings function not only measures the workers' productivity but also the degree of underpayment received by workers who have to undertake costly search to get a wage closer to their actual productivity. These estimations allow differentiating the contribution to productivity from the effect of the reservation wage.