Essays on savings and labor market *policies

My dissertation explores policy-oriented questions related to labor markets and individuals' savings behavior. Chapters 2 and 3 analyze labor markets, whereas Chapters 4 and 5 study savings behavior.;In Chapter 2, I evaluate the quantitative importance of on-the-job training for the lifetime incomes of workers. Using a standard dynamic model of human capital investment, I compare the lifetime income when the worker optimally invests in his human capital to the one when he does not make any investments at all. My results suggest a striking answer to the above question: on-the-job training increases lifetime income by less than one percent.;Chapter 3 is based on a joint work with Atila Abdulkadiroglu and Aysegul Sahin entitled "Unemployment Insurance and the Role of Self-Insurance." In Chapter 3, we employ a dynamic general equilibrium model to design and evaluate long-term unemployment insurance plans (plans that depend on workers' unemployment history) in economies with and without hidden savings. We show that optimal benefit schemes and welfare implications differ considerably in these two economies. Switching to long-term plans can improve welfare significantly in the absence of hidden savings. However, welfare gains become much lower when hidden savings is considered. Therefore, we argue that switching to long-term plans should not be a primary concern from a policy point of view.;Chapter 4 is based on a joint work with Per Krusell and Anthony A. Smith Jr. entitled "Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting." In Chapter 4, we study a representative-agent equilibrium model where the consumer has quasi-geometric discounting and cannot commit to future actions. We characterize the welfare properties of competitive equilibria and compare them to that of a planning problem. We show that the competitive equilibrium results in strictly higher welfare than does the planning problem whenever the discounting is not geometric.;Chapter 5 is based on a joint work with Per Krusell and Anthony A. Smith Jr. entitled "Tax Policy with Quasi-Geometric Discounting." It extends the model in Chapter 4 by incorporating labor-leisure choice into the model and studies time-consistent policy equilibria for different tax constitutions. The results show that a constitution leaving the government with no ability to tax results in strictly higher welfare than one where the government has full freedom to tax. Indeed, for some parameter values, the best tax constitution of all is laissez-faire. For other parameter values, it may be optimal to allow the government to use a less than fully restricted set of tax bases.