Essays in Macroeconomics and Labor Economics

Abstract

In this dissertation, I study classic labor economics questions with an eye towards the macroeconomic impact of the answers. In Chapter 1, I study the general equilibrium properties of the childcare industry and whether those properties could motivate designing an economic stimulus that is more effective than traditional stimulus programs. I build a model of an economy with a childcare sector. The model will demonstrate how wages and employment decisions can change in the presence of a childcare sector. Then, in order to calibrate my model, I estimate how much childcare employment changes in response to demand and supply factors. Specifically, when industries where lots of workers use paid childcare expand by 1000 employees, there are on average 18 more childcare workers. Conversely, when industries that compete with childcare for labor expand by 1000 employees, the childcare sector is on average smaller by about 3 workers. Unfortunately, robustness checks cast doubt on the soundness of these main empirical results. In Chapter 2, we decompose employment growth into contributions from supply and demand factors. Policymakers require an accurate understanding of recent, high-frequency fluctuations in order to form accurate near-term forecasts and to craft appropriate fiscal and monetary policy actions. We adapt the methodology and sign-restriction approach in Shapiro (2024) to infer the presence of supply and demand shocks at the sector level and then aggregate to the labor market. We use data from the Current Employment Situation (CES) to measure employment levels across industries and data from the Employment Cost Index (ECI) to measure real compensation to workers. We demonstrate the importance of accounting for changes in employment composition by comparing our main results to a specification using CES wages instead. In Chapter 3, we generate upper bounds for the GDP increase that could occur if there was a substantial increase in housing supply in America's most productive areas. We write a relatively simple model of production and spatial equilibrium. We vary two parameters determine the maximal GDP increase: the extent to which local GDP increases with employment and how many workers are reallocated across space. If the elasticity of GDP with respect to employment is close to 1 (0.96), then the increase in GDP associated with GDP-maximizing reallocation ranges from 7% (if 16.3 million workers are moved) to 24% (if 64 million workers are moved). If the elasticity is much lower (.8125), then even moving 43 million workers will only increase GDP by 8 percent. Reducing barriers to building are only likely to generate larger increases to national income if there are dynamic benefits from agglomeration, either at the individual or place level.