Essays in Labor Economics and Econometric Methods

The impact of a subsidy or transfer depends greatly on the market forces surrounding/nthe economic actors who receive them. This dissertation contributes to the field of labor eco-/nnomics by shedding light on two under-studied, but widely dispersed, government subsidies./nThese subsidies are the tax exemptions given to nonprofit firms and the Earned Income Tax/nCredit (EITC) issued to low-income households. Although one of these subsidies is given to/na firm and the other to a consumer, both aim to alleviate the low capital burdens for under-/nserved populations. The first chapter examines the effect of a firm’s nonprofit tax status/non workers’ wages using the universe of quarterly wage records from the state of Florida./nThe second chapter investigates market effects for a large durable good during the issuance/nmonths of the EITC. The third chapter presents a theoretical model that improves partial/neffects estimation for ordered outcome variables, which are often variables of interest in em-/npirical questions of this sphere. This is particularly the case when using publicly available,/nbinned data./nIn the first chapter I explore the nonprofit earnings penalty. To separate the influ-/nence of demand and supply, I leverage workers who change employers in administrative tax/ndata. The average nonprofit worker earns 5.5 percent less than the average for-profit worker./nSupply-side factors (worker selection) contribute 80 percent of the nonprofit differential./nThe remaining 20 percent is from demand (a nonprofit penalty). Within-worker nonprofit/nvariation generates several insights about the influence of nonprofits on the labor market./nNonprofits compress the wage distribution and reduce inequality among earners. Nonprofit/npenalties are much more pronounced in classic charities than in “commercial” nonprofits,/nwhich sometimes exhibit nonprofit premia. This study is the first to harness administrative/nwage records, rather than survey data, to estimate the nonprofit earnings penalty. This/nstudy is also the first to show serious misreporting issues in survey data which could bias/nresults./nThe second chapter of my dissertation uses Texas DMV vehicle registration records to/nprecisely estimate quantity and price effects for used car sales in the weeks following the/nissuance of the EITC. I use a difference in difference framework taking advantage of the act that most EITC returns are issued in February and March, and that the share of the/npopulation receiving the EITC varies greatly across zipcodes. I find that for a zipcode with/nthe average EITC population share (20 percent), used car sales increase by 33.3 percent. I/nfind little movement in prices. I conclude that the timing of the EITC return does not result/nin a large loss of incidence for the consumer, despite the large increase in demand for used/ncars. This is the first study to examine price effects, in addition to consumption effects, of/nthe EITC./nMy first two chapters address wage and price effects of subsidies using empirical appli-/ncations. My third chapter presents a theoretical advancement in methods used to recover/npartial effects that are of interest in this field of economics. Often outcome variables of/ninterest such as income, are binned, resulting in “ordered” outcomes. I present an ordered/nresponse model that relaxes rigid distributional assumptions, allowing for less biased and/nmore consistent estimators. This model allows for flexibility gains while still being tractable/nand easy to implement for the applied researcher.

Advisor: Card, David