Essays on Dynamic Structural Models for Employment and Organization.

Abstract

A household or an organization’s environment establishes the structure for how decisions are made, this means that the environment can influence happiness or success over time. The studies comprising this dissertation demonstrate that small changes to a complex decision-making environment’s structure can have substantial effects on long-term outcomes.

In the first chapter, I consider how Social Security’s spouse and survivor benefits alter the work incentives of household members. In 2011, Social Security’s Spouse and Survivor’s Benefits amounted to $112 billion. I estimate how responsive individuals’ retirement decisions are to Spouse and Survivor’s Benefits. I develop a structural life-cycle model of household savings, labor supply, and benefit claiming. I find that husbands and wives respond sharply to changes in the Survivor’s Benefit, but little to changes in the Spouse’s Benefit. In addition, the annuity provided by the Survivor’s Benefit, even if reduced, creates a strong incentive for the couple’s high earner to continue working.

In the second chapter, I document the rise in old-age divorce, and examine the impact of divorce and widowhood after age 50 on individuals’ labor force decisions. I find that female labor force participation increases by up to 17.1 percentage points in the eight years following divorce, compared with an insignificant decline in work amongst widows. Among women, I am able to attribute most of the immediate labor supply response to asset losses during divorce.

A business environment often contains complex, interdependent activities that create and sustain a firm’s competitive advantage. In the third chapter, I find that incorporating complementarities within these interdependencies can alter the speed and success of an organization’s decision-making structure in adapting to changes in complex business environments.