Essays in Labor Markets, Education and Migration in Developing Countries.

Abstract

This dissertation consists of three essays in labor and development economics. The first essay, “Bumpy Rides: School to Work Transitions in South Africa,” quantifies the importance of the option to re-enroll in the school to work transition of South African youth. I estimate a structural model of schooling choice using a panel dataset that contains the entire schooling and labor market histories of sampled youth. Estimates of the model’s parameters confirm the hypothesis that enrollment choices reflect dynamic updating of the relative returns to schooling versus labor market participation. In a policy simulation under which re-enrollment prior to high school completion is completely restricted, the proportion completing 12 years of schooling rises 8 percentage points, as youth who would have dropped out under unrestricted re-enrollment reconsider the long-term consequences of doing so. The second essay, “The Role of Reservation Wages in Youth Unemployment in South Africa: A Structural Approach” (with James Levinsohn), estimates a structural job search model with survey data on the reservation wage. We find that inclusion of reservation wage data implies a labor market in which job offers are relatively frequent but at wages that tend to be too low to be accepted. Using a novel procedure, we combine our structural estimates with reservation wage survey data to estimate the full distribution of search costs in the sample. These estimates confirm the model’s predictions about the relationship between search costs and labor market outcomes. The final essay, “The Impact of Mexican Immigration on U.S. Natives: Evidence from Migrant Flows Driven by Rainfall Shocks” (with Dean Yang), reports a new estimate of the effect of immigration on U.S. labor market outcomes using a novel source of exogenous variation in migrant inflows. Rainfall shocks at the Mexican state level, operating through established migration channels, are strongly correlated with changes in the Mexican labor force share in an annual panel of U.S. states. Using this instrument to estimate the effect of the Mexican labor force share on labor market outcomes, we find that a higher Mexican share of the labor force leads to lower wages and higher unemployment for non-Mexicans.