Labor Market Structure and Policy Evaluations

My dissertation studies labor market structure and evaluates effects of policies relating to transportation improvements and immigration enforcement in different countries including Germany, the Untied States, and China. Specifically, I examine thenature and extent of labor market frictions, explore the causes and consequences, as well as study the role in policy evaluations.In the first chapter, I investigate one potential source of labor market frictions from limited labor mobility by examining how integrating labor markets through improved transportation infrastructure affects both wages and the allocation of workersacross establishments. I take advantage of the expansion of the High-Speed Rail in Germany, which connected medium-sized districts located on existing rail lines, providing a natural experiment to study the effects of labor market integration. Using administrative panel data on establishments and workers linked to their employers, I estimate difference-in-differences and event-study models that compare newly connected districts to matched controls that were never connected. In theory, policies that improve labor mobility might raise wages both by facilitating more productive matches of workers to firms and by reducing the monopsony power that employers have on workers. I find evidence of increased labor mobility for workers in treated districts, especially those that are more likely to commute. Worker wages increase significantly and I find that both reduced monopsony power and better match quality are possible mechanisms. I also test for establishment adjustments including entry, exit, size, and wage that are predicted by each mechanism. This study shows evidence of reduced labor market frictions from improved transportation. It also sheds light on the importance of policies that enhance workers’ ability to switch employers.In the second chapter, I explore the effects of LAWA on labor markets based on evidence that LAWA has significantly reduced the population of Hispanic noncitizens in Arizona. Specifically, I focus on the composition of the labor force and industry heterogeneity. I first show that a synthetic control has similar concurrent economic trends with Arizona, and verify that changes in employee composition are due to the replacement of Hispanic noncitizen workers by other subgroups and not by a change in overall employment. In response to LAWA, firms tend to reduce both the new hire rate and the separation rate. Several robustness checks are conducted to test the accuracy of the estimates and several mechanisms are considered that may drive the results.In the third chapter, we study the structure of labor markets and the effects on wages in China. A growing literature has emphasized the existence of monopsony power stemming from employer concentration within local labor markets, which deviates from the conventional view of labor markets as perfectly competitive. We use firm-level data from the Chinese Annual Survey of Industrial Firms to analyze how employer concentration affects wage behavior. We first verify that local employment concentration measured by the Herfindahl-Hirschman Index of firm employment decreases between 1998 and 2013, in contrast to the increasing trend found in developed countries. Then with OLS and IV models, we show a negative relationship between labor market concentration and wages both the at the market level and at the firm level, indicating theexistence of imperfect labor market competition in China