Florian Hoffmann

The first chapter studies the distribution of economic activity across space and the effects of place-based policies. I develop a model of the location choice of new establishments incorporating taxes, monopsonistic labor markets, and spillovers. Estimates using administrative data from Germany indicate that establishments generally have a preference for lower taxes, as well a preference for lower worker outside options which enable establishments to pay lower wages. The degree to which various types of productivity spillovers matter in the location decision of establishments varies greatly between industrial sectors. I also quantify the effects of a counterfactual place-based policy and find that commuting zones display highly heterogeneous wage and economic activity responses to the same policy due to differing degrees of labor market power across space.In the second chapter, we study the extent to which persistent elevation in the involuntary part-time employment rate following the Great Recession indicated labor market slack in the United States. The fraction of the US workforce identified as involuntary part-time workers rose to new highs during the US Great Recession and came down only slowly in its aftermath. We assess the determinants of involuntary part-time work using an empirical framework that accounts for business cycle effects and persistent structural features of the labor market. We conduct regression analyses using state level panel data for the years 2003–16. The results indicate that structural factors, notably shifts in the industry composition of employment, have held the incidence of involuntary part-time work slightly more than 1 percentage point above its prerecession level.In the final chapter, I use the 1996, 2001, 2004, and 2008 panels of the Survey of Income and Program Participation to investigate the influence earner status plays on the response to a spouse's job separation. I find that conditional on gender, there are still large remaining differences in behavior based on earner status. Conditional on earner status, there are few remaining gender differences on the intensive margin, but clear differences on the extensive margin. As the equivalence between gender and earner status continues to erode, examining earner status will become even more important.

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This thesis consists of three chapters that study various aspects of the interaction between macroeconomics, family economics, and labor economics, with a primary focus on the economic linkage between parents and children. Chapter 2 presents a theoretical study contributing to the literature on intergenerational occupational persistence. I develop an occupational choice model characterized by information friction and intergenerational transmission of ability to analyze the relationship between parents' and children's occupational choices and the consequence on workers' earnings over their lifetimes. In this model, workers enter the labor market with imperfect information about their innate abilities, learn their abilities from working, and optimize their occupational choices. The model is calibrated to a unique employer--employee-matched data source from Germany to match observed empirical moments and investigate how the information friction could improve the occupation-talent allocation in the labor force through a counterfactual experiment.In Chapter 3, I document a set of novel empirical facts characterizing occupational persistence across generations by using both survey and administrative-level panel data from Germany. The pattern of intergenerational occupational persistence against occupations' wage-premia ranking is identified as U-shaped: a worker is more likely to work in the same occupation as their father if their father's occupation is associated with a high or low wage premium. This U-shaped pattern can be consistently explained by the theory discussed in Chapter 2. The information friction regarding ability plays a critical role in delaying workers' learning processes and leads to occupation-talent mismatches, especially when workers are in their early career stages. Chapter 4 investigates how the one-child policy affects household-level saving and spending behaviors as well as aggregate-level savings and human capital accumulation in China. To answer this question, I propose a life-cycle model with intergenerational transfers and human capital accumulation. This life-cycle model provides channels to understand households' responses to fertility restrictions and the corresponding impact on savings and investments in per-child education. The present theory also provides a feasible approach based on demographic composition changes to understand the linkage between the household-level dynamics and the evolution of savings and human capital accumulation at the aggregate level.

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Chapter 2 demonstrates how individual income tax structures incentivize a more coordinatedlabour supply response to childbirth within married households: a joint selectionout of the wage-paying sector and into self-employment. In a parallel analysis of longitudinaladministrative and survey data from Canada, I show that the birth of a first childis associated with an increase in both maternal and paternal self-employment in marriedhouseholds; explained largely by an increase in co-employment. I develop a novel simulatedinstrument research design, which exploits exogenous tax variation, to show thatthis strategic re-organization of the household is partly incentivized by income splittingtax savings. Finding a reduced form elasticity of 0.5, these savings can account for halfthe increase in co-employment after childbirth. Beyond tax avoidance, this paper presentsincome splitting as a subsidy to the creation of flexible, tax-optimizing family firms thatprovide stable, long-run employment to households.Chapter 3 provides the first causal evidence on the impact of incorporation on the laboursupply and hiring practices of self-employed professionals. It exploits staggered reformsacross professions in each province to permit the registration of professional corporations inCanada. I found no evidence of a labour supply response to the significant tax implicationsof incorporation. However, for female professionals, incorporation increases the likelihoodof hiring at least one employee. This result is consistent with the cash flow benefits ofretained corporate earnings that enable to business owners to ensure against uncertainrevenue.Chapter 4 extends the DiNardo, Fortin, and Lemieux (1996) study of the links betweenlabour market institutions and wage inequality in the United States and updates the analysisto the 1979 to 2017 period. A notable extension quantifies the magnitude and distributionalimpact of spillover effects linked to minimum wages and the threat effects of unionization.A distribution regression framework is used to estimate both types of spillover effects.Accounting for spillover effects doubles the contribution of de-unionization to the increasein male wage inequality. It raises the explanatory power of declining minimum wages totwo-thirds of the increase in inequality at the bottom end of the female wage distribution.

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Chapter 2 provides a tractable model that separates firms’ incentive problems and coordinationproblems during the initiation of collusion. In the Chilean pharmaceutical industry, firms colludethrough price leadership. Collusion gradually diffuses among markets: firms collusively raiseprices in a couple of markets per week. We propose a model of price leadership under the dynamic pricing game framework to incorporate the coordination problems by allowing firms’ beliefs about competitors’ conduct to be biased towards a competitive equilibrium. As firms observe supracompetitive prices, they adaptively learn that competitors are willing to collude. We show that gradualism is explained by the heterogeneous market characteristics as well as firms’ learning to coordinate.Chapter 3 develops the likelihood-ratio based test of the null hypothesis of a m₀-componentmodel against an alternative of (m₀+1)-component model in the normal mixture panel regression.I show that the normal mixture panel regression does not suffer from the Fisher Information matrixdegeneracy under the reparameterization proposed in Kasahara and Shimotsu [89]. As a result, the likelihood ratio test statistic can be approximated by a local quadratic expansion of squares and products of the reparameterized parameters. Moreover, I obtain the data-driven penalty function via computational experiments to attend to the unbounded likelihood ratio. In addition, I apply the test to random coefficient Cobb-Douglas production function estimation following the framework of Gandhi et al. [63] and Kasahara and Shimotsu [90]. The empirical findings suggest evidence of heterogeneous production technology beyond the Hicks-neutral technology factor.Chapter 4 develops a modified expectation-maximization(EM) algorithm to incorporate unobservedheterogeneity for the dynamic discrete choice model that does not require the finite dependenceproperty. Following the Euler Equation(EE) representation of dynamic discrete decision problems, we provide an alternative conditional choice probability (CCP) value function representationthat relies only on the CCP of one action. We illustrate the computational gains with MonteCarlo simulations.

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