This thesis contribute towards the understanding of labor economics and applied econometrics; the thesis is made up of three chapters.

The first chapter explores the causal effect of parents’ social capital on the intergenerational occupational inertia in addition to individuals’ labor market outcomes. A new data extract was constructed by re-weighting and combining the Panel Study of Income Dynamics (PSID) and the Survey of Income and Program Participation (SIPP) to correct the selection biases induced by children’s endogenous moving behaviors post-graduation. By exploiting the recent technological revolution and the resulting changes in occupational skill compositions measured by Dictionary of Titles (DOT) and its successor O*NET, it became possible to isolate the effect of inherited social capital from inherited human capital through a regression discontinuity design. Besides, a correction of the selection bias induced by the social capital advantage through children’s occupational switching patterns after the first jobs was made. The results indicate that around 30% of individuals choose the same occupation as their parents for their first job; such people rely more on their parents’ social connections in job hunting. Also, they enjoy a positive wage premium of about 5% of the percentile ranks of annual labor income for entry-level jobs but this positive effect fades away in the long-run.

The second chapter studies the estimation and inference of nonlinear econometric model when the economic variables are contained in different datasets. We show that the unknown structural parameters of interest can be possibly uniquely identified if there are some common conditioning variables in different datasets. The identification result is constructive, which enables us to estimate the unknown parameters based on a simple minimum distance (MD) estimator. We study the asymptotic properties of the MD estimator and provide inference procedure. A simple model specification test on the key identification conditions is also provided.

The third chapter provides an application example of the method developed in the second chapter. It is a long-standing problem in the empirical research that the economic variables are contained in different datasets. One well-accepted solution to this problem is the imputation method, which serves as a crucial step in the seminal work, Blundell, Pistaferri, and Preston (2008) studied the dynamic relationship between consumption and income, with consumption data from CEX and income data from PSID. In this chapter, we first prove that the imputation method is biased because they are significantly different from those based on true data, which is the newly available PSID from 1999 which includes both consumption and income data. Furthermore, we investigate the finite sample performance of our new method with this new PSID data and show that our method delivers comparable results with those based on the true data. We conclude that the imputation gives largely biased estimation compared to the real data results and the new estimator developed in Chapter 2 performs better.

The three chapters share the same interests in the long-lasting question that how we can deal with the situation in which the economic variables or the study population is contained in different datasets. The first chapter starts off from the simplest scenario that the data set

is complete in terms of variables but biased in terms of representativeness. The other two chapters deal with the other more difficult and more usual case that the data set is incomplete in terms of economic variables. We not only contribute methodologically by providing

a new estimator but also implement the method in an important application case and discuss the implications.

This dissertation studies the effects of China's higher education expansion reform on workers' labor market outcomes.

In Chapter 1, I investigate how China's higher education expansion reform affects young workers' labor market outcomes. Using data from the 2005 China Population Survey, I estimate the effects of the reform using a diff-in-diff type of framework. The key variation I use for identification is province-specific cohort-to-cohort variation in the expansion intensity. I find that the reform does not increase unemployment but reduces labor force participation for young workers. In the meantime, the reform increases the likelihood of getting a graduate degree, which partly explains why it decreases labor force participation. Similar results are obtained for college cohorts using IV.

In Chapter 2, I aim to address the caveats embedded in the empirical strategy in Chapter 1. To do so, I construct and structurally estimate a dynamic discrete choice labor market general equilibrium model, and innovate in modeling and estimation by incorporating the college admissions policy of China. Unlike in Chapter 1, this approach allows one to generate counterfactuals and policy simulations while taking into account the general equilibrium effects of the reform. After structurally estimating the model, I show that it matches key data moments reasonably well.

In Chapter 3, I examine the effects of China's higher education expansion reform on the evolution of the college wage premium. I show that the reform interacts with the demographics of workers and affects them differentially. Using the model developed in Chapter 2, I find that in the presence of post-reform technological progress, the reform first increases and then decreases the college wage premium. In its absence, however, the reform decreases the college wage premium from the start. I also find that in the latter case, workers induced to go to college by the reform (compliers) gain the most on average, whereas those who go to college with or without it (always-takers) lose the most, because the large increase in the supply of high-skill labor depresses skill prices. Policy experiments are conducted to show, if China were to continue with the expansion, how long it would take for it to reach the average share of high-skill workers in developed countries.

Chapter I: The Impact of Occupation on Health

Participation in meaningful occupations contributes to good health and well-being. Workers are more likely to derive satisfaction from participating in occupations well-suited to their skills and training. This project provides causal evidence of the impact of occupation on health among college graduates. In particular, I estimate the health effect of participation in occupations well-suited to their education level, that is, occupations that value college education. Valuation of college education in an occupation is measured by occupation-specific college earning premium: the adjusted percentage difference in earnings between workers with and without college degrees in this given occupation. The causal inference relies on estimation with instrumental variables, which are constructed in the spirit of Hausman’s price instrumental variables. The result suggests that college educated individuals participating in occupations with higher college earning premiums have better self-reported health, even after accounting for income, occupational prestige, and within-occupation hierarchy. This is the first paper to establish the causal impact of occupation on health. I also show that this causal impact remains significant across various specifications.

Chapter II: The Power of Propaganda

Since the 1950s, China’s central government’s gender equality propaganda is widely accepted as the explanation for China’s high female labor force participation rate. In an effort to provide empirical evidence for this viewpoint, this project shows that early exposure to propaganda promoting gender equality affects individuals’ attitudes towards women in the workforce. We gauge variation in the political climate between 1952 and 2008 by using the official newspaper of the central government, People's Daily, which has been under the direct control of the Chinese Communist Party's top leadership. For causal inference, we exploit provincial variation in propaganda intensities, proxied by provincial level radio and television signal coverage. In addition, we use the timing of exogenous events to generate an instrumental variable for intensity peaks of the gender-equality propaganda. First, we exploit the exogenous timing of a series of national and international Women’s Conference as one set of instrumental variables. Second, we utilize the timing of Jiang Qing’s (Mao’s wife) coming into prominence and her sudden removal by a political coup towards the end of the Cultural Revolution. We find that women with more intense exposure to propaganda promoting gender equality before age 26, and men with more intense exposure before age 18 tend to endorse women’s participation in the workforce. The effect of propaganda is more pronounced on women than men. It is worth noting that while propaganda encourages women’s participation in the workforce, it does not emphasize men’s responsibility in the household. We indeed find evidence of the “superwoman complex”: women are expected to strive for a career and do the bulk of the housework. This further evidence suggests that propaganda is able to transmit a more nuanced message, rather than a singularly progressive one. This is the first paper to empirically establish the long-term effect of early exposure to propaganda on individual’s preference formation.

Chapter III: Do Food Stamps Need More Restrictions?

Given the high prevalence of obesity in low income population, several times in the history of Supplemental Nutrition Assistance Program (SNAP), Congress has considered placing limits on the types of food that could be purchased with program benefits. This study provides empirical evidence on the effectiveness of such potential restriction by examining the impact of income on calorie consumption patterns. The intuition is that if limited budget is the main reason why low-income households choose calorie dense food items, then subsidy without any restriction, acting as an upward shift in income, would reduce the likelihood of obesity. Using the National Health and Nutrition Examination Survey data from 2007-2014, I compare individuals from households who were recently dropped from SNAP, most likely due to a positive income shock, to individuals who are still participating in the program. I find little income effect on calorie consumption patterns. Whereas reduced grocery store accessibility is significantly correlated with an increase in total calorie intake, and calorie intake from sugar and fat. The result of this study suggests that placing limits on the types of food that could be purchased would be effective in curbing the obesity pandemic in low income population, and it also confirms the importance of eliminating food deserts.

This dissertation consists of three chapters that focus on policy changes related to education in China. The first chapter reviews the education and examination system in China, covering preschool education, primary education, secondary education, and higher education. Given the particular form of socialism with Chinese characteristics, understanding the context of school choice in China is rather interesting. It is clear that the education and examination system in China is strongly influenced by socio-cultural changes and conditions as well as Chinese culture. Eorts have been made by the State to improve education quality and promote equality across regions. However, challenges still remain, including disparities in education expenditures, admission rates, enrollment opportunities at the provincial level, and urban-rural education attainment.

The second chapter estimates the effect of access to quality education on house prices using difference-in-differences methods and a large-scale policy change. Exploring three different policies implemented in the 2014 Beijing Education Reform, I identify parents' valuation on the different extent of children's exposure to elite (key) elementary schools. The results show that parents are willing to pay a price premium of 5.51% or $77.36 to get their kids full access to the benets associated with key schools, even the admission rate to top middle school remain unchanged. I further show that parents are result-driven, which means that they are willing to pay around 9.16% more to guarantee the admission of their kids to top middle school, keeping the primary school characteristics the same.

In the third chapter, we question the effectiveness of key (magnet) school systems in China. Given that parents are paying a price premium for what they perceive to be high-quality schools, we would like to ask whether the investment into these schools is worth it. We use a set of newly released data from the China Family Panel Studies (CFPS) to explore the relationship between key school attendance and students' academic performance. We measured school quality using students' performances in mathematics and language tests, which can be considered as an important indicator of school quality in the absence of national standardized tests. The results from the OLS regression show that there is a positive relationship between attending a key primary school and test scores, but the coefficient becomes insignificant after controlling for individual characteristics and family background. Furthermore, we used propensity score matching (PSM) to alleviate the imbalance of characteristics for students who enrolled in key schools and those who did not. Based on our results, we did not nd any evidence supporting that key school enrollment improves children's test scores; academic outcomes among students enrolled in key schools were not signicfiantly different from that of those enrolled in non-key schools.

These essays contribute towards our understanding of housing and labor economics. This dissertation is composed of three chapters.

In the first chapter, I explore the impact of negative housing equity on households’ geo- graphical mobility using data from Panel Study of Income Dynamics. The empirical analysis implies that addressing the endogeneity nature of homeowners’ underwater mortgage status is crucial. Even with comprehensive controls for households’ demographic characteristics and macro-level factors, omitted variable bias such as homeowners’ attitudes towards their financial responsibility may still generate estimation bias that is quite large. After proper instrumenting for homeowners’ underwater mortgage status using local shocks from housing and labor markets, the estimation results show that having underwater mortgages is associated with an average decline in mobility rate of about 17 percentage points.

The second chapter investigates the role of housing choice and mortgage on employment transitions when there are uncertainties regarding income and house prices. Motivated by the empirical evidence on large employment-transition disparities between homeowners and renters, I develop and estimate a structural model in which mortgage obligations motivate homeowners to exert greater job-search efforts during unemployment spells. The model is used to understand individuals’ response to housing and labor market shocks. I find that while the decline in house prices creates negative labor market externalities for renters, tightening mortgage constraints result in greater job search incentives for homeowners. With concurrent negative labor market shocks, the probability of transitioning out of unemployment for both renters and homeowners declines. Two policy experiments are conducted. The first shows that lower refinance cost discourages housing equity accumulation and is associated with a decline in the average employment rate. The second demonstrates that a lower down payment requirement encourages the transition into home ownership, which has positive labor market implications, especially for younger individuals.

The first two chapters explore the relation between underwater mortgage and geographical mobility and impacts of mortgage debt obligation on employment incentives. Both analyses are based on individual-level data. The last chapter investigates the mysteries of regional housing market disparities from a macro perspective. This chapter shows that local economic conditions are correlated with deviations between house prices and rents in a price-rent model framework, suggesting that the demand for credit and housing is greater when a variety of local economic conditions are more supportive. Several different measures of local economic conditions are considered in this chapter: local unemployment rates, local unemployment rates relative to the natural rate of unemployment, local inflation rates, and measures of local perceptions of the cost of credit. This chapter attempts to offer explanations not as how or why house prices increased, but rather, given the myriad of national factors making home purchase easier and cheaper, where house prices increased. This approach also resolves a bit of a puzzle as to why the housing bubble was so pronounced in some areas and not others.

These essays contribute towards our understanding of applied microeconomics. This dissertation is composed of three chapters.

Chapter 1 studies the effect of private tutoring on human capital development. Private tutoring is a widespread service in many countries. However, economic research focusing on the effect of private tutoring on fundamental factors of human capital is scarce. I estimate two human capital production functions in the context of private tutoring, one for cognitive skills and the other for non-cognitive skills. To deal with endogeneity, I adopt the control function approach, based on peer behavior and household budget. The fact that cognitive and non-cognitive skills are not observable is addressed by the latent factor model, which connects unobservable skills with observable measurements. I find that private tutoring does not affect skill accumulation for both cognitive and non-cognitive skills. I also find that peer behavior positively contributes to the use of private tutoring. Chapter 2 explores effect of co-residing grandparents on educational investment for their grandchildren. Multigenerational households are not an unusual type of household in developed and developing countries, but the educational effect of this type of household on children has not been studied extensively in economic literature. This paper explores the effect of coresiding grandparents on educational investment for their grandchildren. First, by using Korean data, I show a significant negative effect on educational investment. In addition, I also find that this negative effect is directed toward female children. To explore the economic reasons behind the effect, I test whether coresiding grandparents participate in the household decision-making process by using statistical tests based on the collective model, and the results show evidence of participation. Hence, the negative effect on educational investment may be related to the preference of grandparents. Chapter 3 studies the effects of generosity from a child care assistance policy on maternal labor supply behavior, such as weekly working hours, and effects on the child care industry. These effects are estimated by exploiting variation in the copayments amount and reimbursement rates for a hypothetical family across multiple states over time. To minimize endogeneity, the fact that the size of funding is largely decided by several state-level variables is incorporated. The results suggest negative effects from higher copayments and positive effects from higher reimbursement rates, although these are less pronounced than those caused by the copayments. Only weak results are observed for the industry-level effects.

This dissertation contains three essays in labor economics with a focus on economic and institutional differences in regional labor markets. It separately explores the causes and consequences of two major trends in the United States - the declining geographic concentration of immigrant location choices and the increasing prevalence of state-level occupational licensing requirements.

Chapter one shows that the geographic concentration of the foreign-born population in the United States fell sharply between 1980 and 2010 as immigrants were increasingly drawn to areas with historically low migrant inflows. This trend was driven primarily by the changing location choices of new immigrant cohorts, though secondary migration has played a minor role as well. An analysis of the determinants of location choice across four decades suggests that immigrants remain highly responsive to local labor market conditions, but the traditionally strong pull of ethnic enclaves has diminished over time.

Chapter two describes the construction of a novel dataset that compiles over one hundred years of occupational licensing, certification, and registration requirements in all fifty states and the District of Columbia. The data are assembled through a comprehensive analysis of numerous primary and secondary sources and currently identify major state and federal policy changes for 250 unique occupation categories. It is the first occupational licensing database to link each policy to both current statutes or administrative regulations, as well as to historical legislation covering the entire twentieth century. A comprehensive analysis of state session laws, in particular, allows me to observe the exact text of all legislative acts enacting, amending, or replacing statutes that reference specific occupations. Using the content of these laws, I record the enactment and effective dates of regulatory changes and several variables that characterize the type of regulation that was adopted. Relative to existing sources, my data offer a significantly longer time series, the ability to observe superseded legislation, and a more complete coding of legal prohibitions that differentiates between practice and title restrictions.

Chapter three studies the short- and long-run impact of occupational licensing on labor market outcomes in the United States using the data described in chapter two. I implement an event study design that exploits within-occupation variation in the timing of licensing statutes across states to trace out the dynamic response of earnings and employment to policy changes. I find consistent evidence across several independent employer and household surveys that the typical licensing statute adopted during the past half-century increased worker earnings, but had null or weakly positive effects on employment. Twenty-five years after licensing statutes were adopted, cumulative wage growth in treated state-occupation cells exceeded that of untreated controls by 4 to 7%. Over the same time period, my results rule out an average disemployment effect greater than -5%. The data show much larger decreases in employment, however, among occupations that have little potential to cause serious harm. In cases where the consumer protection rationale for licensing is more plausible, I find simultaneous increases in both earnings and employment following the adoption of licensing requirements.

These essays contribute towards our understanding of applied microeconomics. This dissertation is composed of three chapters.

Chapter 1 investigated whether granting legal status to undocumented immigrants improved infant health outcomes in the United States. To answer this question, I've used the Immigration Reform and Control Act of 1986 that legalized about 2.7 million undocumented immigrants in the US as my historical setting. My research design is essentially an analysis on the county level using varying treatment intensities that come in the form of geographical variation in the proportion of legalized immigrants. In order to deal with endogeneity concerns that arise from immigrants' location choice, I employ the "ethnic enclave instrument" and the "distance to the US-Mexico border" instrument. As a summary my results, I found that for a 1\% increase in the proportion of the legalized immigrants in a county, I found a corresponding 2-3\% decrease in the infant mortality rate.

For Chapter 2, we turn our attention to the self-reported health measure. Self-reported health is widely used in economic models to measure general health status. Most major surveys include some form of a question, in which respondents are typically asked to rate their health on a five-point scale from excellent to poor. Despite its widespread usage, we understand little about the process individuals use to position themselves on the scale. Furthermore, the process itself may have changed over time as knowledge and perceptions about particular health conditions and their medical treatments have evolved. Using the National Health Interview Study, we show that use of the scale has changed substantially over the past 22 years. We find the change is due not only to changes in underlying health, but also to changes in the way individuals regard their health in relation to the scale.

For Chapter 3, we explored how within classroom ordinal height or income rank of elementary school students affected their future academic performance. Adolescents' perceived lower social hierarchy is associated with adverse outcomes, and we focused on these two factors that are known to shape one's self-view. We used panel data from Seoul Education Longitudinal Study 2010. We exploit the feature that two students with identical height or family income can be ranked differently based on which classroom they are in. Our results indicate that height, not ordinal height rank, is associated with better academic performance in later years, while ordinal income rank is consistently shown to have an impact on future academic performance. We look for potential mechanisms and arrive at the conclusion that income rank affects future academic performance through increased parental investment.

Chapter 1: I develop and estimate a dynamic household choice model that incorporates a broad set of determinants of children's labor supply and school attendance, to perform ex-ante evaluations of alternative versions of the urban implementation of the Mexican conditional cash transfer program Oportunidades. Previous research suggests that re-calibrating the targeting and parameters of the educational component of the program could potentially improve its effectiveness with respect to two key objectives: (i) increasing average schooling levels and (ii) eliminating the educational gender gap. The estimation of this behavioral model complements previous ex-post evaluations by providing a forecasting tool that can replicate how the households solve the optimization problem as the program's structure changes. I focus on evaluating cost-equivalent policy schemes that improve the program's efficacy in the first dimension. I find that, by eliminating grants at primary and lower secondary levels (where attendance is close to universal) and proportionally expanding transfers at upper secondary, attendance rates could increase by 14.8% for youth 15-17.

Chapter 2: From an economic policy perspective it is crucial to understand what rationale drives individuals to prefer to be employed in the informal sector rather than the formal one, but more importantly if informality is really a choice. As a first approach to disentangle this matter, I evaluate empirically the occupational choice model introduced by Roy (1951) to evaluate if self-selection is an important factor explaining the observed wage distribution in the informal sector. I argue that, under certain conditions, differences on the degree of enforcement of labor market regulation across municipalities can be exploited as a source of variation to identify more adequately the parameters. Given the huge heterogeneity within the informal sector, the model is estimated for two sub-samples: (i) salaried workers and (ii) self-employed workers. I find evidence of positive self-sorting into the informal sector: workers endowed with higher task proficiency for informal sector activities are self-selecting into this sector.

Outcomes for children depend importantly on parental decisions regarding inputs. This relationship is perhaps most obvious in developing countries where families face liquidity constraints and income uncertainty. To better understand potential risk sharing mechanisms within the household, I first present theoretical evidence of the relationship between a parent’s risk aversion and child quality in the context of a collective household model. I then estimate the effect of an experimental measure of risk aversion on a child’s well-being using the Mexican Family Life Survey. I find that a mother and father’s risk aversion increase investments in male children and decrease investments in female children, which is consistent with the patterns of old age support in Mexico.

In my second chapter, I examine whether HIV testing leads to revisions in the subjective likelihood of being HIV positive as well as the likelihood of surviving across various time horizons. This study is based on the Malawi Diffusion and Ideational Change Project (MDICP), which allows me to use randomized financial incentives as instrumental variables for the decision to learn one’s HIV status. I find that women who learn their HIV negative status believe they are negative at the time of testing but appear to overestimate their likelihood of having contracted HIV in the two-year period after learning their HIV status.

My third chapter examines the relationship between learning one’s HIV negative status and decisions made within households in the MDICP. Using the financial incentives as instrumental variables for the decision to learn one’s HIV status, we find that there is no effect on marital stability two years after a woman learns her HIV negative status, but that the marriage is less likely to stay intact if the husband discovers he is HIV negative. We also find a significant increase in the share of expenditures that are spent on children's schooling and a decrease in the share spent on children's medical expenditures. This paper illustrates that HIV testing can be an effective policy tool for increasing the incentives to invest in children’s welfare and human capital.