This thesis consists of three chapters and covers topics in education and the labor market. The first chapter estimates the causal impact of additional government funding on school choice. I construct a structural equilibrium model of the application-admission-scholarship-enrollment game between students and schools. I show how to estimate the causal impact in the presence of omitted variable bias and measurement error by taking advantage of a jump in Cal Grant aid at a GPA threshold. I find that the vast majority of California Cal Grant recipients would have enrolled in-state even without the Cal Grant. I predict that removing the Cal Grant would decrease in in-state enrollment by one-tenth, and the majority of this decrease leads to non-enrollment.
The second chapter estimates the heterogeneous returns to education by place-of-birth for males born between 1930 and 1940. I do not assume the estimate is distributed according to its asymptotic distribution, therefore sidestepping the issues concerning weak instruments. Instead, we form point estimates and credible intervals directly from the posterior distribution of our two-stage estimate. When using weak priors, we obtain the same point estimates as the standard IV-2SLS methods, but we have much larger 95% credible intervals. When using priors determined from cross-validation, we are 95% sure that the returns to education are positive for only four out of nine regions, whereas the standard IV-2SLS asymptotic distribution would yield "significant" results for all nine geographic regions.
The Pasadena Minimum Wage ordinance (Ordinance #7278) passed on March 14, 2016 adopts a minimum wage schedule that is above the state minimum wage through the end of June 2019. The third chapter studies the impact of the Pasadena minimum wage on earnings, employment, and the number of establishments. We distinguish the effect of the California minimum wage increases from the Pasadena increment because the City of Pasadena can only affect its local increment. Using data from the individual zipcodes within and around Pasadena, we find evidence of a positive impact of California/Pasadena minimum wages on the earnings of restaurant workers and of other low wage industries. Our model implies that a state-wide minimum wage increase of 10% would increase the average quarterly earnings per worker in limited-service restaurants by 8% and in full-service restaurants by 5%. We find that the Pasadena local minimum wage has a negative impact on limited-service restaurants employment and document that a minimum wage increase would decrease the number of firms in low-income industries, such as hair, nail, and skin care services.
