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Essays in Labor Economics


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.

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