UC Berkeley

This dissertation studies different policies that affect labor markets and inequality. The first chapter studies whether minimum wages should be used for redistribution on top of taxes and transfers. Theoretical results show that a minimum wage can increase social welfare when it increases the average post-tax wages of low-skill labor market participants and when corporate profit incidence is large. When chosen together with taxes, the minimum wage can help the government redistribute efficiently to low-skill workers by preventing firms from capturing low-wage income subsidies and from enjoying high profits that cannot be redistributed via corporate taxes due to capital mobility. Empirically, the analysis shows that the average US state-level minimum wage reform over the last two decades increased average post-tax wages of low-skilled labor market participants and reduced corporate profits in affected industries, namely low-skill labor-intensive services. The second chapter, written jointly with Maximiliano Lauletta, empirically studies a reform to the workers' compensation system in Argentina that, after a workplace accident, mandated workers to go through a government medical commission that determines the degree of disability, whether the injury happened in the workplace, and the corresponding compensation, before additional legal actions can be taken. Leveraging the staggered implementation of the reform across provinces, the results show that the reform substantially reduced workplace lawsuits with no effects on reported accidents. Employment increased by more than 5% one year after the reform in highly exposed industries, with no effects on average earnings or the number of active firms. Finally, the third chapter empirically asks if policies and institutions matter for pre-tax income inequality. Based on an annual panel of 43 countries for the period 1980–2016, the analysis documents robust correlations between pre-tax income shares and economic policy—financial development, trade openness, government expenditure, and income taxation—even after controlling for economic development. I further find that proxies of institutional quality—e.g., state development, corruption, or political exclusion—mediate the relationship between top income shares and economic policy, in particular for trade openness and government expenditure.