Essays in Labor Economics and Consumer Behavior

University dissertation from Stockholm : The Swedish Institute for Social Research (SOFI), Stockholm University

Abstract: This thesis consists of three essays on labor economics and consumption behavior.“Consumption and Information: A Study of Consumer Behavior using Daily Data” studies the joint dynamics of information and consumption using data on a daily frequency. I find that spending reacts sharply to informational shocks, but in contrast to previous research findings, this reaction fades in a very short period of time. Additionally, my data allow me to move beyond representative agent models in studying the response of individuals facing different levels of income stability. Unlike papers using aggregate data, I am able to contrast the reactions of different types of consumers. I find that individuals who face less secure income streams cut back more than those with a secure income. I argue that this behavior of consumption cannot be adequately explained using canonical consumption theories, such as the permanent income hypothesis model or the buffer stock model.“The Importance of Outside Options for Wage Formation: Survey Evidence” considers a central prediction of the matching model of Diamond-Mortensen-Pissarides. This model suggests that outside options of the worker and the firm matter for wage formation. This prediction has recently been questioned on theoretical grounds. In this essay, I address this issue empirically by using data from unique survey questions to assess the importance of outside options for hourly wages. My findings imply that the disutility of being unmatched matters for wage formation. Together with other research documenting the prevalence of wage bargaining on the labor market, my results imply good news for the Nash bargaining solution of the Diamond-Mortensen-Pissarides model.“Give Me a Break. A Longitudinal Analysis of On-the-Job Leisure” addresses predictions of models of wage formation. Models of efficiency wages predict that pay and monitoring are substitutes in motivating workers to exert effort. If worker autonomy is the reverse of monitoring, a positive relationship between autonomy and wages is implied. If, on the other hand, workers obtain utility from autonomy in a perfectly competitive market, the market will reduce any advantages of holding autonomous jobs. Thus, there will be a negative correlation between autonomy and wages. In this essay, I analyze a common, but little-studied feature of worker autonomy: how much leisure employees can take at work. I find a positive relationship between on-the-job leisure and pay in the 1960s and 1970s, but a negative correlation since the 1980s. This change could be due to a labor market structure described by the neoclassical model or lower monitoring costs.

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