Essays in Labor and Development Economics

Magnaricotte, Matteo

doi:https://doi.org/10.21985/n2-2e6h-7b21

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Essays in Labor and Development Economics

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Individual responses are an important determinant of public policy effectiveness. Development policies often try to remove barriers that limit the ability to make the preferred choices, hoping that this will lead to prosperity at the individual and aggregate levels. However, removing some, but not all, barriers can lead to undesirable outcomes. This dissertation examines how education and occupational choices are affected by an increase in higher education supply (Chapter 1), a redistribution of wealth (Chapter 2), and an increase in publicly available information (Chapter 3). In each case, some barriers are eliminated (distance from college, financial constraints, significant information asymmetries), but others persist. Does human capital increase? Do individuals make different occupational choices? Do they get better jobs? Chapter 1 is motivated by the pervasiveness of enrollment gaps in developing countries. With José Luis Flor Toro, I study the effects of opening new college campuses in underserved areas, a commonly proposed policy to reduce such gaps. Using Peruvian census data to estimate a difference-in-differences model, we find that enrollment rates increased by about 1p.p. in the short term from a 10% baseline. However, the estimated benefits for ethnic minority students are only half the size of other students, widening preexisting gaps. To understand the drivers of this result, we assemble a new administrative dataset on college applications and build a model of education demand with heterogeneity in preferences and probability of admission. The results show that the interaction of initial advantage and meritocratic criteria increases educational inequality: even though proximity is highly valued by less-advantaged students, meritocratic admission criteria hinder access for poor and minority students, who disproportionately attend lower-quality high schools. Our counterfactuals show that addressing high school quality disparities, rather than further expanding supply, is more effective in reducing college enrollment inequality. Current theories suggest that land distribution has ambiguous effects on structural transformation: large landowners can slow industrialization by reducing the local provision of education, but larger scale and local market power in labor markets might accelerate mechanization of production and reduce agricultural employment. In Chapter 2, with Riccardo Bianchi Vimercati and Giampaolo Lecce, I use a difference-in-differences design and novel data on expropriations, and study the effects of redistribution following the Italian 1950 land reform. We find that redistribution led to less industrialization, and explain this finding with a reduction in scale of operations and a more intensive use of family labor. We also show that this effect persisted for at least 50 years, consistently with models of intergenerational transmission, which are also supported by survey evidence on father-son occupations. Finally, using newly digitized municipal-level income data, we find that expropriated areas had lower growth in the period 1970-2000. In Chapter 3, with Fabiola Alba Vivar and José Luis Flor Toro, I study the effects of an increase in publicly available college quality information on college graduates' labor market outcomes. In 2015, Peru started evaluating compliance of colleges with a set of basic quality standards, and awarding or denying operating licenses based on it. Universities received decisions about their standing in the period 2016-2021, with 50 out of 144 of them closed as a consequence of the process. Using data on formal labor market outcomes, we show that receipt of a license affected outcomes of recent graduates from licensed colleges heterogeneously, depending on job tenure at the time of treatment. Income increased for low-tenure workers, with no effect on employment or tenure; workers with longer tenure become more likely to leave their job and join larger firms. Evidence on the denial of licenses is mixed, but does not support strong negative effects on labor market outcomes of graduates from the unlicensed colleges.

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