Working Papers

The Signaling Role of Early Career Job Loss (Job Market Paper) [PDF]

*Missouri Valley Economic Association Distinguished Graduate Student Paper Award

Abstract: I examine the extent to which ability signaling explains long-term wage losses suffered by young workers who experience layoffs. Young workers are of particular interest because employers have limited information about their ability, so signaling theoretically plays a larger role in determining wages. In addition, young workers are unlikely to experience wage losses due to loss of industry-specific human capital or separation from high-quality job matches, which may explain long-term wage decreases among older workers. Using data from the National Longitudinal Survey of Youth 1997, I show that young workers of all ability levels initially experience similar wage losses following layoffs, but high-relative ability workers fully recover within five years while low-relative ability workers experience persistent wage losses. Consistent with traditional learning models, relative, not actual, ability affects wage trajectories. I illustrate a conceptual model of layoff signaling that varies by pre-layoff experience and can explain divergent wage trajectories across high- and low-relative ability workers. I test the model empirically and find that low-relative ability workers' inability to overcome negative layoff signals explains a substantial proportion of long-term wage losses among young workers. Employer learning effects vary by race and gender.

Employer Learning and Dynamic Statistical Discrimination [PDF]

Abstract: Economic theory describes numerous scenarios whereby prospective employers may use non-production-related events as signals of a worker's ability under imperfect information. Empirically analyzing these types of events is often challenging due to data limitations and the complexities of the theoretical models. In this paper, I develop a framework for empirically studying such events by extending the employer learning and statistical discrimination framework of Altonji and Pierret (2001) to dynamically allow for statistical discrimination on the basis of post-labor market entry events. I show that if prospective employers observe a positive (negative) event signal, then: (1) the coefficient on an ability correlate unobserved by employers increases (decreases) discontinuously after the event; (2) this discontinuous effect decreases in magnitude with pre-event experience; (3) the coefficient on the ability correlate grows at a slower (faster) rate with post-event experience than it would have in the absence of the event; and (4) the rate at which the coefficient grows following the event increases (decreases) with pre-event experience. I use data from the NLSY97 to empirically test these predictions in the context of the signaling role of returning to school. I find suggestive evidence that returning to school to receive a GED or graduate degree sends a positive ability signal to the labor market, while returning to school to receive an associate or bachelor's degree does not.

Occupational Sorting, Multidimensional Skill Mismatch, and the Child Penalty among Working Mothers (with Gabrielle Pepin) [PDF]

*Labor and Employment Relations Association Competitive Papers Winner

Abstract: We study the extent to which occupational sorting explains child penalties—gender gaps in labor market outcomes due to children—among working parents. Using an event-study approach and data from the National Longitudinal Surveys of Youth (NLSY) 1979 and 1997, we estimate that children generate long-run earnings gaps of over $200 per week among working parents. In the NLSY79, we find that children lead mothers to sort into lower-paying occupations in which employees tend to work fewer hours. We estimate that children increase multidimensional occupation-skill mismatch among working mothers by 0.3 standard deviations, relative both to their own levels of mismatch from before birth and to those of fathers. In the NLSY97, results suggest that improvements in labor market outcomes among fathers in response to children, rather than a worsening of labor market outcomes among mothers, seem to drive child penalties.