Essays on Policies in Labor and Urban Economics

Abstract

This dissertation consists of three chapters. In the first chapter, I document evidence of search and matching frictions in the rental housing market and study how these frictions impact the costs and benefits of income-based and rent-based housing subsidies. When subsides are income-based (like in the U.S.), recipients pay a fixed percentage of their income towards housing, and the subsidy covers the remaining cost. Rent-based subsidies are instead calculated as a percentage of the contract rent. I develop a directed search model of the rental housing market and analyze the equilibrium effects of each type of subsidy. I find that income-based subsidies distort households' search behavior more than when subsidies are rent-based. In addition, under rent-based subsidies, higher matching frictions increase costs for both the households and the subsidy provider. On the other hand, when subsidies are based on income, households bear most of the additional costs of increased matching frictions. In the second chapter, I study what motivates individuals' decisions to engage in contingent work or traditional employment and I document the characteristics of these two labor markets. Contingent work includes independent contracting, freelance work, consulting, gig work, temporary agency work, and on-call work. I show that there is greater dispersion in hours worked by contingent workers than by traditional employees. In addition, contingent workers' annual income is lower by 33 percent, their hourly wages are lower by 11 percent, and their job spells are on average 11 weeks shorter than those of traditional employees. Finally, in the third chapter, I study how the availability of contingent work affects the need for unemployment insurance. I develop a novel model of how individuals and firms choose contingent work or traditional employment. Contingent work offers hours flexibility to individuals but traditional employment earns a higher wage in equilibrium and has the security of unemployment insurance (UI). Firms hire traditional employees before observing their TFP and must pay administrative costs to hire or fire them. They can hire (less productive) contingent workers flexibly without these constraints. I show that the recent development of apps (such as Upwork) that make contingent work easy to find lowered the optimal UI replacement rate for traditional employees from 48 percent to 41 percent, which shows that contingent work provides valuable insurance to all workers in the economy. I also analyze a recent policy change that extended UI to contingent workers. This policy generates welfare losses of 0.08 percent when the UI programs are funded by separate tax rates.Funding both UI programs together with a single tax generates welfare gains of 0.09 percent.