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Three essays on macro labour economics

Gu, Jiajia (2018) Three essays on macro labour economics. PhD thesis, London School of Economics and Political Science.

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Identification Number: 10.21953/lse.avcx1n62cqiy


The first chapter investigates the role of financial intermediation in explaining the occupation choices. A large fraction of the labour force in developing countries is own-account workers who work for themselves and have no paid employees. This paper argues that imperfect financial intermediation drives a wedge between the return on saving and the cost of borrowing. A larger wedge generates a lower return on saving and a higher borrowing cost. The lower return induces individuals with some wealth but low entrepreneurial ability to manage their own wealth. Together with a wage fall when financial intermediation worsens, the model predicts higher share of own-account workers and lower share of wage workers. The second chapter explores the impact of One-Child Policy on human capital and aggregate income. A quantity-quality trade-off predicts an increase in human capital when fertility falls. The higher human capital level contributes to aggregate output but the lower fertility reduces the size of future labour force, hence reduces aggregate output. In a quantitative OLG model, I show that the human capital level of children born under the strict One-child Policy increases, but the policy’s effect on aggregate income turned negative in around 2000 due to smaller size of labour force. The third chapter examines the effects of a decline in transaction cost of information good. We classify industries into information sector and noninformation sector, and we classify labour into information labour and noninformation labour. We make two observations from the data. The first is the increase in the share of information intermediate input in total intermediate input. The second is the increase in return to information labour relative to non-information labour. In a two sector model, We find that under reasonable parameter assumptions, a decline in transaction cost of information good cannot explain both facts.

Item Type: Thesis (PhD)
Additional Information: © 2018 Jiajia Gu
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Young, Alwyn and Ngai, Rachel

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