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Essays in Labor and Development Economics

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Abstract
This dissertation investigates topics in Labor and Development Economics, with a focus on empirical investigation in South Africa using causal inference methods. My first chapter, "Rent sharing, wage floors and development" (co-authored with Ihsaan Bassier), investigates the conditions under which firms share rents with their workers. Firms benefiting from favorable demand conditions tend to raise wages. However, we show that firms with labor market power facing binding wage floors will absorb these positive shocks as excess profits ("rents") instead of increasing wages or employment. This prediction comes from a novel theoretical insight under a standard framework of monopsonistic competition, and we empirically test the prediction in South Africa using administrative data. We first show how the predicted wage, employment and profit patterns are evident in the cross-section of firms. We then replicate and extend a leading method of identifying rent-sharing elasticities, and show that the same pattern is evident when looking at firm responses to shocks. My second chapter, "Surviving in the dark: the mortality effects of reducing rolling blackouts", uses the introduction of a unique rolling blackout ("load shedding") reduction policy in parts of South Africa’s second-largest city, Cape Town, to investigate the mortality effects of load shedding and its mitigation. South Africa frequently experiences load shedding due to shortfalls in electricity generation. I find that the mitigation policy significantly reduces mortality in Cape Town relative to other parts of South Africa experiencing unmitigated load shedding. The incomplete geographic coverage of the mitigation policy exacerbates existing inequalities in the city. My third chapter, "Estimating employment responses to South Africa’s Employment Tax Incentive" (co-authored with Amina Ebrahim), presents new evidence on the effects of South Africa’s Employment Tax Incentive (ETI), an employment tax credit aimed at reducing youth unemployment. We show that attempts to estimate firm-level treatment effects are likely to fail when comparing ETI to matched non-ETI firms. We show that this is likely due to mean reversion, which has not been recognized in the prior literature. Our results prompt a re-evaluation of the existing literature on the employment effects of the ETI.
Type
Dissertation (Open Access)
Date
2024-09
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License
Attribution 4.0 International
Attribution 4.0 International
License
http://creativecommons.org/licenses/by/4.0/
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