Essays in Labor Economics and Political Economy

Abstract

This dissertation consists of three chapters, each representing a self-contained research paper in labor economics and political economy.

The first chapter studies the impact of immigration and ethnic diversity on political outcomes in immigrant-receiving countries, focusing on the case of immigration and election outcomes across Danish municipalities 1981-2001. A novel IV strategy addresses issues of endogenous location choice of immigrants. Immigration-driven increases in ethnic diversity shifts votes away from traditional left-wing parties, and towards anti-immigrant nationalist parties in particular. The effects appear present both in municipal and national elections, despite the very different issues decided at the two levels of government.

The second chapter (co-authored with Raymond Fisman, Emir Kamenica and Inger Munk) studies the effect of a salary reform in the European Parliament to learn about the impact of salaries on the behavior and composition of legislators. Increases in salaries cause large increases in the willingness to hold office but do not affect the level of effort exerted while in office. For the composition of legislators, increases in salaries leads to elected politicians that have a lower quality education but longer previous tenure in office. Looking at measures of legislative output, higher salaries do not appear to improve the legislative process.

The third chapter examines whether large labor markets lead to better job search outcomes. Previous research have concluded that the size of the labor market is unimportant for job search because workers in large labor markets do not find jobs faster. A simple theoretical argument, however, shows that a positive effect of labor market size on job search need not show up in the speed of job finding but could show up only in the types of jobs that workers find. In line with this idea, the chapter uses a unique new data set from Denmark to document that workers in larger labor markets find jobs for which they are a better match as measured by both previous industry experience and geographical location. They also find jobs that pay higher wages and result in longer employment spells even after controlling for spatial productivity differences among firms.