Essays on the Economics of Labor Markets and Retirement Policies

This dissertation explores three distinct yet relevant aspects of la- bor markets, shedding new light the micro- and macroeconomic mechanisms behind them. It comprises three independent essays. In the first chapter, I explore a novel mechanism through which firms can provide value to their employees: reducing on-the-job search frictions. I build a structural search model where the rate of job offers depends on the current employer. Workers thus value the firms’ contribution to accelerating their ascent on the job ladder. Using a reduced-form approach, I demonstrate the existence of this compensating differential and its payoff in terms of future earnings. Finally, I structurally estimate the model, showing a precise fit with the data. The second chapter offers new evidence of the heterogeneous ef- fects on firm productivity distribution caused by a labor market re- form aimed at enhancing labor flexibility, which indirectly reduced labor costs. Specifically, we show that this decrease in labor costs— attributable to the unique features of Italian collective bargaining institutions—suppresses total factor productivity (TFP) among al- ready unproductive firms while increasing it for the most produc- tive ones. We argue that this effect is driven by negative selection at the bottom of the distribution and construct a model that ratio- nalizes this mechanism and provides welfare implications. The third chapter uses an overlapping generation model to study the implications on optimal taxation of the government’s use of a credible set of social security instruments. We reveal that these instruments introduce new redistributive motives and crowd out others in the context of a standard Ramsey problem. We calibrate the model using data from three different economies, showing that current retirement benefits exceed their optimal level and that the implementation of funded social security schemes is desirable. The dissertation contributes to various branches of labor economics and macro-public finance literature: i. it investigates a brand new xiii compensating differential channel for high-skilled workers that ex- plains a significant component of employees’ transitions behavior; ii. it presents new empirical and theoretical evidence on the hetero- geneous effects of labor market reforms on productivity; iii. it char- acterizes optimal distortionary labor and capital taxation for the first time in the context of a rich set of social security instruments, bridging the gap between social security and traditional Ramsey policy instruments.