Date of Award

5-2008

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Legacy Department

Applied Economics

Advisor

Warner, John T.

Committee Member

Benjamin , Daniel K.

Committee Member

Simon , Curtis J.

Abstract

This thesis is about the relationship between wage inequality and minimum wage, and then about parental choice and the impact of this on economic growth. First, it empirically examines the relation between wage inequality and the federal minimum wage. Then it develops a theory of how a parent of children with heterogeneous abilities makes choices on (a) investments in education for her children and (b) on the number of children she will have. Parental choices on these margins are shown to affect the rate of economic growth.
Chapter 1 briefly introduces my studies for the dissertation. In Chapter 2, I use a time-series analysis to examine whether real federal minimum wage is an important factor of wage inequality. Revisionists claim that non-market factors --- falling real minimum wage and unionization in the United States labor market --- rather than market factors --- shifts in labor supply and demand --- are responsible for increasing wage inequality, especially in the 1980s. Traditional economists, while disagreeing with the revisionist view, have yet to show explicitly that the falling real minimum wage is unrelated to wage inequality. The chapter demonstrates, using a time-series analysis, that non-market factors (minimum wage) may have a spurious relationship with wage inequality, and that market factors (shifts in labor supply and demand) are still important in determining wage inequality.
In Chapter 3, I show that when children's ability is heterogeneous, a parent's choices about educational expenditures and fertility may be a pooling equilibrium or a separating equilibrium. Which of the two equilibria will prevail depends on the probability of getting a child with high ability to accumulate human capital. The outcome of the pooling choice in the pooling regime and the outcome of the separating choice in the separating regime make the growth rate of human capital higher than otherwise. However, as the probability of producing a child with high ability increases, the growth rate of human capital in the separating equilibrium exceeds that in the pooling equilibrium. Finally, I summarize and conclude in Chapter 4.

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