This thesis contains three essays on the economics of inequality. The first two chapters focus on two key determinants of income inequality: the decisions of where to work and what to study. Both chapters study how these discrete choices respond to exogenous shifts in individuals’ budget constraints.
In Chapter one, I use the case of energy price increases to identify the pass-through of price shocks into earnings. Combining 20 years of German employer-employee data with a representative household expenditure survey, the empirical approach relies on regional differences in energy expenditure patterns to show that income adjustments offset around 85% of additional costs over five years. The empirical results suggest that labor supply responses are a significant factor in understanding the consequences of price shocks for consumption inequality more broadly.
Chapter two, co-authored with Adriano De Falco, uses administrative data from Chile to analyze whether financing higher education through student loans or grants affects the college major choices of prospective students. We exploit institutional arrangements that allocate either type of financing based on a standardised test to identify exogenous variation in access to financial aid. Students who are marginally eligible for grants are more likely to enroll in STEM fields, highlighting that policies designed to curb college enrollment also have implications along the margin of the field of study.
The third chapter instead focuses on the consequences of inequality and studies the role of relative comparisons on risk-taking behaviour. Together with Dietmar Fehr, we embed an experiment in a representative survey in Germany and find that respondents who are induced to perceive their relative wealth standing as low display more tolerance towards risk when choosing between lotteries. As inequality widens wealth gaps between individuals, we should expect an increase in relatively poorer individuals’ inclination to take risks when inequality rises.
The event will take place in hybrid modality.