This dissertation contributes to theoretical and empirical studies in microeconomics, with a focus on evaluating policy relevant problems to provide new insights into questions. Within labor economics, I strive to understand the labor market returns to skills, taking into consideration the business cycle. In the first chapter, I investigate how the labor market returns to cognitive skills and social skills vary during recessions. In the second chapter, I examine the short-, medium and long-term career outcomes of college graduates as a function of economic conditions at graduation and both cognitive and social skills. In the third chapter, within information economics, I study how asymmetric information and demand uncertainty influence pricing strategies through learning.
In Chapter 1, I examine how labor market returns to cognitive skills and social skills vary with the business cycle over the past 20 years, using data from the NLSY79 and the NLSY97. Exploiting a comparable set of cognitive and social skill measures across survey waves, I show that an increase in the unemployment rate led to higher demand for cognitive skills in the 2000s. High unemployment also sorted more workers into information use intensive occupations that require computer skills in the 2000s, but it sorted more workers into routine occupations in the 1980s and 1990s. This evidence suggests that recessions accelerate the restructuring of production toward routine-biased technologies. I also find that the returns to social skills increase during periods of high unemployment, though only in terms of the likelihood of full-time employment for experienced workers. Furthermore, an increase in unemployment increases the social skill task intensity of a worker's occupation in the 2000s, while it shows the contrary in the 1980s and 1990s. Based on these results, I argue that routine-biased technological change may not readily substitute for workers in tasks requiring interpersonal interaction, and therefore such technologies demand experienced laborers who have high social skills during recessions.
In Chapter 2, I study the impacts of entry conditions on labor market outcomes to cognitive and social skills for the US college graduating classes of 1979–1989. Using the National Longitudinal Survey of Youth 1979, I find that Workers with higher cognitive skills are more likely to be employed, find job more quickly and have higher-quality employment, while those with higher social skills voluntarily switch jobs more often. I also show that graduating in a worse economy intensifies the roles of social skills, allowing workers with higher social skills to catch up more quickly from poor initial conditions by switching jobs more often. This could partly explain why wage returns to cognitive skills declines but wage returns to social skills increases from graduating in recessions.
In Chapter 3, we consider a dynamic pricing problem facing a seller who has private information about the quality of her good, but is uncertain about the arrival rate of buyers. Restricting attention to the equilibria in which the high-quality seller insists on a constant price, we show that the low-quality seller's expected payoff and equilibrium pricing strategy crucially depend on buyers' knowledge about the demand state. If they are also uncertain about the demand state, then demand uncertainty increases the low-quality seller's expected payoff, and her optimal pricing strategy is to offer a high price initially and drop it to a low price later. If buyers know the demand state, then demand uncertainty does not affect the low-quality seller's expected payoff, and a simple cutoff pricing strategy cannot be a part of equilibrium. In the latter case, we show that there exists an equilibrium in which the low-quality seller begins with a low price, switches up to a high price, and eventually reverts back to the low price.