Three Essays on the Economics of Contracts in Labor and Corporate Debt Market

Chapter 1 studies wage contracts and their roles in workers’ employment and wage dynamics, as well as the implications on income inequality. I develop an on-the-job search model that allows for different types of wage contracts. Using indirect inference method, I am able to estimate the structural model and evaluate the impact of different productivity elements, including firm productivity, returns to routine task and individual effort. The model is able to capture key measures on worker’s labor market mobility, wage growth and distribution. It also allows me to evaluate the implications of productivity change on income inequality through counterfactual analysis. I show that these productivity elements have different implications on income inequality, and the use of performance based wage contract is an important channel for income polarization at the top percentiles. Chapter 2 studies the effect of overtime pay on workers’ working schedule and income. How overtime pay regulations affect the labor market is a controversial yet relatively under- studied topic. In this paper, I study the effect of the revision to statutory overtime pay in 2004 on worker’s income and hours of work. Us