Abstract
This dissertation consists of three essays. The first essay empirically investigates whether South Asian countries constitute an optimum currency area (OCA) by applying a structural vector auto-regression (SVAR) model to trace global, regional, and domestic shocks. Variance decomposition shows that domestic shocks dominate regional and global shocks, which contrasts with the findings for the European Union countries, used as a basis for comparison. This paper concludes that at the present time the South Asian region as a whole does not meet the prerequisite conditions of an OCA. The loss of an autonomous monetary instrument can outweigh the benefits of a common currency.
The second essay investigates the effect of extended unemployment insurance (UI) coverage in the United States in recent years on job search. The U.S. government extended UI benefits in several phases in 2008--2009, increasing the duration of the benefits to a maximum of 99 weeks, up from the regular 26 weeks. Using the American Time Use Survey (ATUS) data, I find that women are more sensitive to the extended UI benefits than men. Difference-in-differences estimation shows that the average effect of the UI extensions for women is over a 10 percentage points decline in the probability of job search. However, I do not find any statistically significant effect on men.
In the third essay, I study the evolution of relative wages, and quality of school teachers in the U.S. over the past half-century. I analyze the quality through the prism of a Roy (1951) model of occupational choice. The estimates imply that those selecting to be teachers are more able workers than those schools would see from random assignment. However, the ability distribution of female teachers is on the decline, while that of non-teachers has steadily been rising. I supplement the Roy model with an examination of the teachers' relative cognitive attributes (measured by standardized test scores). I find that teachers have lower average cognitive ability than that of non-teachers. And, the decline in the quality comes on the heels of the declining relative wage. I show that lower pay of female teachers than that of non-teachers is not a permanent phenomenon, but a new trend emerging from 1990 onwards. To seek explanation for the rising wage gap, I use a model of the rising demand for skills in the non-teaching sector, and find a secular demand for the skills.