Essays on social mobility, immigration and the skill premium

Abstract

This thesis is formed of three chapters. The first chapter examines the effect on social mobility and economic growth following the introduction of reprogenetic technology such that parents can choose to invest in the talent or ability of their unborn children. I find that if the economy is initially in a steady state such that social mobility is low, the introduction of such technology can increase social mobility and economic growth. If the economy is initially in a steady state such that social mobility is high, then the introduction of such technology will not increase (and may decrease) social mobility and will not affect economic growth. The second chapter is a review of the literature on how immigration affects wages focusing on studies of the US and UK labour markets. The third chapter analyses how the skill premium depends on the relative supply of high and low skilled workers in the economy, and the size of the economy. Using a two-sector model where one sector is more skill-intensive than the other, and returns to scale are larger in the skill-intensive sector, I find that the skill premium depends positively on the size of the economy. I consider the effect of an exogenous increase in the number of skilled workers (perhaps due to immigration) on the skill premium and find that under certain conditions the skill premium may increase. I then analyse the effect on the skill premium and the relative price of the skill intensive good in the short and long run and compare the models predictions to the data.