This dissertation consists of two empirical studies and one applied theoretical study in labor economics. In the first chapter, I study the extend to which an observed layoff is used by employers to infer a worker's unobserved ability early in their labor market career. In the second chapter, I develop a theoretical model of wage dynamics that extends the employer learning and statistical discrimination model of Altonji and Pierret (2001) to allow for discrete changes in observable characteristics. In the third chapter, which is joint work with Gabrielle Pepin at the W.E. Upjohn Institute, we study the contribution of occupational sorting and mismatch to child penalties in the United States. I: The Signaling Role of Early Career Job LossI examine the extent to which ability signaling explains long-term wage losses suffered by young workers who experience layoffs. Young workers are of particular interest because employers have limited information about their ability, so signaling theoretically plays a larger role in determining wages. In addition, young workers are unlikely to experience wage losses due to loss of industry-specific human capital or separation from high-quality job matches, which may explain long-term wage decreases among older workers. Using data from the National Longitudinal Survey of Youth 1997, I show that young workers of all ability levels initially experience similar wage losses following layoffs, but high-relative ability workers fully recover within five years while low-relative ability workers experience persistent wage losses. Consistent with traditional learning models, relative, not actual, ability affects wage trajectories. I illustrate a conceptual model of layoff signaling that varies by pre-layoff experience and can explain divergent wage trajectories across high- and low-relative ability workers. I test the model empirically and find that low-relative ability workers' inability to overcome negative layoff signals explains a substantial proportion of long-term wage losses among young workers. Employer learning effects vary by race and gender. II: Employer Learning and Statistical Discrimination with Unexpected InformationThe Employer Learning and Statistical Discrimination (EL-SD) model of Altonji and Pierret (2001) assumes that employers learn about a worker's unobserved ability in a smooth, continuous manner, holding observable characteristics constant. In practice, observable characteristics, such as years of education, often change discretely over time for many workers. I extend the EL-SD model to allow for changes in observable characteristics to influence an employer's belief about a worker's ability. I show that changes in observable characteristics that are correlated with ability lead to discrete changes in employers' beliefs about the worker's ability, interrupting the smooth, continuous employer learning processes described in the EL-SD model. I further show that this discrete change in employer learning is larger for workers early in their labor market career, with the effect diminishing as labor market experience increases. I then use data from the NLSY97 to empirically test these predictions in the context of the signaling role of returning to school. I find suggestive evidence that returning to school to receive a GED or graduate degree sends a positive ability signal to the labor market, while returning to school to receive an associate or bachelor's degree does not. III: Occupational Sorting, Multidimensional Skill Mismatch, and the Child Penalty among Working MothersWe study the extent to which occupational sorting explains child penalties---gender gaps in labor market outcomes due to children---among working parents. Using an event-study approach and data from the National Longitudinal Surveys of Youth (NLSY) 1979 and 1997, we estimate that children generate long-run earnings gaps of over \\$200 per week among working parents. In the NLSY79, we find that children lead mothers to sort into lower-paying occupations in which employees tend to work fewer hours. We estimate that children increase multidimensional occupation-skill mismatch among working mothers by 0.3 standard deviations, relative both to their own levels of mismatch from before birth and to those of fathers. In the NLSY97, results suggest that improvements in labor market outcomes among fathers in response to children, rather than a worsening of labor market outcomes among mothers, seem to drive child penalties.
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