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Abstract
All of our choices and all that sets us apart are governed by what we can do, what we want to do, and what we know. This dissertation aims to quantify two of these channels to better understand why we differ. The first two chapters focus on what we know and how it shapes societal gaps. The first chapter attacks the question of how much of the gap in choices across social groups is driven by differences in outcomes of choices or by differences in the quality of information these groups have about their respective outcomes. I study this question in the context of the college enrollment gap between white and Hispanic high school students. To assess how much of the gap can be attributed to each channel, I introduce a novel decomposition approach and show how we can use a structural model to operationalize and quantify the role of each component. I find that the main driving force behind the college enrollment gap is differences in potential returns, while differences in information quality across the two groups contribute to narrowing the gap. The second chapter tackles the question of whether informational asymmetries among firms can account for all observed wage gaps across social groups. I build a common-value auction model in the labor market with unspecified information structures. In this model, firms meet heterogeneous workers with unobserved productivity and extend wage offers based on their information about worker productivity and competing offers. Using the American Community Survey data, I show that wage disparities among Black and white men and women can arise in an economy where different social groups have identical productivity distributions, but firms have different types of information on these different workers, such that the only driving force behind the wage gap is the information. Finally, the last chapter departs from the notion of what we know and turns to discuss what "we can do" through the lens of intergenerational mobility. It focuses on two common measures of intergenerational mobility—the Intergenerational Elasticity (IGE) and Rank-Rank coefficients. In it, I employ Yitzhaki’s theorem to express these coefficients as weighted averages of the underlying causal mechanisms driving mobility. The chapter highlights the challenges of interpreting cross-country comparisons using IGE or Rank-Rank coefficients due to the regression weighting scheme. It shows that while the Rank-Rank coefficient is more interpretable for positional mobility, it lacks insights into the underlying mechanisms driving mobility across countries.