Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1993. / Includes bibliographical references (leaves 85-87). / by Judith A. Chevalier. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2016. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 167-171). / The dissertation consists of three essays on dynamic problems in political economy. The first essay studies motivated communication on networks. Agents have some hard information about the world and choose whether to tell their neighbors. Information received from other agents can be shared in later meetings. Agents' preferences are mis-aligned, tempting senders to lie by omission. The model yields three main conclusions. First, there is incomplete learning. Second, signals that are close to the mean are more likely to propagate. The reason is that moderate signals travel in both directions, whereas extreme signals are communicated in a predictable direction, which stifles their propagation. Third, if agents are forward-looking, concerns about informational cascades lead to segmentation: agents with close preferences hide information from each other to prevent it from traveling further. The second essay analyzes the evolution of organizations that allow free entry and exit of members, such as cities, trade unions, religious organizations and cooperatives. The organization chooses a policy, which influences the set of agents who want to become members, but current members decide policy in the next period. This generates feedback effects: an organization with a policy x may attract a population with a median-preferred policy higher than x, so a higher policy will be chosen in the next period; but the new policy will attract members wanting an even higher policy, and so on. The set of steady states is pinned down by the preference distribution; equilibrium paths converge to these steady states depending on the starting position. Unlike in models with a fixed population, a small change in the preference distribution can cause dramatic changes in the long-run policy. The third essay studies the impact of term limits on elections where biased candidates compete through ability investments and platform choice. Good politicians facing weak competition extract policy rents, which lowers welfare. Moreover, incumbents exacerbate rent extraction by deterring challenger entry. Term limits alleviate this problem by creating open elections. However, they also lower incumbent quality, so their overall impact is ambiguous. Strong limits are better when politicians are more biased, and challengers' entry cost is intermediate. / by Germán Sergio Gieczewski. / Ph. D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1994. / Includes bibliographical references. / by Andrew Petit Morriss. / Ph.D.

Massachusetts Institute of Technology. Dept. of Economics. Thesis. 1971. Ph.D. / Vita. / Bibliography: leaves 123-127. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2013. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 142-150). / The first chapter proposes a model of booms and busts in housing and non-housing consumption driven by the interplay between relatively low interest rates and an expansion of credit, triggered by further decline in interest rates and relaxing collateral requirements. When credit becomes available, households would like to borrow in order to frontload consumption, and this increases demand for housing and non-housing consumption. If the increase in the demand for housing translates into an increase in prices, then credit is fueled further, this time endogenously, because of the role of housing as collateral. Because a lifetime budget constraint still applies, even in the absence of a financial crisis, the initial expansion in housing and non-housing consumption will be followed by a period of contraction, with declining consumption and house prices. My mechanism clarifies that boom-bust dynamics will be accentuated in regions with inelastic supply of housing and muted in elastic regions. In line with qualitative predictions of my model, I provide evidence that differences in regions' elasticity of housing and initial relaxation of collateral constraints can explain most of the 2000-2006 boom and the subsequent bust in house prices and consumption across US counties. The second chapter (co-authored with Daron Acemoglu, Simon Johnson, James Kwak and Todd Mitton) studies the value of political connections during turbulent times and shows the announcement of Tim Geithner as President-elect Obamas nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a personal connection. This return was around 15 percent from day 0 through day 10, relative to other comparable financial firms. This result holds across a range of robustness checks and regardless of whether we measure connections in terms of meetings he had in 2007-08, non-profit board memberships he shared with financial services executives, or firms with headquarters in New York City. There were subsequently abnormal negative returns for connected firms when news broke that Geithners conrmation might be derailed by tax issues. We argue that this value of connections reflects the perceived impact of relying on the advice of a small network of financial sector executives during a time of acute crisis and heightened policy discretion. The third chapter (co-authored with Adam Ashcraft and Kunal Gooriah) studies the impact of skin-in-the game on the performance of securitized assets using evidence from conduit commercial mortgage backed securities (CMBS) market. A unique feature of this market is that an informed investor purchases the bottom 5 percent of the capital structure, known as the B-piece, conducting independent screening of loans from which all other investors benefit. However, during the recent credit boom, a secondary market for B-pieces developed, permitting these investors to significantly reduce their skin in the game. In this paper, we document, that after controlling for all information available at issue, the percentage of the B-piece that is sold by these investors has a significant adverse impact on the probability that more senior tranches ultimately default. The result is robust to the use of an instrumental variables strategy which relies on the greater ability of larger B-piece buyers to to sell these positions given the need for large pools of collateral. Moreover we show the risk associated with this agency problem was not priced. / by Amir Reza Mohsenzadeh Kermani. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2014. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 190-200). / Chapter 1 examines how political economy considerations affect the desirability of banking unions. It presents a model in which bank recapitalizations are carried out by rent-seeking policymakers. These policymakers face a trade-off between using public funds for needed recapitalizations and diverting them towards socially inefficient rents. In equilibrium, a banking union increases recapitalizations, but it can also increase rent-seeking and decrease consumer welfare. I consider two policy proposals for countering the reduction in welfare: better electoral accountability and limits on public debt. When used alone, neither policy can increase welfare for all countries in the banking union. When used together, the policies have complementary effects, and a Pareto improvement can be achieved in consumer welfare. Chapter 2 focuses on two key features of the bailout programs seen in the 2008-2009 financial crisis: first, the opposition of voters to these programs; and second, the implementation of a variety of interventions, ranging from targeted transfers that inject capital in particular institutions to untargeted transfers aimed at entire sectors. I argue that a shift towards untargeted transfers emerges in a political economy environment, when voters possess less information than the government about the shocks hitting the economy, and when firms can lobby the government for socially inefficient transfers. The model shows that the optimal incentives voters give to elected politicians lead to persistent effects of government interventions. Chapter 3 examines the optimal degree of centralization that can be achieved with respect to bailout policies when a central authority cannot supervise the entire banking system of the economy. Part of the banking system is supervised by a local authority that can observe local shocks and is biased towards local banks. The chapter presents a model of delegation in which a central authority can mandate the contribution of the local authority to bank bailouts as well as the size of the bailout fund. I derive conditions under which it is optimal for the local authority to be given full autonomy over bailout policies. The model shows that these conditions become more restrictive if the local authority can use public debt to increase the size of the bailout fund. / by Octavia Daniela Foarță. / Ph. D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics and Social Science, 1960. / Vita. / Includes bibliographical references (leaves 119-121). / by Paul B. Henderson, Jr. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006. / "September 2006." / Includes bibliographical references. / This thesis is a collection of three theoretical essays that examine the role of time-inconsistent preferences in informal banking. The first two chapters focus on specific banking institutions, while the third studies individual welfare more generally. In Chapter 1, I develop a model of rotating savings and credit associations (roscas) where members are quasi-hyperbolic discounters. I show that, in this setting, roscas function as commitment savings devices, and can survive in equilibrium even in the absence of formal contracting or informal social sanctions. In Chapter 2, I study the behavior of quasi-hyperbolic discounters who have access to credit and a non-secure savings technology. I show that these agents might simultaneously save and borrow to create optimal investment incentives for future selves. Chapter 3 evaluates and compares the welfare outcomes for time-inconsistent agents under several banking environments. / by Karna Basu. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2008. / Includes bibliographical references (p. 99-104). / This thesis studies the macroeconomics of incomplete markets. Chapter 1 studies the effects of capital taxation in a dynamic heterogeneous-agent economy with uninsurable entrepreneurial risk. Unlike either the complete-markets paradigm or Bewley-type models where idiosyncratic risk impacts only labor income, here it is shown that capital taxation may actually stimulate capital accumulation. This possibility emerges because of the general-equilibrium effects of the insurance aspect of capital taxation. Chapter 2, which is joint work with George-Marios Angeletos, revisits the macroeconomic effects of government consumption in the neoclassical growth model augmented with idiosyncratic investment (or entrepreneurial) risk. Under complete markets, a permanent increase in government consumption has no long-run effect on the interest rate, the capital-labor ratio, and labor productivity, while it increases work hours due to the familiar negative wealth effect. Under incomplete markets, the very same negative wealth effect now causes a reduction in risk taking and investment. This in turn leads to a lower risk-free rate and, under certain conditions, also to a lower capital-labor ratio, lower productivity and lower wages. Chapter 3 uses annual Greek data to test the validity of the Permanent Income Hypothesis (PIH) versus the "Keynesian" view that consumption responds to current income. The PIH is rejected by all tests, and so is the simple excess sensitivity hypothesis with a constant marginal propensity to consume. / (cont.) Subsequently, the relevance of a more sophisticated excess sensitivity version, with a time-varying marginal propensity to consume, is determined. It is shown that liquidity constraints, in the form of the spread between private interest rates on loans and deposits, negatively affect the marginal propensity to consume out of current disposable labor income. This result disappears when total disposable income is considered. / by Vasia Panousi. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1998. / Includes bibliographical references. / by Daniel H. Dulitzky. / Ph.D.