Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 131-133). / In this thesis, I study two different economies that consist of heterogeneous labor. By allowing for differences among individuals where previous analyses restricted attention to homogeneous labor, I am able to understand the impact of such a consideration on issues of optimal policy and potential equilibria. The first chapter, Optimal Social Insurance with Individual Private Insurance and Moral Hazard, characterizes optimal social insurance in an economy where competitive firms also provide insurance to workers facing uncertain outcomes. An ex-ante heterogeneous population of workers exerts effort to increase the likelihood of high outcome events. This chapter is novel in its joint consideration of two sources of heterogeneity, two potential sources of insurance, and an endogenous ex-post distribution of outcomes. The introduction of ex-ante heterogeneity in the presence of optimal private insurance changes the optimal prescription for social insurance away from zero. Moreover, the relative source of the variation in outcomes due to ex-ante heterogeneity and ex-post shocks plays a significant role in the welfare loss associated with setting optimal social insurance without recognizing the presence of private insurance. The second chapter, Efficiency Wages with Heterogeneous Agents, builds a model of efficiency wages with heterogeneous workers in the economy who differ with respect to their disutility of labor effort. In such an economy, two types of pure strategy symmetric Nash equilibria in firm wage offers can exist: a no-shirking equilibrium in which all workers exert effort while employed and a shirking equilibrium in which within each firm some workers exert effort while others shirk. The type of equilibrium that prevails in the economy depends crucially on the extent of heterogeneity among the workers. In addition, it is shown that the characterization of the economy is independent of allowing for variable labor hours and the subsequent adverse selection problem it introduces, as there does not exist a pure strategy symmetric separating Nash equilibrium. Finally, in the third chapter I correct the proof of the main proposition in the analysis of an efficiency wage model with a continuum of heterogeneous agents constructed by Albrecht and Vroman (1998). / by Brandon Charles Lehr. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2011. / Cataloged from PDF version of thesis. / Includes bibliographical references. / This dissertation consists of three chapters on topics in labor economics. In the first chapter, I present a model in which firms under-invest in hiring novice workers because they don't receive the full benefit of discovering novice talent. A firm must pay a cost to hire a novice worker. When it does, it obtains both labor services and information about the worker's productivity. This information has option value as a productive novice can be rehired. However, if competing firms also observe the novice's productivity, the option value of hiring accrues to the worker, not the employer. Firms will accordingly under-invest in discovering novice talent unless they can claim the benefit from doing so. I test this model's relevance in an online labor market by hiring 952 workers at random from an applicant pool of 3,767 for a 10-hour data entry job. In this market, worker performance is publicly observable. Consistent with the model's prediction, novice workers hired at random obtained significantly more employment and had higher earnings than the control group, following the initial hiring spell. A second treatment confirms that this causal effect is likely explained by information revelation rather than skills acquisition. Providing the market with more detailed information about the performance of a subset of the randomly-hired workers raised earnings of high-productivity workers and decreased earnings of low-productivity workers. Due to its scale, the experiment significantly increased the supply of workers recognized as high-ability in the market. This outward supply shift raised subsequent total employment and decreased average wages in occupations affected by the experiment (relative to non-treated occupations), implying that it also increased the sum of worker and employer surplus. Under plausible assumptions, this additional total surplus exceeds the social cost of the experiment. In the second chapter, I estimate the sensitivity of students' college application decisions to a small change in the cost of sending standardized test scores to colleges. In 1997, the ACT increased the number of free score reports it provided to students from three to four, maintaining a $6 marginal cost for each additional report. In response to this $6 cost change, ACT-takers sent more score reports and applications, while SAT-takers did not. ACT-takers also widened the range of colleges to which they sent scores. I show that students' response to the cost change is inconsistent with optimal decision-making but instead suggests that students use rules of thumb to make college application decisions. Sending additional score reports could, based on my estimates, substantially increase low-income students' future earnings. In the third chapter, I analyze the effects of the Tennessee Education Lottery Scholarships, a broad-based merit scholarship program that rewards students for their high school achievement with college financial aid. Since 1991, over a dozen states, comprising approximately a quarter of the nation's high school seniors, have implemented similar merit scholarship programs. Using individual-level data from the ACT exams, I find that the program did not achieve one of its stated goals, inducing more students to prefer to stay in Tennessee for college, but it did induce large increases in performance on the ACT. This suggests that policies that reward students for performance affect behavior and may be an effective way to improve high school achievement. / by Amanda Dawn Pallais. / Ph.D.

Thesis (B.S.) Massachusetts Institute of Technology. Dept. of Economics and Social Science, 1957. / MIT copy bound with: Featherbedding / Robert Shaw Green. 1957. / Bibliography: leaves 63-64. / by Malcolm Murray Jones. / B.S.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references (p. 167-178). / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / This dissertation consists of four empirical studies, each using military-induced variation to examine various aspects of human capital production and the U.S. labor market. The first two chapters study the effects of social interactions on human capital development at the United States Military Academy where social groups are randomly assigned. Chapter 1 highlights the empirical difficulties associated with identifying social effects and contains evidence suggesting that occurrences common to a social group may account for a large part of social group correlations found in many studies. While models that address these identification concerns provide little evidence of social effects in academic performance, there is evidence that both peers and role models influence other dimensions of human capital that have important labor market consequences. Chapter 2 builds on the previous chapter by investigating whether peers are complements or substitutes in the production of human capital at West Point. Heterogeneity in peer group composition can provide evidence for the degree of substitutability between peers. Estimates reveal that more heterogeneous peer groups have positive effects on individual grades. This suggests that peers serve as substitutes, and therefore, mixing cadets by ability is optimal for the efficient production of education at West Point. Chapter 3 evaluates the impact of military-induced parental absences and household relocations on children's educational attainment. Estimates indicate that parental absences adversely affect children's test scores by a tenth of a standard deviation and frequent household relocations also have modest negative effects of similar magnitude. Chapter 4 investigates the effects of female labor supply on the U.S. wage structure at mid-century. / (cont.) As men mobilized for war in the 1940s, women were drawn into the workforce. In states with greater mobilization rates, women worked more after the War and in 1950, although not in 1940. Estimates indicate that increases in female labor supply lower female and male wages, and generally increase the college premium and male wage inequality. Finally, at mid-century, women were closer substitutes to high school graduate and relatively low-skill males, but not to those with the lowest skills. / by David S. Lyle. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1989. / Includes bibliographical references. / by Henri Frederic Pagès. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references. / The first chapter attempts to shed light on the role of housing price dynamics in mobility decisions, asking whether households respond to prices in a forward- or backward-looking manner, and the extent to which high leverage constrains moving behavior. On a broader level, the study tests whether price dynamics dominate non-market shocks as a force governing household mobility, given the importance of housing as an investment good and saving device. Using a 13 year sample from the Panel Study of Income Dynamics, I find that households are largely backward-looking in both their mobility and consumption decisions, and that non-market shocks play a significant role. Households show little or no response to equity constraints, and do not appear to time the market, despite significant forecastability in housing prices. These conclusions lend support to the notion of prices leading trading volume, but do not support the theoretical work of Stein (1995), which attributes mobility behavior to changes in equity constraints brought about by changes in housing prices. The second chapter uses data from the Retirement History Survey to measure the impact of property tax abatement programs on elderly homeownership decisions. Analysis using a competing risks framework, in which the decision to trade down is treated separately from the decision to end homeownership completely, shows striking differences in the impact of property taxes on each type of failure: for the elderly who choose to trade down, property taxes have a positive effect on the hazard of moving. Alternatively, property taxes have little impact on the tenure decision. Incorporating individual heterogeneity to correct for sample bias, to capture mover-stayer effects, and to account for correlation between property taxes and omitted variables, has little effect on the results. From an "ex post" perspective, the results of the analysis lead to the conclusion that property tax abatement programs have a small impact at best, and may be leading to undesirable redistributional outcomes. The final chapter employs data from the neighborhood clusters sample of the 1989 American Housing Survey and the wealth supplement of the 1989 Panel Study of Income Dynamics to study to distribution of wealth within US residential neighborhoods. Calculations using the Bourguignon decomposable inequality index show that wealth is more unequally distributed than income, and income more than housing wealth, at all levels of aggregation--neighborhoods, metropolitan areas, census regions, and the entire US. / by Tracey Nicole Seslen. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 143-149). / This thesis examines questions in macroeconomics motivated by the 2007-2008 financial crisis and its aftermath. Chapter 1 studies the impact of a housing bust on regional labor reallocation and the labor market. I document an empirical fact, which suggests that, by increasing the fraction of households with negative housing equity, a housing bust hinders interregional mobility. I then study a multi-region economy with local labor and housing markets and worker reallocation. A housing bust creates debt overhang for some workers, which distorts their migration decisions and increases aggregate unemployment in the economy. In a calibrated version of the model, I find that the regional reallocation effect of the housing bust can account for between 0.2 and 0.5 percentage points of aggregate unemployment and 0.4 and 1.2 percentage points of unemployment in metropolitan areas experiencing deep local recessions in 2010. Chapter 2 studies a model of endogenous fluctuations in credit market conditions. I consider an economy with productivity heterogeneity and durable capital. Entrepreneurs issue debt to buy capital but have superior information about the distribution of their future productivity and, hence, of their debt repayments. Additionally, limited pledgeability of high output realizations creates a wedge between the valuations of inside and outside investors. The combination of these two frictions leads to a new channel of interaction between the price of capital and the credit market, which in turn leads to multiple equilibria and fluctuations in output, the price of capital, and leverage across equilibria. I then use the model to analyze the effect of unconventional monetary policy by a central bank. Financial instability is often characterized by increased uncertainty, debt rollover difficulties and asset liquidation at depressed prices. Chapter 3, which is a joint work with Felipe Iachan, studies a debt roll-over coordination game with dispersed information and market-determined liquidity conditions. We describe conditions under which an improvement in the precision of individuals' information about financial institutions' fundamentals leads to greater financial stability. For the limiting case of arbitrarily precise private information, that condition obtains a simple form in terms of payoff elasticities. Finally, we discuss the effects of stress tests and the "living will" mandate from the Dodd-Frank act. We conclude that given our framework, the latter policy should have a large positive impact for financial stability. / by Plamen T. Nenov. / Ph.D.

Massachusetts Institute of Technology. Dept. of Economics. Thesis. 1974. Ph.D. / MICROFICHE COPY ALSO AVAILABLE IN DEWEY LIBRARY. / Vita. / Bibliography: leaves [272]-275. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2001. / Includes bibliographical references (p. 111-112). / The first two chapters of this thesis explore how coordination happens in simple games. The first chapter models the adaptive play of a 2 x 2 game by pairs of agents matched together from a large population. In contrast with the existing literature, I assume that agents have some control over who they are matched with - specifically, I give them the option to sometimes continue playing against the same opponent. This renewal option allows agents playing efficiently to isolate themselves from those who are not. Perhaps counterintuitively, efficient play may be less likely to survive in the long run when agents have this additional instrument, even in games with common interests. This is because isolation has two effects: it raises the returns to an efficient but fragile strategy, but it also "ghettoizes" agents playing inefficiently - they rarely learn about the efficient strategy and when they do learn about it, they rarely hear good news. I look at an extension in which agents have long memories about the performance of a strategy. With long memories, good news about an efficient strategy will be more likely to trickle down to ghettoized agents, mitigating the bias in learning. With this bias removed, long run survival of efficient play becomes more likely - even when it is not a static Nash equilibrium. Essentially, agents learn to use the renewal option to punish non-cooperators. However, the speed of learning may still be quite slow, so that ghettoization persists for a long time. / (cont.) The second chapter investigates the interaction of strategic uncertainty and timing in a coordination game. Carlsson and van Damme have shown that small departures from common knowledge of the game being played can dramatically alter the equilibrium set. In the game I look at, there are two equilibria, but only the risk dominant equilibrium survives such a perturbation. I augment this model by giving agents a costly option to delay choosing a strategy (thereby observing any actions that were taken without delay). Strategic uncertainty gives agents a reason to exercise this option (under complete information, it never would be). In turn, the fact that Agent B sometimes waits and chooses an action after observing Agent A's choice, mitigates the risk that A faces when taking an action that is efficient but sensitive to coordination. As a result, the efficient equilibrium is played more often; in fact, as the cost of delay vanishes, it is always played. In Chapter 3, I explore the interaction between imperfect consumer information and the endogenous level of product differentiation in a non-spatial model of monopolistic competition with horizontally differentiated products. A principle of extreme differentiation is derived: firms will always choose to differentiate either maximally or minimally. In equilibrium, differentiation is maximal when search costs are low and minimal when search costs are high, providing a new interpretation of Hotelling's classic result. / by Nathan Larson. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics and Social Science, 1959. / Includes bibliographical references (leaves 296-299). / by Zenon Soteriou Zannetos. / Ph.D.