Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references. / This thesis consists of three distinct essays in public finance economics. In the first I use the presence of minority candidates on the ballot to test two implications of the spatial theory of voting. I find, contrary to theoretical predictions, that the magnitude and types of voters who come out to the polls is responsive to the race of the candidate on the ballot. While both black and white voters turn out in greater numbers when there is a black on the ballot, the whites who are propelled to the polls are more often Republican than not. I use this shift in the electorate caused by the racial mix of the candidates as a test of candidate responsiveness, a second implication of the spatial theory. I find evidence in support of this prediction. In Chapter 2 I seek to understand why thirty-five to forty-five percent of low-income American households do not possess a bank account I demonstrate that the low-income household's banking decision responds to the price of savings accounts, particularly their minimum balance requirements. Despite this, I show that government banking regulation to this point has been ineffective in connecting households to transaction accounts. On the other hand, regulation of the fringe banking market has proved more successful. One approach to covering the uninsured that is frequently advocated by policy makers is subsidizing the employee portion of employer-provided health insurance premiums. In Chapter 3, joint with Jonathan Gruber, we study an example of such subsidies: the introduction of pre-tax premiums for postal employees in 1994, and then for the remaining federal employees in 2000. We find that there is a very small elasticity of insurance takeup with respect to its after-tax price, and a modest elasticity of plan choice. Our results suggest that the federal government did little to improve insurance coverage, but much to increase health care expenditures, through this policy change. / by Ebonya Lia Washington. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2009. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 141-145). / This thesis explores power and consistency of estimation and inference procedures with moment inequalities, and applications of the moment inequality framework to estimation of frontiers in finance. In the first chapter, I consider estimation of the identified set and inference on a partially identified parameter when the number of moment inequalities is large relative to sample size. Many applications in the recent literature on set estimation have this feature. Examples discussed in this paper include set-identified instrumental variables models, inference under conditional moment inequalities, and dynamic games. I show that GMM-type test statistics will often be poorly centered when the number of moment inequalities is large. My results establish consistency of the set estimator based on a Wald-type criterion, and I give conditions for uniformly valid inference under many weak moment asymptotics for both plug-in and subsampling procedures. The second chapter evaluates the performance of an Anderson-Rubin (AR) type test for a finite number of moment inequalities, and propose a modified Lagrange Multiplier (LM) and a conditional minimum distance (CMD) statistic. The paper outlines a procedure to construct asymptotically valid critical values for both procedures. All three tests are robust, to weak identification, however in most settings, conservative inference using the LM statistic seems to have greater power against local alternatives than the AR-type test. Furthermore, confidence regions based on the LM statistic will remain non-empty if the model is misspecified. / (cont.) Finally, the third chapter, which is co-authored with Victor Chernozhukov and Emre Kocatulum, presents various set inference problems as they appear in finance and proposes practical and powerful inferential tools. Our tools will be applicable to any problem where the set of interest solves a system of smooth estimable inequalities, though we particularly focus on the following two problems: the admissible mean-variance sets of stochastic discount factors and the admissible mean-variance sets of asset portfolios. We propose to make inference on such sets using weighted likelihood-ratio and Wald type statistics, building upon and substantially enriching the available methods for inference on sets. / by Konrad Menzel. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1994. / Includes bibliographical references (leaves 136-136). / by Winnie Chi-man Yip. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2005. / Includes bibliographical references. / This thesis analyzes two issues in international trade: trade policy determination and international outsourcing. The first three chapters introduce the firm as a novel unit of analysis in the political economy of trade policy. Chapter 1 takes a standard model of political economy of trade policy in the presence of lobbying. It shows that, in the presence of heterogeneity in the participation of firms in political activity, the level of protection is determined, among other factors, by the intensity of lobbying in a given sector. Chapter 2 analyzes the strategic interaction among firms in a given sector and shows how lobbies are formed when protection from foreign competition represents a public good. This chapter offers different criteria that lobby formation might obey and analyzes the impact of the characteristics of the distribution of firm size on the level of protection of industrial sectors. Chapter 3 presents a new dataset which allows me to test the theoretical predictions derived in Chapter 1 and Chapter 2. In particular the empirical results show how ,the level of protection depends positively on the intensity of lobbying as measured in Chapter 1 and how the intensity of lobbying, called here Participation Shares, depend positively on simple characteristics of the distribution of firm size, such as mean and standard deviation. / (cont.) The fourth chapter offers a novel perspective on the decision of firms to outsource part of their production activities and looks at the impact of individual firms' decisions on incentive of other firms to outsource. Outsourcing firms face a potential loss of product differentiation, but achieve economies of scale at the level of the intermediate good producer. Interaction among firms in a sector can lead to waves of outsourcing. / by Matilde Bombardini. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2009. / Cataloged from PDF version of thesis. / Includes bibliographical references. / The three chapters which comprise my thesis are a collection of essays on the analysis of the corporate governance and airline markets and of the federal appellate structure. In Chapter 1, I use a discrete choice framework to analyze state design and firm choice of the implications of incorporation: corporate governance laws, corporate taxes and court structure. Firms - differentiated on ownership, management, industry concentration, financial profile and unobservable dimensions - freely choose their preferred state of incorporation or reincorporation. The revealed preference embedded in this observable choice is used as window into the heterogeneous preferences within and across firms, yielding several findings: For example, I find, surprisingly, that firms are very responsive to incorporation and franchise taxes. In addition, on average, firms like anti takeover statutes, but, consistent with an agency story, firms with an institutional shareholder block and venture capital backed firms dislike them. On average, firms dislike mandatory governance statutes restricting managerial power and facilitating the representation of minority shareholders, but these laws are less restrictive for the choice of firms in concentrated industries. All firms dislike well functioning courts, consistent with a litigation deterrence motive. The recovered firm preferences are then taken to the simulation of recently proposed federal reforms aimed at centralizing the domicile implications and restricting firm choice. / (cont.) They are also related to the documented differential returns earned by firms with better internal governance in the 1990s, as well as to other (new) trading strategies that would have yielded abnormal returns in the 2000s. Chapter 2 begins with the observation that airlines choose the domestic markets - city pairs - they serve and the prices they charge given the structure of their network and the networks of rival airlines. I cast this choice into a dynamic oligopoly entry game to recover airline fixed and variable operating costs, entry costs, and profits, using a panel of 20 quarters of DB1B and T-100 Domestic Segment Data. These estimates are then used to analyze the strategic and cost saving effects of hubs, and LCC. I find that hubs are valuable to consumers and increase the variable profits of the hubbing airline, but when including fixed costs their desirability is much less clear. LCC, and especially Southwest and JetBlue are especially attractive to consumers, have lower marginal costs and have a strong negative impact on the profits of the incumbents in the markets they serve. In Chapter 3, using data on all federal civil trial and appellate cases from 1992-2003, I show that appeals are generally rejected and, for some case categories, can have negative expected net present value. Appellate outcomes can be further related to the trial decision being by judge or jury, the identity of the prevailing party (plaintiff or defendant, US or private), and the form of representation. Some of these factors influence the propensity to appeal, however, others, including whether trial was by judge or jury, go in the opposite way. / (cont.) I discuss the implications of these findings for the modeling of the incentives to appeal and settlement breakdown, and for appellate reform. / by Moshe Aharon Cohen. / Ph.D.

Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Economics, 2008. / Includes bibliographical references (p. 30-31). / Economists have generally assumed that to the extent possible, retirement savings should be done in a tax-deferred account. However, the advent of Roth-style tax-favored accounts and concerns about the tax implications of increasing retirement income through tax-deferred distributions indicate that this question merits a reevaluation. I use data on married couples in the HRS and NBER's TAXSIM model to measure the probability of a household facing a higher tax rate at ages 62, 65, and 69 than the household faced at age 57. When the marginal tax rate is higher, the household could decrease their lifetime tax by choosing a Roth-style account over a tax-deferred account. I also measure the probability of facing a marginal tax rate that is sufficiently high that the household minimizes tax payments by using a taxable account rather than a tax-deferred account, in the absence of a Roth option. I find that for distributions beginning at age 69, between 10 and 35% of households with taxable income at age 57 should prefer a Roth account to a tax-deferred account, but very few households prefer a taxable account. / by Tonja Bowen Bishop. / S.M.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1995. / Includes bibliographical references. / by Stacey Marie Tevlin. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2005. / Includes bibliographical references. / The first essay provides evidence that banks are liquidity constrained and hold private information about borrowers that hinders substitution of financing sources. Using loan level data from a public credit bureau and exploiting an exogenous shock to bank liquidity, I show that adverse selection prevents full arbitrage of profitable opportunities by competing lenders and thus liquidity constraints propagate to bank-dependent borrowers. The second essay evaluates a government program that targeted credit to small firms through existing financial intermediaries. Using the program eligibility rule to identify the effect on target firms, I find that target firms' total bank debt increased by 8 cents for every dollar of program financing provided to the banks. This effect is larger when the intermediary bank is more likely to lend to smaller firms according to observable bank characteristics. The third essay evaluates empirically the effect of credit history disclosure on the financial position of a sample of manufacturing firms in Argentina. Results indicate that credit history disclosure has a negative impact in the ability of firms to raise external finance when firms are exposed to a high liquidity risk. / by Daniel Paravisini. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006. / Includes bibliographical references (p. 157-163). / I investigate search models in which firms wish to employ multiple workers. I first focus on efficiency. One important approach to modeling frictional labor markets is competitive search equilibrium, in which workers direct their search towards wages that firms commit to pay them upon hire. If each firm wishes to hire precisely one worker, the competitive search equilibrium is efficient (Moen, 1997; Shimer, 1996). I show that if firms wish to employ multiple workers, then hiring will not generally be efficient if firms post only a single wage. Efficiency requires that firms commit to hire a fixed number of workers at the posted wage, to pay all applicants, or to make wages contingent on the number of applicants. I show that if firms post only a wage, the amount of inefficiency is highest at intermediate levels of labor market tightness. Efficiency under wage posting is restored in a dynamic model if the duration for which firms commit to posted contracts becomes small. I next calibrate a continuous-time version of the model to US data. Under the benchmark parametrization and in response to plausible business-cycle shocks to productivity, the model does not produce fluctuations in unemployment that match the amplitude of such fluctuations in US data. / (cont.) It appears that the existence of firms that wish to employ multiple workers is not per se a source of much amplification. Finally, Daron Acemoglu and I present a generalization of the Diamond-Mortensen-Pissarides (DMP) search model of unemployment which incorporates both intensive and extensive margins of employment creation. Firms possess a production technology with diminishing returns to labor, and recruit workers by posting vacancies. Entry by new firms corresponds to the extensive margin of employment creation, while job creation by existing firms captures the intensive margin. As in the baseline DMP model and theories of the firm developed by Stole and Zwiebel (1996a,b) and Wolinsky (2000), wages are determined by continuous bargaining between the firm and its employees. We characterize the steady-state equilibrium in this class of models and discuss the implications of various different types of shocks on the equilibrium unemployment rate. / by William Blake Hawkins. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2015. / 2nd and 3rd chapter co-authored with Matthew Rognlie. Cataloged from PDF version of thesis. / Includes bibliographical references. / This thesis consists of three chapters on monetary and fiscal policy. The first chapter explores the importance of redistribution in explaining why monetary policy has aggregate effects on household consumption. I argue that traditional representative agent models focusing on substitution effects ignore a key component of the monetary policy transmission mechanism, which exists because those who gain from accommodative monetary policy have higher marginal propensities to consume (MPCs) than those who lose. I use a sufficient statistic approach to show that, provided households' elasticities of intertemporal substitution are reasonably small, redistributive effects can be as important as substitution effects in explaining the response of aggregate consumption to real interest rate changes in the U.S. My calibrated general equilibrium model predicts that, if U.S. mortgages all had adjustable rates, the effect of interest-rate changes on consumer spending would more than double and would be asymmetric, with rate increases reducing spending by more than cuts would increase it. The second chapter, joint with Matthew Rognlie, explains why a monetary union between countries (such as the Eurozone today) may lead to a stronger fiscal union. Since exchange rates can no longer adjust to offset shocks, the presence of nominal rigidities implies that fiscal risk-sharing becomes more valuable in a monetary union. As a result, countries in such a union are capable of overcoming their lack of commitment to fiscal transfers. However, inefficient equilibria without fiscal transfers remain possible. We derive implications for the optimal policy of the central bank when the fiscal union is under stress. The third chapter, also joint with Matthew Rognlie, studies the possibility that feedbacks between sovereign bond spreads and governments' desire to default may lead to multiple equilibria in sovereign debt markets. We show that such multiplicity does not exist in the infinite-horizon model of Eaton and Gersovitz (1981), a widely adopted benchmark for quantitative analyses of these markets. Our proof may be important to understand Euro government bond markets, and calls for renewed attention on the theoretical conditions that are needed for sovereign debt models to generate multiple equilibria. / by Adrien Auclert. / Chapter 1. Monetary policy and the redistribution channel -- Chapter 2. Monetary union begets fiscal union -- Chapter 3.Unique equilibrium in the Eaton-Gersovitz model of sovereign debt. / Ph. D.