Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 2002. / Includes bibliographical references. / Chapter one is titled "Social Capital and Group Banking." Lending to the poor is costly due to high screening, monitoring, and enforcement costs. Group lending advocates believe individuals are able to select creditworthy peers, monitor the use of loan proceeds, and enforce repayment better than an outside lending organization can by harnessing the social capital in small groups. Using data collected from FINCA-Peru, I exploit the randomness inherent in their formation of lending groups to identify the effect of social capital on group lending. I find that having more social capital results in higher repayment and higher savings. I also find suggestive evidence that in high social capital environments, group members are better able to distinguish between default due to moral hazard and default due to true negative personal shocks. Chapter two is titled "Can Games Measure Social Capital and Predict Financial Decisions." Economic theory suggests that market failures arise when contracts are difficult to enforce or observe. Social capital can help to solve these failures. Measuring social capital has become a great challenge for social capital research. I examine whether behavior in a trust game predicts future financial behavior. I find that trustworthy behavior in the game predicts higher loan repayment and savings deposits, whereas more trusting behavior predicts the opposite. Analyzing General Social Survey responses to questions on trust, fairness and helping others, I find that those with more positive attitudes towards others are more likely to repay their loan. / (cont.) Chapter three is titled "When Curiosity Kills Profits: An Experimental Examination." Economic theory predicts that under Bertrand competition, with equal and observable costs, firms earn zero profits. Theory also predicts that if costs are not common knowledge, firms should use their weakly dominant strategy of pricing above marginal cost and earn positive profits. Hence, rational profit-maximizing Bertrand firms should prefer less public information. In an auction game, we find that individuals without information on each other's valuations earn more profits than those with common knowledge. Then, given a choice between the two rules, half the individuals preferred to have the information. We discuss possible explanations, including ambiguity aversion. / by Dean S. Karlan. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007. / Includes bibliographical references (p. 107-110). / This thesis studies the optimal income tax scheme in four different settings. Chapter 1 focuses on the implications of lack of commitment for the optimal labor and capital income tax rates. It finds that it is optimal to converge to zero capital income taxes and positive labor income taxes in the long run. The government will follow the optimal plan as long as its debt is low enough, which implies that the lack of commitment may lead to some asset accumulation in the short run. Chapter 2 determines the optimal tax schedule when education is endogenous and observable, in a setting where agents have heterogeneous abilities. It finds that, for each ability level, it is optimal to subsidize monetary educational costs at the same marginal rate at which income is being taxed. Chapter 3 finds that when entrepreneurial labor income cannot be observed separately from capital income, then it is optimal to have positive capital taxation in the long run. Chapter 4 finds that if human capital expenses are unobservable, then in the optimal plan human capital accumulation will be distorted in the long run. / by Catarina Reis. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1967. / Three unnumbered pages inserted. / Includes bibliographic references. / by Jagdish Bhagwati. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2014. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 100-103). / Workers find wage-growth and job-satisfaction by building careers. However a worker's ability to string together a sequence of jobs relies on the availability of appropriate opportunities either within their current firm or in other firms in the market. In this thesis, I investigate how variation in the labor market affects this career building process. In the first chapter, I find that career opportunities are scarce for young workers during recessions, and use theory and evidence to argue that this is due to firms choosing to hire more experienced workers instead. In the second chapter, I find that firms reallocate their employees between occupations during recessions, leading workers to receive lower wages and be employed in lower-quality occupations. In the third chapter, I develop a model to explain why workers change firms when opportunities exist within the firm. I show that heterogeneity in firms' production functions and human capital acquisition are sufficient to generate these movements. More specifically, in the first two chapters I use data from the CPS to study reallocations over the business cycle. In Chapter 1, I find that during recessions the probability of being hired falls for young workers, while for experienced workers it rises. I develop a model and show this fact can be explained by firms choosing to hire workers with greater work experience when labor markets are slack. My model provides the distinctive prediction that during recessions, young workers will match with lower-quality jobs and receive lower wages while experienced workers will exhibit no change in either dimension. I develop occupational quality indices using O*NET and OES data and find evidence consistent with both predictions, suggesting that firms' hiring behavior actively contributes to negative outcomes for young workers during recessions. In Chapter 2, I document that occupational mobility is counter-cyclical. I show this is driven by an increase in occupational mobility within firms. I show that these within-firm occupation changers lose ground during recessions, matching with lower-quality jobs and receiving lower wages. Combined with the recessionary increase in within-firm mobility, these results suggest a previously undiscovered cost of recessions borne by employed workers. Finally, in Chapter 3, I develop a model that demonstrates how career-advancing inter-firm mobility can persist despite the possibility of within-firm mobility. I argue that many of these movements are driven by firm heterogeneity and human capital acquisition and show such a model can capture three key empirical regularities: experienced workers are hired into advanced positions, wages rise more at movements between positions (within and between firms) than at stays in the current firm, and external hires tend to have different qualifications than internal promotees. JEL Classification: E24, J62, M51. / by Eliza C. Forsythe. / Ph. D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1997. / Includes bibliographical references (leaves 123-127). / by Peter Blair Henry. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1997. / Includes bibliographical references. / by Roberto Rigobon. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007. / Includes bibliographical references. / In Chapter 1, I propose a model in which consumers base their purchasing decisions upon their recollections of the product quality, and in which firms can use persuasive advertising in order to change these recollections. Although consumers are aware that such advertising has occurred and take this into account when updating their beliefs about the product, they cannot prevent their memories from being affected. I analyze which firms engage in persuasive advertising as well as the price level that these firms choose. I show that persuasive advertising may be used in equilibrium even though consumers are fully aware of it, and that persuasive advertising does not always signal high quality products. The model is then extended to incorporate both persuasive and informative advertising, where firms reveal some verifiable information about their products. In that case, persuasive advertising may block the full unraveling of information, and high quality products are not promoted with only one type of advertising - in some cases, persuasive advertising can signal a product of either higher or lower quality than a product promoted with informative advertising. Chapter 2 is the product of joint work with Abhijit Banerjee and develops a model to study the effectiveness of complaints against corruption. A bureaucrat has to decide on a public infrastructure project in a village where a rich and a poor villagers live. A dishonest bureaucrat can be bribed not to choose the surplus maximizing project and instead to choose a project that favors the rich villager. Once the bureaucrat has chosen a project, the villagers can send a costly praising or complaining message to the bureaucrat's supervisor who does not know whether the bureaucrat is honest or dishonest. / (cont.) From his point of view the messages are anonymous; the supervisor does not know who is rich or poor in the village. The only leverage of the supervisor is to transfer the bureaucrat and replace him with another one who will repeat the game in the following period. In any relevant equilibrium no complaints happen and more generally there are no complaints in equilibrium without bribery. We find that complaints will be observed only when they should not be and that the government cannot necessarily get people to complain by cutting the message cost. In addition, lowering that cost may hurt since, when the share of honest bureaucrat is low, the poor are pessimistic about the benefit of complaints while the rich are optimistic and they respond more to a lower cost. Finally, the supervisor cannot fully decide to implement a particular equilibrium as multiple ones coexist. Chapter 3 is the product of joint work with Elie Ofek. We model a duopoly in which ex-ante identical firms need to decide where to direct their innovation efforts. The firms face market uncertainty with respect to consumers' preferences for innovation on two product attributes, and technology uncertainty with respect to the success of their R&D efforts. Firms can conduct costly research to resolve their market uncertainty before setting R&D strategy. We find that the value of market information to a firm depends on whether its rival is also expected to obtain this information in equilibrium. We show that, as a result, one firm may forgo market research even though its rival conducts such research and learns the true state of demand. We examine both vertical and horizontal demand structures. With vertical preferences, firms are a priori uncertain which attribute all consumers will value more. / (cont.) In this case, a firm that conducts market research will always innovate on the attribute it discovers that consumers prefer, and expend more on R&D than a rival that has not conducted market research. With horizontal preferences, distinct segments exist-each cares about innovation on only one attribute-and firms are a priori uncertain how many consumers are in each segment. In this case, a firm that conducts market research may follow a 'niche' strategy and innovate to serve the smaller segment to avoid intense price competition for the larger segment. Consequently, a firm that conducts market research may invest less in R&D and earn lower profits post-launch than a rival that has forgone such research. / by Dominique Olié Lauga. / Ph.D.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 2002. / Includes bibliographical references. / The central theme of this dissertation is that the interaction between firm characteristics and market characteristics is crucial to understanding the evolution of market structure, competition, and firm behavior. I integrate ideas from industrial organization and strategic management in an empirical examination of two innovative industries: pharmaceuticals and laser printers. Chapter 1 provides an overview of this work and discusses its broader implications. In Chapter 2, a range of econometric models for a firm's decision to launch a new pharmaceutical product in 21 OECD countries is estimated. The results suggest that the interaction between the innovating firm, drug, and target country is a critical component of profitability, and that regulations may not affect firms and products uniformly. Chapter 3 considers how entry is influenced by the characteristics of incumbent firms and other potential competitors in a subset of pharmaceutical markets. In an extension to previous structural entry papers, this work explores the effect of competing with other firms that might have an asymmetric effect on profits. Chapter 4 examines the roles of market structure, product characteristics, and firm characteristics in explaining patterns of product entry and exit in the desktop laser printer industry. I find that firms with complementary assets are less sensitive to competition from similar products than are firms without these assets. Not only do the products of complementary asset firms survive longer, but such firms are more likely to introduce new products in crowded market segments. / (cont.) Firms without complementary assets tend to introduce new products close to the technological frontier. However, their products exit earlier than those of complementary asset firms. These two types of firms appear to pursue different product market strategies, and the mix of both drives the product life cycle. Understanding entry and exit in these settings may provide insights into the diffusion of other new technologies, because pharmaceuticals and laser printers have a number of features in common with other industries of great interest to managers and policymakers at the moment. Thus the insights from this dissertation may be applicable to broad sectors of the economy. / by Margaret Kelly Kyle. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006. / Includes bibliographical references. / This dissertation presents work empirically investigating various aspects of the criminal justice system. Chapter one, coauthored with Chris Rohlfs, examines the judicial bail-setting process and the defendant decision to pay bail. Optimal bail-setting rules must balance the tradeoffs between costs to defendants and costs to society. This chapter develops a model of optimal bail that incorporates the cost of jailing the defendant, the private cost to the defendant from being incarcerated, the cost of crime, and the costs that arise when defendants abscond. The model is empirically calibrated using data from a randomized experiment. The randomized experiment allows the use of defendants' bail posting decisions to estimate their subjective values of freedom. Our estimates suggest that high-risk defendants would be willing to pay $300 to $1,000 for 90 days of freedom. We find the socially optimal level of bail to be substantially lower than levels currently set by judges. Aggregating nationally, we find that the total social benefit of reform would be on the order of $10 billion per year. Chapter two, coauthored with Marianne Bertrand and Sendhil Mullainathan, is a study of the impact of defendant race on interjudge sentencing disparity, which seeks to add to the knowledge of the role of race in the courtroom. / (cont.) This chapter attempts to determine whether the legal system discriminates against minorities by addressing a related question: do judges differ in how they sentence minorities? This approach avoids the difficulty of systematic racial differences in case characteristics by exploiting the random assignment of cases to judges. We measure the between judge variation in the ratio of African-American to White defendant sentence lengths and incarceration rates. In our data set, which includes all felony cases in Cook County, Illinois from 1985-2005, we find large between-judge variation. We also find that judge characteristics, such as age, and the judge's previous work experience as a prosecutor or defender all predict their racial gap in sentencing. Chapter three presents evidence regarding the deterrent effect of incarceration. Knowing the magnitude of the deterrent effect of incarceration on crime is crucial to optimal policy setting. In this chapter I make use of sentence enhancements in gun robbery sentence lengths caused by add-on gun laws to attempt to estimate this impact. Since defendants subject to add-ons would be incarcerated in the absence of the law change, the short-term effect will be solely deterrent. / (cont.) I take advantage of the temporal variation in the passage of these laws in different states to identify the causal impact of the law change. I find that add-on gun laws result in a significant reduction in gun robberies, approximately 5% within the first three years of passage, for the average add-on gun law. The results are robust to a number of tests, and do not appear to be due to a large spillover to other types of crime. / by David S. Abrams. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1988. / Vita. / Includes bibliographies. / by William Eric Moran. / Ph.D.