Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1994. / Includes bibliographical references. / by Alan S. Gerber. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 129-133). / This thesis investigates the role of strategic social interactions in household decision-making using empirical evidence from India. In the first chapter, I ask how the actions of peers influence an individual's own decision to repay her loan obligations. In the subsequent chapters, I employ experiments to unpack some of the complex social interactions at play in communities in India. In each chapter, the value of social relationships plays a key role in influencing behavior. Chapter 1 examines peer effects in the case of microfinance. Around the world, microfinance institutions (MFIs) have invested heavily in building social capital and generally boast stellar repayment rates. However, recent repayment crises have fueled speculation that peer effects might also reinforce default behavior. I estimate the causal effect of peer repayment on individuals' repayment decisions in the absence of joint liability following a district-level default in which 100% of borrowers temporarily defaulted on their loans and after which borrowers gradually decided whether to repay. Because the defaults occurred simultaneously, the timing of the shock induced variation in repayment incentives both at the individual and peer group levels. Individuals (or peer groups) near the end of their 50-week loan cycles were closest to receiving new loans and had the strongest incentives to repay; those who had recently received disbursements had the weakest. Using the variation in the peer group's incentives to instrument for peer repayment, I find that if a borrower's peers shift from full default to full repayment, she is 10-15pp more likely to repay. Last, I present a dynamic discrete choice model of the repayment decision to estimate the net benefit of the peer mechanism to the MFI. Repayers' positive influence on others (not non-repayers' negative influence) mainly drives the effect. Thus, peer effects actually improve repayment rates relative to a counterfactual without peer effects. The second chapter (co-authored with my classmates Arun Chandrasekhar and Horacio Larreguy) uses detailed network data to study the role social interactions may play in contract enforcement and in determining the scope of co-investment. We perform laboratory experiments in Indian villages with non-anonymous participants, where participants play basic two-party trust games with a sender and receiver. In some treatments, we introduce third-party monitors or punishers that may or may not be identifiable by the other two participants. We find that the social network interacts with the play of the game in economically meaningful ways. First, social proximity partially mitigates the investment problem. Second, very central punishers are efficiency enhancing. Third, elites benefit from higher partner transfers, but do not use their status to increase total surplus. Finally, we use our results to provide an assessment of institutional structures as a function of network shape. Typically, socially far judges encourage efficient behavior, while socially close judges are prone to collusion. The final chapter (co-authored with Arun Chandrasekhar) explores the diffusion of information about rival goods. We randomly invite households to come to a pre-specified, central location in 39 villages to participate in laboratory games. Because many households that were not directly invited turned up at our experiments, we study how the information about the opportunity to earn close to one day's wage diffuses through rural Indian communities. Furthermore, because some members of some of the villages had prior experience playing similar laboratory games, we ask how experience with a task affects information-spreading and -seeking behavior. Finally, we examine possible channels for strategic information diffusion. In our environment, participant slots for non-invited households are limited, making them rival goods. Additionally, participants could potentially receive larger payoffs from playing the laboratory games with their peers. Because of these two motivations, we examine how final participation patterns may reflect strategic behavior on the part of informed households. / by Emily Louise Breza. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references (p. 130-139). / In the first chapter, I study the impact of statistical arbitrage on equilibrium asset prices. Arbitrageurs have to learn about the long-run behavior of the stock price process. They condition their investment strategy on the observation of price and volume. The learning process of the statistical arbitrageurs leads to an optimal trading strategy that can be upward sloping in prices. The presence of privately informed investors makes the equilibrium price dependent on the history of trading volume. The response of prices to news is nonlinear, and little news can have large effects in some ranges of the prices. In the second chapter, together with Francesco Franzoni, we develop an equilibrium model of learning about time-varying risk factor loadings. In the model, CAPM holds from investors' ex-ante perspective. However, positive mispricing can be observed when investors' expectations of beta are above ex-post realizations. This model is used to explain the 'value premium'. In a learning framework, the fact that value stocks used to be more risky in the past leads to investors' expectations of beta that exceed the estimates from more recent samples. We propose an empirical methodology that takes investors' expectations of the factor loadings explicitly into account when estimating betas. With the adjusted estimates of beta, we can explain the cross-section of average returns of the ten book-to-market portfolios, and account for the value premium in the relevant sample. The third chapter investigates the role of contagion during the Great Depression. The Great Depression was a worldwide phenomenon, accompanied by financial crisis. I investigate whether financial contagion contributed to the spread of the Great Depression across countries. Contagion happens when idiosyncratic shocks are transmitted from one country to another. / (cont.) Asset price movements in the country affected by contagion are not justified by its own fundamentals. Contagion leads to an increase in the covariance of international financial markets during periods of financial crisis. Two particular events are tested: the stock market crash of 1929 and the Latin American debt crises of 1931. In both events the hypothesis that the crises spread contagiously is rejected with one exception: the French Stock Market. / by Tobias Adrian. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007. / "June 2007." / Includes bibliographical references (p. 101-107). / This dissertation consists of three essays on dictatorships. The first two study the economic impact of power struggles in dictatorships. They focus on one mechanism used by dictators to remain in power, shuffling, where delegates have a short and uncertain tenure in any assignment. In these models, there is a ruler, a delegate and a population. The ruler and the delegate have a 'type', characterizing their ability as a ruler. The population can mount an insurrection, replacing the ruler with the delegate. The type of the ruler is known, while the type of the delegate is unknown to the other players. In Chapter 1, I assume that the delegate does not know his type, but can reveal it through an investment decision. I then show that shuffling is useful politically, even though it produces an economic cost, in that it reduces the delegate's incentive to invest, which prevents information about his type from being revealed. I also show that the ability to shuffle has some economic benefits, in that it assures the ruler that he can eliminate growing political threats, which induces him to encourage some investment. / (cont.) In Chapter 2, I assume that the delegate knows his type and can call for an insurrection. I show that shuffling can ensure the ruler's survival when it is a punishment on the delegate. With sufficiently low payoffs, even a bad type wants to replace the ruler, so that no call for insurrection can be trusted. The same logic explains why a ruler would invest in a white elephant project to remain in power. In Chapter 3, I propose a general model of divide and rule. I show that a ruler maximizes rents by playing off divisions in the population. Typically, a ruler relies on an extreme support base, who is most afraid of the alternative regime, and invests in any technology which exacerbates popular divisions. I argue that the model offers an explanation for the negative correlation between corruption and freedom of the media, which has been widely documented. This explanation is consistent with widespread awareness of corruption in the population. / by Alexandre Debs. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 159-163). / This thesis studies two strategies that households may use to keep their consumption smooth in the face of fluctuations in income and expenses: credit (borrowing and savings) and insurance (state contingent transfers between households). The first chapter asks why insurance among households in rural Thai villages is incomplete. The second chapter analyzes the impacts of micro-credit. The third chapter examines the interaction between interpersonal insurance and access to savings. The first chapter is motivated by the observation that interpersonal insurance within villages is an important source of insurance, yet consumption, while much smoother than income, is not completely smooth. That is, insurance is incomplete. This chapter attempts to identify the cause of this incompleteness. Existing research has suggested three possibilities: limited commitment-the inability of households to commit to remain within an insurance agreement; moral hazard-the need to give households incentives to work hard; and hidden income-the inability of households to verify one another's incomes. I show that the way in which "history" matters can be used to distinguish insurance constrained by hidden income from insurance constrained by limited commitment or moral hazard. This history dependence can be tested with a simple empirical procedure: predicting current marginal utility of consumption with the first lag of marginal utility and the first lag of income, and testing the significance of the lagged income term. This test is implemented using panel data from households in rural Thailand. The results are consistent with insurance constrained by hidden income, rather than limited commitment or moral hazard. I test the robustness of this result to measurement error using instrumental variables and by testing over-identifying restrictions on the reduced form equation for consumption. I test robustness to the specification of the utility function by nonparametric ally estimating marginal utility. The results suggest that constraints arising from private information about household income should be taken into account when designing safety net and other policies. My second chapter (co-authored with Abhijit Banerjee, Esther Duflo and Rachel Glennerster) uses a randomized trial to analyze the impacts of micro credit in urban South India. We find that more new businesses are created in areas where a micro credit branch opens. Existing business owners increase their spending on durable goods but not non-durable consumption. Among households that did not have a business before the program began, those with high estimated propensity to start a business reduce non-durable consumption and increase spending on durables in treated areas. Those with low estimated propensity to start a business increase non-durable consumption and spend no more on durables. This suggests that some households use micro credit to pay part of the fixed cost of starting a business, some expand an existing business, and others pay off more expensive debt or borrow against future income. We find no effects on health, education, or women's empowerment. My third dissertation chapter (co-authored with Arun Chandrasekhar and Horacio Larreguy) is motivated by the observation that the ability of community members to insure one another may be significantly reduced when community members also have the ability to privately save some of their income. We conducted a laboratory experiment in rural South India to examine the impact of savings access on informal insurance. We find that transfers between players are reduced when savings is available, but that, on average, players smooth their consumption more with savings than without. We use social network data to compute social distance between pairs, and show that limited commitment constraints significantly limit insurance when risk-sharing partners are socially distant, but not when pairs are closely connected. For distant pairs, access to savings helps to smooth income risk that is not insured interpersonally. / by Cynthia Georgia Kinnan. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2001. / "June 2001." / Includes bibliographical references (p. 94-95). / Since Friedman (1953) an advantage often attributed to flexible exchange rate regimes relative to fixed regimes is their ability to better insulate the economy against real shocks. I use a post-Bretton Woods sample (1973-1996) of 74 developing countries to assess whether the response of real GDP, real exchange rates and prices to terms of trade shocks differ systematically across exchange rate regimes. I find that real GDP and the real exchange rate responses are significantly different across regimes. In response to a negative terms of trade shock, fixed regimes experience large and significant losses in real GDP growth and the real exchange rate depreciates only after two years. Flexible regimes, on the other hand, are associated with small growth losses and immediate large real depreciations. Negative shocks are inflationary in floats and deflationary in pegs. In the second chapter I document the large dispersion in price levels that exists between different exchange rate regimes. In low and medium income countries, price levels in floats are, respectively, 30 percent and 24 percent smaller than in pegs. A simple application of a stochastic open economy model with nominal rigidities suggests a possible explanation for this fact. / (cont.) Uncertainty and the behavior of the monetary authority can affect the wage setting behavior of private agents. Under a peg, agents require a wage premium relative to floats, to be compensated for the higher variability in employment. This, in turn, implies a higher consumption based price level. However, an endogenous choice of the exchange rate regime and a less than fully accommodating policy in floats can potentially undo this result. Finally, the third chapter provides a simple dynamic framework to study the relation between the banking sector's safety nets and the share of foreign currency (dollar) deposits. When deposit and bank insurance schemes that do not discriminate between currencies they introduce a cross-transfer from local currency (peso) to dollar deposits that favors deposit dollarization and results in an increased currency exposure of banks. Second, the presence of a lender of last resort, by reducing the cost of risk to banks, stimulates dollar financing. / by Christian M. Broda. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1998. / Includes bibliographical references (p. 119-121). / by Luis Videgaray-Caso. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2016. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 159-161). / This thesis consists of three essays on economics focusing on the determinants of regime change and economic growth. I put the focus primarily on political, institutional, and historical factors. I started working on these topics after studying the importance of regime change and institutions in the modern economics literature. The first essay analyzes how media can be a powerful tool to promote regime change in tightly controlled political systems. I analyze the impact of Radio Liberty, an American radio with an anti-communist slant, on the 1991 Russian elections, which were the first elections in the country, to study the role of Western media on the demise of the Soviet Union. I use a novel empirical strategy exploiting ionospheric variation with the aim of obtaining a measure of Radio Liberty availability in each Russian electoral district. The results show a significant effect of these broadcasts in favor of Yeltsin, documenting that media can play an important role in political processes of regime change. In the second essay, I analyze the persistent effects of the territorial division in Spain between the Christian kingdoms in the north and Islamic Iberia in the center and south of the country during the Middle Ages. I analyze this question empirically using a spatial donut discontinuity design which compares Christian and Muslim territories exploiting the dynamics of the reconquest process undertaken by the Christians which resulted in the Muslim defeat. I find important differences in current municipal economic development with substantial positive effects in Christian municipalities. The third essay analyzes the importance of protests for regime change. I provide empirical evidence that protests have a significant and non-linear impact on the likelihood that a country successfully democratizes. I show that it is for intermediate values of protests that the likelihood of democratization is higher. I present a dynamic model to explain the empirical evidence. The main implication is that protests could play an important role for regime change as long as they are not too high because in the latter case there will be a backlash which will block regime change. / by Javier Garcia-Arenas. / Ph. D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2004. / Includes bibliographical references. / This dissertation presents four distinct essays. Mutually beneficial deals between government officials and merchants have negative social externalities, motivating policies to reduce this form of corruption. Chapter 1 analyzes a model with the following two components. Guanxi, or connections, between officials and merchants remove the risk that merchants expose corrupt officials, providing the basis for officials to treat their friends preferentially, leading to ex ante friendship formation; and supervisors demand bribes from their officials with the goal of maximizing returns from unexposed officials. Individual merchant friendship formation imposes externalities on other merchants. I find that short-term policies can have long-term perverse effects. Furthermore, reducing bureaucratic size might non-intuitively increase corruption, and the mere perception that supervisors are corrupt reduces official-merchant corruption. Chapter 2 proposes an explanation for the political bandwagon effect. In democratic countries where investments risk expropriation when the ruling political party changes, voters have an incentive to boost the support of the expected winning party during elections to show investors that the incoming party is more popular than it actually is, and hence more likely to stay in office after the next election. With rational expectations, investors are not fooled, but voters nonetheless over-vote in favor of the expected winner. The determinants of over-voting are explored, and an empirical exercise provides initial support for the results. / (cont.) Chapter 3 is a joint work with Abhijit Banerjee. The chapter evaluates the performance of the World Bank and the Asian Development Bank, and finds no evidence of great effectiveness. The limits to effectiveness, and resistance to evidence-based policy making, are discussed. The authors argue that evidence-based aid is feasible. Chapter 4 is co-authored with James Snyder and Stephen Ansolabehere. The chapter suggests that voters do not merely want to maximize their individual voting power, but also seek to increase the voting power of other voters who have similar spending preferences, effectively allowing other voters to virtually represent them. The authors develop a theoretical explanation, and use legislative ballot proposition data from reapportionment initiatives in California over time and at various aggregation levels for empirical support. / by Ruimin He. / Ph.D.

Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Economics, 2009. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 27-28). / Econometric analysis of rational expectations models has been a widely studied topic in the macro-econometric literature. This thesis looks in particular at evaluating Neokeynesian model (NKM) with respect to its conformity with the data. Among the available econometric techniques, this thesis investigates what cointegrated VAR can illuminate about how close the NKM gets to the data. This project closely follow the approach taken by Mikael Juselius (2008) and extends the analysis to the New Zealand data. The findings from the thesis lend support to Juselius' conclusions but in a limited way. The results from this thesis question the robustness of his claims based on US data supporting inexact rational expectations models. / by Hae-min Kim. / S.M.