This dissertation focuses on explaining the cyclicality of unemployment, job vacancies, job creation and market tightness in the US economy. The framework used to model unemployment and job creation throughout this work, is the search and matching model, created by Mortensen and Pissarides (1994). This dissertation proposes three different mechanisms to improve the performance of a dynamic stochastic general equilibrium model (DSGE) with search unemployment, to align the model's predictions with the quarterly US data from 1955-2005. The first chapter proposes a New Keynesian model with search and matching frictions in the labor market that can account for the cyclicality and persistence of vacancies, unemployment, job creation, inflation and the real wage, after a monetary shock. Motivated by evidence from psychology, unemployment is modeled as a social norm. The norm is the belief that individuals should exert effort to earn their living and free riders are a burden to society. Households pressure the unemployed to find jobs: the less unemployed workers there are, the more supporters the norm has and therefore the greater the pressure and psychological cost experienced by each unemployed searcher. By altering the value of being unemployed, this procyclical psychological cost hinders the wage from crowding out vacancy creation after a monetary shock. Thus, the model is able to capture the high volatility of vacancies and unemployment observed in the data, accounting for the Shimer puzzle. The paper also departs from the literature by introducing price rigidity in the labor market, inducing additional inertia and persistence in the response of inflation and the real wage after a monetary shock. The model's responses after a monetary shock are in line with the responses obtained from a VAR on US data. In the second chapter I attempt to solve the amplification puzzle, the inability of the standard search and matching model to account for the volatility in vacancies and unemployment, by exploring the connection between R&D and employment. R&D affects product creation and product creation affects employment. An improvement in technology benefits the economy in two ways. Same products can be produced more efficiently and also new products are created. Empirical evidence suggests that the increase in production for already existing goods does not imply increases in employment, while new products are associated with increases in employment. The search and matching model implies that changes in technology do not imply large changes in employment for already existing goods which is in line with what the evidence suggest. However, when the search and matching model applies for sectors that innovate and produce new products, changes in employment significantly increase. Therefore, in this model I assume all agents need to innovate first before they create a job opening, because firms that invent new products are the ones that contribute more to the volatility of employment according to the evidence. Since ideas are cheaper to implement after a technological expansion, the cost of vacancies becomes countercyclical which boosts job creation and vacancies. The model can amplify the volatilities of vacancies, unemployment and market tightness approximately by up to 300 percent. The third chapter investigates the macroeconomic implications from introducing perpetual learning in a simple search and matching model. When the agents with rational expectations are replaced with agents that are boundedly rational, the volatilities of vacancies, unemployment and market tightness are increased significantly. Job creation is connected to the present discounted value of future cash flows, which means that if agents do not form rational expectations, their forecasts of future cash flows are subject to periods of either excess optimism or excess pessimism. Those extra distortions of the agents' forecasts amplify the volatility of job creation. Therefore, the amplification puzzle arising from the search and matching model might be due to the strong assumption that agents are rational; thus, when agents need to form multi-period forecasts using past data as in Preston (2005) and Eusepi and Preston (2010), the search and matching model's amplification potential is enhanced. The model can replicate moments from quarterly US data from 1955Q1 to 2007Q4. However the more amplification added to the model through higher gain parameter, the further the correlations generated by the model are from the ones obtained from US data. That is because higher amplification induces vacancies to fluctuate around the rational expectations equilibrium less smoothly. Moreover, higher amplification through learning worsens the prediction of the model for the slope of the Beveridge curve.

This dissertation consists of three essays in applied microeconomics. The first chapter looks at whether the Social Security claiming behavior of husbands respond to the presence of Social Security spouse and survivor benefits paid to wives based on his earnings record. I separately estimate the claiming response to incentives for each of the three types of Social Security benefits: retired worker, spousal, and survivor. This approach departs from the previous literature, which estimates behavioral responses to household incentives. I begin by documenting that failure to maximize household Social Security wealth results in a financial burden borne primarily by the wife. I next estimate husbands' behavioral response to Social Security benefit incentives, with my focus exclusively upon incentives due to the actuarial adjustment from delayed claiming. Variation in incentives comes from rule changes to the Social Security benefit calculation, in addition to the age difference between spouses and the relative strength of the wife's labor force history. I find while husbands are responsive to their own benefit incentives, they are barely responsive to household, spousal, and survivor benefit incentives. A variety of robustness checks looking at segments of the population predicted to be more responsive to incentives provide very similar results to main specification. The second chapter examines the incidence of health insurance coverage for displaced workers during the periods preceding and subsequent to job displacement. Most individuals lose health insurance coverage upon job separation. There is concern that individuals are unable to recover insurance coverage following separation. I find within 18 months following job loss the level of health insurance coverage returns to pre-displacement level. Furthermore, I find that obtaining insurance coverage upon reemployment does not impact wages. The third chapter first examines how much of the fall in poverty among elderly women can be attributed to changes in the distributions of age, marital status, and education of elderly women using the Current Population Survey. Increased educational attainment has put tremendous downward pressure on the poverty rate driven primarily by the shift of high school dropouts to those with a high school diploma. I also find poverty would be slightly lower in the absence of changes to the age distribution and no direct impact on poverty levels due to the changes in distribution of marital status. I also investigate the role of both labor force participation and marital status over the life-cycle on old age outcomes using survey data matched to administrative earnings records from the Census Bureau. I find even after controlling for Social Security and marital status over prime-age years, lifetime earnings and labor force experience still has a significant impact on poverty incidence of elderly women. Projecting poverty for cohorts who have not reached old age, I find increased wages and LFP over the life-cycle places large downward pressure on predicted poverty. Marital status over the life-cycle exerts its own negative impact on poverty.

This thesis focus on the credit dimensions of monetary policy. The topic has been an area of active research since the financial crisis of 2008 and 2009, The chapters can be grouped in terms of the questions that motivated them. For the first and the second, it was "Why do Central Banks in emerging market economies intervene in credit markets in response to external shocks?" while for the third the question is more general "Why do Central Banks intervene in credit markets?" In Chapter 1, we describe that, during the financial crisis of 2008-2009, to respond to a sudden stop in capital flows, many central banks in emerging market economies relied on credit policies. We build a quantitative small open economy model to study these credit policies. The main innovation of our setup is the presence of two imperfect credit markets, one domestic and the other international, and of two types of firms. The exporter is assumed to have access to both credit markets, while the wholesale firm can only borrow in the domestic market. During a sudden stop, exporters, faced with higher spreads for international credit lines, repay part of their foreign debt, tap the local market for funds and cause spreads to increase in the domestic market. This increases financing costs for all firms, causes a deterioration of the balance of payments and depresses output. Calibrating the model to match Brazilian data, we assess the effects of two policies implemented by the Central Bank of Brazil: (i) lending to exporters using previously accumulated foreign-exchange reserves and (ii) expanding credit in order to reduce spreads in the domestic market. The model suggests that both policies probably raised GDP, but that the latter may well have decreased welfare. Moreover, had the central bank not been able to use foreign reserves as the source of funding, lending to exporters would also have reduced welfare. In Chapter 2, we expand our focus to the fact that, during the crisis, the emerging markets economies faced a large decline in their terms of trade and an increase in the interest rate they could borrow from abroad. As their counterparts in developed economies, policymarkers intervened in credit markets. A common ground behind the interventions seems to be failures in the banking system. We build a quantitative small open economy model with domestic financial intermediation to study these credit policies. The main innovation of our setup is the presence of a domestic banking system. In this structure, four main channels link external shocks to the financial sector: (1) the profitability of the export sector, (2) asset prices, (3) bank's borrowing cost and (4) the balance sheet position of banks as they hold foreign currency denominated debt. For the calibration we consider, based on Brazilian data, the domestic financial sector has the largest amplification effect in response to an increase in the international interest rate and the corresponding decline in assets price is the main channel. Hence credit interventions are most powerful in response to this type of a shock, reducing by 30% the initial GDP fall. The model is general and appropriate to address several questions. We illustrate that by showing that it can replicate standard business cycle properties and to discuss conventional monetary policy in the context sudden stops, when the domestic banking system is often at the epicenter of the crisis. In Chapter 3, we first note that a number of recent theoretical papers show that margins can affect asset prices. Such results are important, for example, to understand the unconventional polices implemented by the Fed during the great recession of 2007-2010. However, empirical evidence is still scarce. We contribute to fill this gap. We show that an aggregate margin-related factor is able to predict future excess returns of the SP 500 and that stocks with high exposures to the cost of buying on margin pay on average higher returns.

This dissertation consists of three essays. The first essay analyzes the causal effect of HIV education and incentives (home-based HIV testing and conditional cash transfer) on HIV testing decision. The second essay analyzes the short- and medium-term causal effects of HIV testing on HIV infection expectations and sexual behavior. These two essays are based on data from a randomized controlled trial in Ethiopia. The third essay examines effects of wrongful discharge protections adopted by U.S. state courts on employment and job loss for workers with different ethnicity, race, and education level.

This dissertation consists of three essays on health economics. The first chapter provides empirical evidence on the impacts of government reimbursement of long-term care. We apply a regression discontinuity design using administrative data from South Korea to estimate the impact of subsidies for formal home and institutional care on informal care use and medical expenditures. We find that reimbursement leads to increases in formal long-term care utilization, even accounting for crowd out of private spending. Among individuals who are partially dependent for some activities of daily living (ADLs), we find that increased use of formal home care has no impact on the use of informal care at the extensive margin or on medical expenses. Among individuals who are partially dependent for several ADLs, we find that increased use of institutional care leads to reductions in informal care and medical expenses. Among individuals who are completely dependent for several ADLs, we find that substitution of home care for institutional care leads to substantial decreases in medical spending. The second chapter studies state laws passed in the late 1990s that required health insurers to cover diabetes related equipment, supplies, and education. We assess the impact of these mandates on health related behavior and labor market outcomes. We find no significant effects for diabetics or groups with higher prevalence of diabetes in terms of exercise, diet, income, or employment. These results are robust to different specifications and datasets. The third chapter provides empirical evidence on both outcomes and potential mechanisms resulting from information obtained from screening. We apply a regression discontinuity design using administrative data from South Korea to estimate the impact of different classifications of overall health that vary discontinuously with blood sugar level. We find that secondary examinations due to a "disease suspected" classification leads to follow-up rates greater than 50%. However, we find few impacts otherwise, including short and medium run medical activity and longer run health outcomes. We also find that the responsiveness to the classifications among the highest income quintiles is lower than among the other quintiles, consistent with more educated individuals incorporating information directly from the blood sugar measure itself.

In this dissertation, I examine three questions of relevance to macroeconomists and macroeconomic policy makers. Chapter 1 studies how central banks should communicate with the general public about their policies and the state of the economy. Chapter 2 evaluates alternative empirical estimates of the effects of tax changes through the lens of a dynamic-stochastic general equilibrium (DSGE) model. Chapter 3 examines the degree to which international borders segment product markets above and beyond the market segmentation that occurs within countries. Central banks and other public actors often perceive a tradeoff between providing the public with useful information and the risk of overwhelming it with excessive communication. In chapter 1, I model this tension in a heterogeneous-information environment in which an information authority chooses how many signals to provide regarding an aggregate state. Agents respond by choosing how many signals to observe. When agents desire coordination in actions, I show that the number of signals they acquire may decrease in the number released by the authority. Regardless of whether agents and the authority value coordination equally, the optimal quantity of communication is positive, but does not maximize agents' acquisition of information. In contrast to a model without information choice, the authority always prefers to provide more precise signals. Estimating the tax multiplier via structural vector autoregression (SVAR) and the narrative approach delivers significantly different results. The former yields multipliers of about 1, whereas the latter produces much larger multipliers of about 3. The SVAR and narrative approaches differ along two important dimensions: the identification scheme and the reduced-form transmission mechanism. Chapter 2 uses a DSGE-model approach to evaluate the hypothesis that the different tax multipliers stemming from the SVAR and narrative approaches are due to differences in the assumed reduced-form transmission mechanisms. The main finding of the paper is that in the context of the DSGE model employed this hypothesis is rejected. Instead, the observed differences in estimated multipliers are due either to the models failing to identify the same tax shock, or to small-sample uncertainty. In chapter 3, we develop a model of equilibrium price dispersion via customer search and show that it can match well-known empirical facts about international prices despite the fact that markets are equally integrated across and within countries. We then consider the model's implications for trade quantities, and show these statistics are necessary to independently identify the true degree of market segmentation across versus within countries. Moreover, in our model, disaggregated price evidence alone is not sufficient to disentangle the cross-border dispersion induced by barriers to international trade from that induced by different realizations of aggregate variables or cross-country differences in idiosyncratic shock distributions. Using data simulated from the model, we demonstrate some of the difficulties in using popular regression measures of the "border effect" to infer the degree of market segmentation created by the border.

This dissertation studies patterns of strategic communication in cases, in which the involved parties disagree in their preferences or opinions. In Chapter 1, I study a model of strategic communication in networks, in which the players diverge in their preferences and information can be communicated either through a costly verifiable information (hard) channel or through a low-cost cheap talk (soft) channel. I find that the availability of hard links allows each agent to get a weakly greater number of truthful messages compared to the pure cheap talk setting. If only one party bears the cost of a hard link, then introducing hard links increases the total expected welfare. In contrast, if the cost of a hard link is shared by both parties, then allowing for verifiable communication can decrease the total welfare. In Chapter 2, I consider a model of strategic cheap talk communication in networks, in which the players can disagree in their preferences or their opinions. I find that the information transmission pattern crucially depends on the nature of the disagreement. If the agents diverge in their preferences, then information transmission exhibits a negative externality effect: greater information obtained by some agent discourages further information accumulation by harming the credibility of other agents. In contrast, information transmission displays a positive externality effect when the agents have divergent opinions: greater information obtained by some agent encourages further information accumulation by improving the credibility of other agents. Chapter 3 studies a benevolent authority's decision to constrain or inform a population of individuals. It demonstrates that the authority's decision to regulate an activity depends on whether she deems it a matter of preference or opinion. In the former case, the benevolent authority is libertarian: she gives truthful advice and safeguards liberty. In the latter case, the benevolent authority is paternalistic: believing that she acts in the individuals' best interest, the authority forces another action than the individuals would choose for themselves. In Chapter 4, I consider communication between an informed Sender and an uninformed Receiver. The Sender has a preference bias and is guilt averse to letting down the Receiver's payoff expectations. I show that no separating equilibrium exists; rather, in case of uniform state of the world and quadratic utilities, I demonstrate that there exist partition equilibria (as in Crawford and Sobel (1982)). An increase in the guilt aversion intensity is akin a decrease in the preference divergence: higher guilt aversion intensity allows for more intervals in the equilibrium partition; and holding the number of elements in the partition fixed, greater guilt aversion intensity results in more balanced intervals.

This dissertation broadly focuses on the role government should play in providing and financing education. The first chapter estimates the economic incidence of need-based student aid, one tool intended to ameliorate credit constraints in the market for higher education. The second chapter examines whether government programs providing support to low-income families should explicitly support or deny access to higher education by analyzing the impact of college attendance on the labor market outcomes of current and former welfare recipients. Chapter 3 focuses on publicly provided education at the primary and secondary levels, and estimates the impact of a teacher incentive pay program on student achievement.

This dissertation has been motivated by the question of how countries should optimally structure health care. Especially, there are two important economic and policy questions asked that extend beyond the area of health economics. The first is how the expansion of health insurance coverage affects the utilization and health of its beneficiaries (extensive margin); the second is how generous should health insurance be (intensive margin) to balance the provision of care and financial protection against risk while containing medical expenditures. The three chapters in this dissertation aim to make empirical contributions to these ongoing research questions. First chapter, "The Effect of Patient Cost-Sharing on Utilization, Health and Risk Protection: Evidence from Japan" addresses the second question. It investigates how cost-sharing, requiring patients to pay a share of the cost of care, affects the demand for care, health itself, and risk protection among the elderly, the largest consumers of health service. Previous studies of cost-sharing have had difficulty separating the effect of cost-sharing on patients from the influence of medical providers and insurers. This paper overcomes that limitation by examining a sharp reduction in cost-sharing at age 70 in Japan in a regression discontinuity design. I find that price elasticities of demand for both inpatient admissions and outpatient visits among the elderly are comparable to prior estimates for the non-elderly. I also find that the welfare gain from risk protection is relatively small compared to the deadweight loss of program financing, suggesting that the social cost of lower cost-sharing may outweigh social benefit. Taken together, this study shows that an increase in cost-sharing may be achieved without decreasing total welfare. Third chapter, "Effects of Universal Health Insurance on Health Care Utilization, Supply-Side Responses and Mortality Rates: Evidence from Japan" (with Ayako Kondo) address the first question. Even though most developed countries have implemented some form of universal public health insurance, most studies on the impact of the health insurance coverage have been limited to specific subpopulations, such as infants and children, the elderly or the poor. We investigate the effects of a massive expansion in health insurance coverage on utilization and health by examining the introduction of universal health insurance in Japan in 1961. We find that health care utilization increases more than would be expected from previous estimates of the elasticities of individual-level changes in health insurance status such as RAND Health Insurance Experiment in the US. The two chapters addressed above focus on consumers' incentives. Second chapter, "Supply-Induced Demand in Newborn Treatment: Evidence from Japan" (with Kiyohide Fushimi) examines the incentives faced by medical providers. Since medical providers exert a strong influence over the quantity and types of medical care demanded, measuring the size of supply-induced demand (SID) has been a long-standing controversy in health economics. However, past studies may underestimate the size of SID since it is empirically difficult to isolate SID from other confounding hospital behaviors, such as changes in the selection of patients. We overcome these empirical challenges by focusing on a specific population: at-risk newborns, and we measure the degree of SID by exploiting changes in reimbursement caused by the introduction of the partial prospective payment system (PPS) in Japan, which makes some procedures relatively more profitable than other procedures. We find that hospitals respond to PPS adoption by increasing utilization and increasing their manipulation of infant's reported birth weight, which determines infants reimbursement and maximum length of stay. We also find that this induced demand substantially increases hospital reimbursements without improving infant health, implying that the additional money spent has no commensurate health gains.

This dissertation attempts to understand the factors that determine the performance and choice of political institutions. We start with the recognition that these two aspects of the problem are fundamentally connected given that political institutions are themselves endogenous, i.e. the way in which they perform and function depends importantly on the reasons behind their adoption. Each chapter of this dissertation analyzes a different class of institutions, identifying specific features of the political and social environment that impact their performance and deriving, whenever possible, implications for institutional design. The first chapter studies the main factors that determine the constitutional preferences of citizens over the form of government. We focus on the case of Brazil, where a referendum in 1993 allowed the population to choose between a presidential and a parliamentary system of government. A model is proposed to explain the main facts emerging from the data. It is shown that the parliamentary regime requires a strong system of protection against expropriation, particularly at the local level, and a class of politicians that can be trusted to represent well the interests of voters. We also show that the poor groups of the population are more likely to vote for the presidential regime since the low quality of their local accountability institutions makes them more vulnerable to the expropriation by legislators. The second chapter studies the question of why checks and balances work well in some cases, but not in others. We investigate the conditions under which a system of checks and balances is beneficial to the society. The analysis emphasizes the important role played by political transparency, which is defined as the ability of voters to observe the proposals submitted to congress during the legislative process. We show that transparency is a necessary, but not sufficient, condition for an effective system of checks and balances. The model yields the surprising result that political transparency may be harmful to voters depending on the characteristics of the social and political environment. The third chapter studies a committee decision-making problem with career oriented agents who may be biased towards one of the alternatives. We investigate how the interaction between career concerns and bias affects the behavior of members and how this effect depends on transparency. The main result is that public voting leads to better decisions when the magnitude of the bias is large relative to the common value, while secret voting performs better otherwise. We also show that the interaction between transparency and reputation concerns may exacerbate the biases of incompetent members, leading them to vote more in accordance with their individual interests.