Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2014. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 143-150). / The first chapter of this dissertation examines the market for private school. Private school market shares are rising steadily in many developing countries, but we have a limited understanding of how private schools set prices, how parents respond, and how this affects enrollment and performance in equilibrium. To shed shed light on demand behavior and supply response, I present a model of school pricing that incorporates an unusual feature of schooling compared to other goods - a potential preference by parents for small classes, and hence low school enrollment - that interacts with schools having market power. I show that, for a relatively broad range of parameter values, these two features can lead to the surprising result that an increase in aggregate household income, and hence an increase in willingness to pay for private schooling, can actually cause equilibrium private school enrollment to decrease. To investigate how private school enrollment responds to rising household income in practice, I exploit aggregate community-level income shocks in Chile, which has had a nationwide school voucher system since 1981. These shocks are caused by different responses to the price of copper in different municipalities. I show that private school prices rise by 0.9% in response to a shock that causes a 1% rise in income while private school enrollment falls by 2.0%. I find that falling private school enrollment is primarily caused by the middle-income students at the top schools. Those middle-income students induced to downgrade by rising prices do not experience the test score gains from the income shock experienced by students in the rest of the income distribution. I structurally estimate an extended version of the model and find that both market power and parental preferences for reduced class size are contributing to the observed declines in enrollment. The second chapter studies the responsiveness of United States-Mexico migration to U.S. border enforcement policy. Spending on border enforcement has risen by 240% in the U. S. in the last decade, and the construction of a fence on the U.S.-Mexico border has become a focal point in the debate over the costs and benefits of increased border security. However, whether and by how much the fence actually reduces migration from Mexico to the U. S. remains an open question. This paper estimates the impact of the fence on migration flows between Mexico and the U.S. and investigates the mechanisms driving observed impacts. To conduct this analysis, I exploit variation in the timing of U.S. government tactical infrastructure investment in fence construction in the period after the passage of the 2006 Secure Fence Act. Using Mexican household survey data and data I collected on border fence construction, I find that construction in a given municipality reduces migration by 39% from that municipality and by 26% from adjacent municipalities. I also find evidence that fence construction reduces migration rates for residents of non-border states with historically low access to smugglers by 38%. Based on these estimates, I calculate that the implied cost of the fence per migrant deterred is $4,800 USD. My findings suggest that fence construction deters migration because the migration costs faced by prospective migrants are sensitive to the particular set of available crossing locations. I derive a simple migration selection model to test this hypothesis and find that a left-censoring of the migration cost distribution, consistent with the disproportionate elimination of low-cost crossing options, best rationalizes evidence on changing migration patterns. The third chapter of this dissertation (coauthored with Erica Field and Rohini Pande) examines the economic returns to social interaction. For this research, microfinance clients were randomly assigned to repayment groups that met either weekly or monthly during their first loan cycle and then graduated to identical meeting frequency for their second loan. Long-run survey data and a follow-up public goods experiment reveal that clients initially assigned to weekly groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly two years after the experiment. They were also three times less likely to default on their second loan. Evidence from an additional treatment arm shows that, holding meeting frequency fixed, the pattern is insensitive to repayment frequency during the first loan cycle. Taken together, these findings constitute the first experimental evidence on the economic returns to social interaction, and provide an alternative explanation for the success of the group lending model in reducing default risk. / by Benjamin Feigenberg. / Ph. D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2001. / Includes bibliographical references (p. 142-143). / This thesis examines the workings of insurance markets. The first two papers examine the effect of government tax and regulatory policy in markets for supplementary health insurance. The third paper presents new evidence of the importance of adverse selection in insurance markets. The first paper examines the empirical consequences of imposing binding minimum standards on the market for private health insurance for the elderly in the United States. I find robust evidence of a substantial (40 percent) decline in insurance coverage associated with imposing these minimum standards. The standards are also associated with a reduction in coverage of non-mandated benefits among the insured. The minimum standards therefore, while requiring additional insurance coverage among the insured, were also associated with both extensive and intensive declines in insurance coverage. Considering all of these various changes, I estimate that the standards were, on net, welfare reducing. The second paper presents new evidence of the effect of the tax subsidy to employer-provided health insurance on coverage by such insurance. / (cont.) I study the effects of a 1993 tax change that reduced the tax subsidy to employer-provided supplementary health insurance in Quebec by over half. Using a differences-in-differences methodology in which changes in Quebec are compared with changes in other Canadian provinces not affected by the reform, I estimate an elasticity of employer coverage with respect to the tax price of -0.46 to -0.49. The tax subsidy appears much more critical to the provision of supplementary health insurance in small firms than in larger ones. The third paper, written jointly with James Poterba. re-examines the importance of adverse selection in insurance markets. We use a unique data set of all annuity policies sold by a large U.K. insurance company since the early 1980s to analyze mortality differences among individuals who purchased different types of policies. We find systematic relationships between ex-post mortality and annuity policy characteristics that are consistent with models of asymmetric information in insurance markets. We confirm that the pricing of features of annuity contracts is consistent with the self-selection patterns we find in mortality rates. / by Amy Nadya Finkelstein. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1995. / Includes bibliographical references (p. 145-148). / by Leo Kropywiansky. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2013. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 135-141). / This thesis seeks to analyze two questions central to the economic welfare of rural households in developing countries: the trade-offs between equity and efficiency induced by hybrid forms of property rights, and the decisions made by households in the process of human capital accumulation, particularly in early childhood. The first two chapters examine the impact of periodic land reallocations and tenancy reforms in China and India, respectively, on intravillage land inequality and the investment decisions made by rural households. The final chapter turns the focus to inequality within the household, analyzing how intrahousehold allocation of educational resources in rural China responds to inequities in endowment between children. In the first chapter, I evaluate the impact of village-level land reallocations in China on household economic outcomes. Since land was decollectivized in China in 1983, village leaders have implemented regular forced reallocations of land designed to enhance intravillage equity and attain other policy goals. I estimate the impact of insecure tenure using the past history of land shifts as an instrument for current tenure insecurity, and find that an increase in the probability of losing the current plot yields a decrease in agricultural inputs and production of around one standard deviation. Though the costs of insecure tenure are high, structural estimates of the varying cost of reallocation across different villages suggest the choice to reallocate does reflect an optimizing process on the part of village officials, who reallocate where the net benefit is larger. However, the observed pattern of reallocations would be optimal only given an objective function for the village leader that places an extremely high weight on equity, and even given this objective function, there is evidence that village leaders may be making some costly mistakes. In the second chapter, coauthored with Timothy Besley, Rohini Pande and Vijayendra Rao, we seek to analyze the long-run impact of land reform in southern India. Though land reform policies have been widely enacted across the developing world, evidence about the long-run impact of these policies remains quite limited. In this paper, we provide evidence about these long-run effects by combining the quasi-random assignment of linguistically similar areas to South Indian states that subsequently pursued different tenancy regulation policies with cross-caste variation in landownership. Roughly thirty years after the bulk of land reform occurred, land inequality is lower in more regulated areas, but the impact differs by caste group. Tenancy reforms increase own-cultivation among middle caste households, but render low caste households more likely to work as daily agricultural laborers. At the same time, an increase in agricultural wages is observed. These results are consistent with credit markets playing a central role in determining the long-run impact of land reform: tenancy regulations increased land sales to the relatively richer and more productive middle caste tenants but reduced land access for poorer low caste tenants. In the final chapter, I analyze the strategies employed by households in rural China to allocate educational expenditure to children of different initial endowments, examining whether parents use educational funding to reinforce or compensate for these differences. Empirical results obtained employing early-childhood climatic shocks as an instrument for endowment, measured as height-for-age, indicate that parental expenditure is preferentially directed to the relatively weaker child. In response to the mean difference in endowment between siblings, parents redirect between 10 and 20% of discretionary educational spending to the child with lower endowment, and this effect is robust across multiple measures of endowment and multiple measures of climatic shocks. This analysis is consistent with the hypothesis that parents use the intrahousehold allocation of resources to compensate for differences in endowment and thus in expected welfare, between their children. / by Jessica E. Leight. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007. / Includes bibliographical references. / This thesis is a collection of three independent essays that study the implication of learning on labor mobility, labor supply, wage distribution, wage dynamics, and allocations of workers under different assumptions about the nature of employer learning. The first essay develops a model of job mobility and wage dispersion under the assumption that the current employers have superior information about their workers over outside firms. The superior information of the workers does not lead to market collapse. Instead, there is a unique mixed strategy equilibrium which leads to a positive amount of turnover and a nondegenerate wage distribution. This model implies that a skill-biased technology change that also favors general skill can lead to increase both in job mobility and wage dispersion. This sheds light, on the joint evolution of job mobility and wage dispersion in the U.S. in the past 30 years. The second essay studies the wage distribution and wage dynamics under matching and symmetric Pareto learning. I develop a model that contains pure learning and pure matching as limiting cases. In addition, the model generates effects that arise from the interaction of learning and matching. In particular, the model generates an earning profile typically obtained in a Mincerian regression. / (cont.) Moreover, the model predicts that the wage residuals are more likely to be serially correlated in younger workers in industries with increasingly convex wage schedules. This helps reconcile the conflicting findings that positive correlations are found in small, homogenous samples but not large, heterogeneous samples. The third essay, jointly with Peter Schnabl, develops a, model that examines the optimal solution to the problem of assigning workers into jobs under adverse selections. Workers differ by their disutility of effort. Jobs differ by their productivity and ease of effort-monitoring. Firms would like to assign hard workers to higher level jobs because efforts on these jobs are harder to monitor. To prevent the lazy workers from mimicking the hard workers, we study the use of two instruments firms may use: requiring long hours and distorting job assignments. The model has an essentially unique separating equilibrium. In equilibrium, workers are required to exert inefficiently high levels of effort and firms commit to promote only a fraction of qualified workers. / by Jin Li. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2009. / Includes bibliographical references. / This thesis is a collection of three essays on dynamic sales mechanisms. The first chapter analyzes the Name Your Own Price (NYOP) mechanism adopted by Priceline.com. Priceline.com, a website helping travelers obtain discount rates for travel-related items, gained prominence for its Name Your Own Price system. Under Name Your Own Price, a traveler names his price for airline tickets, hotel rooms, or car rentals. Priceline then checks if there is any seller willing to accept the offer. If no one accepts, the buyer has to wait for a certain period of time (the lockout period) before rebidding. This paper builds a one-to-many dynamic model without commitment to examine the buyer's and the sellers' equilibrium strategies. I show that without a lockout period, in equilibrium, the sellers with different costs are either almost fully discriminated or pooled in intervals except the one with the lowest possible cost. In the latter case, the buyer does not raise the bids much until the very end, so the price pattern is convexly increasing, consistent with the empirical finding, and most transactions occur just before the day of the trip, which illustrates the deadline effect that is observed in many negotiation processes. The lockout period restriction, which limits the buyer's bidding chances and seems to hurt the buyer, thus moves the transactions forward and can actually benefit a buyer in some circumstances. The second chapter studies a one-to-many negotiation process in which a seller with an indivisible object negotiates with two asymmetric buyers to determine who gets the object and at what price. / (cont.) The seller repeatedly submits take-it-or-leave-it offers to the two buyers until one of them accepts. Unlike a Dutch auction, the seller has the discretion to offer two different prices to the two buyers. I show that when committing to some price paths is possible, the optimal outcome for the seller stated by Myerson (1981) is achievable. When commitment is impossible, the optimal outcome is no longer attainable. Instead, there exists an equilibrium in which the seller's equilibrium payoff is the same as that in a second-price auction, which implies that the seller's payoff might be lower than in a Dutch auction. The result thus illustrates the value of a simple institution like a Dutch auction, which seems to restrict a player's freedom but actually benefits the player by providing a commitment tool. The analysis also sheds light on the procurement literature. The third chapter provides a rationale for why a seller may package goods in bundles that are too large for a consumer to consume all by himself. I show that selling in bulk packages is an alternative way for the seller to discriminate buyers when resale cannot be excluded among buyers. When bulk packages are offered, buyers who value the product more usually have stronger incentive to buy the package, and buyers who value the product less tend to buy from resale. Moreover, the seller can make more profit by selling bulk packages than by selling single-unit packages when the buyers' values of the product are more negatively correlated. / by Chia-Hui Chen. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references. / The first two chapters of this thesis investigate a possibly fundamental aspect of technological progress. If knowledge accumulates as technology progresses, then successive generations of innovators may face an increasing educational burden, forcing them to spend longer periods in education and/or become increasingly specialized. In either case, the productivity of innovators may be reduced, with negative implications for growth. The first chapter develops a formal model to examine the growth implications of this "knowledge burden mechanism" and generate testable predictions for innovators. The model predicts that educational attainment, specialization, and teamwork will rise over time. In cross-section, the model predicts that specialization and teamwork will be greater in deeper areas of knowledge while, surprisingly, educational attainment will not vary across fields. I test these predictions using a micro-data set of individual inventors and find evidence consistent with each of these predictions. The second chapter further investigates the knowledge burden mechanism. Using data on famous inventions, I find that the age at which inventors produced them increased by 5 years over the 20th Century. The chapter employs a maximum likelihood model to test explanations for this trend. A knowledge-based explanation receives considerable support: innovators appear to arrive at the knowledge frontier 6.6 years later at the end of the 20th Century than they did at the beginning. This trend is unlikely to be sustainable and further suggests that educational externalities are a problematic byproduct of technological progress, particularly if innovators do their best work when they are young. The final chapter investigates whether national leaders impact growth in developing coun- tries. Using deaths of leaders while in office as a source of exogenous variation, we ask whether such randomly-timed leadership transitions are associated with shifts in country growth rates.We find robust evidence that leaders have a causal effect on growth. The effect of leaders on growth appears limited to non-democracies, where the death of an autocrat tends to be followed by a substantial, prolonged increase in growth. / by Benjamin F. Jones. / Ph.D.

Massachusetts Institute of Technology. Dept. of Economics and Social Science. Thesis. 1965. Ph.D. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006. / "June 2006." / Includes bibliographical references. / This thesis is a collection of three empirical essays on firms, banks, and access to finance. Chapter 1 provides evidence that credit subsidies for exports are substantially misallocated towards financially unconstrained firms. Using loan level data for firms and exploiting an exogenous change in loan eligibility, I show that publicly listed firms are financially unconstrained, and are also allocated nearly 44% of all subsidized loans. The opportunity cost of these misallocated funds is significant as even the more productive privately held firms are shown to be financially constrained. Chapter 2 studies the role of banks in the transmission of financial flows to the economy. Exploiting a large and unexpected liquidity upsurge in an emerging economy, the chapter examines changes in bank lending behavior and finds very stark results. Bank lending to firms did not increase despite a substantial drop in the cost of capital. The results suggest that banks may be limited in their ability to extend credit due to severe agency problems. Chapter 3 analyzes changes in firm ownership structure that may be caused by the level and ease of obtaining outside financing. / (cont.) I combine a sector-specific financial shock with detailed data on the board of directors of firms and find that private firms that are adversely affected by the financial shock are more likely to have group-affiliated directors take positions on their boards. I also find that private firms that do not get a group director are significantly likely to acquire cross-holdings in other private firms, thus integrating horizontally. / by Bilal Husnain Zia. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010. / Cataloged from PDF version of thesis. / Includes bibliographical references. / This thesis consists of three essays that examine household responses to state unemployment insurance (UI) generosity across spells of unemployment, with a particular emphasis on the role of liquidity constraints. Enacted in 1986, the Consolidated Omnibus Budget Reconciliation Act (COBRA) provides limited portability of employer-sponsored health insurance coverage amongst job separators. Separated workers are eligible to maintain their employer-sponsored health coverage at the point of separation for a period of typically 18 months, though are obligated to pay 102 percent of the full employer premium. The substantial cost to maintain continuation coverage relative to transitory income poses a potential barrier for the unemployed. Using Survey of Income and Program Participation (SIPP) panels spanning 1990-2003, Chapter One re-evaluates existing evidence of UI adequacy and the limited effectiveness of continuation of coverage mandates by assessing the role of UI in maintaining private health insurance coverage across employment status. I first establish the magnitude of the loss of private health insurance coverage associated with unemployment, separating the issue of duration dependence. I find that private coverage falls by approximately 19 percentage points, or 26 percent of pre-separation levels, across employment status. Exploiting plausibly exogenous spatial and temporal variation in UI generosity, I then employ a simulated instruments approach to estimate the effect of UI generosity on private health insurance coverage amongst the unemployed. I find that a 10 percentage points increase in the UI replacement rate increases private coverage amongst the unemployed by 3.0 percentage points, and that a $100 increase in weekly UI benefits increases private coverage amongst the unemployed by 7.6 percentage points. Although imprecise, these results imply that current UI generosity mitigates the loss of private health insurance coverage by roughly 41 to 44 percent. Stratification across proxies for liquidity constraint and consumption commitment reveals suggestive evidence of an associated liquidity effect. The policy response to shortfalls in insurance coverage for job separators has been to enact continuation of coverage mandates, which allow job leavers to continue their employer-sponsored coverage without the typical direct cost subsidization provided to active employees. For the unemployed, this cost is incurred during a period of low transitory income, suggesting a plausibly important role for liquidity constraints in limiting take-up of continuation benefits. Incorporating SIPP panels spanning 1983-2003, Chapter Two first evaluates the effectiveness of continuation of coverage mandates in mitigating the fall in private health insurance coverage across spells of unemployment, identified by variation in state mandates and implementation of mandated federal coverage through COBRA. These results imply that 12 months of continuation of coverage eligibility mitigates the fall in private coverage amongst the unemployed with employer-sponsored health coverage prior to separation by approximately 18 percent. Exploiting plausibly exogenous spatial and temporal variation in state UI benefits across the reference period, I then employ a simulated instruments approach to estimate the heterogeneous effect of continuation of coverage mandates across levels of transitory income. These results are consistent with the notion of excess sensitivity to cash-in-hand. Absent state UI, mandate eligibility mitigates only 6 percent of the fall in private coverage. Yet for every $100 in eligible weekly UI benefits, private coverage is increased for mandate-eligible separators by 10 percentage points relative to mandate-ineligible separators. Policy makers must comprehensively address both access to group insurance markets as well as ability to pay for constrained households. Chapter Three re-evaluates existing evidence of a spousal labor supply response to state UI generosity. Although Chetty (2008) documents an associated liquidity effect in the response of unemployment spell duration to UI generosity, there has been no comparable work investigating the importance of liquidity constraints in explaining the crowd-out of spousal labor supply by eligible UI benefits of the household's primary earner. Across such periods of low transitory income of the primary earner, the spousal labor supply of liquidity constrained households plausibly exhibits greater responsiveness to eligible UI benefits. Yet the spousal labor supply response to UI generosity is composed of both an indirect effect, driven by eligible UI benefits of the unemployed primary earner, and a direct effect, driven by own-eligibility of the spouse. The longitudinal nature of the SIPP allows for identification of UI-ineligible spouses, and corresponding sample restrictions purge estimates of the confounding direct effect of UI. Employing a simulated instruments approach that exploits variation within-states across the reference period 1983-2003, I find that each eligible dollar in UI benefits crowds-out spousal earnings by 33 cents across the unemployment spell of the household's primary earner. Despite the sizeable estimate of crowd-out, the predicted increase in spousal earnings absent UI would offset only 13 percent of the lost wages of the unemployed primary earner. Stratification across proxies for liquidity constraint and fixed consumption commitment yields suggestive evidence of an associated liquidity effect. In terms of average spousal earnings, couples proxied as liquidity unconstrained through consideration of net liquid wealth are only 26 percent as responsive to eligible UI benefits of the primary earner relative to couples proxied as liquidity constrained. These results rationalize of the large crowd-out estimates of Cullen and Gruber (2000). / by David Walton Brown. / Ph.D.