<p> This paper documents business cycle facts of prices and the inflation rate for the United States from 1959:Q1 to 2013:Q3. Prices are countercyclical and the inflation rate is procyclical. In addition, prices lead the overall cycle by two quarters and the inflation rate lags the overall cycle by three quarters. To account for the observed cyclical behavior, two models are applied and extended including a business cycle model with endogenous money supply (Freeman and Huffman 1991) and a DSGE model with sticky prices (Ireland 2003). The former model only generates countercyclical prices but not procyclical inflation or the phase shift of prices relative to the overall cycle. For the latter model, its sticky-price version captures all the observed cyclical facts; whereas its flexible-price version fails to capture the procyclical behavior of inflation and the phase shift of prices relative to output. Better performance of the sticky-price model indicates that nominal rigidity can account for the cyclical behavior of prices and inflation. Thus, a powerful empirical business cycle model should incorporate a reasonable degree of price stickiness.</p>

<p> My dissertation studies multiple settings of economic decision making- decision making in a group, decision making by an uninformed principal, and the decision making properties of agents with differing degrees of cognitive reflection.</p><p> In the first essay, I study a problem of voting with information acquisition. I study information control in settings where such voters acquire information, but may lack control over whether it is revealed to other voters. Therefore, voters must balance their ability to inform themselves with their ability to reveal information and hence influence the actions of others. I examine and compare two different settings: private information acquisition and public information acquisition. Public acquisition improves upon private acquisition in two notable aspects. First, public acquisition eliminates low-payoff equilibria under private acquisition. Second, payoffs under public acquisition may provide all players with a higher payoff than any equilibrium payoff under private acquisition. Finally, I provide conditions when a unanimous voting rule outperforms majority rule.</p><p> In the second essay, I study a principal-agent relationship without monetary transfers. The principal is uncertain of the agent's preferences. Before observing the state of nature, agents much choose from a menu of delegation sets, where each delegation set is a set of actions. The defining property of a delegation set is that once an agent selects a delegation set he may only take actions within that set. I show that a pooling menu, a menu consisting of a single, interval (convex) delegation set, is optimal for any distribution over agent preferences. The proof used in this paper provides new intuition for the optimality of interval delegation: the payoff distributions generated by non-convex menus are mean-preserving spreads of those generated by convex menus I also provide comparative statics of the optimal contract.</p><p> In the final essay, I examine the relationship between cognitive reflection and time preferences. Using survey data, I find a positive relationship between cognitive reflection scores and consistency with different models of intertemporal choice.</p>

<p> This research empirically examines whether tourism industry efforts, as well as that industry&rsquo;s performance determinants, overlap with the determinants that promote retirees&rsquo; flow from more economically developed countries (MEDC) to Caribbean and Central American (CC) destinations. Additionally, this study explores the effects of CC governments&rsquo; retirement incentive programs (a supply-side factor) in attracting MEDCretirees. While the Caribbean countries have traditionally taken the lead in the tourism industry, Central American countries now are taking the lead with constructing attractive retirement packages. </p><p> The multiple regression results provide strong empirical evidence that government retirement incentive programs (GRIPs) hold significance in predicting MEDC- migrant stock at CC destinations and the attached capital flows (savings and social security retirement wealth). This study also provides evidence that international tourists flow with MEDC-migrant stock of retirees to the CC region.</p><p>

<p> My dissertation contributes to quantitative macroeconomic approaches to family economics. Compared to dominant microeconometric methods, macroeconomic models have advantages in understanding economic mechanisms behind social phenomena, measuring general equilibrium effects, obtaining quantitative impacts of economic factors, making international comparisons and conducting policy experiments. This thesis applies macroeconomic methods and explores the determinants of family behaviors, particularly female labor supply. </p><p> In the first chapter, I study the decline in the female labor force participation rate in the United States in the 1990s and 2000s. This chapter shows that structural changes in the child care market play a substantial role in influencing the evolution of female labor force participation. I provide new estimates of long-term trends in the child care market that hourly expenditures rose by 32% and hours of daycare used declined by 27%. I propose a life-cycle model of married couples and predict that the rise in child care costs leads to a 5% decline in total employment of females, holding all else constant. </p><p> In the second chapter, I further study the causes of the increase in child care costs in the United States. I propose a hypothesis that expansion of child care subsidies to lower income households distorted the incentives for home-based child care providers. I provide a simple and tractable model of the child care market to analytically and numerically explain the hypothesis. I also propose the empirical evidence in the period of expanding child care subsidies to support the hypothesis. </p><p> In the third chapter, I study the world&rsquo;s largest decline in the female labor force participation rate in Turkey: it has fallen from 72% in 1955 to 29% in 2011. This chapter argues that, (i) the main industry has shifted from agriculture to non-agriculture, (ii) because of the social stigma against non-family market work for Turkish women, they have failed to move from agriculture to other sectors. I propose a simple general equilibrium model and conduct a cross-country comparison. The model captures the Turkish decline well with the stigma effect. This chapter suggests a quantitative importance of cultural factors.</p><p>

This dissertation has two purposes. First, it demonstrates that Friedrich A. Hayek's subjectivism opens doors to a postmodern economics. The second chapter examines the implications of Hayek's emphasis on the unattainability of objective knowledge and the limits of reason. As a result of this subjectivist stance, Hayek stance out a position against the dominant rational-choice model in economics, a position which borders on an antiessentialist or postmodern theory of human action. In addition, the third chapter argues that Hayek's subjectivism is the cornerstone of his theory of the market as a "discovery" process, a theory at odds with the neoclassical conception of the market. The chapter examines the non-reductionist and non-teleological aspects of Hayek's theory of the market, and it illustrates how Oscar Lange and Fred Taylor's well-known proposal for market socialism ignores the subjectivist elements of Hayek's thought. The second purpose of the dissertation is to show that at critical junctures in his political economy, Hayek abandons his subjectivism. The dissertation demonstrates that fundamental contradictions lie at the heart of Hayek's defense of economic freedom. The fourth chapter uses the subjectivist insights of John Maynard Keynes and Post Keynesian macroeconomic theory, particularly the emphasis on uncertainty and subjective expectations, to demonstrate that Hayek attenuates his subjectivism in his monetary and capital theories in order to maintain his defense of the market as a self-regulating, spontaneous order. The fifth chapter continues the critique of Hayek's political economy by posing the subjectivist legal theory of the legal realists against Hayek's jurisprudance to challenge his support of the rule of law as a neutral guide to economic policy. The final chapter develops a radical subjectivist, or postmodernist, defense of activist public policy against both Hayek's criticisms and the charge of nihilism. It presents a subjectivist theory of pattern prediction to defend macropolicy, the attempt to achieve social justice, and the implementation of democratic firms.

Voluntary agreements are increasingly being considered as viable alternatives to more traditional forms of environmental management. Although the economic literature on voluntary approaches to environmental protection has progressed quite far in the last decade, no one has rigorously addressed the fact that compliance with voluntary agreements must be enforced. This body of work directly addresses this issue by examining the consequences of the need for member-financed enforcement of compliance on the performance of voluntary agreements for environmental protection. In the first chapter, I examine the impact of including costly monitoring of compliance within a theoretical model of a self-enforcing international environmental agreement (IEA). I find that although monitoring costs limit the circumstances under which international cooperation to protect the environment is worthwhile, when IEAs do form they will involve greater participation than IEAs that do not require costly monitoring. Consequently, costly monitoring of IEAs is associated with higher international environmental quality. The second chapter develops a theoretical model to compare the properties of a voluntary agreement made between a government and an industry with a traditional emissions tax, when compliance is costly to enforce. I find that a voluntary agreement can be a more efficient way to achieve an environmental quality objective over an emission tax, but only if (1) profitable agreements exist; (2) members bear the cost of enforcement, and (3) the enforcer of the agreement has a significant advantage in enforcement technologies compared to the government. In the final chapter, a set of provision point experiments are used to empirically test the major theoretical conclusions of the first chapter. I find that, contrary to what the theory predicts, member-financed enforcement of compliance actually reduces the overall provision of the public good. This result is entirely due to the fact that members of stable coalitions only profit if all members fully comply with their commitments, and therefore, cooperative coalitions to provide a public good completely collapse with any positive level of noncompliance. Finally, I show that requiring all members to participate within an agreement that is costly to enforce can significantly increase the overall provision of the public good.

The three essays in this dissertation address issues pertinent to hypothetical bias in the contingent valuation (CV) mechanism. Empirical evidence gathered through several experiments conducted at the University of Massachusetts, Amherst, is used to provide a better understanding of the cause and nature of hypothetical bias. The first essay is based upon the notion that uncertain responses in stated preference valuation are associated with hypothetical bias. While the relationship between respondent uncertainty and hypothetical bias is not well understood, calibration techniques such as the uncertainty adjustment have been developed to mitigate the bias. Hence this study seeks to fill this gap by uncovering the relationship between hypothetical bias and respondent uncertainty using induced value goods. According to the results there is no relationship between certainty of induced values and either respondent's stated level of certainty or hypothetical bias. The lack of hypothetical bias with induced value goods, but its continual existence in homegrown value goods lays ground for further investigation of the bias in the second essay. By employing both induced value and homegrown value goods, this study seeks to isolate the cause of hypothetical bias. Furthermore, a within-subject design is employed to prevent the infiltration of any individual specific biases. According to the results, hypothetical bias is non-existent with induced value goods but emerges once homegrown value goods are introduced. Hence the value formation process as hypothesized by Taylor, et al. (2001) is identified as a key contributor to hypothetical bias. The third essay explores a relatively new approach to non-market valuation that is based upon a prediction format. Unlike the traditional CV format that asks individuals to state personal values and opinions, this technique inquires about their predictions of other's behavior. Literature in psychology regards these estimates to be less strategic, which could potentially eliminate biases including hypothetical bias. In this study we obtain hypothetical bias in both the traditional CV and the prediction formats. Although prediction estimates were significantly lower, it was observed that individuals are able to correctly predict the magnitude of hypothetical bias in the traditional CV.

This dissertation consists of three independent essays. The first essay, “Long Waves and Short Cycles in a Model of Endogenous Financial Fragility,” presents a stock flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors. Changes in firms’ and households’ financial practices produce long waves. The Hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles, and simulations illustrate stable limit cycles. The long waves are characterized by periodic economic crises following long expansions. Short cycles, generated by the interaction between effective demand and labor market dynamics, fluctuate around the long waves. The second essay,“Macroeconomic Implications of Financialization,” examines macroeconomic effects of changes in firms’ financial behavior (retention policy, equity financing, debt financing), and household saving and portfolio decisions using models that pay explicit attention to financial stock-flow relations. Unlike the first essay, the second essay focuses on the effects of financial change on steady growth path. The results are insensitive to the precise specification of household saving behavior but depend critically on the labor market assumptions (labor-constrained vs dual) and the specification of the investment function (Harrodian vs stagnationist). The last essay, “Finance, Sectoral Structure and the Big Push,” studies the role of finance in the presence of investment complementarities using a big push model. Due to complementarities between different investment projects, simultaneous industrialization of many sectors (big push) may be needed for an underdeveloped economy to escape from an underdevelopment trap. Such simultaneous industrialization requires costly coordination by a third party, such as the government. Some recent papers show that private banks with significant market power may also solve the problem of coordination failure. We show that private coordination may not work since even large private banks may find it more profitable to finance firms in the traditional sector than in the modern sector.

Contingent valuation (CV) is a surveying technique used to estimate the willingness to pay (WTP) by individuals for non-market goods (goods for which no market of exchange exists). Many CV studies have shown the existence of hypothetical bias which occurs when individuals are asked a hypothetical WTP question followed by a request for actual donations, and the real payments are not the same as (and usually less than) the hypothetical WTP. This dissertation examined hypothetical bias using both theoretical and statistical analysis. The theoretical analysis consisted of a literature review and a microeconomic exploration of utility theory. The literature review identified past studies that expanded on Walrasian theory of consumer behavior including the ideas of option and existence value, fair share, and social approval. Other articles reviewed discussed uncertainty with respect to supply of a resource as well as the preferences and income of the consumer. The microeconomic theory section evaluated the concepts from previous literature within a utility framework that in turn was used to guide the statistical analysis. The statistical analysis examined two empirical case studies. Each study consisted of a set of three surveys administered to several college-level classes. The surveys collected information on the socioeconomic characteristics of respondents and asked for each respondent's WTP (in a donation mechanism) for a specific good. The commitment level was tightened and respondents were asked for an actual donation. In the first case study respondents were asked for their WTP for a scholarship fund and the second case study respondents were asked for a donation to a fund purchasing clean air permits. Results of the case studies found hypothetical bias of about 2650%. When the question wording changed to include more information and a higher level of commitment, the mean WTP was not statistically different at the 5% level. Only one respondent between either study actually donated money. The Mach IV test, when used as a personality proxy, may be an important factor in estimating WTP and hypothetical bias. The mean WTP between different levels of certainty was not statistically different at the 5% significance level. Finally, many students indicated that they might be making their decisions without considering economic trade offs and that respondents' MP may also be influenced by some aspects of personality, social approval and other characteristics not associated with the good being valued.

In this dissertation, I develop theoretical models and an empirical study of the role of social interactions, the evolution of social norms, and their impact on individual behavior. Although my models are consistent with individual utility maximization, they generally emphasize social factors that channel individual decisions and/or shape individuals' preferences. I apply this approach to three different issues: labor supply, fertility decisions, and intergenerational transfers, generating predictions that are more consistent with observed empirical patterns of behavior than standard neoclassical approaches that assume independent preferences, perfect information, and efficient markets. In the first essay, I explain the long-run evolution of working hours during the 20th century in developed countries: the substantial decline for the first three quarters of the 20th century and the deceleration or even reversal of the fall in working hours in the last quarter. I develop a model of the determination of working hours and how this process is affected by both the conflict between employers and employees and the employees' desire to emulate the consumption standards of the rich reference group. The model also explores the effects of direct and indirect policies to limit hours advocated by political representations of workers such as trade unions or leftist parties. In the second essay, I study the coevolution of gender norms and fertility regimes. Since the 1990s, a new pattern of positive correlation between fertility rates and female labor force participation emerged in developed countries. This recent trend seems inconsistent with conventional economic approaches that explain fertility decline as a result of the increasing opportunity costs of childrearing, predicting a negative correlation between fertility and women's labor force participation. To address this puzzle, I develop a model of the evolution of gender norms and fertility in various economic environments influenced by the level of women's wages. Randomly matched spouses make choices related to fertility—labor supply and the division of household labor—based on their preferences shaped by gender norms. In the model, norm updating is influenced by both within-family payoffs and conformism payoffs from social interactions among the same sex. The model shows how changes in economic environments and the degree of conformism toward norms can alter fertility outcomes. The results suggest that the asymmetric evolution of gender norms between men and women could contribute to very low fertility, explaining the positive correlation between fertility and women's labor force participation. Finally, I estimate the effect of exogenously introduced public pensions for the elderly on the amount of private transfers they receive. There has been a long debate whether public transfers crowd out private transfers. Previous empirical studies on this issue suffer from the endogeneity of income that contaminates estimates. I use an exogenously introduced public transfer, the Basic Old Age Pension in Korea, to test the crowding out hypothesis. A considerable proportion of the elderly population, especially women living without a spouse, do not experience the crowding out effect and moreover, among those who do, the size of the effect is relatively small. The results support the redistribution effect of the Basic Old Age Pension targeting the poor elderly in Korea.