Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2006. / Source: Dissertation Abstracts International, Volume: 67-11, Section: A, page: 4277. Adviser: Jay P. Kesan. Includes bibliographical references. Available on microfilm from Pro Quest Information and Learning.

Thesis (Ph.D.)--Indiana University, Dept. of Geography, 2006. / Source: Dissertation Abstracts International, Volume: 67-04, Section: A, page: 1473. Adviser: Daniel Knudsen. "Title from dissertation home page (viewed May 7, 2007)."

Doctor of Philosophy / Department of Economics / Wayne Nafziger / Kuwait is an oil-based economy that adopts an export promotion policy as the fundamental strategy for economic growth. The country has experienced remarkable economic growth and high per capita GDP for the last four decades. The export-led growth (ELG) hypothesis has been commonly used to examine the impact of exports on economic growth. Numerous studies support this hypothesis and found evidence that exports have a significant positive relationship with economic growth. However, it is not yet known how effective the ELG hypothesis is in small oil producing country like Kuwait. The central question addressed is whether the ELG hypothesis is valid in the case of Kuwait. This empirical research investigates the relationship of two components of exports (oil exports and non-oil exports) with economic growth by examining the ELG hypothesis using annual time series data for the Kuwaiti economy over the period 1970-2004. The study applies a number of econometric techniques: unit root test, cointegration test, error correction model (ECM), impulse responds function (IRF), and Granger causality test. The results of this dissertation show that all the variables are stationary in the first difference. Moreover, the cointegration test confirms the existence of the long run relationship among the three variables. The Granger test shows bidirectional causality between oil exports and economic growth, and a unidirectional causality from non-oil exports to economic growth. However, the causality results are consistent with the results reported by the ECM.

In Chapter 1, I propose a growth theory-based framework for analyzing experimental research in the social sciences. I apply a number of variations of the two standard growth models---Solow-Swan model, and the Schumpeterial growth model---in the context of experimental research, and derive policy recommendations aimed at improving the technological state of the field. In Chapter 2, I lay out a functional specification of the Popper Framework---a suite of software tools designed to implement policy recommendations from Chapter 1. The specification provides a high-level description of four main functional components of the framework: Development Environment, Subject Pool Module, Popper Cloud, and Analysis Environment. The system enables multiple competing implementations for each for the functional components, which makes it extensible and robust to incremental changes of the technological landscape. In Chapter 3, we employ unique administrative data from Moscow to obtain a direct estimate of hidden incomes. Our approach is based on comparing employer-reported earnings to market values of cars owned by the corresponding individuals and their households. We detect few hidden earnings in most foreign-owned firms and larger firms, especially state-owned enterprises in heavily regulated industries. The same empirical strategy indicates that up to 80 percent of earnings of car owners in the private sector are hidden, especially in smaller companies and industries such as trade and services, where cash flows are easier to manipulate. We also find considerable hidden earnings in government services.

As life expectancy rises and the workforce around the developed world ages, questions about retirement, savings, and health are becoming increasingly important. Are households saving enough for retirement? What is the role of employer contributions to savings accounts in determining overall savings? To what extent are households insured against health shocks and are they financially prepared to face them? How should the answers to these questions guide us in designing optimal social insurance policies? This dissertation addresses these important questions on the economics of aging. In the three chapters of this dissertation, I apply theory in analyzing the behavior of households, firms, and the social planner, and quasi-experimental research designs that use newly available administrative data on labor market behavior and health outcomes. The first chapter, jointly written with Torben Heien Nielsen, studies how households respond to severe health shocks and the insurance role of spousal labor supply. In the empirical part of the paper, we provide new evidence on individuals' labor supply responses to spousal health and mortality shocks. Analyzing administrative data on over 500,000 Danish households in which a spouse dies, we find that survivors immediately increase their labor supply and that this effect is entirely driven by those who experience significant income losses due to the shock. Notably, widows – who experience large income losses when their husbands die – increase their labor force participation by more than 11%, while widowers – who are significantly more financially stable – decrease their labor supply. In contrast, studying over 70,000 households in which a spouse experiences a severe health shock but survives – for whom income losses are well-insured in our setting – we find no economically significant spousal labor supply responses, suggesting adequate insurance coverage for morbidity (vs. mortality) shocks. In the theoretical part of the paper, we develop a method for welfare analysis of social insurance using only spousal labor supply responses. In particular, we show that the labor supply responses of spouses fully identify the welfare gains from insuring households against health and mortality shocks. Our findings imply large welfare gains from transfers to survivors and identify efficient ways for targeting government transfers. The second chapter of this dissertation is jointly written with Jessica Laird and Torben Heien Nielsen. In this chapter we empirically study how firms, which play an increasingly significant role in retirement savings, set their contributions to employees’ savings accounts, and analyze whether employer contributions reflect employees’ savings preferences. Using a reform that decreased the subsidy for contributions to capital retirement savings accounts for Danish workers in the top income tax bracket, we find strong evidence that firms set contributions to employer-provided savings accounts in accordance with their employees' savings preferences. Specifically, we find that the reform shifted employers' contributions from capital accounts to the more subsidized annuity accounts. Furthermore, these responses were proportional to the share of employees directly affected by the reform. We also find that employers with more passive savers among the affected workers had stronger reactions, suggesting that firm responses substitute for individual responses. In the third chapter, jointly written with David Laibson, we theoretically study savings in the presence of non-optimizing agents and the effect of a benevolent planner on overall retirement savings. As equilibrium behavior is jointly determined by the actions of households and social planners, we highlight the distinction between planner optimization and household optimization. We show that planner optimization is a substitute for household optimization and that this is true even when there are information asymmetries, so that households know more about their preferences than planners. Our analysis illustrates a potential misattribution in economic analysis. Is optimal behavior caused by optimizing households, or is optimal behavior caused by planners who paternalistically manipulate households that would not optimize on their own? We show that widely studied optimality conditions that are implied by household optimization also arise in an economy with a rational planner who uses default savings and Social Security to influence the choices of non-optimizing households. Therefore, many classical optimization conditions do not resolve the question of household optimization. Pseudo-rationality arises when rational planners elicit (seemingly) optimal behavior from non-optimizing households. / Economics

When does government intervention successfully correct perceived market failures? What effects do such interventions have on firm decisions? These questions are especially vital to the energy sector, which features large negative externalities, volatile commodity prices, and intensive regulation. My dissertation examines energy policies in three otherwise disparate contexts: a U.S. national research and development (R&D) subsidy intended to expedite clean energy technology deployment; a U.S. state-level oil price risk management policy targeting highway paving firms; and a Chinese fuel economy standard aimed at reducing oil consumption and hastening technology adoption among Chinese automakers. Each analysis evaluates the public policy and uses it to glean insight into firm financial constraints and innovation investment. Together, the three chapters contribute to the literatures on entrepreneurial finance, corporate risk management, innovation, and industrial policy. Motivating the first paper is the observation that governments regularly subsidize new ventures to spur innovation, often in the form of R&D grants. I examine the effects of such grants in the first large-sample, quasi-experimental evaluation of R&D subsidies. I implement a regression discontinuity design using data on ranked applicants to the Small Business Innovation Research grant program at the U.S. Department of Energy. An award approximately doubles the probability that a firm receives subsequent venture capital and has large, positive impacts on patenting and the likelihood of achieving revenue. The effects are stronger for more financially constrained firms. In the second part of the paper, I use a signal extraction model to identify why grants lead to future funding. The evidence is inconsistent with a certification effect, where the award contains information about firm quality. Instead, the grant money itself is valuable, possibly because it funds proof-of-concept work that reduces investor uncertainty about the technology. The second chapter examines how firms manage oil price risk when oil is an important input cost. Despite a rich theoretical literature, there is little empirical evidence about risk management heterogeneity across firm types. I evaluate a policy that shifts oil price risk in highway procurement from the private sector to the government, reducing the cost of hedging to zero. In a triple-differences design using data from Kansas and Iowa, I show that firms value hedging oil price risk between the auction and commencement of work. Consistent with the prediction that hedging is more valuable for financially constrained firms, I find higher risk premiums in private vis-à-vis public firms and in smaller vis-à-vis larger firms. I also find that family ownership and a lack of diversification are associated with higher risk premiums. Competition is highly imperfect in this industry. Monopoly power in product markets, together with market frictions in derivative hedging, may limit the pass- through of risk to financial markets, and thus prevent efficient allocation of risk. I turn to China - a very different economic setting - in the third chapter. Technology absorption is critical to emerging market growth. To study this process I exploit fuel economy standards, which compel automakers to either acquire fuel efficiency technology or reduce vehicle quality. With novel, unique data on the Chinese auto market between 1999 and 2012, I evaluate the effect of China’s 2009 fuel economy standards on firms’ vehicle characteristic choices. Through differences-in-differences and triple differences designs, I show that Chinese firms responded to the new policy by manufacturing less powerful, cheaper, and lighter vehicles. Foreign firms manufacturing for the Chinese market, conversely, continued on their prior path. For example, domestic firms reduced model torque and price by 12% and 13% of their respective means relative to foreign firms. Private Chinese firms outperformed state-owned firms and were less affected by the standards, but Chinese firms in joint ventures with foreign firms suffered the largest negative effect regardless of ownership. My evidence suggests that fuel economy standards and joint venture mandates - both intended to increase technology transfer - have instead retarded Chinese firms’ advancement up the automotive manufacturing quality ladder. / Political Economy and Government

The three essays in this dissertation present field experiments exploring phenomena in behavioral and public economics in real-world settings. The first essay outlines a field experiment that uses mailers with peer rank information to motivate water conservation. The essay contributes some of the first pieces of evidence on how comparisons with specific peers might influence behavior. The main finding is that while competitive framing of peer information has positive impacts on efficient homes, it has simultaneous negative impacts on inefficient homes, which are larger in magnitude. In particular, the essay finds that households who rank last in a displayed peer comparison are demotivated by their poor performance, and increase their water use relative to controls. The second essay studies the impact of signing an explicit promise statement at loan initiation on ensuing loan repayment behavior. The essay provides one of the first field tests of a phenomenon observed in laboratory studies, namely that making a promise can change people's ensuing behavior. Interestingly, the essay does not find support for this claim, and shows the potential difficulty in generalizing laboratory results to real-world settings. The third essay focuses on decision making about risk. Specifically, it presents two field studies that use quasi-random, real-world events to explore how emotions influence risk decisions. These studies are among the first field tests of the relationship between emotion and risk preferences. The essay offers mixed results, finding that negative emotions seem to increase risk aversion only when the emotions derive from events linked to individual self-responsibility. / Public Policy

Chapter 1 studies the effects of fighting corruption on public service delivery. While corruption crackdowns have been shown to effectively reduce missing government expenditures, their effects on public service delivery have not been credibly documented. This matters because, if corruption generates incentives for bureaucrats to deliver those services, then deterring it might actually hurt downstream outcomes. The chapter exploits variation from an anti-corruption program in Brazil, designed by the federal government to enforce guidelines on earmarked transfers to municipalities, to study this question. Combining random audits with a differences-in-differences strategy, we find that the anti-corruption program greatly reduced occurrences of over-invoicing and off-the-record payments, and of procurement manipulation within health transfers. However, health indicators, such as hospital beds and immunization coverage, became worse as a result. Evidence from audited amounts suggests that lower corruption came at a high cost: after the program, public spending fell by so much that corruption per dollar spent actually increased. These findings are consistent with those responsible for procurement dramatically reducing purchases after the program, either because they no longer can capture rents, or because they are afraid of being punished for procurement mistakes. Chapters 2 and 3 study the psychology of droughts. Chapter 2 tests whether uncertainty about future rainfall affects farmers’ decision-making through cognitive load. Behavioral theories predict that rainfall risk could impose a psychological tax on farmers, leading to material consequences at all times and across all states of nature, even within decisions unrelated to consumption smoothing, and even when negative rainfall shocks do not materialize down the line. Using a novel technology to run lab experiments in the field, we combine recent rainfall shocks and survey experiments to test the effects of rainfall risk on farmers’ cognition, and find that it decreases farmers’ attention, memory and impulse control, and increases their susceptibility to a variety of behavioral biases. Chapter 3 investigates whether index insurance can shield farmers against the cognitive effects documented in the previous chapter. In theory, insurance could mitigate those effects by alleviating the material consequences of rainfall risk. To test this hypothesis, we randomly assign offers of an index insurance product, and find that it does not affect farmers’ cognitive load. These results suggest that farmers’ anxiety might be relatively difficult to alleviate. / Political Economy and Government

In the first chapter of this dissertation, I look at the relationship between preference sets among students in similar majors, compared with different majors, in Peru. I find that students within majors share preference sets that differ from students in other majors. I further find that students from households without a formal labor market participant have made decisions that are more consistent with predicted professional opportunities compared with students with a formal labor market participant. These differences are systematic and not related to the general industrialization level of the city where the student lives. This research suggests that the difference between students and workers from households with formal labor-market familiarity and those from households without formal labor-market familiarity are not accidental or due to lack of familiarity. In the second chapter, I evaluate whether proxy-means testing as a method of targeting for Mexico's Conditional Cash Transfer program caused spending distortions among (potential) recipients. The income and wealth effect of participating in Progresa complicate a simple comparison of members of the control and treatment group in the acquisition of assets. To resolve this, I look at reduced asset acquisition just above the cutoff point. Because an imperfect implementation of the eligibility evaluation may have reduced treatment villagers’ perceived benefit of distorting, I also look for evidence of increased spending in non-assets and of increasing the number of eligible-aged children in the home to increase the size of the transfer. I do not find evidence of lack of investment in assets along the eligibility cutoff, but I do find evidence of increased spending as a percentage of income on items not included in the PMT, as well as evidence of increases in eligible-aged children among the poorest families in treatment villages. In the final chapter, which is joint with Lant Pritchett, we propose that many development programs, projects and policies are characterized by a high dimensional design space with a rugged fitness function over that space. In nearly any project/program/policy there are many design elements, and each design element has a number of possible choices, and the combination produces a high dimensionality design space. If different program designs produce large changes to outcomes/impact, this implies that the "fitness function" or "response surface," the mapping from program design to outcomes/impact, is rugged. We motivate this investigation using as an example a skill-set signaling program for new entrants to the labor market in Peru. We present a simulation model which compares two alternative learning strategies: "crawling the design space" (CDS) and a standard randomized control trial (RCT) approach. In this artificial world, we demonstrate that with even modest dimensionality of the design space and even modest degrees of ruggedness, the CDS learning strategy substantially outperforms the RCT learning strategy. Moreover, we show that the greater the ruggedness of the fitness function, the higher the variance of the RCT results relative to CDS and hence the lower the reliability of RCT results even with "external validity" across contexts. We suggest that RCT results to date are consistent with a world in which social programs exist in a high dimensional design space with rugged fitness functions and hence in which the standard RCT approach has limited direct practical application. / Public Policy

Over the last ten years there have been dramatic changes in the health insurance environment in the United States, spurred on by broad reforms in the public health insurance sector. In 2006 the Medicare Prescription Drug, Improvement and Modernization Act went into effect, providing broad access to prescription drug insurance for millions of elderly Americans. In 2014 the main provisions of the Patient Protection and Affordable Care Act began to be felt, dramatically changing health insurance markets, particularly for those seeking non-group coverage. These legislative changes both raise questions regarding how well the policy changes meet their goals, as well as offering new variation with the potential to answer questions of fundamental economic significance. This dissertation addresses such important questions surrounding the effectiveness of public health insurance in meeting policymakers’ goals, and the implications of public health insurance for private markets. In the three chapters of this dissertation I utilize the policy changes of Medicare Part D and the Affordable Care Act to provide quasi-experimental estimates of retirement lock, of the correlation of risk aversion and crowd-out of private insurance, and of the effectiveness of the individual health insurance mandate in expanding coverage. The first part studies the implications of public drug insurance for labor markets. This part examines whether the lack of an individual market for prescription drug insurance causes individuals to delay retirement. I exploit the quasi-experiment of the introduction of Medicare Part D, which provided subsidized prescription drug insurance to all Americans over age 65 beginning in 2006. Using a differences-in-differences design, I compare the labor outcomes of individuals turning 65 just after 2006 to those turning 65 just before 2006 in order to estimate the causal effect of eligibility for Part D on labor supply. I find that individuals at age 65 who would have otherwise lost their employer-sponsored drug insurance upon retirement decreased their rate of full-time work by 8.4 percentage points due to Part D, in contrast to individuals with retiree drug insurance even after age 65 for whom no significant change was observed. This reduction was composed of an increase of 5.9 percentage points in part-time work and 2.5 percentage points in complete retirement. I use these estimates to quantify the extent of the distortion due to drug insurance being tied to employment, and the welfare gains from the subsidy correcting that distortion. The results suggest that individuals value $1 of drug insurance subsidy as much as $3 of Social Security wealth. The second part of this dissertation considers the effect of public drug insurance on private drug coverage, with a focus on the correlation of crowd-out and risk aversion. I utilize Health and Retirement Survey data around the time of introduction of the Medicare Part D prescription drug insurance for the elderly in order to estimate crowd-out of private prescription drug insurance. I use individuals between the ages of 55 and 64, who are not eligible for the program, as a control group relative to individuals aged 65 to 75, who are eligible. I take a differences-in-differences approach to estimation by comparing outcomes before and after 2006, when Medicare Part D went into effect. I construct measures of risk aversion by exploiting unique questions eliciting risk preferences in the Health and Retirement Survey, as well as information on whether individuals have other kinds of insurance, or engage in risky behaviors. I find substantial differential crowd-out by risk aversion: every standard deviation increase in risk aversion was associated with about 5 percentage points less crowd-out, over a base crowd-out rate of 50%-60%. More risk averse individuals also saw greater reductions in out-of-pocket spending on prescription drugs due to Part D, particularly at high levels of spending: at the 85th percentile of spending an individual one standard deviation more risk averse than the average experienced a decline of $110/year due to Part D eligibility, above and beyond the gains for an averagely risk averse individual of $382/year. The third part of the dissertation estimates the effectiveness of the individual mandate in the Patient Protection and Affordable Care Act in expanding health insurance coverage. This paper studies the impact of the individual health insurance mandate in the Patient Protection and Affordable Care Act (PPACA) on health insurance coverage. This mandate went into effect in 2014, alongside various other elements of the PPACA. I focus on individuals ages 26-64 who are ineligible for the subsidies or Medicaid expansions included in the PPACA to isolate the effect of the mandate from these other components. To account for changes unrelated to the PPACA that occur over time and affect insurance coverage I utilize a control group of residents of Massachusetts who were already subject to mandated insurance following the 2006 health care reform in their state. Employing a differences-in-differences design applied to data from the American Community Survey, I find that the mandate caused an increase of 0.85 percentage points in health insurance coverage, or a 17% decline in the uninsurance rate. This increase was concentrated in coverage purchased directly by individuals, rather than acquired through an employer, and predominantly affected younger individuals. Both these observations are consistent with the mandate ameliorating adverse selection in the individual health insurance market. / Economics