Chapters one and two of the dissertation investigate the effects of political disagreement on macroeconomic outcomes. I introduce a model of governments with heterogeneous preferences over the composition of consumption between private and public goods alternating in power. Unable to commit to future policies, the party in power has incentive not only to shape consumption according to their preferences but also to manipulate the future state faced by successive governments to influence the decisions of future policy makers. Alternating governments give rise to political business cycles; fluctuations in economy-wide variables due to the political system. Political business cycles help explain the divergence in outcomes of economic variables across countries with different levels of political disagreement and political stability. The first chapter adapts a real business cycle model to include political shocks in addition to the productivity shocks. This is motivated by a key puzzle in the business cycle literature: for emerging economies the volatility of consumption is higher than the volatility of output, a feature of the data that is not explained by standard theory. The goal of this chapter is not only to replicate the data but to understand how consumption responds to political shocks differently than shocks to productivity. This model is also able to recreate endogenously the high level of volatility in government expenditure observed in the data. The model can explain up to 29% of the variation in the relative volatility of consumption across countries. Chapter two focuses on a similar model in the presence of debt instead of capital to develop a positive theory for fiscal policy (debt, expenditure, and deficits) over the business cycle to compare to historical observation. I find that political shocks are important to understand observed U.S. data moments. Chapter three investigates the welfare effects of tax-deferred retirement accounts (similar to Traditional IRAs in the US). I find that such accounts increase aggregate welfare as well as increasing economy-wide inequality. I find from an aggregate welfare perspective the optimal contribution limit for IRAs is to not have a contribution limit. / text

Indiana University-Purdue University Indianapolis (IUPUI) / The dissertation consists of three essays which attempt to capture causal relationships between shocks during childhood and before birth, and later health outcomes. Exogenous shocks such as the experiences of war and political upheaval are treated as natural experiments which minimize problems of endogeneity and selection that are present in most association studies. The first essay examines how exposure to civil war during childhood affects females’ outcomes including age at first marriage, fertility, and second generation infant mortality using the Biafra war which took place in Nigeria between years 1967 and 1970. The study uses difference-in-difference analysis to show that females that witnessed war during early adolescence got married younger than their peers not exposed to the war, and were more likely to have higher fertility and second-generation infant mortality. The second essay uses the same shock, the Biafra war, to test if males’ and females’ exposure to community-level violence results in higher risk of experiencing domestic violence in their marital relationships in the long-run. The study conducts difference-in-difference analysis on females and males separately to show that the males’ exposure to the war at ages 13 and older is the main mechanism behind females being victims of domestic violence in the long-run. The third essay examines the impact of acute prenatal stress on birth weight using the 2011 Egyptian revolution fatalities as an indicator for exposure to violence and stressful events. Results show that higher prenatal stress resulting from political conflict during the first and second trimesters of pregnancy has a significant negative impact on birth weight. This finding is robust to restricting the sample to siblings’ data and using mother fixed effects, suggesting that neither observable nor unobservable characteristics of mothers are driving the results.