An employment relationship consists of many dimensions other than monetary compensation. Textbook economic theory implies employers and employees will agree upon an efficient level of such nonwage compensation based on an employee's preferences and the employer's cost. At the same time, most types of nonwage compensation are set in a context of substantial regulation, legal restrictions, and other interventions. This dissertation investigates how regulatory intervention and other changes to the external environment affect firms' decisions regarding two types of nonwage compensation: workplace safety and employment mobility. Chapter One investigates how media coverage of employers caught violating workplace safety and health regulations affects future compliance. Using quasi-random variation in media coverage induced by a policy change at the Occupational Safety and Health Administration (OSHA), I find coverage about one employer leads to significantly higher compliance among other employers likely exposed to it. The results are most consistent with employers acting defensively to avoid their own future publicity. This work contributes to a growing literature investigating how providing information to stakeholders about sellers' quality leads to quality improvements. Chapter Two examines how workplaces respond to health and safety regulatory enforcement inspections. We first analyze the effects of randomized inspections on safety and business outcomes of inspected workplaces. We find inspections lead to significantly fewer injuries and have no detectable effect on business outcomes. We then attempt to identify the types of workplaces where inspections are more or less effective. Chapter Three investigates why employers have employees sign non-compete agreements (NCAs), which contractually limit where the employee can work in the event of a job separation. NCAs may solve hold-up problems that limit incentives to invest in transferable assets (e.g. general human capital). At the same time, NCAs may impose large costs on employees who sign them. We develop a model of how labor market conditions and liquidity constraints can jointly determine the decision to include an NCA in a hiring contract. We find strong support for the model's predictions using a survey we conducted among employers in the high-end hair salon industry, one in which NCAs are a large and growing phenomenon.

The first chapter examines adolescent beauty as a potential originator of the observed wage premium for adult beauty and finds that adolescent beauty has its own separate effect on adult wages. Adolescent beauty also affects early human capital development, as evidenced by its significant impact on educational outcomes. Changes in beauty over time are shown to be positively correlated with changes in wages for full-time workers, and changes in beauty are generally not correlated with appearance-related choice variables. I explore the possibility that self-confidence and social capital are potential mechanisms through which adolescent attractiveness affects future wages but find that these do not change the magnitude of the effects of adolescent beauty, although they are of themselves significant determinants of wages. The second chapter examines the effects of personal grooming behaviors on earnings and shows evidence that these effects are due to persistent differences in preferences or productivity between workers displaying different grooming choices and not statistical discrimination on the part of employers. In a longitudinal sample of lawyers graduating from the same law school, men who wear glasses and men with facial hair face an earnings penalty in first-year income and to some extent in subsequent years. Some grooming behaviors are positively correlated with income in the 1970's cohort and negatively correlated with income in the 1980's cohort (and vice versa), suggesting that fashion signals change relatively quickly. I also find that grooming behaviors are correlated with beauty ratings and that the beauty premium is unaffected by earnings, but the estimated effects of some grooming behaviors partially result from their correlation with beauty. I do not find evidence that grooming behaviors act as a signaling mechanism in the labor market. The third chapter evaluates the claim that design piracy is beneficial to certain status-goods firms. It builds on Pesendorfer's model of fashion cycles by introducing the possibility of design imitation for a market in which designs are used as a signaling mechanism. There exist equilibria in which both the designer and imitator are active in the market, but there are no conditions under which imitation is profitable to the designer. Under some conditions the presence of a potential imitator will ensure that the designer does not produce at all. / text

This dissertation consists of three studies in the field of health economics. The first chapter studies the market situation of the U.S. nursing home industry. It uses the most recent data available from the Annual Survey of Nursing Homes conducted in Wisconsin. In this study, we derive theoretical predictions from an optimization problem of a representative nursing home under various assumptions. We introduce a new measure, a home's bed-utilization rate, in our empirical strategy and find evidence of excess demand from Medicaid patients in Wisconsin. A positive relationship between Medicaid payment rates and private-pay prices is found in homes with high bed utilization. Additionally, we find strong adverse effects of higher reimbursement rates on quality measures. These findings prove there is an excess demand from Medicaid patients in Wisconsin. This conclusion has direct implications for the quality of care that a nursing home provides for its patients. The second study takes advantage of the "natural experiment" features of the major health care reform in Thailand in 2002 in order to estimate the price elasticity of health care demand among Thai citizens. We use the difference-in-difference technique to capture the pure effect of the reform on the health care utilization behavior of those who were directly affected by the reform. In order to capture any secular trend in health care utilization, we use data from a group of people who were not affected by the reform. We find that the reduction in health care price immediately induced those who lacked health insurance coverage to increase their visits to a public health care facility, although similar trends were not found a few years after the reform. The estimated change in visits is used to calculate the price elasticity of demand, which falls in the range of -1.36 to -0.58. The last study examines the relationship between risky behaviors among Americans aged 50-65 and their health insurance coverage. Despite the fact that moral hazard behaviors are predicted by economic theory, the study finds that health insurance has no significant effect on certain risky behaviors such as smoking. Surprisingly, we find a significantly positive relationship between health insurance coverage and healthy behaviors such as exercising regularly. This finding reflects the importance of health insurance companies in providing its customers with more health information that could encourage health-oriented attitudes. / text

Thesis advisor: Michael Grubb / Thesis advisor: Lucas Coffman / What You Don’t Know Can’t Pass Through: Consumer Beliefs and Pass-through Rates I model consumer search with imperfect information about firms’ costs and test predictions about consumer beliefs and pass-through in the US residential mortgage market. In the model, when consumers are unaware of an increase in costs, a high price would be surprising and may induce additional search. In equilibrium, sellers do not pass though the entire change in costs, and average pass-though is decreasing in consumer uncertainty about costs. The model provides a unified explanation for a number of patterns in pass-through rates including incomplete pass-through (passthrough rates less than one), pass-through over-shifting (pass-through rates greater than one), and asymmetric pass-through (greater pass-through rates for cost increases than decreases). I test a novel prediction of this model using confidential Home Mortgage Disclosure Act data. I find that different components of the marginal cost of mortgage lending have different average pass-through rates. Widely known costs are passed through nearly completely while more obscure costs have much lower pass-through rates. This pattern is not explained by existing models of pass-through, as the standard determinants of pass-through are identical across all cost components of the same mortgage. People Don’t Demand Commitment Devices That Might Not Work Demand for costly commitment devices is rare. A possible explanation is that individuals are unaware of their present bias and their need for commitment. I run an experiment that successfully corrects subjects’ beliefs about their present bias and find that this increased awareness does not increase demand for commitment. These results, interpreted through the lens of a theoretical model of commitment demand, imply that low demand for commitment is not driven by a perceived lack of present bias, but rather subjects’ accurate belief that they may fail to follow through, even with the offered level of commitment. The Illusion of Competition with Michael Grubb Most existing models of price competition in the presence of search costs ignore the possibility that multiple products in a market are sold by the same firm. We develop a theoretical model of equilibrium price dispersion under costly consumer search over prices in the presence of jointly owned “brands.” We establish conditions on consumers’ search technology that determine consumer welfare implications and suggest antitrust remedies (e.g. post-merger consolidation of brands). / Thesis (PhD) — Boston College, 2023. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

This dissertation consists of three research papers in Applied Microeconomics. Each paper uses an econometric technique to analyze a problem related to human behavior. The first paper examines the separate effects of time and location of the School Breakfast Program on participation and consumption of breakfast by elementary school children in northern Nevada. Controlling for potential selection bias and unobserved individual fixed effects with a panel version of the Heckman sample selection model, it is shown that extra time allowed for breakfast leads to an approximately 20% increase in average participation, and the transition from cafeteria to classroom adds another 40% for the typical student. The second paper uses the Hedonic Property Valuation Method to quantify the willingness-to-pay of residents in the Dan River region for three dimensions of an improved food environment---availability, accessibility, and acceptability of food. This paper accounts for potential omitted variables issue in the hedonic analysis by applying a spatial-lag model, and finds an overall negative or null preference of residents in this region for an improved food environment. The third paper investigates the effects of characteristics of human interpreters and images on the accuracy of cloud interpretation for satellite images in an online experiment, using a fractional logit model. The results indicate that an image with higher cloud coverage and/or larger brightness is more likely to receive higher accuracy, and the more time spent on the image and more image completed are also beneficial for improving the accuracy. This paper also uses a logistic regression model to compare the performance of human interpreters to that of an automated algorithm, and finds that human interpreters outperform the automated algorithm for an average satellite image out of our twelve selected images. / Ph. D. / This dissertation consists of three research papers with each focusing on a problem related to human economic behavior. The first paper examines the separate effects of time and location of the School Breakfast Program on participation and consumption of breakfast by elementary school children in northern Nevada. The School Breakfast Program is a national food assistance program that provides subsidized breakfast to children from low-income families at participating institutions. It is shown that extra time allowed for breakfast leads to an approximately 20% increase in average participation, and the transition from cafeteria to classroom adds another 40% for the typical student. The second paper quantifies the preferences of residents in the Dan River region for three dimensions of an improved food environment—availability, accessibility, and acceptability of food. The results suggest an overall negative or null preference of residents in this region for an improved food environment. This is consistent with the focus group findings with local residents showing a desire for high fat and high energy-dense “comfort foods” and little social/cultural norms around healthful foods. The third paper investigates the effects of characteristics of human interpreters and images on the accuracy of cloud interpretation for satellite images in an online experiment. The results indicate that an image with higher cloud coverage and/or larger brightness is more likely to receive higher accuracy, and the more time spent on the image and more image completed are also beneficial for improving the accuracy. This paper also compares the performance of human interpreters to that of an automated algorithm, and finds that human interpreters outperform the automated algorithm for an average satellite image out of our twelve selected images.

This dissertation focuses on how changes in SNAP (Supplemental Nutrition Assistance Program, formerly called food stamp) policies affect the consumption choices for recipient households and how macroeconomic environment affects individuals’ behaviors. In the first chapter, I examine the consumer response to SNAP benefit change. In the second chapter, I examine the investor attention under different stock market valuations. In the third chapter, I examine the impact of rising housing prices on individuals’ marriage entry. In the first chapter, we examine how SNAP benefits were spent. The American Recovery and Reinvestment Act of 2009 (commonly known as the Stimulus Act) temporarily increased the benefit level for SNAP recipients and released qualification requirements. We use a consumer panel with detailed transaction records to analyze the impact of SNAP benefits changes on participant household’s consumption choices. We find that the marginal propensity to spend (MPS) on food out of SNAP benefits increase is 0.45. The MPS out of SNAP benefit decrease is -0.85. SNAP participant households are more sensitive toward the benefits decrease than increase. We also study how SNAP benefits spent are in response to benefit changes. We find that with more SNAP benefits recipient households consume much more tobacco and with less benefit they consume much less alcohol. Results are robust to various placebo tests. In the second chapter, I examine the impact of stock market valuation on investor attention. Investor attention affects stock return variance and risk premia. Using Google Trend data, I come up with a new proxy for measuring investor attention. This chapter investigates investor attention effect on the merger announcement and how market valuations and days of the week affect investor attention. With the Google search index, this study finds that investor attention has positive correlations on market reactions following the merger announcement. In the third chapter, I estimate the impact of increasing on first marriage age in China. The first marriage age plays a very important role in the population economy, especially for a demographic dividend. The marriage market is affected by income, education, wealth inequality, consumption, etc. In China, the first marriage age has fallen since the late 1990s. This chapter focuses on how the price of the apartments change people decisions on marriage and ascribes that part of the delay to first marriage age is due to increase in housing price over the same period. In China, social norms require men to own an apartment before they get married. Based on the empirical evidence of population dynamics, the chapter suggests that a 1% increase in housing price will result in 0.016 years delay in the age of first marriage in China. When the housing price increases too much, it will have an even larger effect on marriage decisions because the high housing price becomes unaffordable for young couples. The result is robust with a wide range of model specifications.

This dissertation proposal examines empirically the determinants of Olympic performance and the transition and persistence of Major League Soccer (MLS). The first chapter estimates the relationship between the performance by a country at the Olympics, measured by number of medals obtained, and a country's health indicators. We want to examine the relationship that improved sanitation access has on Olympic performance. The data sources are from the Olympic Committee, World Development Indicators and various sources. A panel tobit estimation will be used to examine this relationship. The second chapter deals with the determinants of Major League Soccer teams' performance. We want to examine and estimate variables that improve the performance of MLS teams. The data sources are taken from Major League Soccer teams main pages, Bureau of Economic Analyis, Bureau of Labor Statistics and the United States Census Bureau. We will use a Generalized Method of Moments (GMM) estimation and instrumental variable (IV) estimation which assists us in controlling for observed endogeneity. The third chapter examines the competitive transition and persistence associated with Major League Soccer. A proportional hazard model and a multinomial logit model is used in this estimation to examine the ability of teams to remain competitive, where we explore the factors that assists teams in remaining in specific states of competitiveness.

<p>This dissertation extends the empirical industrial organization literature with two essays on strategic decisions of firms in imperfectly competitive markets and one essay on how inertia in consumer choice can result in significant welfare losses. Using data from the airline industry I study a well-known puzzle in the literature whereby incumbent firms decrease fares when Southwest Airlines emerges as a potential entrant, but is not (yet) competing directly. In the first essay I describe this so-called Southwest Effect and use reduced-form analysis to offer possible explanations for why firms may choose to forgo profits today rather than wait until Southwest operates the route. The analysis suggests that incumbent firms are attempting to signal to Southwest that entry is unprofitable so as to deter its entry. The second essay develops this theme by extending a classic model from the IO literature, limit pricing, to a dynamic setting. Calibrations indicate the price cuts observed in the data can be captured by a dynamic limit pricing model. The third essay looks at another concentrated industry, mobile telecoms, and studies how inertia in choice (be it inattention or switching costs) can lead to consumers being on poorly matched cellphone plans and how a simple policy proposal can have a considerable effect on welfare.</p> / Dissertation

This thesis explores the causal relationships between tax incentives, research and development (R&D) and productivity. Using R&D survey data from the United Kingdom (UK) Office for National Statistics and administrative data on corporation tax returns from HM Revenue and Customs, I first conduct empirical analyses of tax incentive policies for R&D, and then estimate the elasticity of output with respect to firms' own R&D efforts as well as external R&D performed by neighboring firms in technology and product space. In the first two chapters which focus on tax incentive policies and their evaluation, I am able to identify the policy effect of interest by exploiting two significant reforms in the UK in 2002 and 2008. I find that tax incentives had a positive and significant stimulating effect on businesses' R&D spending. I argue that the availability of a quasi-experimental set up helps in better identifying the policy impact. The production function estimation exercise in the third chapter shows that double counting of R&D human resources and materials in the production function causes the elasticity of output with respect to the firms' own R&D to be substantially underestimated. I also find that the R&D done in multi-unit enterprise groups is productive for the production facilities which themselves do not perform R&D. The Jaffe (1986) and Bloom et al. (2013) measures of external R&D, which account for closeness of firms in technology and product space can be constructed and included in the production function in the spirit of Griliches (1979). I find that the point estimate for the elasticity of output with respect to firms' own R&D is around 3 percent and statistically significant. Evidence is mixed regarding the productivity effects of R&D carried out by competitors in the product market or neighboring firms in technology space. The detailed data sets used in this study offer valuable resources for empirical work on R&D and productivity.

Rural inhabitants of developing countries face extraordinarily risky environments, and decision-making under risk has crucial implications for the welfare of the rural poor. Therefore, obtaining a better understanding of the behaviour under risk of low-income populations is a vital step in the comprehension of human behaviour, and is important for effective policy design and evaluation, as well as for shedding light on production, investment and technology adoption decisions. In Chapter One, I analyze data collected from a laboratory experiment involving poor subjects in rural Ethiopia, in order to determine which decision models (and corresponding risk preferences) best describe the decision-making under risk of inhabitants. I find that expected utility theory (EUT) does not provide a good overall description of the decisions made by participants in the experiment; instead, there is evidence of probability weighting and loss aversion, implying that rank-dependent and reference-dependent choice models are more likely to represent the true latent decision-making process of subjects. In Chapter Two, I analyze combined experimental and survey data from rural Ethiopia in order to evaluate the determinants of risk preferences as well as assess the degree of asset integration in experimental decisions. Analyzing both EUT and non-EUT decision models and using an instrumental variable strategy, I find that household wealth negatively affects both risk aversion and loss aversion, but independent background risk has no effect on risk preferences. Further, I find evidence of narrow framing, as opposed to asset integration, suggesting that participants make decisions in the experiment in isolation from outside wealth. In Chapter Three, I analyze experimental data from Brazil to evaluate whether subjects understand decision problems that use the complex Multiple Price List (MPL) elicitation procedure, and to determine which decision models best describe observed choices. I find that the MPL decision problems of the experiment enable a finer characterization of risk preferences as compared to Ordered Lottery Selection problems (used in the Ethiopian experiment). However, I find that a significant fraction of choice patterns in the MPL problems are intransitive, and the evidence indicates that subjects did not properly understand the decision problems and thus observed choices do not reveal true risk preferences. Therefore, the relatively complex MPL procedure may not be suitable for experiments conducted with poorly-educated subjects in developing country settings. Chapter Four presents a theory outlining the relationship between rational demand for index insurance – for which the net transfer between insurer and policyholders depends only on a publicly verifiable index – and wealth. Further, the validity of this theory is tested using the experimental data from Ethiopia. In line with the theoretical model presented, due to basis risk and actuarially unfair premiums, demand for index insurance is hump-shaped – first increasing then decreasing – in wealth. The results indicate that the low take-up of this product observed among the poorest (and most risk averse) individuals in recent field studies may result from rational choice rather than credit constraints or poor decision-making.