Economics

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Accounting for Information: Case Studies in Editorial Decisions and Mortgage Markets
(2014) Bandeh-Ahmadi, Ayeh; Rust, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
I measure information on distinct facets of quality from a corpus of reviews and characterize how decision-makers integrate this information present in text with that available through other channels. Specifically, I demonstrate that referee comments at a scholarly journal contain information on submissions' future citation impact above and beyond information available in referee scores. I measure this signal on future citation impact and show that it does not enter into editorial decision-making directly but rather through an interaction that amplifies the information content of referee scores: the more citations a low- or mediocre-scoring paper is likely to get the less likely it is to be published. Secondly, I describe referee comments that are highly predictive of greater citations. Papers that referees say have access to unique datasets, or are written on topics of relevance to ongoing debates or government applications receive greater citations on average. Third, I show the appearance of favoritism amongst editors who accept a higher share of papers that cite themselves is partly a reflection of an ability to draw and select for papers that receive more citations. Finally, I characterize budget constraints on publication space and referee capital and provide some guidance on what types of information editorial systems could capture to promote transparency in future analyses while protecting privacy of authors or referees. A second chapter introduces a theoretical framework for assessing the empirical discussion of asymmetric information amongst mortgage lenders and adds the idea of lender competition into this framework.
Affecting Children and the Effect of Children
(2006-04-27) Cristia, Julian Pedro; Evans, William N; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
In the first half of my dissertation, I estimate the causal effect of a first child on female labor supply. This is a difficult task given the endogeneity of the fertility decision. Ideally, this question could be answered by running a social experiment where women are randomly assigned children or not. Using field data from the National Survey of Family Growth (NSFG), I mimic this hypothetic experiment by focusing on a sample of women that sought help to become pregnant. After a certain period since they started receiving help, only some of these women are successful. In this instance, fertility appears to be exogenous to labor supply in that pre-treatment labor supply is uncorrelated with subsequent fertility. Using this strategy, I estimate that having a first child younger than a year old reduces female labor supply by 26.3 percentage points. These estimates are close to OLS and fixed-effects estimates obtained from a panel data constructed from the NSFG. They are also close to OLS estimates obtained using similarly defined samples from the 1980 and 1990 Censuses. The second part of my dissertation explores the problem of an educational authority who decides his revelation policy about students' educational attainments in order to maximize mean educational achievement. Incentives in an educational context are different from those in the marketplace. Schools cannot pay students to motivate them to attain higher levels of education. However, there is still a role for incentives. Since students care about which signal they can get from the school (pass/fail, GPA), the school has a tool to influence students' behavior. Using a theoretical model, I explore the optimal way to use this tool, i.e., the optimal way to reveal educational achievements. I find that this optimal revelation policy is dependent on the distribution of students with respect to ability. I show that this optimal scheme could be: a) classify individuals in two groups and just reveal this information, b) reveal all information, c) set a critical standard and group all individuals together below this level and provide full information about students' productivity above it.
AFRICA'S RECENT ECONOMIC REVIVAL: ROLE OF POLICIES, POLITICS AND INSTITUTIONS
(2011) Hobdari, Niko; Drazen, Allan; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Sub-Saharan Africa (SSA) has made significant progress in democracy and economic performance since mid-1990s, but the continent remains by far the poorest region in the world. This dissertation consists of three chapters. Chapter 1 reviews SSA's history of democracy and economic policy since independence, including a literature review. It argues that while SSA's disappointing economic performance is, in part, due to its difficult geography, high incidence of disease, and colonial legacy, the main reason for Africa's woes until mid-1990s seem to be the failure of economic policies adopted by most SSA governments after independence. Chapter 2 examines SSA's recent economic growth acceleration, and finds that such acceleration is mainly due to better institutions and policies adopted by most SSA governments (as a result of more open and democratic societies), as well as lower incidence of armed conflicts, whereas the role of aid and terms of trade is relatively limited. Chapter 3 reviews the impact on fiscal policy of competitive presidential elections in SSA during 1980-2005, and finds that (i) the magnitude of political budget cycles has declined over time as a result of stronger checks and balances and more experienced electorates; and (ii) that looser fiscal policies do not help reelect incumbents.
An Empirical Analysis of the Determinants of Initial Occupational Choice by Male High School Graduates
(1986) Cox, Donald Francis; Brechling, Frank; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, MD)
This dissertation consisted of an empirical analysis of the determinants or initial occupational choice by male high school graduates. The approach used was based on the theory of random utility. According to this approach, the individual selects a particular outcome from a set of possible outcomes based on both observed and unobserved characteristics of the individual and the particular possible outcome. In this analysis, the occupational choice set contained three possible outcomes. These possibilities were civilian sector employment, military service and college enrollment. For empirical analysis, a sample of 1,748 male high school graduates was drawn from the National Longitudinal Survey of Youths (1979-1981). The empirical model consisted of a mixed discrete/continuous simultaneous 4 equation system. Three estimation strategies were used. The first was a sample two stage logit/ordinary least squares procedure. The second was a modified two stage logit/ordinary least squares procedure that corrected for self-selectivity bias. the third strategy consisted of a modified two stage logit/ordinary least squares procedure that corrected for both self-selectivity and choice-based sampling bias. The estimation results indicate that the decision to enlist is most sensitive to the net income of the individual's family and the predicted civilian sector wage. The military experience of the individual's father and the desire to acquire additional training are also important in this decision. In addition, the differences in the estimates across the three estimation procedures illustrate the importance of correcting for sample biases.
Applied Economics Essays
(2020) Bo, Hao; Galiani, Sebastian; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation uses mathematical economic models and advanced statistical and econometric tools to study knowledge markets, external validity, and institutional changes. In Chapter 1, I focus on knowledge markets exploring how network relationships between knowledge consumers impact the equilibrium number of opinion leaders. Both a theoretical model and empirical analysis show that there’ll be more opinion leaders in a knowledge market if the most active knowledge consumers occupy more central positions in a social network connecting consumers. This is the first work to formally quantify opinion leaders, knowledge markets, and consumer attention. While the existing literature emphasizes the role of opinion providers’ network positions on the making of opinion leaders, this work shows that the network positions of active consumers also matter because active consumers serve as a propaganda machine. In Chapter 2, Professor Sebastian Galiani and I provide a formal, general exploration of the question of external validity and propose a simple and generally applicable method for evaluating the external validity of randomized controlled trials. This is important. Once researchers have conducted an internally valid analysis, that analysis yields an established set of findings for the specific case in question. As for the future usefulness of that result, what matters is its degree of external validity. In Chapter 3, I theoretically argue that people weigh specialization gains against trade costs when they decide whether to specialize and trade or self-produce all goods by themselves, and thus more people participate in trade under better institutions. I show that the better the institution of an economy’s trade partner, the more prosperous the economy is, thanks to expanded trade. Moreover, when more people trade, more people would like to fight for a better institution and may induce institutional improvement. Better initial institutions or lower trade costs facilitate institutional improvements; but with very high initial institutional quality, people may lose their incentive to protest. I also provide historical evidence consistent with the theory.
Asymptotic Theory for Spatial Processes
(2008-07-15) Jenish, Nazgul; Prucha, Ingmar R.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Recent years have seen a marked increase in the application of spatial models in economics and the social sciences, in general. However, the development of a general asymptotic estimation and inference theory for spatial estimators has been hampered by a lack of central limit theorems (CLTs), uniform laws of large numbers (ULLNs) and pointwise laws of large number (LLN) for random fields under the assumptions relevant to economic applications. These limit theorems are the basic building blocks for the asymptotic theory of M-estimators, including maximum likelihood and generalized method of moments estimators. The dissertation derives new CLTs, ULLNs and LLNs for weakly dependent random fields that are applicable to a broad range of data processes in economics and other fields. Relative to the existing literature, the contribution of the dissertation is threefold. First, the proposed limit theorems accommodate nonstationary random fields with asymptotically unbounded or trending moments. Second, they cover a larger class of weakly dependent spatial processes than mixing random fields. Third, they allow for arrays of fields located on unevenly spaced lattices, and place minimal restrictions on the configuration and growth behavior of index sets. Each of the theorems is provided with weak yet primitive sufficient conditions.
Auction Design for Colombia’s Forward Energy Market
(University of Maryland, 2007-06) Cramton, Peter
Auctioning Many Divisible Goods
(MIT Press, 2004) Ausubel, Lawrence M.; Cramton, Peter
We study the theory and practical implementation of auctioning many divisible goods. With multiple related goods, price discovery is important not only to reduce the winner’s curse, but more importantly, to simplify the bidder’s decision problem and to facilitate the revelation of preferences in the bids. Simultaneous clock auctions are especially desirable formats for auctioning many divisible goods. We examine the properties of these auctions and discuss important practical considerations in applying them.
Auctioning Securities
(University of Maryland, 1998-03) Ausubel, Lawrence M.; Cramton, Peter
Treasury debt and other divisible securities are traditionally sold in either a pay-your-bid(discriminatory) auction or a uniform-price auction. We compare these auction formats with a Vickrey auction and also with two ascending-bid auctions. The Vickrey auction and the alternative ascending-bid auction (Ausubel 1997) have important theoretical advantages for sellers. In a setting without private information, these auctions achieve the maximal revenue as a unique equilibrium in dominant strategies. In contrast, the pay your-bid, uniform-price, and standard ascending-bid auction admit a multiplicity of equilibria that yield low revenues for the seller. We show how these results extend to a setting where bidders have affiliated private information. Our results question the standard ways that securities are offered to the public.
Balance of Payment Crises In Emerging Markets: Large Capital Inflows and Sovereign Governments
(1998-03-15) Calvo, Guillermo A.
The paper shows that the combination of large capital inflows and sovereign governments could give rise to self-fulfilling balance of payments crises. It argues that a current account deficit could impair the resolution of such crises, but the crises themselves could occur even though the current account was in balance. The key is a weak financial sector, possibly made so by an accommodating central bank. In contrast with most of the literature on this subject, the paper endogenizes output and discusses the channels (New Classical and Keynesian) through which a BOP crisis can result in output collapse. Building on a Time to Build model, the paper shows that a growth slowdown can take place even though a BOP crisis brings about no current account reversal.
Bank Fundamentals, Bank Failures and Market Discipline: An Empirical Analysis for Emerging Markets During the Nineties
(2004-06-03) Arena, Marco Antonio; Reinhart, Carmen M; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
After the East Asian crisis, there has been a renewed interest in both academic and policy circles about the role that bank weaknesses play in contributing to systemic banking crisis. Even though, it has been recognized in the recent theoretical literature on banking crises that both macroeconomic and bank-level fundamentals have to be taken into account in the explanation of systemic banking crisis, to date, there is little cross-country empirical evidence for emerging markets on the role of bank weaknesses in contributing to both sudden deposit withdrawals and bank failures. In this context, my thesis analyzes the episodes of systemic banking crisis in Latin America (Argentina, 1995; Mexico, 1994; and Venezuela, 1994) and East Asia (Indonesia, Korea, Malaysia, Philippines, and Thailand in 1997) using bank-level data in order to answer the following questions. First, to what extent, did financial conditions of individual banks explain bank failures? Did only the weakest banks, in terms of their fundamentals, fail in the crisis countries? Second, did depositors in crisis countries discipline riskier banks by withdrawing their deposits in such a way that deposit withdrawals could be considered an act of market discipline? The results for East Asia and Latin America show that bank-level fundamentals both affect significantly the likelihood of failure and explain a high proportion of the likelihood of failure of failed banks (around fifty percent). In East Asian crisis countries, there was little overlap in the distribution of logit propensity scores between failed and non-failed banks, implying that mainly the weakest banks failed. However, in Latin American crisis countries, there was a much clear overlap in the distribution of logit propensity scores, implying that banking system and macroeconomic shocks are relatively much more important in Latin America. Regarding market discipline, a stable model of bank-level fundamentals explains the growth rate of deposits in both regions even during the peak of the crisis periods. However, in both regions, the relative contribution of bank level fundamentals during the peak of the crisis periods declined. In this context, to some degree, the observed deposit withdrawals represented an informed market response to observable bank weaknesses.
The Benefits of Metro Rail in Mumbai, India: Reduced Form and Structural Approaches
(2022) Suri, Palak; Cropper, Maureen L; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation studies the welfare effects of introducing metro rail in the city of Mumbai, India using a combination of reduced form and structural econometric approaches. Mumbai is one of the most densely populated cities in the world. To supplement its extensive, but overcrowded, network of Suburban Railway, over 300 km of metro rail lines are planned. Each chapter in this dissertation looks at a different dimension of the benefits of metro rail in the city and is a standalone paper. In Chapter 1, I analyze the benefits of the introduction of metro rail in Mumbai by computing the value of travel time savings to households. I estimate preferences for commute time from residence to work using two discrete choice models: a commute mode choice model assuming fixed residence and work locations for short-term analysis, and a combined housing and commute mode choice model assuming fixed work location for medium-term analysis. Using the expected compensating variation measure, I value travel time savings due to: (i) Line 1 (11.4 km), operational since 2014, and (ii) three upcoming lines (92 km). The value of short-term benefits for an average beneficiary under either project is Rs. 71-99 per month (9-14% of the average out-of-pocket cost). The medium-term benefits are an order of magnitude higher than the short-term benefits due to the possibility of household re-sorting. Women, college educated workers, and high-income households receive greater benefits. Benefits of the upcoming network accrue to more individuals and are more dispersed, both spatially and demographically, than the benefits of Line 1. A limitation of the partial equilibrium models in this chapter is that they capture benefits only to households and only through the channel of time savings. In Chapter 2, I address this by studying the net benefits of Metro Line 1. In Chapter 2 (co-authored with Maureen Cropper), we study the impact of Metro Line 1 in Mumbai on property prices using difference-in-differences in an event study framework. We use administrative data on assessed land values from 2011-18 for 726 sub-zones in the city. Comparing areas within 1 km of the metro with those beyond 1 km but within 3 km, we estimate the effects on property values for commercial, industrial, and residential properties. We find a significant and persistent increase in prices for all land use categories in the treated areas relative to the control areas after Metro Line 1. The price increase ranges from 13% for commercial properties to 17% for residential. We show that improvements in employment accessibility and other location amenities are plausible mechanisms underlying these effects. In Chapter 3 (co-authored with Maureen Cropper), we study the effects of the introduction of Metro Line 1 in Mumbai on air pollution. We use data on daily average levels of nitrogen dioxide (NO2), sulfur dioxide (SO2), and particulate matter (PM10) from ground monitoring stations in an event study framework to identify the changes in pollution levels following the opening of Metro Line 1. We find a robust and significant reduction in the level of NO2 and no evidence of changes in PM10 and SO2. We also find a decline in the level of Aerosol Optical Depth measured using satellite data at 1 km resolution.
Betting Against The State: Socially Costly Financial Engineering
(Elsevier, 1999-05-29) Calvo, Guillermo A.
The central question raised in the paper is the desirability of state-contingent contracts under imperfect policy credibility. The paper shows a benchmark case in which imperfect credibility of a trade liberalization program is distorting, and the distortion is magnified by statecontingent markets. In addition, it examines the welfare implications of gaining credibility concluding that, in general, more credibility is better than less, and examines the moral hazard faced by policymakers in carrying out reform in case the private sector is able to obtain insurance against its discontinuation.
Borrowing Constraints and the Business Cycle in Emerging Markets
(2012) Komatsuzaki, Takuji; Korinek, Anton; Vegh, Carlos A; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
The global financial crisis of 2008/09 has reminded both policymakers and academics of the powerful effect of sudden changes in the direction of capital flows. A tightening of borrowing constraints was an important contributor to these sudden changes and forced many borrowers into rapid deleveraging. Based on their experience in the 1990s, a number of emerging market economies had prepared for such shocks by accumulating foreign reserves. This dissertation analyzes the effects of such credit shocks and the optimal precautionary response in emerging economies. Chapter 1 is a brief introduction that motivates the topic and overviews main results of the subsequent chapters. Chapter 2 takes the view of a small open economy. It develops a formal model of why emerging markets simultaneously hold external debt and external reserves. Reserves may be held simultaneously with debt even when their return is lower because they are valuable for self-insurance. Two key assumptions generate this finding. First, the economy may experience a sudden stop in its access to new foreign debt issuance. Second, debt has longer maturity than reserves. When a sudden stop occurs, the maturity difference allows the agent to repay the debt gradually, giving a liquidity advantage to reserves. I numerically show that the model economy optimally chooses simultaneous holding for most periods. The model also generates contrasting responses of reserves to the sudden stop shock and the endowment shock, consistent with the data. Chapter 3 takes the view of a firm in an emerging economy. It investigates the relationship between credit shocks and firm financing patterns. After empirically establishing that banking crises are followed by stagnation in credit and that investment is financed less by debt and more by internal fund or equity at the time of banking crises, I develop a dynamic model of the firm consistent with this finding. In the model, the firm increases its reliance on retained earnings or equity issuance in response to a negative credit shock. In the long-run distribution, the introduction of a credit shock leads to a lower average debt and higher volatility in equity payout, debt, and capital. An extended period of negative credit shocks leads to a creditless recovery where investment is financed not by debt but by retained earnings or equity issuance.
A Brief Guide to C and C++ for Fortran or Basic Programmers
(1999) Almon, Clopper
This paper introduces C and C++ programming for learners who already have some experience in another language such as Fortran or Basic. It explains basic syntax, dynamic space allocation, structures, classes, constructors and destructors, and overloading of operators. All concepts are illustrated with working programs.
Burst of Fall, A Painting by Alma Thomas
(2019-01) Almon, Clopper
"Burst of Fall" is a 1968 painting by the Alma W. Thomas, and African-American woman painter of the Washington Color school. This brief note describes the circumstances of its origin and of its initial purchase. It includes as jpg image of the painting.
The Business Cycle Consequences of Informal Labor Markets
(2013) Finkelstein Shapiro, Alan; Aruoba, Boragan; Haltiwanger, John C; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation explores the connection between the structure of labor markets and business cycle dynamics, with a focus on informality. The first chapter summarizes the main contributions of the dissertation. Institutional quality is one of the most important determinants of cross-country differences in informality. The second chapter analyzes the link between institutions, the size of the informal sector, and aggregate volatility. I build a business cycle search and matching model with informal labor markets that captures the positive connection between informal sector size and consumption and investment volatility in the data. In addition, I show that the root cause of changes in the size of the informal sector matters for establishing the relationship between (1) informality and long-run macroeconomic outcomes and (2) informality and aggregate volatility. For the same change in informal sector size, changes in different parameters of institutional quality in the model have contrasting quantitative implications for the steady state and the volatility of unemployment in the economy. These results highlight the importance of identifying the specific source behind changes in the size of the informal sector to characterize the link between informality and business cycle dynamics. The third chapter explores the connection between the share of self-employment in the economy and the pace of economic recoveries. Self-employment comprises an important share of employment in many countries. Recent studies document that self-employment expands during downturns, a fact that arises from higher transition rates out of unemployment and into self-employment in recessions. Furthermore, countries with higher self-employment shares exhibit lower output persistence over the business cycle. I build a novel business cycle model with frictional labor markets where individuals can be self-employed or employed in salaried firms. I show that economies with larger self-employment shares exhibit faster recoveries following a negative economy-wide productivity shock. Differences in the ease of entry into self-employment as the economy recovers play a key role in explaining contrasting labor market and output dynamics. The model successfully captures some of the key cyclical patterns of self-employment absent in existing models, as well as the quantitative relationship between self-employment and cyclical output persistence in the data.
Caffeinated Development and Other Essays in Latin American Economic History
(2020) Uribe-Castro, Mateo; Wallis, John J; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation consists of three essays. The first one focuses on Colombia after 1850 and measures the impact of the expropriation of Church's assets on political violence. With yearly data on the number of battles per municipality, archival information on the reform, and difference-in-differences, the paper documents a reduction of political violence in places where the Church's assets were expropriated. The paper contests the traditional idea of the expropriation of Church's real estate as a source of political violence. It highlights changes in political competition after the alliance between Conservative factions and the Church was weakened. Specifically, it shows the reduction in political violence was concentrated in municipalities with high political competition and where the Conservative Party was relatively weak. The second essay studies the effect of the first wave of globalization on developing countries' structural transformation, using data from Colombia's expansion of coffee cultivation. Counties engaged in coffee cultivation in the 1920s developed a smaller manufacturing sector by 1973 than comparable counties, despite starting at a similar level in 1912. My empirical strategy exploits variation in potential coffee yields, and variations in the probability to grow coffee at different altitudes. This paper argues that coffee cultivation increased the opportunity cost of education, which reduced the supply of skilled workers, and slowed down structural transformation. Using exogenous exposure to coffee price shocks as instrument, I show that reductions in cohorts' educational attainment led to lower manufacturing activity in the long-run. The effect is driven by both a decrease in demand for education and reductions in public goods. Finally, coffee cultivation during the early 20th Century had negative long-run effects on both individual incomes and poverty rates. The third essay explores how changes in commodities’ prices can have differential effects on school enrollment according to characteristics of crop’s production functions. It compares schooling outcomes in counties that specialize in sugar (a land intensive crop with economies of scale) or coffee (mostly produced in small farms) in Puerto Rico between 1900 and 1930. Sugar price increases lead to increases in enrollment in sugar counties, while coffee price changes have a negative relationship with enrollment in coffee regions.
A Capacity Market that Makes Sense
(Elsevier Science, 2005-06-15) Cramton, Peter; Stoft, Steven
We argue that a capacity market is needed in most restructured electricity markets, and present a design that avoids problems found in the early capacity markets. The proposed market only rewards capacity that contributes to reliability as demonstrated by its performance during hours in which there is a shortage of operating reserves. The capacity price responds to market conditions, increasing when and where capacity is scarce and decreasing to zero when and where it is plentiful. Market power in the capacity market is addressed by basing the capacity price on actual capacity, rather than bid capacity, so generators cannot increase the capacity price by withholding supply. Actual peak energy rents (the short-run energy and reserve profits of a benchmark peaking unit) are subtracted from the capacity price. This allows the capacity market to more accurately control short-run profits and suppresses market power in the energy market. This design both avoids and hedges energy market risk, and by suppressing market power avoids regulatory risk. Risk reduction saves consumers money as do the performance and investment incentives inherent in the pay-for-performance mechanism.
Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops
(Journal of Applied Economics, 1998-11) Calvo, Guillermo A.
The paper studies mechanisms through which a sudden stop in international credit flows may bring about financial and balance of payments crises. It is shown that these crises can occur even though the current account deficit is fully financed by foreign direct investment. However, equity and long-term bond financing may shield the economy from sudden stop crises. The paper also examines possible factors that could trigger sudden stops, and argues that the greater independence that countries have, as compared to regions of a given country, could help to explain why sudden stop crises are more prevalent and destructive at international than at national levels.

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