Economics Theses and Dissertations

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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.
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.
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.
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.
Capital Inflows, Financial Development, and Credit Constraints at the Firm Level: Theory and Evidence
(2012) Armenta Reales, Armando Jose; Vegh, Carlos; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation is composed of two related essays on the effects of periods of large capital inflows on macroeconomic aggregates and financing constraints at the firm level, and the relationship of the differences in these effects among developed and emerging economies with the degree of financial development. In the first essay I conduct an empirical exploration of this topic. I show that periods of large capital inflow are associated with more volatile macroeconomic outcomes in economies with a low degree of financial development, relative to economies with more developed financial systems. Employing firm level data for 42 countries, I show that firms in economies with a low level of financial development exhibit a relatively larger loosening in the cost of borrowing and a larger appreciation in equity prices. I show that financing constraints are more prevalent in firms located in countries with a low degree of financial development. Moreover, periods of capital inflow booms relax these financing constraints. This decrease is significant regardless of the composition of capital inflows, stronger when coupled with domestic credit booms, larger for firms in the non-tradable sector and larger for firms that depend more heavily on internal funds to finance their investment opportunities. In the second essay, using a theoretical model, I explain the larger aggregate response around capital inflow booms, as arising from varying degrees of financial development, and their relation to the pervasiveness of credit constraints at the firm level. I propose a heterogeneous agents model in which the share of borrowing-constrained agents depends on the level of financial development. Agents in an economy characterized by a low degree of financial development can use a lower share of their assets, measured at their market value, as collateral to secure debt. I show that a period of large capital inflow causes an increase in the demand for capital for both unconstrained and constrained firms. At the initial valuation of capital, only unconstrained firms can freely adjust their demand for capital. However, the increase in the aggregate demand for capital increases its valuation and thus generates a loosening in financing constraints for ex-ante constrained firms, and an amplified response at the firm level and on macroeconomic aggregates.
The Causality and Characterization of the Widowhood Effect
(2006-08-04) Espinosa, Javier; Evans, William; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Researchers from a variety of fields have noted a sharp rise in mortality for widows soon after the death of their spouse, a relationship that has often been called the widowhood effect. Because of assortative mating, married couples tend to share many of the same lifestyle characteristics, so this result may reflect correlation rather than a causal relationship. In this dissertation, I attempt to decipher whether the widowhood effect reflects a causal relationship. The key innovation in the dissertation turns on the notion that some causes of death reveal more information about the surviving spouse than others. In the extreme, if a cause of death was randomly assigned, then these types of deaths could be used to identify the death of a spouse does in fact raise mortality of the surviving spouse. In practice, we cannot specify what causes of death are randomly assigned, but instead, we can identify those that are uncorrelated with observed characteristics. Specifically, I use data from the National Longitudinal Mortality Survey and the National Health Interview Survey Multiple Cause of Death supplement to create longitudinal datasets of married couples, aged 50 to 70. I initially use this sample to identify those causes of death that are predicted by socio-economic status (income, occupation and education) and those that are not. I refer to these two types of deaths as informative and uninformative causes of death, respectively. If the heightened mortality of surviving spouses is subject to an omitted variables bias, in single-equation models, I should find a greater excess mortality for informative deaths than for uninformative ones. If omitted variable bias is not a serious concern, I should see little difference between the two types of widows. In Cox proportional hazard models, I find for men the death of a spouse from an uninformative cause has only a slightly smaller impact on mortality than a death from an informative cause. The findings suggest a 30 percent increase in male mortality as a direct result of becoming a widow. I do not find similar evidence for women; in fact, the results show no marriage protection effect.
Changes in the Wage Gap of Gender and Caste Groups in India
(2006-04-24) Jacob, Marilyn; Sanders, Seth; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
We explore the changes in the wage gap of caste and gender groups in India. Traditional Hindu society divided people into social classes based on the caste system. The lowest of the castes have traditionally been economically disadvantaged. Women in India have typically been restricted to the household and their participation in the formal labor market has begun expanding only recently. We explore the changes that these two groups have experienced over the years using a nationally representative dataset. In the second chapter we decompose the wage gaps of these groups into explained and unexplained components based on the Blinder-Oaxaca (1973) decomposition technique. Our contribution to the literature here is the extension of the analysis of discrimination to a society with a clearly established social hierarchy. We find that the gross wage gap has reduced over this period, and the extent of the gap attributable to discrimination has decreased over time. We further decompose the wage gap into components attributable to wage differences and occupational differences based on Brown et al. (1980). We find that the wage discrimination component has decreased over time and the job discrimination component is statistically insignificant. In the third chapter we investigate whether there have been beneficial wage gains for women and lower castes because of increased competition following liberalization of trade in India. Based on Becker's model of taste-based employer discrimination, it is expected that as an economy becomes more competitive, employer discrimination should decline. The trade liberalization reforms that began in 1991 in India increased competition by lowering protection in certain manufacturing industries. Firms who could indulge a taste for discrimination when trade protection allowed supernormal profits may not have been able to continue to do so as competition eliminated such profits. Using individual-level data and tariff data from pre- and post-reform periods, we find that wage differences reduced for female workers relative to male workers in the more open manufacturing sector industries. However, there is no significant effect on the wage differential between low and high caste workers.
Childhood Events and Long-Term Consequences
(2015) Palloni, Giordano; Galiani, Sebastian; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Health and experiences in early childhood are strongly associated with adult outcomes. In this dissertation, I explore the association in detail with a focus on identifying the causal mechanisms that generate variation in early health and uncovering the parental behaviors that determine whether early health and living conditions evolve into long-term deficits or advantages. In chapter 1, I explore whether pre-conception maternal desire for children of a particular sex has implications for the health of children in Indonesia. I show that a simple fertility stopping model predicts that when a child is born of the mother’s preferred sex, they will receive more resources, and I test this prediction empirically using a longitudinal data set. I find that children born of the mother’s preferred sex are heavier, have a higher body mass index, and experience fewer illnesses. I provide evidence that reductions in subsequent fertility are the primary mechanism for these effects. The existing research measuring the long-term implications of early childhood conditions frequently fails to identify the mechanisms through which early deficits become life-long disadvantages. In chapter 2, I examine one instance where deficits may matter for long-term well-being. Using data from Indonesia, I find that when third trimester rainfall is fifty percent higher than expected, birth weight and relative size are approximately .23 standard deviations higher. Despite this early advantage, I find no persistent positive impact fifteen years later. However, parental investment appears to be negatively influenced by in utero exposure to rainfall, suggesting that parents compensate for early health conditions. To date, research on the long-term effects of childhood participation in subsidized housing has been limited by the lack of suitable identification strategies and appropriate data. In chapter 3, I, along with my co-authors, create a new, national-level longitudinal data set on housing assistance and labor market earnings to explore how children’s housing affects their later employment and earnings. We find that while naïve estimates suggest there are substantial negative consequences to childhood participation in subsidized housing, household fixed-effects specifications attenuate these negative relationships for some demographic groups and uncover positive and significant effects for others.
Civil Liberties, Mobility, and Economic Development
(2009) BenYishay, Ariel; Betancourt, Roger R.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
To what extent do civil liberties affect economic development? This dissertation addresses this question in two essays. The first chapter (joint with Roger Betancourt) provides a new economic interpretation of civil liberties as rights over a person's most basic human asset: her own self. The importance of these rights to economic development is based on the principle that property rights-defined over a broad set of "property''-are crucial for economic growth. The empirical literature to date shows little support for such claims related to civil liberties, however, with ambiguous evidence on the role of these rights in driving long-run growth. Using newly available data from Freedom House, we find that one of the recently disaggregated categories of civil liberties explains income differences across countries more powerfully and robustly than any other measure of property rights or the rule of law considered. This component, entitled "Personal Autonomy and Individual Rights,'' evaluates the extent of personal choice over issues such as where to work, study, and live, as well as a broader set of property rights and other choices. While the first chapter finds that greater civil liberties can substantially improve long-run economic development, the second chapter identifies a key friction in this relationship. In countries that lack complementary institutions, civil liberties governing individual mobility can complicate credit transactions. By allowing individuals to move to locations where less is known about their prior defaults, mobility freedoms induce opaqueness and can result in credit rationing. I develop an instrumental variable estimation to study these effects, which would otherwise be complicated by omitted variable bias and endogeneity. Using household survey data from Guatemala, I instrument for individual migration with the interaction of violence patterns and individual sensitivities toward that violence. Using this approach, I find that the act of migration within a country actually causes individuals to have significantly less access to credit, primarily because lenders are concerned about these borrowers' opportunistic default.
Competing or Collaborating Siblings? An Investigation of the Relationship between Industrial and Trade Policies
(2006-08-02) Sharma, Gunjan; Betancourt, Roger; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation investigates the relationship between industrial and trade policies and their impact on firm-level incentives to become more productive. In Chapter two we use a two-sector growth model and show that the impact of a rise in competition in the intermediate goods sector (that invests in quality-enhancing technology) is sensitive to market structure in the final goods sector. We find that more competition in the intermediate goods sector (due to industrial policy reform) can lead to rising investment in technology and hence rising productivity. Further we find that industries that face more competition domestically can perform better in the face of foreign competition. That is, there may be strategic complementarities between industrial deregulation and trade reform. We also find that a rise in competition in the final goods sector can affect investment incentives in the intermediate goods sector and hence affect productivity. This study highlights the importance of market structure assumptions in growth models. The third chapter tests predictions from chapter two using two unique data sets. We use the industrial licensing regime in India (operating from the 1950s onwards) and its gradual relaxation during the 1980s and 1990s to test whether industrial de-regulation that leads to more competition domestically, affects firm-level productivity. To our knowledge, ours is the only detailed data set on Indian industrial policy. Our firm-level data for the period 1980-94 is a census of firms in India and has been rarely used in literature. We also use the interesting chronology of reforms in India (industrial de-regulation in the 1980s and trade reforms in 1991) to test whether industries that faced more competition domestically tend to perform better when facing foreign competition. Our identification strategy uses an important institutional feature of Indian policy. Firms with assets below a certain defined rupee threshold were exempt from licensing requirements. This institutional feature provides us within-industry variation that allows us to identify the interaction between de-licensing and exemption status. We find that industrial de-regulation during the 1980s led to a significant rise in firm productivity. Further preliminary results suggest that there exists a strategic complementarity relationship between industrial and trade policies--industries and firms that were de-licensed tend to perform better vis productivity after trade liberalization. Our results are robust to the inclusion of a wide variety of firm and industry fixed effects and controls for policies other than de-licensing that may affect productivity. This chapter contributes to the literature by being the only detailed empirical analysis of the industrial licensing regime in India, especially the de-licensing that took place during the 1980s and by providing evidence of the crucial link between trade and industrial de-regulation.
CONTRACTING OUT PUBLIC SCHOOLS AND ACADEMIC PERFORMANCE: EVIDENCE FROM COLOMBIA
(2011) Bonilla-Angel, Juan Diego; Hellerstein, Judith K; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Contracting out public schools to private institutions is an instrument for reforming public education as it may facilitate academic innovation and improve student academic performance through higher school accountability and autonomy. The degree of autonomy that different providers have may vary substantially depending on the contractual and institutional arrangements they are subject to. In principle, contractual differences should generate different sets of incentives for providers that may ultimately affect student academic performance. One can expect, for example, that programs with limited achievement accountability rules might invest sub-optimally in resources aiming at improving the academic performance of their students. In this dissertation, I evaluate short- and longer-run achievement effects of the \emph{Colegios en Concesi\'on} (CEC) program, a large-scale initiative implemented in 2000 in Bogota, Colombia, which contracted out the administration of some traditional public schools (TPS) to reputed, not-for-profit private schools and universities. This program allows participating schools to operate outside public schools' collective bargaining provisions in return for being accountable, among other things, for the academic performance of their students in the ICFES test, a high-stakes college entry national standardized test. The major empirical challenge in studies of alternative school models is selection bias. Students who attend CEC schools may differ in a number of ways from public school students. To overcome potential selection bias of CEC attendance, I exploit variation in distance from a student's residence to the closest CEC institution as an instrument for CEC attendance. While distance may in theory be correlated with unobservable characteristics of students, I demonstrate using a variety of empirical strategies that this instrument is conditionally exogenous of unobserved determinants of academic achievement. I first evaluate the effects of attending a CEC school on ICFES test scores. Instrumental variables results indicate that CEC students exhibit important and significant gains in test scores on the ICFES test. That is, the two-stage least squares estimates obtained indicate that CEC students score 0.6 and 0.2 standard deviations higher in math and verbal tests, respectively, relative to TPS students. I provide evidence that the positive test score results of CEC attendance are not driven by unintended strategic responses by CEC schools such as excluding low-performing students from the pool of test-takers or via test specialization in the curriculum, or by significant differences in education inputs such as teachers' education, student-teacher ratios, or expenditures per student. I also provide suggestive auxiliary evidence that the estimated results are a consequence of an institutional arrangement that makes CEC schools accountable for the academic performance of their students. I also evaluate whether attending a CEC school translates into longer-run gains in potentially more meaningful outcomes such as increasing the probability of investing in post-secondary schooling, attending a more selective tertiary institution, or being admitted in high-return academic programs. The results on college attendance indicate that CEC students exhibit a significantly higher probability of attending a higher education institution and to attend a vocational program relative to TPS students. Moreover, CEC students have a slightly higher probability of attending a selective public institution and are not more likely to drop out from college relative to TPS students. The overall results provide compelling evidence that the contractual arrangement that defines the operation of CEC schools are successful at improving the academic performance of their students relative to TPS.
Credit and Liquidity in the Macroeconomy
(2015) Kreamer, Jonathan; Korinek, Anton; Shea, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation studies the role of credit and liquidity in macroeconomic fluctuations. Chapter 1 analyzes the effect of endogenous unemployment risk on the dynamics of recovery from a liquidity trap. In a liquidity trap, an adverse demand shock raises unemployment and produces a period of slow hiring. Slow hiring further reduces demand, both for standard precautionary reasons and because credit conditions endogenously worsen, reducing households' ability to borrow and consume. Multiple equilibrium paths exist, and which one the economy follows depends on household expectations and the policy rule adopted by the central bank after the economy exits the trap. Employment remains depressed for a substantial period after an adverse shock because high unemployment increases the dispersion of household debt holdings, slowing the recovery of demand. I find that the initial household debt distribution significantly affects the economy's sensitivity to a demand shock, and study the role of central bank policy in mitigating the initial fall in employment and promoting faster recovery. Chapter 2 explores a novel channel through which financial shocks affect the real economy through the supply of liquidity. I consider a model in which firms require uncertain ongoing financing, and agency costs limit their ability to raise new funds. To secure future financing, firms hold assets to sell if needed, and purchase credit lines from financial intermediaries. I collectively refer to these instruments as liquidity. Financial intermediaries' ability to commit future funds depends on their capital. This creates a linkage between bank balance sheets and the aggregate supply of liquidity. Bank losses raise the liquidity premium and reduce investment. I analyze the optimal supply of public liquidity, and find that when private liquidity is scarce the government should issue bonds for their liquidity properties. I further find that the optimal supply of government debt is decreasing in bank capital. This suggests that in the wake of a financial crisis in which financial intermediaries suffer large losses, governments should increase debt issuance. Chapter 3 considers the distributive implications of financial regulation. It develops a model in which the financial sector benefits from financial risk-taking by earning greater expected returns. However, risk-taking also increases the incidence of large losses that lead to credit crunches and impose negative externalities on the real economy. A regulator has to trade off efficiency in the financial sector, which is aided by deregulation, against efficiency in the real economy, which is aided by tighter regulation and a more stable supply of credit.
CURRENCY MISMATCHES IN EMERGING MARKETS: CAUSES AND IMPLICATIONS FOR FIRMS' INVESTMENT DURING CURRENCY CRISES
(2003-11-24) Rodriguez Martinez, Pedro Cesar Jesus; Reinhart, Carmen; Broner, Fernando; Haltiwanger, John; Shea, John; Economics
This thesis studies two related issues that have gained relevance as a consequence of several of the major currency crises of the 1990s. The first is the impact that devaluations have on investment when domestic firms have currency mismatches, i.e., debt denominated in foreign currency and assets and revenues in domestic currency. The second has to do with the causes behind the widespread presence of currency mismatches in many economies of the world. Chapter 2 analyzes the first issue using firm level data for Thailand to test for the impact of currency mismatches on firms' investment during the Asian crisis. A key feature of the analysis is that it exploits the heterogeneity that exists in the degree of currency mismatch across firms in order to identify the mentioned impact.The results of this chapter suggest that currency mismatches played a statistically significant role in explaining the investment decline observed in Thailand during and after the Asian crisis, and, as a result, that a balance sheet channel may have operated during the crisis. The results also suggest that omitting complementary explanations of the Asian crisis, in particular the presence of over-investment prior to the crisis, produces an artificially high impact of currency mismatches on investment. This result occurs due to the co-movement that investment and currency mismatches have in the period preceding the crisis. Chapter 3 assesses the generality of the results of the previous chapter by analyzing other three countries that were involved in the Asian crisis: Indonesia, Malaysia, and South Korea. Although less robust due to data limitations, the analysis is still very insightful. Chapter 4 deals with the second issue mentioned in the first paragraph. The chapter proposes a model that emphasizes the incentives of domestic governments to generate opportunistic devaluations in order to transfer resources from foreign lenders to domestic borrowers in case debt contracts were denominated in domestic currency. The model is not only able to explain why firms end up having currency mismatches, but it is also consistent with several of the stylized facts associated with international capital movements.