College of Behavioral & Social Sciences
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Item ESSAYS IN EXPERIMENTAL ECONOMICS WITH IMPLICATIONS FOR ECONOMIC DEVELOPMENT(2011) Douoguih, Kahwa C.; Cropper, Maureen; Ozbay, Erkut; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In an exploration of the joint concerns of economic development, namely efficiency and equality, I employ experimental methods to consider several issues regarding entrepreneurship and regulation with particular applications in developing countries. Entrepreneurship programs in developing countries may not take hold in rural populations if people there tend to shy away from competitive and uncertain economic opportunities, thus contributing to the systematic underdevelopment of rural areas. In a field experiment conducted among potential entrepreneurs in rural and urban Ghana, we found that rural subjects were 20 percent less likely than their urban counterparts to select an all-or-nothing tournament compensation scheme over a piece rate wage to per- form a simple matching task. The difference between the rural and urban tournament choice was driven by subjects who believed their own performance was the best within their group; urban subjects were twice as likely as their rural counterparts to believe that they had scored in first place and were thus more likely to select the tournament compensation. To examine behavior in a tax setting, we develop a simple tax evasion model as a signaling game between a taxpayer and an auditor that includes a non-strategic, always compliant taxpayer. In addition to the taxpayer's income report to the auditor, he has the option to send a costly message, a donation to charity that may serve as an indirect signal to the auditor of the taxpayer's ethical type. In the case where the taxpayer has misreported his income and is audited, he must pay unpaid taxes and a penalty. We establish a Perfect Bayesian equilibrium where taxpayers will use the charitable donation to signal honesty, thereby reducing the probability of audit. Auditors will optimally audit reports without charity donations more frequently than those with donations. To test our theoretical predictions, we use a two-sided signaling experiment where the taxpayer voluntarily reports his income to determine his tax liability and can make an observable and verifiable charity donation. Our aggregate experimental results indicate players employ mixed strategies in line with theoretical predictions.Item Four Essays in the Measurement of Governance Institutions(2010) Givens, David Michael; Murrell, Peter; Chao, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation produces a new set of orthogonal governance measures based on expert assessment data. Chapter 1 constructs the measures using a factor model. Chapter 2 applies the measures to study comparative economic development. Chapter 3 conducts a number of robustness checks on results from the first two chapters. Chapter 4 uses Monte Carlo experiments to assess potential inaccuracy in my governance measures caused by the application of the maximum-likelihood estimator to polytomous data.Item ESSAYS ON COOPERATION IN DEVELOPING COUNTRY INDUSTRIAL CLUSTERS(2005-01-25) Thompson, Theresa Marie; Betancourt, Roger R.; Minehart, Deborah F.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)An industrial cluster is a group of firms that are specialized by sector, located in close geographic proximity and consist of mostly small and medium sized enterprises. An introduction to these clusters is provided in Chapter One. Chapter Two develops a model to examine the conditions under which clustered firms in a less developed country may cooperate in a "joint action" to market their output in a developed country, eliminating the role of an intermediary firm in the developed country. The clustered firms are heterogeneous in expected quality of output and know the quality type of other firms, but the foreign intermediary does not. The intermediary, however, has a lower marketing cost than the clustered firms. The main result of the model is that joint action can occur among high quality type firms, but the low quality firms always use the foreign intermediary to distribute their output. Chapter Three examines empirically two aspects of collective efficiency, one passive and one active, through the analysis of a survey of the surgical instrument cluster in Sialkot, Pakistan. First, I test an idea from relational contracting theory that informal relationships can substitute for formal enforcement through the judicial system. Inter-firm trust is measured as the amount of trade credit offered to customers. The results show that suppliers are more likely to offer trade credit when they believe in the effectiveness of formal contract enforcement and when they participate in business networks (proxied by inter-firm communication). Customer lock-in helps to develop inter-firm trust since firms give more credit when relationships are of longer duration. This is because locked-in customers are less able to find alternate suppliers. Chapter Three also examines the firm-level characteristics that determine the firms' interest in intra-cluster cooperation to market their own goods. The results demonstrate that firms are more likely to be interested in such initiatives once they have already had some direct experience in marketing, and when firms have a lower opportunity cost of leaving their current customers, where opportunity cost is measured by the length of the trading relationship.