Economics - Theses, Dissertations, and other Required Graduate Degree Essays

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Essays on the economics of linguistic diversity and preference for surprise

Author: 
Date created: 
2017-07-19
Abstract: 

This thesis is composed of three essays, the first two of which are on the economics of linguistic diversity and the last on the evolutionary foundation of the preference for surprise. Chapter 1 is joint work with Leanna Mitchell. We propose a theory that relates linguistic diversity (i.e. the number of languages within a region) to cooperative and competitive incentives in a game theoretic framework. In our model, autonomous groups interact periodically in games that represent either cooperation, competition, or no interaction. Language matters in these interactions because language common to a pair of groups facilitates cooperation; whereas language unique to one group affords that group an advantage in competitions against other groups. The relative frequency of cooperation and conflict in a region provide incentives for each group to modify their own language, and therefore leads to changes in linguistic diversity over time. Hence, a main contribution of our paper is to model strategic incentives as a cause of linguistic divergence. Our model predicts that higher frequency of cooperative interactions relative to competitive ones reduces a region’s linguistic diversity. Chapter 2 reports a laboratory experiment designed to test the theory proposed in the previous chapter. In the experiment, pairs of subjects endowed with a set of words interact repeatedly in a series of underlying games, in which they use the words to signal their intended action. The underlying games are either coordination or zero-sum. As the subjects are allowed to modify their vocabularies by learning words from their counterpart and creating new words, I observe that, over time, the pairs of vocabularies in coordination games tend to converge, while in zero-sum games, the vocabularies experience constant pressure to diverge. This finding is consistent with the theoretical predictions in Chapter 1. Chapter 3 uses a principal-agent model to provide an evolutionary explanation of the preference for surprise, where surprise is measured by the Kullback-Leibler divergence between a decision-maker’s prior and posterior. The principal in the model is interpreted as the blind force of evolution, who tries to maximize the fitness of the agent—generations of human beings—whose objective in turn is to maximize a utility function designed by the principal. In a typical period, the agent first decides how many signals about the state to purchase, and then he chooses an action that, together with the state, determines his fitness. The variance of the signal distribution changes across time, but the agent is predisposed to believe that it is the same as the one in the previous period. I show that if the variance of the signal distribution decreases at a sufficiently fast rate over time, it is evolutionarily optimal for the utility function to include a component that rewards surprises.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Arthur Robson
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Essays on development economics and health economics

Author: 
Date created: 
2017-08-16
Abstract: 

In chapter 1, I estimate and decompose the welfare benefit of Thailand's universal health care policy, also known as the “30 Baht program”. The total welfare impact of the 30 Baht program is defined as the amount of consumption that an enrollee would need to give up so as to leave her with the same expected utility as without the 30 Baht program. I find that the total welfare benefit is approximately 75 cents per dollar of government spending. The main source of the welfare effect can be attributed to improved consumption smoothing rather than increases in the consumption level. Using the difference in differences method, I find that the effect of the 30 Baht program on income is significantly positive, while the effect on consumption is slightly negative but not significant. This implies that the 30 Baht program has a positive impact on savings and future consumption, rather than current consumption. In chapter 2, I investigate into the effect of the 30 Bath program on drinking and smoking behaviours. This effect is decomposed into the moral hazard component, the increased utilization component and the increased life expectancy component in the framework. Using Townsend Thai project monthly surveys, I estimate the average treatment effect of the program by difference in differences using households of government employees as the control group. I also use quantile regressions to study the treatment effect heterogeneity. Although the estimated average treatment effects of the 30 Baht program on smoking and drinking behaviours are not statistically significant, the quantile regression estimates suggest that (1) the effects of the program on smoking/drinking expenditure are negative at the 10th percentile, and (2) the 30 Baht program negative affects smoking/drinking expenditure even though the moral hazard component and the increased utilization component are isolated. In chapter 3, with Tenzin Yindok, we investigate into the effect of Thailand's 2003 black market lottery crackdown on households' gambling behaviours and consumption-saving behaviours. We estimate the average treatment effect by difference in differences technique using annual household spending on black market lottery as a continuous treatment variable. We find that the crackdown resulted in a statistically significant decrease in black market lottery activities, and an increase in participation and spending on government lotteries, although this increase is not commensurate with the reduction in black market gambling. Our main results on consumption and saving suggest that households responded to the policy by increasing their savings, without any statistically significant increase in non-gambling related consumption. We further find that the statistically significant and positive result on saving is driven by households in the poorest quintile and households in the richest quintile. The former effect is also the largest in terms of magnitude.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Alexander Karaivanov
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Sources of Irrational Behaviour. Three Essays on Theory and Experimental Evidence

Author: 
Date created: 
2017-04-05
Abstract: 

This thesis investigates aspects of human behaviour that can be considered irrational from an economic point of view. Potential reasons for three persistent behavioural patterns in economic interactions are investigated: Altruism, discrimination, and punishment of deviant (“immoral”) behaviour. For the first two patterns, this thesis reports the results of dictator game experiments with young children in primary schoolsin Vancouver, BC, Canada. To understand altruism, the thesis looks for potential reasons why children share resources with genetically unrelated others. It shows that socialization in a particular cultural environment, indicated by the language children speak at home, influences children’s sharing behaviour to a large extent. The second part investigates discrimination among children belonging to different ethnic groups. It shows that while children from the dominant white category show clear signs of in-goup bias in their sharing decisions, children from the East Asian minority behave based on a more complex ethnic identity. The third part presents a simple game theoretic model to outline a potential evolutionary origin for a genetic disposition to punish behaviour that conflicts with prevailing moral norms. The model shows how human evolution in small groups can make moral punishment evolutionarily advantageous for individual agents.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Jasmina Arifovic
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Applications of Individual Evolutionary Learning

Date created: 
2017-01-30
Abstract: 

This research investigates three applications of the Individual Evolutionary Learning (IEL) model. Chapter 2 utilizes a horse-race approach to investigate the overall performance of 4 learning algorithms in games with congestion. The games utilized are Market Entry games and Choice of Route games. I show that a version of the IEL has the best fit of the experimental data relative when the experimental subjects have full information. Chapter 3 (joint work the Jasmina Arifovic and John Duffy) applies the IEL to games with correlated equilibrium suggested by an external third party. The IEL nearly perfectly matches the behavior of experimental subjects playing the Battle of the Sexes game, but requires an adjustment to the initial conditions to match the behavior of experimental subjects in the Chicken game. Chapter 4 extends the Individual Evolutionary Learning with Other-Regarding Preferences (IELORP*) model to force the algorithm to match the discrete nature of the experimental choices and introduce beliefs via adaptive expectations. The algorithm continues to match the stylized facts associated with the standard LPGG, but does not appear to extend to games where beliefs are elicited using monetary incentives.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Jasmina Arifovic
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Competition and efficiency: application to tax haven, profit shifting and platform competition

Date created: 
2017-01-18
Abstract: 

The first chapter considers the tax information exchange agreement as a way to draw Pareto improvement between off-shore tax havens and non-haven countries. Individuals who reside in a non-haven country choose the volume of tax evasion to maximize the expected payoff which depends on the tax rate and the probability of being detected. A tax haven might be reluctant to sign a TIEA since establishing a TIEA increases the probability of detection thus decreasing the volume of individuals' tax evasion ceteris paribus. However, we find that establishing a TIEA makes the non-haven country increase the tax rate so that both tax evasion and welfare increase. This is because non-haven country government catches tax criminals with greater probability so it can handle greater volume of tax evasion under higher tax rate. Because not only the non-haven country's welfare but also the capital inflow into the tax haven are increased, tax havens would sign TIEAs with non-haven countries voluntarily in anticipation of greater future payoff. The second chapter, I, jointly with Dr. Mongrain and Dr. Ypersele, develop a continuous fiscal competition model in which two countries compete over multinational firms (MNF) by varying the tax rates and the tightness of profit shifting control. Being loose on profit shifting decreases the tax base of one country but at the same time it brings two benefits. First, the country attracts more MNFs for given tax rate. Second, loose control of one country allows the other country to set high tax rate by alleviating the pressure of tax competition. Since the tax rates of the two countries are strategic complements, both countries can achieve efficiency gain by not actively controlling international profit shifting. We also show that relaxing the profit shifting regulations can reduce the equilibrium tax gap between high tax region and low tax region. This is because the high tax region's tax choice is generally more sensitive to the profit shifting control. As all the downward forces on the tax rate choices, which are resulted by the location effect and per-firm profit shifting effect, are positively related to the equilibrium tax gap, choosing the lax profit shifting control may close the tax gap and lead to the higher tax revenue even for the high tax region. The third paper studies the competition in the platform markets where companies improve the quality standard to attract the consumers. In some platform markets, e.g. video game industry, improving the quality standard decreases the number of software developed due to the greater pressure of development cost. Such disadvantage of the quality upgrade in one platform is spread to its competitors because all the platforms share a certain portion of video game software through `porting.' Because of the negative externality created by porting, the platforms tend to increase the quality standard by extra amount. Our model shows that the quality competition in the competitive market is excessive because the platforms fail to internalize the inter-platform externality.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Steeve Mongrain
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Three essays on economic history and experimental economics

Date created: 
2016-12-08
Abstract: 

While economists recognize the important role of formal institutions in the promotionof trade, there is increasing agreement that institutions are typically endogenous to culture.The question remains how institutions interact with cultural variables when they areimposed exogenously. In social psychology, the individualism/collectivism distinction isthought to be an important cultural variable underlying many behavioral differences. Inthe first chapter, Erik kimbrough and I design an experiment to explore the relationship betweensubjects’ dispositions to individualism/collectivism and their willingness to engagein trade under enforcement institutions of varying strength. Overall, we find a positive effectof strong institutions on trade, but once we control for individualism/collectivism,institutions have no significant effect, and we observe that individualists engage in trademore often than collectivists. This suggests that cultural dispositions may even outweighinstitutions in the promotion of trade.The choice of enforcement mechanism in conducting long-distance trade has long beenassociated with cultural dispositions to individualism and collectivism. Nevertheless, theselection process of a formal or an informal enforcement mechanism and how it relatesto the reliability of the third party enforcement is unknown. In the second chapter, I designeda laboratory experiment in which the options for both a safe local trade and a riskyyet more profitable long-distance trade are available. Long-distance trade is governed byeither a formal or an informal enforcement mechanism. I examined the choice of informalversus formal enforcement mechanism while controlling for the cultural dispositionof subjects. I found that individuals with a collectivist cultural orientation used informalenforcement when effective formal enforcement is available significantly more frequentlythan those with an individualist orientation. Those with individualistic cultural orientationsubstituted formal enforcement for informal enforcement when the former created areliable contract.Enforceable property rights are the first steppingstones toward economic development.While nobles in some Western European countries successfully constrained sovereigns’arbitrary taxation, their Middle Eastern counterparts failed to gain similar rights. In thethird chapter, I compare the impact of Islamic inheritance law and that of primogeniture onthe welfare of economic agents. In the model, I define three types of agents: the sovereign,nobles and peasants. The nobles, unlike the peasants, own land. Furthermore, noblesalso own firms/estates that produce food. To protect their produce, nobles engaged ina conflict with an extractive sovereign to determine the tax rate. The findings demonstratedthat primogeniture led to a lower tax rate and higher welfare level for both noblesand the sovereign. Peasants, however, due to lower wages, suffered under primogeniture.

Document type: 
Thesis
Senior supervisor: 
David Jacks
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Dissertation) Ph.D.

Essays in Financial Markets and Time Series Econometrics

Author: 
Date created: 
2016-05-02
Abstract: 

This thesis consists of two independent essays on financial econometrics. The first study introduces a new family of portmanteau tests for serial correlation. Using the wavelet transform, we decompose the variance of the underlying process into the variance of its low frequency and of its high frequency components and we design a variance ratio test of no serial correlation in the presence of dependence. Such decomposition can be carried out iteratively, each wavelet filter leading to a rich family of tests whose joint limiting null distribution is a multivariate normal. We illustrate the size and power properties of the proposed tests through Monte Carlo simulations. The second study focuses on counterparty risk and its role as a determinant of corporate credit spreads. However, there are only a few techniques available to isolate it from other factors. In this paper we describe a model of financial networks that is suitable for the construction of proxies for counterparty risk. Using data on the U.S. supplier-customer network of public companies, we find that, for each supplier, counterparties' leverage and jump risk are significant determinants of corporate credit spreads. Our findings are robust after controlling for several idiosyncratic, industry, and market factors.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Ramazan Gencay
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Essays in applied econometrics

Date created: 
2016-08-12
Abstract: 

Amid growing evidence of the importance of non-cognitive skills for both cognitive skill development and long-term outcomes, understanding the effect of education policies on non-cognitive skill formation is of increasing interest. The first two chapters of this thesis studies the effect of two school interventions on student behavior.The first paper of this Thesis (Chapter 1) provides the first evidence of the effect of multigrade classes on non-cognitive skills. I exploit strictly enforced class size caps accompanied by centralized funding rules to generate IV estimates of this effect using custom survey data administered to over 15000 parents of Kindergarten and Grade 1 students linked to publicly available administrative data on multigrade classes. I find that placing children in multigrade classes causes significantly more peer relationship problems and hyperactivity compared to single grade classrooms.The second paper of this Thesis (Chapter 2) my coauthors and I exploit the staggered rollout of universal full-day Kindergarten (FDK) to estimate its effects on children’s behavior. Our research design identifies these effects by comparing across-cohort changes in outcomes among early versus late adopting schools. We find little effect of FDK on child behavior or parents’ mental health, and an increase in hours worked by parents who are employedpart-time. These results hold across a range of child and family characteristics, with one exception. In families who do not speak English at home, FDK reduces child hyperactivity and peer relationship problems, improves parents’ mental health and increases employment and hours.The last paper of this Thesis (Chapter 3) was triggered by a heated debate in the Iranian parliament over the effectiveness of the "1993 Population Control Law". There has been a long debate among economists and policy makers over the effectiveness of population planning programs. The estimated program effects in the literature vary substantially. One such program is the Iranian 1993 Population Control Law that withdrew paid maternity leave and social welfare subsidies in the case of children of fourth and higher parities. My coauthor and I use data from publicly available sample 2006 census data in Iran and the annual Household Expenditure and Income Surveys (HEIS: 1988-2005) to estimate the effect of this policy on fertility outcomes. Our difference in difference method compares the change in probability of having birth in families with fewer than three children prior to the legislation to the change in probability of having birth of families with three or more children. We find that the legislation had a modest effect of 8 to 13 percent on decreasing the probability of a fourth or higher birth. The law has the highest impact after four years of implementation and after that effect size gradually goes away.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Dr. Jane Friesen
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Dissertation) Ph.D.

Monetary Policy Shocks and Consumer Inflation Expectations: An Empirical Study

Date created: 
2016-05-26
Abstract: 

Economists have become very interested in the relationship between monetary policy and inflation expectations. However, most research has focused on professional forecasters rather than consumers' expectations. This paper explores interactions between monetary policy and consumer expectations. Specifically, we estimate the impact of monetary policy shocks on consumer expectations. Using a simple linear regression model and data from the Michigan Survey of Consumers, we found somewhat surprising results. Namely, that consumers adjust their expectations positively in response to an unexpected tightening of monetary policy. This suggests the existence of the "signalling channel" of monetary policy. We control for a host of macroeconomic and demographic variables, and our results are consistent across income and education groups. In line with previous research, we found greater heterogeneity in expectations for lower-income and lower-educated groups. Our research challenges conventional thinking regarding the influence of monetary policy on inflation Expectations, and suggests that this relationship is more complex.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Luba Petersen
Brian Krauth
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Project) M.A.

Essays on Financial Economics

Date created: 
2016-07-26
Abstract: 

This thesis addresses three topics in modern financial economics. In econometrics, we propose a consistent estimator for a model with both smooth structural changes and abrupt structural breaks. Our methodology is particularly well-suited for modern high frequency data. In market microstructure, we show that the traditional paradigm is no longer applicable in general, in light of recent technological evolution in trading and associated change in market behavior. In financial networks, we consider determinants of systematic risk that is due to the structure and stability of the network underlying the financial system. We propose a pricing factor that captures the diversification vs. contagion risk trade-off of the interconnectedness of the network.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Ramazan Gencay
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Dissertation) Ph.D.