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

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The Coevolution of Beliefs and Networks

Date created: 
2015-04-15
Abstract: 

In this research, we set out some of the behavioral foundations of social learning. Social psychologists have shown that people experience cognitive dissonance when two or more of their cognitions diverge, and that they actively manage the dissonance. With this in mind we develop a model of social learning in networks to understand the coevolution of beliefs and networks. We focus on beliefs concerning an objective phenomenon. Initial beliefs are based on noisy, private and unbiased information. Because private information is noisy, initial beliefs differ, creating dissonance. Social behavior is motivated by a desire to minimize this dissonance. In many circumstances this behavior adversely affects the efficiency of social learning, such that in equilibrium the mean aggregate belief is biased and there is significant variation of beliefs across the population. The parameterizations of our model that result in the most inefficient learning produce a fractionalized network structure in which there are a number of distinct groups: within any group all beliefs are identical; beliefs differ from group to group, sometimes greatly; there is no intergroup interaction. Since dissonance minimizing behavior is apparently a deeply rooted feature of humans, one that cannot be changed, we are led to ask: What policies could improve the situation? Our results suggest that policies that improve the availability of objective information and/or increase the size of networks enhance efficiency of social learning. On the other hand, anything that makes changing networks more attractive as a dissonance minimizing strategy has the opposite effect

Document type: 
Thesis
File(s): 
Supervisor(s): 
Jasmina Arifovic
Department: 
Arts & Social Sciences:
Thesis type: 
(Thesis) Ph.D.

Labour Supply Response to the Working Income Tax Benefit (WITB): A Difference-in-differences Approach

Author: 
Date created: 
2015-03-09
Abstract: 

The Working Income Tax Benefit (WITB) is a federal level refundable tax credit program in Canada. This paper is the first study that measures the actual labour supply response to this program. Using confidential microdata from the Labour Force Survey (LFS) and exploiting the quasi-experimental nature of the WITB, I construct a treatment group and a control group based on the eligibility for the program. Then I employ the difference-in-differences technique to estimate the average effect of the WITB on the employment and hours of work of the eligible individuals. I also incorporate an instrumental variable strategy with the difference-in-differences framework to encounter a potential endogeneity problem. I find that the WITB increased the probability of being employed by up to around two percentage points, and hours of work per week by up to around forty minutes.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Brian Krauth
Department: 
Arts & Social Sciences:
Thesis type: 
(Project) M.A.

Macro-Prudential Policy and Canadian Housing Market: Analysis of Five Major Provinces in Canada

Author: 
Date created: 
2014-12-11
Abstract: 

The high level of household indebtedness and stretched valuations in some segments of the Canadian housing market poses a potential risk to financial stability in the country. To protect and strengthen the Canadian housing market, the government has taken prudential measures during 2008 to 2012 to reduce the risks associated with the housing market. This paper conducts an empirical analysis regarding the effectiveness of Canadian macro-prudential policies based on the user cost model. This paper found that the four rounds of policy changes were effective in reining in housing price and reducing housing credit growth in the five provinces including Ontario, British Columbia, Alberta, Quebec and Manitoba to varying degrees based on their diverse provincial economic backgrounds.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Luba Petersen
Department: 
Arts & Social Sciences:
Thesis type: 
(Project) M.A.

Heterogeneous Relationships between Employment Insurance Receipt and Job Search

Author: 
Date created: 
2014-12-16
Abstract: 

I explore the heterogeneous relationships between Canada’s Employment Insurance (EI) program and job search intensity before, during and after the recent financial crisis among different subgroups of workers in Canada. I find a significant, positive relationship between job search intensity and EI benefits. The positive relationship between EI benefits and job search hours is largest for women, while the positive relationship between EI benefits and job search expenditures is largest for among workers from poor households. EI recipients experience longer unemployment durations than non-recipients, but the unemployment durations for EI recipients during the recession are shorter than before the recession. My findings have important implications for policy-makers wishing to target EI benefits among populations where such benefits will have the greatest impact.

Document type: 
Graduating extended essay / Research project
File(s): 
Supervisor(s): 
Andrew McGee
Department: 
Arts & Social Sciences: Economics
Thesis type: 
(Project) M.A.

Essays on Inequality and Poverty

Date created: 
2014-09-04
Abstract: 

This thesis is composed of three essays on inequality and poverty in the United States and Canada.Despite their nominal wage disadvantage, immigrants in the United States tend to settle in the most expensive locations in the country. I show that incorporating spatial price variation into the price index dramatically worsens estimates of immigrant integration. In comparison with nominal measures, real measures show twice as much immigrant wage disparity, much slower assimilation over time, and a more pronounced decline in entry wages of more recent cohorts. To rationalize these location patterns, I use a spatial equilibrium model. The model allows us to distinguish between quality of life and productivity differences as competing explanations for the concentration of immigrants. Parameterizing the model and using housing cost and wage differentials each year, the productivity channel seems to be the more plausible explanation. It also appears to have become more important over time. Like the United States, several studies document the tendency for immigrants in Canada to live in areas with high costs of living: approximately 90% live in metropolitan areas. In the second chapter, I re-examine immigrant wage disparity and poverty estimates in Canada after adjusting immigrant incomes for their relatively high costs of living.In the third chapter, I outline an Oaxaca-Blinder detailed decomposition method based on the Shapley Value. It is path-independent and adds up intuitively to the aggregate decomposition components. It is also simple to implement in practice for various limited dependent variable regression models. I show how this decomposition method can be used in tandem with the recentered influence function regression framework (Firpo et al., 2009) . Together, this constitutes a flexible framework to decompose differences of a wide variety of poverty measures over time or between groups. The empirical application examines the decline in U.S. poverty during the 1990s, in particular the importance of technological change and offshoring. I find these are important determinants of poverty in a given year but cannot explain any of the change in the poverty rate over time. Changes in the return to family size explain the entire change in the poverty rate. I also find that the methods we use to examine poverty can easily change the conclusions we draw.

Document type: 
Thesis
File(s): 
Supervisor(s): 
Krishna Pendakur
Department: 
Arts & Social Sciences:
Thesis type: 
(Thesis) Ph.D.

Essays on Social Capital and State Capacity: Tracing the Origins of the Welfare States

Date created: 
2014-08-07
Abstract: 

In Chapter 2 of this Thesis, I study the effect of form of government on government policy in elections with a small margin of exceeding a threshold. I propose an identification strategy that is suitable for the implementation of a sharp regression discontinuity design for all possible types of pure and mixed proportional electoral systems used in 82 countries. To illustrate the implementation of this identification strategy, I use electoral, census and public finances data from Spanish municipalities in the autonomous region of the Basque Country. I present causal evidence suggesting that form of government induces a budget electoral cycle in components of per capita expenditure that are visible to the voters and classifiable as local public goods. Relative to coalition governments, single party governments increase the shares of capital outlays and tangible investment to the total budget by additional 14 % and 20 % respectively. In Chapter 3 of this Thesis, I present evidence that households contribute more to local public goods in the presence of a community organization based on cross-sectional survey data from low-income neighbourhoods of Quito, Ecuador. The observed differences in household contributions are attributed to the ability of a community organization to coercively induce households to commit their time to community projects. This coercive power is argued to have origins associated with the formation of a neighbourhood as an illegal settlement. This coercive power is also suggested to have been a by-product of households voluntarily contributing to the organization in return for protection against government eviction. Locations with specific geographic characteristics served an important role in providing natural protection and also in legally qualifying the organization to seek a global title over the invaded land. Using exogenous variation in these geographic characteristics, I find that the presence of a community organization has a positive effect on household time contributions to two public goods: trash collection in public areas (50 %) and community patrolling (176 %). In Chapter 4 of this Thesis, I develop an occupational choice model with open-rule legislative bargaining to determine the conditions allowing for poor property rights to arise in a democratic equilibrium and to also demonstrate that their presence leads to inefficient outcomes. The necessary conditions emerge when each rich agent self-selects as an entrepreneur for a positive theft rate. The equilibrium occupational shares determine the necessity for coalition formation in the legislature, where the endogenously determined status-quo theft rate is subject to revision. A minimum winning coalition favouring a higher theft rate up to a threshold value, at which each rich agent is just willing to be an entrepreneur who hires workers, provide the sufficient conditions. The equilibrium is inefficient because a positive equilibrium theft rate reduces implies that not all of endowment is invested in the most productive process. The majority in this society, the ex-ante identical poor agents, also end up being ex-post identical but their most preferred theft rate is higher relative to the equilibrium theft rate. This result arises because the poor agents end up being represented by two political parties based on their occupation choice.

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

Essays on Institutions and Development

Author: 
Date created: 
2014-06-20
Abstract: 

This thesis studies three different aspects of the development of societies. The first chapter studies the effect of monopolistic competition in the presence of moral hazard on consumer welfare and the efficiency of resource allocation based on market institutions. The second chapter analyses the effect of capital market imperfections on the evolution of inequality and conflict between different socio-economic classes. The goal of this chapter is to provide a framework of the study of the effect of economic development on the dynamics of state repression. The third chapter looks at the process of development from a historical perspective and studies the effect of European colonization on contemporary economic development of former colonies. To this end, I examine the effect of colonization on genetic and non-genetic (e.g. institutional) aspects of former colonies. The broad message of this thesis is that non-market factors - historical and contemporary factors relating to social norms, beliefs, and institutions - play a crucial role in determining societies' potential for development and their prosperity.

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

Three Essays on the Economic Effects of Violent Conflicts and Culture

Date created: 
2014-05-15
Abstract: 

Chapters 1 and 2 of my thesis deal with long-term economic effects of violent conflicts. In the first chapter, I use World War II casualties suffered in Austrian municipalities as a natural experiment for human casualties and find a significant negative causal effect of human losses on economic activity today. As I demonstrate, the likely channel through which the effect persisted over time is through its impact on the structural composition of the work force. Specifically, greater human losses increased the fraction of employment in manufacturing at the expense of agriculture until the 1970s and services from then onwards. A simple model shows that structural change can translate a lower labor share in agricultural production into less participation of service sector growth at a later time. In the next chapter, I identify a channel through which the disadvantage of displacement during a violent conflict might be carried over to the next generation. In particular, I show that displaced parents spend significantly less on the education of their children years later. A decomposition of the causal effect shows that differences in income and the stock of durable goods can at most explain one third of the finding. Some evidence points towards increased uncertainty about the future of displaced parents and hence reduced spending on non-vital expenditure positions. The final chaper revisits the paper by Algan & Cahuc (AER, 2010) in which they find that inherited trust has a large impact on GDP per capita. First, I show that the estimates presented in Algan & Cahuc might be biased due to a difference between the lag structure of inherited trust and initial income in their econometric specification. Next, I focus on their robustness checks, where I replicate their results and document that most of their robustness checks fail when a programming error and data problems are corrected. I conclude that their results should be considered with great care.

Document type: 
Thesis
File(s): 
Supervisor(s): 
Anke Kessler
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Three Experiments on Institutions

Author: 
Date created: 
2014-04-25
Abstract: 

Institutions are an ubiquitous presence in our lives. The focus in this Thesis is on norm compliance, analyzed as an important component of the institutional framework within which decisions are made. The first paper of this Thesis (Chapter 2) evaluates how norms of symmetry and centricity affect the functioning of two ways to allocate resources described in the economic anthropology literature, namely reciprocity and redistribution. The main conclusion of the experimental inquiry is that reciprocity and redistribution can seldom allocate resources efficiently in the absence of norms of symmetry and centricity in the experimental design. By symmetry we mean a common acknowledgement that certain features are shared in the group. By centricity we mean a common acknowledgement that a degree of differentiation in roles is acceptable in the group. The second paper of this Thesis (Chapter 3) presents an experimental investigation of a well-known repeated network formation game. Heterogeneity and perceived similarity are found not to influence networking choices. Players do not frequently engage in naive best responses when transitioning from one round of play to the next in the repeated game. Although Nash networks are rare in this environment, subjects come often close to achieving an equilibrium network. Reciprocity is found to discourage naive best responses. The third paper of this thesis (Chapter 4) discusses two instruments through which corporate law attempts to promote trust and trustworthiness in business organizations: (i) monitoring of the manager by a principal, as in the agency approach; (ii) moral suasion, as in the approach according to which managers are held to a standard of trustworthiness. A laboratory experiment shows that the "fiduciaries" language increases the investors' trust. Monitoring also increases the investors' trust, but only when the manager is not aware of the experimental identity of the principal. The manager is trustworthy up to a certain degree, regardless of the governance structure of the organization and of the accuracy with which he/she observes each investor's entrustment.

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

Technology-specific capacity and the environment

Author: 
Date created: 
2013-06-20
Abstract: 

Chapter 1 studies the role of investment-related emissions for the efficient distribution of investment among dirty and clean technologies. Dirty technology is not used depending on technology parameters, though clean technology may be relatively more expensive on all scales, and the societal effect of the first pollution unit may be small. In plausible cases there is a unique stationary point. Disregarding emissions from investment in dirty technology biases the stationary cost of polluting downward if dirty technology is used and the time discount factor is not too small. An inverse relationship between the cost of polluting and the marginal rate of intertemporal substitution of consumption on an optimal path is established. Chapter 2 examines the retirement of pre-existing capital and irreversible investment in dirty and clean technologies in Pareto optimum and competitive equilibrium. Dirty capacity is optimally underutilized in equilibrium if government policy internalizes the pollution externality after such policy is sufficiently long delayed. Dirty technology capital, for example, fossil-fuel using engines and plants, should be underutilized if pollution, such as atmospheric carbon dioxide, is below its long-term level. Underutilization of the pre-installed dirty technology capital diminishes it optimally because it is not needed in the long-term or smooths it through postponing its use until investment becomes worthwhile in dirty technology. Clean technology capital, for example, solar panels or wind turbines, are efficiently underutilized to save emissions from investment or because creating new units is more costly than forwarding existing units. Chapter 3 considers production using a dirty and reliable technology, for example, coal-using electricity generation, versus production using a clean and unreliable technology, for example, solar energy conversion into electricity, in a dynamic economy. Consumption can be equalized across states because investment absorbs the fluctuation in clean technology productivity in days in which consumption is maximized. Clean output subsidies such as feed-in premiums for grid-distributed electricity can implement a Pareto optimum. For example, the subsidy rebates a uniform energy tax or a uniform tax on investment goods. In a further example the subsidy is funded by price surcharges that are differentiated between households.

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