This dissertation includes three essays on development economics, and in particular on the role of institutions in development. The first and main essay studies the relationship between cooperation and social division. I develop a model in which a community is divided into a number of different groups, and in which agents search over the entire community to find partners for cooperative relationships. The extent of cooperation that can be supported within a given relationship depends on the outside option to the relationship. A social norm that prohibits agents from forming relationships outside of their groups makes it more difficult for unmatched agents to find new matches, lowering the outside option to any given relationship and increasing the level of cooperation that can be supported within the relationship. I show that there is a mechanism that can enforce this social norm in equilibrium, even though agents are rational and care only about material payoffs and there are no intrinsic differences between groups. I show that this social norm can be welfare improving, and I argue that this is part of the reason why social divisions exist. An empirical implication of my model is that there should be less cooperation between members of groups that make up a large percentage of the community. I test this implication by studying two specific kinds of cooperation within castes in rural Nepal.
In my second essay, I extend the model of the first chapter to allow for a continuous distribution of discount factors among agents. This allows me to examine the effect of improving formal contract enforcement on the composition of the set of agents who choose to respect the group segregation norm. As formal contract enforcement improves, only the highest discount factor agents continue to respect the norm. As a result, an improvement in formal contract enforcement can lead to an increase in the salience of group membership for the highest discount factor agents, where the salience of group membership is defined as the amount that an agent would have to be paid in order to interact with an agent from a different group. I argue that this result can help to explain the fact that modernization seems to have led to an increase in fundamentalism and group identification in some parts of the world.
In my third essay, I study the market for preventative health care products in developing countries. The literature has generated three stylized facts about these markets. First, usage of preventative health care markets is low, despite the large potential gains from using such products. Second, very small incentives are sufficient to induce consumers to experiment with new products. Third, inducing consumers to experiment with new products can lead to long-term changes in behavior. I rationalize these facts in a model in which both effective and ineffective products coexist in the market, and the ineffective products mimic the effective products in an analogy to the way that harmless species mimic dangerous species in evolutionary biology. I propose a potential empirical test of my model.
|Commitee:||Rosenzweig, Mark, Samuelson, Larry|
|School Location:||United States -- Connecticut|
|Source:||DAI-A 74/05(E), Dissertation Abstracts International|
|Keywords:||Contract enforcement, Discount factors, Economic development, Preventative health care products, Social divisions|
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