Dissertation/Thesis Abstract

Essays in Applied Microeconomics
by Verriest, Ewout, Ph.D., New York University, 2019, 399; 13811045
Abstract (Summary)

This dissertation consists of three chapters.

The first chapter, "Household Labor Supply, Child Development and Childcare Policies in the United States", studies the dynamic relationship between parental labor supply, children's cognitive development and intra-household bargaining power. To do so, I construct a model that incorporates preference heterogeneity across and within households, a constrained cooperative bargaining framework with explicit outside options, a dynamic technology of the child's cognitive development, and endogenous parental human capital and wages. Using detailed U.S. panel data on married households, I identify and estimate the model with the Method of Simulated Moments, and show that it replicates observable trends and heterogeneity in parental time use, the use of formal childcare arrangements and child test scores. I use the model to simulate the effects of cash transfers and formal childcare subsidies. First, I find that the cost-effectiveness of the recently expanded Child Tax Credit, in terms of fostering child cognition and reducing intra-household inequality, could be improved by giving cash to mothers directly, and by making the credit increase with the child's age. Second, I consider expansions of the Child and Dependent Care Tax Credit which offer larger formal childcare subsidies and relax the employment requirements. I estimate that a 25 percent subsidy could boost young children's skills by over 0.1 standard deviations, increase maternal labor supply even when there is no work requirement, and be financed at no additional cost through a 50 percent reduction in the Child Tax Credit for households with young children.

The second chapter, "Actors in the Child Development Process" is coauthored with Daniela Del Boca, Christopher Flinn and Matt Wiswall. In this paper, we construct and estimate a model of child development in which both the parents and children make investments in the child's skill development. In each period of the development process, partially altruistic parents act as the Stackelberg leader and the child the follower when setting her own study time. We then extend this non-cooperative form of interaction by allowing parents to offer incentives to the child to increase her study time, at some monitoring cost. We show that this incentive scheme, a kind of internal conditional cash transfer, produces efficient outcomes and, in general, increases the child's cognitive ability. In addition to heterogeneity in resources (wage offers and non-labor income), the model allows for heterogeneity in preferences both for parents and children, and in monitoring costs. Like their parents, children are forward-looking, but we allow children and parents to have different preferences and for children to have age-varying discount rates, becoming more ``patient'' as they age. Using detailed time diary information on the allocation of parent and child time linked to measures of child cognitive ability, we estimate several versions of the model. Using model estimates, we explore the impact of various government income transfer policies on child development. As in Del Boca et al. (2016), we find that the most effective set of policies are (external) conditional cash transfers, in which the household receives an income transfer given that the child's cognitive ability exceeds a prespecified threshold. We find that the possibility of households using internal conditional cash transfers greatly increases the cost effectiveness of external conditional cash transfer policies.

The third chapter, "The Power of the Agenda Setter: A Dynamic Legislative Bargaining Game", is coauthored with Ravideep Sethi. In this paper, we consider a society with three players. Through an infinitely repeated legislative bargaining game in which the agents split a dollar in every period, we study theoretically the conditions under which a veto player (e.g. a monarch) would initiate or support "voluntary democratization", i.e. a democratic reform which provides more agenda setting power to the non-veto players (e.g. the bourgeoisie and nobility). We show that such transitions could be the result of a rational, farsighted monarch trying to weaken coalitional ties between her opponents. In the model, the status quo evolves endogenously over time, as agents can approve new proposals by simple majority. Crucially, the veto player must approve any proposal that alters the status quo. The veto player's agenda setting power is defined as the probability (p) that she is randomly selected as the proposer in a given period. We characterize a symmetric Markov Perfect Equilibrium for all possible primitives, and show that for any interior initial status quo allocation and for sufficiently patient players, there exists a threshold of p beyond which the non-veto players can sustain positive allocations, by forming a permanent blocking coalition against the veto player. Below this threshold, the veto player can exploit her ``weakness'' by offering alternating bribes to her opponents, allowing her to slowly but surely acquire the full surplus in the long run. We interpret this incentive of the monarch to reduce her own recognition probability as voluntary democratization. The MPE that we find is unique after applying a coalitional stability refinement, and robust to having an arbitrary odd number of players.

Indexing (document details)
Advisor: Flinn, Christopher
Commitee: Gilraine, Michael, Wiswall, Matthew, Cherchye, Laurens
School: New York University
Department: Economics
School Location: United States -- New York
Source: DAI-A 81/5(E), Dissertation Abstracts International
Subjects: Economics, Labor economics
Keywords: Bargaining, Child development, Household economics, Labor supply, Time allocation
Publication Number: 13811045
ISBN: 9781392585047
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