Essays in Applied Microeconomics

Abstract

This dissertation consists of three essays on topics in applied microeconomics. Chapter 1, "Grade Organization and School Performance: Evidence from Texas," studies how school performance is related to the combination of grades in a school. It finds evidence that for each additional grade a school contains below a given grade, the performance of students in that grade rises, while for each additional grade a school contains above it, performance falls. This general result, the presence of lower grades is beneficial, upper grades detrimental, holds across subjects (math and reading) and for all grades (five through nine) studied. These findings suggest that a portion of the between-school variation in passing rates is due to effects associated with grade organization.

Chapter 2, "Neighborhood Effects on Decision-Making Processes by Low-Income Adults and Youth," tests whether geographic variation in individual outcomes is due in part to an influence of neighborhoods on preference formation and choice. This work examines the decision-making processes of low-income adults and youth by taking advantage of a unique randomized housing mobility program, Moving to Opportunity (MTO). MTO measured attitudes toward time and risk, including through the use of a time-preference experiment conducted among selected youth. It finds some evidence that moves to lower poverty neighborhoods may lead male youth to be less patient, while female youth are unaffected. For adults, the evidence suggests that such moves may lead individuals to have higher levels of risk tolerance.

Chapter 3, "A Reduced-Form Approach to Behavioral Public Finance," coauthored with Sendhil Mullainathan and Joshua Schwartzstein, develops a framework with which to understand recent advances in behavioral public finance. Rather than drawing out the consequences of specific psychological assumptions, the framework takes a reduced-form approach to behavioral modeling. It emphasizes the difference between decision and experienced utility that underlies most behavioral models. This framework is then used to examine the behavioral implications for canonical public finance problems involving the provision of social insurance, commodity taxation, and correcting externalities. The results show how deeper principles undergird much work in this area and that many insights are not specific to a single psychological assumption.