This thesis is composed of three essays, one in Choice Theory (Chapter 1) and two in Social Choice Theory (Chapters 2 and 3). All chapters consider situations where an issue has arisen with a number of alternative ways to deal with it, and some individual (henceforth, some choice correspondence) needs to choose one, or more, of these alternatives in order to deal with this situation.
In Chapter 1, we are interested in choice correspondences that satisfy some of the following properties: two versions of the independence of irrelevant alternatives (IIA and WIIA), as well as the weak axiom of revealed preference (WARP). Loosely speaking, we show that combinations of these properties can partially or completely determine the choice correspondences satisfying said properties.
In Chapters 2 and 3 choice made by the choice correspondence must be according to the preferences of a group of agents. Specifically, we are interested in choice correspondences satisfying some of the following properties.
- In Chapter 2: Pareto efficiency, population-monotonicity, and replacement domination.
- In Chapter 3: Pareto efficiency, strategy-proofness, and anonymity.
Loosely speaking, we show that combinations of these properties characterize target set correspondences (Chapter 2) and generalized median correspondences (Chapter 3).
This thesis consists of three research papers, with household finance as common topic. The first paper studies a lifetime combination of financial, work and health-related decisions made by households. The results, obtained from a dynamic life cycle model of allocations and welfare, show that households' lifetime decisions are challenging to match, even after accounting for the complex interactions between them. Whereas financial savings and pension claims are both well matched, the model overestimates health levels, and consequently life expectancy. Moreover, health is maintained through more spending, and less leisure than currently observed. As a consequence, observed post-retirement income is higher than expected, and explains the divergence in consumption after 65. The second part analyzes the homeowners' life cycle responses to financial, health and real estate shocks. After successfully matching the US households life cycle data using a unique structural life cycle model, the results show that asset rebalancing and time allocation decisions are shock-dependent. Unsurprisingly, shocks decrease the net worth and postpone the full retirement age, but in different magnitudes. Notice that when the shock is a real estate market collapse, the life cycle impact is bigger. Finally, the third research paper examines the impacts of conventional (i.e. man-made law) and Islamic (i.e. Sharia rules) financial literacies on the Pakistani households participation in the formal and informal financial sectors. Based on a statistical model, the results highlight that the conventional financial literacy positively and strongly affects the use of formal financial services, while the Islamic financial literacy has a weaker positive impact. Therefore, financial literacy programs could be a way to reduce financial exclusion.
Along the life-cycle, individuals go through a series of important events and turning-points that determine their health characteristics and trajectories, and shape their economic and social well-being. This thesis is about applying economic analysis and tools to understand how some of these turning-points affect one’s health and health behaviors. The three important events that I consider in my thesis are birth, schooling and retirement.
I show in the first chapter of my thesis that children born in Malawi in a year in which their mother experienced a negative economic shock had poorer subjective and objective health outcomes later in life. The second chapter looks at the effects of education on technology use and adoption among older adults in Europe. I show that persons who acquired more education due to a compulsory schooling reform are more likely to use the Internet and to have better computer skills later in life. The third paper of my thesis uses social security eligibility ages as instruments for retirement in econometric models for physical activity and longitudinal data from the USA. I find that retirement causes older persons to engage in more physical activity, especially among highly educated and wealthy individuals. Finally, the last chapter of my thesis highlights potential reporting heterogeneity in subjective survey measures based on Visual Analogue Scale (VAS) and cautions regarding the use of subjective measures in empirical studies for drawing conclusions on how health, health behaviors and well-being change over the life-cycle.
Along the life-cycle, individuals experience a series of major events that shape their health and ability to engage in economic and social activities. Understanding the effects of these events on individual’s life requires objective measures that are comparable across individuals. My thesis shows that health and health behaviors can be influenced by non-health-related causes occurring throughout life, such as economic shocks at birth, education and retirement. My thesis therefore identifies some of the events that causally determine health and contributes to the current understanding on how health evolves along the life-cycle.
The PhD dissertation consists of three separate chapters. Each chapter is a self-contained work and can be read in isolation. The common themes across the three chapters are techniques and methods for a rigorous and causal assessment of economic policies.
The first chapter evaluates the impact of the Chinese minimum wage policy on consumption of low wage household. Using a representative household panel, we find that poorer households fully consume their additional income. This large propensity to consume is driven by households with at least one child, while childless poor households save two thirds of a minimum wage hike. The expenditure increase is concentrated in health care and education with potentially long-lasting benefits to household welfare.
The second chapter is an evaluation of an investment readiness program for start-ups in the Western Balkans. Investment readiness programs attempt to help firms to become ready to attract and accept outside equity funding through a combination of training, mentoring, master classes, and networking. The investment readiness program resulted in an increase in the investment readiness score. Treated firms attain significantly more media attention, and are more likely to have made a deal with an outside investor, although this increase is not statistically significant.
The third chapter is an impact evaluation of bank capital regulation on bank capital, risk taking behaviour, and solvency. An increase in regulatory capital requirements leads to a capital increase but this comes at a cost. The paper documents the existence of portfolio substitution effects toward riskier assets. The risk taking behaviour is predominantly driven by large and less profitable banks.
The thesis consists of three papers that explore the role of incentives and behaviour in different environments. All three papers apply experimental methods to understand the effect of an incentive on a specific behavior.
The first paper explores the role of conflicts in organisations. Intuitively, conflicts are associated with negative emotions, however, the economic literature shows that conflicts can enhance cooperation in settings with symmetric and complete information. In this paper we explore the role of conflicts in the presence of subjectivity. Our findings suggest that even conflicts that appear to be wasteful may be efficiency-enhancing if they occur in a coordinated manner.
The second paper studies the role of incentives in rating systems. Empirical research shows that rating systems tend to have a positive bias. In particular, the systems present an under provision of ratings and, specifically, of negative ratings. In the paper we propose alternative tools to increase the provision of ratings and we make use of experiments to test the efficiency of each tool. The results show that all the incentivised rating systems improve efficiency to some extent compared to the baseline, where no incentives are in place. However, each system suffers from certain weaknesses. Our results suggest that designing an unbiased rating system is not straightforward. The optimal rating system should focus on increasing the incentives to consume without prior information and to provide truthful ratings, whilst keeping implementation simple.
The third paper focuses on the role of charisma on trust. We make use of the charismatic leadership tactics developed in the management literature to test their effect on the trust decision of other players. These charismatic tactics consist of verbal and nonverbal tactics such as the use of metaphors, stories, gestures and tone patterns. Furthermore, we develop a theory that predicts that charisma enhances trust due to the presence of guilt aversion. However, our results are not in line with this prediction. These null results do not indicate that charisma has no effect on cooperation in general. However, they illustrate that it is not trivial to capture the impact of charisma in an experimental setting.