Abstracts of Award‐Winning Theses

Raghunathan, Uthra. “Evaluating the Performance of Microfinance Systems: A Bayesian Efficiency Analysis of Lenders and Their Borrowers.” MS Thesis, University of Georgia. Outstanding Masters Thesis Award. This thesis consists of three studies that address the efficiency of microfinance institutions (MFIs) and their borrowing groups. The first study utilizes a Bayesian distance function to analyze the efficiency of MFIs, and their dualistic goals (outputs) of profitability and outreach. Results suggest that MFIs are generally efficient, with gross loan portfolio and funding significantly influencing the outputs. The second study uses a Bayesian stochastic frontier to estimate the efficiency of an MFI's borrowing groups. Results suggest that the rate‐of‐repayment (output) is affected by the interest rate and number of members in a group, while agricultural loans do not fare any different from small‐business loans. The third study determines which explanatory variables affect the efficiency of MFI's through the use of a Bayesian technical effects model. The results indicate that agricultural loans in the loan portfolio are significantly and positively correlated with the efficiency of MFIs. Cuffey, Joel M. “The Link between Food Security and Health among People Living with HIV/AIDS in Delhi, India.” MS Thesis, University of Illinois. Honorable Mention. The nature of the relationship between health and food insecurity in the context of HIV and AIDS is poorly understood, particularly in terms of the magnitudes of possible effects. Using data from a convenience sample of patients at a clinic for people with HIV/AIDS in Delhi, India, the relationship between health and food insecurity is examined. Of 244 patients with food insecurity data, 67% were classified as moderately food insecure and 20% as severely food insecure, as defined by the Household Food Insecurity Access Scale. This sample appears to be slightly better off than the average person with HIV, according to a comparison with National Family Health Survey data. Using the clinic data, this thesis first investigates the determinants of food insecurity and then looks at the relationship between food insecurity and different health outcomes. Important determinants of food insecurity are the client's age, education, and sex, as well as household assets. Food insecurity is related with greater mental illness, although the relationship disappears when a correction for endogeneity is applied. Using the endogeneity correction, food insecurity is positively and significantly related with the likelihood of having tuberculosis as well as with any opportunistic infection in general. Although a small sample size limits the analysis of causality, this research shows a positive relationship between food security and improved health for a population of people with HIV/AIDS. These results highlight the importance of the socioeconomic context when finding effective ways to care for people suffering from HIV/AIDS. Luckstead, Jeff. “The Effects of Immigration, Farm, and Trade Policies and the Macroeconomic Conditions on Illegal Immigration and Agricultural Trade.” MS Thesis, University of Idaho. Honorable Mention. The 1986 Immigration Reform and Control Act granted amnesty to existing unauthorized workers, tightened the border control, implemented employer sanctions, and established a new guest‐worker program. However, because of the lax border and domestic enforcements and cumbersome guest‐worker program, the illegal population in the United States grew to about 12 million by 2004. Due to concerns of wage depression, job loss, fiscal costs, and also national security, congress considered several legislations in recent years to curb the growth of the illegal population. However, congress failed to pass any immigration reforms because of disagreements over providing citizenship to unauthorized workers, and the illegal immigration issue remains unresolved. Because congress did not reform the immigration laws, the U.S. government has drastically increased its workplace raids and border patrols. These raids have led to a severe farm labor shortage during peak operations such as planting and harvest, resulting in unharvested crops, huge losses, and even the outsourcing of farm operations to Mexico. Given the importance of Mexican labor to U.S. agriculture, this thesis investigates the effects of trade liberalization, U.S. farm supports, immigration policy, and economic growth on illegal immigration and agricultural trade. The theoretical analysis develops an integrated trade‐migration model with two countries linked by their commodity and labor markets. Trade is distorted by tariffs before the end of NAFTA and U.S. farm subsidies. Labor flow is restricted by border and domestic enforcements. The theoretical results show that (a) NAFTA and farm supports exacerbate the illegal labor flow and increase U.S. exports, (b) heightened domestic enforcement and border control contract the flow of illegal workers but also reduce the U.S. exports, (c) a U.S. macroeconomic recession discourages illegal laborers to come to the United States and increases U.S. exports because of lower domestic demand; while economic development in Mexico lowers the wage and income gap between the two countries and reduces the economic incentives for immigration and increases U.S. exports. The theoretical model is implemented empirically by estimating a system of commodity and labor demand and supply functions for the United States and Mexico using the three‐stage least square procedure. The model is estimated over the period 1989–2007. The empirical model also includes U.S. exports to the rest of the world. The estimated equations are used to run simulation analysis for the period 1994–2007 to quantify the effects of NAFTA, U.S. farm policy, immigration policy, and macroeconomics conditions on agricultural production, demand, labor supply, employment, illegal labor flow, and commodity trade. The results of the simulation analyses show trade liberalization under NAFTA increases the illegal labor flow to U.S. agriculture per year by about 3,093 workers and U.S. commodity exports by $17.10 billion per year at the end of NAFTA. In contrast, a decrease in U.S. farm subsidies contracts the illegal labor flow by an average of 0.20% to U.S. agriculture and U.S. exports by $3.42 billion to Mexico. Increased spending on domestic enforcement and heightened border enforcement decrease the illegal immigrants by about 42,000 and 8,147, respectively, and reduce U.S. exports by an average of 8.11% and 5%, respectively, in 2007. The results of these enforcements show a distinct tradeoff between a reduction in illegal labor flow and U.S. exports to Mexico because labor shortages adversely impact U.S. production and exports. The current U.S. economic downturn shows 2,000 fewer Mexican laborers emigrate per year, while U.S. exports increase on average by 1.12 billion. Hansen, Kristiana. “Contractual Mechanisms to Manage Water Supply Risk in the Western United States.” PhD Dissertation, University of California, Davis. Outstanding Doctoral Dissertation Award. Risk and reliability dominate water supply discussions in the arid western United States. To mitigate supply risk, water managers have traditionally built additional storage. The least expensive storage sites have now been taken, and there are strong environmental objections to new facilities. Reliability is further diminished due to concerns about endangered species and global climate change. Thus water agencies increasingly turn to water markets and contractual mechanisms to manage risk and reliability. This dissertation is three essays on contractual mechanisms for managing water supply in the presence of significant temporal and spatial variation in availability. Water markets form differently across the western United States, depending on the relative importance of water supply uncertainty and impediments to water transfers. In many locations, trades take the form of short‐term leases of water, where the underlying property rights remain unaffected. In other regions, rights transfers predominate. The first essay develops a theoretical model to show the conditions that favor leasing water or purchasing rights. Econometric analysis of 2,804 transactions reported in the Water Strategist over 1990–2005 supports the conclusion that institutions have influenced not only whether water trades occur, but also the style of the trades. The second essay explores the theoretical value of annual dry‐year options within California. Under an annual dry‐year option, a water agency pays an option premium for the right to purchase water at some point in the future, if water conditions turn out to be dry. The premium represents the value of the flexibility gained by the buyer from postponing its decision whether to purchase water. The mechanism for exploring option value is a very large hydroeconomic model that runs seventy‐one years of historical hydrological conditions through the current configuration of the California water system to determine the economically efficient allocation of water under a range of stochastic water realizations. The model, a nonlinear mathematical programming model, optimizes with limited foresight of future water conditions and stores water according to a carryover value function derived within the model itself. This model utilizes current urban and agricultural demands, storage and conveyance infrastructure and incorporates variable groundwater pumping costs. The model deduces the true economic value of water in the current year at key locations within the state and signals the value of storing water for use in the future when water conditions are not known. The resulting distributions of imputed water prices at different locations are utilized to calculate the spatially stratified theoretical value of an option in California. The model indicates significant option value at the Sacramento‐San Joaquin Delta for delivery across the San Luis Canal to urban demand centers in the south of the state, though option values generated within the model are smaller as a percentage of average water value than option premia observed historically in California. The third essay reports an experimental investigation of dry‐year option contracts. Although a few water agencies across the West have implemented dry‐year options, sufficient data for conventional econometric analysis do not yet exist. This essay instead utilizes experimental economics to analyze the effect of annual dry‐year options on water markets. How do market structure (competitive versus market power) and option contract availability affect water price and allocation within a market? Three hundred and sixty‐five experiment participants in markets of five to eight individuals trade stochastic realizations of water in a nonuniform double auction parameterized to resemble the California water market. Forty‐five of the fifty‐eight markets functioned well enough to generate meaningful data. Realized gains from trade are found to be higher on average when options can be traded, by 29% in competitive markets and by 49% in dominant buyer markets. Findings in this analysis may assist policymakers in preparing for the next multiyear drought in California. Aker, Jenny C. “Three Essays on Markets and Welfare in Sub‐Saharan Africa.” PhD Dissertation, University of California, Berkeley. Honorable Mention. This dissertation looks at the relationship between agrofood markets, social networks, and welfare in sub‐Saharan Africa. Economists have long recognized the importance of information for the efficient functioning of markets. Due to limited or costly information, excess price dispersion is a common occurrence in developing countries. In this context, a new search technology can have important implications for market performance and hence welfare. The first chapter of this dissertation looks at the impact of a new search technology, mobile phones, on grain market performance in Niger. I construct a novel theoretical model of trader search, and use the framework to derive two testable hypotheses. Using a time‐series panel dataset, I exploit the quasiexperimental nature of the rollout of mobile phone towers in Niger to estimate the impact of cell phones on grain market performance. I find that cell phones are associated with a reduction in price dispersion across markets in Niger and in the intraannual coefficient of variation. The effect is stronger for markets that are farther apart, and for those that are linked by poor‐quality roads. Cell phones are more useful as a higher percentage of markets have cell phone coverage. The results suggest that cell phones are associated with lower consumer prices, and hence improved welfare. The second chapter of this dissertation assesses grain market performance in a different context, namely during a severe food crises. In 2004, a drought occurred in Niger, resulting in a food crisis that affected 2.5 million Nigerians. I exploit the exogenous nature of rainfall to test whether a market failure occurred in 2005. I find that markets are fairly integrated, and that drought is associated with a decrease in price dispersion across markets. This effect is stronger when a higher percentage of markets are affected, as was the case in 2004–05. These results suggest that markets performed well during the food crisis, but that the spatial distribution of drought lowered incentives to import from a key trading partner, Nigeria. The third chapter of this dissertation looks at a different aspect of welfare, focusing on the impact of social networks on household income. Using a household‐level dataset from Tanzania, I find that households that are members in community‐based organizations have higher household expenditures and are associated with a lower probability of being poor. Gramig, Benjamin M. “Essays on the Economics of Livestock Disease Management: On‐Farm Biosecurity Adoption, Asymmetric Information in Policy Design, and Decentralized Bioeconomic Dynamics.” PhD Dissertation, Michigan State University. Honorable Mention. Livestock disease management involves both private and public resources and takes place in an environment of uncertainty. An econometric procedure to estimate disease control functions that will inform herd‐level decision making is proposed and demonstrated to shed light on the determinants of health management practice adoption. An incentive compatible, government provided indemnity for private livestock assets culled in response to an outbreak of contagious disease when the government is constrained by hidden action and hidden information is characterized and compared with status quo indemnities. A bioeconomic model with feedbacks between disease and behavioral strategies is constructed to evaluate the nature of strategic effects between private decision makers in a decentralized setting when government policies are a source of externalities. Rabassa, Mariano J. “Ambient Air Pollution and the Allocation of Environmental Enforcement Effort.” PhD Dissertation, University of Illinois at Urbana‐Champaign. Honorable Mention. The Clean Air Act sets nationwide attainment standards for ambient air quality at the county level, and delegates authority for monitoring and inspection to states. This decentralization generates a jurisdictional mismatch between enforcement authority and attainment classification. Also, federal regulation stipulates sanctions for noncompliance with the ambient pollution standards: these penalties are intended to provide incentives to exert more enforcement effort in heavily polluted areas. This dissertation analyzes the effect of transboundary pollution and penalties for crossing ambient pollution thresholds on prolonged noncompliance of ambient pollution standards, and in particular, on regulators’ incentives to allocate enforcement efforts. The main body of this dissertation is composed of three distinct studies. The first two studies represent two approaches to analyze empirically whether regulators attempt to internalize air quality externalities. While the first study stresses intrastate externalities, the second study focuses on interstate externalities. Both studies use detailed plant‐level data on chemical releases from the Toxics Release Inventory, and enforcement actions by state environmental protection agencies from the AIRS Facility System. The first study shows that emissions originating upwind of nonattainment counties are as important as locally originated emissions in determining the duration of nonattainment spells. The second study introduces a measure of pollution exportability based on both plant location and actual wind data, and shows that state regulatory agencies in the United States inspect less frequently facilities located near state borders with higher potential to generate pollution spillovers. The third study focuses on the role of ambient pollution thresholds in the allocation of enforcement effort. I develop a theoretical model to show that penalties for noncompliance with ambient pollution standards might not improve air quality in heavily polluted areas, but rather lead to disproportionate allocation of enforcement effort around the threshold at which nonattainment designation occurs. In this dissertation, I show that transboundary pollution and penalties for noncompliance generate incentives for strategic behavior by state enforcement agencies: laxness in enforcement of polluting plants with higher potential to generate spillovers in the former and precautionary behavior that leads to nonmonotonic enforcement in the latter. These findings help to explain, in part, why inspection rates are lower in heavily polluted areas than in areas with ambient pollution concentrations closer to the nonattainment threshold.