| The common theme of my dissertation is how aggregate changes at the macroeconomic level affect individual and firm decisions. The connection from policy and structural changes "at the top" to microeconomic consequences is especially important in developing countries. Such changes are often the results of planning which rely on informational, institutional and social background assumptions that do not fit developing countries. My three chapter dissertation revisits background assumptions to enrich existing models and thereby better explain why outcomes for the same policies differ between rich and poor countries. The chapters are: (1) "Is Skill Dispersion a Source of Productivity and Exports in Developing Countries?" revisits theories of firm behavior to incorporate the role of heterogeneous worker teams. The chapter investigates the claim that skill mix within firms, in contrast to average human capital, influences the entire economy. I develop a multisector model of firms who employ teams of workers in production. Empirically, my model motivates a novel specification that characterizes industries as "intensive in skill diversity" or "intensive in skill similarity". (2) "Is Selection on Firm Productivity a Third Gain from Trade?" (with Swati Dhingra). Empirical studies show liberalization reallocates resources towards high productivity firms. Do Selection Effects yield new Gains from Trade distinct from Comparative Advantage and Scale Effects? How does Selection caused by trade compare with domestic policy options? Examining heterogeneous firm models, we find the answers depend not on the production structure rather the demand structure. The results highlight the role of demand in determining when Selection Effects are distinct, optimal and anti-variety. (3) "Left, Right, Left: Income Dynamics, Learning and the Evolution of Political Preferences by Bayesian Voters" (with Michael Carter). This chapter builds on forward-looking voter models to analyze political preferences. Non-concave functions, which offer no prospect of upward mobility for segments of the population, may result in stronger support for redistributive policies than anticipated. Estimated transition functions suggest much stronger support for redistribution. We thus eschew the assumption that voters had full information on their new economic reality, and model voters as Bayesian learners. |
