Essays on the economic and political impact of ethnic composition and consumer confidence

The dissertation is comprised of three separate chapters. The first two chapters deal with attitudes toward minorities and the political and economic outcome of these attitudes in the U.S. and Israel. The third chapter evaluates The Conference Board Consumer Confidence Index in the United States.; The first chapter deals with ethnic composition, attitudes toward redistribution and voting in the US. In recent years a body of literature has found a negative influence of ethnic heterogeneity on redistribution. This paper adds to this literature by trying to explain why this negative effect occurs. It focuses on one possible channel, in which ethnic heterogeneity has an impact on attitudes toward redistribution and voting, and this reduces redistribution. Using United States public opinion surveys and state-level election results, this paper finds that an increase in the percentage of the Hispanic population within a state leads white citizens to oppose redistribution and to support Republican candidates. These results are especially strong among males and less educated people.; In Chapter Two, together with my co-author Yaron Raviv, we decompose income gaps between ethnic groups in Israel. (A version of this paper, "Decomposing Wage Gaps Between Ethnic Groups: The Case of Israel," has been published in Southern Economic Journal, Vol. 73, No.4, 1066-1087, 2007.) In this paper we separate the non-Jewish group into three main religious minorities: Muslims, Christians and Druze. Using the latest Israeli census, we find significant explained and unexplained income gaps in favor of Jews. The unexplained gaps tend to be larger the more educated the individual. Jews have much higher representation in the more lucrative occupations, and earn significantly more in them. In almost every dimension Muslims suffer from the largest income gaps. Druze, on the other hand, enjoy the lowest income gaps across most of the income distribution, due in large part to direct and indirect benefits they reap from serving in the army. Among minorities, Christians are the most educated and most concentrated in the top occupations, which explains why they enjoy the lowest gaps in the highest percentiles of the income distribution.; In Chapter Three I analyze the usefulness of The Conference Board Consumer Confidence Index. This paper finds consumer confidence measures to be useful in forecasting variables that are related to business decisions like investment in equipment and in software, employment, and unemployment. The consumer confidence measures are more likely to reduce forecasting errors around periods of recession. This paper uses both linear and Markov switching estimation. Given the poor ability of Markov switching models to improve forecasting, a new two-step Markov switching framework is developed in this paper. This new model improves upon the regular Markov switching method and, in contrast to most previous literature, also improves upon OLS forecasting. In addition to forecasting, this paper examines the usefulness of regime probabilities in signaling turning points in the economy and finds them quite accurate.