Essays in applied microeconomics

My dissertation consists of three essays, all of which attempt to broaden the horizon of microeconomics. The first essay develops a model of human memory based on biological and psychological evidence. I argue that this model can be used to explain several experimental findings on decision making biases. I then apply the model to understand asset pricing and consumption. The second (joint with Marianne Bertrand) examines the impact of anti-takeover legislation on executive compensation. Such an examination sheds some light on the process by which CEO pay is set. We find that laws which insulate CEOs from takeover raise both the mean level of pay and the sensitivity of pay to performance. The final essay (joint with Marianne Bertrand and Erzo F. P. Luttmer) empirically examines the impact of social networks on welfare participation. Using information on language spoken, we find that individuals are more likely to take up welfare if their acquaintance use welfare themselves. Our technique attempts to deal with the omitted variable biases inherent to the problem, and we argue that the results are unlikely to be plagued by them.