Micro and Macro essays in Applied Fiscal Policy

This thesis analysis micro and macro aspect of applied fiscal policy issues. The first chapter investigates the extent to which local budget spending composition reacts to fiscal rules variations. I consider the budget of Italian municipalities and exploit specific changes in the Domestic Stability Pact’s rules, to perform a difference-in-discontinuities analysis. The results show that imposing a cap on the total amount of consumption and investment is not as binding as two caps, one for consumption and a different one for investment. More specifically, consumption is triggered by changes in wages and services spending, while investment relies on infrastructure movements. In addition, there is evidence that when an increase in investment is achieved, there is also a higher budget deficit level. The second chapter intends to analyze the extent to which fiscal policy shocks are able to affect macrovariables during business cycle fluctuations, differentiating among three intervention channels: public taxation, consumption and investment. The econometric methodology implemented is a Panel Vector Autoregressive model with a structural characterization. The results show that fiscal shocks have different multipliers in relation to expansion or contraction periods: output does not react during good times while there are significant effects in bad ones. The third chapter evaluates the effects of fiscal policy announcements by the Italian government on the long-term sovereign bond spread of Italy relative to Germany. After collecting data on relevant fiscal policy announcements, we perform an econometric comparative analysis between the three cabinets that followed one another during the period 2009-2013. The results suggest that only fiscal policy announcements made by members of Monti’s cabinet have been effective in influencing significantly the Italian spread in the expected direction, revealing a remarkable credibility gap between Berlusconi’s and Letta’s governments with respect to Monti’s administration.

Essays on geography and diseases

This dissertation explores how diseases contributed to shape historical institutions and how health and diseases are still affecting modern comparative development. The overarching goal of this investigation is to identify the channels linking geographic suitability to diseases and the emergence of historical and modern insitutions, while tackling the endogenenity problems that traditionally undermine this literature. I attempt to do so by taking advantage of the vast amount of newly available historical data and of the richness of data accessible through the geographic information system (GIS). The first chapter of my thesis, 'Side Effects of Immunities: The African Slave Trade', proposes and test a novel explanation for the origins of slavery in the tropical regions of the Americas. I argue that Africans were especially attractive for employment in tropical areas because they were immune to many of the diseases that were ravaging those regions. In particular, Africans' resistance to malaria increased the profitability of slaves coming from the most malarial parts of Africa. In the second chapter of my thesis, 'Caste Systems and Technology in Pre-Modern Societies', I advance and test the hypothesis that caste systems, generally viewed as a hindrance to social mobility and development, had been comparatively advantageous at an early stage of economic development. In the third chapter, 'Malaria as Determinant of Modern Ethnolinguistic Diversity', I conjecture that in highly malarious areas the necessity to adapt and develop immunities specific to the local disease environment historically reduced mobility and increased isolation, thus leading to the formation of a higher number of different ethnolinguistic groups. In the final chapter, 'Malaria Risk and Civil Violence: A Disaggregated Analysis for Africa', I explore the relationship between malaria and violent conflicts. Using georeferenced data for Africa, the article shows that violent events are more frequent in areas where malaria risk is higher.

Essays in Industrial Organization and Information Technology

Chapter 1 studies how consumers’ switching costs affect the pricing and profits of firms competing in two-sided markets such as Apple and Google in the smartphone market. When two-sided markets are dynamic – rather than merely static – I show that switching costs lower the first-period price if network externalities are strong, which is in contrast to what has been found in one-sided markets. By contrast, switching costs soften price competition in the initial period if network externalities are weak and consumers are more patient than the platforms. Moreover, an increase in switching costs on one side decreases the first-period price on the other side. Chapter 2 examines firms’ incentives to invest in local and flexible resources when demand is uncertain and correlated. I find that market power of the monopolist providing flexible resources distorts investment incentives, while competition mitigates them. The extent of improvement depends critically on demand correlation and the cost of capacity: under social optimum and monopoly, if the flexible resource is cheap, the relationship between investment and correlation is positive, and if it is costly, the relationship becomes negative; under duopoly, the relationship is positive. The analysis also sheds light on some policy discussions in markets such as cloud computing. Chapter 3 develops a theory of sequential investments in cybersecurity. The regulator can use safety standards and liability rules to increase security. I show that the joint use of an optimal standard and a full liability rule leads to underinvestment ex ante and overinvestment ex post. Instead, switching to a partial liability rule can correct the inefficiencies. This suggests that to improve security, the regulator should encourage not only firms, but also consumers to invest in security.

Essays in Applied and Labor Economics

This thesis consists of three self-contained papers. In the first paper I analyze the labor supply behavior of Bologna Pizza Delivery Vendors. Recent influential papers analyze labor supply behavior of taxi drivers (Camerer et al., 1997; and Crawford and Meng, 2011) and suggest that reference-dependence preferences have an important influence on drivers’ labor-supply decisions. Unlike previous papers, I am able to identify an exogenous and transitory change in labor demand. Using high frequency data on orders and rainfall as an exogenous demand shifter, I invariably find that reference-dependent preferences play no role in their labor’ supply decisions and the behavior of pizza vendors is perfectly consistent with the predictions of the standard model of labor’ supply. In the second paper, I investigate how the voting behavior of Members of Parliament is influenced by the Members seating nearby. By exploiting the random seating arrangements in the Icelandic Parliament, I show that being seated next to Members of a different party increases the probability of not being aligned with one’s own party. Using the exact spatial orientation of the peers, I provide evidence that supports the hypothesis that interaction is the main channel that explain these results. In the third paper, I provide an estimate of the trade flows that there would have been between the UK and Europe if the UK had joined the Euro. As an alternative approach to the standard log-linear gravity equation I employ the synthetic control method. I show that the aggregate trade flows between Britain and Europe would have been 13% higher if the UK had adopted the Euro.

Essays in Media and Finance

This Ph.D. thesis consists in three research papers focused on the relationship between media industry and the financial sector. The importance of a correct understanding what is the effect of media on financial markets is becoming increasingly important as long as fully informed markets hypothesis has been challenged. Therefore, if financial markets do not have access to complete information, the importance of information professionals, the media, follows. On the other side, another challenge for economic and finance scholar is to understand how financial features are able to influence media and to condition information disclosure. The main aim of this Ph.D. dissertation is to contribute to a better comprehension for both the phenomena. The first paper analyzes the effects of owning equity shares in a newspaper- publishing firm. The main findings show how for a firm being part of the ownership structure of a media firm ends to receive more and better coverage. This confirms the view in which owning a media outlet is a source of conflicts of interest. The second paper focuses on the effect of media-delivered information on financial markets. In the framework of IPO in the U.S. market, we found empirical evidence of a significant effect of the media role in the IPO pricing. Specifically, increasing the quantity and the quality of the coverage increases the first-day returns (i.e. the underpricing). Finally the third paper tries to summarize what has been done in studying the relationship between media and financial industries, putting together contributes from economic, business, and financial scholars. The main finding of this dissertation is therefore to have underlined the importance and the effectiveness of the relationship between media industry and the financial sector, contributing to the stream of research that investigates about the media role and media effectiveness in the financial and business sectors.

Essays on Ethnic Diversity and Development

This dissertation consists of three papers. The first paper "Ethnicity, Migration and Conflict: Evidence from Contemporary South Africa” exploits some of the institutional changes intervened in South Africa during the end of apartheid to investigate the relationship between ethnic diversity and conflict. I find within-ethnic polarization to be significantly related to the intensity of armed confrontations among black-dominated groups. My investigation thus gives strong and robust empirical support to the theoretical arguments which identify ethnic diversity as one of the determinants of civil conflict. The second chapter, "Pre-Colonial Centralization, Colonial Activities and Development in Latin America", investigates the hypothesis that pre-colonial ethnic institutions shaped contemporary regional development in Latin America. I document a strong and positive relationship between pre-colonial centralization and regional development. Results are in line with the view that highly centralized pre-colonial societies acted as a persistent force of agglomeration of economic activities and a strong predictor of colonial state capacity. The results provide a first evidence of the existence of a link between pre-colonial centralization, colonial institutional arrangements and contemporary economic development. The third paper "Bite and Divide: Malaria and Ethnic Diversity” investigates the role of malaria as a fundamental determinant of modern ethnic diversity. This paper explores the hypothesis, that a large exposure to malaria has fostered differential interactions that reduced contacts between groups and increased interactions within them Results document that malaria increases the number of ethnic groups at all levels of spatial disaggregation and time periods (exploiting historical and current ethnic diversity). Regressions' results show that endogamous marriages are more frequent in areas with higher geographic suitability to malaria. The results are in line with the view that malaria increases intra-ethnic interactions while decreasing inter-ethnic ones.

Essays in Macroecometrics: methodological aspects and empirical applications

In the first chapter, I develop a panel no-cointegration test which extends Pesaran, Shin and Smith (2001)'s bounds test to the panel framework by considering the individual regressions in a Seemingly Unrelated Regression (SUR) system. This allows to take into account unobserved common factors that contemporaneously affect all the units of the panel and provides, at the same time, unit-specific test statistics. Moreover, the approach is particularly suited when the number of individuals of the panel is small relatively to the number of time series observations. I develop the algorithm to implement the test and I use Monte Carlo simulation to analyze the properties of the test. The small sample properties of the test are remarkable, compared to its single equation counterpart. I illustrate the use of the test through a test of Purchasing Power Parity in a panel of EU15 countries. In the second chapter of my PhD thesis, I verify the Expectation Hypothesis of the Term Structure in the repurchasing agreements (repo) market with a new testing approach. I consider an "inexact" formulation of the EHTS, which models a time-varying component in the risk premia and I treat the interest rates as a non-stationary cointegrated system. The effect of the heteroskedasticity is controlled by means of testing procedures (bootstrap and heteroskedasticity correction) which are robust to variance and covariance shifts over time. I fi#nd that the long-run implications of EHTS are verified. A rolling window analysis clarifies that the EHTS is only rejected in periods of turbulence of #financial markets. The third chapter introduces the Stata command "bootrank" which implements the bootstrap likelihood ratio rank test algorithm developed by Cavaliere et al. (2012). The command is illustrated through an empirical application on the term structure of interest rates in the US.

Essays on the Economic Analysis of Tort Law

The analysis of tort law is one of the most influential and extensively developed applications of the economic approach in the study of law. Notwithstanding the exhaustive number of contributions on tort law and economics, several open questions remain that warrant further investigation. The general aim of this research project is to refine the traditional model of tort law in order to make it more realistic, updated with the recent technological progress and in line with the experimental results concerning prosocial behavior. This book is divided into six chapters: Chapters 1 and 6 provide an introduction and conclusions, respectively, while the remaining chapters are written in the form of separate yet related articles.