Empirical essays on finance and development

The central focus of this dissertation is the role of financial instruments, in particular insurance and credit, in economic development. Motivated by the observation that exposure to the risk of extreme weather conditions may constrain investment by subsistence farmers and lead to inefficient production choices, the first chapter evaluates whether insuring farmers against such risks alters resource allocation decisions. In particular I consider the effects of a Mexican government disaster relief program with insurance-like features. The results, based on a regression discontinuity design, indicate that insurance against losses arising from natural disasters changes how rural households invest in their farms. Insured farmers utilize more expensive capital inputs and adopt different technologies. Additionally, the insurance changes labor supply patterns. Notably, members of insured households are approximately 10% more likely to migrate internationally. Additional results, that the program matters most when the returns to migration are more unpredictable, are consistent with a model where insurance obviates the need for precautionary savings, allowing households to finance international migration. Turning from insurance to the role of access to credit in furthering development, the second chapter considers how interest rate ceilings affected investment in agricultural capital and the tenure status of farms in the nineteenth century United States. Using within state variation in usury laws, I find that more restrictive laws lead to an economically meaningful reduction in agricultural investment.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2009

Author dc:creator

• Shapiro, Jeremy Place

Advisor dc:contributor.advisor

• Esther Duflo.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/55150

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/55150