Date of Award
Spring 2024
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Economics
First Advisor
Zilibotti, Fabrizio
Abstract
The role of human capital in development is a central topic of academic and policy discussions. The first two chapters of my dissertation are contributions to this topic. First, I use educational reform in Brazil to shed light on the impact of rising educational attainment on economic development. Second, I study the role of demand subsidies on access and increasing the quality of higher education. In Chapter 1, “From Classroom to Prosperity: Fostering Economic Development Through Higher Education,” I use both an empirical and theoretical approach to investigate the contribution of higher education to the development process, focusing on the case of Brazil. In the empirical analysis, I leverage a 1996 education reform in Brazil that reduced entry costs to private colleges. The reform's impact on educational attainment varied across local labor markets. I estimate this heterogeneous effect through an IV strategy exploiting the idea that private colleges targeted locations under-served before the reform. Using this instrumental variation, I compare locations with similar initial levels and pre-trend development and find that rising college attainment causes income growth and accelerates the decline in agricultural employment. I also use administrative data on firms to document a novel mechanism: college graduates increase the prevalence of medium-size firms in the local economy. Reassuringly, when I ran my empirical design before the reform, I found the instrument was uncorrelated with economic outcomes. To quantify the macroeconomic effects of rising educational attainment, I propose a structural model featuring an educational choice and a sectoral specialization of educated workers in non-agricultural activities. A key implication of the theory is that reducing access costs to college increases college attainment, facilitating size expansion and increasing firms' productivity in the non-agricultural sector. I estimate the model’s structural parameters. Because, in my theory, educational attainment is both a cause and a consequence of economic development, I develop an identification strategy that allows me to separate changes in demand (e.g., skill-biased technological change) from changes in education costs. Crucially, I show that the model can quantitatively replicate the 2SLS coefficients obtained in the empirical analysis. I conclude with a counterfactual analysis that allows me to quantify the effects of reducing access costs to college. Reducing access costs to college accounts for around 18% of Brazil's GDP per capita growth and 7% of the decline in agricultural employment between 2000 and 2010. Labor markets with faster growth in skill-bias technology benefit relatively more from reducing college costs. In Chapter 2, “College Quality and Tuition Subsidies in Equilibrium” (with Fernando Cordeiro), we study how merit-based scholarships affect the quality of the education provided in equilibrium. We link administrative data on pre-college academic performance, college choice and performance, and labor market outcomes at the individual level. Using this unique dataset and a model, we estimate the demand and supply for college education and conduct policy counterfactuals. We find that a 10% increase in the probability of getting a subsidy allows 17 thousand students to enroll in college, favoring poorer, high-ability students. From the supply side, for-profit institutions respond to subsidies by increasing the quality provided. In many developing countries, corruption is a pervasive phenomenon, widespread across districts and local officials. In Chapter 3, "Spatial Consequences of Corruption: Entry and Location Decisions of Firms" (with Bernardo Ribeiro), we study the role of institutions that reduce the incentives of local governments to engage in corruption in procurement contracts. The chapter studies the impact of corruption on the spatial distribution of economic activity and its dynamic effects on local and aggregate growth. Our investigation focuses on a federal policy in Brazil that randomly selected local governments for audits on the use of public funds received through transfers. While evidence suggests this program effectively reduced corruption and enhanced political accountability, its implications for firms still need to be understood. For example, diminishing corruption could optimize the allocation of procurement contracts by prioritizing efficiency over political connections, fostering competition. Building upon Colonnelli and Prem (2022), we use a difference-in-differences analysis to reveal the positive impact of corruption reduction on local economic activity. As all eligible municipalities were aware of the policy, this approach captures the \textit{relative} effects of audits on firm outcomes. To discern the policy's aggregate effects, we develop a spatial model wherein firms' entry decisions and choice of production locations are endogenously determined. Variations in corruption levels influence relative productivity and potentially lead to misallocation. In our model, audited municipalities witness a more significant decrease in corruption, creating favorable conditions for business initiation. We derive equations from the model that directly correspond to the empirical difference-in-differences coefficient. This relationship between the model's structural parameters and empirical findings enables us to estimate the upper and lower bounds of the policy's aggregate impact.
Recommended Citation
Cox Lescano, Alvaro Esteban, "The Role of Human Capital and Institutions in Economic Growth" (2024). Yale Graduate School of Arts and Sciences Dissertations. 1428.
https://elischolar.library.yale.edu/gsas_dissertations/1428
