Essays in economic development and education

Abstract

The first chapter of this dissertation examines the market for private school. Private school market shares are rising steadily in many developing countries, but we have a limited understanding of how private schools set prices, how parents respond, and how this affects enrollment and performance in equilibrium. To shed shed light on demand behavior and supply response, I present a model of school pricing that incorporates an unusual feature of schooling compared to other goods - a potential preference by parents for small classes, and hence low school enrollment - that interacts with schools having market power. I show that, for a relatively broad range of parameter values, these two features can lead to the surprising result that an increase in aggregate household income, and hence an increase in willingness to pay for private schooling, can actually cause equilibrium private school enrollment to decrease. To investigate how private school enrollment responds to rising household income in practice, I exploit aggregate community-level income shocks in Chile, which has had a nationwide school voucher system since 1981. These shocks are caused by different responses to the price of copper in different municipalities. I show that private school prices rise by 0.9% in response to a shock that causes a 1% rise in income while private school enrollment falls by 2.0%. I find that falling private school enrollment is primarily caused by the middle-income students at the top schools. Those middle-income students induced to downgrade by rising prices do not experience the test score gains from the income shock experienced by students in the rest of the income distribution. I structurally estimate an extended version of the model and find that both market power and parental preferences for reduced class size are contributing to the observed declines in enrollment. The second chapter studies the responsiveness of United States-Mexico migration to U.S. border enforcement policy. Spending on border enforcement has risen by 240% in the U. S. in the last decade, and the construction of a fence on the U.S.-Mexico border has become a focal point in the debate over the costs and benefits of increased border security. However, whether and by how much the fence actually reduces migration from Mexico to the U. S. remains an open question. This paper estimates the impact of the fence on migration flows between Mexico and the U.S. and investigates the mechanisms driving observed impacts. To conduct this analysis, I exploit variation in the timing of U.S. government tactical infrastructure investment in fence construction in the period after the passage of the 2006 Secure Fence Act. Using Mexican household survey data and data I collected on border fence construction, I find that construction in a given municipality reduces migration by 39% from that municipality and by 26% from adjacent municipalities. I also find evidence that fence construction reduces migration rates for residents of non-border states with historically low access to smugglers by 38%. Based on these estimates, I calculate that the implied cost of the fence per migrant deterred is $4,800 USD. My findings suggest that fence construction deters migration because the migration costs faced by prospective migrants are sensitive to the particular set of available crossing locations. I derive a simple migration selection model to test this hypothesis and find that a left-censoring of the migration cost distribution, consistent with the disproportionate elimination of low-cost crossing options, best rationalizes evidence on changing migration patterns. The third chapter of this dissertation (coauthored with Erica Field and Rohini Pande) examines the economic returns to social interaction. For this research, microfinance clients were randomly assigned to repayment groups that met either weekly or monthly during their first loan cycle and then graduated to identical meeting frequency for their second loan. Long-run survey data and a follow-up public goods experiment reveal that clients initially assigned to weekly groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly two years after the experiment. They were also three times less likely to default on their second loan. Evidence from an additional treatment arm shows that, holding meeting frequency fixed, the pattern is insensitive to repayment frequency during the first loan cycle. Taken together, these findings constitute the first experimental evidence on the economic returns to social interaction, and provide an alternative explanation for the success of the group lending model in reducing default risk.