Essays in development macroeconomics

Krrikyan, Vahe

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URL:	https://madoc.bib.uni-mannheim.de/50412
URN:	urn:nbn:de:bsz:180-madoc-504126
Document Type:	Doctoral dissertation
Year of publication:	2019
Place of publication:	Mannheim
University:	Universität Mannheim
Evaluator:	Adam, Klaus
Date of oral examination:	17 May 2019
Publication language:	English
Institution:	School of Law and Economics > VWL, Internat. Wirtschaftsbeziehungen (Adam) Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSE (Economics)
Subject:	330 Economics
Classification:	JEL: E44, F41, G21, H31, J21, J65, O16,
Keywords (English):	occupational choice , family firms , subsistence entrepreneurship , financial frictions , social insurance , cross-country analysis
Abstract:	This dissertation consists of two self-contained chapters. Each of the chapters studies a specific friction in occupational choice that can lead to resource misallocation and affect country level measured total factor productivity and per capita output. In Chapter 2, I show that in developing countries, the share of family owned and managed firms is much higher in comparison to developed countries, and I argue that the resulting concentration of firm ownership and management can be a source of misallocation of managerial talent and it can explain a significant part of cross-country differences in measured TFP. I use a quantitative model of occupational choice to further study the channel and I find that only the managerial talent misallocation due to differences in firm ownership and management can explain around 12 percent of cross-country differences in measured TFP. In Chapter 3, I study the role of social policy in understanding cross-country differences in occupational distribution, access to finance and output per worker. I argue that the lack of social protection in developing countries forces the unemployed to become entrepreneurs out of necessity, leading to resource misallocation in the labor market. Consequently, due to information asymmetry between lenders and entrepreneurs, the higher share of necessity driven entrepreneurs in total entrepreneurship drives the borrowing interest rate up, creating resource misallocation in the capital market and decreasing the labor productivity. I develop a model of occupational choice to capture the proposed mechanism and use it to study the role of social insurance in explaining the differences in occupational distribution, access to finance and output-to-worker ratio between the economies of Chile and the United States. I find that around 16 percent of the difference in output-to-worker ratio can be explained by the model.