Essays in applied microeconomics

Caramellino, Gianpaolo (2018) Essays in applied microeconomics. PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis consists of three chapters that belong to the realm of Applied Microeconomics. The first two chapters are empirical projects that assess the role of time for human capital development of immigrants in the U.S.. The third one is a theory project that studies how managerial career concerns and experimentation influence risk-taking behaviours. Chapter 1 studies how age at arrival in the U.S. affects the skill development of young immigrants in the U.S.. Using the within family variation across siblings entered in the U.S. at different ages, I document a cognitive / non-cognitive tradeoff induced by age at arrival. As for cognitive skills, the effect of age at arrival is negative, in particular for the ability to learn English. The effect on cognitive skills is reflected in immigrants’ educational achievements. However, age at arrival plays a positive role for illicit behaviours. Children of immigrants arrived later tend to show less problematic behaviours than their siblings arrived earlier, also controlling for their English ability. Through an indirect accounting exercise, I estimate the negative effect of age at arrival on the labor market performance of immigrant adults. I conclude the paper showing that more educated parents anticipate the arrival of their children in the U.S.. Chapter 2, co-authored with Leonardo Felli, Carola Frege and Yona Rubinstein, studies the intergenerational assimilation of immigrants in the U.S.. In our study, we observe the outcomes of several immigrant generations. Moreover, we link immigrant mothers and their children, thus observing the outcomes of two immigrant generations belonging to the same cohort. Controlling for the selection into migration and return migration, we document that it takes two immigrant generations to exhaust the full potential of cognitive and educational assimilation, while it might take longer for other social outcomes, such as the attitude towards problematic behaviour and the likelihood of having children. Chapter 3, co-authored with Francesco Sannino, studies the effect of managerial career concerns and experimentation on risk-taking. We model an economy where managers create value through their ability to learn at an intermediate stage about the intrinsic profitability of a risky investment. Managers are heterogeneous in their ability to extract information from experiments, and care about their reputation. Their incentive to take on risk is distorted by career concerns, and can result in under or over risk-taking. When, following the experiment, better managers discard risky projects more often than bad ones we observe over risk-taking. Our result is in contrast with Holmstr¨om (1999) where managers’ ability affects the project’s success rate, and career concerns can only produce inefficiently low risk-taking. We show that the inefficiency is reduced in one extension of the model, where the market can also observe the outcome of similar projects. The novel implication is that markets more plagued by career concerns distortions are those where managers engage in more idiosyncratic activities.

Item Type:	Thesis (PhD)
Additional Information:	© 2018 Gianpaolo Caramellino
Library of Congress subject classification:	H Social Sciences > HB Economic Theory
Sets:	Departments > Economics
Supervisor:	Nava, Francesco and Felli, Leonardo and Rubinstein, Yona
URI:	http://etheses.lse.ac.uk/id/eprint/3786

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