Essays in Applied Microeconomics

Abstract

This dissertation tackles three questions theoretically and empirically. The first chapter studies how non-binding default options influence the behavior of consumers. We argue that default options arise in an inherently strategic setting between a default setter and decision makers. Building upon this premise, we show empirically and theoretically how default effects depend on the characteristics of the default setting institution and the decision makers.<br /> The second chapter provides evidence that two important features of labor markets—the existence of involuntary unemployment, and the segmentation of markets according to firms offering “good” and “bad” jobs—may have a common underlying cause. In particular, in the prevalent case that contracts are incomplete, the implicit contracting strategies adopted by firms may simultaneously generate both phenomena.<br /> The third chapter investigates the effects of power concentrating institutions on the quality of political selection, i.e., voters’ capacity to empower competent politicians. We show that variations in power concentration involve a tradeoff. On the one hand, higher concentration of power enables the voters’ preferred politician to enforce his agenda. On the other hand, higher power concentration leads to more opportunistic campaigns. We find theoretically and empirically that full power concentration is desirable only if politicians are strongly driven by welfare considerations.