Essays in Development and Labor Economics

Abstract

This dissertation consists of two independent studies that seek to improve public policies in developing country context. I first study how anti-poverty programs in developing countries can improve their screening procedure so that they can better direct resources to the poor over time. Then, I investigate the impacts of trade openness on fertility decisions in countries known for son preference, thereby informing governments in those countries of the unintended consequences of such growth-focused trade policies. In the first chapter, “Bunching and Learning in Targeting Poverty: Evidence from Vietnam,” I examine how households manipulate eligibility criteria in order to appear eligible for an anti-poverty program. Despite ample evidence that households manipulate these criteria, little is known about how such behaviors evolve over time in a long-term program. Using data from Vietnam, I find that, early on in each phase of its National Anti-Poverty Program, about 1-2% of the population (or 8-18% relative to the program size) bunch at the official income cutoff in order to appear eligible. However, this fraction falls by 60-100% towards the end of the phase, only to increase yet again when a new phase starts with a new income cutoff. To explain this temporal pattern of bunching, I develop a model in which over time the program staff learn to rely on housing conditions, a less-manipulable criteria, to select households. This refined information, in turns, discourages households from manipulating their income. I find that an increase of 0.5 standard deviation in the housing quality index further reduces the chance of being accepted to the program by 25.11% after two years. Meanwhile, other criteria, including reported income and asset holdings, do not contribute any additional predictive power to the program status over the same period. Without this learning process, the program would have misallocated about 1.7%, or equivalently 32.3-36.4 million USD (PPP), of its budget to non-poor households during the first phase of the program. In the second chapter, “Why does the sex ratio at birth rise? Evidence from Vietnam,” joint with Nghiem Huynh, we investigate the causal link between a major trade agreement between the US and Vietnam and the rise in sex ratio at birth in Vietnam. We test three theories of the rise in sex ratio at birth and find evidence that the fertility mechanism explains the recent increase in Vietnam. Using the 2001 US-Vietnam Bilateral Trade Agreement as an exogenous shock, we show that mothers exposed to larger tariff cuts are more likely to have boys, work more hours and less likely to give birth. These results hold up when we account for other competing mechanisms, including changes in fathers' exposure to the policy and daughters’ economic returns in repeated cross-sectional and panel data. This chapter highlights the trade-off between work and children for mothers, and the potential role of trade policy in heightening this trade-off, leading to lower fertility and higher sex selection. Although both studies are situated in Vietnam, their results and implications are relevant to policy discussions in many developing countries.