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Dissertations

Browse the categories to access the content of academic, scientific and opinion publications of the professors and students of the Department of Economics PUC-Rio.

Legalize it? The effects of California's medical marijuana law on violent crime

There is a large debate among both scholars and policy makers about the potential effects of drug legalization on crime. On the one hand, proponents of drug criminalization claim that legalization would lead to greater consumption and crime. On the other hand, advocates of drug legalization (e.g. Friedman, 1991) argue that prohibition itself can cause more crime by lowering the marginal cost of violence or diverting police resources away from deterring non-drug crimes. In this paper, we examine one specific drug that corresponds to a large share of the drug consumption: Marijuana. For that, we analyze California's pioneer experience with medical marijuana legalization, which started in 1996. California's experience is particularly interesting because it was close to a de facto total legalization of the drug, including for recreational purposes. We use a synthetic control approach to estimate the impact of marijuana legalization on violent crime. The results indicate a reduction of 13% on violent crime.

Gustavo Tovar Albuquerque.


Orientador: Gabriel Ulyssea.

Banca: Juliano Assunção. Rudi Rocha.

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The added worker effect for married women and children in Brazil: a propensity score approach

The added worker effect (AWE) is the increase in the likelihood of an individual entering the labor force in response to the household head's job loss. This dissertation estimates the AWE for married women and children in Brazil using a propensity score approach. We find evidence of a significant AWE for both groups, in particular for the children. We also investigate the recent surge in the Brazilian population of young people not in work, employment or training (NEET) using the same AWE framework. Our results suggest that the increase in real wages and shorter unemployment spells Brazil experienced in recent years played a significant role in the Brazilian NEET phenomenon.

Daniel Gomes da Silva.


Orientador: Gustavo Gonzaga.

Banca: Gabriel Ulyssea. Mauricio Cortez Reis.

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Populism in general equilibrium :indirect efects on political support

We present a version of the standard general equilibrium model with heterogenous agents and incomplete markets to address matters of populism and political support of governments. The novelty is to assume that governments may expropriate part of the resources in the economy. We highlight a new mecanism in which a populist government can obtain the approval necessary to maintain power. Transfers to poorest/less productive households increases the equilibrium interest rates, by reducing precautionary savings, benefiting rich capital holders and creating a coalition between them. Further, we calibrate the model to a standard U.S economy and conduct some comparative statics in key parameters to address the likelihood of such arrangement.

Marcel Chamarelli Gutierrez.


Orientador: Eduardo Zilberman.

Co-orientador: Tiago Couto Berriel.

Banca: Gabriel Ulyssea. Pedro Cavalcante Gomes Ferreira.

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Term structure of variance and dividend returns

We extend the literature on the term structure of variance risk price and dividends strips. First we show that a substantial amount of S&P’s equity premium is on the medium and long run dividends, contrary to previous literature. Then we indicate that market aggregated liquidity is relevant for the returns of variance related assets. We also provide some insights on the connection between these assets and show that the slope of the variance risk curve is a good predictor for monthly returns. Finally, we show that a properly calibrated version of Dreschler and Yaron (2010) can account for most of these stylized facts, as mean returns, Sharpe ratios and returns correlations.

Leandro de Miranda Gomes.


Orientador: Ruy Monteiro Ribeiro.

Banca: Carlos Viana de Carvalho. Marco Bonomo.

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Inflation Financing and banks balance sheet: a fiscalist stagflation

We develop a New Keynesian model with financial frictions and a maturity mismatch on banks balance sheets. The longer maturity of assets relative to liabilities gives rise to a inflation mismatch, as the former become more sensitive to unanticipated price shocks. Based on the Fiscal Theory of the Price Level, we study the costs of inflation financing in this environment and offer alternative interpretation for crises episodes arising from unsustainable fiscal policy. Contrary to conventional models with fiscal determination and price rigidities, we find that deficits can be stagflationary as inflation deteriorates banks balances, reducing capital finance, investments and output. The fall on capital acts a supply side shock to the economy, rising the cost of capital and inflation, which helps to restore government solvency.

Moises Shalimay de Souza Andrade.


Orientador: Tiago Couto Berriel.

Banca: Carlos Viana de Carvalho. Eduardo Henrique de Mello Motta Loyo.

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Instrument Selection and Identification of Macroeconomic Equilibrium Conditions

Mavroeidis (2005) alertou que equações de equlíbrio motivadas por modelos macroeconômicos com expectatvas racionais poderiam ser fracamente ident_cados devido ao uso de instrumentos fracos. Eu argumento que, embora tais preocupações sejam legítimas, elas não são empiricamente graves, contanto que instrumentos sejam devidamente selecionados. Eu utilizo um modelo DSGE estimado de média escala como laboratório para avaliar estimação uniequacional de condições de equilíbrio macroeconômicas. Apresento estimadores baseados no LASSO que selecionam instrumentos e tem boa performance em amostra _nita, que argumento funcionam melhor em relações que incluem termos de expectativa, como a Curva de Phillips Novo Keynesiana. Por último, faço uma aplicação empírica para a Curva de Phillips da economia dos Estados-Unidos e as estimativas validam um componente de expectativa predominante.

Marcelo Moura Jardim Teixeira Sena .


Orientador: Tiago Couto Berriel.

Co-orientador: Marcelo Medeiros.

Banca: Carlos Viana de Carvalho. João Vitor Issler.

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(Your) ignorance is bliss :robust moral hazard

We consider an environment with moral hazard where a principal and agent have heterogeneous beliefs as to how actions map to output. We focus first on optimal contracts when the principal is at some level aware of the agent's biases, demonstrating that standard firm sale is generally suboptimal in such contexts. We then look at optimal contract design when a principal who is faced with total uncertainty regarding an agent's beliefs demands robustness to his own ignorance.

John Joaquim Sigaud Pease.


Orientador: Walter Novaes.

Banca: Humberto Moreira. Leonardo Rezende.

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Changes in the Brazilian yield curve responses to monetary shocks

Empirical evidence from reduced form VAR estimates shows that there has been a change in the way that the Brazilian yield curve reacts to a monetary policy shock. To better understand the sources of this change we estimated a linearized DSGE model with a term structure of interest rates over two sample periods to see what parameters of the economy might have caused the change. The linearization method is augmented with a volatility adjustment term in order to generate a positive term spread and a risk-adjusted steady state. We discuss the empirical evidence, compare the solution method with other traditional methods and estimate a model with Epstein-Zin preferences using Bayesian methods. We find that our structural model is capable of capturing this change in behavior, and it is caused mainly by changes in parameters of the interest rate rule and interest rate shocks.

Gustavo Curi Amarante.


Orientador: Carlos Viana de Carvalho.

Banca: Carlos Viana de Carvalho. Marco Bonomo. Tiago Couto Berriel.

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Robust Regulation of a Monopolist

This work studies the problem of a regulator who faces a monopolist with unknown costs. Different to previous works, we leave the strong assumption that the regulator knows the true probability distribution of monopolist cost, and instead we assume that regulator holds only a prior belief which gives him exact information about the mean. Regulator maximizes the expected social welfare under the worst distribution in the set of mean preserving spread distribution of his prior. The solution entails a linear social welfare which induces a state-dependent optimal quantity, in contrast to the two point quantity which solves the problem under perfect knowledge of the probability distribution of monopolist cost.

Carlos Antonio Burga Idrogo.


Orientador: Vinicius Nascimento Carrasco.

Banca: Humberto Moreira. Leonardo Rezende. Vinicius Nascimento Carrasco.

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Electoral Re-registration, Disenfranchisement and Public Service Provision

This paper examines whether reforms aimed at reducing electoral fraud can have the unintended effect of disenfranchising poorer citizens and, as a consequence, affect public services delivered to poorer households. We exploit a large program of re-registration of voters in Brazil’s municipalities where the electoral commission suspected the presence of electoral fraud. Using a difference-in-difference strategy, we compare the electoral registration and turnout in 1186 Brazillian municipalities that went through electoral revision with those that did not in elections prior to the re-registration and after the change. We find that the program reduced registration rates by 10 percentage points and participation rates by 5 percentage points, specially in municipalities with low education levels and with low media penetration. Moreover, we find that the newly elected mayors responded to this change by reducing public expenditure in areas that disproportionately benefits poor and uneducated voters (education and health). Finally, we show that the reduction in expenditures deteriorated the infrastructure of public schools and worsened health outcomes of less educated citizens.

Carlos Eduardo Sant´Anna Varjão.


Orientador: Claudio Ferraz.

Banca: Claudio Ferraz. Gustavo Gonzaga. Ricardo Madeira.

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Introducing Capital in a Three-Sector Model of Structural Transformation: A Cross-Country Analysis

Recent literature has highlighted the importance of sectoral productivity growth in explaining reallocation of employment across sector through time--what is usually called structural transformation. In this paper, we develop a three-sector model of structural transformation with capital, allowing for multiple-sector investment shares. This framework enables us to investigate different causes of sectoral labor reallocation, such as sector-specific productivity growth, changes in sectoral investment shares, and growth in capital stock. We do benchmark and counterfactual exercises to assess the effects of each of these factors in explaining structural transformation and aggregate productivity. We find that sectoral productivity growth in agriculture was important in explaining sectoral labor reallocation, while the same does not apply to manufacturing and services. This last result contrasts with what was recently explored in the literature using a framework without capital. Capital accumulation actually plays an important role in explaining sectoral shifts in employment, while productivity growth in manufacturing is important in our model in explaining an increase aggregate productivity. We argue that considering a simple framework without capital can bring to misleading conclusions about what are the main drivers of structural transformation and aggregate productivity across countries.

Pedro Tanure Veloso.


Orientador: Tiago Couto Berriel.

Co-orientador: Carlos Viana de Carvalho.

Banca: Carlos Viana de Carvalho. Eduardo Zilberman. Tiago Couto Berriel. Cezar Santos.

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Choosing Institutions Locally: Determinants of Legislative Size in Brazil

Who should choose local legislatives' number of seats, the federal government or local politicians? To answer this question I take advantage of a natural experiment in Brazil where legislators were given the chance to choose local legislative size given population caps. I estimate a structural discrete choice model where legislators may care for individual returns to reelection and to welfare considerations of representation when making the decision to vote for or against a change in seats. Results indicate legislators weigh 20% welfare and 80% reelection payoffs when choosing seats. With these results, I run some counterfactual analyses varying the population caps' function and the configuration of local political competition.

Ricardo Dahis.


Orientador: Claudio Ferraz.

Banca: Claudio Ferraz. Leonardo Rezende. Marcos Yamada Nakaguma.

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Do Politicians Respond to Political Protests? Effects of the 2013 Protests in Brazil

Political protests are becoming a widespread movement all over the world. In this context, it is important to study whether they are an effective instrument through which citizens can affect political outcomes. Focusing my analysis in the Chamber of Deputies of Brazil, I analyze whether the protests that took place in Brazil in 2013 had any effects in the deputies’ behavior. Using a diff-in-diff approach, I show that the protests did not achieve a positive impact on politicians. Facing this result, we can ask if citizens changed their political behavior – like the way they vote – as a response to the lack of effectiveness of the protests, impacting the political equilibrium. To answer this question, I use data of the 2014 elections, analyzing if voters from places that had at least one political protest behave differently from voters that have not experienced a protest.

Amanda de Albuquerque Jardim Rocha.


Orientador: Claudio Ferraz.

Banca: Claudio Ferraz. Juliano Assunção. Cesar Zucco Jr.

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The Labor Market in Brazil and the 2008 Financial Crisis: An Analysis Based on the Flow Approach

This paper uses matched employer-employee data to investigate a relevant transmission channel of the 2008 financial crisis on the labor market in Brazil: the credit channel. I study the cross-sector impact on employment decisions of firms of the manufacturing industry; to do that I rely on the flow approach, i.e., on measures such as hiring, separation and turnover rates. I find that the credit was an important transmission mechanism of the crises to the real economy. More specifically, I find that more financially constrained industries had higher firing rates during the crisis. Younger and less skilled workers were more adversely affected through the credit channel. Also, I find evidence of reallocation of workers from more to less financially dependent sectors, and particularly so for the smaller firms. I also find some evidence of reallocation within sector and across firm size intervals.

Bianca Ravani Cecato.


Orientador: Juliano Assunção.

Co-orientador: Gustavo Gonzaga.

Banca: Carlos Henrique Corseuil. Gabriel Ulyssea. Gustavo Gonzaga. Juliano Assunção.

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Does collateral pricing matter for news-driven cycles?

Asset prices are strongly influenced by expectations. Therefore, in the presence of collateralized debt, credit availability will depend on those expectations. We develop a simple RBC model, with credit constraints, to formalize this intuition. We then build a more complex model, fit for quantitative analysis, in order to study the relevance of the mechanism. Our main finding is that the credit constraint does not significantly affect the economy if we allow the firms to substitute between equity and debt. This result holds even if the substitution is subjected to severe frictions. 

Cauê de Castro Dobbin.


Orientador: Eduardo Zilberman.

Co-orientador: Carlos Viana de Carvalho.

Banca: Carlos Viana de Carvalho. Eduardo Zilberman. Tiago Couto Berriel. Felipe Iachan.

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Lift-off Uncertainty: What Can We Infer From the FOMC’s Summary of Economic Projections?

What kind of information can we extract from the Summary of Economic Projections? We use two DSGE models subject to the Zero Lower Bound to answer two questions. First, we calibrate versions of these models under different assumptions about the degree of policy commitment, and assess which specification provides the best fit to the so-called “SEP dots”. We then use the best fitting specification for each model to construct uncertainty bands around interest rate forecasts to quantify the lift-off uncertainty. Our results suggest that the Federal Reserve has decreased its commitment degree in 2013 and, specially, in 2014. The reduction follows a change in the FOMC forward guidance statement, and increases with the Quantitative Easing tapering. As for uncertainty, our median projection indicates the lift-off will occur in 2015Q2, but there is some risk that rates will increase in 2015Q1 or remain at zero until the end of 2016.

Octavio Portolano Machado.


Orientador: Carlos Viana de Carvalho.

Co-orientador: Tiago Couto Berriel.

Banca: Carlos Viana de Carvalho. Ruy Monteiro Ribeiro. Tiago Couto Berriel. Stefano Eusepi.

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Two Essays on Liquidity and Strategic Interaction

In this master’s degree thesis, I present two essays based on classic models of strategic interaction. In both essays, the overarching theme is how liquidity relates to asymmetric information. On the first, the aim is to investigate bargaining over an illiquid option subject to exogenous uncertainty. In particular, I develop a bargaining model in which the underlying uncertainty is better predicted by the buyer and establish that the existence of the seller’s exercise option allows “deadline strategies” that are shown to be part of the equilibrium of such game. In other words, the seller fixes a date to exercise her outside option, provided that the trade does not take place until that time. On the second essay, I seek to investigate how borrower runs relate to external funding thorough a market for bank loans. This essay’s conclusion is that borrower runs may be a driver of the originate-to-distribute banking business model, for it induces the sale of loans irrespective of their quality, rendering the market for bank loans information insensitive. This result might be relevant in the context of relationship banking.

Caio Rangel Praes.


Orientador: Vinicius Nascimento Carrasco.

Banca: Leonardo Rezende. Pablo Hector Seuanez Salgado. Vinicius Nascimento Carrasco.

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Crop rotation and the dynamics of Brazilian Agriculture

Crop rotation is a land management practice used in the world's largest grain producing countries that can deliver important insights on how landowners react to changes in incentives to produce crops. The existence of such practices should be taken into account in the evaluation of policies that have impact on crop choice and land use. In this paper, we are interested in the impact on cropland area of changes in incentives generated by different types of policies. We incorporate crop rotation into our model by considering that productivity gains are obtained by cultivating soybeans and corn in a particular sequence and estimate those gains. As the crop choice is tied to previous planting decisions, the farmer's problem is intrinsically dynamic. Therefore, we estimate a structural model that accounts for the dynamic interdependencies between productivity functions of these two crops, using data from 30 grain-producing municipalities in Brazil. Using this framework, we show that a policy that stimulates the production of soybeans has an indirect positive effect on corn production. This approach allows for a richer analysis of the impact of policies across markets affected directly and indirectly. Finally, the result differs from the ones reached by static and single-choice approaches in terms of the magnitude of the impact of such policies over crop supply and, by extension, over prices. It also differs in its prediction of the magnitude of the environmental cost of policies that promote crop production.

Vitoria Rabello de Castro.


Orientador: Juliano Assunção.

Co-orientador: Leonardo Rezende.

Banca: Arthur Amorim Bragança. Gabriel Ulyssea. Juliano Assunção. Leonardo Rezende.

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Transitions in Central Bank Leadership: Empirics and a Simple Theory

The importance assigned to the identity of a central banker demonstrates that transitions of central bank leadership are an important aspect of monetary policy. This has been overlooked by the literature. Our paper analyses these issues within empirical and theoretical frameworks. We provide empirical evidence, within a country panel, that transition periods are associated with a more contractionary monetary policy stance. We then develop a model of monetary policy temporal inconsistency to show how a departing central banker can, by distorting his 
nal decisions, aff ect the public's beliefs about his successor: a reputation transfer takes place

Tiago Tavares Flórido.


Orientador: Carlos Viana de Carvalho.

Co-orientador: Eduardo Zilberman.

Banca: Carlos Viana de Carvalho. Eduardo Zilberman. Leonardo Rezende. Bernardo Vasconcellos Guimarães.

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