Essays on microeconomic incentives in public policies

This thesis consists of three chapters on public and development economics that study incentives in public policies from the perspective of microeconomics. It is devoted to understanding behavioural responses in public policies that are relevant to its design in each domain, including trading in market with frictions, enrolment in education and child marriage practice for young girls, and childcare resource allocation in family. Chapter 1 studies how transaction tax policy affect market with frictions. Transaction tax in property market, with tax rate decreasing in holding period of property, received attention from governments in Asia for moderating speculation since 2000s. Using administrative transaction record of property, this chapter studies the behavioural response to the transaction tax in the timing of transaction, tax incidence and selection of buyers in Hong Kong and Singapore. I find that the inherent tax incentives, in the form of tax notches, induced tax avoidance behaviour in the timing of transaction, and average buyer and seller are willing to wait 3-4 weeks to avoid 1% of transaction tax. Exploiting discontinuity in tax liability at daily level, I find that the tax policy has impact on transaction activity that links closely to its rate and lower the overall chance of a property sold. Buyers bear significant tax burden on seller specific tax even when tax-free sellers are abundant in the market both evidence suggest strong search friction in property market. I also find that the differential tax rate in holding duration produce selection effect among buyers with different ex ante probability of trade in the taxable holding period. This chapter contributes to understanding the nature of transaction tax in markets with search friction. Chapter 2, a joint work with S Roy, studies the impact of matrimonial laws introduced by the British in colonial India during 1800s and early 1900s. Legal reforms on marriage practices, including laws on minimum marriage age and female infanticide, were introduced in British Provinces - district that were under British direct rule. Exploiting quasi-random variations of districts that were former British Provinces within each post-independent Indian states, this chapter studies their impact on female education and under age marriages in post-Independent India. From independent sources of large-scale micro data, including administrative records from schools and representative household surveys, we find that in former British Provinces females have 5% lower chances of marrying under the current legal age, and 1.6% higher chance of attending school at 10-16 years old. Child Marriage abolition Act was introduced in 1931, which raised the minimum age of marriage for female to 14. With newly digitized data on district level marriage pattern from Census of India 1901-1931, we find that the act distorts the marriage market in the short-run by increasing the likelihood of girls marrying at young age as it was preannounced before its implementation, while district more aware of the law exhibit lower child marriage in the long run. It suggest that expansion of education for girls in India has demand side constraints from child marriage practice that has historical root. The introduction of prenatal sex-detection technologies in India has led to a phenomenal increase in abortion of female fetuses. Chapter 3, a joint work with S Anukriti and Sonia Bhalotra investigates their impact on the relative chances of girls surviving after birth, fertility and parental investments. We find that it lead to reduction in excess female mortality, erosion of gender gaps in parental inputs such as breastfeeding and immunization, and moderation of son-stopping fertility. For every five aborted girls, we estimate that roughly one additional girl survives to age five. Our findings have implications that sex-selective abortion not only account for counts of missing girls but also for the later life outcomes of girls.