Title: Three essays on development economics
Description: This dissertation contains three essays on development economics, addressing trade liberalization and inequality in Brazil, a large-scale child health intervention in Indonesia, and conceptual and methodological aspects of measuring household economic well-being. The three consider different aspects of household welfare and its determinants. The first chapter examines the effect of a macroeconomic policy on household welfare; the second chapter studies the effect of a microeconomic intervention on a component of household welfare, that of children; the final chapter explores how we might conceive of and measure household welfare itself. Using nationally representative, economy-wide data, the first chapter investigates the relative importance of trade-mandated effects on industry wage premiums, industry and economy-wide skill premiums, and employment flows in accounting for changes in the wage distribution in Brazil during the 1988-1995 trade liberalization. Unlike in other Latin American countries, trade liberalization appears to have made a significant contribution towards a reduction in wage inequality.

These effects have not occurred through changes in industry-specific (wage or skill) premiums. Instead, they appear to have been channeled through substantial employment flows across sectors and formality categories. Changes in the economy-wide skill premium are also important. Indonesia's posyandu program is a very large child health and nutrition intervention with over 200,000 posts in 65,000 villages, introduced in the 1980s. The second chapter examines the short- and medium-term effects of the program. While the field efficacy of the individual components - immunization, vitamin A supplementation, oral rehydration salts, and growth monitoring and nutrition education - has been well established, there has been little evidence from micro-data of integrated programs being successfully implemented at scale. However, using household-level data and exploiting differences in timing and location of new posyandu, it appears that the program reduced under-five mortality by 36 deaths per 1,000 children, which is consistent with the reduction we would expect from the known clinical efficacy of its interventions, and represents 40 percent of the national decrease from 1980-2000.

The chances of being underweight or stunted were reduced by 19 to 26 percent, with the effect concentrated in children two years and younger. There is also evidence that improved nutritional status led to large increases in test scores (0.24 to 0.37 standard deviations). A comparison of costs per child and cost-effectiveness with similar programs in other countries and other interventions indicates that the posyandu program is amongst the most cost-effective child health care interventions ever implemented. The chapter briefly examines why this large-scale program was successful in Indonesia when there is limited evidence that similar programs have been effective elsewhere in the developing world. The final chapter examines the construction and use of household indices with asset data, a recent and popular approach to measuring economic well-being. After outlining the conceptual relationships and differences between components of economic well-being and monetary measures, a rich Indonesian dataset is used to evaluate methods of index construction, including different combinations of the underlying asset indicators and the various approaches to weighting such variables (PCA, PFA, MCA and DiHOPIT).

Different weights are shown to have generally little empirical difference. However, the choice of underlying variables is found to be important; most choices lead to a good measure of consumption, but only a few produce a good measure of wealth. Based on the empirical results and theoretical discussion, approaches are recommended for constructing asset indices given different research objectives. In addition, the potential bias when using or omitting asset indices as proxies for particular omitted variables is estimated. Multidimensional extensions measuring components of economic well-being separately are also introduced.