Three Essays in Applied Microeconomic Theory.

Abstract

This dissertation consists of three papers in applied microeconomic theory. "Criminal Registries, Community Notification, and Optimal Avoidance" studies the effect of community notification of criminal registries on neighborhood behavior and shows that notification is not always optimal. The main results highlight the complementary relationship between government imposed penalties and notification policies. I prove that notification with too light of a penalty is bad for the community. Conversely, there always exists a penalty severe enough to ensure that notification improves the community's welfare. Therefore, the government's decision to notify communities of criminals in their midst depends in part on how severely it wants to penalize repeat offenders.

In joint work with Lones Smith, "The Economics of Performance Ratings" studies the use of performance ratings as both information and incentive devices. When effort is costly, the rating system serves as both a yardstick of achievement and a dynamic incentive system. We show that ratings generally cannot simultaneously be statistically accurate and induce maximal effort. We prove that the agent's optimal effort is higher when ratings are more dependent on recent performance scores. If the rating system designer always prefers greater accuracy and effort, he faces a tradeoff: ratings can elicit more effort only at the cost of being less informative.

In "When Should Governments Reveal Criminal Histories?" I study how the government's policy on when to make criminal histories publicly available affects criminal behavior and productivity. I focus attention on two policies: a strict policy which discloses after the first conviction and a lenient policy which discloses after the second conviction. My main results highlight the ways in which leniency can be beneficial, by minimizing the crime rate and increasing the productivity of the criminal population. The lenient policy minimizes the crime rate when public notification has a large negative effect on wages, a small positive effect on detection probabilities, and a criminal's expected lifetime is long. In contrast to that qualified result, I prove that the productivity of the criminal population is emph{always} higher under the lenient policy.