This dissertation contains three chapters that examine development and urbanization in China since 1980. The first chapter investigates the impact of Special Economic Zones established since 1992 on local economic outcomes and urbanization rates. The second chapter studies local bureaucrats’ incentives while balancing the goals of economic growth and resource or environmental protection. The last chapter examines patterns of urbanization in China as related to the administrative hierarchy between urban and rural regions.

In the first chapter, I examine the local and aggregate productivity impacts of Chinas Special Economic Zones (SEZ) program from the 1990s to 2006. Using an event study de- sign where I exploit variation in the timing of the first zone establishment across counties, I find that an SEZ increased GDP by 1% to 2% per year over 5 years. In order to assess the aggregate impact of the program, I develop a spatial equilibrium model with two sectors – agriculture and manufacturing. In the model, the economy-wide output impact of an SEZ depends on the elasticities of inter-regional and inter-sectoral labor supply, as well as the relative productivity levels of the SEZ-hosting regions and other regions. I do not find any evidence that the SEZ program induced inter-regional labor reallocation. However, the program did accelerate the shift of employment from the agricultural sector.

In the second chapter, I explore whether Chinese bureaucrats’ policy decisions depend on connections with their superiors through the appointment of bureaucrats to office. In particular, I consider appointment as a kind act on the part of the promoter, and ask whether the promoted bureaucrat enacts policies that are in the interest of his benefactor. This framework is applied to the policy outcome of rural land conversion and air pollution. I examine whether rural land conversion is more prevalent, and whether air pollution is more abundant, when the local bureaucrat works under the Party Secretary who promoted him. My analysis exploits variation in the length of politicians terms within individual and pairs of politicians. Preliminary findings suggest that promoted land bureaucrats may exhibit reciprocal behavior, while environmental protection bureaucrats may not.

In the last chapter, I study the impact on urbanization of the Cities Leading Counties (CLC) policy implemented in China beginning in 1983. This nationwide program granted large metropolitan governments administrative control over counties in the surrounding

hinterland. I use annual county-level nighttime lights data to examine changes in urbanization in the hinterland after integration with a city. I find that while the policy increased urbanization in counties subsumed into cities, the cities themselves did not experience faster urbanization.

This dissertation combines three projects, each analyzing how markets or individuals respond to different policy or environmental changes in low and middle income countries. Each study theoretically motivates the hypotheses of interest and combines novel data from a wide range of sources to test them.

The first chapter examines the role of prices of foods, rich in different nutrients in the obesity and diet-related disease epidemic in Mexico. In response to the growing epidemic of obesity and diet-related chronic diseases, a number of governments are proposing taxes designed to reduce the consumption of unhealthy foods and thereby improve health outcomes. In this paper, I provide the first estimates of the effects of price changes of foods rich in sugar on the prevalence of obesity and diet-related chronic diseases, such as diabetes and hypertension. The analysis is made possible by rich longitudinal and nationally representative micro data on food prices and objective measures of health outcomes in Mexico for the period 1996-2010. I employ a unique bar-coded level price dataset with product-specific nutritional information combined with two datasets on health outcomes: (1) a state-level administrative dataset and (2) an individual panel dataset. Exploiting plausibly exogenous within-state variation in prices over time, I show that a decrease in the price of sugar-rich foods significantly increases the prevalence of abdominal obesity, type 2 diabetes, and hypertension. In addition, the least healthy and most impatient individuals seem to be more responsive to price changes, suggesting that time preferences are an important mechanism driving the results. Overall, the effect of sugar prices on the incidence of chronic diseases is large. Since the signing of NAFTA, I estimate that the reduction in prices of sugar-rich foods explains 20 percent of the increase in diabetes.

The second chapter, joint work with Paul J. Gertler, identifies how junk food and soda taxes are passed through to consumer prices. I use a unique bar-code level price dataset with product-specific nutritional information and the introduction of junk food and soda taxes in Mexico in January 2014 to assess whether and how the excess tax burden is split between consumers and producers. Preliminary results suggests that pass-through is the strongest for sodas, followed by snacks, candy and cakes. For these products a full pass-through materializes within six months after the introduction of the tax. On average, the tax is not fully passed through to consumer prices in the case of cereal and cookies. However, the pass through is increasing over time for the latter, reaching a full pass-through by May 2014. We also observe large variation in pass-through across cities - from over to under shifting; hence observing decreases in consumer prices as well. Using price elasticities of health from Gracner (2015), a one time introduction of junk food and soda taxes in Mexico would imply approximately one and a half percentage point decrease in abdominal obesity and between a quarter to one half of a percentage point decrease in type II diabetes prevalence, under the assumption of a symmetric response to a price change.

The third chapter, based on joint work with Paul J. Gertler, Marco Gonzalez-Navarro, and Alex D. Rothenberg, provides evidence of the effects of road quality on local economic activity using temporal variation generated by maintenance investments in roads. A long panel of firms and households allows us to shed light on the effects of road quality for pre-existing households and firms. Methodologically, we propose a new road quality instrument using a nationwide panel dataset of road surface roughness to predict road quality from temporal variation in budgets exogenously allocated to different road maintenance authorities. We first show that higher road network quality improves household consumption and income. We then show that this is partly due to job creation in the manufacturing sector. Third, we show evidence of an occupational shift from agriculture into manufacturing and higher profits for those who stay in agriculture. The gap in average income between agriculture and manufacturing employment is reduced with road quality but not eliminated. Because wages in the manufacturing sector do not change with road quality the results are consistent with dual labor markets in Indonesia.

This dissertation applies tools developed in labor economics to empirically study questions in labor, development, and urban economics. Each chapter attempts to decompose a problem into competing explanations. The first decomposes racial segregation in US cities. The second decomposes differences in wages between agricultural workers and and non-agricultural workers. And finally, the last decomposes the heterogeneous responses of workers to a new monitoring technology.

In the first chapter, I revisit the question of whether residential segregationin US cities emerged in the mid-twentieth century as a consequence of decentralized location choices in combination with white antipathy toward black residents or whether it reflected institutionalized constraints on the availability of neighborhoods that black families could access. The chapter analyzes rich population data from the 1930 and 1940 censuses to disentangle these channels. I first lay out a simple discrete choice model of residential choices by white and black families that depends on the local price of housing and on the fraction of black residents in each neighborhood. I show how the preferences of both race groups can be identified using information on the impacts of exogenous inflows of white and black residents to different neighborhoods. White and black rural inflows constituted a major source of inmigration to major cities during this time period; I construct a pair of novel instrumental variables for these inflows by connecting the distributions of white and black surnames in rural areas to earlier migrants living in different census tracts in 1930. The resulting structural estimates confirm that white families had a relatively high willingness to pay to avoid black neighbors, consistent with an important role for preferences in the evolution of neighborhood segregation. Combining white and black preferences, however, I also find strong evidence that black residents faced supply side constraints on their neighborhood choices. I conclude that about one half of the overall degree of neighborhood segregation observed in 1940 was due to the different preferences of white and black families, while a comparable share was due to implicit or explicit constraints on which neighborhoods black families could move into.

While the first chapter interpreted incumbent residents' responses to migrants as reflective of their racial preferences, the second chapter, based on joint work with Marieke Kleemans, Joan Hamory Hicks, and Ted Miguel, directly studies the migrant experience itself. Recent research has pointed to large gaps in labor productivity between the agricultural and non-agricultural sectors in low-income countries, as well as between workers in rural and urban areas. Most estimates are based on national accounts or repeated cross-sections of micro-survey data, and as a result typically struggle to account for individual selection between sectors. We use long-run individual-level panel data from two low-income countries (Indonesia and Kenya). Accounting for individual fixed effects leads to much smaller estimated productivity gains from moving into the non-agricultural sector (or urban areas), reducing estimated gaps by over 80%. Estimated productivity gaps do not emerge up to five years after a move between sectors. We evaluate whether these findings imply a re-assessment of the conventional wisdom regarding sectoral gaps, discuss how to reconcile them with existing cross-sectional estimates, and consider implications for the desirability of sectoral reallocation of labor.

Finally, the third chapter is based on joint work with Ernesto Dal Bó, Frederico Finan, and Laura Schechter and empirically studies models of task assignment within organizations in a developing country context. Standard models of hierarchy assume that agents and middle managers are better informed than principals about how to implement a particular task. We estimate the value of the informational advantage held by supervisors (middle managers) when ministerial leadership (the principal) introduced a new monitoring technology aimed at improving the performance of agricultural extension agents (AEAs) in rural Paraguay. Our approach employs a novel experimental design that, before randomization of treatment, elicited from supervisors which AEAs they believed should be prioritized for treatment. We find that supervisors did have valuable information---they prioritized AEAs who would be more responsive to the monitoring treatment. We develop a model of monitoring under different allocation rules and roll-out scales (i.e., the share of AEAs to receive treatment). We semi-parametrically estimate marginal treatment effects (MTEs) to demonstrate that the value of information and the benefits to decentralizing treatment decisions depend crucially on the sophistication of the principal and on the scale of roll-out.