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Three Essays in Development Economics


This dissertation consists of three essays on development economics. I use data from the Indonesia Family Life Survey (IFLS) to analyze individual decisions and to investigate the underlying factor determining their decisions.

In chapter one, ''Mistake on Risk Question, Cognitive Ability, and Earning: Evidence from Indonesia'', I study whether individuals' mistake on understanding simple risk task during a survey is associated with cognitive abilities, and whether committing the mistake correlates with individuals' abilities to generate earning. I use data from the fourth wave of IFLS to answer these two questions. I find that people with higher cognitive scores make finer mistake than people with low cognitive score suggesting a human capital channel. I also find that individuals who commit the mistake are more likely to earn lower earning.

In chapter two, ''The Effects of Early Childhood Exposure to Natural Disaster on Mistake on Risk'', I investigate the effect of early childhood exposure to the 1992 Flores Earthquake and Tsunami on the observed mistake on risk attitudes as adult. I use individuals' birth date and place recorded in IFLS and merge with geo-location of the epicenter of the 1992 Flores Earthquake and Tsunami. The evidences in this paper point to no correlation between exposure to the earthquake and making mistake on risk. Furthermore, this study cannot find enough evidence that long-run mistake on risk of early child is sensitive to the environmental conditions they experienced early in life. The null findings may be related to selection bias.

In chapter three, ''The Long Term Effects of the School Construction Program on Education and Non-Farm Business Profits in Indonesia'', I replicate Duflo (2001) in a sample of self-employed workers in the IFLS4. I cannot reject her estimates, though my estimates are very imprecise. Additional research is needed to better understand the effect of that large-scale program, especially on self-employed workers, as it comprises almost 70\% of Indonesian's labor force.

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