Essays in labor economics and development economics

This dissertation contains three essays on labor economics and development economics. In the first and second chapters, I examine determinants and consequences of alcohol consumption in Russia and quantify the effects of various public policies on mortality rates and on consumer welfare. For the past twenty years, Russia has confronted the Mortality Crisis - the life expectancy of Russian males has fallen by more than five years, and the mortality rate has increased by 50%. Alcohol abuse is widely agreed to be the main cause of this change. In the first chapter, I employ a rich dataset on individual alcohol consumption to analyze the determinants for heavy drinking in Russia, including the price of alcohol, peer effects, and habits. I exploit unique location identifiers in my data and patterns of geographical settlement in Russia to measure peers within narrowly-defined neighborhoods. This definition of peers is validated by documenting a strong increase in alcohol consumption around the birthday of peers. With natural experiments, I estimate the own price elasticity of the probability of heavy drinking using variation in alcohol regulations across Russian regions and over time. From these data, I develop a dynamic structural model of heavy drinking to quantify how changes in the price of alcohol would affect the proportion of heavy drinkers among Russian males (and subsequently also affect mortality rates). I find that that higher alcohol prices reduce the probability of being a heavy drinker by a non-trivial amount. An increase in the price of vodka by 50% would save the lives of 40,000 males annually, and would result in an increase in welfare. Peers account for a quarter of this effect. The second chapter analyzes the consequences of government policy towards light alcohol drinks. Light drinks are commonly viewed as stepping stone to harder drinks, but also as safer substitutes for them. Here, I analyze this trade-off by utilizing micro-level data on the alcohol consumption of Russian males. I find, first, that beer is a safer drink compared to hard alcohol beverages, in the sense that consumption of hard beverages increases the hazard of death while consumption of beer does not. Second, I find that beer is a substitute for vodka: there is significant positive cross-price elasticity of vodka consumption with respect to beer price. I find also little evidence that beer consumption actually serves as stepping stone for vodka consumption. Initiation of beer consumption instead forms habits for the further consumption of beer. Drinking beer at earlier ages results in higher beer consumption and higher overall alcohol intake in older years, but also results in reduced consumption of hard drinks compared to vodka drinkers and to non-abstainers. Finally, I estimate a multivariate model of consumer choice, and quantify the effect of different government policies on mortality rates, drinking patterns, and consumer welfare. I find that the taxation of beer may decrease consumer welfare and increase mortality rates. In contrast, subsidizing beer consumption will increase consumer welfare and even slightly decrease mortality rates. The third chapter of my dissertation documents the unequal enforcement of liberalization reform of business regulation across Russian regions with different governance institutions, which leads to unequal effects of liberalization. National liberalization laws were enforced more effectively in sub-national regions with a more transparent government, more-informed population, higher concentration of industry, and stronger fiscal autonomy. As a result, in regions with stronger governance institutions liberalization had a substantial positive effect on the performance of small firms and on the growth of the official small-business sector in general. In contrast, in regions with weaker governance institutions there is no effect from the reform, and in some cases even a negative effect is observed.