Economics - Theses, Dissertations, and other Required Graduate Degree Essays

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Sources of Irrational Behaviour. Three Essays on Theory and Experimental Evidence

Author: 
Date created: 
2017-04-05
Abstract: 

This thesis investigates aspects of human behaviour that can be considered irrational from an economic point of view. Potential reasons for three persistent behavioural patterns in economic interactions are investigated: Altruism, discrimination, and punishment of deviant (“immoral”) behaviour. For the first two patterns, this thesis reports the results of dictator game experiments with young children in primary schoolsin Vancouver, BC, Canada. To understand altruism, the thesis looks for potential reasons why children share resources with genetically unrelated others. It shows that socialization in a particular cultural environment, indicated by the language children speak at home, influences children’s sharing behaviour to a large extent. The second part investigates discrimination among children belonging to different ethnic groups. It shows that while children from the dominant white category show clear signs of in-goup bias in their sharing decisions, children from the East Asian minority behave based on a more complex ethnic identity. The third part presents a simple game theoretic model to outline a potential evolutionary origin for a genetic disposition to punish behaviour that conflicts with prevailing moral norms. The model shows how human evolution in small groups can make moral punishment evolutionarily advantageous for individual agents.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Jasmina Arifovic
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Applications of Individual Evolutionary Learning

Date created: 
2017-01-30
Abstract: 

This research investigates three applications of the Individual Evolutionary Learning (IEL) model. Chapter 2 utilizes a horse-race approach to investigate the overall performance of 4 learning algorithms in games with congestion. The games utilized are Market Entry games and Choice of Route games. I show that a version of the IEL has the best fit of the experimental data relative when the experimental subjects have full information. Chapter 3 (joint work the Jasmina Arifovic and John Duffy) applies the IEL to games with correlated equilibrium suggested by an external third party. The IEL nearly perfectly matches the behavior of experimental subjects playing the Battle of the Sexes game, but requires an adjustment to the initial conditions to match the behavior of experimental subjects in the Chicken game. Chapter 4 extends the Individual Evolutionary Learning with Other-Regarding Preferences (IELORP*) model to force the algorithm to match the discrete nature of the experimental choices and introduce beliefs via adaptive expectations. The algorithm continues to match the stylized facts associated with the standard LPGG, but does not appear to extend to games where beliefs are elicited using monetary incentives.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Jasmina Arifovic
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Competition and efficiency: application to tax haven, profit shifting and platform competition

Date created: 
2017-01-18
Abstract: 

The first chapter considers the tax information exchange agreement as a way to draw Pareto improvement between off-shore tax havens and non-haven countries. Individuals who reside in a non-haven country choose the volume of tax evasion to maximize the expected payoff which depends on the tax rate and the probability of being detected. A tax haven might be reluctant to sign a TIEA since establishing a TIEA increases the probability of detection thus decreasing the volume of individuals' tax evasion ceteris paribus. However, we find that establishing a TIEA makes the non-haven country increase the tax rate so that both tax evasion and welfare increase. This is because non-haven country government catches tax criminals with greater probability so it can handle greater volume of tax evasion under higher tax rate. Because not only the non-haven country's welfare but also the capital inflow into the tax haven are increased, tax havens would sign TIEAs with non-haven countries voluntarily in anticipation of greater future payoff. The second chapter, I, jointly with Dr. Mongrain and Dr. Ypersele, develop a continuous fiscal competition model in which two countries compete over multinational firms (MNF) by varying the tax rates and the tightness of profit shifting control. Being loose on profit shifting decreases the tax base of one country but at the same time it brings two benefits. First, the country attracts more MNFs for given tax rate. Second, loose control of one country allows the other country to set high tax rate by alleviating the pressure of tax competition. Since the tax rates of the two countries are strategic complements, both countries can achieve efficiency gain by not actively controlling international profit shifting. We also show that relaxing the profit shifting regulations can reduce the equilibrium tax gap between high tax region and low tax region. This is because the high tax region's tax choice is generally more sensitive to the profit shifting control. As all the downward forces on the tax rate choices, which are resulted by the location effect and per-firm profit shifting effect, are positively related to the equilibrium tax gap, choosing the lax profit shifting control may close the tax gap and lead to the higher tax revenue even for the high tax region. The third paper studies the competition in the platform markets where companies improve the quality standard to attract the consumers. In some platform markets, e.g. video game industry, improving the quality standard decreases the number of software developed due to the greater pressure of development cost. Such disadvantage of the quality upgrade in one platform is spread to its competitors because all the platforms share a certain portion of video game software through `porting.' Because of the negative externality created by porting, the platforms tend to increase the quality standard by extra amount. Our model shows that the quality competition in the competitive market is excessive because the platforms fail to internalize the inter-platform externality.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Steeve Mongrain
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Three essays on economic history and experimental economics

Date created: 
2016-12-08
Abstract: 

While economists recognize the important role of formal institutions in the promotionof trade, there is increasing agreement that institutions are typically endogenous to culture.The question remains how institutions interact with cultural variables when they areimposed exogenously. In social psychology, the individualism/collectivism distinction isthought to be an important cultural variable underlying many behavioral differences. Inthe first chapter, Erik kimbrough and I design an experiment to explore the relationship betweensubjects’ dispositions to individualism/collectivism and their willingness to engagein trade under enforcement institutions of varying strength. Overall, we find a positive effectof strong institutions on trade, but once we control for individualism/collectivism,institutions have no significant effect, and we observe that individualists engage in trademore often than collectivists. This suggests that cultural dispositions may even outweighinstitutions in the promotion of trade.The choice of enforcement mechanism in conducting long-distance trade has long beenassociated with cultural dispositions to individualism and collectivism. Nevertheless, theselection process of a formal or an informal enforcement mechanism and how it relatesto the reliability of the third party enforcement is unknown. In the second chapter, I designeda laboratory experiment in which the options for both a safe local trade and a riskyyet more profitable long-distance trade are available. Long-distance trade is governed byeither a formal or an informal enforcement mechanism. I examined the choice of informalversus formal enforcement mechanism while controlling for the cultural dispositionof subjects. I found that individuals with a collectivist cultural orientation used informalenforcement when effective formal enforcement is available significantly more frequentlythan those with an individualist orientation. Those with individualistic cultural orientationsubstituted formal enforcement for informal enforcement when the former created areliable contract.Enforceable property rights are the first steppingstones toward economic development.While nobles in some Western European countries successfully constrained sovereigns’arbitrary taxation, their Middle Eastern counterparts failed to gain similar rights. In thethird chapter, I compare the impact of Islamic inheritance law and that of primogeniture onthe welfare of economic agents. In the model, I define three types of agents: the sovereign,nobles and peasants. The nobles, unlike the peasants, own land. Furthermore, noblesalso own firms/estates that produce food. To protect their produce, nobles engaged ina conflict with an extractive sovereign to determine the tax rate. The findings demonstratedthat primogeniture led to a lower tax rate and higher welfare level for both noblesand the sovereign. Peasants, however, due to lower wages, suffered under primogeniture.

Document type: 
Thesis
Senior supervisor: 
David Jacks
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Dissertation) Ph.D.

Essays in Financial Markets and Time Series Econometrics

Author: 
Date created: 
2016-05-02
Abstract: 

This thesis consists of two independent essays on financial econometrics. The first study introduces a new family of portmanteau tests for serial correlation. Using the wavelet transform, we decompose the variance of the underlying process into the variance of its low frequency and of its high frequency components and we design a variance ratio test of no serial correlation in the presence of dependence. Such decomposition can be carried out iteratively, each wavelet filter leading to a rich family of tests whose joint limiting null distribution is a multivariate normal. We illustrate the size and power properties of the proposed tests through Monte Carlo simulations. The second study focuses on counterparty risk and its role as a determinant of corporate credit spreads. However, there are only a few techniques available to isolate it from other factors. In this paper we describe a model of financial networks that is suitable for the construction of proxies for counterparty risk. Using data on the U.S. supplier-customer network of public companies, we find that, for each supplier, counterparties' leverage and jump risk are significant determinants of corporate credit spreads. Our findings are robust after controlling for several idiosyncratic, industry, and market factors.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Ramazan Gencay
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Essays in applied econometrics

Date created: 
2016-08-12
Abstract: 

Amid growing evidence of the importance of non-cognitive skills for both cognitive skill development and long-term outcomes, understanding the effect of education policies on non-cognitive skill formation is of increasing interest. The first two chapters of this thesis studies the effect of two school interventions on student behavior.The first paper of this Thesis (Chapter 1) provides the first evidence of the effect of multigrade classes on non-cognitive skills. I exploit strictly enforced class size caps accompanied by centralized funding rules to generate IV estimates of this effect using custom survey data administered to over 15000 parents of Kindergarten and Grade 1 students linked to publicly available administrative data on multigrade classes. I find that placing children in multigrade classes causes significantly more peer relationship problems and hyperactivity compared to single grade classrooms.The second paper of this Thesis (Chapter 2) my coauthors and I exploit the staggered rollout of universal full-day Kindergarten (FDK) to estimate its effects on children’s behavior. Our research design identifies these effects by comparing across-cohort changes in outcomes among early versus late adopting schools. We find little effect of FDK on child behavior or parents’ mental health, and an increase in hours worked by parents who are employedpart-time. These results hold across a range of child and family characteristics, with one exception. In families who do not speak English at home, FDK reduces child hyperactivity and peer relationship problems, improves parents’ mental health and increases employment and hours.The last paper of this Thesis (Chapter 3) was triggered by a heated debate in the Iranian parliament over the effectiveness of the "1993 Population Control Law". There has been a long debate among economists and policy makers over the effectiveness of population planning programs. The estimated program effects in the literature vary substantially. One such program is the Iranian 1993 Population Control Law that withdrew paid maternity leave and social welfare subsidies in the case of children of fourth and higher parities. My coauthor and I use data from publicly available sample 2006 census data in Iran and the annual Household Expenditure and Income Surveys (HEIS: 1988-2005) to estimate the effect of this policy on fertility outcomes. Our difference in difference method compares the change in probability of having birth in families with fewer than three children prior to the legislation to the change in probability of having birth of families with three or more children. We find that the legislation had a modest effect of 8 to 13 percent on decreasing the probability of a fourth or higher birth. The law has the highest impact after four years of implementation and after that effect size gradually goes away.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Dr. Jane Friesen
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Dissertation) Ph.D.

Monetary Policy Shocks and Consumer Inflation Expectations: An Empirical Study

Date created: 
2016-05-26
Abstract: 

Economists have become very interested in the relationship between monetary policy and inflation expectations. However, most research has focused on professional forecasters rather than consumers' expectations. This paper explores interactions between monetary policy and consumer expectations. Specifically, we estimate the impact of monetary policy shocks on consumer expectations. Using a simple linear regression model and data from the Michigan Survey of Consumers, we found somewhat surprising results. Namely, that consumers adjust their expectations positively in response to an unexpected tightening of monetary policy. This suggests the existence of the "signalling channel" of monetary policy. We control for a host of macroeconomic and demographic variables, and our results are consistent across income and education groups. In line with previous research, we found greater heterogeneity in expectations for lower-income and lower-educated groups. Our research challenges conventional thinking regarding the influence of monetary policy on inflation Expectations, and suggests that this relationship is more complex.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Luba Petersen
Brian Krauth
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Project) M.A.

Essays on Financial Economics

Date created: 
2016-07-26
Abstract: 

This thesis addresses three topics in modern financial economics. In econometrics, we propose a consistent estimator for a model with both smooth structural changes and abrupt structural breaks. Our methodology is particularly well-suited for modern high frequency data. In market microstructure, we show that the traditional paradigm is no longer applicable in general, in light of recent technological evolution in trading and associated change in market behavior. In financial networks, we consider determinants of systematic risk that is due to the structure and stability of the network underlying the financial system. We propose a pricing factor that captures the diversification vs. contagion risk trade-off of the interconnectedness of the network.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Ramazan Gencay
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Dissertation) Ph.D.

Essays on the Impact of China's One-Child Policy on Economic Development

Author: 
Date created: 
2016-08-29
Abstract: 

My dissertation focuses on the macroeconomic consequences of China's one-child policy. The first chapter examines the effects of China's one-child policy on savings and foreign reserve accumulation. Fertility control increases the saving rate both by altering saving decisions at the household level, and by altering the demographic composition of the population at the aggregate level. As in Song, Storesletten and Zilibotti (2011), government-owned firms are assumed to be less productive but have better access to the credit market compare to entrepreneurial firms. As labor switches from less productive to more productive firms, demand for domestic bank borrowing decreases. As saving increases while demand for loans decreases, domestic savings are invested abroad, generating a foreign surplus. In the second chapter of my dissertation, I provide a theoretical framework for examining the effects of China's one-child policy on its long run economic growth. The model incorporates within family intergenerational transfers and a "quantity/quality" tradeoff. When a population control policy is implemented, parents increase investment in their children's education in order to compensate for reduction in future transfers. As in Galor and Weil (2010), technological progress is assumed to be driven by two forces: the population size and the level of education. With population control, the total population decreases and the average level of education increases. Thus, the overall effect on technological progress is ambiguous without specifying functional forms for technology and human capital. The third chapter provides a quantitative exploration of the model from the second chapter. The calibrated results are consistent with the model, in which population, technological progress, and income per capita move in endogenous cycles. The impact of China's one-child policy depends on the timing of the policy. If the policy is enforced when the population is large enough, hence when the rate of technological progress is high, it increases GDP growth both in the short-run and in the long-run.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Kenneth Kasa
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.

Essays on Entrepreneurship in Developing Economies

Author: 
Date created: 
2016-06-02
Abstract: 

I explore the theoretical foundations and the empirical relevance of the idea that entrepreneurship in developing countries could arise out of poor or non-existent alternatives. In the first chapter, I use an occupational choice model to show that the observed large increase in the rate of business ownership in rural Thailand during the 1997 Asian crisis can be explained by a negative shock to the labor market. According to my GMM estimates, a 47% fall in the outside option of entrepreneurship is required to explain the observed increase in business ownership from 17% to 37% between 1997 and 1998. I find that endogenously starting a business enabled households to offset about 40% of the income loss during the crisis, but also that low entrepreneurial productivity limits the extent to which pro-business policies can stand in as unemployment insurance for the average household. In the second chapter, joint with A. Karaivanov, we explicitly model and distinguish between voluntary and so-called involuntary entrepreneurship, which arises for those who prefer the non-business occupation (e.g., wage work) but cannot obtain it (with some probability that we estimate), due to labor market frictions. We also allow for credit constraints and analyze their interaction with the labor market constraint. We estimate the model via GMM using data from semi-urban Thailand from 2005, and find that 11% of all households in our sample (approximately 17% of all households running a business) are classified as involuntary entrepreneurs. While there are large potential income gains, especially for poorer households, from relaxing either the labor market or credit constraints, involuntary entrepreneurship can only be significantly reduced by addressing the labor market constraint. In the final chapter, I structurally estimate a model in which risk neutral agents maximize total income by optimally allocating capital and labor into entrepreneurship, subject to credit and time constraints. I estimate the model via GMM using 2005 Thai urban data, where about 20% of business owners report a second occupation. I find that while most entrepreneurs that hold two jobs are skill-constrained (the first-best scale of the business does not exhaust the time-constraint), there is a small fraction that are credit-constrained. These two groups within the multiple occupation group are also predicted to be considerably heterogeneous in terms of initial wealth, schooling and entrepreneurial talent.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Alexander Karaivanov
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) Ph.D.