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

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Three essays on the economics of family ties

Author: 
Date created: 
2019-07-10
Abstract: 

The thesis includes three chapters on the economics of family ties. In chapter 2, I examine the effect of kin ties beyond family—measured by cousin marriage rates—on institutional quality of societies—measured by corruption index. We show that higher cousin marriage rates are associated with higher corruption level. We also use historical measures and instrumental estimation method to provide some causal evidence. In chapter 3, we provide evidence from bribery experiments in three countries (Canada, Iran, and Ecuador) to show that strong family ties facilitate nepotistic relationships at the expense of strangers. In chapter 4, using individual-level data from the United States, I examine the effect of age at leaving parental home on future incomes. Late emancipation of young adults is considered as an important consequence of stronger family ties, with important economic implications for within- and across-countries. I show that late emancipation is associated with lower future incomes among American youths. Controlling for individual unobservables, the results suggest that the relationship might be causal.

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

Essays on firm-level distortions and aggregate productivity

Author: 
Date created: 
2019-06-25
Abstract: 

The development economics literature assigns a significant role to productivity in explaining the differences in standards of living across countries. This thesis studies the role that firm-level distortionary policies can have on productivity and revisits the empirical significance of productivity differences across countries. The first paper of this thesis (Chapter 1) develops a theory to quantify the impact of distortionary policies on aggregate productivity. I use firm-level data to measure the degrees of allocation and selection inefficiencies across countries in different levels of development. The results show that there are more severe selection distortions in developing economies where as documented in the literature, a greater level of misallocation is observed as well. Furthermore, I find that almost the entire gap in the output per-worker between rich and poor countries can be eliminated by removing the inefficiencies caused by such distortionary policies where approximately half of the effect can be attributed to the selection margin. The second paper of this thesis (Chapter 2) proposes a theoretical method to disentangle the role that different channels play in creating misallocation. Higher levels of measured misallocation can be explained by distortionary policies as well as more severe adjustment costs of capital formation in developing economies. Using data from the manufacturing firms in the US and China, I identify the role of these two channels in each country. I find that the adjustment costs play a minor role and it is the distortionary policies underlying Chapter 1 that are responsible for the most of the measured misallocation observed in both countries. The last paper of this thesis (Chapter 3) is centered around an empirical question: To what extent does productivity explain the differences in standards of living across countries? The difficulty in measurement of human and physical capital at the country level has led to drastically different answers to this question in previous work. In this paper, I use firm-level data to estimate productivity at the firm-level and use it to construct a measure of productivity at the country level. The results show that less than 55% of the income differences across countries can be explained by differences in productivity.

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

Testing for structural change in AR(1) models with wavelets

Author: 
Date created: 
2019-04-11
Abstract: 

This paper develops a new procedure to test the changes in the autocorrelation structure of an AR(1) process by constructing a test statistic of cumulative sum (CUSUM) of squares based on a specific frequency decomposition of the variance using the maximal overlap discrete wavelet transformation (MODWT). The wavelet approach is appealing since it is based directly on the different behavior of the spectra of autoregressive processes with different coefficients. A feasible version of the test and the empirical quantiles of the test statistic are given. We demonstrate the size and power properties of the proposed test through Monte Carlo simulations.

Document type: 
Thesis
File(s): 
Senior supervisor: 
Bertille Antoine
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Thesis) M.A.

Three essays on applying structure analysis in financial econometrics

Author: 
Date created: 
2018-11-23
Abstract: 

This thesis is composed of three essays on applying different structure analyses in financial econometrics. The first chapter, entitled "Application of Wavelet-based Structures in Time-Series Index Forecasting", is based on a joined work with Ramazan Gencay and M. Ege Yazgan, which is published in Economics Letters in 2017. This essay explores the potential of wavelet-based multiresolution analysis in forecasting. A hierarchical structure for a single time series index is defined and estimated in frequency domain, based on which a forecast combination technique is applied to achieve an improvement in forecast accuracy. The second chapter, entitled "Application of Network Structures in Stock Return Volatility Forecasting", is based on a joined work with Xiao Yu and Ramazan Gencay. This essay explores the potential of network analysis in forecasting stock return volatility. A customer and supplier network structure is identified and incorporated in the usual reduced form stock return volatility model. Results show that there is a propagation dynamic of stock return volatility along supply chain, and incorporating customer channel improves the accuracy of volatility forecasting. The third chapter, entitled "Application of Network Structures in Mutual Fund Performance Forecasting", is based on a joined work with Ramazan Gencay, which is published in Singapore Economic Review in 2018. This essay explores the relationship between mutual fund performance persistence and the network structure of mutual funds. By constructing a network of mutual funds based on the commonality of their stock holdings, we can identify mutual funds that are more likely to possess momentum in performance.

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

Three essays on customer-supplier networks and financial markets

Author: 
Date created: 
2018-11-23
Abstract: 

This thesis is composed of three independent essays on customer-supplier networks and financial markets. The first chapter, entitled "Economic Links and Return Volatility", is co-authored with Keyi Zhang and Ramazan Gencay. This study investigates the propagation of stock return volatility along supply chains. Our results show that the effect of customer volatility is approximately 10 times as large as trading volume on supplier's volatility. Our findings are robust to controlling for variables capturing the time-series properties of volatility and a set of idiosyncratic, industry and market factors; tested under various assumptions regarding the activeness of customer-supplier linkages; and to different estimation methods. Our out-of-sample tests provide consistent evidence that incorporating customer channel improves volatility forecasting. Furthermore, the transfer of volatility is more pronounced when investors are more aware of customer-supplier linkages. The second chapter, entitled "Resilience to the Financial Crisis in Customer-Supplier Networks" is also co-authored with Ramazan Gencay and Keyi Zhang. Inspired by the Capital Asset Pricing Model (CAPM) beta, we construct customer and supplier betas to separately investigate potentially different properties of downstream and upstream linkages. With the adjacency matrix acting as a "filter" to extract each company's return covariances with its trading partners, the cross-sectional dependence contained in the customer-supplier network is summarized by our betas. We explore how these two betas are related to a company's resilience to the financial crisis of 2008-2009. We observe that a higher customer beta is generally associated with more resilience during the crisis. The third chapter, entitled "Economic Links and Credit Spreads", is co-authored with Ramazan Gencay, Daniele Signori, Yi Xue and Keyi Zhang. This paper has been published in the Journal of Banking and Finance. This study describes a model of financial networks that is suitable for the construction of proxies for counterparty risk. We find that, for each supplier, counterparties' leverage and option implied volatilities are significant determinants of corporate credit spreads in the period after the 2008-2009 U.S. recession. 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 on occupation-specific human capital investment and occupational mobility

Author: 
Date created: 
2018-12-05
Abstract: 

My thesis focuses on occupation-specific human capital investment and occupational mobility. The first chapter of my thesis investigates gender disparities in early-career wage returns to firm tenure, occupational tenure, industry tenure, and general labor market experience. I show that the relative importance of various types of tenure differs across genders: occupational tenure matters more than industry tenure in men’s wages, while industry tenure matters more than occupational tenure for women. Averaging across all occupations, early-career wage growth associated with occupational tenure is substantially higher for men than women. I then explore the underlying reasons for gender disparities in wage growth with occupational tenure. I show that gender differences in hours of work and occupational choice partially explain the gender gap in tenure returns, but I find no evidence that gender differences in human capital investment in education prior to labor market entry contribute to the gap. Given the evidence that occupational changes tend to improve occupational match quality, the observed higher occupational mobility of men relative to women may also explain the gender gap in wage growth with occupational tenure. The second chapter examines whether negative housing equity affects homeowners’ occupational mobility. Homeowners with negative equity face stricter constraints and relatively higher occupational mobility cost than renters and homeowners who are not “underwater" which might potentially limit their ability to change occupations. I don’t find any strong evidence that negative equity affects homeowners’ occupational mobility in either recourse or non-recourse states. The third chapter examines the extent to which shifts in occupational structure explain the upward trend in occupational mobility during the period of 1968-1997. I find that shifts in occupational composition can partially explain the rising occupational mobility trend for less educated young workers and more educated workers. An approximate 10-20% reduction in the estimated mobility trend when occupation is controlled for implies that occupational composition generally shifted to less stable occupations. In addition, when negative occupational employment shocks are controlled for, workers in most age-education subgroups exhibit higher increases in occupational mobility.

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

Three essays on macroeconomics and wealth distribution

Author: 
Date created: 
2018-08-03
Abstract: 

My thesis focuses on macroeconomics and monetary policy, with a concentration on belief heterogeneity, household portfolio choice and wealth distribution. I also work on real option models in monetary policy. The first chapter of my thesis, entitled “Wait and See" Monetary Policy , was coauthored with my classmate Michael Tseng, and is recently published in Macroeconomic Dynamics. The paper develops a model of the optimal timing of interest rate changes. With fixed adjustment costs and ongoing uncertainty, changing the interest rate involves the exercise of an option. Optimal policy therefore has a “wait-and-see" component, which can be quantified using option pricing techniques. We show that increased uncertainty makes the central bank more reluctant to change its target interest rate, and argue that this helps explain recent observed deviations from the Taylor Rule. The second chapter is entitled Risk, Uncertainty and the Dynamics of Inequality, which is co-authored with my senior supervisor Professor Kenneth Kasa, and is recently published in Journal of Monetary Economics. That paper studies the dynamics of wealth inequality in a continuous-time Blanchard/Yaari model. Its key innovation is to assume that idiosyncratic investment returns are subject to (Knightian) uncertainty. In response, agents formulate ‘robust’ portfolio policies (Hansen and Sargent (2008)). These policies are non-homothetic; wealthy agents invest a higher fraction of their wealth in uncertain assets featuring higher mean returns. This produces an endogenous feedback mechanism that amplifies inequality. It also produces an accelerated rate of convergence, which resolves a puzzle recently identified by Gabaix, Lasry, Lions, and Moll (2016). The third chapter, entitled Information and Inequality, studies wealth inequality in a continuous-time Blanchard/Yaari model with idiosyncratic investment returns. Its key innovation is to assume that individuals can buy information. Information reduces uncertainty about the unknown mean investment return. If the coefficient of relative risk aversion exceeds unity, reduced estimation risk encourages investment in higher yielding risky assets. As a result, endogenous information acquisition amplifies wealth inequality. Relatively wealthy individuals buy more information, which leads them to invest more in higher yielding assets, which then makes them even wealthier.

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

The origins and consequences of kin networks and marriage practices

Author: 
Date created: 
2018-07-31
Abstract: 

In the first chapter, I investigate a potential channel to explain the heterogeneity of kin networks across societies. I argue and test the hypothesis that female inheritance has historically had a positive effect on in-marriage and a negative effect on female premarital relations and economic participation. In the second chapter, my co-authors and I provide evidence on the positive association of in-marriage and corruption. We also test the effect of family ties on nepotism in a bribery experiment. The third chapter presents my second joint paper on the consequences of kin networks. Taking a bigger-picture approach, we define a kinship intensity index based on basic elements of kinship systems such as marriage practices, residence patterns, and lineage organizations. Combining data on 20 psychological outcomes, we show that a significant portion of the existing psychological variation around the world originates in the differences of kin networks. Using historical measures of Church exposure, we also show that the variation in these differences arose historically from the Catholic Church’s marriage and family policies.

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

Essays on the economics of linguistic diversity and preference for surprise

Author: 
Date created: 
2017-07-19
Abstract: 

This thesis is composed of three essays, the first two of which are on the economics of linguistic diversity and the last on the evolutionary foundation of the preference for surprise. Chapter 1 is joint work with Leanna Mitchell. We propose a theory that relates linguistic diversity (i.e. the number of languages within a region) to cooperative and competitive incentives in a game theoretic framework. In our model, autonomous groups interact periodically in games that represent either cooperation, competition, or no interaction. Language matters in these interactions because language common to a pair of groups facilitates cooperation; whereas language unique to one group affords that group an advantage in competitions against other groups. The relative frequency of cooperation and conflict in a region provide incentives for each group to modify their own language, and therefore leads to changes in linguistic diversity over time. Hence, a main contribution of our paper is to model strategic incentives as a cause of linguistic divergence. Our model predicts that higher frequency of cooperative interactions relative to competitive ones reduces a region’s linguistic diversity. Chapter 2 reports a laboratory experiment designed to test the theory proposed in the previous chapter. In the experiment, pairs of subjects endowed with a set of words interact repeatedly in a series of underlying games, in which they use the words to signal their intended action. The underlying games are either coordination or zero-sum. As the subjects are allowed to modify their vocabularies by learning words from their counterpart and creating new words, I observe that, over time, the pairs of vocabularies in coordination games tend to converge, while in zero-sum games, the vocabularies experience constant pressure to diverge. This finding is consistent with the theoretical predictions in Chapter 1. Chapter 3 uses a principal-agent model to provide an evolutionary explanation of the preference for surprise, where surprise is measured by the Kullback-Leibler divergence between a decision-maker’s prior and posterior. The principal in the model is interpreted as the blind force of evolution, who tries to maximize the fitness of the agent—generations of human beings—whose objective in turn is to maximize a utility function designed by the principal. In a typical period, the agent first decides how many signals about the state to purchase, and then he chooses an action that, together with the state, determines his fitness. The variance of the signal distribution changes across time, but the agent is predisposed to believe that it is the same as the one in the previous period. I show that if the variance of the signal distribution decreases at a sufficiently fast rate over time, it is evolutionarily optimal for the utility function to include a component that rewards surprises.

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

Essays on development economics and health economics

Author: 
Date created: 
2017-08-16
Abstract: 

In chapter 1, I estimate and decompose the welfare benefit of Thailand's universal health care policy, also known as the “30 Baht program”. The total welfare impact of the 30 Baht program is defined as the amount of consumption that an enrollee would need to give up so as to leave her with the same expected utility as without the 30 Baht program. I find that the total welfare benefit is approximately 75 cents per dollar of government spending. The main source of the welfare effect can be attributed to improved consumption smoothing rather than increases in the consumption level. Using the difference in differences method, I find that the effect of the 30 Baht program on income is significantly positive, while the effect on consumption is slightly negative but not significant. This implies that the 30 Baht program has a positive impact on savings and future consumption, rather than current consumption. In chapter 2, I investigate into the effect of the 30 Bath program on drinking and smoking behaviours. This effect is decomposed into the moral hazard component, the increased utilization component and the increased life expectancy component in the framework. Using Townsend Thai project monthly surveys, I estimate the average treatment effect of the program by difference in differences using households of government employees as the control group. I also use quantile regressions to study the treatment effect heterogeneity. Although the estimated average treatment effects of the 30 Baht program on smoking and drinking behaviours are not statistically significant, the quantile regression estimates suggest that (1) the effects of the program on smoking/drinking expenditure are negative at the 10th percentile, and (2) the 30 Baht program negative affects smoking/drinking expenditure even though the moral hazard component and the increased utilization component are isolated. In chapter 3, with Tenzin Yindok, we investigate into the effect of Thailand's 2003 black market lottery crackdown on households' gambling behaviours and consumption-saving behaviours. We estimate the average treatment effect by difference in differences technique using annual household spending on black market lottery as a continuous treatment variable. We find that the crackdown resulted in a statistically significant decrease in black market lottery activities, and an increase in participation and spending on government lotteries, although this increase is not commensurate with the reduction in black market gambling. Our main results on consumption and saving suggest that households responded to the policy by increasing their savings, without any statistically significant increase in non-gambling related consumption. We further find that the statistically significant and positive result on saving is driven by households in the poorest quintile and households in the richest quintile. The former effect is also the largest in terms of magnitude.

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