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

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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.

Three essays on exchange rate dynamics and model uncertainty

Date created: 
2016-05-24
Abstract: 

At least since Knight (1921), economists have suspected that the distinction between risk and `uncertainty' might be important in economics. However,Savage (1954) showed this distinction is meaningless if agents adhere to certain axioms, which seem to be normatively compelling. Savage's SubjectiveExpected Utility (SEU) model became the dominant paradigm in economics, and remains so to this very day. Still, suspicions that the distinction matters never really died. The Ellsberg Paradox (1961) first raised doubts about the SEU model. Then, Gilboa and Schmeidler (1989) showed how to modifySavage's axioms so that the distinction does matter. In their model, agents entertain a set of priors, and optimize against the worst-caseprior. Finally, Hansen and Sargent (2008) operationalized this new approach by linking it to the engineering literature on `robust control'. My dissertationapplies the Hansen-Sargent framework to the foreign exchange market. I show that if we think of market participants as confronting both uncertainty andrisk, then we can easily explain several well known empirical puzzles in the foreign exchange market.The second chapter of my dissertation, entitled "Robustness and Exchange Rate Volatility", was published in the Journal of International Economics in 2013, and is coauthored with my supervisor, Prof. Kenneth Kasa. This paper uses the monetary model of exchange rates. It assumes investors are aware of their own lack of knowledge about the economy. They respond to their ignorance strategically, by constructing forecasts that are robust to model misspecification. We show that revisions of robust forecasts are more sensitive to new information, and can easily explain observed violations of Shiller's variance bound inequality.The third chapter, entitled "Model Uncertainty and the Forward Premium Puzzle", was published in the "Journal of International Money and Finance" in 2014. It studies a standard two-country Lucas (1982) asset-pricing model. The main objective is to understand the determinants of observed excess return in the foreign exchange market. The paper shows that Hansen-Jagannathan (1991) volatility bounds can be attained with both reasonable degrees of risk aversion and empirically plausible detection error probabilities. Hence, excess returns in the foreign exchange market appear to be primarily driven by a `model uncertainty premium' rather than a risk premium.The fourth chaper, entitled "Robust Learning in the Foreign Exchange Market", was recently revised and resubmitted to the "Canadian Journal of Economics". Following Hansen and Sargent (2010), it assumes agents cope with uncertainty by both learning and by formulating robust decision rules. Agents entertain two competing models, differing by the persistence of consumption growth. As in my previous paper, agents continue to doubt the specification of each model. It shows that robust learning can not only explain unconditional risk premia in the foreign exchange market, but can also explain the cyclical dynamics of risk premia. In particular, an empirically plausible concern for model misspecification and model uncertainty generates a stochastic discount factor that uniformly satisfies the spectral Hansen-Jagannathan bound of Otrok et. al. (2007).

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

The Convergence Debate : Some Empirical Issues

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
1993
Abstract: 

Several empirical considerations have emerged over the last decade, which are central to the debate on convergence of international income levels. For instance, there has been discussion over the use of total factor productivity, as opposed to income per capita or labour productivity, as the basis for convergence studies. Further, there is the question of sample selection: that is, what set of countries should be used. Many other considerations, such as the use of trended data, the robustness of results over time, the use of purchasing power parity estimates, and errors in estimation, are also at issue. This essay will examine these issues, and discuss them in the context of several well known empirical studies.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Richard Lipsey
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Extended essay) M.A.

Why Western Economic Progress Surpassed that of the Rest of the World

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Date created: 
1993
Abstract: 

This essay examines why, over the last several hundred years, significant economic growth has occurred in the West, but not elsewhere. It concludes that, although institutional considerations and the process of innovation have been intrinsic elements of Western progress, neither serves as a complete explanation. Further causes, many of which are primarily cultural, social, or geographic, must be taken into account. Any attempt to answer the question of Western progress must involve the above concerns, otherwise it will be at best incomplete.

Document type: 
Graduating extended essay / Research project
File(s): 
Senior supervisor: 
Richard Lipsey
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Extended essay) M.A.

Evolution of Canadian Business Cycle with Terms of Trade

Author: 
Date created: 
2016-04-19
Abstract: 

The terms of trade of commodity exporting small open economies are subject to large variations, and can be an important source of macroeconomic fluctuations. This paper quantifies the relationship between the terms of trade and the business cycle using a small open economy real business cycle model. I then use this model to explore the implications of terms of trade shocks as a source of business cycle fluctuations in Canada. Results suggest that terms of trade shocks have been increasingly important in Canada since the commodity price boom in 2002.

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

Essays on Macroeconomic Policies: Experiments and Simulations

Date created: 
2016-04-25
Abstract: 

The first paper of this thesis (Chapter 2) explores how expectations of inflation and output are influenced by central bank forward guidance within a learning--to--forecast laboratory macroeconomic environment. Subjects are incentivized to forecast the output gap and inflation. An automated central bank forms projections about the economy assuming subjects form expectations following the REE solution. The central bank communicates output and/or inflation projections, interest rate projections, or no information. Communicating about future output or inflation generally reduces the degree to which subjects rely on lagged information and increases their reliance on the REE solution. Interest rate projections, by contrast, do not significantly alter subjects' forecast accuracy or disagreement. Central bank credibility significantly decreases when the central bank makes larger forecast errors when providing forward guidance about either output and inflation, but not when they provide a dual projection. Our findings suggest that expectations are best coordinated and stabilized by communicating output and inflation forecasts simultaneously. The second paper of this thesis (Chapter 3) evaluates the central bank communication of its future inflation and output expectations to reduce economic variations in the event of a demand or cost--push shock. Four communication strategies are tested: no communication, communicating output, communicating inflation, and communicating output and inflation. Two Taylor rules are considered: (a) central bank interest rate responds to inflation and output (flexible inflation targeting [IT]), and (b) central bank responds only to inflation (strict IT). We find that with a demand shock, communicating future inflation reduces output variations and increases inflation and interest rate variations; however, communicating output stabilizes inflation and interest rates and destabilizes output (the interest rate rule did not matter qualitatively). With a cost--push shock, communicating future output decreases inflation and interest rate variability, irrespective of Taylor rule qualitatively. In order to stabilize output, a central bank should be uncommunicative under flexible IT but should communicate future inflation under strict IT. The third paper of this thesis (Chapter 4) studies the effect of the degree of information observability on bank runs in a sequential laboratory environment. We conduct an experiment with ten depositors in a queue who are randomly ranked to submit their decisions. The depositors decide between withdrawing their deposit or waiting and leaving their deposit in a common experimental bank. Two treatments are considered: a sequential high-information treatment, and a sequential low--information treatment. In both treatments, depositors who are in the front of the queue tend to withdraw more than those at the back of the queue. Moreover, depositors are responsive to the information about the preceding withdrawals within a period. We find that in the sequential high--information treatment the possibility of observing preceding withdrawals increases the likelihood of bank runs compared to a sequential-low information treatment.

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

Essays on Social and Economic Networks

Date created: 
2016-04-13
Abstract: 

Peer pressure and social networks are powerful influences on behaviour. The focus of this thesis is studying the channels through which social networks impact individuals’ choices and outcomes in three different contexts.The first paper of this thesis (Chapter 2) develops a theoretical network-based model of Twitter, formulating individual interaction as a dynamic game in which heterogenous agents choose a ‘niche’ to tweet in, and whom to follow. By characterizing the stable networks that the dynamic Markov process converges to, we show that information does not diffuse as widely as one might expect: although many agents are directly or indirectly connected to each other, agents strategically filter information in accordance with their niche.The second paper of this thesis (Chapter 3) presents a social network model of criminal activity, where agents’ payoffs depend on the structure of their connections with each other. The Nash equilibria in crime activity are characterized, and the theoretical results are used to identify the optimal network, which maximize the sum of agents’ payoffs, by searching over all possible non-isomorphic graphs of given size. In addition, the effects of different anti-crime policies on the optimal crime network structure and the overall crime level are analyzed and presented.The third paper of this thesis (Chapter 4) studies the direct and spillover effects of social interactions on fundraising and engagement activities in a network of volunteers from Engineers Without Borders, Canada. The network effects are modelled through two separate channels: a strategic interaction term which affects the marginal benefit from supplying effort and a direct spillover term affecting the level of payoff. This model is estimated using several online and offline networks via instrumental variables and system GMM. The results always present large significant levels of strategic complementarities in fundraising activities. However, in engagement activities, strategic complementarities are only significant in online networks. Additionally, engagement activities exhibit positive significant levels of direct spillovers for all networks. In contrast, in fundraising campaigns, the direct spillover effect is only significant in large offline networks.

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

Essays on Applied Econometrics

Author: 
Date created: 
2016-03-07
Abstract: 

This thesis is composed of three essays on labor and education in Iran and Canada.In the first chapter, I estimate the effect of having children on labor force participation of mothers in urban Iranian areas. I exploit sex composition of children as an exogenous source of variation in family size to account for endogeneity of fertility. Using information from the Iranian Household Income and Expenditure Survey (HIES) over three samples, namely households with one and more, two and more, and three and more children, I find no significant effect of fertility on female labor force participation in Iran.In the second chapter, I estimate family member’s resource shares and investigate gender bias in intra-household resource allocation. I follow Dunbar et al. (2013) in that I estimate the household member’s resource shares by observing how budget shares on private assignable goods vary with total expenditure and family size. I extend their methodology to analyze how sex composition of children influences resource shares. Using data from the 2005 Iranian Household Income and Expenditure Survey (HIES), I find that in Iranian rural areas parents assign 1.6 to 1.9% more resources toward their sons. Similarly, I find that mothers in all-boy families get 2.8 to 3.6% less resources than in all-girl families. These effects are more pronounced among farmer families. In contrast, I find no significant role of gender composition on intra-household resource allocation in Iranian urban areas.In the final chapter I, jointly with Dr. Friesen and Dr. Woodcock, investigate the question of whether schools that charge private tuition deliver higher quality education compared to their public counterparts has proven very challenging. This paper contributes new evidence regarding the quality of private schools relative to public schools. We use a longitudinal student-level data set from British Columbia, Canada that comprises the entire population of students in fourth through seventh grade who enrolled in public or private schools. We apply a procedure developed by Abowd et al. (2002), which allows us to exploit mobility between schools to estimate a full set of both school and student fixed effects.

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

Asset valuation operators with diffusion processes

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
1981
Abstract: 

Heaney and Garman develop a linear valuation operator which prices risky income streams when arbitrage profits are precluded. Both study the case where the states of nature are presumed to follow a diffusion process over the real line; each developing a differential equation involving the values (prices) of assets, as a function of the underlying states and time, dividends to these assets and the valuation operator.

It is shown that the differences in the developments of these two equations - arising partially from different definitions of diffusion processes - are more apparent than real. These differences in derivation are only changes in the order that the steps are performed, not the application of different assumptions.

Further, Heaney's differential equation, which governs the valuation operator for all times and states, is shown to hold only when a certain consistency condition is satisfied. Requiring this condition to be satisfied restricts the class of accepted no-arbitrage economies, but allows the valuation operator to be obtained from Heaney's equation.

Lastly the effect of barriers to the diffusion process is investigated. 

File(s): 
Senior supervisor: 
Robert Grauer
Department: 
Arts & Social Sciences: Department of Economics
Thesis type: 
(Project) M.A.