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- Creators: Department of Information Systems
- Creators: Bick, Alexander
Description
This dissertation is a collection of two essays relating to the dynamic effects of taxation.
In the first chapter, I focus on a key challenge faced by tax reforms: their short-run
welfare consequences. I examine a consumption-based tax reform that, despite the long-run welfare gains it generates, causes the welfare for some groups such as retirees or the working poor to fall during transition between steady states. Using a life-cycle model with heterogeneous households, I show how to devise a transition path from the current U.S. federal tax system to a consumption-based tax system that improves the welfare of current generations as well as those who are born in the long-run steady state. In a nutshell, all households alive at the time of the policy change can choose when they want to switch to the new tax system, or whether they want to switch at all. I find that implementing a tax reform with this feature improves the welfare of 95% of the population in the short run, compared to less than 25% of population in the conventional case with no choice. It takes about 20 years for half of the population to pay their taxes under the new tax code.
In the second chapter, I study the aggregate consequences of the differential tax treatments of U.S. businesses focusing on the role of legal forms of organization. I develop an industry equilibrium model in which the organizational form is an endogenous choice.
This model incorporates the key trade-off that businesses face when choosing their legal forms: the tax treatment of the business income; the access to external capital, and the potential level and evolution of productivity over time.
The model is matched to the firm dynamic features of U.S. businesses and the contributing share of each legal form in total output. Using the model, I study revenue-neutral tax reforms in which legal forms receive the same tax treatments, and
I find that the incentives induced by tax structure for organizational form and external finance are both large. Relative to the benchmark economy, unifying the tax code for all legal forms, can lead to 8% increase in the aggregate output.
In the first chapter, I focus on a key challenge faced by tax reforms: their short-run
welfare consequences. I examine a consumption-based tax reform that, despite the long-run welfare gains it generates, causes the welfare for some groups such as retirees or the working poor to fall during transition between steady states. Using a life-cycle model with heterogeneous households, I show how to devise a transition path from the current U.S. federal tax system to a consumption-based tax system that improves the welfare of current generations as well as those who are born in the long-run steady state. In a nutshell, all households alive at the time of the policy change can choose when they want to switch to the new tax system, or whether they want to switch at all. I find that implementing a tax reform with this feature improves the welfare of 95% of the population in the short run, compared to less than 25% of population in the conventional case with no choice. It takes about 20 years for half of the population to pay their taxes under the new tax code.
In the second chapter, I study the aggregate consequences of the differential tax treatments of U.S. businesses focusing on the role of legal forms of organization. I develop an industry equilibrium model in which the organizational form is an endogenous choice.
This model incorporates the key trade-off that businesses face when choosing their legal forms: the tax treatment of the business income; the access to external capital, and the potential level and evolution of productivity over time.
The model is matched to the firm dynamic features of U.S. businesses and the contributing share of each legal form in total output. Using the model, I study revenue-neutral tax reforms in which legal forms receive the same tax treatments, and
I find that the incentives induced by tax structure for organizational form and external finance are both large. Relative to the benchmark economy, unifying the tax code for all legal forms, can lead to 8% increase in the aggregate output.
ContributorsRaei, Sepideh (Author) / Ventura, Gustavo (Thesis advisor) / Herrendorf, Berthold (Committee member) / Bick, Alexander (Committee member) / Arizona State University (Publisher)
Created2018
Description
This dissertation consists of three essays on modern economic growth and structural transformation, in particular touching on the reallocation of labor across industries, occupations, and employment statuses.
The first chapter investigates the quantitative importance of non-employment in the labor market outcomes for the United States. During the last 50 years, production has shifted from goods to services. In terms of occupations, the routine employment share decreased, giving way to increases in manual and abstract ones. These two patterns are related, and lower non-employment had an important role. A labor allocation model where goods, market services, and home services use different tasks as inputs is used for quantitative exercises. These show that non-employment could significantly slow down polarization and structural transformation, and induce significant displacement within the labor force.
The second chapter, coauthored with Bart Hobijn and Todd Schoellman, looks at the demographic structure of structural transformation. More than half of labor reallocation during structural transformation is due to new cohorts disproportionately entering growing industries. This suggests substantial costs to labor reallocation. A model of overlapping generations with life-cycle career choice under switching costs and structural transformation is studied. Switching costs accelerate structural transformation, since forward-looking workers enter growing industries in anticipation of future wage growth. Most of the impact of switching costs shows on relative wages.
The third chapter establishes that job polarization is a global phenomenon. The analysis of polarization is extended from a group of developed countries to a sample of 119 economies. At all levels of development, employment shares in routine occupations have decreased since the 1980s. This suggests that routine occupations are becoming increasingly obsolete throughout the world, rather than being outsourced to developing countries. A development accounting framework with technical change at the \textit{task} level is proposed. This allows to quantify and extrapolate task-specific productivity levels. Recent technological change is biased against routine occupations and in favor of manual occupations. This implies that in the following decades, world polarization will continue: employment in routine occupations will decrease, and the reallocation will happen mostly from routine to manual occupations, rather than to abstract ones.
The first chapter investigates the quantitative importance of non-employment in the labor market outcomes for the United States. During the last 50 years, production has shifted from goods to services. In terms of occupations, the routine employment share decreased, giving way to increases in manual and abstract ones. These two patterns are related, and lower non-employment had an important role. A labor allocation model where goods, market services, and home services use different tasks as inputs is used for quantitative exercises. These show that non-employment could significantly slow down polarization and structural transformation, and induce significant displacement within the labor force.
The second chapter, coauthored with Bart Hobijn and Todd Schoellman, looks at the demographic structure of structural transformation. More than half of labor reallocation during structural transformation is due to new cohorts disproportionately entering growing industries. This suggests substantial costs to labor reallocation. A model of overlapping generations with life-cycle career choice under switching costs and structural transformation is studied. Switching costs accelerate structural transformation, since forward-looking workers enter growing industries in anticipation of future wage growth. Most of the impact of switching costs shows on relative wages.
The third chapter establishes that job polarization is a global phenomenon. The analysis of polarization is extended from a group of developed countries to a sample of 119 economies. At all levels of development, employment shares in routine occupations have decreased since the 1980s. This suggests that routine occupations are becoming increasingly obsolete throughout the world, rather than being outsourced to developing countries. A development accounting framework with technical change at the \textit{task} level is proposed. This allows to quantify and extrapolate task-specific productivity levels. Recent technological change is biased against routine occupations and in favor of manual occupations. This implies that in the following decades, world polarization will continue: employment in routine occupations will decrease, and the reallocation will happen mostly from routine to manual occupations, rather than to abstract ones.
ContributorsVindas Quesada, Alberto José (Author) / Hobijn, Bart (Thesis advisor) / Bick, Alexander (Committee member) / Ventura, Gustavo (Committee member) / Arizona State University (Publisher)
Created2019
Description
This paper is intended to identify a correlation between the winning percentage of sports teams in the four major professional sports leagues in the United States and the GDP per capita of their respective cities. We initially compiled fifteen years of franchise performance along with economic data from the Federal Reserve Bank of St. Louis to analyze this relationship. After converting the data into a language recognized by Stata, the regression tool we used, we ran multiple regressions to find relevant correlations based off of our inputs. This paper will show the value of the economic impact of strong or weak performance throughout various economic cycles through data analysis and conclusions drawn from the results of the regression analysis.
ContributorsAndl, Tyler (Co-author) / Shirk, Brandon (Co-author) / Goegan, Brian (Thesis director) / Eaton, John (Committee member) / School of Accountancy (Contributor) / Department of Finance (Contributor) / Department of Supply Chain Management (Contributor) / Department of Information Systems (Contributor) / Barrett, The Honors College (Contributor)
Created2017-12
Description
Alternative currencies have a long and varied history, in which Bitcoin is the latest chapter. The pseudonymous Satoshi Nakamoto created Bitcoin as an implementation of the concept of a cryptocurrency, or a decentralized currency based on the principles of cryptography. Since its creation in 2008, Bitcoin has had a fairly tumultuous existence that limited its adoption. Wide price fluctuations occurred as the appeal of free money by running a piece of computer software drove people to purchase expensive hardware, and high-profile scandals cast Bitcoin as an unstable currency well-suited primarily for purchasing illicit materials. Consumer confidence in the currency was extremely low, and businesses were extremely hesitant to accept a currency that could easily lose half (or more) of its value overnight. However, recent years have seen the currency begin to stabilize as businesses and mainstream investors have begun to accept and support it. Alternative cryptocurrencies, titled "altcoins," have also been created to fill market niches that Bitcoin was not addressing. Governmental intervention, a concern of many following the currency, has been surprisingly restrained and has actually contributed to its stability. The future of Bitcoin looks very bright as it carries the dream of the alternative currency forward into the 21st century.
ContributorsReardon, Brett (Co-author) / Burke, Ryan (Co-author) / Happel, Stephen (Thesis director) / Boyes, William (Committee member) / School of Politics and Global Studies (Contributor) / Department of Information Systems (Contributor) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2016-05
Description
Marijuana is the most commonly used illicit substance in the United States with over two million pounds seized annually and with a usage rate estimated at 19.8 million people in 2013 (SAMSHA, 2014). Currently there is a nationwide movement for the legalization of recreational marijuana via referendum at the state level. Three states and the District of Columbia have already adopted amendments legalizing marijuana and over a dozen more currently have pending ballots. This report explores what would be the impact of legalizing marijuana in Arizona through the examination of data from Colorado and other governmental sources. Using a benefit/cost analysis the data is used to determine what the effect the legalization of marijuana would have in Arizona. I next examined the moral arguments for legalization. Finally I propose a recommendation for how the issue of the legalization of recreational marijuana should be approached in Arizona.
ContributorsDiPietro, Samuel Miles (Author) / Kalika, Dale (Thesis director) / Lynk, Myles (Committee member) / Barrett, The Honors College (Contributor) / Department of Information Systems (Contributor) / WPC Graduate Programs (Contributor) / School of Accountancy (Contributor)
Created2015-05
Description
This study examines the economic impact of the opioid crisis in the United States. Primarily testing the years 2007-2018, I gathered data from the Census Bureau, Centers for Disease Control, and Kaiser Family Foundation in order to examine the relative impact of a one dollar increase in GDP per Capita on the death rates caused by opioids. By implementing a fixed-effects panel data design, I regressed deaths on GDP per Capita while holding the following constant: population, U.S. retail opioid prescriptions per 100 people, annual average unemployment rate, percent of the population that is Caucasian, and percent of the population that is male. I found that GDP per Capita and opioid related deaths are negatively correlated, meaning that with every additional person dying from opioids, GDP per capita decreases. The finding of this research is important because opioid overdose is harmful to society, as U.S. life expectancy is consistently dropping as opioid death rates rise. Increasing awareness on this topic can help prevent misuse and the overall reduction in opioid related deaths.
ContributorsRavi, Ritika Lisa (Author) / Goegan, Brian (Thesis director) / Hill, John (Committee member) / Department of Economics (Contributor) / Department of Information Systems (Contributor) / Barrett, The Honors College (Contributor)
Created2019-05
Description
In this paper I seek to understand how consumers value music today by investigating what consumers are willing to pay for digitally downloaded songs (such as the ones available on the iTunes or Amazon music stores) and the variety of factors that influence their willingness to pay. I conducted a survey and received over 500 responses regarding willingness to pay for single-song downloads, consumer sentiment on whether music should be free, streaming service use, and other information pertaining to music consumption behavior. Through this research I found that paid-streamers are willing to pay more for songs than those who do not pay to stream, all else being equal. Further, Free-streamers are not willing to pay significantly more or less than non-streamers. This finding is additional information to other research that suggests streaming acts as a substitute for sales. I also found that most consumers are in the middle when it comes to the debate for whether music should always be free or always be purchased. Where someone aligns on the spectrum is a statistically significant contributing factor to what that person is willing to pay for a song. My findings also suggest that consumer preferences distinguish between benefit derived from music ownership and benefit derived from the ability to listen to music. This information sheds more light on the reason behind the declining digital download market.
ContributorsRodriguez, Stefan Daniel (Author) / Mandel, Naomi (Thesis director) / Veramendi, Gregory (Committee member) / Department of Economics (Contributor) / Department of Finance (Contributor) / Department of Information Systems (Contributor) / Barrett, The Honors College (Contributor)
Created2018-05
Description
The dissertation consists of three essays that deal with variations in economic growth and development across space and time. The essays in particular explore the importance of differences in occupational structures in various settings.
The first chapter documents that intergenerational occupational persistence is significantly higher in poor countries even after controlling for cross-country differences in occupational structures. Based on this empirical fact, I posit that high occupational persistence in poor countries is symptomatic of underlying talent misallocation. Constraints on education financing force sons to choose fathers' occupations over the occupations of their comparative advantage. A version of Roy (1951) model of occupational choice is developed to quantify the impact of occupational misallocation on aggregate productivity. I find that output per worker reduces to a third of the benchmark US economy for the country with the highest level of occupational persistence.
In the second chapter, I use occupational prestige as a proxy of social status to estimate intergenerational occupational mobility for 50 countries spanning the breadth of world's income distribution for both sons and daughters. I find that although relative mobility varies significantly across countries, the correlation between relative mobility and GDP per capita is only mildly positive for sons and is close to zero for daughters. I also consider two measures of absolute mobility: the propensity to move across quartiles and the propensity to move relative to father's occupational prestige. Similar to relative mobility, the first measure of absolute mobility is uncorrelated with GDP per capita. The second measure, however, is positively correlated with GDP per capita with correlations being significantly higher for sons compared to daughters.
The third chapter analyses to what extent the growth in productivity witnessed by India during 1983--2004 can be explained by a better allocation of workers across occupations. I first document that the propensity to work in high-skilled occupations relative to high-caste men increased manifold for high-caste women, low-caste men and low-caste women during this period. Given that innate talent in these occupations is likely to be independent across groups, the chapter argues that the occupational distribution in the 1980s represented talent misallocation in which workers from many groups faced significant barriers to practice an occupation of their comparative advantage. I find that these barriers can explain 15--21\% of the observed growth in output per worker during the period from 1983--2004.
The first chapter documents that intergenerational occupational persistence is significantly higher in poor countries even after controlling for cross-country differences in occupational structures. Based on this empirical fact, I posit that high occupational persistence in poor countries is symptomatic of underlying talent misallocation. Constraints on education financing force sons to choose fathers' occupations over the occupations of their comparative advantage. A version of Roy (1951) model of occupational choice is developed to quantify the impact of occupational misallocation on aggregate productivity. I find that output per worker reduces to a third of the benchmark US economy for the country with the highest level of occupational persistence.
In the second chapter, I use occupational prestige as a proxy of social status to estimate intergenerational occupational mobility for 50 countries spanning the breadth of world's income distribution for both sons and daughters. I find that although relative mobility varies significantly across countries, the correlation between relative mobility and GDP per capita is only mildly positive for sons and is close to zero for daughters. I also consider two measures of absolute mobility: the propensity to move across quartiles and the propensity to move relative to father's occupational prestige. Similar to relative mobility, the first measure of absolute mobility is uncorrelated with GDP per capita. The second measure, however, is positively correlated with GDP per capita with correlations being significantly higher for sons compared to daughters.
The third chapter analyses to what extent the growth in productivity witnessed by India during 1983--2004 can be explained by a better allocation of workers across occupations. I first document that the propensity to work in high-skilled occupations relative to high-caste men increased manifold for high-caste women, low-caste men and low-caste women during this period. Given that innate talent in these occupations is likely to be independent across groups, the chapter argues that the occupational distribution in the 1980s represented talent misallocation in which workers from many groups faced significant barriers to practice an occupation of their comparative advantage. I find that these barriers can explain 15--21\% of the observed growth in output per worker during the period from 1983--2004.
ContributorsSinha, Rishabh (Author) / Herrendorf, Berthold (Thesis advisor) / Schoellman, Todd (Thesis advisor) / Bick, Alexander (Committee member) / Arizona State University (Publisher)
Created2015
Description
This dissertation consists of three chapters. The first two explore the impact of government policies on human capital accumulation.
Chapter one makes two novel contributions related to the two workhorse models in the human capital literature: Learning by Doing (LBD) and Ben-Porath (BP).
First, I show that BP is much more consistent with empirical life-cycle patterns related to individual earnings growth rates relative to LBD.
Second, I show that the same model features that generate different life-cycle predictions between models also generate different policy implications. In particular, increasing the top marginal labor tax rate, relative to the current US level, generates much larger reductions in lifetime human capital accumulation in the BP model versus the LBD model.
Chapter two examines reforms to the Social Security taxable earnings cap in the context of a human capital model. Old age Social Security benefits in the US are funded by a 10.6% payroll tax up to a cap of $118,500. There has been little work examining the likely outcomes of such a policy change. I use a life-cycle BP human capital model with heterogeneous individuals to investigate the aggregate and distributional steady state impacts of several policy changes the earnings cap. I find that when I eliminate the cap: (1) aggregate output and consumption fall substantially; (2) the role of endogenous human capital is first order; (3) total federal tax revenues are lower or roughly unchanged; (4) about 1/3 of workers are made worse off.
The final chapter studies the existence and optimality of equilibria in the presence of asymmetric information. I develop an equilibrium concept which corresponds to the presence of mutual insurance organizations for a class of adverse selection economies which includes the Spence (1973) signaling and Rothschild-Stiglitz (1976) insurance environments. The defining features of a mutual insurance organization are that policy holders are also the owners of the organization, and that the organization can write policies for which the terms depend on the experience of the mutual members. In general the equilibrium exists and is weakly Pareto optimal. Further, all equilibria have the same individual type utility vector.
Chapter one makes two novel contributions related to the two workhorse models in the human capital literature: Learning by Doing (LBD) and Ben-Porath (BP).
First, I show that BP is much more consistent with empirical life-cycle patterns related to individual earnings growth rates relative to LBD.
Second, I show that the same model features that generate different life-cycle predictions between models also generate different policy implications. In particular, increasing the top marginal labor tax rate, relative to the current US level, generates much larger reductions in lifetime human capital accumulation in the BP model versus the LBD model.
Chapter two examines reforms to the Social Security taxable earnings cap in the context of a human capital model. Old age Social Security benefits in the US are funded by a 10.6% payroll tax up to a cap of $118,500. There has been little work examining the likely outcomes of such a policy change. I use a life-cycle BP human capital model with heterogeneous individuals to investigate the aggregate and distributional steady state impacts of several policy changes the earnings cap. I find that when I eliminate the cap: (1) aggregate output and consumption fall substantially; (2) the role of endogenous human capital is first order; (3) total federal tax revenues are lower or roughly unchanged; (4) about 1/3 of workers are made worse off.
The final chapter studies the existence and optimality of equilibria in the presence of asymmetric information. I develop an equilibrium concept which corresponds to the presence of mutual insurance organizations for a class of adverse selection economies which includes the Spence (1973) signaling and Rothschild-Stiglitz (1976) insurance environments. The defining features of a mutual insurance organization are that policy holders are also the owners of the organization, and that the organization can write policies for which the terms depend on the experience of the mutual members. In general the equilibrium exists and is weakly Pareto optimal. Further, all equilibria have the same individual type utility vector.
ContributorsBlandin, Adam (Author) / Ventura, Gustavo (Thesis advisor) / Schoellman, Todd (Committee member) / Wiswall, Matthew (Committee member) / Bick, Alexander (Committee member) / Arizona State University (Publisher)
Created2016
Description
This paper explores the history of sovereign debt default in developing economies and attempts to highlight the mistakes and accomplishments toward achieving debt sustainability. In the past century, developing economies have received considerable investment due to higher returns and a degree of disregard for the risks accompanying these investments. As the former Citibank chairman, Walter Wriston articulated, "Countries don't go bust" (This Time is Different, 51). Still, unexpected negative externalities have shattered this idea as the majority of developing economies follow a cyclical pattern of default. As coined by Reinhart and Rogoff, sovereign governments that fall into this continuous cycle have become known as serial defaulters. Most developed markets have not defaulted since World War II, thus escaping this persistent trap. Still, there have been developing economies that have been able to transition out of serial defaulting. These economies are able to leverage debt to compound growth without incurring the protracted consequences of a default. Although the cases are few, we argue that developing markets such as Chile, Mexico, Russia, and Uruguay have been able to escape this vicious cycle. Thus, our research indicates that collaborative debt restructurings coupled with long term economic policies are imperative to transitioning out of debt intolerance and into a sustainable debt position. Successful economies are able to leverage debt to create strong foundational growth rather than gambling with debt in the hopes of achieving rapid catch- up growth.
ContributorsPitt, Ryan (Co-author) / Martinez, Nick (Co-author) / Choueiri, Robert (Co-author) / Goegan, Brian (Thesis director) / Silverman, Daniel (Committee member) / Department of Economics (Contributor) / Department of Information Systems (Contributor) / School of Mathematical and Statistical Sciences (Contributor) / School of Politics and Global Studies (Contributor) / W. P. Carey School of Business (Contributor) / Barrett, The Honors College (Contributor)
Created2015-12