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This dissertation consists of two essays. The first measures the degree to which schooling accounts for differences in industry value added per worker. Using a sample of 107 economies and seven industries, the paper considers the patterns in the education levels of various industries and their relative value added per

This dissertation consists of two essays. The first measures the degree to which schooling accounts for differences in industry value added per worker. Using a sample of 107 economies and seven industries, the paper considers the patterns in the education levels of various industries and their relative value added per worker. Agriculture has notably less schooling and is less productive than other sectors, while a group of services including financial services, education and health care has higher rates of schooling and higher value added per worker. The essay finds that in the case of these specific industries education is important in explaining sector differences, and the role of education all other industries are less defined. The second essay provides theory to investigate the relationship between agriculture and schooling. During structural transformation, workers shift from the agriculture sector with relatively low schooling to other sectors which have more schooling. This essay explores to what extent changes in the costs of acquiring schooling drive structural transformation using a multi-sector growth model which includes a schooling choice. The model is disciplined using cross country data on sector of employment and schooling constructed from the IPUM International census collection. Counterfactual exercises are used to determine how much structural transformation is accounted for by changes in the cost of acquiring schooling. These changes account for small shares of structural transformation in all economies with a median near zero.
ContributorsSchreck, Paul (Author) / Herrendorf, Berthold (Committee member) / Lagakos, David (Committee member) / Schoellman, Todd (Committee member) / Arizona State University (Publisher)
Created2011
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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

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.
ContributorsRaei, Sepideh (Author) / Ventura, Gustavo (Thesis advisor) / Herrendorf, Berthold (Committee member) / Bick, Alexander (Committee member) / Arizona State University (Publisher)
Created2018
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This dissertation consists of two essays with a macroeconomic approach to economic development. These essays explore specific barriers that prevent economic agents from exploiting opportunities across regions or sectors in developing countries, and to what extent the observed allocations are inefficient outcomes or just an efficient response to economic fundamentals

This dissertation consists of two essays with a macroeconomic approach to economic development. These essays explore specific barriers that prevent economic agents from exploiting opportunities across regions or sectors in developing countries, and to what extent the observed allocations are inefficient outcomes or just an efficient response to economic fundamentals and technological constraints.

The first chapter is motivated by the fact that a prominent feature of cities in developing countries is the existence of slums: locations with low housing-quality and informal property rights. This paper focuses on the allocation of land across slums and formal housing, and emphasizes the role of living in central urban areas for the formation of slums. I build a quantitative spatial general equilibrium model to study the aggregate effects of anti-slum policies and use microdata from India for the quantitative implementation. According to my findings, demolishing slums in central urban areas leads to a decrease in welfare, aggregate labor productivity, and urban population. In contrast, decreasing formal housing distortions in India to the U.S. level increases the urban population share by 20% and labor productivity by 2.4%, and reduces the share of the urban population living in slums by 19%.

The second chapter is motivated by the fact that labor productivity gaps between rich and poor countries are much larger for agriculture than for non-agriculture. Using detailed data from Mexican farms, this paper shows that value added per worker is frequently over two times larger in cash crops than in staple crops, yet most farmers choose to produce staples. These findings imply that the agricultural productivity gap is actually a staple productivity gap and understanding production decisions of farmers is crucial to explain why labor productivity is so low in poor countries. This paper develops a general equilibrium framework in which subsistence consumption and interregional trade costs determine the efficient selection of farmers into types of crops. The quantitative results of the model imply that decreasing trade costs in Mexico to the U.S. level reduces the ratio of employment in staple to cash crops by 17% and increases agricultural labor productivity by 14%.
ContributorsRivera Padilla, Alberto (Author) / Schoellman, Todd K. (Thesis advisor) / Herrendorf, Berthold (Thesis advisor) / Ferraro, Domenico (Committee member) / Arizona State University (Publisher)
Created2019
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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

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.
ContributorsSinha, Rishabh (Author) / Herrendorf, Berthold (Thesis advisor) / Schoellman, Todd (Thesis advisor) / Bick, Alexander (Committee member) / Arizona State University (Publisher)
Created2015
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The dissertation consists of two essays in misallocation and development. In particular, the essays explore how government policies distort resource allocation across production units, and therefore affect aggregate economic and environmental outcomes.

The first chapter studies the aggregate consequences of misallocation in a firm dynamics model with multi-establishment firms.

The dissertation consists of two essays in misallocation and development. In particular, the essays explore how government policies distort resource allocation across production units, and therefore affect aggregate economic and environmental outcomes.

The first chapter studies the aggregate consequences of misallocation in a firm dynamics model with multi-establishment firms. I calibrate my model to the US firm size distribution with respect to both the number of employees and the number of establishments, and use it to study distortions that are correlated with establishment size, or so-called size-dependent distortions to establishments, which are modeled as implicit output taxes. In contrast to previous studies, I find that size-dependent distortions are not more damaging to aggregate productivity and output than size-independent distortions, while the implicit tax revenue approximately summarizes the effects on aggregate output. I also use the model to compare the effects of size-dependent distortions to establishments and to firms, and find that they have different effects on firm size distribution, but have similar effects on aggregate output.

The second chapter studies the effects of product market frictions on firm size distribution and their implications for industrial pollution in China. Using a unique micro-level manufacturing census, I find that larger firms generate and emit less pollutants per unit of production. I also provide evidence suggesting the existence of size-dependent product market frictions that disproportionately affect larger firms. Using a model with firms heterogeneous in productivity and an endogenous choice of pollution treatment technology, I show that these frictions result in lower adoption rate of clean technology, higher pollution and lower aggregate output. I use the model to evaluate policies that eliminate size-dependent frictions, and those that increase environmental regulation. Quantitative results show that eliminating size-dependent frictions increases output by 30%. Meanwhile, the fraction of firms using clean technology increases by 27% and aggregate pollution decreases by 20%. In contrast, a regulatory policy which increases the clean technology adoption rate by the same 27%, has no effect on aggregate output and leads to only 10% reduction in aggregate pollution.
ContributorsXi, Xican (Author) / Herrendorf, Berthold (Thesis advisor) / Ventura, Gustavo (Thesis advisor) / Schoellman, Todd (Committee member) / Arizona State University (Publisher)
Created2016
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This dissertation consists of two chapters. Chapter one studies distortionary effects of tax exemption of employer-sponsored health insurance (ESHI) premiums. First, I argue that, in the competitive labor market, tax deductibility of ESHI premiums generates an implicit labor cost subsidy to the employers sponsoring health insurance (HI) which distorts the

This dissertation consists of two chapters. Chapter one studies distortionary effects of tax exemption of employer-sponsored health insurance (ESHI) premiums. First, I argue that, in the competitive labor market, tax deductibility of ESHI premiums generates an implicit labor cost subsidy to the employers sponsoring health insurance (HI) which distorts the allocation of labor across employers. Second, I quantify the extent of this misallocation measured as output loss in a general equilibrium model of firm dynamics extended to incorporate tax exemption of ESHI premiums and endogenous provision of HI by the employers. The calibrated model shows that elimination of tax exemption increases aggregate output by 1.73%. About two-thirds of this effect comes from removing the misallocation of labor across existing establishments, and the remaining one-third comes from the increase in the number of operating establishments. Third, I use the model to analyze how tax exemption interacts with the employer mandate of the Affordable Care Act imposing a tax on large employers not sponsoring HI. Quantitative results show that implementing the employer mandate when the tax exemption is present reduces output by 0.13%.

Chapter two studies macroeconomic implications of a higher cost of health services faced by the unemployed which arise because 1) workers lose access to ESHI when they leave their jobs and 2) the uninsured face inflated health care prices. First, I provide evidence suggesting that the cost of health services for the privately insured is about 50% lower than for the uninsured. Second, I quantify the effects of higher cost of health services for the unemployed in the Lucas and Prescott (1974) island model extended to allow the workers to pay an extra cost of health services contingent on their employment status. Calibration procedure uses the differences between costs of health services for the privately insured and uninsured inferred from the data as a gap between costs of health services for the employed and unemployed. Quantitative results show that equalizing these costs across workers increases labor productivity by 1.2% and unemployment rate by 1.5 percentage points. The increased unemployment dominates quantitatively leading to a decrease in aggregate output by 0.26%.
ContributorsKrukava, Nastassia (Author) / Vereshchagina, Galina (Thesis advisor) / Herrendorf, Berthold (Committee member) / Ventura, Gustavo (Committee member) / Arizona State University (Publisher)
Created2017
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This dissertation consists of three essays that broadly deal with the growth and development of economies across time and space. Chapter one is motivated by the fact that agricultural labor productivity is key for understanding aggregate cross-country income differences. One important proximate cause of low agricultural productivity is the low

This dissertation consists of three essays that broadly deal with the growth and development of economies across time and space. Chapter one is motivated by the fact that agricultural labor productivity is key for understanding aggregate cross-country income differences. One important proximate cause of low agricultural productivity is the low use of intermediate inputs, such as fertilizers, in developing countries. This paper argues that farmers in poor countries rationally choose to use fewer intermediate inputs because it limits their exposure to large uninsurable risks. I formalize the idea in a dynamic general equilibrium model with incomplete markets, subsistence requirements, and idiosyncratic productivity shocks. Quantitatively, the model accounts for two-thirds of the difference in intermediate input shares between the richest and poorest countries. This has important implications for cross-country productivity. Relative to an identical model with no productivity shocks, the addition of agricultural shocks amplifies per capita GDP differences between the richest and poorest countries by nearly eighty percent. Chapter two deals with the changes in college completion in the United States over time. In particular, this paper develop a dynamic lifecycle model to study the increases in college completion and average IQ of college students in cohorts born from 1900 to 1972. I discipline the model by constructing historical data on real college costs from printed government reports covering this time period. The main finding is that that increases in college completion of 1900 to 1950 birth cohorts are due primarily to changes in college costs, which generate a large endogenous increase in college enrollment. Additionally, evidence is found that supports cohorts born after 1950 underpredicted sharp increases in the college earnings premium they eventually received. Combined with increasing college costs during this time period, this generates a slowdown in college completion, consistent with empirical evidence for cohorts born after 1950. Lastly, the rise in average college student IQ cannot be accounted for without a decrease in the variance of ability signals. This is attributed the increased precision of ability signals primarily to the rise of standardized testing. Chapter three again deals with cross-country income differences. In particular, it is concerned with the fact that cross-country income differences are primarily accounted for by total factor productivity (TFP) differences. Motivated by cross-country empirical evidence, this paper investigates the importance individuals who operate their own firms because of a lack of other job opportunities (need-based entrepreneurs). I develop a dynamic general equilibrium labor search model with with entrepreneurship to rationalize this misallocation across occupations and assess its role for understanding cross-country income differences. Developing countries are assumed to have tighter collateral constraints on entrepreneurs and lower unemployment benefits. Because these need-based entrepreneurs actually have a comparative advantage as workers, they operate smaller and less productive firms, lowering aggregate TFP in developing countries.
ContributorsDonovan, Kevin (Author) / Prescott, Edward C. (Thesis advisor) / Herrendorf, Berthold (Committee member) / Lagakos, David (Committee member) / Schoellman, Todd (Committee member) / Arizona State University (Publisher)
Created2013
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This dissertation consists of three essays on education and macroeconomics. The first chapter analyzes whether public education financing systems can account for large differences among developed countries in earnings inequality and intergenerational earnings persistence. I first document facts about public education in the U.S. and Norway, which provide an interesting

This dissertation consists of three essays on education and macroeconomics. The first chapter analyzes whether public education financing systems can account for large differences among developed countries in earnings inequality and intergenerational earnings persistence. I first document facts about public education in the U.S. and Norway, which provide an interesting case study because they have very different earnings distributions and public education systems. An overlapping generations model is calibrated to match U.S. data, and tax and public education spending functions are estimated for each country. The benchmark exercise finds that taxes and public education spending account for about 15% of differences in earnings inequality and 10% of differences in intergenerational earnings persistence between the U.S. and Norway. Differences in private education spending and early childhood education investments are also shown to be quantitatively important. The second chapter develops a life-cycle model to study increases in college completion and average ability of college students born from 1900 to 1972. The model is disciplined with new historical data on real college costs from printed government surveys. I find that increases in college completion for 1900 to 1950 cohorts are due primarily to changes in college costs, which generate large endogenous increases in college enrollment. Additionally, I find strong evidence that post-1950 cohorts under-predicted large increases in the college earnings premium. Modifying the model to restrict perfect foresight of the education premia generates a slowdown in college completion consistent with empirical evidence for post-1950 cohorts. Lastly, I find that increased sorting of students by ability can be accounted for by increasingly precise ability signals over time. The third chapter assesses how structural transformation is affected by sectoral differences in labor-augmenting technological progress, capital intensity, and capital-labor substitutability. CES production functions are estimated for agriculture, manufacturing, and services on post-war U.S. data. I find that sectoral differences in labor-augmenting technological progress are the dominant force behind changes in sectoral labor and relative prices. Therefore, Cobb-Douglas production functions with labor-augmenting technological change capture the main technological forces behind post-war U.S. structural transformation.
ContributorsHerrington, Christopher (Author) / Prescott, Edward C. (Thesis advisor) / Ventura, Gustavo (Thesis advisor) / Herrendorf, Berthold (Committee member) / Schoellman, Todd (Committee member) / Arizona State University (Publisher)
Created2013
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Are heterogeneous labor market outcomes a product of markets efficiently allocating resources or the result of structural market failures which should be corrected through well-crafted policy? In order to address this fundamental question in modern economics, we must first understand the forces which shape individuals' earnings, employment, and occupational choices.

Are heterogeneous labor market outcomes a product of markets efficiently allocating resources or the result of structural market failures which should be corrected through well-crafted policy? In order to address this fundamental question in modern economics, we must first understand the forces which shape individuals' earnings, employment, and occupational choices. This collection of essays provides new evidence to support several novel channels which influence labor markets. First, I evaluate the connection between technological change and labor market outcomes by bringing new data and methods to study the mechanization of American agriculture in the early 20th century. Using an instrumental variables estimation strategy, I find that exogenous increases in exposure to technological change generated occupational displacement for incumbent laborers, increased income inequality, and had important impacts on intergenerational mobility for the children of affected workers. Additionally, I investigate the connection between low-opportunity neighborhoods and public housing residents' labor market outcomes. Leveraging quasi-random variation in neighborhood quality due to a public housing demolition, I find that residents' wages increased after moving to higher-opportunity neighborhoods and that more intense supportive services improved post-move employment. Taken together, these essays provide new evidence that both large-scale factors like new technologies and local factors like neighborhood quality contribute to heterogeneity in labor market outcomes both historically and up to the present day.
ContributorsFrench, Jacob (Author) / Zafar, Basit (Thesis advisor) / Aucejo, Esteban (Thesis advisor) / Silverman, Daniel (Committee member) / Herrendorf, Berthold (Committee member) / Arizona State University (Publisher)
Created2022
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This dissertation consist two chapters related with misallocation and economic development.

The first chapter studies the organization of production, as summarized by the number of managers per plant, the number of workers per manager and the mean size of plants in terms of employment. First, I document that in the manufacturing

This dissertation consist two chapters related with misallocation and economic development.

The first chapter studies the organization of production, as summarized by the number of managers per plant, the number of workers per manager and the mean size of plants in terms of employment. First, I document that in the manufacturing sector, richer countries tend to have (i) more managers per plant, (ii) less workers per manager and (iii) larger plants on average. I then extend a knowledge-based hierarchies model of the organization of production where the communication technology depends on the managerial level in the hierarchy and the abilities of subordinates. I estimate model parameters so that the model jointly produces plant size distribution and number of managers per plant in the United States manufacturing sector. I find that when the largest, more complex, plants face distortions that are twice as large as distortions faced by smaller plants, output declines by 33.4% and the number of managers per plant falls by 30%. Moreover, I find that a 10% increase in communication cost parameters can account for a 35% decrease in the aggregate output without having a significant effect on the number of managers per plant.

The second chapter examines the relationship between bribery, plant size and economic development. Using the Enterprise Survey, I document that small plants spend higher fraction of their output on bribery than big plants do. Then I develop a one sector growth model in which size-dependent distortions, bribery opportunities and different plant sizes coexist. I find that size-dependent distortions become less distortionary in the presence of bribery opportunities and the effect of such distortions on the plant size become reversed since bigger plants are able to avoid from distortions by paying larger bribes. My results indicate that changes in the distortion level do not affect output and size significantly because managers are able to circumvent the distortions by adjusting their bribery expenditures. However, the removal of distortions can have a substantial effect on both the output and the mean size. Output in Turkey can increase by 12.3%, while the mean size can increase by almost double.
ContributorsTamkoc, Mehmet Nazim (Author) / Ventura, Gustavo (Thesis advisor) / Herrendorf, Berthold (Committee member) / Ferraro, Domenico (Committee member) / Arizona State University (Publisher)
Created2020