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Essays in international economics and development

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This dissertation consists of three essays that broadly deal with the international economics and development. The first chapter provides empirical evidence of the prevalence and importance of intangible capital transfer within multinational corporations (MNCs). Using a unique data set of

This dissertation consists of three essays that broadly deal with the international economics and development. The first chapter provides empirical evidence of the prevalence and importance of intangible capital transfer within multinational corporations (MNCs). Using a unique data set of Korean multinational foreign affiliates, I find that most of the foreign affiliates have managers transferred from their parent, while almost half are isolated from the parent in terms of physical trade. Furthermore, the transferred managers are positively associated with labor productivity, while physical trade from the parent is less so. I consider two possibilities for this productivity effect: (1) the managers transferred from the parent are simply more efficient than native managers; and (2) they provide knowledge that increases the productivity of all inputs. I find that the latter is consistent with the data. My findings provide evidence that transferring managers from the parent is a main source of benefit from foreign direct investment (FDI) to foreign affiliates because the managers transfer firm-specific knowledge. The second chapter analyzes importance role of service or other sectors for economic growth of manufacturing. Productivity in agriculture or services has long been understood as playing an important role in the growth of manufacturing. In this paper we provide an endogenous growth model in which manufacturing growth is stimulated by the non-manufacturing sector that provides goods used for both research and final consumption. The model permits to evaluatation of two policy options for stimulating manufacturing growth: (1) a country imports more non-manufacturing goods from a foreign country with a higher productivity; or (2) the country increases productivity of domestic non-manufacturing. We find that both policies increase welfare of the economy, but depending on the policy the manufacturing sector responses differently. Specifically, employment and value added in manufacturing rise with policy (1), but contract with policy (2). Therefore, specialization through importing non-manufacturing goods explains how some Asian economies experience fast growth in the manufacturing sector without progress in the other sectors. The third chapter tests for the importance of composition effects in affecting levels and changes of education wage premiums. In this paper I revisit composition effects in the context of Korea. Korea's large and rapid expansion of education makes it an ideal place to look for composition effects. A large, policy-induced increase in attainment in the 1980s offers additional scope for identifying composition effects. I find strong evidence that the policy-induced expansion of education lowered education wage premiums for the affected cohorts, but only weak evidence that the trend expansion of education lowered education wage premiums.

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Date Created
2014

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Essays on Charitable Fundraising, Free Riding, and Public Good Provision

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This dissertation consists of three essays on public good provision.

The first chapter develops a model of charity’s choice of fundraising method under two dimensions of asymmetric information, quality and purpose. The main implication is a separating equilibrium where higher-quality charities

This dissertation consists of three essays on public good provision.

The first chapter develops a model of charity’s choice of fundraising method under two dimensions of asymmetric information, quality and purpose. The main implication is a separating equilibrium where higher-quality charities choose to distinguish themselves by using a traditional fundraising method, while lower-quality ones exploit a low-stakes, take-it- or leave-it, ``checkout’’ method. An empirical application reinforced that charities of lower quality are more likely to adopt the checkout method. Despite this, consumers still choose to give in the equilibrium, due to the small requested amount of checkout donations, which disincentivizes serious thinking. Although exploited by lower-quality charities, the checkout method, along with purpose uncertainty, has the potential to alleviate the free-riding problem associated with public good provision and is, therefore, welfare improving.

The second chapter studies why corporations donate to charities and

how their donations affect social welfare. I propose that firms make donations out of an image reason. In a model where two firms compete with each other, charitable donation could attract consumers and also signal firm overall social responsibility. I show that there exists an equilibrium where the high responsibility firm overdonates,

resulting in a donation level closer to the socially optimal

one. This leads to higher consumer welfare due to higher private good

consumption as well as higher public good consumption when overdonation is prominent. Overall social welfare is enhanced. Empirical results support social image as an incentive for firms to donate.

The third chapter examines people's marginal willingness to pay for a change in local public good provision. We use a fixed effects hedonic model with MSA level data to study the effect of crime on local housing price. We explore the 1990s crime drop and use abortion data in 1970s and 1980s as an instrumental variable based on \citet*{donohue2001impact}. One result we find is that a decrease in murder of 100 cases per 10,000 people increases housing price by 70\%. We further translate this result into a value of a statistical case of homicide, which is around 0.4 million in 1999 dollars.

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Created

Date Created
2017

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Three Essays on Environmental Economics: Effects of Air Pollution on Health and Human Capital

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This dissertation consists of three chapters. Chapter one examines whether spending different amount of time outdoors on weekends and weekdays change the estimates of the impact of ground level ozone on the incidents of respiratory disease and asthma in California.

This dissertation consists of three chapters. Chapter one examines whether spending different amount of time outdoors on weekends and weekdays change the estimates of the impact of ground level ozone on the incidents of respiratory disease and asthma in California. This chapter contributes to the literature that focuses on the short term effect of air pollution on public health. Using the American Time Use Survey data, I find that on average people spend 50 minutes outdoors on weekends more than weekdays. Incorporating this difference in estimating the health impact of ozone changes the results significantly, especially for adults 20-64. The specification also allows me to find a precise estimate for each day of the week.

In chapter two I estimate the effect of exposure to ozone on skills of children aged 3 to 15 years. I use the Letter-Word (LW) test scores from the Panel Study of Income Dynamics (PSID) as a measure of children's skills. Due to omitted variable bias, OLS estimate of ozone effect on children's skill is positive and imprecisely estimated. To mitigate the omitted variable bias I use the instrumental variables approach. This method accounts for endogeneity of pollution. The effect of ozone on children's skills becomes negative but only marginally significant.

In chapter three, I estimate a production function of skill formation for children 3 to 15 years old and simultaneously account for their childhood exposure to ozone. I find that a one standard deviation increase in ozone leads to a 0.07 standard deviation reduction in the LW test scores on average. The LW test score of 3 year olds drops by 0.10 standard deviation in response to one standard deviation increase in pollution levels, while for the 14 year olds this effect is only half as much, 0.04 standard deviation. I also find that households exhibit compensatory behavior and mitigate the negative effect of pollution by investing more on their children. I quantitatively demonstrate that certain policies, such as a reduction in pollution levels or income transfers to families, can remediate the negative impact of childhood exposure to pollution on adult outcomes.

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Created

Date Created
2017

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Essays on Public Policy and Consumption Responses

Description

This dissertation focuses on consequences of public policy on consumption responses.

Chapter 1 evaluates the effect of Thailand's car tax rebate scheme in 2012 on household consumption by examining aggregate and administrative data. Car sales doubled during the policy

This dissertation focuses on consequences of public policy on consumption responses.

Chapter 1 evaluates the effect of Thailand's car tax rebate scheme in 2012 on household consumption by examining aggregate and administrative data. Car sales doubled during the policy and dramatically declined afterwards while domestic household spending was sluggish following the policy, suggesting a substantial dampening effect of the policy on future household consumption.

Chapter 2 develops a formal model to evaluate Thai household consumption responses. A life-cycle model of consumption and saving is developed with features including uninsured income risks, liquidity constraints, durable goods with embedded adjustment costs and non-homothetic preference in durable goods. Adjustment costs and liquidity constraints are important frictions in the evaluation of the shorter-term responses to changes in relative prices, while non-homotheticity captures the income effect given that cars are luxury goods in the Thai economy context. Key parameters and the partial equilibrium responses, which are key inputs to inform the aggregate outcome of the policy, are estimated. The results show that the car-tax rebates had a sizable impact on slowing Thai household consumption following the policy due to high level of elasticity of intertemporal substitution among Thai households.

Chapter 3 examines the effect of public smoking bans in the EU countries. Using individual-level data, this chapter investigates whether nationwide smoke-free laws in Europe lead to higher smoking reduction and cessation rates among mature smokers. Exploiting the different timing in imposing smoking ban laws and using a difference-in-differences approach, I find that light smokers and heavy smokers were more likely to quit smoking after comprehensive bans were in place while there was no significant effect on average smokers. The results confirm that smoking bans, particularly when enforced more strictly and comprehensively, lead to higher smoking cessation rates even among mature smokers with well-established addiction.

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Created

Date Created
2018

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Essay in Family Economics and Media Economics in China

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Family economics uses economic concepts such as productions and decision making to understand family behavior. Economists place emphasis on the rule of families on labor supply, human capital investment, and consumption. In a household, the members choose the optimal time

Family economics uses economic concepts such as productions and decision making to understand family behavior. Economists place emphasis on the rule of families on labor supply, human capital investment, and consumption. In a household, the members choose the optimal time allocations between working, housework and leisure, and money between consumption of different members and savings. One-Child policy and strong inter-generational connections cause unique family structure in China. Households of different generations provide income transfer and labor support to each other. Households consider these connections in their savings, labor supply, human capital investment, fertility and marriage decisions. Especially, strong intergenerational relationships in China are one cause of the high level of young female labor supply and high saving rate. I will investigate the rules of intergenerational relationships on household economic behavior.

Affirmative Action allocates college seats to a separate group. To evaluate the distribution effects of AA on discrete groups, we need to study household's strategic reactions on the rule of college seats allocation. The admission system of National College Entrance Examination in China is a type of AA. That distributes college seats by regions. I will use the rapid expansion of Chinese college enrollment as a natural experiment to check the households' reaction on AA and college expansion.

Media economics utilizes economic empirical and theoretical tools to figure out the social, cultural, and economic issues in media industries. The impact of online piracy on genuine products sales is under debate, because people cannot find representing proxies to evaluate piracy levels. I will use Chinese data to study the effects of online piracy on theater revenue.

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Created

Date Created
2017

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Essays on child development

Description

This dissertation comprises three chapters.

In chapter one, using a rich dataset for the United States, I estimate a series of models to document the birth order effects on cognitive outcomes, non-cognitive outcomes, and parental investments. I estimate a model that

This dissertation comprises three chapters.

In chapter one, using a rich dataset for the United States, I estimate a series of models to document the birth order effects on cognitive outcomes, non-cognitive outcomes, and parental investments. I estimate a model that allows for heterogeneous birth order effects by unobservables to examine how birth order effects varies across households. I find that first-born children score 0.2 of a standard deviation higher on cognitive and non-cognitive outcomes than their later-born siblings. They also receive 10\% more in parental time, which accounts for more than half of the differences in outcomes. I document that birth order effects vary between 0.1 and 0.4 of a standard deviation across households with the effects being smaller in households with certain characteristics such as a high income.

In chapter two, I build a model of intra-household resource allocation that endogenously generates the decreasing birth order effects in household income with the aim of using the model for counterfactual policy experiments. The model has a life-cycle framework in which a household with two children confronts a sequence of time constraints and a lifetime monetary constraint, and divides the available time and monetary resources between consumption and investment. The counterfactual experiment shows that an annual income transfer of 10,000 USD to low-income households decreases the birth order effects on cognitive and non-cognitive skills by one-sixth, which is five times bigger than the effect in high-income household.

In chapter three, with Francesco Agostinelli and Matthew Wiswall, we examine the relative importance of investments at home and at school during an important transition for many children, entering formal schooling at kindergarten. Moreover, our framework allows for complementarities between children's skills and investments from schools. We find that investments from schools are an important determinant of children's skills at the end of kindergarten, whereas parental investments, although strongly correlated with end-of-kindergarten outcomes, have smaller effects. In addition, we document a negative complementarity between children's skills at kindergarten entry and investments from schools, implying that low-skill children benefit the most from an increase in the quality of schools.

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Created

Date Created
2018

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Essays on Children's Skill Formation

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The dissertation is composed by three chapters. In Chapter 2 (coauthored with Matthew Wiswall) I develop new results for the identification and estimation of the technology of children’s skill formation when children’s skills are unobserved. In Chapter 3 I shed

The dissertation is composed by three chapters. In Chapter 2 (coauthored with Matthew Wiswall) I develop new results for the identification and estimation of the technology of children’s skill formation when children’s skills are unobserved. In Chapter 3 I shed light on the importance of dynamic equilibrium interdependencies between children’s social interactions and parental investments decisions in explaining developmental differences between different social environments. In Chapter 4 (coauthored with Giuseppe Sorrenti) I study the effect of family income and maternal hours worked on both cognitive and behavioral child development.

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Date Created
2018

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Decision Making in Health Insurance Markets

Description

Prior research on consumer behavior in health insurance markets has primarily focused on individual decision making while relying on strong parametric assumptions about preferences. The aim of this dissertation is to improve the traditional approach in both dimensions. First, I

Prior research on consumer behavior in health insurance markets has primarily focused on individual decision making while relying on strong parametric assumptions about preferences. The aim of this dissertation is to improve the traditional approach in both dimensions. First, I consider the importance of joint decision-making in individual insurance markets by studying how married couples coordinate their choices in these markets. Second, I investigate the robustness of prior studies by developing a non-parametric method to assess decision-making in health insurance markets. To study how married couples make choices in individual insurance markets I estimate a stochastic choice model of household demand that takes into account spouses' risk aversion, spouses' expenditure risk, risk sharing, and switching costs. I use the model estimates to study how coordination within couples and interaction between couples and singles affects the way that markets adjust to policies designed to nudge consumers toward choosing higher value plans, particularly with respect to adverse selection.

Finally, to assess consumer decision-making beyond standard parametric assumptions about preferences, I use second--order stochastic dominance rankings. Moreover, I show how to extend this method to construct bounds on the welfare implications of choosing dominated plans.

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Date Created
2020

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Essays on General Equilibrium Impacts of Environmental Regulations on Labor Markets

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Environmental regulations such as carbon taxation and air quality standards can lead to notable improvements in health outcomes and ambient air quality. However, these types of policies may have significant impacts on the labor market, in particular for workers in

Environmental regulations such as carbon taxation and air quality standards can lead to notable improvements in health outcomes and ambient air quality. However, these types of policies may have significant impacts on the labor market, in particular for workers in energy-intensive industries, especially if these workers have acquired specific human capital in those industries. This dissertation focuses on the general equilibrium consequences of environmental regulation on the labor market. Specifically, I examine costly reallocation of workers between sectors, the welfare effects of involuntary unemployment, and the heterogeneous effects of this policy on different types of workers. To this end, I develop a two-sector search model with sectoral human capital accumulation to explore the effects on the labor market of implementing a per unit of energy use carbon tax in the US. I separate the economy into a high-intensive sector (’dirty’) and a low-intensive sector (’clean’). I calibrate the model using 2014 U.S. data. I find that a carbon tax increases total unemployment by 0.06 percentage points, decreases the dirty employment rate by 2.1 percent, and increases the clean employment rate by 1.04 percent. Firms in the dirty sector adjust by decreasing the demand for high-skilled workers and increasing the number of vacancies in the low-skilled market

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Date Created
2019

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Essays on Family Economics

Description

The presence of children can influence importantly how households respond to income risk. The aim of this dissertation is to study how different aspects of families' life-cycle decisions are affected by different sources of income fluctuation. In the first part

The presence of children can influence importantly how households respond to income risk. The aim of this dissertation is to study how different aspects of families' life-cycle decisions are affected by different sources of income fluctuation. In the first part of this dissertation, I study the relationships between fertility choices, consumption, and labor supply, by developing a model with endogenous fertility decisions and income volatility. Within this framework, fertility choices act as a mechanism to smooth utility over time. In this context, I analyze the insurance value of fertility choices. I use a structural model that combines two features underexplored by the literature: children as consumption commitments, and nonseparabilities of family size and consumption. Having children in the household affects consumption and labor marginal utilities, changing the insurance value of fertility decisions and generating incentives to avoid childbearing during low-income spells. I find that the welfare loss of a negative transitory income shock is 34 to 38 times larger if households are not able to choose when to have their children. These results underscore how costly unplanned childbearing can be to the household in terms of welfare.The second part of this dissertation evaluates the impact of being born under negative conditions in the labor market on human capital formation, and what parental behavior could be leading to those effects. I estimate the impact of the unemployment rates on children's assessment outcomes in cognitive and noncognitive skills. Counterintuitively, the results suggest that higher unemployment rates are linked to positive child development outcomes later in childhood. In my main specification, an increase of 1 percentage point in state unemployment causes an increase of 2.5% of a standard deviation in cognitive test scores after controlling for income at birth, hours worked at birth, and other variables.

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Date Created
2021