UMD Theses and Dissertations
Permanent URI for this collectionhttp://hdl.handle.net/1903/3
New submissions to the thesis/dissertation collections are added automatically as they are received from the Graduate School. Currently, the Graduate School deposits all theses and dissertations from a given semester after the official graduation date. This means that there may be up to a 4 month delay in the appearance of a given thesis/dissertation in DRUM.
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Item Essays on Firm Dynamics and Macroeconomics(2023) Kim, Seula; Haltiwanger, John; Shea, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation describes a broad set of topics in firm dynamics and macroeconomics, including young firm dynamics, business dynamism, firm innovation, technological advance, and economic growth in the U.S. economy. In Chapter 1, I study how workers’ uncertain job prospects affect young firms’ pay and employment growth, and quantify macroeconomic implications. Building a heterogeneous-firm directed search model in which workers gradually learn about permanent firm productivity types, I find that the learning process creates endogenous wage differentials for young firms. In the model, a high performing young firm must pay a higher wage than that of high performing old firms, while a low performing young firm offers a lower wage than that of low performing old firms, to attract workers. This is because workers are unsure whether the young firm’s performance reflects its fundamental type or a temporary shock given the lack of track records. I find that these wage differentials affect both hiring and retention margins of young firms and can dampen the growth of high-potential young firms. Furthermore, the model indicates that higher uncertainty about young firms results in bigger wage differentials and thus hampers overall young firm activity and aggregate productivity. Using employee-employer linked data from the U.S. Census Bureau and regression specifications guided by the model, I provide empirical support for the novel predictions of the model. Chapter 2 studies the effect of competition on firm innovation by developing a discrete-time endogenous growth model where multi-product firms do two types of innovation subject to friction in technology spillovers. Firms improve their existing products through internal innovation while entering others’ product markets through external innovation. We introduce a novel friction, which we label as imperfect technology spillovers, which refer to frictions in learning others’ technology in the process of external innovation. In contrast to existing models, this friction allows incumbent firms to defend themselves from competitors by building technological barriers through internal innovation. Using firm-level data from the U.S. Census Bureau integrated with firm-level patent data, we find regression results consistent with the model predictions. Our counterfactual analysis shows that rising competition by foreign firms leads domestic incumbent firms to undertake (i) more (less) internal innovation for the products in which they have (do not have) a technological advantage, and (ii) less external innovation. This compositional change in firm innovation affects overall innovation in the aggregate economy in different directions depending on the costs of external innovation. Specifically, the shift in innovation composition in response to rising competition decreases overall innovation in the U.S., but would increase overall innovation in an economy with high external innovation costs. Lastly, Chapter 3 examines how increasing knowledge complexity and the accompanying rise in innovation cost affect firm innovation patterns and business dynamism in the U.S. economy. Using detailed firm-level data from S&P’s Compustat and the U.S. Census Bureau, integrated with the U.S. patent database (USPTO PatentViews), we document the increasing trend in knowledge complexity in firm innovation activities. Specifically, the inventor team size, the number of technology types (technology subclasses), and the degree of interdependence across different technology subclasses associated with firms’ patent portfolio have been increasing over time. Furthermore, we find the increasing trend of knowledge complexity is associated with the declining trend of business dynamism, such as firm entry, the share of young firms, and young firms’ activity in job creation and reallocation. We offer a simple endogenous growth model in which different R&D inputs are interdependent (complementary) to each other and firms are required to use different types of inputs to generate a given amount of innovation. This increases more complexity in firm innovation process and makes small, young firms with less knowledge base more difficult to conduct innovation as before. This can impede firm entry and dampen the growth of small and young firms.Item Investment and Economic Performance in Europe: The Role of the Investment Climate(2020) Schwarzenberg Zilberstein, Andres; Swagel, Phillip L; Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation investigates how investment, the investment climate, and economic integration affect the economic performance of 31 European countries. A major contribution is the development of two new composite indicators—the European Investment Attractiveness Index (IAI) and the European Union (EU) Economic Integration Index (EEI). The study conceptualizes the investment climate both as a multidimensional construct and as a framework for understanding how political, economic, and social factors interact and affect the attractiveness of a country for foreign and domestic investment. In addition, it considers how trade, financial, monetary, and value chain relationships have shaped the process of economic integration at the EU level. The study then uses the indices to examine the impact of foreign and domestic investment on gross domestic product (GDP). The results from cross-country regression and dynamic panel data analyses reveal that both types of investment have a positive and significant impact on economic growth in Europe (although, notably, exports seem to have a larger impact than either foreign or domestic investment). Moreover, this study finds that the investment climate matters for economic performance. Attractive investment climates and higher levels of economic integration—particularly among the Central and Eastern European economies—are associated with higher per capita GDP levels and growth rates. Finally, the dissertation examines the relationship between foreign direct investment (FDI), exports, and GDP in 11 countries in Central and Eastern Europe (CEE). While the goal is not to establish “true” causality, the results show that links between foreign investment, exports, and GDP differ significantly across these countries. While for many of them there is a reinforcing relationship between foreign investment and GDP, there does not seem to be a “causal” relationship between their exports and GDP. These findings challenge the validity of policy guidelines that emphasize—often almost exclusively—attracting foreign investment and boosting exports for development under the assumption that FDI or exports “cause” growth. Thus, policies aimed at improving the fundamentals of these economies (i.e., the investment climate) might be key in generating and sustaining economic growth.Item Essays on Economic Spillovers, Labor Markets, and Economic Development(2015) Zou, Ben; Hellerstein, Judith K; Galiani, Sebastian; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Location-based policies are widely used across the world in the hope of stimulating particular local economies. This dissertation consists of three chapters of empirical studies that evaluate the efficacy and efficiency of three different location-based government policy interventions. The first chapter studies the impacts of military personnel contractions on various aspects of the economies of counties in the United States. The second chapter estimates the causal effect of international aid on economic growth of recipient developing countries. The third chapter studies a large-scale industrial buildup in China and its impact on long-run regional economic development. Chapter 1: The Local Economic Impacts of Military Personnel Contractions The main challenges to comprehensive evaluations of the effects of local businesses on other parts of the local economy are to establish causality and to calculate the welfare impacts in a unified framework. In the first chapter, I study the effects on county economies of the large military personnel contractions in the United States in the 1990s. To establish causal estimates, I propose a new identification strategy that combines the synthetic control method and the instrumental variable estimator. I then put the estimated effects in a spatial general equilibrium model and calculate the welfare impacts on different agents of the local economy. I find that military personnel contractions significantly reduced local employment levels, but as people migrate, the incidence of welfare impacts was mainly on landowners, not on workers. Chapter 2: The Effect of Aid on Growth: Evidence from a Quasi-Experiment (with Sebastian Galiani, Steve Knack, and L. Colin Xu) Whether foreign aid promotes economic growth in recipient countries is one of the most important yet most debated questions in the study of economic growth. The second chapter studies the causal effect of foreign aid on economic growth by exploiting the large discontinuous reduction in aid that occurs as a country passes an exogenously-given income threshold. We find a positive and sizable causal effect of foreign aid: a one percentage point increase in the aid-to-GNI ratio raises annual economic growth by 0.35 percentage point. Chapter 3: Industrializing from Scratch: the Persistent Effects of China's Third Front Movement" (with Jingting Fan) The third chapter studies the effect of a large-scale industrialization effort in China known as the "Third Front Movement" on long-run development of regional economies. The Movement provides a unique policy experiment to study the important question of whether temporary government subsidies in the nascent industrial sector can permanently push a rural economy into a new development path. We find that decades after the Movement ended, industrialization and urbanization levels remained much higher in local economies that received large subsidies from the Movement, and the effects are mainly driven by the fast-growing non-state sector.Item The Macroeconomics of Rare Events(2010) Olaberria, Eduardo Augusto; Vegh, Carlos; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)People in developing countries are more often affected by rare events, such as natural disasters and epidemics, than people in developed nations. Furthermore, the intensity of these events is usually higher in poor countries. Among policymakers, these rare events and other external shocks, such as terms-of-trade fluctuations and changes in international conditions, are often explicitly or implicitly blamed for the bad performance of growth. Do these rare events affect economic growth? Are the frequency and intensity of these rare events helpful in explaining the gap in income between rich and poor countries? The answer to this question is important not only for evaluating policies aimed at preventing these events and mitigating its consequences, but also for understanding the reasons why some countries are rich and some poor. Although there has been a steady increase in the number of researchers tackling these questions, the effects of rare events on economic development and long-run growth remains unclear. There are some studies reporting negative, and others indicating no, or even positive effects. The purpose of this dissertation is to show that these seemingly contradictory findings can be reconciled by exploring the effects of disasters on growth separately by type of disaster. This study examines the long- term economic impact of natural disasters and epidemics and shows that these rare events (natural disasters and epidemics) appear to be associated with different patterns of economic vulnerability and so entail different options for reducing risk. A few main conclusions emerge. Rare events significantly affect economic development but not always negatively, and differently across disasters and economic sectors. Hence, in order to understand and assess the economic consequences of natural disasters and epidemics and the implications for policy, it is necessary to consider the pathways through which different types of events affect economic development, the different risks posed, and the ways in which economies can respond to these threats.Item Essays on Law, Finance, and Venture Capitalists' Asset Allocation Decisions(2005-07-28) Obrimah, Oghenovo Adewale; Maksimovic, Vojislav; Finance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation consists of three essays. The first essay finds that small firms in poor quality legal environments (poor quality contract enforcement and property rights environments) are more financially constrained relative to small firms in better quality legal environments. Consequently, financial development, that is, the emergence of venture capitalists, has a greater effect on small firms' access to external financing in poor quality legal environments. The second essay finds that the quality of contract enforcement is a risk factor, while the quality of property rights protection is not. The results indicate that poor quality property rights protection hinders the development of informal capital markets; hence, there exists a greater need for financial intermediation in such environments. These results indicate that venture capital financing should be encouraged in poor quality legal environments and provide one rationale for why capital markets in poor quality legal environment countries tend to be bank-based. The third essay finds that the demand for growth financing is lower in poor quality legal environments relative to better quality legal environments. The existing literature has focused on the effect that limited supply of external financing has on firm growth rates in poor quality legal environments. This paper indicates that lower firm growth rates in poor quality legal environments may also result from lower demand for growth financing. The empirical results in all three essays indicate that poor quality legal environments primarily affect the development of informal capital markets. Hence, financial intermediation is of greater importance in poor quality legal environments during the early stages of a firm's growth cycle. This indicates that encouraging the growth of venture capital financing, which is better suited to ameliorating moral hazard problems (investments in small firms and technology intensive ventures) relative to debt or bank financing, will facilitate faster economic growth in poor quality legal environments. Evidence that venture capitalists' asset allocations are significantly and positively associated with long-run country growth rates is provided in the second essay.