Theses and Dissertations from UMD
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Item Trade Openness and Well-Being: Do Complementary Conditions Matter?(2008-05-15) Guzman, Julio A; Graham, Carol; Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In the last three decades, most of the existing literature using regression analysis to explore the effects of trade on development has conferred the first one a leading role in directly determining cross-country differences on income. Indeed, this should come at surprise, since what trade theory predicts and what results from General Equilibrium Models (an econometric-alternative quantitative tool) recently display are not completely aligned with conventional empirical evidence at hand. According to these sources, the effects of trade liberalization on welfare are indirect, transmitted through several channels, and dependent on multiple initial conditions. Much of such discrepancy may be due to measurement error and omitted variable problems, data limitations, and methodological shortcomings presented in regression analysis. On one hand, there is agreement over the fact that conventional proxies of trade openness contain severe measurement errors. In addition, data on control variables affecting well-being and believed to be correlated with trade became available just recently. On the other hand, and more importantly, the search for a possible contingent or conditional relationship between free trade and well-being has not been a priority in the agenda of mainstream literature with the exception of sporadic and isolated studies, despite the fact that trade theory has long recognized that possibility. Using newly developed policy-oriented measures of trade integration built with information from tariff rates, non-tariff-barriers, and subsidies, and controlling by multidimensional policy areas beyond those found in conventional literature, this study finds evidence of a contingent relationship between trade openness and well-being. More specifically, this investigation arrives at two conclusions. First, unilateral or one-way-street trade liberalization is not associated with higher levels of well-being, showing neither a direct impact nor a conditional one in the presence of complementary conditions. Second, gains in international market access, or multilateral trade openness, do not alone guarantee the achievement of higher levels of well-being, but do demonstrate significant potential for development in the presence of favorable internal conditions, such as those linked to business competitiveness and market efficiency, the promotion and respect of political rights among the citizenry, and the less concentrated distribution of economic and social opportunities.Item Generating Up-to-date Starting Values for Detailed Forecasting Models(2008-01-27) Sampattavanija, San; Almon, Clopper; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In economic forecasting, it is important that the forecasts be based on data that is both reliable and up-to-date. The most reliable data typically come from conducting a census. These censuses produce estimates with a long lag between the reference year and the date of publication. However, we also have other sources of economic data that are less reliable but published more frequently. These higher frequency data should be a source of useful information for analyzing economic activity in the current, incomplete year. The objective of this study is to use high frequency (monthly and quarterly) data to generate forecasts of the annual data from reliable sources used in an inter-industry forecasting model. The results will be used as starting values to improve the model's short-term forecast performance. The distinguishing feature of this dissertation is that it studies the economic data at the sectoral level as opposed to other studies that only try to generate aggregate data. The aggregate data will be a by-product of these detailed estimates. Thus, we can forecast the trends of the aggregates and observe sectors that contribute to these trends. In this dissertation, I study data on four main aspectts of the U.S. economy: 1) Personal consumption expenditures, 2) Investment in equipment and software, 3) Investment in structures, and 4) Gross output. By historical simulations, I find that the performance of the forecasts depends heavily on the accuracy of the exogenous variables used in each forecast. The estimated detailed values are consistent with the macroeconomic data, used as regressors in the processes. Thus, generally, the results will be reliable as long as we have a good forecast of macroeconomic variables. The performance of the first-period forecast also depends on where in the calendar year the last published data is. The closer to the end of the year, the better is the accuracy of the forecast.Item The Impact Of Online Sponsored Search Advertising On Consumer And Seller Strategies(2007-08-07) Animesh, Animesh; Agarwal, Ritu; Viswanathan, Siva; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Sponsored search advertising has emerged as an important and significant forum for advertisers, accounting for 40% of all advertising spending online. The unique features of sponsored search advertising - the nature of consumer search as well as the pricing mechanisms employed - differentiate it from traditional advertising formats, and raise many interesting questions regarding consumers' search and purchase behavior, sellers' advertising strategies, and the ensuing market dynamics. However, despite the robust growth in sponsored search advertising, research on its implications is limited. My dissertation, comprising three essays, seeks to fill this gap. In addition to examining the effects of sponsored search advertising on consumers and sellers, I also investigate the validity of theories developed for traditional media in an emerging online sponsored search context. The first essay focuses on the impact of a seller's sponsored search advertising strategies, including its rank in the sponsored listing, the unique selling proposition (USP) employed in its advertisement text/creative, and competitive market dynamics on the performance of the focal seller's advertisement. Drawing upon prior research on consumer search and directional markets, I propose a model of the consumer search process in the sponsored search context and conduct an empirical study to test the research model. The results validate the research hypothesis that the search listing can act as a consumer filtering mechanism and competitive intensity within adjacent ranks has a significant impact on the seller's performance. The second essay employs consumer search and quality signaling theories from information systems, marketing, and economics to understand the impact of the informational cues contained in the sponsored search listing about sellers' relative advertising expenditure on consumer search and purchase behavior. Contrary to conventional wisdom, I find that the unique format of the sponsored search listing significantly increases the strength of the advertising signal vis-à-vis the price signal. In addition, I find that the risk attitude of consumers has a significant impact on the valence of these different information cues in the online setting. The third essay examines market outcomes in directional markets such as sponsored search and comparison shopping advertising. Specifically, I focus on comparison shopping advertising where advertising not only informs consumers about price and quality but also directs consumer search. I find that the relationship between a firm's price, quality, and advertising intensity in this market is strikingly different from that in traditional markets, a result attributable to the differential impact of price and quality on an advertiser's conversion rates and profit margins. Overall, these studies provide crucial insights into consumer behavior in online sponsored search markets. These findings have significant implications for firms, as well as for the market makers. Insights from these studies will enable practitioners to develop appropriate advertising strategies and online intermediaries to optimize the design of online sponsored search markets.Item Internal Control, Enterprise Risk Management, and Firm Performance(2007-08-02) Tseng, Chih-Yang; Gordon, Lawrence A; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation investigates two research questions arising from the regulation of internal controls required by Sarbanes-Oxley Act of 2002 (SOX). The first research question asks whether better internal controls can enhance firm performance? To address this question, the relation between market-value and internal control is estimated by a residual income model. Firms with weak internal controls are identified as those that disclose material weaknesses in internal controls in periodic filings from August 2002 to March 2006, as required by SOX. The empirical results, based on a sample of 708 firm-years with the disclosures of material weaknesses, show that firms with weak internal controls have lower market-value. Building on the' efforts for SOX to improve internal controls, more and more firms are starting to adopt Enterprise Risk Management (ERM), because sound internal control system rests on adequate and comprehensive analysis of enterprise-wide risks. In light of this trend triggered by SOX, the second research question in this dissertation asks whether implementation of ERM has an impact on firm performance? The basic approach to answer this question uses a contingency perspective, since all risks arise from the firm's internal and external environment. More specifically, the basic argument states that the relation between ERM and firm performance is contingent on the proper match between ERM and five key contingency variables: environment uncertainty, industry competition, firm size, firm complexity, and monitoring by the firm's board of directors. A sample of 114 firms disclosing the implementation of ERM in their 2005 10Ks and 10Qs are identified by keyword search in EDGAR database. In developing the proper match, high performing firms are defined as those with greater than 2% one-year excess return to develop the proposed proper match. An ERM index (ERMI) is constructed based on the Committee of Sponsoring Organizations (COSO) ERM's (2004) definition of four objectives: strategy, operation, reporting, and compliance. The contingency view is supported by the empirical evidence, since the deviation from the proposed proper match is found negatively related to firm performance.Item Measurement and Determination of Rules of Origin in Preferential Trade Agreements (PTA's)(2007-06-07) Harris, Jeremy Tyler; Betancourt, Roger; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation explores the measurement and determinants of product-specific rules of origin (PSRO) in preferential trade agreements (PTAs). In order to study PSRO empirically it is necessary to be able to measure them in some objective way. We analyze in great detail the mechanisms for specifying PSRO in PTAs, propose a methodology for measuring their relative restrictiveness, and demonstrate that accounting for several previously overlooked factors can have important empirical implications. We then employ the proposed measurement methodology to analyze the determinants of restrictiveness in a panel dataset of five recent PTAs in the Western Hemisphere. Exploring four alternative hypotheses we find that, except in a few particular sectors, governments tend to negotiate less restrictive rules so as to assure market access rather than more restrictive rules that would serve as hidden protection.Item Representing, Visualizing, and Modeling Online Auction Data(2007-05-03) Hyde, Valerie; Shmueli, Galit; Jank, Wolfgang; Applied Mathematics and Scientific Computation; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The wide and growing popularity of online auctions creates enormous amounts of publicly available bid data providing an important topic for research. These data pose unique statistical challenges because of their special structures. This research focuses on methods for representing, visualizing, and modeling such data. We find semi-continuous data manifested in auction consumer surplus data. Semi-continuous data arise in many applications where naturally continuous data become contaminated by the data generating mechanism. The resulting data contain several values that are ``too-frequent", a hybrid between discrete and continuous data. The main problem is that standard statistical methods, which are geared towards continuous or discrete data, cannot be applied adequately to semi-continuous data. We propose a new set of two transformations for semi-continuous data that ``iron-out" the too-frequent values into completely continuous data. We show that the transformed data maintain the properties of the original data but are suitable for standard analysis. We are also interested in the effect of concurrency not only on the final price of an auction but also on the relationship between the current bid levels and high bids in simultaneous ongoing auctions. We suggest several ways to visually represent the concurrent nature of online auction prices. These include ``rug plots" for displaying the price-evolution and price dynamics in concurrent auctions, time-grouped box plots, and moving statistics plots. We find price trends and relationships between prices in concurrent auctions and raise new research questions. Finally, bids during an online auction arrive at unequally-spaced discrete time points. Our goal is to capture the entire continuous price-evolution function by representing it as a functional object. Various nonparametric smoothing methods exist to estimate the functional object from the observed discrete bid data. Previous studies use penalized polynomial and monotone smoothing splines; however, these require the determination of a large number of coefficients and often lengthy computational time. We present a family of parametric growth curves that describe the price-evolution during online auctions. Our approach is parsimonious and has an appealing interpretation in the online auction context. We also provide an automated fitting algorithm that is computationally fast.Item The effect of life-cycle cost disclosure on consumer behavior(2007-04-25) Deutsch, Matthias; Ruth, Matthias; Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)For more than 20 years, analysts have reported on the so-called "energy paradox" or the "energy efficiency gap", referring to the fact that economic agents could in principle lower their total cost at current prices by using more energy-efficient technology but, nevertheless, often decide not to do so. Theory suggests that providing information in a simplified way could potentially reduce this "efficiency gap". Such simplification may be achieved by providing the estimated monetary operating cost and life-cycle cost (LCC) of a given appliance--which has been a recurring theme within the energy policy and efficiency labeling community. Yet, little is known so far about the causal effects of LCC disclosure on consumer action because of the gap between the acquisition of efficiency information and consumer purchasing behavior in the real marketplace. This dissertation bridges the gap by experimentally integrating LCC disclosure into two major German commercial websites--a price comparison engine for cooling appliances, and an online shop for washing machines. Internet users arriving on these websites were randomly assigned to two experimental groups, and the groups were exposed to different visual stimuli. The control group received regular product price information, whereas the treatment group was, in addition, offered information about operating cost and total LCC. Click-stream data of consumers' shopping behavior was evaluated with multiple regression analysis by controlling for several product characteristics. This dissertation finds that LCC disclosure reduces the mean energy use of chosen cooling appliances by 2.5% (p<0.01), and the energy use of chosen washing machines by 0.8% (p<0.001). For the latter, it also reduces the mean water use by 0.7% (p<0.05). These effects suggest a potential role for public policy in promoting LCC disclosure. While I do not attempt to estimate the costs of such a policy, a simple quantification shows that the benefits amount to 100 to 200 thousand Euros per year for Germany, given current predictions regarding the price of tradable permits for CO2, and not counting other potential benefits. Future research should strive for increasing external validity, using better instruments, and evaluating the effectiveness of different information formats for LCC disclosure.Item The Economics of Nuclear Power(2006-11-28) Horst, Ronald L; Rust, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)We extend economic analysis of the nuclear power industry by developing and employing three tools. They are 1) compilation and unification of operating and accounting data sets for plants and sites, 2) an abstract industry model with major economic agents and features, and 3) a model of nuclear power plant operators. We build a matched data set to combine dissimilar but mutually dependent bodies of information. We match detailed information on the activities and conditions of individual plants to slightly more aggregated financial data. Others have exploited the data separately, but we extend the sets and pool available data sets. The data reveal dramatic changes in the industry over the past thirty years. The 1980s proved unprofitable for the industry. This is evident both in the cost data and in the operator activity data. Productivity then improved dramatically while cost growth stabilized to the point of industry profitability. Relative electricity prices may be rising after nearly two decades of decline. Such demand side trends, together with supply side improvements, suggest a healthy industry. Our microeconomic model of nuclear power plant operators employs a forward-looking component to capture the information set available to decision makers and to model the decision-making process. Our model includes features often overlooked elsewhere, including electricity price equations and liability. Failure to account for changes in electricity price trends perhaps misled earlier scholars, and they attributed to other causes the effects on profits of changing price structures. The model includes potential losses resulting from catastrophic nuclear accidents. Applications include historical simulations and forecasts. Nuclear power involves risk, and accident costs are borne both by plant owners and the public. Authorities regulate the industry and balance conflicting desires for economic gain and safety. We construct an extensible model with regulators, plant operators, insurance companies, and consumers. The model possesses key attributes of the industry seldom found in combination elsewhere. We then add additional details to make the model truer to reality. The work extends and corrects existing literature on the definition, effects, and magnitudes of implicit subsidies resulting from liability limits.Item Energy Prices and Substitution in U.S. Manufacturing Plants(2006-04-17) GRIM, CHERYL; Haltiwanger, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Persistent regional disparities in electricity prices, growth in wholesale power markets, and recent deregulation attempts have intensified interest in the performance of the U.S. electric power industry, while skyrocketing fuel prices have brought renewed interest in the effect of changes in prices of all energy types on the U.S. economy. This dissertation examines energy prices and substitution between energy types in U.S. manufacturing. I use a newly constructed database that includes information on purchased electricity and electricity expenditures for more than 48,000 plants per year and additional data on the utilities that supply electricity to study the distribution of electricity prices paid by U.S. manufacturing plants from 1963 to 2000. I find a large compression in the dispersion of electricity prices from 1963 to 1978 due primarily to a decrease in quantity discounts for large electricity purchasers. I also find that spatial dispersion in retail electricity prices among states, counties and utility service territories is large, rises over time for smaller purchasers, and does not diminish as wholesale power markets expand in the 1990s. In addition, I examine energy type consumption patterns, prices, and substitution in U.S. manufacturing plants. I develop a plant-level dataset for 1998 with data on consumption and expenditures on energy and non-energy production inputs, output, and other plant characteristics. I find energy type consumption patterns vary widely across manufacturing plants. Further, I find a large amount of dispersion across plants in the prices paid for electricity, oil, natural gas, and coal. These high levels of dispersion are accounted for by the plant's location, industry, and purchase quantity. Finally, I present estimates of own- and cross-price elasticities of demand for both the energy and non-energy production inputs.Item ESSAYS ON COOPERATION IN DEVELOPING COUNTRY INDUSTRIAL CLUSTERS(2005-01-25) Thompson, Theresa Marie; Betancourt, Roger R.; Minehart, Deborah F.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)An industrial cluster is a group of firms that are specialized by sector, located in close geographic proximity and consist of mostly small and medium sized enterprises. An introduction to these clusters is provided in Chapter One. Chapter Two develops a model to examine the conditions under which clustered firms in a less developed country may cooperate in a "joint action" to market their output in a developed country, eliminating the role of an intermediary firm in the developed country. The clustered firms are heterogeneous in expected quality of output and know the quality type of other firms, but the foreign intermediary does not. The intermediary, however, has a lower marketing cost than the clustered firms. The main result of the model is that joint action can occur among high quality type firms, but the low quality firms always use the foreign intermediary to distribute their output. Chapter Three examines empirically two aspects of collective efficiency, one passive and one active, through the analysis of a survey of the surgical instrument cluster in Sialkot, Pakistan. First, I test an idea from relational contracting theory that informal relationships can substitute for formal enforcement through the judicial system. Inter-firm trust is measured as the amount of trade credit offered to customers. The results show that suppliers are more likely to offer trade credit when they believe in the effectiveness of formal contract enforcement and when they participate in business networks (proxied by inter-firm communication). Customer lock-in helps to develop inter-firm trust since firms give more credit when relationships are of longer duration. This is because locked-in customers are less able to find alternate suppliers. Chapter Three also examines the firm-level characteristics that determine the firms' interest in intra-cluster cooperation to market their own goods. The results demonstrate that firms are more likely to be interested in such initiatives once they have already had some direct experience in marketing, and when firms have a lower opportunity cost of leaving their current customers, where opportunity cost is measured by the length of the trading relationship.