College of Behavioral & Social Sciences
Permanent URI for this communityhttp://hdl.handle.net/1903/8
The collections in this community comprise faculty research works, as well as graduate theses and dissertations..
Browse
3 results
Search Results
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 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.