Economics Theses and Dissertations

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    Essays in Labor Economics
    (2023) Gonzalez Prieto, Nathalie; Abraham, Katharine G; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This dissertation has as a unifying theme the analysis of labor markets. It includes three papers that analyze labor markets from three different perspectives: the role of firms in workers’ careers, the effect of public policies on firms’ decisions, and the aggregate labor market effects of individual migration choices. These diverse perspectives show the complexity of labor markets and highlight some ways in which labor markets affect workers, firms and communities.In the first essay, the objects of study are the career outcomes of workers. More specifically, using Chilean employer-employee data, we provide evidence of the divergent trajectories of workers’ careers based on the type of firms they work at. We focus on earnings, periods of employment, and the number of jobs held over the five years after a job transition. Our findings indicate that there is an earnings penalty of 6.7% for joining a startup vs. an established firm. Workers who join a startup have a lower probability of being employed and hold fewer jobs over the five years we follow them. The second chapter focuses on evaluating the effectiveness of a public policy implemented at the beginning of the COVID-19 pandemic, a time when mandated quarantines prevented firms from operating, to maintain existing job relationships by providing liquidity in the form of payments to furloughed workers. We leverage a discontinuity in the eligibility for the policy and are able to identify a positive effect on the likelihood of job survival for workers with short tenure. Heterogeneity analysis indicates that the effect was larger in sectors more affected by the pandemic and for more vulnerable workers. Finally, the third chapter looks at the aggregate labor market effects of experiencing a labor demand shock in a Commuting Zone (CZ) in the US. The main goal of that chapter is to better understand why local labor markets in the US experience a persistent decline in labor force participation following a recession. Using uniquely granular data from the Consumer Credit Panel (CCP), we show that there is a differential migration response to local demand shocks based on the age of individuals. In particular, we find that younger adults increase their in-migration to CZs experiencing a positive labor demand shock. Additionally, while the in-migration response of the retirement-age population also is positive, it is muted and their out-migration response to a positive shock is positive, effectively delivering a negative net migration response to a positive labor demand shock for this age group. The combination of these results indicates that following a positive labor demand shock, local labor markets in the US experience a persistent re-composition of their age structure that leaves them with a higher proportion of young people. On the flip side these results point to the fact that labor markets experiencing a negative demand shock being left with a higher proportion of retirement-age people as the product of the age differentiated migration.
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    Essays on Speculation, Joint Bidding, and Dynamic Entry in Auctions
    (2023) Deng, Shanglyu; Ausubel, Lawrence; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This dissertation consists of three essays on auction design. In Chapter 1, I provide an introduction for the following chapters. In Chapter 2, I examine speculation in procurement auctions, where speculators may have the incentive to acquire items from multiple sellers prior to the auction in order to increase their market power and reduce competition during the auction. I show that the profitability of the speculation scheme hinges on the auction format: Speculation always generates a positive expected profit in second-price auctions but could be unprofitable in first-price auctions. This comparison in profitability is driven by different competition patterns in the two auction mechanisms. In terms of welfare, speculation causes private value destruction and harms efficiency. Sellers benefit from the acquisition offer made by the speculator. Therefore, speculation comes at the expense of the auctioneer. In Chapter 3, I consider a procurement setting where suppliers may be functionally complementary, meaning they need to collaborate to complete a complex project. I compare two methods for incorporating complementary firms into procurement auctions: allowing them to bid jointly or using combinatorial auctions, such as the VCG auction, to coordinate their collaboration. The joint bidding approach leads to a double marginalization problem, as the prime contractor must elicit private cost information from subcontractors, and then submit a bid on behalf of the group. Consequently, the joint bidding approach often underperforms the VCG auction in several aspects, including efficiency, procurement price, and support for small businesses. Chapter 4 presents both theoretical and empirical analyses for recurring auctions. Auctions for durable assets, such as land, house, or artwork, are commonly recurring, as the seller often holds a subsequent auction after a previous attempt fails. Theoretical results show that recurring auctions outperform single-round auctions in terms of efficiency and revenue when potential buyers face costly entry. This occurs because recurring auctions allow potential buyers with different values to enter at different times, which generates savings in entry costs and increases the overall probability of sale. Additionally, optimal reserve price sequences are derived for recurring auctions based on whether the seller aims to maximize efficiency or revenue. In the empirical analysis, the theory is applied to home foreclosure auctions in China, where foreclosed homes are auctioned up to three times in a row. The study identifies the structural parameters in a recurring auction model and compares the observed recurring auctions to counterfactual single-round auctions. The results are in line with theoretical predictions, showing a significant improvement in efficiency and revenue for recurring auctions over single-round auctions. Using the optimal reserve price sequences derived from our model can further enhance the performance of recurring auctions in practice.
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    Essays in Gender and Development
    (2023) SIVARAM, ANUSUYA; Goldberg, Jessica; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This dissertation consists of three essays at the intersection of gender and economics in developing countries. In chapter 1, I study the economic implications of a particular cultural practice: cousin, or consanguineous, marriage. One sixth of all marriages in Egypt are between first cousins, but there are important differences in the characteristics of individuals who select into such relationships relative to those who marry non-relatives. To measure the causal impact of the practice on socioeconomic outcomes abstracting from selection, I instrument for the probability of marrying a cousin using exogenous variation in family structure, and use weak instrument robust methods to estimate parameters and evaluate statistical significance. I find that individuals who marry a cousin because of exogenous attributes of their natal family structure are further in age from their spouse, predominantly driven by older men marrying cousins. I also find that women married to cousins receive higher levels of marital transfers that give them bargaining power within their marriages, likely as compensation for their spouse's attributes. This contrasts to patterns for those who select into cousin marriage; those individuals are younger at the time of marriage, match with partners closer to their own ages, and have no differences in the level of marital transfers exchanged. The contrast between OLS and IV results suggests that selection into cousin marriage may be motivated by anticipation of not matching on the wider marriage market, credit constraints, or the desire to consolidate property within the extended family. In chapter 2, I present baseline statistics from an experiment which examines the impact of random job offers on women's experiences of intimate partner violence in Bangladesh. This paper build on a larger study which aims to increase women's labor force participation and use of mobile money services. I collect supplementary data on women's experiences of intimate partner violence, men and women's agreement with conservative social norms, and second order beliefs regarding their community's sanction of intimate partner violence. I validate survey measures of intimate partner violence with a list randomization elicitation. I also present results from two incentivized decisionmaking activities conducted at baseline. I specify the outcomes I plan to test once endline data is available, as well as the econometric specifications I will use. Finally, I present power calculations using baseline data to determine the smallest effect sizes I can detect. Finally, in chapter 3, I study the impact of an exogenous negative shock to labor demand for female migrants within Bangladesh. I use a difference in differences strategy and compare outcomes between districts that have a history of sending migrants with those that do not, before and after the shock. I find that migrants respond to the initial shock and return to their households rather than remain unemployed in Dhaka, and that at least some of these women marry. I see no decrease in the level of investment in children's human capital, which suggests households do not revise their perceptions regarding the returns to education, and have access to other tools to smooth consumption. Finally, I see no changes in the daily agricultural wage rate for women in the years after the shock. I lack data on several important margins of adjustment which would allow us to discern the mechanisms behind the effects.
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    Essays on Aspects of Education and Anti-corruption Policies in China
    (2023) Fang, Ming; Abraham, Katharine; Hellerstein, Judith; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This dissertation comprises three chapters that examine the outcomes of government policies pertaining to education and anti-corruption measures in contemporary China. The study investigates the impacts of these policies on diverse domains such as the marriage market, innovation activities in higher education, and citizens' political attitude towards the government. \underline{Chapter 1: The Effects of China's College Expansion on the Marriage Market (with Sai Luo)} Education policies can have crucial effects on the marriage market. In this chapter, we study the impacts of China's college expansion on the marriage market, with a special focus on its effects on the marriage outcomes of college-educated women and men. The empirical analysis is undergirded by a model featuring educational investment, marriage matching, and reductions in search frictions associated with the expansion. We estimate the effects of the expansion on marriage outcomes by exploiting geographic and birth-cohort variation in exposure to the expansion. Our analysis shows that, consistently with the predictions of the model, the expansion increased the marriage probability of college graduates. The expansion also increased the probability of college-college matches relative to the counterfactual of random matching and reduced the marriage age gap. Our findings highlight the important role of higher education institutions in shaping the marriage market. \underline{Chapter 2: (Mis)use of Power in the Ivory Tower: Evidence from Deans in Chinese Universities} \underline{(With Yuyu Chen and Xuan Wang)} In a hierarchical academic system, power can distort the allocation of research resources and output ownership. We study the role of power in intellectual property acquisition. Using biographical information of deans in elite universities in China, we find that the deanship increases their patent applications by 14\%. Further analysis suggests that the deanship effect is driven by misuse of power rather than ability or research resources. We provide causal evidence by showing that an anti-corruption campaign, which increases the cost of misusing power, contains the deanship effect. Finally, we find that misusing power distorts resource allocation. \underline{Chapter 3: Anti-Corruption and Political Trust: Evidence from China (with Weizheng Lai)} How can anti-corruption campaigns influence political trust in government? We investigate this question through the lens of China's recent anti-corruption campaign, launched in 2013, which has unprecedentedly disclosed many corruption investigations to the public. By analyzing a large individual panel dataset, we show that on average, the campaign has significantly reduced political trust, particularly among groups less informed about corruption before the campaign. We document strong heterogeneity in trust changes, possibly driven by a pro- and anti-government cleavage, as captured by previous unpleasant experiences with the government, pro-government indoctrination, and Confucian norms. Our results fit in a model where polarization is rationalized by differences in priors about the government. We also rule out several alternative explanations for our findings.
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    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.