Essays On Economic Growth And Informational Frictions
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Essays On Economic Growth And Informational Frictions
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Author : Samuel Jaime Pienknagura
language : en
Publisher:
Release Date : 2011
Essays On Economic Growth And Informational Frictions written by Samuel Jaime Pienknagura and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This thesis consists of three chapters on Economic Growth and Informational Frictions. Chapter 1 investigates the relation between financial development, R&D expenditure and aggregate growth. It provides empirical evidence that financial development has a large positive effect on both growth and R&D, and that the effect of financial development on growth is likely to be explained by its effect on R&D. I also study a general equilibrium model in with predictions which are consistent with the empirical regularities mentioned above. In particular, aggregate growth increases as financial development increases. The model also predicts that financial development produces large welfare gains, specially at low levels of financial development. Finally I show that the model studied suggests that R&D policy is welfare improving and that policy should be conditional on the level of financial development. Chapter 2 gives an empirical assessment of the world income distribution. In particular, I take a CES production function implied by a Skill-Biased technical change model and fit this production function to the data. The calibration results give evidence of the importance of including different skills to account for the observed income differences over time. I also show that the calibration exercise is validated by the estimated values of the parameters of the model. In Chapter 3 I study a model of entry under uncertainty. In particular, I analyze an economy where potential entrants make entry decisions after receiving noisy signals of the true demand levels for the different sectors of the economy. I show that equilibrium strategies depend on the precision of the signals received by agents. When precision is low the equilibrium of the game is a pure strategy equilibrium where agents enter the sector for which they receive a higher signal. On the other hand when precision is high the optimal strategy is to randomize over which sector to enter. The model also highlights the non-monotonic relations between the discrepancy between the equilibrium and efficient entry levels and both the precision of the signal and the true relative demand between sectors.
Essays On Intermediated Corruption Financial Frictions And Economic Development
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Author : Elton Dusha
language : en
Publisher:
Release Date : 2013
Essays On Intermediated Corruption Financial Frictions And Economic Development written by Elton Dusha and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Essays On Information Frictions And The Macroeconomy
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Author : Andras Komaromi
language : en
Publisher:
Release Date : 2015
Essays On Information Frictions And The Macroeconomy written by Andras Komaromi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This dissertation is a compilation of three essays on the role of information frictions in macroeconomics. The first essay contributes to the literature on the impact of uncertainty on the business cycle. The cross-sectional dispersion of firm-level outcomes, such as sales growth or stock returns, is markedly countercyclical. Recent papers have framed this fact as evidence that exogenous "uncertainty shocks" are important drivers of business cycles. This paper provides empirical evidence that the co-movement of various dispersion measures with the business cycle is better understood as the economy's endogenous response to traditional first moment shocks - dispersion is the effect, not the cause. It then develops a theoretical model that links the cross-sectional dispersion of micro-level outcomes to the aggregate state of the economy. The mechanism is based on time-varying rational inattention. In bad times, firms pay more attention to idiosyncratic shocks hitting their business environment. More precise micro- level information about the underlying heterogeneity leads to higher dispersion in realized outcomes. In line with the empirical findings, the model generates countercyclical dispersion without relying on exogenous second moment (uncertainty) shocks. The second essay uses survey expectations to assess the microfoundations of an important class of macroeconomic models. Many theoretical macro models try to explain the pervasive nominal and real stickiness in the data by assuming rational decision-making under imperfect information. The behavior of consensus (average) forecasts is consistent with the predictions of these models, which can be seen as supportive empirical evidence for the models' microfoundations (Coibion and Gorodnichenko, 2012). This paper demonstrates, however, that the individual-level data underlying the consensus forecasts are at odds with this interpretation. In particular, I document that individual expectations in the Survey of Professional Forecasters do not pass a very weak test of rational expectations: current forecast revisions are strong predictors of subsequent forecast errors. Information frictions alone cannot explain this pattern. I go on to propose a simple modification of the noisy information framework that allows for a particular form of non-rational expectations: agents may incorrectly weight new information against their prior. I show that this parsimonious model can match the survey data along several dimensions. Using the structure of the model, I estimate the direction and size of inefficiencies in the expectations formation process. I find that in most cases agents put too much weight on their private information, which can be interpreted as overconfidence in the precision of private information. I also show that there is substantial heterogeneity across agents in the deviation from rational expectations, and I relate these differences to observable characteristics. Finally, I discuss potential interpretations of my empirical results and their implications for macroeconomic theory. The third essay explores the potential trade-off between competition and systemic stability in financial intermediation. Why do banks feel compelled to operate with such high leverage despite the risks this poses? Using a simple model, I argue that the degree of competition goes a long way in explaining capital structure decisions. On the one hand, information frictions (adverse selection) render debt a cheaper form of financing than equity. On the other hand, more reliance on debt increases the probability of bankruptcy, which results in the loss of the bank's charter value. The degree of competition affects charter values, and hence changes the way banks balance between these two forces. A panel analysis of European banks' capital structure around the introduction of the euro reveals statistically and economically significant effects consistent with this hypothesis. Banks, in particular smaller banks, decreased their equity ratios after entering the currency area. Complementary evidence suggests that this effect can be attributed to increased competitive pressures boosted by the euro.
Essays On Firms In Developing Countries
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Author : Jie Bai (Ph. D.)
language : en
Publisher:
Release Date : 2016
Essays On Firms In Developing Countries written by Jie Bai (Ph. D.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This thesis consists of three chapters on microeconomic issues of firms in developing countries and the impact of government policies on business growth. The first chapter examines firms' incentive to establish a reputation for quality. A key problem in developing countries is the lack of reliable provision of high quality goods and services. I designed an experiment to understand this phenomenon in a setting that features typical market conditions in a developing country: the retail watermelon market in a major Chinese city. I begin by demonstrating empirically that there is substantial asymmetric information between sellers and buyers on sweetness, the key indicator of quality for watermelons, yet sellers do not sort and price watermelons by quality. I then randomly introduce one of two branding technologies into 40 out of 60 markets-one sticker label that is widely used and often counterfeited and one novel laser-cut label. I track sellers' quality, pricing and sales over an entire season and collect household panel purchasing data to examine the demand side's response. I find that laser branding induced sellers to provide higher quality and led to higher sales profits, establishing that reputational incentives are present and can be made to pay. However, after the intervention was withdrawn, all markets reverted back to baseline. To rationalize the experimental findings, I build an empirical model of consumer learning and seller reputation. The results indicate that information frictions and fragmented markets lead to significant under-provision of quality in this setting. Though there is a high demand for quality, trust could take a long time to establish under the existing branding technology, which makes reputation building a low return investment. While the new branding technology enhances consumer learning, small individual sellers do not have the incentive to invest in this technology due to their small market size and market competition. The second chapter (co-authored with Seema Jayachandran, Edmund J. Malesky and Benjamin Olken) considers how local governments' bribe extraction could interact with firms' growth. We propose a model in which government officials' choice of how much bribe money to extract from firms is modulated by inter-jurisdictional competition. The model predicts that economic growth decreases the rate of bribe extraction under plausible assumptions, with the benefit to officials of demanding a given share of revenue as bribes outweighed by the increased risk that firms will move elsewhere. A second prediction is that the negative effect of growth on bribery is larger if firms are more mobile. We find empirical support for these predictions. In particular, we employ two instrumental variables strategies-one based on growth in a firm's industry in other provinces within Vietnam and another based on industry growth in neighboring China and find that growth causes a decrease in bribe extraction. Our results suggest that as poor countries grow, corruption could subside on "its own." Consistent with the model's predictions, we find that the effect is for firms whose property rights to their land are transferable and who have operations in multiple provinces, two proxies for geographic mobility. The third chapter examines the impact of internal trade barriers on firms' performance and export activities. It is well known that various forms of non-tariff barriers exist among Chinese provinces. However, empirically, it is difficult to measure these barriers because they can take many forms. I take advantage of an export VAT rebate policy reform in 2004 as a natural experiment to identify the existence of internal trade barriers and study the impact on TFP and resource allocation. In particular, as a result of shifting tax rebate burdens, the 2004 reform leads to a greater incentive for the provincial governments to block the domestic flow of non-local goods related to exporting. I find that foreign trade companies in the coastal region become more "inward-looking" in the years after the reform, consistent with rising local trade barriers. The value of exports through intermediaries grows less in the inland region relative to the coastal region, and the negative effect is larger in inland provinces with greater exposure to the reform, measured using baseline reliance on trade through intermediaries. I extend the standard open-economy heterogeneous firm model by adding an intermediary sector as in Ahn, Khandelwal and Wei (2011) but with a new focus on the intermediary's role of domestic sourcing. The model can be used to analyze general equilibrium effects, examine firms' entry and exit into exporting, and quantify the distortion on TFP.
Essays On International Trade And Economic Development
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Author : Zhimin Li
language : en
Publisher:
Release Date : 2018
Essays On International Trade And Economic Development written by Zhimin Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This dissertation consists of three chapters regarding international trade and economic development. In the first two chapters I explore how China’s economic rise to the global stage affects resource allocations inside and outside the country, and in the third chapter I present a new method to infer risk sharing regimes pertinent to studying consumption behavior in developing countries. The first chapter studies how the "China shock"--the remarkable growth in China's productivity and trade activities since its accession to the World Trade Organization (WTO)--affects China's labor market and real exchange rate dynamics. I apply a dynamic trade and spatial equilibrium model to jointly explain two distinctive features of China's economic growth: the structural transformation, as characterized by the reallocation of labor from agriculture to manufacturing and services, and the sluggish appreciation of the real exchange rate, a puzzle from the perspective of a standard international economics model. The model highlights the role of the subsistence sector in shaping the patterns of the structural transformation and real exchange rate dynamics. Using inter-regional trade and migration data, I calibrate the model to decompose the ``China shock" into productivity shocks and trade shocks and show that the two features above arise naturally from the interaction between the labor market and observed shocks to productivity and trade costs. I find that while productivity growth is the primary source of the structural transformation, the accession to the WTO explains about 35% of the rise in the employment share and 20% of the increase in the real wage in the manufacturing sector. Welfare gains from the "WTO entry" are 27% on average and would be larger if complemented by relaxing labor restrictions further. By accounting for trade costs, the subsistence sector, and labor market frictions, the model generates dynamics for China's real exchange rate consistent with the data. The second chapter studies the effects of real estate investments by foreign Chinese on local economies in the United States. This chapter is co-authored with Leslie S. Shen and Calving Zhang. We document an unprecedented surge in housing purchases by foreign Chinese in the US over the past decade and analyzes their effects on US local economies. Using transaction-level data on housing purchases, we find that the share of purchases by foreign Chinese in the California real estate market increased more than tenfold during the period of 2007-2013 relative to earlier years. In particular, these purchases have been concentrated in zip codes that are historically populated by ethnic Chinese, making up for more than 10\% of the total real estate transactions in these neighborhoods in 2013. We exploit the cross-sectional variation in the concentration of Chinese population settlement across zip codes during the pre-sample period to instrument for the volume of housing purchases by foreign Chinese. Our results show that housing purchases by foreign Chinese significantly increased local housing prices as well as local employment. Our evidence highlights the role of foreign investments in local employment, especially in times of economic downturns. The third chapter proposes a novel approach to test alternative theories of risk sharing--full insurance, self-insurance, and private information--in a unified framework. Given the prevalence of informal insurance in developing countries to share consumption risks, studying risk sharing regimes is important. A distinguishing feature of the framework presented in this chapter is that it accounts for aggregate shocks and does not require data on interest rates, an important advantage for studying rural economies. Applying the approach to a longitudinal dataset from Tanzania, I reject models of full insurance and private information and find evidence of self-insurance. An incorrect inference on the insurance regime could underestimate the welfare loss from risk by as much as ten times.
Essays On Imperfect Information And Economic Growth
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Author : Niloy Bose
language : en
Publisher:
Release Date : 1995
Essays On Imperfect Information And Economic Growth written by Niloy Bose and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with categories.
Other People S Money
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Author :
language : en
Publisher:
Release Date : 2012
Other People S Money written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
"This dissertation investigates capital market frictions across three themes. The first theme is sovereign debt. Recent experience in the EU shows that it can be complex to enforce the repayment promises of states. Furthermore, governments are better informed about their repayment capacity than creditors are. This dissertation argues that enforcement and information problems explain why states issue simple debt contracts that frequently lead to debt crises. Such contracts are optimal because they save on costly audits by creditors. The second theme concerns collective pension funds. It is often argued that pension funds can enhance the welfare of their participants. This dissertation highlights one rationale for pension funds based on credit constraints. Pension funds' actual ability to increase welfare may be limited due to an agency problem. The third theme concerns political intervention in capital markets. Financial liberalization and expanded access to capital are historically seen as signs of greater freedom. Yet many democratic states choose to restrain the resource allocation called for by free capital markets. This dissertation argues that democracies may choose to introduce restraints on free capital markets-thereby favouring income stability over economic growth-depending on demographical context, the distribution of wealth, and the rate of technological progress."--Achterplat.
Other People S Money
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Author : Mario Ronald Christian Bersem
language : en
Publisher:
Release Date : 2012
Other People S Money written by Mario Ronald Christian Bersem and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
"This dissertation investigates capital market frictions across three themes. The first theme is sovereign debt. Recent experience in the EU shows that it can be complex to enforce the repayment promises of states. Furthermore, governments are better informed about their repayment capacity than creditors are. This dissertation argues that enforcement and information problems explain why states issue simple debt contracts that frequently lead to debt crises. Such contracts are optimal because they save on costly audits by creditors. The second theme concerns collective pension funds. It is often argued that pension funds can enhance the welfare of their participants. This dissertation highlights one rationale for pension funds based on credit constraints. Pension funds' actual ability to increase welfare may be limited due to an agency problem. The third theme concerns political intervention in capital markets. Financial liberalization and expanded access to capital are historically seen as signs of greater freedom. Yet many democratic states choose to restrain the resource allocation called for by free capital markets. This dissertation argues that democracies may choose to introduce restraints on free capital markets-thereby favouring income stability over economic growth-depending on demographical context, the distribution of wealth, and the rate of technological progress."--Achterplat.
Essays Is Bank Competition And Credit Policy
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Author : Gustavo Passarelli Giroud Joaquim
language : en
Publisher:
Release Date : 2020
Essays Is Bank Competition And Credit Policy written by Gustavo Passarelli Giroud Joaquim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This thesis estimates the eect of competition in the financial sector using both individual level data and economic theory, and explores the role of credit policy in mitigating potential adverse effects of imperfect competition. The first essay uses heterogeneous exposure to large bank mergers to estimate the eect of bank competition on both financial and real variables in local Brazilian markets. Using detailed administrative data on loans and firms, we employ a difference-in-differences empirical strategy to identify the causal eect of bank competition. Following M&A episodes, spreads increase and there is persistently less lending in exposed markets. We also find that bank competition reduces employment. We develop a tractable model of heterogeneous firms and concentration in the banking sector and show that the observed effects in the data and predicted by the model are consistent. Among other counterfactuals, we show that if the Brazilian lending spread were to fall to the world level, output would increase by approximately 5%. The second essay develops a contract-based model of industrial organization for markets characterized by information and other frictions (Moral Hazard, Limited Commitment, Adverse Selection etc.) and dierent market structures (Monopoly, Oligopoly, Competition), the latter driven by spatial costs, idiosyncratic preferences, and number of financial service providers. We derive a likelihood estimator for the structural parameters that determine contracting frictions and market structure and apply this to the Townsend Thai data on small and medium enterprises and bank locations. Our model of production is microfounded and thus can be used for a broad set counterfactuals. The third essay explores the role of credit policies to mitigate the effects of lack of competition in the financial sector. In many emerging markets, governments try to increase credit access and stimulate economic growth by imposing caps on lending rates. We analyze these policies by extending workhorse models with financial frictions to include a banking sector with market power. Caps are beneficial as they reduce credit costs but are also harmful as they crowd out risky borrowers which can access credit only at high interest rates, and thus have an ambiguous effect in current output and capital accumulation. We show that the optimal policy to maximize steady state welfare involves relatively high caps on a large share of bank loans. The optimal policy decreases output today, but increases capital accumulation through a lower cost of credit and thus output in the future. Thanks to tractable aggregation properties, the framework can be used to analyze a broad set of alternative credit policies.
Essays On Student Debt Unemployment And Labor Market Outcomes
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Author : Jin Yan (Ph. D. in economics)
language : en
Publisher:
Release Date : 2022
Essays On Student Debt Unemployment And Labor Market Outcomes written by Jin Yan (Ph. D. in economics) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
This dissertation focuses on studying the effect of certain life events including accumulating student debt and incidences of unemployment on workers' labor market outcomes. The chapters use economic models to guide empirical analysis and find that both student debt and unemployment experience can negatively impact workers' future earnings. The models in Chapter 2 and 3 both feature imperfect information about workers' underlying ability and learning through noisy productivity signals over time. Both chapters suggest that information frictions in the labor market can be costly. Chapter 2 develops and estimates a model of career choices and experimentation featuring imperfect information, risk aversion, and incomplete markets. The model emphasizes the importance of career experimentation in driving earnings growth and shows that information frictions cause risk-averse graduates with student debt to choose a safe career path with a flatter experience-earnings profile which is consistent with the empirical results. Chapter 3 finds that the longer a worker is unemployed, the less he earns initially coming out of an unemployment spell, but the wage penalty of unemployment duration decreases over time. The findings are consistent with the prediction of the employer learning with statistical discrimination model developed in Altonji and Pierret (2001) which suggests that information frictions can motivate profit-maximizing employers to use unemployment duration as a negative signal to predict workers' productivity at the time of hire, put extra negative weight on unemployment duration when making initial wage offers, and alleviate it only after learning about workers’ underlying ability. Chapter 4 presents a flow-based methodology for real-time unemployment rate projections to characterize the evolution of the unemployment rate during the recession triggered by the COVID-19 pandemic. In particular, the chapter analyzes fluctuations in the unemployment rate through the lens of labor market flows and this approach performed considerably better at the onset of the COVID-19 recession in spring 2020 in predicting the peak unemployment rate as well as its rapid decline in the following months. The predictive power of the methodology comes from its combined use of real-time data with the flow approach