Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007. / Includes bibliographical references (p. 138-140). / This paper offers a set of explicit functional relationships that link energy and the economy. Despite the reliance on energy permeating the whole economy, no such complete relationships had been presented before. How related are energy and the economy? What role does energy play in the economic growth? Motivated to seek an explicit functional answer, I theorize the role of energy and then test it with economic models, using data for 16 OECD countries from 1980 to 2001. First, I find that energy is a cross-country representative good whose prices are equalized when converted to a reference currency. Thus, energy prices satisfy the purchasing power parity. For all but one country, the half life of the real energy exchange rate is less than a year and as low as six months, shorter than those derived by other real exchange rate measures. Second, considering energy a cross-time representative good, I obtain that a country's utility function is inversely proportional to both its income share of energy and its energy price. I also obtain an explicit, unified two-dimensional (cross countries and time) production function with energy and non-energy as the two inputs. Third, I conclude a cross-country parity relationship for income shares of energy, similar to that for energy prices. / (cont.) Further, I provide an intertemporal connection between the trajectory of the income share of energy and the productivity growth of the economy. Lastly, I demonstrate the tradeoffs between energy efficiency and economic wellbeing, with the energy price being the medium for the tradeoffs. One may apply the functional roles of energy offered in this paper to help frame the current global-scale issues that are energy relevant. / by Vincent H. Chang. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003. / Includes bibliographical references. / This dissertation is a collection of three essays which address several questions in corporate finance and taxation. The first essay uses a panel dataset of balance sheet and income information, taken from the tax returns of U.S. corporations, to study the relationship between bank competition and the financing of firms. Over the period 1987 to 1998, I find that in more competitive banking markets firms use less outside debt and more inside debt and equity than firms in less competitive banking markets. The evidence is consistent with models in which market power provides banks with implicit equity stakes in their borrowers, making banks more willing to begin lending relationships with borrowers whose projects are characterized by substantial asymmetric information or delayed payoffs. In the second essay, I reconsider the distortionary impact that the U.S. corporate and personal tax systems may have on organizational form choices by firms. I show that when Project choice is endogenous and when one considers the non-linear nature of the corporate tax schedule, it is not necessarily inefficient for a firm to choose to be a pass-through entity rather than a non-pass-through entity in response to differences in after-tax returns between the two entity types. I provide empirical evidence that is consistent with this theoretical point by examining the behavior of a sample of S corporations and C corporations. The third essay is co-authored with Daniel Bergstresser and James Poterba. In this essay, we use a panel dataset of mutual fund characteristics and returns from Morningstar, Inc. to develop measures of the effective capital gains tax burden mutual fund investors face on unrealized capital gains in mutual funds. We explore the determinants of the effective capital gains tax burdens and the impact they have on net inflows of savings into mutual funds. / by Rebecca Elizabeth Zarutskie. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 147-159). / The first chapter analyzes incentives and quality in hospitals with physician-investors. Proponents of physician ownership argue that it improves care; opponents claim that physician-investors "cherry-pick" profitable patients. This paper uses new data on physician-owned hospitals to estimate a model that allows for both cherry-picking and quality effects. The data contain information on the distribution of physician ownership across hospitals and I develop a probabilistic discrete choice framework to examine the selection behavior of physician-investors. A structural approach with instrumental variables provides estimates of hospital quality both on average and varying with patient characteristics. I estimate the model using a sample of non-emergency cardiac patients obtained from the Center for Medicare and Medicaid Services. I find evidence of a significant mortality improvement for patients treated at physician-owned hospitals, which primarily holds for moderate-severity patients. There is no strong evidence of physician-owner cherry-picking of healthier patients. The distribution of patients across hospitals is primarily driven by physicians' average preferences over hospitals. The second chapter explores price transparency in health care. Many U.S. states have recently begun requiring that hospitals publish prices, citing the need for consumer search. This paper uses two sources of longitudinal hospital data to evaluate the effects of Web-based price-posting requirements and on-site price-posting requirements on the distribution of hospital prices in nineteen states with such regulations. I find that transparency regulation is associated on average with small price increases, which is inconsistent with transparency enhancing consumer search. The effects are smaller among for-profit hospitals and in areas with a greater self-pay patient population. The third chapter (co-authored with Glenn Ellison) examines differences in the frequency with which students from different schools reach high levels of math achievement. Data from the American Mathematics Competitions is used to produce counts of high-scoring students from public U.S. high schools. High-achieving students are far from evenly distributed. There are strong demographic predictors of high achievement, but there are large differences among seemingly similar schools. The unobserved heterogeneity across schools includes a thick tail of schools that produce many more high-achieving students than the average school. Gender-related differences and other breakdowns are discussed. / by Ashley Swanson. / Ph.D.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 1999. / Includes bibliographical references. / I explore the recent attempts of Alaska Natives and American Indians to achieve self-determined economic progress by exploiting one-time, group-based wealth transfers. The results suggest caution when using such transfers as development tools. In Essays one and two, I analyze the Alaska Native Claims Settlement Act of 1971 (AN CSA), which transferred 44 million acres of land and 1 billion dollars to Alaska Native business corporations. After adjustment for windfall tax preferences and natural resource asset sales the 12 regional corporations lost 80 percent of their cash endowment -- about $380 million -- in business operations between 1973 and 1993. The corporations channeled resources toward investment, but the investment was not productive. Behind the poor average performance lies much cross-sectional variation which I explore using models from development theory and political economy. In a multi-sector framework, local business ventures based on the traditional economy earned positive returns, but were limited by small markets. Statewide enterprises made persistent losses of more than 20% per year. Oil investments produced mixed results. Joint ventures with non-Native firms performed better than wholly owned operations. Quasirents from Native employment were important to three firms -- the rest lost money without any countervailing employment. Case history evidence suggests that internal sharing networks and common preferences helped the high-employment firms to deliver both jobs and dividends. Overall, most variation in performance remains unexplained. In Essay three I estimate the welfare effects of reservation-based high-stakes bingo on individual American Indians, using differences-in-differences techniques applied to U.S. census microdata from 1980 and 1990. The economic decline of one large non-gaming tribe generates spurious average treatment effects. When this tribe is removed from the data the average gains to bingo-area Indians in hours worked, income, and poverty status are plausible but insignificant. Using bingo revenue as a measure of treatment intensity I find modest and significant positive effects of bingo revenue on hours worked and income. Using white people as additional controls corroborates these results and highlights the economic decline of Indians relative to whites. Against this decline any gains from bingo are small. / by Stephen G. Colt. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006. / Includes bibliographical references. / In Chapter 1, I study the efficiency properties of competitive search equilibria in economies with informational asymmetries. Employers and workers are both risk-neutral and ex-ante homogeneous. I characterize an equilibrium where employers post contracts and workers direct their search towards them. When a match is formed, the disutility of labor is drawn randomly and observed privately by the worker. An employment contract is an incentive-compatible mechanism that satisfies a participation constraint on the worker's side. I first show that in a static setting the competitive search equilibrium is constrained efficient, that is, it cannot be Pareto improved by a Social Planner subject to the same informational and participation constraints faced by the decentralized economy. I then show that in a dynamic setting, on the contrary, the equilibrium can be constrained inefficient. The crucial difference between the static and the dynamic environment is that the worker's outside option is exogenously given in the former, while in the latter it is endogenously determined as the equilibrium continuation utility of unemployed workers. Inefficiency arises because the worker's outside option affects the ex-ante cost of information revelation, generating a novel externality which is not internalized by competitive search. / (cont.) In Chapter 2, I explore whether match-specific heterogeneity, with or without full information, can amplify the responsiveness of unemployment rate and market tightness to productivity shocks. On the contrary, I show that heterogeneity can dampen the response of market tightness to productivity, once one calibrates the model to match two main facts: the finding rate and the finding rate elasticity to market tightness. First, I show a theoretical result for the steady state analysis in the extreme case of no aggegate shock. Then, I report the calibration exercise for alternative specification of the idiosyncratic shocks distribution. Chapter 3 is the product of joint work with Daron Acemoglu and constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share (despite the equilibrium reallocation of capital and labor away from that sector). We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb-Douglas production functions in each sector. / (cont.) In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. We investigate whether for realistic parameter values, the model generates transitional dynamics that are consistent with both the more rapid growth of some sectors in the economy and aggregate balanced growth facts. Finally, we construct and analyze a model of "non-balanced endogenous growth," which extends the main results of the paper to an economy with endogenous and directed technical change. This model shows that non-balanced technological progress will generally be an equilibrium phenomenon. / by Veronica Guerrieri. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010. / Cataloged from PDF version of thesis. / Includes bibliographical references (p. 135-144). / Chapter 1 analyzes Pareto optimal non-linear taxation of profits and labor income in a private information economy with endogenous firm formation. Individuals differ in both their skill and their cost of setting up a firm, and choose between becoming workers and entrepreneurs. I show that a tax system in which entrepreneurial profits and labor income must be subject to the same non-linear tax schedule makes use of general equilibrium effects through wages to indirectly achieve redistribution between entrepreneurs and workers. As a result, constrained Pareto optimal policies can involve negative marginal tax rates at the top and, if available, input taxes that distort the firms' input choices. However, these properties disappear when a differential tax treatment of profits and labor income is possible, as for instance implemented by a corporate income tax. In this case, redistribution is achieved directly through the tax system rather than "trickle down" effects, and production efficiency is always optimal. When I extend the model to incorporate entrepreneurial borrowing in credit markets, I find that endogenous cross-subsidization in the credit market equilibrium results in excessive (insufficient) entry of low-skilled (high-skilled) agents into entrepreneurship. Even without redistributive objectives, this gives rise to an additional, corrective role for differential taxation of entrepreneurial profits and labor income. In particular, a regressive profit tax may restore the efficient occupational choice. In chapter 2, which is joint work with Nick Netzer, we show that, in the presence of a time-inconsistency problem with optimal agency contracts, competitive markets can implement allocations that Pareto dominate those achieved by a benevolent planner, and they induce more effort. In particular, we analyze a model with moral hazard and two-sided lack of commitment. After agents have chosen a hidden effort and the need to provide incentives has vanished, firms can modify their contracts and agents can switch firms, resulting in an adverse selection problem at the ex-post stage. As long as the ex-post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals who choose different effort levels, the market allocation is Pareto superior to a social planner's allocation with a complete breakdown of incentives. In addition, even when a planner without commitment is able to sustain effort incentives, competitive markets without commitment implement more effort in equilibrium under general conditions. We illustrate our findings with standard market equilibrium concepts. Chapter 3 studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty and ex ante heterogeneous agents. I show that any such arrangement has to be such that ratios of expected inverse marginal utilities across different agents are independent of aggregate shocks. I use this condition to show how to implement Pareto-optima as equilibria when agents can trade claims to consumption contingent on aggregate shocks in financial markets. If aggregate shocks affect individual outputs only, the implementation of optimal allocations does not require interventions in financial markets. If they also affect probability distributions over idiosyncratic risk, however, transaction taxes need to be introduced that are higher for claims to consumption in states with a more volatile distribution of likelihood ratios in the sense of second-order stochastic dominance. Two implementation results are provided. If transaction taxes are constrained to be linear, they need to condition on individual outputs in addition to aggregate shocks. To prevent double-deviations, they induce additional risk for agents who buy financial claims and provide additional insurance to those who sell them. Finally, an implementation with non-linear transaction taxes that do not depend on idiosyncratic shocks is constructed. / . / by Florian Scheuer. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012. / Cataloged from PDF version of thesis. / Includes bibliographical references. / This thesis contains three essays on innovation, productivity, and talent allocation. The first essay explores a novel channel through which short-term economic fluctuations affect the long-term innovative output of the economy: innovators' accumulation of human capital. Using a newly constructed data set on the patenting history of all individuals obtaining a bachelor's degree from the Massachusetts Institute of Technology (MIT) between 1980 and 2005, I find that cohorts graduating during booms produce significantly fewer patents over the subsequent two decades. Initial economic conditions do not affect inventors' long-term occupational affiliation, suggesting that the main differences lie in their long-term level of inventive human capital. The decrease in patent output of cohorts graduating during booms is mainly from inventors with relatively low GPAs, and marginal patents receive fewer citations than the rest. The second essay uses the 2008 financial crisis as a natural experiment to study the characteristics of recent graduates from MIT bachelor programs who pursued a career in finance immediately after graduation. I find that finance competes against science and engineering graduate programs for the best talent from MIT but values academic skills less. As a result of endogenous skill development during college, financiers have significantly lower academic skills than students entering graduate school at graduation, despite having similar levels of raw academic talent measured at college entrance. Marginal financiers have lower starting salaries than average financiers, suggesting that there is positive selection into finance. The third essay examines the asset accumulation and labor force participation of Social Security Disability Insurance applicants. Using the RAND Health and Retirement Study panel data, I provide empirical support for the theory that an imperfectly screened disability insurance program encourages individuals who dislike work to save more in the present and plan to apply for disability insurance in the future, regardless of their future health. Despite exhibiting lower labor force attachment and earning less than accepted applicants, rejected applicants have significantly more assets immediately prior to their application, but not in the several years before. Although imperfect, the current screening differentiates the applicants in meaningful ways without using assets as an additional criterion. / by Pian Shu. / Ph.D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1997. / Includes bibliographical references (p. 131-134). / by Harrison G. Hong. / Ph.D.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2016. / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 154-160). / Economic agents often do not interact on the basis of some fixed prior information: choosing what to know is a central part of their interaction. The essays composing this thesis provide and apply theoretical tools to understand information as a choice variable. In the first essay on "Unrestricted Information Acquisition," I study costly information acquisition in games where players can acquire information not only about the state, but also about one another's information in a flexible way. Two main patterns emerges. First, in coordination games, players have a strong incentive to learn what others know: for instance, I show that this can explain the onset of phenomena such as bank runs or currency crises. Second, this incentive weakens as the game gets large and players small: for instance, I show that this leads nonfundamental volatility to vanish in many canonical large games. In the second essay on "Endogenous Informational Smallness," I deepen the investigation of unrestricted information acquisition in large games and show that players end up being informationally small in equilibrium. Information is valuable, but also costly: this is the tradeoff that makes information an economic good. Understanding the cost of information is challenging, since it usually reflects unobservable factors such as time, effort, and cognitive resources. In the third co-authored essay on "Rationally Inattentive Preferences," I highlight basic properties of the cost of information that can be assumed without loss of generality and are necessary and sufficient for identification from observable menu-choice data. / by Tommaso Denti. / Ph. D.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1993. / Includes bibliographical references (leaf 148). / by Tasneem Chipty. / Ph.D.