Master of Arts / Department of Economics / Lance J. Bachmeier / This thesis examines the properties of two short-term interest rates: the federal funds rate and the rate of return on 90-day Treasury securities (T-Bills). Findings indicate strong evidence of cointegration among the two series. This result leads us to consider whether future movements in T-bill returns are predictable using the same methods used to predict the target federal funds rate. The “Taylor Rule,” introduced by Taylor (1993), assumes the Federal Reserve considers inflation and the output gap in their deliberation of how to adjust the federal funds target rate. We do an in-sample analysis followed by an out-of-sample forecasting comparison. Findings show that, in addition to inflation and the output gap, the unemployment rate and stock market contain valuable information for forecasting future T-bill rates.

Doctor of Philosophy / Department of Economics / Dennis L. Weisman / Mandatory network unbundling is one of the foremost topics in regulatory economics today. The concept has crucial importance in the deregulation of many previously regulated industries including telecommunications, gas, electricity and railroads. Moreover, the topic has emerged as one of the more prominent issues associated with the implementation of the 1996 Telecommunication Act in the United States. Upon initial examination, establishing the correct costing standards and/or determining the correct input prices would seem important for sending the correct price signals to the entrants for their efficient make-or-buy decisions. Sappington (AER, 2005) uses a standard Hotelling location model to show that input prices are irrelevant for an entrant’s make or buy decision. In this first essay, we show that this result is closely related to the degree of product differentiation when firms are engaged in price competition. Specifically, it is shown that input prices are irrelevant when firms produce homogeneous products, but are relevant for make-or-buy decisions when the entrant and incumbent produce differentiated products. These results suggest that, in general, it is important for regulators to set correct prices in order to not distort the entrants’ efficient make-or-buy decisions. The second essay investigates optimal access charges when the downstream markets are imperfectly competitive. Optimal access charges have been examined in the literature mainly under the condition where only the incumbent has market power. However, network industries tend to exhibit an oligopolistic market structure. Therefore, the optimal access charge under imperfect competition is an important consideration when regulators determine access charges. This essay investigates some general principles for setting optimal access charges when downstream markets are imperfectly competitive. One of the primary objectives of this essay is to show the importance of the break-even constraint when first-best access charges are not feasible. Specifically, we show that when the first-best access charges are not feasible, the imposition of the break-even constraint on only the upstream profit of the incumbent is superior to the case where break-even constraint applies to overall incumbent profit, where the latter is the most commonly used constraint in the access pricing literature. Bypass and its implications for optimal access charges and welfare are also explored. The third essay is empirical in nature and investigates two primary issues, both relating to unbundled network element (UNE) prices. First, as Crandall, Ingraham, and Singer (2004) suggested, we will empirically test the stepping stone hypothesis using a state-level data set that spans multiple years. To do this, we will explore the effect of UNE prices on facilities-based entry. Second, in light of those findings, we will investigate whether the form of regulation (e.g. price cap and rate of return regulation) endogenously affects the regulator’s behavior with respect to competitive entry. Lehman and Weisman (2000) found evidence that regulators in price cap jurisdictions tend to set more liberal terms of entry in comparison with regulators in rate-of-return jurisdictions. This paper investigates whether their result is robust to various changes in modeling, including specification and econometric techniques.

Dans ce mémoire, je considère un modèle de sélection standard avec sélection non aléatoire. D’abord, je discute la validité et la ‘‘sharpness ’’ des bornes sur l’intervalle interquantile de la distribution de la variable aléatoire latente non censurée, dérivées par Blundell et al. (2007). Ensuite, je dérive les bornes ‘‘sharp ’’ sur l’intervalle interquantile lorsque la distribution observée domine stochastiquement au premier ordre celle non observée. Enfin, je discute la ‘‘sharpness’’ des bornes sur la variance de la distribution de la variable latente, dérivées par Stoye (2010). Je montre que les bornes sont valides mais pas nécessairement ‘‘sharp’’. Je propose donc des bornes inférieures ‘‘sharp’’ pour la variance et le coefficient de variation de ladite distribution. / In this master thesis, I consider a standard selection model with nonrandomly censored outcome. First, I discuss validity and sharpness of bounds on the interquantile range of the distribution of the uncensored outcome, derived by Blundell et al. (2007). Second, I give sharp bounds on the interquantile range respectively under stochastic dominance of the unobserved outcome distribution by the observed one, and in presence of an exclusion variable. Third, I discuss sharpness of the variance bounds given by Stoye (2010). I show that the bounds are not necessarily sharp and I provide sharp lower bounds on the variance and the coe fficient of variation.

Doctor of Philosophy / Department of Economics / Lance J. Bachmeier / This dissertation consists of three essays in nonlinear macroeconomic modeling and econometrics. In the first essay, we decompose oil price movements into oil demand (stock market) shocks and oil supply (oil-market) shocks, and examine the response of the stock market to these shocks. We find that when oil prices are “net-increasing”, a stock market shock that causes the S&P 500 to rise by one percentage point will cause the price of oil to rise approximately 0.2 percentage points, with a statistically significant positive effect one day after the stock market shock. On the other hand, the response of the stock market to an oil market shock is a decline of 6.8 percent when the price of oil doubles. For other days, the initial response of the oil market to a stock market shock is the same as in the net oil price increase case (by construction). We then analyze the response of monetary policy to the identified stock market and oil market shocks and find that short-term interest rates respond to the stock market shocks but not the oil market shocks. Finally, we evaluate the predictive power of the decomposed stock market and oil shocks relative to the change in the price of oil. We find statistically significant gains in both the in-sample fit and out-of-sample forecast accuracy when using the identified stock market and oil market shocks rather than the change in the price of oil. The second essay revisits the statistical specification of near-multicollinearity in the logistic regression model using the Probabilistic Reduction approach. We argue that the ceteris paribus clause invoked with near-multicollinearity is rather misleading. This assumption states that one can assess the impact of near-multicollinearity by holding the parameters of the logistic regression model constant, while examining the impact on their standard errors and t-ratios as the correlation (\rho) between the regressors increases. Using the Probabilistic Reduction approach, we derive the parameters (and related statisitics) of the logistic regression model and show that they are functions of \rho , indicating the ceteris paribus clause in the traditional account of near multicollinearity is unattainable. Monte carlo simulations in the paper confirm these findings. We also show that traditional near-multicollinearity diagnostics, such as the variance inflation factor and condition number can fail to detect near-multicollinearity. Overall, the paper finds that near-multicollinearity in the logistic model is highly variable and may not lead to the problems indicated by the traditional account. Therefore, unexpected, unreliable or unstable estimates and inferences should not be blamed on near-multicollinearity. Rather the modeler should return to economic theory or statistical respecification of their model to address these problems. The third essay examines the correlations between income inequality and economic growth using a panel of income distribution data for 3,109 counties of the U.S. We examine the non-spatial dynamic correlations between county inequality and growth using a System GMM approach, and find significant negative relationships between changes in inequality in one period and growth in the subsequent period. We show that this finding is robust across different sample sizes. We further argue that because the space-specific time-invariant variables that affect economic growth and inequality can differ significantly across counties, failure to incorporate spatial effects into a model of growth and inequality may lead to biased results.We assume that dependence among counties only arises from the disturbance process, hence the estimation of a spatial error model. Our results indicate that the bias in the parameter for inequality amounts to about 2.66 percent, while that for initial income amounts to about 21.51 percent.

Contrairement à l’hypothèse de David Harvey (1973) qui considère que le principe de redistribution prend progressivement la place de la réciprocité pour finalement donner lieu à l’économie du marché, nous croyons que c’est de l’intérêt de l’économie dominante de maintenir vivante l’économie morale subordonnée afin de faciliter l’accaparement du contrôle résiduaire des resguardos et ainsi garantir l’expansion du capital dans les territoires autochtones. Si le patronage est la forme d’organisation sociopolitique nécessaire à l’intégration des populations autochtones au marché, ce sont les économies morales précapitalistes qui contribuent à l’expansion du système capitaliste. Ainsi, l’économie morale autochtone devient un instrument de domination qui opère contre cette même population autochtone. Son opération demeure invisible si nous continuons à évaluer les droits autochtones dans le cadre d’un droit non-autochtone, et si nous analysons le problème dans le cadre des langages scientifiques difficilement fondés sur la pensée des populations concernées. Notre recherche aborde la question de l’accaparement du contrôle du point de vue normatif, en examinant les enjeux qui entourent l’entente qui a permis au secteur privé d’exploiter les terres de Wacoyo, une propriété collective localisée au sein de la dernière frontière agricole colombienne. / Contrary to David Harvey’s hypothesis (1973), who considers that the principle of redistribution gradually replaces reciprocity before leading to the market economy, we believe that it is in the interest of the dominant economy to keep alive the underlying moral economy in order to facilitate the residual control grabbing of the resguardos, and thus to guarantee the expansion of the capital in the indigenous territories. If patronage is the form of socio-political organization necessary for the integration of indigenous populations into the market, it is the pre-capitalist moral economies which contribute to the expansion of the capitalist system. Thus, the indigenous moral economy becomes an instrument of domination which operates against this same indigenous population. Its operation remains invisible if we continue to assess indigenous rights in the context of non-indigenous law, and if we analyse the problem in the context of scientific languages hardly based on the thinking of the populations concerned. Our research tackles the question of the control grabbing from a normative point of view, by examining the issues surrounding the agreement that allowed the private sector to exploit a land of Wacoyo, a collective property located within the last Colombian agricultural frontier.

Doctor of Philosophy / Department of Agricultural Economics / Vincent Amanor-Boadu / Allen M. Featherstone / Estimation of cost functions can provide useful economic information to producers, economists, and policy makers. From the estimation of a cost function, it is possible to calculate cost efficiency, economies of scope, and economies of scale. Economic theory specifies the cost function as a frontier since firms cannot operate at lower cost than the cost minimizing input/output bundle. However, traditional parametric estimation techniques often violate economic theory using two sided-error systems. The stochastic frontier method has allowed the estimation of a frontier but continues to restrict the technology through functional assumption. Nonparametric frontier estimation is an alternative approach to estimate a cost frontier by enveloping the data which by its construct, conforms to economic theory. This research expands the economic information available by deriving multi-product scale economies and product-specific scale economies from the nonparametric approach. It also tests its ability to accurately recover these important economic measures under different assumptions of the cost function, and cost inefficiency distributions. Next, this new method is compared to other methods used to estimate cost functions and associated economic measures including a two-sided error system, stochastic frontier method, and an OLS model restricting the errors to take on only positive values. Finally, the nonparametric approach with the new measures is applied to a sample of Kansas farms. The nonparametric approach is able to closely estimate economies of scale and scope from estimation of a cost frontier. Comparison reveals that the nonparametric approach is closer to the “true” economic measures than some parametric methods and that it is better able to extrapolate out of sample when there are no zero output firms. Finally, the nonparametric approach shows that potential cost savings from economies of scale and economies of scope exist for small Kansas farms. However, cost savings from economies of scale become exhausted when farms exceed gross annual revenues of $500k, while economies of scope also diminish as farms grow larger. Results also show from annual frontier estimations that estimates of economies of scale, scope, and cost efficiency have remained relatively stable from 2002 to 2011.

Doctor of Philosophy / Economics / Steven P. Cassou / The increase in commodity prices that has taken place in the past decade or so has resulted in renewed interest in the debate about the macroeconomic consequences of such price increase. Previous studies tend to assume that all commodity price shocks are alike and advocate a “one size fit all” policy response by monetary authorities, either by means of contractionary monetary policy to alleviate inflationary pressures or doing nothing, since these shocks are believed to have insignificant economic impact. This dissertation analyses the impact of fluctuations in commodity prices on the South African economy. The first chapter studies the impact of shocks to prices of four commodities on monetary policy variables. Results show that shocks to different commodity prices have different effects on the monetary policy variables, hence rejecting the “one size fits all” policy response by monetary authorities, as some researchers have suggested. Chapter two investigates the sectorial effects of commodity price shocks. The Dutch Disease hypothesis suggests that a boom in the natural resource sector shrinks the manufacturing sector through crowding out and appreciation of the real exchange rate. South Africa is a major exporter of a large number of commodities. Using a structural VAR framework this chapter analyzes the impact of shocks to different commodity prices on the production and employment levels in the manufacturing and mining sectors in South Africa. The results show that the commodity price boom has had a positive impact on both sectors, hence the manufacturing sector did not experience signs of the Dutch disease. Chapter three examines the volatility transmission between commodity prices and nominal exchange rate in South Africa. This chapter uses conditional and realized volatility models to estimate volatility in exchange rate, gold, platinum, oil, palladium and silver prices and then employs Granger-causality, Impulse Response analysis, Variance Decomposition and Ordinary Least Squares to analyze the volatility transmission from the commodity prices to the nominal exchange rate. The results show that there is volatility transmission from commodity prices to the nominal exchange rate, hence knowing the volatility in commodity prices would improve investor’s ability to manage risk in South Africa.

Cette thèse comporte trois essais sur les interactions sociales en sciences économiques. Ces essais s’intéressent à la fois au côté théeorique qu’empirique des interactions sociales. Le premier essai (chapitre 2) se concentre sur l’étude (théorique et empirique) de la formation de réseaux sociaux au sein de petites économies lorsque les individus ont des préférences homophilique et une contrainte de temps. Le deuxième essai (chapitre 3) se concentre sur l’étude (principalement empirique) de la formation de réseau sociaux au sein de larges économies où les comportement d’individus très distants sont aproximativement indépendants. Le dernier essai (chapitre 4) est une étude empirique des effets de pairs en éducation au sein des écoles secondaires du Québec. La méthode structurelle utilisée permet l’identification et l’estimation de l’effet de pairs endogène et des effets de pairs exogènes, tout en contrôlant pour la présence de chocs communs. / This thesis includes three essays on social interactions in economics, both from a theoretical and applied perspective. The first essay (chapter 2) focusses on the (theoretical and empirical) study of a network formation process in small economies characterized by the fact that individuals have homophilic preferences and a time constraint. The second essay (chapter 3) is focussed on the study (mostly empirical) of a network formation process in large economies characterized by the fact that distant individuals have approximately independent behaviours. The last essay (chapter 4) is an empirical study of peer effects in education for Quebec high-school teenagers. The structural method used allows for the identification and estimation of the endogenous peer effect and the exogenous peer effects, while controlling for the presence of common shocks.

Nous avons mené une étude empirique pour tester les conclusions théoriques d'un article de Foellmi et Oeschlin (2010), selon lesquelles la libéralisation commerciale accroît les inégalités de revenu dans les pays dont les marchés financiers sont affectés par des frictions. On réalise une régression sur des indices synthétiques de la distribution des revenus, de type Gini, de l’ouverture commerciale, en interaction avec un indicateur de disponibilité du crédit. On dispose d’un panel de pays en développement et de pays émergents, comprenant des données annuelles. Il apparaît que les signes de nos variables d’intérêts sont toujours cohérents avec l’analyse de Foellmi et Oeschlin, même après intégration de divers groupes de variables de contrôle et également lorsque les régressions sont effectuées sur des données agrégées par 5 ans. Néanmoins, les paramètres perdent en significativité pour certains groupes de variables de contrôle, certainement du fait de la faible qualité des données et de la taille relativement modeste de l’échantillon. / We lead an empirical analysis based on a model by Foellmi and Oeschlin (2010), in which trade liberalization increases income inequalities in developing countries where the credit market is imperfect. We build a panel of developing and emerging countries with annual observations and we regress synthetic indexes of inequality on trade, in interaction with a measure of financial development. The coefficients of interest are always consistent with Foellmi and Oeschlin's analysis, even if we add several control variables and if we perform the estimations on 5 yearsaverage observations. But the parameters lose significance after adding some control variables, because the estimations suffer of a lack of precision.

Cette thèse comporte trois essais sur les interactions sociales en sciences économiques. Ces essais s’intéressent à la fois au côté théeorique qu’empirique des interactions sociales. Le premier essai (chapitre 2) se concentre sur l’étude (théorique et empirique) de la formation de réseaux sociaux au sein de petites économies lorsque les individus ont des préférences homophilique et une contrainte de temps. Le deuxième essai (chapitre 3) se concentre sur l’étude (principalement empirique) de la formation de réseau sociaux au sein de larges économies où les comportement d’individus très distants sont aproximativement indépendants. Le dernier essai (chapitre 4) est une étude empirique des effets de pairs en éducation au sein des écoles secondaires du Québec. La méthode structurelle utilisée permet l’identification et l’estimation de l’effet de pairs endogène et des effets de pairs exogènes, tout en contrôlant pour la présence de chocs communs. / This thesis includes three essays on social interactions in economics, both from a theoretical and applied perspective. The first essay (chapter 2) focusses on the (theoretical and empirical) study of a network formation process in small economies characterized by the fact that individuals have homophilic preferences and a time constraint. The second essay (chapter 3) is focussed on the study (mostly empirical) of a network formation process in large economies characterized by the fact that distant individuals have approximately independent behaviours. The last essay (chapter 4) is an empirical study of peer effects in education for Quebec high-school teenagers. The structural method used allows for the identification and estimation of the endogenous peer effect and the exogenous peer effects, while controlling for the presence of common shocks.