Modern macroeconomic models with a Keynesian flavour usually involve nominal rigidities in wages and goods prices. A typical model is static and combines wage bargaining in the labour markets and monopolistic competition in the goods markets. As central policy implication it follows that deregulating labour and/or goods markets increases equilibrium employment. We reassess the consequences of deregulation in a dynamic model. It still increases employment at the fixed point, which corresponds to the static equilibrium solution. However, deregulation may also lead to stability loss and endogenous fluctuations. / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

A central concern in economics is explaining the allocation of resources, its consequences for economic activity and the distribution of the associated economic revenues. This dissertation contains three essays examining the average and distributional effects of reallocations resulting from liberalization reforms or trade shocks. Chapter 1 examines the distributional effects of trade liberalization. A vast literature demonstrates that liberalization is associated with higher wage inequality. Nearly the entire literature considers comparative statics or steady states, which ignore dynamics and of necessity feature monotonic changes. I address these limitations by developing a micro-founded model that emphasizes the dynamics of reallocation between heterogeneous firms and workers in the presence of costly labor adjustments. Trade liberalization provides firms both new export markets and new sources of competition. Expanding high-paying firms increase wages to recruit better workers faster. Workers at firms threatened by competition accept wage cuts to delay their employers' exit and keep their job. This provides novel implications for both aggregate and within-firm inequality across a distribution of firm types. I show that key mechanisms of the model are consistent with a wide range of facts, some of which being examined in greater details in chapter 2. Results from the calibrated model suggest an overshooting of inequality on the path to a new steady state. This is consistent with evidence based on an event study of recent liberalization episodes. Inequality appears to peak about six years after liberalization, with one-fourth of the overshooting disappearing in the following ten years. Chapter 2 investigates the effects of firm growth on hiring and separations. I contribute to the literature on worker flows by studying the wages and characteristics of new and separated workers. First, I show that separations are an essential and robust component of firm growth. I argue that this may be the result of a more intense search for better matches at faster growing firms. Second, I find that wage offers to new hires increase with firm hiring rates. This is partly the result of the selection of more experienced workers. However fixed unobservable and variable observable worker characteristics cannot fully explain this relationship: the residual wage of new hires is significantly associated with the firm hiring rate. We interpret this as direct evidence of the firm-level upward-sloping labor supply curve predicted by the canonical models. We provide estimates of the slope of the curve using an instrumental variable approach to control for supply shocks. We find that a 10% increase in the hiring rate results in a wage increase of 1%. In chapter 3 Jaromir Nosal, Jonathan Vogel and I ask the following: What is the contribution of industry reallocation and productivity changes to the economic gains resulting from banking deregulation? How does local industrial structure determine the outcomes of banking deregulation? This chapter uses the staggered reforms of the banking sector in the U.S. between 1977 and 1997 to empirically investigate these questions. In the private sector, we show that the deregulation-induced reallocation of workers was directed towards industries with lower GDP per worker. Moreover, employment gains were associated with a reduction in productivity. Nevertheless we find that these effects are offset by across the board within-industry productivity gains. In addition, total output and aggregate productivity increased because of the reallocation of workers out of unemployment, self-employment and non-private industries towards the more productive private sector. Finally we find that initial industry mix can explain up to one third of the variation in state aggregate responses.

In a deregulated power market financial transmission rights (FTR) serve as a mechanism for protecting market participants from price variation resulting from network congestion. Possession of FTRs allows participants to recover congestion related losses resulting from unequal locational marginal prices that arise from out of merit dispatch. There exists different strategies for allocating FTR which are in use in the deregulated market. Designing a comprehensive framework for market specific FTR allocation that includes factors like unbalanced FTR, FTR for losses and AC-OPF is currently a major research issue in the deregulated power industry. This thesis develops a method for allocation of financial transmission rights that maximizes revenue while satisfying the system security constraints of alternating current (AC) networks and the revenue adequacy constraint of the financial market. Both the maximization of the FTR revenue and maintaining the constraints are accomplished through solving a modified version of the optimal power flow program. The methodology developed here considers allocation of both balanced and unbalanced point to point FTR obligations. The design of the framework is centered around three main scenarios that arise in the allocation of FTR. In the first scenario the total FTR bid quantity is much less than the total generation quantity available in the network. To maximize revenue the ISO will allocate the entire quantity and needs to only determine the loss quantity associated with the FTR quantity. In the second scenario the total FTR bid quantity is much greater than the total generation quantity available in the network. The ISO is required to determine the maximum allocatable FTR bid per bus in the network for the given generation limit in the network. A novel adaptation of the OPF program that maximizes the total FTR quantity allocated is run in this case to determine the maximum allocatable bid quantities. The third scenario is when the total FTR bid quantity is less than the total generation quantity available in the network but when the losses stipulated by the FTR quantity are added to the bid quantity the total generation capacity is exceeded. Here the novel adaptation of the OPF program is run to determine the maximum allocatable FTR bid quantity per bus (ceiling values). The original FTR bid quantities are then allocated upto the ceiling values determined. When multiple FTR bids are offered on a point-to-point node pair, allocation of FTRs among the bidders for that node pair is done through an auction process. Various auction strategies such as first price uniform, discriminatory auction, and second price uniform auction are considered. The performance of the FTR allocation process is evaluated for the above auction strategies through sample IEEE networks with 9 and 32 buses, available in the MATPOWER software.

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The research presented in this thesis aims to improve our knowledge regarding the impact of privatisation and deregulation of public service type infrastructure industries. In recent years, Australia's industry reform policies have critically relied on rapid deregulation of major utilities such as telecommunication, gas and electricity. Although several industries have been deregulated in the last two decades, our understanding regarding the impact of deregulation on residential electricity market is still developing. In order to accomplish the research, about 400 residential customers were surveyed and their electricity consumption patterns (ECP)were monitored by installing special electronic meters. The findings are discussed in detail. As an implication to policy and practice there is an urgent need for a nation-wide standard,reshaping the practices of the electricity marketing and establishing a time-dynamic ECP monitoring system. Another important implication concerns the well-founded theories in micro-economic literature. This research has established that the price of the commodities and services charged by public service type utility suppliers should not be left entirely to the market forces concerned with demand - supply equilibrium. There is an urgent need to understand the role of different socio-economic segments in contributing to the economic efficiencies of public service type assets. More efficient segments should be equitably rewarded for their contributions rather than penalised perhaps due to the lack of their bargaining power. / Doctor of Philosophy (PhD)

The introduction of deregulation and subsequent open access policy in electricity sector has brought competition in energy market. Allocation of transmission loss has become a contentious issue among the electricity producers and consumers. A closed form solution for transmission loss allocation does not exist due to the fact that transmission loss is a highly non-linear function of system states and it is a non-separable quantity. In absence of a closed form solution different utilities use different methods for transmission loss allocation. Most of these techniques involve complex mathematical operations and time consuming computations. A new transmission loss allocation tool based on artificial neural network has been developed and presented in this thesis. The proposed artificial neural network computes loss allocation much faster than other methods. A relatively short execution time of the proposed method makes it a suitable candidate for being a part of a real time decision making process. Most independent system variables can be used as inputs to this neural network which in turn makes the loss allocation procedure responsive to practical situations. Moreover, transmission line status (available or failed) was included in neural network inputs to make the proposed network capable of allocating loss even during the failure of a transmission line. The proposed neural networks were utilized to allocate losses in two types of energy transactions: bilateral contracts and power pool operation. Two loss allocation methods were utilized to develop training and testing patterns; the Incremental Load Flow Approach was utilized for loss allocation in the context of bilateral transaction and the Z-bus allocation was utilized in the context of pool operation. The IEEE 24-bus reliability network was utilized to conduct studies and illustrate numerical examples for bilateral transactions and the IEEE 14-bus network was utilized for pool operation. Techniques were developed to expedite the training of the neural networks and to improve the accuracy of results.

The U.S. trucking industry was deregulated with implementation of the Motor Carrier Act of 1980. After deregulation, increased concentration was observed in the general freight segment of the industry. The purpose of this study was to examine structural differences in general freight commodity carriers and to help explain the increased concentration. Cost functions were estimated for large and small carriers in order to see whether or not size related advantages exist. Although the hypothesis of constant returns to scale could not be rejected, significant structural differences were found between large and small carriers. The results imply that the services provided by large and small carriers are different. Presence of "economies of integration and "economies of route density" for large firms indicate the possibility of oligopoly in the general freight commodity trucking. / Graduation date: 1992

The introduction of deregulation and subsequent open access policy in electricity sector has brought competition in energy market. Allocation of transmission loss has become a contentious issue among the electricity producers and consumers. A closed form solution for transmission loss allocation does not exist due to the fact that transmission loss is a highly non-linear function of system states and it is a non-separable quantity. In absence of a closed form solution different utilities use different methods for transmission loss allocation. Most of these techniques involve complex mathematical operations and time consuming computations. A new transmission loss allocation tool based on artificial neural network has been developed and presented in this thesis. The proposed artificial neural network computes loss allocation much faster than other methods. A relatively short execution time of the proposed method makes it a suitable candidate for being a part of a real time decision making process. Most independent system variables can be used as inputs to this neural network which in turn makes the loss allocation procedure responsive to practical situations. Moreover, transmission line status (available or failed) was included in neural network inputs to make the proposed network capable of allocating loss even during the failure of a transmission line. The proposed neural networks were utilized to allocate losses in two types of energy transactions: bilateral contracts and power pool operation. Two loss allocation methods were utilized to develop training and testing patterns; the Incremental Load Flow Approach was utilized for loss allocation in the context of bilateral transaction and the Z-bus allocation was utilized in the context of pool operation. The IEEE 24-bus reliability network was utilized to conduct studies and illustrate numerical examples for bilateral transactions and the IEEE 14-bus network was utilized for pool operation. Techniques were developed to expedite the training of the neural networks and to improve the accuracy of results.

Abstract The Chinese government has fulfilled the policy of ¡§revolution opening¡¨ since 1979, and it has taken ¡§outside economy¡¨ and ¡§region incline¡¨ course to fulfill the programming development with ¡§southern, middle, and western¡¨ three-route region. The Chinese government has given the programming development to keep the initiative in its own hands to attract foreign capital, technology, and enterprise management experiences. Such a development has made Chinese economy grow up rapidly, and set up a political economic environment of socialism which has been filled with Chinese characteristics. The Chinese government has carried out the policy of ¡§the ninth five-year national development program prospect goal suggestion¡¨ in 1996. The policy indicates that Shanghai is the nuclear window which can be the connection between China and the world and plans to build Shanghai to be the center of international economy, trade, finance and shipping. Thus, Shanghai has started a diversely development that can attract international enterprises¡¦ investment largely. In the demand of market institution, the process of being developed has faced a serious problem that is a lack of enough enterprise management elites. Education funds and resources, total amounts of high colleges and equipments have shown up the imbalance of the Chinese government. In order to achieve the goal of training professional elites, the Chinese government takes ¡§building nation with technology education¡¨ as a main policy and ¡§distance education¡¨ as a main artifice, and uses communication channel as network and television to train enterprise management elites of ¡§fast, effort-saving, excellent, and few amount¡¨ to make development of human resource in China, which can grow up with Chinese economy at the same time. ¡§Shanghai long-distance education group¡¨ belongs to Shanghai City Government. It is the first long-distance institute allowed by China National Council to set up with grouping. It expands Chinese education resources, merges Shanghai Television University, Shanghai Education TV Company, Shanghai Electric Education Institute, Shanghai Television Secondary Training School, and Shanghai Calculator Assessment Application Office to set up the large information platform, and uses the entire development of Shin-shi Harbor in Shanghai City to provide with the service of elites-training in all kinds of fields, and improve the competitive ability of internationalization after participating in WTO by the way. The thesis takes qualitative research of ¡§grounded theory¡¨ to combine with document probe, personal participation, deep interview, and induces the practical development situation of prospect, mission, goal, and strategy of research objects with ¡§open coding¡¨, ¡§axial coding¡¨, and ¡§selective coding¡¨. The thesis also probes deeply the regulation and market-opening policy of the Chinese government, the evaluation of putting in education market with enterprise resources, vertical and horizontal revolution of internal organization, motivation of learning, position of marketing, institution of competition, effect of internationalization, and potential of development, contrasts with the relationship between dependent and dependent variables to prove those issues near the real situation, and predicts the prospective trend. The thesis is practical and marketable. Besides probing China long-distance education of training enterprise management elites, the thesis also expects to provide Taiwan¡¦s enterprises with some related criterions of investing in China and economic competition and cooperation between Taiwan and China. Moreover, the thesis finds out Chinese electric learning and the market opportunity of electronic commerce. It will be good for integrating the resources between Taiwan and China and it will create a peaceful and prosperous environment.

This dissertation examines game-theoretic equilibrium analysis applications to deregulated electricity markets. In particular, three specific applications are discussed: analyzing the competitive effects of ownership of financial transmission rights, developing a dynamic game model considering the ramp rate constraints of generators, and analyzing strategic behavior in electricity capacity markets. In the financial transmission right application, an investigation is made of how generators’ ownership of financial transmission rights may influence the effects of the transmission lines on competition. In the second application, the ramp rate constraints of generators are explicitly modeled using a dynamic game framework, and the equilibrium is characterized as the Markov perfect equilibrium. Finally, the strategic behavior of market participants in electricity capacity markets is analyzed and it is shown that the market participants may exaggerate their available capacity in a Nash equilibrium. It is also shown that the more conservative the independent system operator’s capacity procurement, the higher the risk of exaggerated capacity offers. / text