Providing secure and reliable water supply service to major urban areas has become a considerable challenge in recent years on a global basis. Rapid population growth, urbanization and development needs put enormous pressure on water resource managers to satisfy the ever-growing demand. Climate change, in addition to the inherent variability in hydrological cycles, adds another layer of deep uncertainty to forecast surface water availability. Many major cities have observed declining reservoir storages during unprecedented droughts. The once-reliable reservoir storage systems can no longer serve its purpose. During extended period of water shortages, urban residents and businesses suffered from mandatory water restrictions, causing large economic and social welfare losses. Facing these challenges, water utilities and governments make large investments in supply augmentation infrastructure, which have long-term consequences that can shape development for decades. However, the increasing complexity of uncertainty suggests that the ability to predict the future is limited; hence, there is a need to shift from the conventional “predict-then-act” planning paradigm. This thesis presents an alternative framework to urban water investment planning, using a portfolio approach. A generalized risk-based framework for urban water supply-demand planning is proposed, and it is applied to Melbourne, Australia, to demonstrate its utility and usefulness. First of all, water shortage risk is clearly defined in two terms–frequency and severity of water shortages–of a defined planning horizon. Supply-side uncertainty is quantified based on probability distributions of precipitation and runoff to reservoirs. Demand-side uncertainty is modeled by scenarios with different combinations of population growth rate and per capita water usage. Next, the thesis presents an investment decision-making tool to identify cost-effective supply-demand portfolios that minimize water shortage severity while achieving a target level of reliable service. In addition to find the optimal portfolio composition, the model presents sequences of investments, indicating timing of implementation of each chosen measure. Using mixed integer programming, the decision-making tool yields Pareto efficient frontiers for different demand scenarios. The Pareto frontier exhibits trade-offs between cost of a water supply-demand strategy and water shortage risks facing a society in the long run. The trade-offs provide analytical insights on risk attitude towards water supply services, namely (i) what is the acceptable level of water shortage risk for a society, and (ii) how much are customers willing to pay to avoid such a risk. The results indicate that a portfolio which diversity risk of individual supply augmentation and conservation measures is robust when confronting a wide range of plausible climate and demand growth scenarios. Finally, recognizing important roles played by society and government in water-related investment decision-making process, the thesis discusses institutional barriers in adopting and implementing the proposed risk-based framework in practice. This thesis presents an alternative framework to quantitatively integrate risk in urban water resources management. Under this framework, the portfolio approach is an analytical tool for decision-makers to prioritize investments in supply augmentation infrastructure and implementation of demand management programs. It is the hope of the author that this work provides new insights and necessary tools to water sector professionals in urban water investment planning. The use of risk-based framework and portfolio approach is not limited to any specific city and could find many applications in urban areas where water scarcity and climate risk are pressing issues. / Engineering and Applied Sciences - Engineering Sciences

This dissertation explores intergenerational mobility and inequality in the early twentieth century. The first chapter asks whether economic downturns increase or decrease mobility. I estimate the effect of the Great Depression on mobility, linking a sample of fathers before the Depression to their sons in 1940. I find that the Great Depression lowered intergenerational mobility for sons growing up in cities hit by large downturns. The effects are driven by differential, selective migration: the sons of richer fathers are able to move to better destinations. The second chapter compares historic rates of intergenerational mobility to today. Based on a sample matched from the Iowa 1915 State Census to the 1940 Federal Census, I argue that there was more mobility in the early twentieth century than is found in contemporary data, whether measured using intergenerational elasticities, rank-rank correlations, educational persistence, or occupational status measures. In the third chapter, I detail the machine learning method used to create the linked census samples used in chapters 1 and 2. I use a supervised learning approach to record linkage, training a matching algorithm on hand-linked historical data which is able to efficiently and accurately find links in noisy in historical data. / Economics

In the following essays, I apply theoretical insights and experimental methods from behavioral science to address three questions at the intersection of environmental economics and consumer behavior. In Chapter 1, I use an experimental intervention to explore the role of salience in the willingness to pay for climate change mitigation. The long time horizon between the mitigation decision and the benefits of that decision may hinder optimal investment in climate change mitigation. The immediate costs of the decision loom large in the decision-maker's mind while the future benefits have lower prominence in their decisions. As a result, climate change mitigation decisions may be prone to salience bias. In an online randomized control experiment, I test whether tasks focusing attention on the risks and challenges of climate change will increase the willingness to pay for climate change mitigation. In the Letter treatment, the writing task is framed as a message directed to a particular individual living in the year 2050. In Essay treatment, the writing task is framed as an essay on the risks and challenges of climate change. I find that compared to a control group, both writing tasks that focus attention on the risks and challenges of climate change increase the willingness to donate to a climate change mitigation non-profit organization. However, the two treatments appear to operate through different pathways. These findings contribute to the understanding of how to effectively bridge the psychological distance between choice and consequence for climate change mitigation. They also have broader implications for the interplay between psychological distance and salience bias in a broad range of decision-making contexts. In Chapter 2, coauthored with Joseph Aldy, we model the consumer welfare impacts of gasoline price volatility under expected utility theory and prospect theory. The salience of gasoline prices among the U.S. public reflects consumer concerns about the price, and the uncertainty around the price, of gasoline. Volatility in gasoline prices reduces the ability of credit-constrained households to smooth consumption, and could result in substantial welfare losses for such households. Volatility reduces the information value of prices, which can undermine consumer decision-making for new investments. Gasoline price volatility may also reflect energy and environmental policies. As decision-makers compare the welfare impacts of policies that accomplish the same goal (e.g. reduce carbon dioxide emissions) but generate different levels of volatility in energy prices (e.g. fixed carbon tax compared to a fluctuating allowance price), the effects of consumer price volatility are often left out of the analysis. The goal of this research is to understand how energy price volatility affects consumer welfare. Focusing specifically on the gasoline market, we estimate the risk premium for increased gasoline price volatility due to a carbon allowance market. Under an expected utility theory model, households with highly inelastic demand or high-risk aversion tend to prefer fixed prices but have low risk premiums. Under a prospect theory model with reference-dependent utility, loss aversion leads to a strong preference for fixed prices with risk premiums around 2% of the average price. The salience of gasoline prices creates a strong reference point and the level of attention focused on "pain at the pump" when prices rise sharply implies loss aversion. Thus, prospect theory may be particularly well-suited to this market setting. By clarifying the welfare impacts of gasoline price volatility, we will better understand the full set of tradeoffs among energy policy options that have differential effects on fuel price volatility. In Chapter 3, I use a series of experiments to explore the impacts of eco-friendly labels on perceptions and evaluations of product attributes. Expectations may affect how people evaluate product attributes. If people expect different levels of performance from eco-products and regular products, then the presence of an eco-product label may bias their evaluations. Six experiments examine how expectations of the objective performance of eco-products affect perceptions of those products and subsequent product preferences. Holding objective performance constant, I find that prior expectations bias the evaluations of eco-product attributes. Expecting energy efficient bulbs to generate unpleasant lighting causes people to evaluate the lighting as unpleasant; expecting toilet tissue from recycled paper to be coarse causes people to evaluate the toilet paper as coarse. Using a study designed to isolate the effects on sensory perception, I find that expectations do not bias the sensory perception of product attributes. Instead, I find that consumers follow Bayesian predictions of combining prior expectations with a new perceptual signal to form posterior evaluations. This research may help explain the slower than expected take-up of energy efficient products (referred to as the "energy efficiency gap"), and the persistence of beliefs that eco-products underperform standard products, when many objectively do not. / Public Policy

Motivated by policy debates emerging from the U.S. Great Recession and Eurozone crisis, I study the stabilization role of monetary, fiscal, and macroprudential policies in response to short-run fluctuations. In the first essay on "Unemployment Insurance in Macroeconomic Stabilization", I characterize the role of unemployment insurance (UI) generosity as a particular instrument of fiscal policy, and use my framework to quantitatively evaluate the employment and welfare effects of UI extensions in the U.S. over 2008-13. In the second essay on "Labor Market Frictions in a Monetary Union", I study stabilization trade-offs and optimal monetary policy in a monetary union where labor markets are frictional and heterogeneous across member states, with implications for the sustainability of the Euro and policy of the ECB. In the third essay on "Firm vs. Bank Leverage over the Business Cycle", I develop a general equilibrium model explaining the contrasting cyclical behavior of non-financial corporate and bank leverage in U.S. data, and study its implications for macroprudential regulation in banking. Methodologically, these essays share a focus on building theoretical models of closed and open economies to address policy-relevant questions in macroeconomics, drawing on additional ideas from related fields such as public economics and finance. / Business Economics

Cooperation is abundant in the world around us, spanning all levels of biological and social organisation. Yet the existence and maintenance of cooperation is puzzling from an evolutionary perspective because the costs borne to cooperating individuals put them at an evolutionary disadvantage. We thus require an understanding of mechanisms and institutions that can enable cooperation to thrive and be maintained. In this dissertation, I discuss three issues that have presented, or currently present, a challenge to the sustenance of human cooperation. The first chapter addresses an issue of much contemporary debate – inequality. I ask how the well-documented, widespread lack of knowledge of income inequality in society affects the use of costly punishment and costly reward in maintaining public cooperation. When income inequality in a group is not known, the poorest group members are punished (for their low absolute contributions) while the richest are rewarded (for their high absolute contributions). Conversely, when income inequality is revealed, this outcome reverses: the poorest are rewarded (for their high percentage of income contributed) and the richest are punished (for their low percentage contributed). In my next dissertation chapter, I turn to study the emergence of large-scale cooperation. How can cooperation arise and remain stable in large groups? Although it has been argued that the standard reciprocity mechanism weakens in large groups, a simple, scalable intervention—dubbed “local-to-global” reciprocity—successfully maintains public cooperation in groups orders of magnitude larger than previously studied. Local-to-global reciprocity works to maintain group-level cooperation because individuals withhold cooperation from defectors in pairwise interactions as a form of punishment. In the last chapter, I investigate how we can cooperate with future generations: people today face the challenge that they must pay the cost of cooperation now to benefit people in the future who cannot reciprocate their actions. When people decide individually, the renewable resource quickly depletes leaving future generations empty-handed. When decisions today are made by majority vote, however, the resource is sustained for many generations. Voting works because it allows a cooperative majority to restrain a minority of present-day defectors. / Biology, Organismic and Evolutionary

This dissertation addresses institutional development in emerging economies, as well as its implications on firm strategy. Specifically, as emerging markets are characterized by “institutional voids”, that is, the absence of information or contracting intermediaries that effectively connect economic agents, I take imperfect information as a defining characteristic of emerging economies, and investigate how the ever-increasing societal demand for information disclosure and transparency affects firm behavior and competiveness. The three chapters of my dissertation examine “institutional voids” at product markets, labor markets and capital markets, respectively. In examining these questions, I utilized various empirical methods including natural, field and online survey experiments, and large-sample dataset econometric analyses.

This study investigates Japanese Prime Minister Shinzo Abe’s economic policy package, known as “Abenomics.” Abenomics is intended to end two decades of deflation in Japan, based on a Three Arrow approach (monetary policy, fiscal stimulus, and structural reform). This study examines how it is different from past policies and actions, its initial results, and the outlook concerning future results. In 1990, Japan’s asset bubble burst and the country became mired in two decades of deflation and low GDP growth. This study examines existing analysis and compare past policies to the present. It concludes that although the First Arrow (monetary policy) and Second Arrow (fiscal stimulus) have been able to achieve initial success, Abenomics may struggle to succeed without a firmly executed Third Arrow (structural reform). All three arrows are needed. However, many difficult barriers pose an obstacle for reform. American President Roosevelt also pursued aggressive measures in the 1930’s to take the United States out of the Great Depression. Roosevelt’s resolve was instrumental in his succeed. Japan will need seamless and simultaneous execution of the Three Arrows, along with aggressive Roosevelt Resolve to ensure success in its domain.

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