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Poland has joined the European Union and is set to join the European Monetary Union (EMU) in the near future. Euro area membership involves potential costs and benefits. On the one hand, Poland will abolish the zloty/euro exchange rate and, as a result, transaction costs and exchange rate risk within the single currency area will be eliminated. On the other hand, it is argued that a single currency area implies the costs stemming from the sacrifice of autonomous monetary stabilization policy, which allows for an independent interest rate policy, and an exchange rate adjustment mechanism in the presence of country-specific shocks. This dissertation focuses on a quantitative assessment of the economic costs of joining the EMU. The evaluation of the volatility of main macroeconomic variables under the current inflation targeting regime and fixed exchanged rate is performed within an optimizing dynamic general equilibrium model of a small open economy with nominal rigidities. Model dynamics under terms of trade and world interest rate shocks are investigated. We find that the euro adoption implies a higher macroeconomic volatility. Analyzing the impact of terms of trade shock, the inflation targeting regime is more favorable, as an inability to devalue the currency under the euroization scenario leads to a slower recovery in demand for non-tradable goods and thus consumption. Considering the impact of a sudden decline in the world interest rate, an excessive zloty appreciation and the tightening of monetary policy under inflation targeting pushes the economy into a deeper recession compared to the adoption of the euro regime, while long-run implications are almost the same for the two scenarios. / Economics

Master of Arts / Department of Economics / William F. Blankenau / This paper describes the socioeconomic determinants of school dropout for Vietnamese children aged 11-18. It seeks to answer the following two questions: 1) What is the magnitude of the dropout rate for children between the ages of 11-18 and how does this figure change over time? 2) What are the determinants that affect the decision to drop out of school? This paper is based largely on the two Vietnam Living Standard Surveys (VLSS) conducted in 2004 and 2006. A probit model is used to ascertain the major determinants affecting the probability to drop out of school. The decision to drop out of school is affected by key factors including the child’s demographic characteristics (such as age, gender, ethnicity, and regions where they are living) and the child’s household’s situation (such as income per capita, cost of schooling, household size, and parental education). In particular, age and household size have significantly positive effects on the dropout probability. The dropout rate is also shown to vary between girls and boys, but this gender gap has narrowed substantially. Minority girls face more obstacles in staying school than minority boys. The school dropout rate is also very sensitive to changes in the household’s income and cost of schooling. However, the cost of schooling has different impacts on families in different quintiles. Region is another determinant affecting child’s decision to drop out of school. Vietnam’s population is unequally distributed in 8 regions with different socio-economic conditions, and hence the dropout situation is also regionally specific. Moreover, the parents’ perception of the value of education may increase the child’s probability of school retention. Since it is difficult to measure parental attitude to schooling, the paper uses parents’ education level instead, assuming that parents who have more education will appreciate education more.

Doctor of Philosophy / Department of Economics / Yang M. Chang / The first essay is on TRIPS (trade related intellectual property rights), biodiversity and North-South trade. This essay explores how true North-South trade and different IPR (intellectual property rights) regimes affect the level of biodiversity that is maintained by a Southern government. The results show that protecting farmers’ rights only is the regime that will be chosen by the Southern government and that will lead to the maximum level of biodiversity. This is important for policymakers as provisions for protecting farmers’ rights do not currently exist. This finding confirms previous results that did not include true North-South trade. Another result, and one that departs from existing literature, is that positive levels of biodiversity will be maintained by the Southern government if only international patent protection is implemented. The second essay focuses on factors that affect attendance at MLS soccer matches, in particular David Beckham. The primary results in the study are that David Beckham has a very large, statistically significant effect on attendance at MLS matches. This effect is estimated as at least a sixty-five percent increase in attendance in games Beckham plays in. Other results from this study are that there are no significant effects from the months matches are played and that the only day of the week with a significant effect is Saturday (its effect is positive). The results from this study provides insight to MLS as it faces upcoming decisions about designated players, such as Beckham, and about the calendar upon which the MLS season is played. The final essay is on moral hazard, market power and the demand for health insurance. The issue of health insurance is one of the main questions facing the U.S. government and its citizens. This essay explores the particular interaction of moral hazard and market power in the form of a duopoly in a pharmaceutical market. The results from this essay show that there are notable differences in the effects on the welfare of market participants under duopoly as compared to monopoly, such as the importance of cross-price effects that do not show up in a monopoly market.

Master of Arts / Department of Economics / Yang M. Chang / This paper empirically examines whether there is a tendency for trade-induced price convergence - in other words if price differences among city pairs separated by a border decline with increased levels of trade. The paper examines the prices of goods in cities across Brazil and Paraguay after the implementation of MERCOSUR. Evidence of a border effect - the failure of the law of one price - between Brazil and Paraguay is found. However, the data show that since the beginning of MERCOSUR, price dispersion between Brazil and Paraguay is less for those goods that are traded more between these partners.

Doctor of Philosophy / Department of Economics / William F. Blankenau / The first essay examines the allocation of education spending. Human capital investment in early childhood can lead to large and persistent gains. Beyond this window of opportunity, human capital accumulation is more costly. Despite this, government education spending is allocated disproportionately toward late childhood and young adulthood. The consequences of a reallocation are examined using an overlapping generations model with private and public spending on early and late childhood education. Taking as given the higher returns to early investment, the model shows the current allocation may nonetheless be appropriate. With a homogeneous population, this can hold for moderate levels of government spending. With heterogeneity, this can hold for middle income workers. Lower income workers, by contrast, may benefit from a reallocation. The second essay provides a detailed review of the human capital proxies used in growth regressions. Economic theory and intuition tells us that human capital is important for economic growth, and now most empirical growth studies include a human capital component. Human capital is a complex concept that is difficult to quantify in a single measure. A number of proxies have been proposed, with most focusing on an aspect of education. The consensus is that human capital is poorly proxied. For each of the most commonly used measures, I give a description, discuss trends, summarize the literature and results, compare advantages and disadvantages, and list data sets. This review will serve as a useful reference for any researcher including human capital in a growth regression. The final essay explores the importance of a variety of human capital measures for growth using the Bayesian Averaging of Classical Estimates (BACE) approach proposed by Sala-i-Martin, Doppelhofer, and Miller (2004). BACE combines standard Bayesian methods with the classical approach to address the problem of model uncertainty. A new data set is constructed that includes 35 human capital variables. The analysis shows that multiple human capital measures are robustly significant for growth. Some of these variables are IQ scores, the duration of primary and secondary education, average years of primary education, average years of female higher education, and higher education enrollment.

Master of Arts / Department of Economics / Wayne Nafziger / Although the ozone layer is vital to life on Earth, as a common resource it has been the subject of rational exploitation. With ozone depletion a global (rather than merely regional) problem, measures to address it have necessarily been international efforts. The international treaty that addressed ozone depletion, the Montreal Protocol (with its subsequent amendments), has widely been hailed as a success. However, the triumphs of the Montreal Protocol are inseparable from its Multilateral Fund, whose creation was a prerequisite for developing nations, including juggernauts China and India, to ratify the Protocol. Since its inception the Fund has supplied over $2.5 billion to initiatives that support the phase-out of ozone-depleting chemicals in developing nations. These projects have increasingly employed market mechanisms to achieve efficient results, and have generated positive profits for participating firms. Funded initiatives have included upgrading capital, educating maintenance workers, production buyouts, public awareness, and institutional strengthening. Aside from ensuring the success of the overall Protocol, this last item will likely be the Multilateral Fund’s most enduring legacy, as inherent shortcomings of the Fund have largely been attributed to its status as a pioneering financial mechanism. The Multilateral Fund has broken new ground in international environmental regulation and shown that success on ecological issues is indeed possible at the global level, leading many to hope that the Fund will serve as a model for future mechanisms to address climate change. While the more complex chemistry and economics of climate change make such a ready duplication of the Multilateral Fund’s success unlikely, the Fund’s role in strengthening institutions that address ecological concerns has undoubtedly smoothed the way for future international environmental action.

Thesis advisor: Francis M. McLaughlin / This thesis examines the impact of the hospital regulatory system in the state of Maryland. The system has been highly successful in lowering the gross charge-to-cost ratios that hospitals charge to their patients. In many states, these charge markups appear to be exorbitantly high, which is a great concern since the cost of health care is becoming more and more expensive for Americans. This thesis will include a description of the regulatory agency in Maryland, an explanation of how it works, and how it affects the Maryland hospital sector. Econometric analysis will then be employed in order to determine whether or not the regulatory system successfully helps hospitals reduce costs, a high priority objective of the system. In this model, Maryland hospital costs will be compared with nearby hospitals in Virginia. The paper will conclude with an evaluation of the merits of the system, and a recommendation on whether or not it would be useful in other states. / Thesis (BS) — Boston College, 2008. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics. / Discipline: College Honors Program. / Discipline: Economics Honors Program.

Thesis advisor: Richard Tresch / The Appalachia region has long been plagued by economic depression. Poverty is prevalent in this region, along with low income, and high unemployment. The Appalachian Regional Commission (ARC) was established in 1965 to promote economic development and alleviate poverty the historically lagging region. Until 1983 the ARC functioned under a growth center strategy that channeled funds to Appalachian areas that were more economically stable and appeared promising. In 1983 the ARC undertook a major change in policy with the introduction of the Distressed Counties Program, which shifted the focus and funds to counties in severe economic duress. My thesis uses regression analysis to test the effect of the Distressed Counties Program on poverty rates, unemployment rates, and real per capita income of the distressed counties in Appalachia. / Thesis (BS) — Boston College, 2007. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics Honors Program.

Thesis advisor: Alicia Munnell / Since 1975, Social Security retirement benefits have been tied to the Consumer Price Index to adjust for inflation. The CPI measures price changes for a market basket of goods and services designed to replicate the average consumer's expenditures. The elderly, however, consume a market basket different from that of the typical person. In particular, the elderly tend to purchase more medical services than other consumers. Because the price of medical care increases more rapidly than other prices, the inflation rate experienced by the elderly is greater than the inflation rate for the general population, even when controlling for the upward quality bias in the medical care component of pricing data. However, given that this difference in inflation rates is less than the size of the total measurement error in the CPI, recipients of Social Security retirement benefits are actually overcompensated for increases in inflation. Over the course of a beneficiary's retirement, this overcompensation results in a total benefit that is 5.4 – 6.6% greater than what the total benefit would have been under an ideal inflation indexing scheme. / Thesis (BA) — Boston College, 2005. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics Honors Program.