<div>My dissertation consists of three independent chapters in the field of labor economics. The first chapter studies the economic forces underlying employment declines and skill upgrading in the U.S. manufacturing sector around the turn of the 21st century. The second chapter assesses the role of Japanese import competition in explaining stalled racial progress in the U.S. during the 1970s and 1980s. The third chapter explores end-of-life medical spending for dogs who have been diagnosed with cancer. </div><div><br></div><div>In the first chapter, I propose a new method to decompose employment changes by skill type into changes caused by output, labor supply, production task concentration, and labor-augmenting technology, using market equilibrium conditions within a constant elasticity of substitution production framework. I apply this method to manufacturing industries between 1990 and 2007, a period of steep employment declines for non-college workers. I find that labor-augmenting technology, by reducing labor per unit of output, is the leading source of displacement overall. However, a shift toward high-skill tasks is even more important in displacing non-college workers, who represent a majority of employment. In contrast, output changes have little influence on upskilling or aggregate job loss. In applications, I explore the impacts of import penetration from China and susceptibility to automation and offshoring. Of these, only offshoring is associated with some task upgrading, suggesting these mechanisms are not the primary drivers of this source of employment loss.</div><div><br></div><div>The second chapter is written with Timothy N. Bond. We assess the impact of the rapid rise in imports from Japan in the 1970s and 1980s on domestic labor markets. We use commuting zone level variation in exposure and stratify our outcomes by racial groups. We find it decreased black manufacturing employment, labor force participation, and median earnings, and increased public assistance recipiency. However these manufacturing losses for blacks were offset by increased white manufacturing employment. This compositional shift appears to have been caused by skill upgrading in the manufacturing sector. Losses were concentrated among black high school dropouts and gains among college educated whites. We also see a shifting of manufacturing employment towards professionals, engineers, and college educated production workers. We find no evidence the heterogeneous effects of import competition can be explained by unionization, prejudice, or changes in spatial mismatch. Our results can explain 66-86% of the relative decrease in black manufacturing employment, 17-23% of the relative rise in black non-labor force participation, and 34-44% of the relative decline in black median male earnings from 1970-1990. </div><div><br></div><div>The third chapter, written with Kevin Mumford, contributes to the literature on the causal effect of end-of-life medical spending by focusing on the pet health care industry. Using administrative records and an identification strategy based on the timing of pet health insurance benefit renewal, we create an environment in which arrival of insurance benefits is quasi-random. We focus on how the availability of health insurance reimbursement funds affects spending, veterinary visits, and mortality over a two-year period after a serious cancer diagnosis. Increases in the generosity of health insurance reimbursement causes increases in both spending and veterinary visits, but we do not find evidence of a causal effect on mortality.</div>

This thesis presents three dynamic stochastic general equilibrium models to answer three macroeconomic questions. In each model, I impose one or more frictions or constraints and analyse how these frictions affect macroeconomic dynamics. Chapter 2 studies the coordination of fiscal and monetary policies under optimal commitment and discretion policies under a New Keynesian framework. The chapter shows that when there is indexation in price setting which depends on the lagged output gap as in Steinsson (2003), under the optimal commitment policy, both fiscal and monetary policies have active roles in inflation stabilisation, even although debt follows a unit-root process. Under the optimal discretion policy, both fiscal and monetary policies have active roles in inflation stabilisation to drive debt back to the pre-shock level, consistent with Leith and Wren-Lewis (2008). Extending the model to include capital accumulation does not alter these results. Chapter 3 presents a microfounded two-country model of global imbalances and debt deleveraging. During global imbalances a sustained rise in saving in one country can lead to a worldwide fall in the interest rates and an accumulation of debt in the other country. When an ensuing deleveraging shock occurs as a result of the global financial crisis, the interest rates are forced further down. I show that in the presence of a liquidity trap the deleveraging country may face a combination of a large fall in output, deflation and real exchange rate appreciation, as a result of debt deflation. Chapter 4 adds a highly-leveraged financial sector to the Ramsey model and shows that this augments the macroeconomic effects of aggregate productivity shocks. My model is built on the financial-accelerator approach of Bernanke, Gertler and Gilchrist (BGG), in which leveraged goods-producers borrow from a competitive financial sector. In this chapter, by contrast, financial institutions are leveraged and subject to idiosyncratic productivity shocks. They obtain funds by paying an interest rate above the risk free rate, and this risk premium is anti-cyclical, and so amplifies the shocks. My parameterisation, based on US data, is one in which the leverage of the financial sector is two and a half times that of the goods-producers in the BGG model. This causes a much more significant augmentation of aggregate productivity shocks than that found in the BGG model.

Analyzing crimes through the scope of economics, this thesis explores the correlation between unemployment rate and crime rate, and other possible causes of surging crimes in China by using a fixed-effect regression model. Using provincial level panel data from 2000 to 2010, we did not find significant correlation between arrest rate and prosecution rate to unemployment rate. We found evidence that the Chinese government might intentionally controlled the unemployment rate at an artificially low and stable rate. Additionally, the set of ‘stern punishment’ campaigns during the 2008 Beijing Olympic games, causing a huge increase in arrest rate and police expenditure, could distort the overall trend of crime and unemployment. Moreover, we find a significant positive correlation between GDP per capita level, rural-urban income inequality and floating population to crime. Therefore, we recommend that the Chinese government should create social safety net that targets specifically at rural migrant workers. Not only that, reform and increase job opportunities in rural area is also urgent to close the income gap in rural and urban areas.

Thesis advisor: Peter Ireland / My dissertation consists of three papers on business cycles in developing countries. All the papers are different from each other and emphasize different aspects of understanding economic fluctuations in developing countries. The first paper is titled `Medium Term Business Cycles in Developing Countries' (with Diego Comin, Norman Loayza and Luis Serven). This paper models the link between business cycle fluctuations in developed countries with fluctuations in developing countries. Business cycle fluctuations in developed economies tend to have large and persistent effects on developing countries. We study the transmission of business cycle fluctuations from developed to developing economies with a two-country asymmetric DSGE model with two important features: (i) endogenous and slow diffusion of technologies from the developed to the developing country, and (ii) adjustment costs to investment flows. Consistent with the model, we observe that the flow of technologies from developed to developing economies co-moves positively with output in both developed and developing countries. After calibrating the model to Mexico and the U.S., it can explain the following stylized facts: (i) U.S. and Mexican output co-move more than consumption; (ii) U.S. shocks have a larger effect on Mexico than in the U.S.; (iii) U.S. business cycles lead over medium term fluctuations in Mexico; (iv) Mexican consumption is more volatile than output. The second paper of my dissertation is based on a price setting survey conducted by the State Bank of Pakistan (Central Bank). The paper is titled `Price-Setting Discoveries: Results from a Developing Country' (with M. Ali Choudhary, Abdul Faheem, Nadeem Hanif, and Saima Naeem) present the results of 1189 structured face-to-face interviews about price-setting behavior of the formal firms in the manufacturing and services sector of Pakistan. The key findings of the survey are:the frequency of price change is high in Pakistan, lowering the real impact of monetary policy. Price rigidity is mainly explained by firms caring about relative prices and the persistence of shocks. The exchange-rate and cost shocks are more important than financial and demand shocks for both setting prices and also the readiness with which these shocks pass-through to the economy. Formal sector firms with connections to the informal sector, especially through demand, have a lower probability of price adjustment. The lack of taxes and compliance with tax regime, i.e. enforcement are held responsible for existence of the informal sector by formal sector firms. The results from this paper provided motivation for the last paper of my dissertation about understanding and modeling the business cycle fluctuations in a developing economy like Pakistan. The last paper of my dissertation is titled `Modeling Business Cycles in Pakistan: A First Step'. In this paper, I establish the nature of short-run fluctuations of the Pakistani economy over the period of 1960-2010. There have been significant changes in the nature of the Pakistani economy over the last few decades. Therefore, I focus my detailed analysis on the last few decades where it seems more appropriate to investigate the nature and causes of business cycles in Pakistan. Furthermore, I evaluate the performance of a typical RBC and an augmented RBC model with an exogenous FDI shock in explaining cyclical fluctuations experienced by the Pakistani economy. I find that a simple RBC model does badly in terms of matching relevant second order moments of short run fluctuations as depicted by the data. However, augmented RBC model performs better compared to the simple RBC model. / Thesis (PhD) — Boston College, 2012. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Under the traditional land system in Iran there was little possibility for an increase in the agricultural output or a raise in the standard of living for the rural population; the land reform of 1962 brought change in the land ownership and in water rights. A ten-year period of the land reform may be divided into two separate phases: the first, the land reform of 1962-68 and the second, land reform corelated with agrarian reform 1968-72. Phase one established some social and economic independency for Iranian farmers, but since the technology applied by farmers did not change, the agricultural output increased only slightly. In 1968, with the beginning of phase two and the establishment of the Farm Corporation, the government instigated large-scale production utilizing new technology. From 1968 to October 1972, forty-three farm corporations were established. It is too early to analyze the result of the farm corporations since the production potential will depend on the differences in location between them and in the availability of credit given to them. In general, however, production may be improved by placing more land under cultivation in some of the corporations and providing additional man-power to supplement the farmer share-holder in others. The number of Farm Corporation members with respect to the total number of Iranian farmers is considerably small, thus it may be necessary for the government to supply facilities which would make the small landholder more efficient, such as supervised credit and technology that is more labor-intensive due to the availability of cheap labor. Therefore, with adequate supply of market facilities, Iranian agriculture has hope for a prosperous future.

This dissertation is composed of three essays on international trade and economic growth. The first essay investigates whether the content of what economies export matters for human capital accumulation. I construct a small open economy model and find that expansion of primary exports can harm human capital accumulation if the economy is initially allocating significant resources to primary goods production. Then I test this prediction empirically using Latin American data over the period from 1965 to 2010 and find robust evidence in support of the hypothesis that a shift towards primary exports reduces human capital accumulation. In the second essay, I investigate the effects of gravity variables (distance, common border, colony relationship, free trade agreement, or language) on preference and trade costs. This essay models the imports of the U.S. at the individual good level and uses the three-stage least square regression approach by focusing on the trade elasticities. Using actual data on trade costs, this essay decomposes the overall effects of gravity variables on trade into those through gravity channels: duties/tariffs, transportation costs, and dyadic-preference. The results imply that gravity variables mainly capture the effect of preference rather than trade costs (as implied by the existing literature). In the final essay, I examine the effects of increased demand from China on economic growth of the Latin American and the Caribbean (LAC) countries. This essay views the increased Chinese demand in the early 2000s as a quasi-natural experiment and considers it as a “treatment” to which a part of the LAC region was subjected. I adopt a difference-in-difference framework and find that China's demand did deliver significantly higher growth rates to LAC exporters over the last decade and a half.

This research examines direct and indirect mode of export in sub-Saharan Africa through a combination of theoretical and empirical analysis. We use firm-level data from 38 sub-Saharan Africa countries to test the theoretical findings. The first chapter analyzes a manufacturing firm that chose to export but faced with the discrete decision of choosing a mode of export. The firm weighs between exporting directly and indirectly. We investigate the factors that affect a firm's decision and compare the payoff in each scenarios viz., direct and indirect exports. We formulate a theoretical model for a single firm that can successfully choose from either export channels under various circumstances. Further, we compare the profits under either modes of export. We find that the profit of using direct export mode improves as a firm becomes more efficient, in which case the difference between the profits from using direct and indirect mode gets larger. Our empirical findings show similar relationships. The results also indicate that factors such as size of the firm, being a subsidiary of a multi-plant firm and access to information technology affect the choice to become direct exporter positively. On the other hand, a firm's increased perceptions of obstacles to current operation in the forms of lack of access to finance and corruption are associated with decreased probability of becoming direct-exporter. The second chapter's primary goal is to investigate the oligopolistic interdependence between direct and indirect exporters in the presence of government subsidy. It makes one main assumption that is government subsidy provision targets only direct exporters. In our analysis, we present the effects of pre-determined subsidy and subsidy as a function of levels of inefficiency of both mode exporters and competition between direct exporters. We find that the socially optimal subsidy is negative implying that the chosen policy instrument is a tax on the direct exporters. For both pre-determined and endogenous subsidy, we find that the level of efficiency of the firm affects export decision positively in either direct or indirect-mode exporters' cases. While, the efficiency level of one type mode exporter negatively affects the output of the other mode exporter. We also find that the indirect exporter's level of inefficiency positively affects optimal subsidy provision to the direct exporters, if the indirect exporter has a large market share. We find empirical evidence that support our theoretical findings. In the last chapter, we investigate the interdependence between the direct and indirect export modes of exporters by including domestic sales. Both our theoretical and empirical results indicate that level of exports and domestic sales are directly related to level of efficiency (or inversely related to inefficiency of the firm). However, level of cross-efficiency affects export and domestic sales negatively for both direct and indirect exporters. The empirical test also reveals that domestic sales and either forms of export sales are substitutes; change in domestic sales has a negative effect on both direct export and indirect export sales.

Evolution of the financial system involves continual institutional changes for reform purposes. However, reform experiences differed considerably from one country to another. Why is it that some countries can effectively implement reforms to foster successful development while others fail to do so? This study takes a first step in answering this question. It aims to explain the variations of financial reform experience in terms of informal institutional influence and highlight the importance of governance in shaping the reform outcome. The thesis studies governance characteristics that influence Taiwan's banking evolu- tion and examines the development of both formal and informal institutions. It argues that development of Taiwan's banking sector has been path-dependent and significantly influenced by informal institutions, which held back its recent reform progress. The study comprises three parts: theoretical framework, quantitative statistical research and qualitative country study. It applies the analytical framework set out in the theoretical part and draws on empirical evidences from quantitative research to form the basis for an empirical investigation into the historical financial development and recent reform experience in Taiwan. At the conceptual level, the research adopts the New Institutional Economics (NIE) framework and argues that governance bears a decisive importance for an effective reform because it fosters trust in the institutions and facilitates the reform by encouraging cooperative behaviours among actors. It identifies that governance of financial service industry is perceived from institutional qualities of property rights protection, corruption prevention, and political stability. Using the case of Taiwan's banking sector, the research explores the sector has been shaped and conditioned by the institutional contexts in which it operates. It discovers that that the underdeveloped mechanism for creditors' rights protection, collusion between financial businesses owners and politicians, deadlocked political situation with China contribute to weak governance which amplified its 1990s banking crises. It is observed that government's behaviours did not transform with the reform to form new habits and thoughts under the influence of the institutional persistence, hence only had limited success in inducing policy enforcement. In terms of policy implications, the research encourages policy makers to study historical development and to build upon existing initiatives taking into account the path-dependent environment and informal institutional embeddedness of implemented projects.

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The goal of this research was to determine which population factors were associated with iPad pricing differences across countries. Specifically, this paper measured the relationship between iPad prices in a given country and its U.S. dollar exchange rate, amount of income inequality, Gross Domestic Product per capita, luxury good sales growth, Individualism Index score, and population density. Panel data was collected for the iPad 2, the iPad Retina, and the iPad Mini tablets from 38 countries of varying geographic locations, economic paradigms, and political structures. The pooled data set yielded 114 observations in total. Regressing iPad price as a percent of national average income revealed a positive relationship between price and status consciousness as well as cultural individualism. There existed a negative relationship between iPad price and luxury sales growth. These results indicated that the iPad served as a status symbol with higher demand in countries that promoted individualism and exhibited higher degrees of income inequality.