This dissertation analyses the impact of political and macroeconomic uncertainties on environmental outcomes and design of policy instruments.  The first essay examines how the rate of agricultural land expansion in tropical countries depends on the nature and persistence of new political regimes.  We use a novel panel data method that extends previous studies.  We find that both new autocratic and democratic regimes have accelerated the expansion of agricultural land, thus yielding support to some of the findings in the earlier literature.  Interesting differences emerge between regions, with the impact being most pronounced in Latin America.  The analysis is developed more formally using a simple competitive land use model with political regime dependent confiscation risk and agricultural subsidy policy.  The second essay evaluates the effectiveness of performance bonding for tropical forest concession management in achieving first and second best outcomes concerning reduced impact logging (RIL) standards.  As a novel contribution, this essay introduces a simple model of two-stage concession design, and focus on the impact of three complications: harvester participation constraints, government repayment risk, and imperfect enforcement.  We find several new and interesting results, in particular, imperfect enforcement and bond risk may deter implementation of bonding schemes as either the bond payment has to be set higher or the penalty mapping has to become more punitive.  Policy implications, including potential for mechanisms such as REDD+ in improving the bonding outcomes, and the degree of financial support required to guarantee full implementation of RIL, are also examined.  The third essay focuses on the relative performance of fixed versus intensity allowances in the presence of both productivity and energy price uncertainties.  Both allowance instruments achieve the same steady-state emissions reduction target of 20%, which is similar to the current policy proposals, and the regulator then chooses the allowance policy that has the lowest expected abatement cost.  We use a standard real business cycle (RBC) model to solve for the expected abatement cost under both policies.  Unlike previous studies, our results show that under a reasonable model calibration, fixed allowances outperform intensity allowances with as much as 30% cost difference. / Ph. D.

For more than a decade, to reduce the agency problem, various ways have been examined on how to align the interest of manager with shareholders. Evidence and empirical findings are conflicting on the agency problem. Recently, deferred compensation as one incentive compensation draws the attention as a means to incentivize CEOs to make them work for the firm. However, it is still not evident if deferred compensation has effect on aligning CEOs with the firm’s goal possibly due to the issue on data. Therefore, the first essay investigates if deferred compensation has the effect on the agency problem and on the firm performance improvement after dealing with the data issue. This paper mainly aims to investigate if there is the non-linear relationship between the investment choice problem and the deferred compensation as Jensen and Meckling (1976) claim. This paper concludes that deferred compensation from NQDC table has positive and significant effect on the firm performance and the investment choice problem. More importantly, following McConnell and Servaes (1990), this paper finds the curvilinear relationship between Tobin’s Q and the deferred compensation and can confirm Jensen and Meckling (1976) theoretical application. The second essay aims to clarify the understanding on the relationship between the firm’s cash holdings and its causes by introducing the more detailed relationship between cash holdings and macroeconomic uncertainty. While previous literature tries to explain the level of cash holdings mainly by the firm-level variables, this study considers the full impact of the macroeconomic uncertainty on the level of cash holdings by introducing the firm’s heterogeneous exposure to macroeconomic uncertainty to see if the heterogeneity can tell the difference in the change in the level of cash holdings. This paper finds that macroeconomic uncertainties measured by difference macroeconomic condition variables are significant and contribute to the change in cash holdings. Additionally, this paper shows that the firms’ different level of exposure to macroeconomic uncertainty can cause the different degree of cash holdings and that firms with the higher level of exposure have the higher level of cash holdings.