<p>This dissertation aims to introduce a new sequential Monte Carlo (SMC) based estimation framework for structural models used in macroeconomics and industrial organization. Current Markov chain Monte Carlo (MCMC) estimation methods for structural models suffer from slow Markov chain convergence, which means parameter and state spaces of interest might not be properly explored unless huge numbers of samples are simulated. This could lead to insurmountable computational burdens for the estimation of those structural models that are expensive to solve. In contrast, SMC methods rely on the principle of sequential importance sampling to jointly evolve simulated particles, thus bypassing the dependence on Markov chain convergence altogether. This dissertation will explore the feasibility and the potential benefits to estimating structural models using SMC based methods.</p><p> Chapter 1 casts the structural estimation problem in the form of inference of hidden Markov models and demonstrates with a simple growth model.</p><p> Chapter 2 presents the key ingredients, both conceptual and theoretical, to successful SMC parameter estimation strategies in the context of structural economic models.</p><p> Chapter 3, based on Chen, Petralia and Lopes (2010), develops SMC estimation methods for dynamic stochastic general equilibrium (DSGE) models. SMC algorithms allow a simultaneous filtering of time-varying state vectors and estimation of fixed parameters. We first establish empirical feasibility of the full SMC approach by comparing estimation results from both MCMC batch estimation and SMC on-line estimation on a simple neoclassical growth model. We then estimate a large scale DSGE model for the Euro area developed in Smets and Wouters (2003) with a full SMC approach, and revisit the on-going debate between the merits of reduced form and structural models in the macroeconomics context by performing sequential model assessment between the DSGE model and various VAR/BVAR models.</p><p> Chapter 4 proposes an SMC estimation procedure and show that it readily applies to the estimation of dynamic discrete games with serially correlated endogenous state variables. I apply this estimation procedure to a dynamic oligopolistic game of entry using data from the generic pharmaceutical industry and demonstrate that the proposed SMC method can potentially better explore the parameter posterior space while being more computationally efficient than MCMC estimation. In addition, I show how the unobserved endogenous cost paths could be recovered using particle smoothing, both with and without parameter uncertainty. Parameter estimates obtained using this SMC based method largely concur with earlier findings that spillover effect from market entry is significant and plays an important role in the generic drug industry, but that it might not be as high as previously thought when full model uncertainty is taken into account during estimation.</p> / Dissertation

This paper adopts an modle with endogenous variable to investigates policy inertia hypothesis or unobserved variable hypothesis in Taiwan¡¦s interest-rate rule 1981- 2010. Empirical result suggests that both policy inertia and omitted variable hypothesis are important in monetary policy in Taiwan,which is consistent with that of Gerlach- Kristen (2004).

Consumer segmentation based on expenditure are usually done by using observedcharacteristics, such as age and income. This thesis highlights the problem with negativeexternalities which Venice suffers from, due to mass tourism. This thesis aims to assesswhether unobservable heterogeneity can be used to detect latent classes within tourismexpenditure. Segmenting the tourism market using this approach is valuable for policy making.Segmenting is also useful for the actors in the market to identify and attract high spenders. Inthat way, a destination may uphold a sustainable level of tourism instead of increasing touristnumbers. The method used for this approach is finite mixture modelling (FMM), which is notmuch used within consumer markets and therefore this thesis also contributes to tourismexpenditure methodology. This thesis adds to the literature by increasing the knowledge aboutthe importance of unobserved factors when segmenting visitors.The results show that four latent classes are found in tourism expenditure. Some of thevariables, which are significant in determining tourism expenditure, are shown to affectexpenditure differently in different classes while some are shown not to be significant. Theconclusions are that segmenting tourism expenditure, using unobserved heterogeneity, issignificant and that variables, which are barely significant in determining the expenditure ofthe population, can be strongly significant in determining the expenditure for a certain class.

The post-2007 global financial crisis, characterised by huge firm losses, especially in the USA and Europe, initiated a new strand of literature, where default models are adjusted for unobserved risk factors, including measurement errors, missing firm specific and macroeconomic variables. These new models assume that default correlations are not only driven by observable firm-specific and macroeconomic factors, but also by unobserved risk factors. This thesis present three empirical essays. The first essay estimates and predicts the within-sector failure rate and dependence of firms on the London Stock Exchange. The study offers an additive lognormal frailty model that accounts for both unobserved factors and regime changes. The analysis reveals that during distressed market periods the sector-based failure rates and dependencies tend to be high. The second essay proposes a novel approach based on a bias-corrected estimator to investigate the impact of informative firm censoring and unobserved factors on hazard rates of US firms. The approach uses inverse probability of censoring weighted scheme that explicitly accounts for firm specific factors, economic cycles, industry-level dependence and market activities induced by unobservable factors. The analysis shows that during distressed market periods the effect of informative censoring averagely increases the hazards rates, and varies across industries. The third essay employs a mixed effects Cox model to estimate the failure dependence caused by firms’ exposure to country-based and group-level unobserved factors within the Eurozone. The empirical results show that a higher failure dependence among firms in groups of countries with similar economic and financial conditions than countries with different conditions. Overall, the thesis contributes to the empirical literature on firm default in the broad area of corporate finance by offering a different approach of capturing default dependence and its variations during unfavourable market conditions and adjusting for the effects of non-default firm exit on active firms.

This dissertation contains three essays on firm-sponsored training. Paper 1 develops a general theoretical framework in a frictional labour market to investigate how firms decide to sponsor how much general as well as specific training to workers assuming complementarity between the two types of training as well as education. It shows that firms’ profit maximizing decisions provide firms with an incentive to provide more training, general as well specific, to the more educated workers, more training for more educated workers may lead to low turnover rate, and the resulting life-time profile of firm-sponsored training is U-shaped or decreasing. The policy implications are that governments can subsidize both education and training to improve efficiency. Paper 2 and paper 3 try to provide empirical evidence from different perspectives, respectively determinants and effects of three types of firm-sponsored training, i.e., class-room training, on-the-job-training, and career-related but not job directly related training based on Statistics Canada’s Worker Place and Employee Survey (WES) of 2003/2004. The major empirical findings arising from our estimation results are: (1) Education is positively and significantly associated with the incidence of all three types of training, and significantly positively correlated with the intensity of on-the-job training. (2) Workers in larger firms are more likely to obtain classroom training and on-the-job training than workers in smaller firms. (3) Job tenure is significant and negative for the intensity of classroom training or on-the-job training. (4) Classroom-training and on-the-job training increases the average earnings of workers but less than average resultant firm-level productivity growth. Firm sponsored career related training has no significant impact on a worker’s earnings but increases the firm’s productivity significantly. All these findings by and large are consistent with the theory developed in first paper.

This dissertation contains three essays on firm-sponsored training. Paper 1 develops a general theoretical framework in a frictional labour market to investigate how firms decide to sponsor how much general as well as specific training to workers assuming complementarity between the two types of training as well as education. It shows that firms’ profit maximizing decisions provide firms with an incentive to provide more training, general as well specific, to the more educated workers, more training for more educated workers may lead to low turnover rate, and the resulting life-time profile of firm-sponsored training is U-shaped or decreasing. The policy implications are that governments can subsidize both education and training to improve efficiency. Paper 2 and paper 3 try to provide empirical evidence from different perspectives, respectively determinants and effects of three types of firm-sponsored training, i.e., class-room training, on-the-job-training, and career-related but not job directly related training based on Statistics Canada’s Worker Place and Employee Survey (WES) of 2003/2004. The major empirical findings arising from our estimation results are: (1) Education is positively and significantly associated with the incidence of all three types of training, and significantly positively correlated with the intensity of on-the-job training. (2) Workers in larger firms are more likely to obtain classroom training and on-the-job training than workers in smaller firms. (3) Job tenure is significant and negative for the intensity of classroom training or on-the-job training. (4) Classroom-training and on-the-job training increases the average earnings of workers but less than average resultant firm-level productivity growth. Firm sponsored career related training has no significant impact on a worker’s earnings but increases the firm’s productivity significantly. All these findings by and large are consistent with the theory developed in first paper.

This thesis contributes to the field of causal inference, where the main interest is to estimate the effect of a treatment on some outcome. At its core, causal inference is an exercise in controlling for imbalance (differences) in covariate distributions between the treated and the controls, as such imbalances otherwise can bias estimates of causal effects. Imbalance on observed covariates can be handled through matching, where treated and controls with similar covariate distributions are extracted from a data set and then used to estimate the effect of a treatment. The first paper of this thesis describes and investigates a matching design, where a data-driven algorithm is used to discretise a covariate before matching. The paper also gives sufficient conditions for if, and how, a covariate can be discretised without introducing bias. Balance is needed for unobserved covariates too, but is more difficult to achieve and verify. Unobserved covariates are sometimes replaced with correlated counterparts, usually referred to as proxy variables. However, just replacing an unobserved covariate with a correlated one does not guarantee an elimination of, or even reduction of, bias. In the second paper we formalise proxy variables in a causal inference framework and give sufficient conditions for when they lead to nonparametric identification of causal effects. The third and fourth papers both concern estimating the effect an enhanced cooperation between the Swedish Social Insurance Agency and the Public Employment Service has on reducing sick leave. The third paper is a study protocol, where the matching design used to estimate this effect is described. The matching was then also carried out in the study protocol, before the outcome for the treated was available, ensuring that the matching design was not influenced by any estimated causal effects. The third paper also presents a potential proxy variable for unobserved covariates, that is used as part of the matching. The fourth paper then carries out the analysis described in the third paper, and uses an instrumental variable approach to test for unobserved confounding not captured by the supposed proxy variable.

We estimate a multivariate unobserved components stochastic volatility model to explain the dynamics of a panel of six exchange rates against the US Dollar. The empirical model is based on the assumption that both countries' monetary policy strategies may be well described by Taylor rules with a time-varying inflation target, a time-varying natural rate of unemployment, and interest rate smoothing. The estimates closely track major movements along with important time series properties of real and nominal exchange rates across all currencies considered. The model generally outperforms a benchmark model that does not account for changes in trend inflation and trend unemployment. (authors' abstract) / Series: Department of Economics Working Paper Series

The purpose of the thesis is to introduce novel measure of real marginal cost in the New Keynesian Phillips Curve (NKPC) and compares its performance with conventional mea- sures such as output gap and labour share of income. Real marginal cost is derived from a flexible function whereas labour share is based on restrictive assumption of Cobb-Douglas technology. Dynamic correlations and results of NKPC indicate that real marginal cost is better than ad hoc measure of output gap and labour share. Given the heterogeneity in price setting behaviour across sectors, cost functions and NKPC are estimated for the agriculture, manufacturing and other sectors of Pakistan's economy. Real marginal cost is derived from static and dynamic cost functions. In the presence of adjustment costs, dynamic cost functions that are consistent and integrated with their static systems are required. Such dynamic translog cost functions are estimated after testing the theoretical properties and existence of long term relationships in the static functions. Cost attributes, marginal cost, total factor productivity, technological progress, demand and substitution elasticities are derived from static and dynamic functions. Three specifications of forward looking and hybrid form of the Phillips curves are estimated with real marginal cost, output gap and labour share. Results indicate that hybrid specifications perform better than the forward looking models in terms of goodness of fit and statistical significance. Further, comparison of Phillips curves estimated with real marginal cost, output gap and labour share indicate that real marginal cost performs better in explaining inflation dynamics in Pakistan. The results indicate that forward looking behaviour dominates and high level of nominal rigidities persists in Pakistan. Finally, hybrid form of the NKPC is estimated for a panel of sixteen Asian economies. With the consideration of heterogeneity and aggregation bias, the mean group, random coefficient and weighted average coefficients are derived from individual estimates. The unobserved time variant common factors cause cross correlation in the errors that may lead towards inconsistent estimates. Therefore, cross section averages of the explanatory and the dependent variables are augmented in hybrid specification to capture the effect of latent variables. Findings suggest that the discount factor is almost 0.94, the nominal rigidities are 33% and the weights of expected and past inflation are 66% and 33% respectively. Nominal rigidities of the Asian economies are lower than the estimates for US and Euro areas. The weights of expected and past inflation of the Asian economies are consistent with the US but lower than the estimates from the Euro areas.

This thesis contains three essays in microeconometrics and applied labor economics. In the first two essays, we estimate dynamic models of schooling choices and employment contract outcomes of the French population. The first essay focuses on the comparison between second-generation immigrants from Africa and their French-natives counterparts. We show that the gap in higher education attainments between those two sub-populations is mainly explained by parents' background and that schooling investment is the main determinant of the gap in permanent employment. The second essay investigates the role played by educational attainments on the employment contract transitions in the early career. We find that a first fixed term contract has a positive impact on the probability of employment in a permanent contract, except for a limited set of the population endowed with particular schooling attainments and unobserved characteristics. Globally, schooling attainments account for around one third of the variance in the probability of permanent employment. The third essay is devoted to the analysis of intra-firm promotions of American executives. We estimate a dynamic model of promotions, in which we disentangle the spurious and the causal impacts of the speed of past advancement. We find that the principal determinant of promotions is unobserved heterogeneity and that the speed of past advancement in the firm's hierarchy (fast tracks) does not have a causal impact on promotions. Functional area has a high explanatory power in promotion outcomes. / Cette thèse présente trois essais en microéconométrie et économie du travail appliquée. Dans les deux premiers essais, nous estimons des modèles dynamiques de choix d'éducation et de contrats de travail en France. Le premier essai s'intéresse à la comparaison entre immigrés de deuxième génération originaires d'Afrique et natifs de parents français. Nous montrons que l'écart dans l'accès aux diplômes d'éducation supérieure entre ces deux sous-populations est expliqué principalement par l'environnement parental et que l'investissement en scolarité est le principal déterminant de l'écart dans l'accès à l'emploi permanent. Le deuxième essai s'intéresse au rôle joué par la scolarité dans les transitions entre contrats de travail en début de carrière. Nous trouvons qu'un premier contrat à durée fixe a un impact positif sur la probabilité d'emploi dans un contrat permanent, excepté pour une partie limitée de la population, dotée de niveaux de scolarité et de caractéristiques inobservables particulières. Globalement, le niveau de scolarité atteint explique environ un tiers de la variance de la probabilité d'emploi permanent. Le troisième essai est dédié à l'analyse des promotions intra-firme de cadres américains. Nous estimons un modèle dynamique de promotion dans lequel nous séparons l'effet causal de l'effet artificiel de la vitesse des avancements passés. Nous trouvons que le principal déterminant des promotions est l'hétérogénéité individuelle inobservable et que la vitesse antérieure de progression dans la hiérarchie de la firme (fast tracks) n'a pas d'impact causal. La division d'appartenance dans l'entreprise a un fort pouvoir explicatif dans les promotions observées.