Essays on Health Economics and Consumer

Summary: My dissertation is a collection of work in health economics and household finance. In the first chapter, I study how healthcare providers alter the quantity and quality of care they deliver after limitations are placed on how much they can charge uninsured patients. In the second chapter, I examine trends and potential explanations for the extreme variation that exists among list prices for services at different hospitals. In the third chapter, I assess retirement preparedness by comparing the wealth accumulation of successive generations of Americans. In the fourth chapter, I study the effects of financial education delivered to elementary students through a randomized experiment. References: John Karl Scholz (Primary Advisor) – [email protected] J. Michael Collins (UW Center for Financial Security) – [email protected] Chris Taber – [email protected] Papers: “How do Financial Incentives affect Hospital Care and Health Outcomes? Evidence from Fair Pricing Laws” (Job Market Paper, with Benedic Ippolito) “Mystery of the Chargemaster: Examining Variation in Hospital List Prices” (with Benedic Ippolito) “Not Your Father's Retirement?” “Experimental Evidence on the Effects of Financial Education on Elementary Students' Knowledge, Behavior, and Attitudes” (revised and resubmitted to the Journal of Consumer Affairs, with J. Michael Collins and Elizabeth Odders-White) Experience: Research Assistant, UW Center for Financial Security, 2012-Present UW Health-Economics Research Collaboration, 2013-2014 Senior Consultant (Actuarial), Deloitte Consulting, 2005-2010 Teaching Experience: Graduate Microeconomics (2011), Intermediate Microeconomics (2012) Fields of Interest: Applied Microeconomics, Health Economics, Consumer Finance Essays on Health Economics and Consumer Finance Dissertation Abstract Michael Batty University of Wisconsin-Madison How do Financial Incentives affect Hospital Care and Health Outcomes? Evidence from Fair Pricing Laws (with Benedic Ippolito) It is often assumed that the financial incentives of healthcare providers affect the care they deliver, but this issue is surprisingly difficult to study. Recently enacted state laws that limit how much hospitals can charge uninsured patients provide a unique opportunity. Unlike most other studies where the financial incentives of providers and patients are aligned, these policies create opposing incentives for the delivery of care. Using panel data from the Nationwide Inpatient Sample in an event study framework, we examine whether these regulations lead to reductions in the amount and quality of care given to uninsured patients. We find that the introduction of a fair pricing law leads to a seven to ten percent reduction in average length of stay for uninsured patients, with a similar decline in total charges per stay. Although the longer-term effects of these care reductions are uncertain, they are not accompanied by worsening of short-term measures of the quality of inpatient care (as measured using AHRQ quality indicators). Overall, our results provide strong evidence that hospitals actively alter their behavior in response to financial incentives, and are consistent with FPLs promoting a shift towards more efficient care delivery. Mystery of the Chargemaster: Examining Variation in Hospital List Prices (with Benedic Ippolito) The typical list price for a hospital service is more than three times what they will be paid by an average patient. However, many uninsured and out-of-network patients do pay list price. We know different hospitals charge widely different prices for the same service, but we have little systematic knowledge of how prices vary. This paper documents patterns in hospital prices, and explores several potential explanations. We find that relative prices vary much more across hospitals than within, and geography explains little of the overall variation. Further, we find that large, urban, well-equipped, teaching, and for-profit hospitals have higher list prices. The price variation cannot be explained by care quality, nor is it consistent with hospitals attempting to extract higher payments from wealthier uninsured patients. Not Your Father's Retirement? Many researchers, policy makers, and members of the financial sector worry that Americans are not saving adequately for retirement. However, it is difficult to agree upon what constitutes adequate savings. This paper combines data from the Retirement History Study (RHS) and Health and Retirement Study (HRS) to compare wealth accumulation patterns of different cohorts of Americans born in the first half of the 20th century. As opposed to a subjective standard of savings adequacy, this comparative standard frames the retirement prospects of future and recent retirees in terms of the documented retirement experiences of older generations. Contrary to common perception, I find that the wealth accumulation of Americans nearing and entering retirement today is very similar to that of older generations. Experimental Evidence on the Effects of Financial Education on Elementary Students' Knowledge, Behavior, and Attitudes (with J. Michael Collins and Elizabeth Odders-White) As the financial landscape for consumers becomes increasingly complex, the importance of financial capability continues to grow. Although most financial decisions are made by adults, there is a burgeoning interest in providing financial education to children. We use an experimental design to evaluate a standardized financial education program delivered to fourth and fifth graders in two different school districts. We find that even a relatively brief program results in knowledge gains that persist one year later. Students exposed to financial education also have more positive attitudes about personal finance, and appear more likely to save. The findings thus constitute strong evidence that younger students can learn financial topics and suggest that improved attitudes and behaviors may follow well-designed educational interventions. University of Wisconsin – Madison Department of Economics NAME: Chih-Yi Jinny Chen Citizenship: Canada Address: Department of Economics Office: (608) 770-7021 University of Wisconsin-Madison Home: (608) 770-7021 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/jinnycychen/ Degrees: Ph.D., Economics, University of Wisconsin-Madison, Expected 2015 M.S., Economics, University of Wisconsin-Madison, 2011 M.F.E, Financial Economics, University of Toronto, 2006 B.Sc.(Hons), Actuarial Science, University of Toronto, 2004 Dissertation Title: Three Essays on Price Determination with Search Frictions Abstract Summary: The fist essay studies the relationship between the rental cost and purchase price of housing. Because of the search friction and cost associated with the purchase/sale housing market, the rent-to-purchase-price ratio is higher in cities where the probability of relocation is high. The second essay studies the effect of international circulation of multiple currencies on prices, exchange rates and optimal money supply. Multiple equilibria can arise and there exists an equilibrium where the two currencies serve as perfect substitutes for each other when the countries are similar enough. Under such equilibrium, all equilibrium allocations depend solely on the total money stock and the optimal quantity of money supply will be implemented as the governments choose their money supplies separately to maximize the welfare of their own citizens. The third chapter investigates how advertising can affect the price distribution and what percentage of the total sales is comprised of the advertising cost.Summary: The fist essay studies the relationship between the rental cost and purchase price of housing. Because of the search friction and cost associated with the purchase/sale housing market, the rent-to-purchase-price ratio is higher in cities where the probability of relocation is high. The second essay studies the effect of international circulation of multiple currencies on prices, exchange rates and optimal money supply. Multiple equilibria can arise and there exists an equilibrium where the two currencies serve as perfect substitutes for each other when the countries are similar enough. Under such equilibrium, all equilibrium allocations depend solely on the total money stock and the optimal quantity of money supply will be implemented as the governments choose their money supplies separately to maximize the welfare of their own citizens. The third chapter investigates how advertising can affect the price distribution and what percentage of the total sales is comprised of the advertising cost. References: Randall Wright (Primary Advisor) – [email protected] Kenichi Fukushima [email protected] Benoit Julien [email protected] Jaime Luque [email protected] Papers: "International Currency and Foreign Exchange Markets" (Job Market Paper) "A Three-City Model of Migration and Housing Markets" "The Cost of Advertising and the Effect on Price Distributions" Teaching Experience: Teaching Assistant at UW-Madison Principles of Microeconomics (3 times) Intermediate Macroeconomics Theory Fields of Interest: Macroeconomics, Search Theory and Monetary Economics Three Essays on Price Determination with Search Frictions Dissertation Abstract Chih-Yi Jinny Chen University of Wisconsin-Madison Chapter 1: A Three -City Model of Migration and Housing Markets This chapter studies the disparity in the rent-to-purchase-price ratios across US cities and hypothesizes that the varying degrees of mobility or migration rates among those cities contribute to such disparity. A model is developed where cities are endowed with varying rates of mobility and that agents must choose between renting or participating in the purchase/sale housing market upon entering a new city. It is found that stationary equilibrium can only be supported in the case where the buyer's bargaining power is greater than zero and less than one and that search intensity and market participation are endogenously determined in equilibrium. The model illustrates that, relative to the rental payment, it will be more expensive to purchase housing in a city where the out-bound mobility rate is low. Chapter 2: International Currency and Foreign Exchange Markets (Job market paper) This chapter investigates the effects of the circulation of multiple international currencies on prices, exchange rates and monetary policy. The model builds upon the two-country, two-currency framework in Trejos and Wright (2001), where agents of either country can meet at various rates depending on their nationalities. Following the decentralized market (DM), agents in this model enter their separate home centralized markets (CM ) to produce and consume home-specific goods, and rebalance their currency holdings. Multiple stationary equilibria can arise and, in particular, there will always be an equilibrium where the nominal exchange rate equals one, given that the two countries are not too asymmetrical. Even though currencies are treated as perfect substitutes by the agents in this equilibrium, how much a currency is worth in terms of CM goods differs across the two countries and hence the real exchange rate is not one. Moreover, the value of each currency and the gain from each type of DM trade depends on the total stock of money circulating across the two economies. The governments of the two countries will always implement the overall welfare-maximizing quantity of money as a result of their non-cooperative decisions to maximize the welfare of their own citizens. This is the same outcome as what would arise under a currency union with a single issuing authority. Chapter 3: The Cost of Advertising and the Effect on Price Distributions This chapter aims to study how the availability of advertising service can affect the price distribution and what fraction of the total sales is comprised of the advertising expenditure. Even though firms who advertise have a higher probability of reaching their potential clients, the associated cost leaves them with a disadvantage in price competition. In equilibrium, firms will be indifferent between whether to advertise and all earn the same profit. University of Wisconsin – Madison Department of Economics NAME: Man-Wah Cheung Citizenship: Hong Kong Address: Department of Economics Mobile 1: + 1 608 609 3132 University of Wisconsin–Madison Mobile 2: + 852 6146 6583 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/jennymwcheung Degrees: Ph.D. in Economics, University of Wisconsin–Madison 2010 present M.Phil. in Economics, The Chinese University of Hong Kong 2008 10 M.Phil. in Mathematics, The Chinese University of Hong Kong 2005 07 B.Sc. in Mathematics (First Class Honors), The Chinese University of Hong Kong 2002 05 Dissertation Title: Essays in Continuous-Strategy Evolutionary Dynamics Abstract Summary: {see the Thesis Abstract}Summary: {see the Thesis Abstract} References: William H. Sandholm (Major Professor) [email protected] Marzena Rostek [email protected] Antonio Penta [email protected] Publications: “Pairwise Comparison Dynamics for Games with Continuous Strategy Space”. Journal of Economic Theory, 153 (2014), 344–375. Working Papers: “Time-Dependent Mutations and Convergence of Empirical Distributions” (with Kam-Chau Wong). Revise and resubmit, International Journal of Game Theory. Work in Progress: “Imitative Dynamics for Continuous Strategy Games” “An Evolutionary Foundation for Cultural Polarization” (with Jiabin Wu) “Potential Games with Continuous Strategy Space and Continuous Player Sets” Teaching Experience: Teaching Assistant: University of Wisconsin–Madison, Department of Economics Game Theory, Principles of Microeconomics, Principles of Macroeconomics Teaching Assistant: The Chinese University of Hong Kong, Department of Economics Game Theory, Advanced Topics in Microeconomics, Intermediate Microeconomic Theory, Introductory Econometrics Teaching Assistant: The Chinese University of Hong Kong, Department of Mathematics Introductory Probability, Numerical Analysis, Mathematics Laboratory I Fields of Interest: Evolutionary Game Theory, Game Theory, Microeconomic Theory Essays in Continuous-Strategy Evolutionary Dynamics Dissertation Abstract Man-Wah Cheung University of Wisconsin-Madison Paper 1: Pairwise Comparison Dynamics for Games with Continuous Strategy Space This paper studies pairwise comparison dynamics for population games with continuous strategy space. We show that the pairwise comparison dynamic is well-defined if certain mild Lipschitz continuity conditions are satisfied. We establish Nash stationarity and positive correlation for pairwise comparison dynamics. Finally, we prove global convergence and local stability under general deterministic evolutionary dynamics in potential games, and global asymptotic stability under pairwise comparison dynamics in contractive games. Paper 2: Imitative Dynamics for Continuous Strategy Games This paper studies imitative dynamics for population games with continuous strategy space. We define imitative dynamics – which include the replicator dynamic as a special case – as evolutionary game dynamics that satisfy the imitative property and payoff monotonicity. We show that imitative dynamics are well-defined if certain mild Lipschitz continuity conditions are satisfied. We show that all imitative dynamics satisfy positive correlation, and characterize the rest points of imitative dynamics. Finally, we provide global convergence and local stability results for imitative dynamics in potential games. Paper 3: An Evolutionary Foundation for Cultural Polarization (with Jiabin Wu) This paper proposes a model of cultural evolution on continuous trait space. The evolutionary dynamic is generated by both an inter-generational cultural transmission process and an intragenerational “self-persuasion” process. An agent’s cultural distaste towards a trait is an increasing function of cultural distance – the distance between the trait and his own trait in the continuous trait space. This reasonable assumption is captured most easily using continuous trait models. We find that the evolutionary dynamic gives rise to a rich set of cultural phenomena given different cultural distaste patterns. In particular, in the case of pure distaste of distance, i.e., agents dislike cultural traits that are further away from their own traits more, the most extremely polarized state is globally asymptotically stable. Therefore, our model provides a theoretical explanation for cultural polarization. University of Wisconsin – Madison Department of Economics NAME: Thomas S. Conkling Citizenship: United States Address: Department of Economics Cell: (814) 321-4210 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive http://tomconkling.wordpress.com/ Madison, WI 53706 Degrees: Ph.D., Economics, University of Wisconsin-Madison, (expected 2015) M.S., Economics, University of Wisconsin-Madison (2012) B.S., Computer Science, Economics, Pennsylvania State University (2010) Dissertation Title: Competition and Oversight in Subsidized Markets Abstract Summary: My dissertation focuses on markets in which firms compete to provide government-funded benefits or services to individuals. Through the study of a specific federal program, Lifeline, I show how program efficiency and outcomes depend on competition and regulatory oversight. The first chapter documents how oversight influences both the composition of providers entering a market, and their post-entry behavior. Oversight generates a selection effect on the heterogeneous potential entrants, which drives the large state-level differences in waste and inefficiency. The second chapter addresses whether the program achieved its goals of promoting universal service, and to what extent it crowded out spending in the unsubsidized market segment.Summary: My dissertation focuses on markets in which firms compete to provide government-funded benefits or services to individuals. Through the study of a specific federal program, Lifeline, I show how program efficiency and outcomes depend on competition and regulatory oversight. The first chapter documents how oversight influences both the composition of providers entering a market, and their post-entry behavior. Oversight generates a selection effect on the heterogeneous potential entrants, which drives the large state-level differences in waste and inefficiency. The second chapter addresses whether the program achieved its goals of promoting universal service, and to what extent it crowded out spending in the unsubsidized market segment. References: Alan Sorensen (Major Professor) [email protected] Ken Hendricks [email protected] Amit Gandhi [email protected] Papers: “Regulatory Oversight and Entry Decisions in Subsidized Markets: the Federal Lifeline Program,” Job Market Paper, UW-Madison (2014) “Crowdout and Enrollment in the Federal Lifeline Program,” UW-Madison (2014) Teaching Experience: Head Teaching Assistant – Principles of Microeconomics (2014) Teaching Assistant – Behavioral Economics (2013) Principles of Macroeconomics (2012) Principles of Microeconomics (2011) Research Experience: Project Assistant – Alan Sorensen, UW-Madison (2012) Fields of Interest: Industrial Organization, Public Economics, Regulatory Policy Competition and Oversight in Subsidized Markets Dissertation Abstract Thomas S. Conkling University of Wisconsin Madison My dissertation focuses on markets in which firms compete to provide government-funded benefits or services to individuals. Through the study of a specific federal program, Lifeline, I show how program efficiency and outcomes depend on competition and regulatory oversight. Lifeline subsidizes phone service for low-income households, and its state-level variation in regulatory environments makes for an ideal test case of firm responses to oversight. The first chapter documents how oversight influences both the composition of providers entering a market, and their post-entry behavior. The second chapter addresses whether the program achieved its goals of promoting universal service, and to what extent it crowded out spending on unsubsidized wireless providers. Regulatory Oversight and Entry Decisions in Subsidized Markets: the Federal Lifeline Program In the first chapter, I study the effects of competition and oversight on firm behavior in the Lifeline market. The program was expanded in 2008, allowing entry by numerous low-cost wireless service providers. This expansion led to huge increases in enrollment, but also strong anecdotal evidence of waste and fraud. I provide evidence of substantial heterogeneity between providers, in both the quality of service offered and compliance with program rules. Firms with low quality and compliance select into markets with lax oversight, and their entry drives the large state-level differences in waste and inefficiency. These characteristics are revealed through a one-time reform of the program, imposing uniform oversight across states. The reform reveals that the behavior of a given firm is relatively fixed across markets, and that the most substantial variation is across firms. Based on these findings, I estimate a model of firms’ enrollment process and entry decisions, which depend on competition and oversight. In counterfactual exercises, I quantify how tighter oversight decreases the level of waste, but also leads to fewer eligible enrollments. This trade-off depends on the effects through the margin of entry. The evidence of these dynamics is presented for the Lifeline program, but the patterns are likely to exist in many other markets for subsidized products and services. As a result, the selection effect of oversight on heterogeneous firms will be of great importance in designing cost-effective privatization efforts and subsidy programs. Crowdout and Enrollment in the Federal Lifeline Program In the second chapter, I evaluate the extent to which the Lifeline program increased access to telephone services, as well as any crowdout effects on the unsubsidized wireless market. The stated goal of the Lifeline program is to promote universal and affordable access to phone services. The previous literature has found only small increases in household access to phones due to the program, which leaves a bit of a puzzle of how Lifeline fits into the broader market. To address this question, I exploit state-level variation in the timing of Lifeline’s expansion to measure the program’s effect on household phone spending. Using data from the American Community Survey and Consumer Expenditure Survey, I find negligible effects on phone access, but a sizable reduction in wireless spending due to the availability of free Lifeline phones. This suggests that beneficiaries use Lifeline phones to supplement another unsubsidized service line, or would have purchased service anyway in the absence of the program. Thus crowdout effects appear strong, but the welfare impact is ambiguous due to qualitative evidence that Lifeline recipients receive higher service quality than they would have under unsubsidized plans. University of Wisconsin – Madison Department of Economics NAME: Matthew Friedman Citizenship: United States Address: Department of Economics Phone: (303) 898-9111 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive http://ssc.wisc.edu/~mfriedma/ Madison, WI 53706 Degrees: Ph.D. Economics, University of Wisconsin-Madison, Expected 2015 M.S. Economics, University of Wisconsin-Madison, 2012 B.A. Economics, University of Colorado-Boulder, 2006 B.A. Broadcast Journalism, University of Colorado-Boulder, 2006 Dissertation Title: "Essays on Empirical Microeconomics" Abstract Summary: In the first chapter of my dissertation I develop a model and empirical tests to determine if police exhibit racial preferences as well as whether suspected criminals' responses to police interdiction vary across race. This framework is then applied to data generated by the New York Police Department's Stop, Question & Frisk program. The concomitant analysis finds evidence consistent with both racially biased policing and racially differentiated suspect responses. In the second chapter I employ a hedonic model of real-estate prices to determine whether New York City property-owners value intensive policing regimes. The third chapter explores the relationship between prices and trader expectations in prediction markets.Summary: In the first chapter of my dissertation I develop a model and empirical tests to determine if police exhibit racial preferences as well as whether suspected criminals' responses to police interdiction vary across race. This framework is then applied to data generated by the New York Police Department's Stop, Question & Frisk program. The concomitant analysis finds evidence consistent with both racially biased policing and racially differentiated suspect responses. In the second chapter I employ a hedonic model of real-estate prices to determine whether New York City property-owners value intensive policing regimes. The third chapter explores the relationship between prices and trader expectations in prediction markets. References: Steven N. Durlauf (Major Advisor) [email protected] John Karl Scholz [email protected] Jesse Gregory [email protected] Elizabeth Kelly (Teaching) [email protected] Papers: "Spatial Tests for Racial Bias in the NYPD's Stop, Question and Frisk Program" (Job Market Paper, 2014) “Valuing Proactive Policing: A Hedonic Model of Housing Prices using Interpolated Data” (2012) “Prediction Market Efficiency and Information Aggregation in U.S. Elections” with Arik Roginsky (In Progress) Teaching Experience: Teaching Assistant at UW-Madison: Principles of Microeconomics (4 semesters) Principles of Macroeconomics (1 semester) Intermediate Microeconomics (3 semesters) Analytical Public Finance (1 semester) Adjunct Faculty/Instructor: Analytical Public Finance, UW Madison (1 semester) Economic Analysis for Managers, Chaminade University (1 semester) Fields of Interest: Applied Microeconomics, Public Economics, Law & Economics Essays on Empirical Microeconomics Dissertation Abstract Matthew L. Friedman University of Wisconsin Madison Chapter 1: Spatial Tests for Racial Bias in the NYPD's Stop, Question & Frisk Program This paper introduces a model that allows investigators to determine whether police officers exhibit tastebased racial bias when selecting suspects for interdiction, as well as whether suspect responses to police interdiction vary by race. Using data provided by the New York Police Department I estimate that African-American suspects are less likely than their white counterparts to be found in possession of contraband when searched by police. This finding is robust to alternative modeling assumptions and is consistent with racially biased policing within my model. In a novel result, this paper also identifies suspect responses to interrogation as a previously unresearched channel through which racial preferences can diminish police efficiency. I offer evidence that the relative (to Caucasians) probability that police recover contraband from an African-American suspect diminishes with spatial proximity to areas where African-Americans are stopped most intensively. My paper shows this finding to be consistent with racially-differentiated suspect responses to intensive policing, making it the first to positively associate racial disparities in policing intensity with differential suspect behavior. Chapter 2: Valuing Proactive Policing: A Hedonic Model of Housing Prices using Interpolated Data In this chapter I estimate the private value of a public good: proactive policing. My paper tests whether housing values respond to policing intensity, while controlling for reported crime. To do so I compile a geo-spatially detailed repeated cross-sectional dataset of real-estate sale prices in New York City from 2005-2013. It includes an extensive collection of covariates that include property attributes, reported crimes, emergency service requests, school quality and exhaustive records of law-enforcement encounters with suspects that were not motivated by a call for service (proactive policing). I then leverage spatial discontinuities in policing intensity along precinct borders to identify the effect of intensive policing on real-estate values. In multiple specifications I find that police contacts with criminal suspects that occur independent of a reported crime have a negligible to slightly negative effect on housing prices, indicating residents place little value on the deterrent effect of proactive policing. Chapter 3: Prediction Market Efficiency and Information Aggregation in U.S. Elections Prediction markets allow participants to trade contingent commodities that assume values based on the binary outcome of an uncertain event. This chapter is an empirical investigation of the relationships between price, trading volume, bid-ask spreads and trader profits in prediction markets related to the outcome of U.S. elections. The purpose of this investigation is to determine whether the prices of these state-contingent securities effectively aggregate all publicly available information and, accordingly, whether they can be interrupted as the probability of an event's occurrence. Using trader-level data generated by Intrade (previously a leading prediction market) during the past three presidential elections, we show that bid-ask spreads negatively correlate to the number of active traders independent of volume. This finding, as well as our failure to reject the null hypothesis that the Democrat and Republican candidates' price histories are cointegrated, are interpreted as evidence that beliefs converge toward a common posterior probability. University of Wisconsin – Madison Department of Economics NAME: Amanda P. Gaulke Citizenship: USA Address: Department of Economics Office: No office phone University of Wisconsin-Madison Cell: (262)385-1471 1180 Observatory Drive #7226 E-mail: [email protected] Madison, WI 53706 http://www.ssc.wisc.edu/~agaulke/ Degrees: Ph.D. in Economics. University of Wisconsin-Madison, Expected 2015 M.S. in Economics. University of Wisconsin-Madison, 2012 Minor in Education Sciences (met IES requirements), 2012 B.A. in Economics (Honors) and Spanish, Lake Forest College, 2009 Dissertation Title: Essays on Enrollment and Persistence in Higher Education Abstract Summary: In the first essay, I first establish some stylized facts related to taking time off from college, or stopping out. A model is estimated to determine the effect of credit constraints on stopping out. The second essay uses state variation in tuition policies for undocumented immigrants to test how these laws affect the composition of student bodies. There is no clear evidence of native students being crowded out by undocumented immigrants in college. The third essay explores students enrolling in certificate or training programs after completing a BA degree.Summary: In the first essay, I first establish some stylized facts related to taking time off from college, or stopping out. A model is estimated to determine the effect of credit constraints on stopping out. The second essay uses state variation in tuition policies for undocumented immigrants to test how these laws affect the composition of student bodies. There is no clear evidence of native students being crowded out by undocumented immigrants in college. The third essay explores students enrolling in certificate or training programs after completing a BA degree. References: Chris Taber (Main Advisor) [email protected] John Karl Scholz [email protected] Chao Fu – [email protected] Papers: “Stopping out of College: The Role of Credit Constraints” “Does In-State Tuition for Undocumented Immigrants Change the Student Composition in Postsecondary Education?” “BA Degree Completion and Enrollment in Less-than-Two-Year Programs” Teaching Experience: Teaching Assistant, Business Learning Center, 2010-2011 Economics 102 (fall), Economics 101 (spring) for Eudey Teaching Assistant, Department of Economics, 2009-2010 Economics 101 for K. Hansen, Gandhi Fields of Interest: Public Economics, Labor Economics, Economics of Education Essays on Enrollment and Persistence in Higher Education Dissertation Abstract Amanda P. Gaulke University of Wisconsin-Madison Chapter 1: “Stopping out of College: The Role of Credit Constraints” Stopping out, or taking a break during college, is quite common. Using the National Longitudinal Study of Youth-1997 restricted access data, this paper first documents some stylized facts. These include the frequency of stopout, how stopouts compare with other students, consequences of stopouts and potential explanations for stopout. In the weighted sample of individuals who attended at least one semester of college, twenty nine percent stopout at some point. Overall, stopouts appear to be more disadvantaged than students who continuously enroll. For example, stopouts are less likely to have a parent who attended college, are less likely to be white or Asian, and are from families with lower household net worth in the 1997 survey. Students who stopout are more likely to start college at a two-year institution. I do not find evidence supporting a correlation between stopping out and worse labor market outcomes. If students are credit constrained they might need to stop enrolling in college temporarily in order to accumulate money to pay for school. This paper estimates the extent to which stopout behavior would be reduced if federal program loan limits were increased by $500 per semester. To better reflect loan rules student actually face, loan limits are a function of individual limits (financial need) and program limits. Ignoring individual limits neglects a non-trivial amount of students who would mistakenly be categorized as not borrowing the maximum loan available. The dynamic structural model of college enrollment and savings decisions indicates that increasing the program limits would not eliminate stopout. Chapter 2: “Does In-State Tuition for Undocumented Immigrants Change the Student Composition in Postsecondary Education?” I test whether laws allowing undocumented immigrants to pay in-state tuition lead to crowding out of native students in the first year undergraduate student body using difference-in-differences. Identification comes from variation in when and whether states pass such laws and assumes implementation is exogenous. Due to difficulties identifying undocumented immigrants in the data, a proxy of non-resident alien is used. Estimates are allowed to differ in Texas and in California while the other states with similar laws are combined into one group due to issues of power. In the other states there is no significant increase in enrollment of non-resident aliens and thus no potential for crowding out. There is no crowding out in Texas. Even though non-resident aliens increase their enrollment at Texas two-year public schools, schools in Texas increase their total enrollment. The results are less clear in California. There is a decrease in Hispanic males at four-year public schools, which is the sector in which non-resident aliens and whites increase their enrollment. It is possible that the decrease in Hispanic males is due to differences in how this group categorizes themselves before and after the law was passed. Chapter 3: “BA Degree Completion and Enrollment in Less-than-Two-Year Programs” Using the National Longitudinal Study of Youth-1997 I find that nine percent of BA recipients later enroll in a less-than-two-year program. Less-than-two-year programs include business/secretarial, vocational programs, technical programs, trade programs or correspondence programs. I am interested in why so many BA completers are later enrolling in less-than-two-year programs. These types of programs may be preferable to a graduate degree since they are shorter and can be cheaper. While business management is the most popular major for both students who do and do not later enroll in less than two year programs, fine and applied arts and communications are more popular among those who later enroll in less-than-two-year programs. It could be the case that students who selected majors without regard for potential returns in the labor market find themselves unable to find employment in their fields or find jobs that pay high enough wages to live comfortably. Thus, students with BA degrees may need to get another degree in order to be more successful in the labor market. University of Wisconsin – Madison Department of Economics NAME: Gultekin Gollu Citizenship: Turkey Address: Department of Economics Office: (608) 263 2327 University of Wisconsin-Madison Home: (608) 772 6883 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/gultekingollu/ Degrees: Ph.D. in Economics, University of Wisconsin-Madison, expected June, 2015 M.S. in Economics, University of Wisconsin-Madison, 2012 M.A. in Economics, Bogazici University, 2009 B.A. in Economics, Sabanci University, 2006 Dissertation Title: Essays in Health Economics Abstract Summary: My thesis explores three important issues in health economics. Chapter one utilizes a recent policy change under the Affordable Care Act (ACA). I find that extending parental insurance coverage to young adults decreases employment of the targeted group heterogeneously with larger effects for higher socio-economic classes. The second chapter uses early state-based Medicaid expansions to examine whether public health coverage affects childless adults’ labor supply. I find that the policy had no effect on employment. The third chapter investigates if internet use for health purposes has an effect on patient’s mental health. I find that higher use of the internet for health purposes improves patient’s mental health.Summary: My thesis explores three important issues in health economics. Chapter one utilizes a recent policy change under the Affordable Care Act (ACA). I find that extending parental insurance coverage to young adults decreases employment of the targeted group heterogeneously with larger effects for higher socio-economic classes. The second chapter uses early state-based Medicaid expansions to examine whether public health coverage affects childless adults’ labor supply. I find that the policy had no effect on employment. The third chapter investigates if internet use for health purposes has an effect on patient’s mental health. I find that higher use of the internet for health purposes improves patient’s mental health. References: Barbara Wolfe (Main Advisor) [email protected] Chris Taber [email protected] Jesse Gregory [email protected] L. Kamran Bilir (Teaching) [email protected] Papers: “Effects of Parental Coverage on Young Adult’s Labor Supply: Evidence from 2010 Affordable Care Act” Job Market Paper, 2014 “Effects of Public Insurance Coverage on Childless Adults’ Labor Supply: Evidence from Early Medicaid Expansions under Affordable Care Act”, 2014 “Effects of Internet Use for Health Purposes on Patient Distress”, 2013 Teaching Experience: Teaching Assistant, Public Finance, UW-Madison (2014), Intermediate Microeconomics, UW-Madison (2011-2012, three semesters) Teaching Assistant, Game Theory, Econometrics, Isik University (2008-2009) Teaching Assistant, Statistics, Bogazici University (2006) Research Experience: Research Assistant for Marguerite Burns (1/2013 -6/2014) Fields of Interest: Health Economics, Public Economics, Labor Economics Essays in Health Economics Dissertation Abstract Gultekin Gollu University of Wisconsin-Madison Chapter 1: Effects of Parental Coverage on Young Adult’s Labor Supply: Evidence from 2010 Affordable Care Act Historically health insurance in the U.S. has been strongly tied to employment. The literature shows that health insurance availability is a strong incentive for individuals’ labor supply decisions. One of the major policy changes under the Affordable Care Act (ACA) in 2010 was to allow young adults to stay on their parents’ health insurance plan until the age of 26. Since uninsurance rates among 19-25 years old young adults is double the overall level, the labor supply effects of a parental coverage extension can be substantial. This chapter estimates the effect of health insurance expansion on young adults’ employment choices using data from Medical Expenditure Panel Survey. I use a difference in differences model to estimate the extensive and intensive labor supply effects of this policy change on young adults. Additionally, I investigate the effects of the policy on self-employment and uninsurance among the employed. The results suggest that both extensive and intensive labor supply decreased among males, higher socioeconomic groups, and the unmarried. I find no effect of the policy on self-employment, and a decrease in uninsurance among the employed. More specifically I find that the policy decreased employment among 23-25 year-olds by 5%. The policy’s negative effect is larger among 23-25 year-old men, and is equal to 6%. On the other hand, the effect is not statistically significant among 23-25 year-old women. Chapter 2: Effects of Public Insurance Coverage on Childless Adults’ Labor Supply: Evidence from Early Medicaid Expansions under Affordable Care Act Availability of public insurance coverage may provide individuals an incentive to reduce their labor supply. The ACA extends public insurance coverage to childless adults, yet we know very little about the impact of a public health insurance extension policy on labor supply of childless adults. Using Current Population Survey data, this chapter investigates labor supply effects of early Medicaid expansions under ACA on childless adults. The ACA extended public insurance coverage to childless adults in 2014, but a number of states opted in early, and extended Medicaid before 2014. My paper utilizes this variation across states to evaluate if the policy change had any effects on childless adults’ employment. I find that the early Medicaid expansions under the ACA had no effect on employment. Chapter 3: Effects of Internet Use for Health Purposes on Patient’s Mental Health This chapter uses data from the Behavioral Risk Factor Surveillance System to analyze if internet use for health purposes has an effect on patients’ mental health. Over the last decade internet use has become universal and provides various health related tools and information sources. Patients now search online, and read news or comments about their health problems, or connect with other patients through online support groups. Health related distress can have large impacts on quality of life, and the literature has not addressed the possible impact of internet use on patients’ mental health. I use variation across states’ “right of way” policies during the broadband boom period of 2001-2005. Using rights of way rules’ easiness as a proxy for broadband penetration rates, I investigate if patients’ mental health levels changed differently in states with less strict rights of way rules. I find that internet use improves patient’s mental health. I also explore heterogeneous effect of internet use on mental health and find that internet use is detrimental to mental health of people with good overall health. University of Wisconsin – Madison Department of Economics NAME: Han Han Citizenship: P. R. China Address: Department of Economics Office: (608) 628-6877 University of Wisconsin-Madison Home: (608) 628-6877 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 http://sites.google.com/a/wisc.edu/han-han/ Degrees: Ph.D., Economics, University of Wisconsin-Madison, expected May 2015 M.S., Economics, University of Wisconsin-Madison, May 2011 M.A., Economics, CCER, Peking University, July 2009 B.S., Physics, Peking University, July 2006 Dissertation Title: Three Essays on Macro and Monetary Economics Abstract Summary: My dissertation examines three different financial markets. The first essay studies over-the-counter (OTC) markets and the impact of two monetary policies employed by the Federal Reserve during the Great Recession: changing interest rate and quantitative easing (QE). The main finding is that, although QE has no effect when interest rates are low, when interest rates are high, QE will increase asset prices and lower welfare. The second essay examines the interaction between Chinese shadow banking and housing markets. Possible bailout costs are analyzed if there is systematic failure. The third essay examines effects of lifting restrictions on Chinese rural housing, and measures how much rural urban wealth inequality can be reduced with this policy change.Summary: My dissertation examines three different financial markets. The first essay studies over-the-counter (OTC) markets and the impact of two monetary policies employed by the Federal Reserve during the Great Recession: changing interest rate and quantitative easing (QE). The main finding is that, although QE has no effect when interest rates are low, when interest rates are high, QE will increase asset prices and lower welfare. The second essay examines the interaction between Chinese shadow banking and housing markets. Possible bailout costs are analyzed if there is systematic failure. The third essay examines effects of lifting restrictions on Chinese rural housing, and measures how much rural urban wealth inequality can be reduced with this policy change. References: Randall Wright (Primary Advisor) [email protected] Dean Corbae [email protected] Kenichi Fukushima [email protected] Papers: “Over-the-counter markets, middlemen and monetary policy”, Job Market Paper, UW-Madison, September 2014. “Chinese shadow banking and housing markets”, UW-Madison, September 2014. “Housing liquidity, inflation and rural-urban wealth inequality in China”, UWMadison, in progress. Teaching Experience: Teaching Assistant, UW-Madison: Principles of Microeconomics (4 semesters) Principles of Macroeconomics (5 semesters). Fields of Interest: Macroeconomics, Money and Banking, Finance Three Essays on Macro and Monetary Economics Dissertation Abstract Han Han University of Wisconsin-Madison Over-the-counter markets, middlemen and monetary policy (Job Market Paper) During the Great Recession, the Federal Reserve implemented two monetary policies: cutting interest rates and quantitative easing (QE). This paper builds a model to study these two monetary policies in a financial environment with frictions. In this model, agents sell assets to get money when a consumption opportunity arises, which can only be done through over-the-counter (OTC) markets. In equilibrium, when the interest rate is low (not necessarily zero), agents who trade in OTC markets achieve their first best consumption, and QE has no effect on asset pricing. When the interest rate is high, QE will raise asset prices and lower agents’ consumption. The asset price increase indicates a higher liquidity premium, which reflects inefficiency. Chinese shadow banking and housing markets Recently, there has been growing interest in Chinese shadow banking. The size of the market is large and increases. However, this rapid growth begins to raise concerns about market risks, since there has been very limited regulations in this market. Meanwhile, shadow bankers lend enormous funds to the Chinese real estate industry, which is considered unstable now. We study the interaction between the shadow banking system and the housing market in China. In this model, housing has two functions. First of all, it provides utility for occupants. Secondly, it serves as collateral when households need liquidity. Using the model, the effects of a housing price drop on shadow banking are analyzed, and the possible cost of a bailout is analyzed if there is systematic failure. Housing liquidity, inflation and rural-urban wealth inequality in China (in progress) In the past three decades, rural and urban wealth inequality in China has grown rapidly. The wealth gap exceeds the huge rural and urban income gap. There is an institutional friction that increases wealth inequality: the difference in housing liquidity. Chinese peasants are not able to use their houses as collateral when they need money, while the urban residences do not suffer from this constraint. Inflation will aggravate the inequality, because peasants cannot get a housing liquidity premium. We study effects of the government lifting the restriction on rural housing, and measure how much wealth inequality can be reduced with this policy change. University of Wisconsin – Madison Department of Economics NAME: Benedic N. Ippolito Citizenship: USA Address: Department of Economics Cell: (202) 557-8383 University of Wisconsin-Madison 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 http://sites.google.com/site/benedicippolito/ Degrees: Ph.D. in Economics, University of Wisconsin-Madison (Expected 2015) M.S. in Economics, University of Wisconsin-Madison (2012) B.A. in Mathematics/Economics, Emory University (2010) Dissertation Title: Three Essays on Public Economics Abstract Summary: The first paper investigates how financial incentives impact the quantity and quality of health care delivered by hospitals. The paper finds that state laws which limit how much hospitals can collect from uninsured patients lead to reductions in the amount of care given to these patients, but with no measurable deterioration in quality metrics. The second paper shows how the health characteristics of older workers influences their response to retirement incentives imbedded in health insurance contracts. In the third paper we examine trends and potential explanations for the marked variation in hospital list prices.Summary: The first paper investigates how financial incentives impact the quantity and quality of health care delivered by hospitals. The paper finds that state laws which limit how much hospitals can collect from uninsured patients lead to reductions in the amount of care given to these patients, but with no measurable deterioration in quality metrics. The second paper shows how the health characteristics of older workers influences their response to retirement incentives imbedded in health insurance contracts. In the third paper we examine trends and potential explanations for the marked variation in hospital list prices. References: John Karl Scholz (Major Professor) – [email protected] Chris Taber – [email protected] John Mullahy – [email protected] Papers: “How Do Financial Incentives Affect Hospital Care and Health Outcomes? Evidence from Fair Pricing Laws” (with Michael Batty), Job Market Paper, UW-Madison, September 2014. “The Selection Effects of Tied Health Insurance Contracts,” UW-Madison, September 2013. “Unraveling the Chargemaster: Examining Variations in Hospital List Pricing,” (with Michael Batty), UW-Madison, September 2014. Teaching Experience: Project Teaching Assistant, Econ 548: The Economics of Health Care (2014) Research Experience: NIMH Trainee in Health Economics, UW-Madison (2012-) Co-investigator, UW Health – Health Economics Collaboration (2013-) Fields of Interest: Applied Microeconomics, Public Economics, Health Economics Three Essays on Public Economics Dissertation Abstract Benedic N. Ippolito University of Wisconsin Madison How Do Financial Incentives Affect Hospital Care and Health Outcomes? Evidence from Fair Pricing Laws (with Michael Batty) It is often assumed that the financial incentives of healthcare providers affect the care they deliver, but this issue is surprisingly difficult to study. Recently enacted state laws that limit how much hospitals can charge uninsured patients provide a unique opportunity. Unlike many other studies where the financial incentives of providers and patients are aligned, these policies create opposing incentives for the delivery of care. Using panel data from the Nationwide Inpatient Sample in an event study framework, we examine whether these regulations lead to reductions in the amount and quality of care given to uninsured patients. We find that the introduction of a fair pricing law leads to a seven to ten percent reduction in average length of stay for uninsured patients, with a similar decline in total charges per stay. Although the longer-term effects of these care reductions are uncertain, they are not accompanied by worsening of short-term measures of the quality of inpatient care (as measured using AHRQ quality indicators). Overall, our results provide strong evidence that hospitals actively alter their behavior in response to financial incentives, and are consistent with FPLs promoting a shift towards more efficient care delivery. The Selection Effects of Tied Health Insurance Contracts Employers typically offer one of two types of health plans: tied contracts (coverage ends at retirement) or retiree contracts (coverage continues in retirement). In comparison to a retiree plan, a tied contract provides an obvious incentive to delay retirement, but which workers stay? That is, what are the health characteristics of workers who respond to the incentives of the tied contract? The literature is comparatively silent on this point, though some papers suggest that the sickest workers are most likely to stay because they presumably attach the highest value to health insurance. It seems odd, however, that a firm would voluntarily institute a contract that delivers such adverse selection. Closer consideration shows that it is not obvious whether tied contracts should disproportionately attract sickly or healthy workers, since sickness also affects, and is reflective of, a variety of other factors that influence the retirement decision (like disutility of work). Empirically I show that, in fact, tied contracts produce advantageous selection. That is, firms that use tied contracts are successful not only in increasing their retention rate, but also in improving the health composition of their older workforce. Additionally, I investigate the fact that tied contracts are consistently found to delay retirement even after age 65 at which point workers are eligible for Medicare coverage. I show that this “excess retention” effect is entirely driven by workers with younger spouses who do not have their own insurance. Unraveling the Chargemaster: Examining Variations in Hospital List Pricing (with Michael Batty) The typical list price for a hospital service is more than three times what they will be paid for treating the average patient. We also see examples of greatly different prices for the same service, but we have little systematic knowledge of how prices vary, or why this variation exists. This paper documents patterns in hospital prices, and explores several potential explanations. We find that variation in prices across hospitals is much greater than within, and geography explains little of the overall variation. Further, large, urban, well-equipped, teaching, and for-profit hospitals have higher list prices. The price variation cannot be explained by variation in care quality, nor is it consistent with hospitals attempting to extract higher payments from wealthier uninsured patients. University of Wisconsin – Madison Department of Economics NAME: Lindsay Jacobs Citizenship: U.S.A. Address: Department of Economics Office: (608) 609-1254 University of Wisconsin–Madison E-mail: [email protected] 1180 Observatory Drive http://www.ssc.wisc.edu/~lpjacobs/ Madison, WI 53706 Degrees: Ph.D., Economics, University of Wisconsin–Madison, May 2015 (expected) M.S., Economics, Carnegie Mellon University, May 2008 B.A., Math and Economics, Wittenberg University, May 2006 Dissertation Title: Dynamic Models of Health and Labor Supply in Later Life Abstract Summary: In these essays, I develop and estimate life-cycle models aimed at explaining various patterns in labor supply behavior at older ages. The first study measures the extent to which later-life differences in health and disability risks across occupations affect retirement behavior and how these risks influence initial career choice. In the second essay, I look at the degree to which the changing composition of occupations over time—from more to less physically demanding—has contributed to the increase in labor force participation at older ages. The final study examines the effects of wage and health transition processes as well as the role of accrued work-related strain on the labor force participation decisions of older males, aimed particularly at accounting for the high rates of “reverse retirement” seen in the data.Summary: In these essays, I develop and estimate life-cycle models aimed at explaining various patterns in labor supply behavior at older ages. The first study measures the extent to which later-life differences in health and disability risks across occupations affect retirement behavior and how these risks influence initial career choice. In the second essay, I look at the degree to which the changing composition of occupations over time—from more to less physically demanding—has contributed to the increase in labor force participation at older ages. The final study examines the effects of wage and health transition processes as well as the role of accrued work-related strain on the labor force participation decisions of older males, aimed particularly at accounting for the high rates of “reverse retirement” seen in the data. References: James Walker (primary advisor): [email protected] John Kennan: [email protected] Christopher Taber: [email protected] Marek Weretka (teaching): [email protected] Papers: “An Equilibrium Model of Occupational Choice, Retirement, and the Effects of Disability Insurance” (job market paper) “Increasing Labor Force Participation Among Older Males: Can Changes in Occupational Composition Explain the Trend?” “Labor Force Transitions at Older Ages: The Effects of Earnings, Health, and Stress” (with Suphanit Piyapromdee) “Causality in the Health and Income Relationship” (in progress) Teaching Experience: Teaching Assistant, Introductory Macroeconomics, UW–Madison, Fall 2012 Teaching Assistant, Intermediate Microeconomics, UW–Madison, Spring 2013 Research Experience: Project Assistant, Morgridge Institute for Research (Pharmaceutical Informatics Group), UW–Madison, Fall 2009–Spring 2012 Fields of Interest: Labor Economics, Health and Aging, Applied Econometrics Dynamic Models of Health and Labor Supply in Later Life Dissertation Abstract Lindsay Jacobs University of Wisconsin–Madison Chapter 1: An Equilibrium Model of Occupational Choice, Retirement, and the Effects of Disability Insurance (Job Market Paper) There is much variation in the physical requirements across occupations, giving rise to great differences in laterlife productivity, disability risk, and the value of Social Security Disability Insurance (SSDI). In this paper, I look at how such differences across occupations affect career choice as well as the extent to which SSDI, which insures shocks to productivity due to disability, influences more people to choose physically intense occupations. Using data from the Health and Retirement Study (HRS) and the Current Population Survey (CPS), I estimate a dynamic model of occupational choice and retirement with equilibrium effects on earnings across occupations. I document the differences between blue-collar and white-collar occupations in the impact of declining health and disability on productivity, which affects labor supply in later life and, in the context of a life-cycle model, influences the occupation decision. Through counterfactual exercises, I show that the additional disability risk in blue-collar relative to white-collar jobs is equivalent to a reduction of six percentage points in lifetime consumption and that the absence of SSDI, which insures some of this risk, would be equivalent to, respectively, a twelve and seven percent reduction in consumption for those in blueand white-collar jobs. Furthermore, I find that the presence of SSDI results in three percent more individuals choosing blue-collar occupations, which is comparable to the effect on occupation selection resulting from an eight-percent increase in blue-collar earnings. This overall effect, however, is greatly mitigated by the selection of less risk-averse individuals into blue-collar jobs and the equilibrium effects on wages; earnings for the most risk-averse type would have to be nearly 28 percent greater to choose blue-collar work in the absence of SSDI. Chapter 2: Increasing Labor Force Participation Among Older Males: Can Changes in Occupational Composition Explain the Trend? The labor force participation of older males has been increasing in the U.S. over the past two decades, reversing a long trend in declining participation rates spanning most of the twentieth century. In this paper I show the extent to which these higher participation rates reflect a change in the composition of job types held. In the HRS survey data, we see that individuals—even those with similar health—in physically demanding occupations retire sooner and, before exiting, switch to less physically intense jobs. Connecting occupation–effort relationships in the HRS responses with historical data from the CPS, I decompose the changes in participation decisions and find that over one third of the recent increase in participation for men over age 65 is due to changes in job composition, with changes in health, longevity, and education together explaining another 42 percent. Additionally, I estimate a life-cycle model of labor supply and health in later life to match retirement behavior to the data, in which the mechanisms generating earlier retirement for those whose jobs require more physical effort are made explicit. I use this model to approximate the relative effects on labor force participation of changes in occupational composition, health, and education over time. This exercise suggests that changes in health and longevity together account for about half of the increase in participation over time, while changes in occupation contributes to 18 percent. Finally, I use this model to evaluate the disparate effects of increases in the Social Security Normal Retirement Age on individuals with different occupations and longevity expectations. Chapter 3: Labor Force Transitions at Older Ages: The Effects of Earnings, Health, and Stress (with Suphanit Piyapromdee) Partial and reverse retirement are two key behaviors characterizing labor force dynamics for individuals at older ages, with half working part-time and over a third leaving and later re-entering the labor force. This paper studies the effects of wage and health transition processes as well as the role of accrued work-related strain on the labor force decisions of older males. Using measures of stress from the HRS, we propose a stress accumulation and decumulation process to account for patterns of labor force exit, re-entry, and shifts to part-time work with age. We develop and estimate a dynamic model of retirement that captures the behavior observed in the data, incorporating uncertainty in earnings, health, and stress accumulation. University of Wisconsin – Madison Department of Economics NAME: Yi Li Citizenship: China Address: Department of Economics Phone: (608) 695-6992 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive http://www.ssc.wisc.edu/~li88/ Madison, WI 53706 Degrees: Ph.D. in Economics, University of Wisconsin-Madison, expected 2015 M.S. in Economics, University of Wisconsin-Madison, 2011 M.S. in Economics, Wuhan University, China, 2009 B.A. in Economics and Mathematics, Wuhan University, China, 2007 Dissertation Title: “Three Essays on Human Capital” Abstract Summary: My dissertation consists of three applied econometric papers on human capital. The first paper examines the inequality in higher education. I argue that, instead of credit constraints, low income children’s stronger precautionary saving motives, which are caused by their parents’ less capacity to provide insurance against college investment risk, impede their educational attainment. The second paper studies the on-the-job learning. I find that, multiple general skills interpromote each other in the learning process, and lower occupational moving costs facilitate workers to exploit this inter-promotion and acquire more skills over their career lives. Finally, I turn to investigate household’s education decisions in a non-stationary economy, by taking advantage of the data from china when college expansion and rural-urban migration jointly accelerate its labor market transition.Summary: My dissertation consists of three applied econometric papers on human capital. The first paper examines the inequality in higher education. I argue that, instead of credit constraints, low income children’s stronger precautionary saving motives, which are caused by their parents’ less capacity to provide insurance against college investment risk, impede their educational attainment. The second paper studies the on-the-job learning. I find that, multiple general skills interpromote each other in the learning process, and lower occupational moving costs facilitate workers to exploit this inter-promotion and acquire more skills over their career lives. Finally, I turn to investigate household’s education decisions in a non-stationary economy, by taking advantage of the data from china when college expansion and rural-urban migration jointly accelerate its labor market transition. References: Christopher Taber (Major Professor) [email protected] John Kennan [email protected] Ananth Seshadri [email protected] Papers: “Cost and Risk Sharing in Higher Education” -Job Market Paper “Skill Accumulation and Occupational Mobility” -UW-Madison, 2012 “Education Complements Urbanization: Evidence from China” -In progress Teaching Experience: Teaching Assistant, UW-Madison Environmental Economics, Economics: Issue and Policy, Intermediate Microeconomics, Population Economics, Principles of Microeconomics Fields of Interest: Labor Economics, Public Economics, Applied Econometrics Three Essays on Human Capital Dissertation Abstract Yi Li University of Wisconsin-Madison Chapter 1. Cost and Risk Sharing in Higher Education This study provides a novel explanation to the correlation between children’s college attendance and family income. Family income determines parents' capacity to insure their children against college investment risk. With more parental insurance, wealthy children invest in college confidently. In contrast, even if credit constraints are not binding for poor children, precautionary saving motives drive poor children to invest less in college. In order to test this explanation, I build a life-cycle model with idiosyncratic degree completion shocks and wage shocks. The key innovation of this model is allowing for parents' strategic responses to children's financial status, which is changing over time and across states. Two data features enable this model’s identification and estimation. First, the NLSY97 survey records the correlations between parental transfers and children’s student loan borrowing and schooling decisions. Second, the recent recession affects the NLSY97 cohort’s early working lives and triggers their parents’ responses, in forms of cash transfers and co-residence. The structurally estimated parental transfer strategies are policy invariant and thus valid for the evaluations of alternative educational aid programs. Besides offering generous grants and credits, I assess in particular the cost efficiency of adding flexible repayment options into student loans, as an insurance to college investment. Chapter 2. Skill Accumulation and Occupational Mobility Occupations differ in their requirements and on-the-job learning opportunities of mathematical and verbal reasoning skills. New workers with distinct comparative advantages in the two skills choose career paths to accelerate skill accumulation and maximize lifetime earnings. This study proposes that the interpromotion during the two skills' accumulation processes contributes to one important but little studied pattern of occupational mobility: although a minority of workers endowed with a highly dominant skill stick to specialized occupations, the majority develop both skills by working in different occupations and ultimately select to the occupations requiring relatively balanced skills. Linking the occupational skill data from the Dictionary of Occupational Titles and the individual working history from the NLSY79, I structurally estimate the skill accumulation technology and the cost of moving across occupations. Counterfactual experiment results suggest that, for a typical college educated worker, increasing occupational moving cost will significantly impede skill accumulation and reduce lifetime earnings. Chapter 3. Education Complements Urbanization: Evidence from China This study focuses on heterogeneous urban households' decisions in their children's non-compulsory education, when the opportunities in colleges and in the labor market change with college expansion and rural-urban migration. On the one hand, college expansion increases the option value of high school education and thus pulls urban children to higher education levels. On the other hand, rural low-skilled migrants push urban children to have more education in order to distinguish themselves in the labor market. Put together, the consequent shift in urban population’s skill distribution enhances urban area’s capacity to absorb rural migrants. This mechanism is studied in an optimal schooling model with general equilibrium effects. Precisely, the wages for workers with different education levels and origin areas are determined by a multi-level nested CES production function. The CHIP urban survey data before the launch of college expansion are used to estimate the benchmark model, while the later data are applied to examine the model's prediction. University of Wisconsin – Madison Department of Economics NAME: Hsuan-Chih (Luke) Lin Citizenship: Taiwan Address: Department of Economics Cell: (608) 556-4108 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive https://sites.google.com/site/hc4lin/ Madison, WI 53706 Degrees: Ph.D. in Economics, University of Wisconsin-Madison (Expected 2015) M.S. in Economics, University of Wisconsin-Madison (2011) M.A. in Mathematics, National Taiwan University (2007) B.A. in Finance/Mathematics, National Taiwan University (2005) Dissertation Title: Essays on Contracting Problems Abstract Summary: My dissertation consists of three chapters on contracting problems. The first chapter studies the joint design of disability insurance and unemployment insurance when there are business cycles. I show that there is a large potential cost saving in switching from the current system to the optimal system. In the second chapter, I study optimal contracting design with non-stationary, twosided learning, and heterogeneous beliefs. I show that effort could be increasing or decreasing over time depending on belief differences. In the third chapter, I analyze the money-burning behavior in implementing anti-dumping duties, and provide an alternative explanation of the inefficiency incurred when antidumping duties are implemented.Summary: My dissertation consists of three chapters on contracting problems. The first chapter studies the joint design of disability insurance and unemployment insurance when there are business cycles. I show that there is a large potential cost saving in switching from the current system to the optimal system. In the second chapter, I study optimal contracting design with non-stationary, twosided learning, and heterogeneous beliefs. I show that effort could be increasing or decreasing over time depending on belief differences. In the third chapter, I analyze the money-burning behavior in implementing anti-dumping duties, and provide an alternative explanation of the inefficiency incurred when antidumping duties are implemented. References: Noah Williams (Primary Advisor) [email protected] Robert Staiger [email protected] John Kennan [email protected] Dean Corbae [email protected] Research Experience: Project Assistant for Noah Williams (September 2013 present) Teaching Experience: Teaching Assistant for Ph.D. Macroeconomics, International Trade and Finance, Principles of Macroeconomics, and Principles of Microeconomics Tutor for Ph.D. Macroeconomics/Microeconomics Preliminary Exam Papers: “Optimal Disability Insurance and Unemployment Insurance with Cyclical Fluctuations,” Job Market Paper, 2014 “Non-Stationary Two-Sided Learning in Continuous Time,” 2014 “Anti-Dumping Duties and Money Burning,” 2014 “Dynamic Common Agency Problems in Continuous Time,” 2012 “Efficient Allocations in a Dynamic Moral Hazard Economy” (with Noah Williams), 2014, in progress “Disability Insurance and the Business Cycles: A Structural Model and Estimation” (with Atsuko Tanaka), 2014, in progress Fields of Interest: Macroeconomics, Dynamic Contracting, International Trade Essays on Contracting Problems Dissertation Abstract Hsuan-Chih (Luke) Lin University of Wisconsin-Madison Chapter1: Optimal Disability Insurance and Unemployment Insurance with Cyclical Fluctuations This paper studies the optimal joint design of disability insurance and unemployment insurance in an environment with moral hazard, when health status is private information, and cyclical fluctuations. I show how disability benefits and unemployment benefits vary with aggregate economic conditions in an optimal contract. In a special case of the model, I first show the optimal contract can be solved explicitly up to a system of non-linear equations. I then demonstrate that the optimal joint insurance system can be implemented by allowing workers to save or borrow using a bond and by providing flow payments and lump-sum transfers (or payments), where the interest rates and the amounts paid (transferred) depend on the employment or health status of the agent and the state of the economy. Finally, I consider a calibrated version of the full model and study the quantitative implications of both the current system and the optimal system. In the optimal system, disability benefits are designed such that the system punishes workers who stay unemployed for a long time. I consider the welfare impact of changing from the current system to the optimal one when both systems provide the same ex-ante utility to the worker. The cost savings incurred from incentive problems are substantial, ranging from 45 percent to 101 percent for different workers, and the unemployment rate could be reduced by roughly 50 percent. Chapter 2: Non-Stationary Two-Sided Learning in Continuous Time This paper studies the multi-period contracting problem when actions of an agent are unobservable and both parties disagree on the agent’s ability. The question being asked is how the actions would be affected when the amount of disagreement is another motivating factor. I derive the necessary and sufficient conditions for incentive compatibility. I then use results from stochastic analysis to transform the problem into one that can be solved numerically using Monte Carlo simulations. My results exhibit an interesting pattern—effort is no longer front-loaded as discussed in Prat and Jovanovic (2013), and responses to incentives are significant when the time approaches the terminal date. The time-increasing effort policy might come from the fact that agents do not want to exert effort when belief differences are substantial. As the terminal date approaches, the difference in beliefs is decreasing, and the agent might find it optimal to exert effort to manipulate outcomes. Chapter 3: Anti-Dumping Duties and Money Burning Dumping occurs when foreign firms price their exports below what is considered “fair” value. If such dumping is found to be “injuring” the domestic industry, government agencies then can impose an antidumping (AD) duty. However, there are known problems with an AD duty, especially the acknowledged inefficiency of AD investigation process. This paper answers the following question: why would the government waste resources determining fair value and the extent of injury before implementing anti-dumping duties when this has little informational content? I show that with delegated decisions and private information, optimal trade agreements could consist of tariff caps as well as burning money before high tariff sanctions are used. University of Wisconsin – Madison Department of Economics NAME: Tzu-Chi Lin Citizenship: Taiwan Address: Department of Economics Mobile: (608) 772-9807 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive https://sites.google.com/site/tzuchilin029 Madison, WI 53706 Degrees: Ph.D., Economics, University of Wisconsin-Madison, Expected 2015 M.A., Economics, National Taiwan University, June 2009 B.A., Economics, National Taiwan University, June 2007 Dissertation Title: High-Dimensional Quantile Regression and Forecast Combination Abstract Summary: In first chapter, we introduce a threshold quantile adaptive Lasso estimator allowing a data rich environment. The proposed adaptive Lasso estimator has an oracle property. It means that the proposed estimator can consistently estimate parameters and select the correct model pattern even when the number of regressors is much larger than the sample size. We apply our method to examine the threshold effect of debt on economic growth and find that a tipping point appears to exist for many countries. The second chapter proposes a new forecast combination method which selects the forecast weights by minimizing the Shibata criterion. We show that our estimator is asymptotically optimal in the sense of achieving the lowest possible one-step-ahead mean-squared prediction error for same-realization autoregressions. Third chapter considers quantile inference for high-dimensional factor-augmented time-series regression. The novel aspect of the theory is that it allows for time series and estimated factors. Empirical applications to interval forecasting and risk evaluation are discussed.Summary: In first chapter, we introduce a threshold quantile adaptive Lasso estimator allowing a data rich environment. The proposed adaptive Lasso estimator has an oracle property. It means that the proposed estimator can consistently estimate parameters and select the correct model pattern even when the number of regressors is much larger than the sample size. We apply our method to examine the threshold effect of debt on economic growth and find that a tipping point appears to exist for many countries. The second chapter proposes a new forecast combination method which selects the forecast weights by minimizing the Shibata criterion. We show that our estimator is asymptotically optimal in the sense of achieving the lowest possible one-step-ahead mean-squared prediction error for same-realization autoregressions. Third chapter considers quantile inference for high-dimensional factor-augmented time-series regression. The novel aspect of the theory is that it allows for time series and estimated factors. Empirical applications to interval forecasting and risk evaluation are discussed. References: Bruce E. Hansen (Primary Advisor) [email protected] Xiaoxia Shi [email protected] Kenneth D. West [email protected] Papers: Debt Overhang and Economic Growth Controversy: High-Dimensional Threshold Quantile Regression (Job Market Paper) Asymptotic Optimal Averaging Weight Selection for Predictions in Autoregressions Inference and Factor Selection on Quantile Factor-Augmented Regression Model (in progress) Adaptive Optimal Forecast Combination for Autoregressive Time Series (in progress) Teaching Experience: UW-Madison: Statistics: Measurement in Economics, 2 semesters. Principles of Microeconomics, 2 semesters. Introduction to Econometrics, 1 semester. Econometrics ( Master ), 1 semester. Fields of Interest: Econometrics, Macroeconomics, Development Economics. High-Dimensional Quantile Regression and Forecast Combination Dissertation Abstract Tzu-Chi Lin University of Wisconsin –Madison Chapter 1. Debt Overhang and Economic Growth Controversy: High-Dimensional Threshold Quantile Regression In first chapter, we propose a threshold quantile Lasso estimator and investigate the existence of the 90% debt-to-GDP tipping point found by Reinhart and Rogoff (2010). We consider a high-dimensional quantile regression model with a potential threshold allowing for time series data. The merits of our approach are threefold. First, high-dimensional analysis deals with model uncertainty problem in new growth theory. Second, asymmetric effect of public debt on GDP can be captured via the proposed quantile method and verified with our empirical results. Third, time-series approach delineates country characteristics which are crucial for country-specific policy implementation. Our main contributions include three parts: First, under mixing and sparse conditions, we derive the consistency of regression coefficients regardless of the identification of threshold. Second, we show that the oracle property of adaptive Lasso can distinguish between linear and threshold regression models while the number of covariates is much larger than sample size. Third, we apply the method to check the existence of a tipping point between debt and GDP growth for cross-country and country-specific data. We find that the detrimental tipping point effect is prevailing in developing countries instead of developed countries and the tipping points are heterogeneous across countries, ranging from 10% to 110%. Furthermore, the proposed quantile method shows that the negative tipping point impact of public debt on GDP growth rate is asymmetric among developed countries. While debt ratio surpasses the threshold, the potential risk of economic downturn is projected to increase and the chance of rapid GDP growth is reduced in developed countries. The channels for the impact of public debt and corresponding policy implementations are also discussed. Chapter 2. Asymptotic Optimal Averaging Weight Selection for Predictions in Autoregressions In this chapter, we propose a new forecast combination method which selects the forecast weights by minimizing the Shibata criterion. The advantages of the proposed method are twofold. First, the estimator is asymptotically optimal in the sense of achieving the lowest possible one-step-ahead mean-squared prediction error for same-realization autoregressions. Second, the optimal property is preserved for nonstationary process without the prior knowledge of integration order. The Monte Carlo simulation results show that the proposed method has low out-of-sample mean-square prediction error. Chapter 3. Inference and Factor Selection on Quantile Factor-Augmented Regression Model (in progress) Third chapter considers quantile inference for high-dimensional factor-augmented time series regression mode. The novel aspect of the theory is that it allows for time series and estimated factors. We first derive the asymptotic normality for the quantile regression estimator. Second, given the square root convergence rate of the quantile regression estimator, we propose a factor selection method via adaptive Lasso which has oracle properties. It means that proposed estimator can consistently estimate parameters and correctly select the relevant factors. Our method can be applied to interval forecasting and risk evaluation. University of Wisconsin – Madison Department of Economics NAME: Zhentong Lu Citizenship: China Address: Department of Economics Cell: (608) 609-3138 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive http://sites.google.com/site/zhentonglu/ Madison, WI 53706 Degrees: Ph.D. in Economics, University of Wisconsin-Madison, Expected 2015 M.S. in Economics, University of Wisconsin-Madison, 2012 M.A. in Economics, Peking University, 2010 B.A. in Statistics, Hunan University, 2007 Dissertation Title: A Moment Inequality Approach to Estimating Multinomial Choice Models with Unobserved Consideration Sets Abstract Summary: My job market paper proposes a moment inequality approach to estimating discrete choice models in which the consideration sets of consumers are unobservable to the econometricians and apply it to study how limited attention contributes to the observed persistence in consumer brand choice using household purchase and store scanner data.Summary: My job market paper proposes a moment inequality approach to estimating discrete choice models in which the consideration sets of consumers are unobservable to the econometricians and apply it to study how limited attention contributes to the observed persistence in consumer brand choice using household purchase and store scanner data. References: Amit Gandhi (Co-advisor) [email protected] Xiaoxia Shi (Co-advisor) [email protected] Kenneth Hendricks – [email protected] Alan Sorensen [email protected] Papers: “A Moment Inequality Approach to Estimating Multinomial Choice Models with Unobserved Consideration Sets”, Job Market Paper, 2014 “Estimating Demand for Differentiated Products with Error in Market Shares”, with Amit Gandhi and Xiaoxia Shi, Working Paper, 2013 “Consistent Estimation of Discrete Choice Demand Models Defined by Conditional Moment Restrictions”, Working Paper, 2012 Research Experience: Project Assistant, Jean-Francois Houde, January 2011 – May 2011 Project Assistant, Amit Gandhi and Xiaoxia Shi, June 2011 – December 2011 Project Assistant, Xiaoxia Shi, January 2012 – May 2013 Project Assistant, Kenneth Hendricks, June 2013 – August 2014 Project Assistant, Kevin Chung and Noah Lim, September 2014 Now Fields of Interest: Empirical Industrial Organization, Econometrics A Moment Inequality Approach to Estimating Multinomial Choice Models with Unobserved Consideration Sets Dissertation Abstract Zhentong Lu University of Wisconsin-Madison This paper proposes a moment inequality approach to estimating discrete choice models in which the consideration sets of consumers are unobservable to the econometricians. Instead of setting up a detailed model of consideration set generation, I explore an incomplete specification that only imposes intuitive restrictions on the consideration set distribution using economic theory and institutional knowledge. I show that, combined with the utility maximization assumption, this limited structure generates theoretical bounds on observed choice probabilities. The bounds imply a set of conditional moment inequalities which forms the basis of statistical inference. The moment inequality approach avoids modelling the consideration set generation and thus has less risk of misspecification. In addition, the moment inequalities can be very informative and even point identify the parameters in the model under certain conditions. Based on the point identification results, I propose a consistent estimator that performs well in the Monte Carlo experiments in terms of recovering the true value of parameters and correcting the bias caused by some possible misspecifications of the consideration set generation. The framework can be readily extended to handle price endogeneity and market level data. I apply the proposed approach to study the persistence in consumers' brand choice using IRI household panel and store scanner data. To study whether and how much consumers’ limited consideration can explain the observed persistence in consumer brand choice, I specify a panel data discrete choice model that allows for three potential sources of persistence: state-dependent utility originated from brand loyalty, serially correlated unobserved heterogeneity and consideration set generation affected by previous purchases and in-store displays. The estimation results suggest that the state dependent utility is overestimated substantially without properly controlling the consideration set endogeneity. Counterfactual experiments shows that about 20% to 60% (varying across brands) of the observed persistence in terms of re-purchase probability comes from the effects of limited consideration and 10% to 30% percent of brand switches are driven by in-store displays. University of Wisconsin – Madison Department of Economics NAME: Kurt G. Lunsford Citizenship: U.S.A. Address: Department of Economics University of Wisconsin-Madison Home: (202) 812-6225 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/a/wisc.edu/kglunsford/home Degrees: Ph.D. Economics. University of Wisconsin – Madison, Expected 2015 M.S. Economics. University of Wisconsin – Madison, 2011 B.S. Commerce. University of Virginia, 2005 Dissertation Title: Essays in Macroeconomics Abstract Summary: In the first essay, I incorporate searching, matching and bargaining frictions into the housing market of a two-sector dynamic stochastic general equilibrium model. I show that search frictions transmit monetary, productivity and preference shocks to housing construction and that administrative costs of mortgages also transmit monetary policy shocks to housing construction. An identified factor-augmented vector autoregression supports the model’s qualitative responses to monetary policy shocks. In the second essay, I forecast residential investment by modelling multicointegration among housing starts, completions and units under construction. This model performs better than standard time series models and at least as well as the Survey of Professional Forecasters. In the third essay, I study the effect that the changing mix of goods and services has on monetary policy given the observed differences in nominal rigidities between these sectors.Summary: In the first essay, I incorporate searching, matching and bargaining frictions into the housing market of a two-sector dynamic stochastic general equilibrium model. I show that search frictions transmit monetary, productivity and preference shocks to housing construction and that administrative costs of mortgages also transmit monetary policy shocks to housing construction. An identified factor-augmented vector autoregression supports the model’s qualitative responses to monetary policy shocks. In the second essay, I forecast residential investment by modelling multicointegration among housing starts, completions and units under construction. This model performs better than standard time series models and at least as well as the Survey of Professional Forecasters. In the third essay, I study the effect that the changing mix of goods and services has on monetary policy given the observed differences in nominal rigidities between these sectors. References: Kenneth D. West (Primary Advisor): [email protected] Dean Corbae: [email protected] Charles Engel: [email protected] Papers: “Housing Search and Fluctuations in Residential Construction,” Job Market Paper, UW – Madison, 2014. “Forecasting Residential Investment in the United States,” forthcoming International Journal of Forecasting. “Jobless but Not Unemploymentful Recoveries,” in progress, UW – Madison, 2013 “Has the Impact of the Federal Funds Rate Increased?” UW – Madison, 2011. Teaching Experience: Anna Morris Ely Teaching Award, 2014. Teaching assistant for Introductory Microeconomics (2 semesters), Introductory Macroeconomics (2 semesters), Intermediate Macroeconomics (1 semester), and Advanced Macroeconomics (1 semester). Research Experience: Project Assistant for Prof. Kenneth D. West (3 semesters) Fields of Interest: Macroeconomics, Monetary Economics, Applied Time Series Econometrics Essays in Macroeconomics Dissertation Abstract Kurt G. Lunsford University of Wisconsin – Madison Chapter 1: Housing Search and Fluctuations in Residential Construction This chapter develops a two-sector dynamic stochastic general equilibrium (DSGE) model where the housing sector is subject to searching, matching and bargaining frictions. I show that the searching and matching frictions are a transmission source for monetary, productivity and preference shocks to impact residential construction, and that the administrative costs of mortgages also transmit monetary shocks to residential construction. Consistent with the stylized fact that residential investment is more volatile than other components of GDP, a calibrated version of the model yields large responses in residential construction from all shocks. To test the qualitative predictions of monetary policy shocks in the DSGE model, I estimate a factor-augmented vector autoregression and identify the structural monetary policy shocks with an external instrument. The identified impulse response functions of mortgage rates, residential construction spending, new house starts, new house sales, real house prices, real rental prices, time on the market and the homeownership rate are consistent with the DSGE model. Chapter 2: Forecasting Residential Investment in the United States, forthcoming International Journal of Forecasting This chapter studies models for forecasting residential investment. It includes standard univariate and multivariate models, and proposes an error correction model (ECM) based on the stock-flow relationship of housing starts, completions and units under construction. All models are estimated on real-time data, and the root mean squared prediction errors (RMSPEs) of the models are compared along with the RMSPEs of the Survey of Professional Forecasters (SPF) and the Federal Reserve's Greenbook. For the 1981:Q3 to 2013:Q2 sample, the ECM improves upon the competing models with its largest improvements on the univariate models coming from the current quarter forecasts and on the multivariate models from the multi-step forecasts. Further, the ECM makes modest improvements to the SPF and performs comparably to the Greenbook from 1981:Q3 to 2007:Q4. Relative to the current state of professional forecasting, the ECM performs best at multi-step forecast horizons and in volatile economic periods. Chapter 3: Has the Impact of the Federal Funds Rate Increased? Two stylized facts of the U. S. economy are that nominal prices in the services sector change less frequently than nominal prices in the goods sector and that the size of the services sector relative to the goods sector has increased over the last 50 years. In a two-sector new Keynesian model, these facts imply that interest rate shocks should have a larger impact on output in more recent time periods, holding parameters of the model other than price stickiness and relative sector size constant. In contrast to this implication, impulse response functions of U.S. GDP to Federal Funds rate shocks estimated using both vector autoregressions and factor-augmented vector autoregressions are larger in the 1959 to 1979 time period than in the 1983 to 2007 time period. One possible explanation for this empirical result is that interest rate policy became aggressive against inflation in recent time periods. Via calibration, I show that the effects of this policy shift swamp the effects of changes to nominal stickiness and relative sector size. University of Wisconsin – Madison Department of Economics NAME: Gabriella Monahova Citizenship: Bulgaria; U.S. Permanent Resident Address: Department of Economics Cell: (309) 363 4117 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive http://sites.google.com/site/gabriellamonahova/ Madison, WI 53706 Degrees: PhD Economics, UW-Madison, 2015 (expected) M.S. Economics, UW-Madison, 2012 B.A. Economics & International Relations, Lake Forest College, 2010 Dissertation Title: Essays in Industrial Organization Abstract Summary: The first chapter of my dissertation looks at the effect of conflicting hospital incentives regarding interoperability on the choice of vendor when adopting electronic medical records. I find no evidence that hospitals place a high value on interoperability when they choose their vendor, which might give support to government intervention to increase data exchange between providers. The second chapter of the dissertation examines tax policy in the presence of black markets. The strategy is to estimate substitution patterns between the same good traded legally and on the black market and to quantify losses in tax revenue due to consumers opting to purchase illegally.Summary: The first chapter of my dissertation looks at the effect of conflicting hospital incentives regarding interoperability on the choice of vendor when adopting electronic medical records. I find no evidence that hospitals place a high value on interoperability when they choose their vendor, which might give support to government intervention to increase data exchange between providers. The second chapter of the dissertation examines tax policy in the presence of black markets. The strategy is to estimate substitution patterns between the same good traded legally and on the black market and to quantify losses in tax revenue due to consumers opting to purchase illegally. References: Alan Sorensen (main advisor) – [email protected] Kenneth Hendricks – [email protected] Amit Gandhi – [email protected] Elizabeth Kelly (teaching) – [email protected] Papers: “Interoperability and Hospital Incentives in the Adoption of Electronic Medical Records” (JMP) “Tax Policy in the Presence of Illegal Markets”, 2013 Teaching Experience: Teaching assistant, UW-Madison Principles of Macroeconomics: Fall 2011, Spring 2012 Principles of Microeconomics: Fall 2012, Spring 2014 Intermediate Microeconomics: Spring 2013 Intermediate Microeconomics (Master’s Level): Fall 2013 Fields of Interest: Empirical Industrial Organization, Health Economics, Illegal Markets Essays in Industrial Organization Dissertation Abstract Gabriella Monahova University of Wisconsin – Madison Chapter 1: Interoperability and Hospital Incentives in the Adoption of Electronic Medical Records (Job Market Paper) Interoperability, or the ability of health providers to exchange patient data electronically, has been cited as crucial for electronic medical records (EMR) to achieve their promise of improved quality of healthcare and decreases in health expenditures. This paper uses EMR adoption data to study if and how much hospitals prioritize interoperability when they choose their EMR vendor. Exploiting differences in interoperability within and across vendors, I construct a discrete choice model of vendor selection based on potentially conflicting hospital incentives regarding interoperability. I find no evidence that hospitals place a high value on interoperability when they make the adoption decision, but are highly influenced by the choices of other members in their systems. This suggests that hospitals have weak private incentives to prioritize interoperability and gives support to ongoing government efforts to increase the level of patient data exchange between providers. Chapter 2: Tax Policy in the Presence of Illegal Markets An important question for tax policy makers is how consumers respond to tax increases that lead to higher prices. This question becomes more complicated when tax evasion and black market transactions are considered. The goal of this paper is to estimate substitution patterns between legal and illegal products and use the estimates to quantify the loss in tax revenue that is attributed to this substitution. The results suggest that increases in the tax to producers indeed lead to consumers opting to purchase on the black market and that such transactions rob the government of significant portions of tax revenue. University of Wisconsin – Madison Department of Economics NAME: Mitchell P. Morey Citizenship: United States of America Address: Department of Economics University of Wisconsin-Madison Cell: 650-793-2568 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/mitchellmorey/ Degrees: 2015 Ph.D. Economics, University of Wisconsin-Madison (expected) 2012 M.S. Economics, University of Wisconsin-Madison 2010 M.S. Industrial & Labor Relations, Cornell University 2007 B.S. Industrial & Labor Relations, Cornell University Dissertation Title: Essays on International Trade in Developing Countries Abstract Summary: I seek to examine the ways in which observed patterns of trade deviate from the theoretical optimum for issues that are salient in developing countries. In particular, the first chapter of my dissertation examines a potential demand-side reason for the home bias in trade. I find that consumers display a preference for domestically produced goods independent of any potential quality effect. The proclivity to favor domestically produced goods translates to a significant reduction of imports. In the second chapter, I examine the role of bilateral trade as it affects to the incidence of terrorist acts targeting trading partners. I address the endogeneity of terrorism and trade by instrumenting for imports with terms of trade shocks. Results show that trade with the USA makes US interests less likely to be the target of a given attack but that trade increases the likelihood that there will be some positive level of terrorism in that country.Summary: I seek to examine the ways in which observed patterns of trade deviate from the theoretical optimum for issues that are salient in developing countries. In particular, the first chapter of my dissertation examines a potential demand-side reason for the home bias in trade. I find that consumers display a preference for domestically produced goods independent of any potential quality effect. The proclivity to favor domestically produced goods translates to a significant reduction of imports. In the second chapter, I examine the role of bilateral trade as it affects to the incidence of terrorist acts targeting trading partners. I address the endogeneity of terrorism and trade by instrumenting for imports with terms of trade shocks. Results show that trade with the USA makes US interests less likely to be the target of a given attack but that trade increases the likelihood that there will be some positive level of terrorism in that country. References: Robert Staiger (Major Professor) [email protected] Laura Schechter [email protected] L. Kamran Bilir [email protected] Papers: Testing the Existence of a Home Bias in Trade (Job Market Paper) Trade as an Antiterrorist Policy (Working Paper) Cash, food, or vouchers? An application of Market Information and Food Insecurity Response Analysis Framework Conducted in urban and Rural Kenya with Hope Michelson, Erin Lentz, et al. Food Security 2012, 4:3 Teaching Experience: Introductory Microeconomics (Spring 2011, Summer 2014) Introductory Macroeconomics (Fall 2010, Spring 2014) Intermediate Algebra (Fall 2011, Fall 2013) Fundamental Mathematical Skills (Fall 2012) International Trade & Finance (Fall 2012, Fall 2014) Human Resources & Economic Growth (Spring 2013) Fields of Interest: Development, International ESSAYS ON INTERNATIONAL TRADE IN DEVELOPING COUNTRIES Dissertation Abstract MITCHELL P. MOREY University of Wisconsin-Madison I study the role of international trade in contexts most relevant for developing countries. In particular, I focus on phenomena that suppress trade relative to a world in which the ideal neoclassical models hold. In the first chapter, I address the question of why the observed levels of international trade are far lower than predicted by neoclassical trade models. To this point, there is little evidence that this home bias in trade is driven by preference-based demand structures while many different supply side factors have been identified as causes. This paper provides evidence that consumers have an inherent preference for domestically produced goods. Using data from a randomized controlled trial and survey conducted in Madagascar, respondents' willingness to pay for rice of varying quality and origin is investigated. By imposing a novel structure on traditional valuation collection methods, it is possible to isolate the effect of a good being produced domestically from the effect of quality differences. The results demonstrate that consumers are willing to pay at least 8% more for a good that is domestically produced. This corresponds to a roughly 5% reduction in the quantity of imported rice that is consumed. This constitutes an important portion of the total amount of missing trade. There are many implications for this result, including the role of trade parameters for CGE models and the assumed welfare gains that would result from reducing trade costs. The second chapter of the dissertation examines the role of international trade as a mechanism for reducing terrorist attacks on the citizens of a trading partner. Many studies have asked the reverse question: the effect of terrorism on international trade. This indicates that there is a significant problem with endogeneity. To overcome this obstacle, I indentify an instrument that will affect international trade but is completely exogenous to a country. I instrument for bilateral trade flows with terms of trade shocks and use two-stage least squares to estimate the effect on the incidence of terrorism. Results demonstrate that when a country trades in large volumes with the United States, American citizens represent a smaller share of the victims of terrorist attacks in that country. At the same time, as trade with the United States increases, a country will become more likely to experience a positive level of terrorist attacks. University of Wisconsin – Madison Department of Economics NAME: Kayuna Nakajima Citizenship: Japan Address: Department of Economics Cell: (608) 770-4711 University of Wisconsin-Madison E-mail: [email protected] 1180 Observatory Drive http://www.ssc.wisc.edu/~nakajima/ Madison, WI 53706 Degrees: Ph.D. in Economics, University of Wisconsin-Madison, expected May 2015 M.S. in Economics, University of Wisconsin-Madison, 2012 M.S. in Economics, University of Tokyo, 2010 B.A. in Economics, Keio University, Magna Cum Laude, 2008 Dissertation Title: Three Essays on Immigration Abstract Summary: In the first chapter, I construct a structural model of Mexican immigrants and use it to quantify how various immigration policies affect the US government’s budget deficit. In doing so, I take into account the fact that such policies may change not only the number of immigrants in the US but also their composition in terms of earnings and marital status. In the second paper, I propose a new explanation for why unsuccessful Mexican immigrants are more likely to return to Mexico and then come back to the US. In the third chapter, I document the extent to which wages of undocumented Mexican immigrants in the US decrease during recessions in the US and analyze the potential impact of this on natives’ employment.Summary: In the first chapter, I construct a structural model of Mexican immigrants and use it to quantify how various immigration policies affect the US government’s budget deficit. In doing so, I take into account the fact that such policies may change not only the number of immigrants in the US but also their composition in terms of earnings and marital status. In the second paper, I propose a new explanation for why unsuccessful Mexican immigrants are more likely to return to Mexico and then come back to the US. In the third chapter, I document the extent to which wages of undocumented Mexican immigrants in the US decrease during recessions in the US and analyze the potential impact of this on natives’ employment. References: John Kennan (Primary Advisor) – [email protected] Rasmus Lentz – [email protected] Christopher Taber – [email protected] Nicolas Roys (Teaching) – [email protected] Papers: “The Fiscal Impact of Border Tightening,” Job Market Paper “The Repeated Migration Puzzle: A New Explanation” “Immigrant Wages and Recessions: Evidence from Undocumented Mexicans” (with Rebecca Lessem) “Real Indeterminacy of Stationary Monetary Equilibria in Centralized Economics” (with Kazuya Kamiya and So Kubota), revision requested Teaching Experience: Teaching Assistant for Microeconomics and Mathematical Economics Fields of Interest: Labor Economics, Applied Microeconomics Three Essays on Immigration Dissertation Abstract Kayuna Nakajima University of Wisconsin-Madison Chapter 1: The Fiscal Impact of Border Tightening (Job Market Paper) Since the 1990s, the US government has been increasing the US-Mexico border patrol budget, intensifying deportation, and taking measures to make it harder for unauthorized immigrants to work. One of the motivations for such policies is to ease the fiscal burden of low-skilled immigrants. In this paper, I analyze the impact of these and other immigration policies on the budget deficit using a dynamic lifetime structural model of immigrants. A novel feature of the model is that it takes into account the fact that stricter immigration policies will not only reduce the number of immigrants in the US, but may also change their composition in terms of earnings and marital status. The latter effect—which I call a “composition effect”—may strengthen or weaken the deficit reduction, potentially significantly given the extent to which net tax contributions vary across these traits. I estimate the model so as to replicate a number of empirical facts on low-educated Mexicans, including selective initial and return migration and wage assimilation in the US. Using the estimated model, I conduct counterfactual simulations that evaluate the impact of various immigration policies. I find that the composition effect can be quantitatively significant and its sign may change at different time horizons. For example, when the border tightens, the proportional reduction in the deficit is larger than the proportional reduction in the number of immigrants in the long run, because small net tax contributors are deterred from entering the US. In the short run, however, the proportional reduction in the deficit is smaller than that in the number of immigrants. These patterns vary across policies. Chapter 2: The Repeated Migration Puzzle: A New Explanation About 15% of Mexican immigrants return to Mexico after earning less than $5600 and these unsuccessful immigrants are more likely to repeatedly enter the US. In order to explain this, I build a model in which Mexicans want to migrate to the US to accumulate assets until they reach their target level, but they also have a preference for living in their home country. I assume that the disutility associated with living abroad—which I call a “homesickness”—increases as they reside in the US. Once an immigrant returns to Mexico, his homesickness drops to zero and he can make a fresh start. Thus, immigrants who could only get low wage jobs in the US choose to return home within a few years because their gain from residing in the US is not enough to compensate for their homesickness. But once they return to Mexico and their homesickness drops to zero, they reenter the US to resume their asset accumulation. According to the estimated model, reducing homesickness increases trip duration and total earnings. Chapter 3: Immigrant Wages and Recessions: Evidence from Undocumented Mexicans” (with Rebecca Lessem) We show that undocumented immigrants experience larger wage drops during recessions than natives. Motivated by this observation, we build a model in which natives’ wages are rigid (because of long term labor contracts) while immigrants’ wages are flexible. We estimate the model to replicate the migration behavior and wages of Mexicans from 1982 to 2003 using the Mexican Migration Project Survey. According to the estimated model, reducing the flexibility of immigrants’ wages increases the volatility of natives’ employment. This suggests that the flexibility of immigrants’ wages may be mitigating the employment fluctuations of natives over the business cycle. University of Wisconsin – Madison Department of Economics NAME: Christopher J. Reynolds Citizenship: United States Address: Department of Economics Office: (608) 262-0213 University of Wisconsin–Madison Home: (817) 975-7823 1180 Observatory Drive E-mail: [email protected] Madison, Wisconsin 53706 https://sites.google.com/site/econcjr Degrees: Ph.D. in Economics, University of Wisconsin–Madison (Expected 2015) M.S. in Economics, University of Wisconsin–Madison (2010) B.A. cum laude in Economics and Urban Studies, Trinity University (2006) Dissertation Title: Essays on State and Local Effects of Poverty-Alleviation Policies Abstract Summary: In the first essay, I find that physical proximity to a traditional financial institution is associated with lower utilization of alternative financial services among residents of low-to-moderate-income communities. I then use the findings as an upper-bound for estimating the benefits of the Community Reinvestment Act’s bank branch location regulations. In the second essay, we propose a new model for evaluating the labor demand effects of unemployment insurance programs. We find that this model has significant theoretical advantages over the literature’s standard model, that the standard model overstates firms’ employment reaction to higher UI taxes, and we identify a class of firms facing a tax incentive to lay more workers off.Summary: In the first essay, I find that physical proximity to a traditional financial institution is associated with lower utilization of alternative financial services among residents of low-to-moderate-income communities. I then use the findings as an upper-bound for estimating the benefits of the Community Reinvestment Act’s bank branch location regulations. In the second essay, we propose a new model for evaluating the labor demand effects of unemployment insurance programs. We find that this model has significant theoretical advantages over the literature’s standard model, that the standard model overstates firms’ employment reaction to higher UI taxes, and we identify a class of firms facing a tax incentive to lay more workers off. References: J. Karl Scholz (Major Professor) — [email protected] Chris Taber — [email protected] Jesse Gregory — [email protected] Elizabeth Kelly (Teaching) — [email protected] Papers: “The Role of Proximity in Financial Service Utilization and Implications for the Community Reinvestment Act,” Job Market Paper “Labor Demand Responses to Unemployment Insurance Incentives,” with Victoria Udalova Teaching Experience: Head Teaching Assistant, Introductory Microeconomics (Fall 2010) Teaching Assistant, Introductory Microeconomics (2009–2010) Lead Instructor, “Economists in the Schools” Program (2004–2006) Research Experience: RA for Laura Dresser, Center on Wisconsin Strategy (2014–2015) RA for Thomas DeLeire, Population Health Institute (2013) RA for Timothy Smeeding, Institute for Research on Poverty (2011–2012) RA at the Federal Reserve Board of Governors (2006–2009) Fields of Interest: Public Economics, Applied Econometrics, Urban Economics Essays on State and Local Effects of Poverty-Alleviation Policies Dissertation Abstract Christopher J. Reynolds University of Wisconsin–Madison Chapter 1: The Role of Proximity in Financial Service Utilization and Implications for the Community Reinvestment Act (Job Market Paper) In 1977, the Federal government enacted the Community Reinvestment Act (CRA). This legislation included several alterations to bank regulation—most notable among them were provisions requiring banks to extend loans to and locate bank branch offices in low-and-moderateincome communities. Despite the significant costs to banks of compliance with these location regulations, there has been little work examining the impact of bank branch location on nearby consumers. I address this question using the Detroit Area Household Financial Services survey, which collected extensive data on consumers’ revealed preferences for various financial products and also on the physical landscape of traditional and alternative financial service (AFS) providers. I use this geographic information to construct measures of respondents’ proximity to types of service-providers and examine whether having a bank branch nearby is associated with reduced utilization of check-cashing and money order services. I explore mechanisms by which proximity could causally alter behavior, and I find a small, statistically significant effect of bank accessibility on voluntary substitution away from AFS use. I use this estimate as an upper-bound on the benefits to consumers of bank proximity. I then present evidence that helps policymakers weigh this upper bound of consumer benefits against the cost to banks of suboptimal branch location, and thus to evaluate the efficiency of the CRA. Chapter 2: Labor Demand Responses to Unemployment Insurance Incentives (with Victoria Udalova) In the wake of the severe recession that began in 2007, the unemployment rate spiked to nearly ten percent. As a consequence, many state unemployment insurance (UI) systems, which had been largely uncontroversial and self-sustaining since their inception, watched their financial reserves dwindle toward insolvency. For thirty years, economic literature examining UI systems has relied on a theoretical framework established by Robert Topel in 1983. Topel proposed a statistic called marginal tax cost (MTC) as a measure of the tax implications to firms of future layoffs. Calculating this statistic, however, requires a number of simplifying assumptions. We propose a new methodology for calculating MTC that more accurately reflects the implications of UI statutes and that does not rely on the simplifications of the standard model. We utilize UI data from the Wisconsin Department of Workforce Development and characterize the relationship between observed layoffs and MTC as calculated by both the standard model and by our alternative model. We find that the assumptions of Topel-derived MTC bias its relationship with layoffs upward for firms with tax costs below the statutory maximum rate and downward for firms paying that maximum rate. Further, we characterize a class of firms that have a negative MTC (an incentive to lay off more workers, rather than fewer), which is a scenario assumed away under the standard model. We conclude that our alternative statistic improves upon Topel-derived MTC, which, on the whole, overstates the relationship between UI tax incentives for firms and those firms’ subsequent labor demand decisions. University of Wisconsin – Madison Department of Economics NAME: Hector Hugo Sandoval Gutierrez Citizenship: Mexican Address: Department of Economics Office: (608) 443-9604 University of Wisconsin-Madison Home: (608) 443-9604 1180 Observatory Drive E-mail: [email protected] Madison, WI 537006 https://sites.google.com/site/hhsandoval/ Degrees: Ph.D. in Economics, University of Wisconsin – Madison (expected 2015) M.S. in Economics, University of Wisconsin – Madison (2013) M.A. in Economic and Public Policy, Monterrey Institute of Technology and Higher Education, Graduate School of Public Policy, Mexico (2006) B.S. in Economics, Monterrey Institute of Technology and Higher Education, Mexico (2004) Dissertation Title: Social Interactions in Randomized Experiments Abstract Summary: This paper studies peer effects and randomized experiment using the experimental data from the Progresa program. Progresa is the main antipoverty program in Mexico where eligible and non-eligible households living in the same locality interact with each other and influence each other’s decisions. Using the theory of social interactions two effects are observed. First, a direct effect arises from the receipt of the program’s benefits and second, an indirect effect arises from peer’s behavior. The identification of these effects is closely related to the design of the experiment and knowledge of the reference groups. In the context of Progresa and school attendance behavior these two effects are found to be significant.Summary: This paper studies peer effects and randomized experiment using the experimental data from the Progresa program. Progresa is the main antipoverty program in Mexico where eligible and non-eligible households living in the same locality interact with each other and influence each other’s decisions. Using the theory of social interactions two effects are observed. First, a direct effect arises from the receipt of the program’s benefits and second, an indirect effect arises from peer’s behavior. The identification of these effects is closely related to the design of the experiment and knowledge of the reference groups. In the context of Progresa and school attendance behavior these two effects are found to be significant. References: Steven N. Durlauf (Primary advisor) – [email protected] James R. Walker – [email protected] Jesse M. Gregory – [email protected] Papers: “Social Interactions in Randomized Experiments”, Job Market Paper, UWMadison 2014 “Social Interactions, Groups, and Schooling in Rural Mexico”, Field Paper, UW-Madison 2013 Teaching Experience: Teaching Assistant, Economic Growth and Human Resources (undergraduate level), fall 2014 Research Experience: External Consultant, UNDP Human Development Office, Mexico, 2013 Project Assistant, Graduate School of Public Policy, Mexico, 2004-2006 Work Experience: Vice-director of Statistics, Poverty Division of the National Council of Social Development Public Policy Evaluation (CONEVAL), Mexico (2007 2009) Fields of Interest: Applied microeconomics, social interactions, and development economics Social Interactions in Randomized Experiments Dissertation Abstract Hector H. Sandoval University of Wisconsin Madison Randomized social experiments are widely used to evaluate social programs. These social experiments typically involve households or individuals that live and interact with each other. In this context, peer effects provide a potential mechanism to diffuse the program’s impact. This is the case of the main Mexican antipoverty program Progresa (currently known as Oportunidades); whose conditional cash transfer design is broadly applied in other countries around the world. Progresa’s evaluation was planned in parallel as a randomized experiment taking advantage of the sequential expansion due to budgetary restrictions. In this experiment, eligible and non-eligible households living in the same locality interact with each other. In particular, eligible and non-eligible children interact with each other and influence each other’s individual schooling decisions as well as aggregate group behavior. This paper uses the theory of social linear interactions models and the data from Progresa to study school attendance behavior in the presence of peer effects and randomized experiments. Using this methodological framework I observe a direct effect arising from the receipt of the program’s benefits, which modifies the individual’s private incentives and an indirect effect from peer’s behavior. The identification of the direct effect is policy relevant to assess the program’s impact on individual behavior, while the knowledge of the indirect effect provides information about potential program spillover effects to other, possibly untreated, group members. The identification of these two effects is closely related to the design of the experiment and knowledge of potential reference groups where social interactions take place. Randomization at the group level identifies an overall group effect, which compounds the direct and indirect effect, but fails to identify them separately. Randomization at the individual level, without considering group membership, might potentially bias the assessment of the direct effect of the program by ignoring the indirect effects. A two step randomization process, in which the first stage randomizes at the group level and the second stage randomizes or selects a subset of individuals into treatment within the selected treated groups, helps to identify and estimate both effects separately. The Progresa experiment randomizes at the locality (group) level, and then provides the program’s benefits to a subset of the households within each locality according to their poverty status. Considering children in the same locality and in the same grade as the reference group, the direct effect on school attendance is around 2 percentage points, while the indirect effect is around 2.5 percentage points. These two effects are robust to alternative group specifications that consider ethnicity and gender within each school and grade as separate groups. Further research is required to assess the program’s impact on other important outcomes such as labor outcomes, in particular child labor; as well as health outcomes since some of the program’s benefits were conditional on attending regular medical check-ups. Moreover, in this framework, the program’s benefits are intended to exclusively affect the private incentives to invest in human capital. However, in some cases the benefits might produce changes in the relationship between the households by partitioning the group in treated and untreated subgroups, for example. Studying such cases is policy relevant since social programs might not intend to alter the social structure. University of Wisconsin – Madison Department of Economics NAME: Hsuan-Li Su Citizenship: Taiwan Address: Department of Economics Cell: (608) 358-2448 University of Wisconsin-Madison Home: (608) 886-7373 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/hsuanlisu/ Degrees: Ph.D. in Economics, University of Wisconsin-Madison, expected 2015 M.S. in Economics, University of Wisconsin-Madison, 2012 B.A. in Physics, National Taiwan University, 2006 Dissertation Title: Three Essays in Macroeconomics Abstract Summary: My dissertation studies three topics in macroeconomics. The first chapter studies the importance of financial frictions in generating macroeconomic fluctuation. I show that financial frictions play a crucial role when uncertainty shocks hit the economy, and input-output linkages can further amplify the impact of financial frictions. The second chapter investigates the city size distribution. I settle the debate between Eeckhout and Levy by showing that the upper tail of the city size distribution in the U.S. follows a power law. I then show that the city size distribution is a mixture of lognormal distributions and that this mixture generates the heavy tail observed in data. The third chapter examines the relation between wage inequality and economic growth in developed countries. I show that there is no clear causality between inequality and growth in empirical data because this relation depends on the race between the rate of human capital accumulation and the rate of skill-biased technological change.Summary: My dissertation studies three topics in macroeconomics. The first chapter studies the importance of financial frictions in generating macroeconomic fluctuation. I show that financial frictions play a crucial role when uncertainty shocks hit the economy, and input-output linkages can further amplify the impact of financial frictions. The second chapter investigates the city size distribution. I settle the debate between Eeckhout and Levy by showing that the upper tail of the city size distribution in the U.S. follows a power law. I then show that the city size distribution is a mixture of lognormal distributions and that this mixture generates the heavy tail observed in data. The third chapter examines the relation between wage inequality and economic growth in developed countries. I show that there is no clear causality between inequality and growth in empirical data because this relation depends on the race between the rate of human capital accumulation and the rate of skill-biased technological change. References: Steven Durlauf (Major Professor): [email protected] Enghin Atalay: [email protected] Dean Corbae: [email protected] Kenneth West: [email protected] Papers: “Financial Frictions, Capital Misallocation, and Input-Output Linkages,” Job Market Paper, October, 2014 “On the City Size Distribution: A Finite Mixture Interpretation,” 2012 Teaching Experience: Teaching Assistant at UW-Madison: Principle of Microeconomics (one semester), Principle of Macroeconomics (one semester), Intermediate Microeconomics (one semester), Intermediate Macroeconomics (three semesters) Teaching Assistant at National Taiwan university: Option Pricing (graduate class, one semester) Fields of Interest: Macroeconomics, Financial Economics, Networks Three Essays in Macroeconomics Dissertation Abstract Hsuan-Li Su University of Wisconsin-Madison Chapter 1. Financial Frictions, Capital Misallocation, and Input-Output Linkages I analyze the role of financial frictions in amplifying impulse responses to different type of shocks and show that input-output linkages have important implications in amplifying the impact of financial frictions on the aggregate economy. Financial frictions distort the allocation of capital and induce capital wedges. The capital wedge channel is weak under TFP shocks, but is strong under uncertainty shocks. As a result, in standard models driven by TFP shocks, adding financial frictions dampens the impulse responses. On the other hand, financial frictions can drive aggregate TFP fluctuation and play a crucial role when uncertainty shocks hit the economy. Adding input-output linkages can further amplify the impact. In the model calibrated to U.S. data, I quantify the amplification effects of firm linkages. By adding input-output linkages, aggregate output drops an additional 84% under TFP shocks and an additional 40% under uncertainty shocks. Furthermore, the model shows that the Manufacturing and the Finance sectors are the two most important sectors in their impact on aggregate output. Chapter 2. On the City Size Distribution: A Finite Mixture Interpretation This paper settles the debate between Eeckhout (2004, 2009) and Levy (2009) and offers a simple but neglected explanation for the heavy tail observed in the city size distribution. Using the same data set and thestatistics reported in Eeckhout (2004), I show that U.S. city sizes are not lognormally distributed and that the upper tail indeed follows a power law. I then show that the aggregate city size distribution is a mixture of lognormal distributions, and that this mixture generates the heavy tail. This paper also advocates abandoning the use of the Kolmogorov-Smirnov statistic and OLS regressions and instead using the rigorous and powerful Cramer-von Mises type statistics to do goodness-of-fit tests. Finally, I relax the independence assumption and show that city sizes are positively dependent in the data, and that the power law distribution is robust under this positive dependence. Chapter 3. The Relation between Growth and Inequality in Developed Countries Income inequality affects economic growth through channels of human capital accumulation, fertility, and investment. However, whether inequality encourages or hurts economic growth remains controversial. Empirical findings suggest that income inequality hurts economic growth in developing countries, but the results in developed countries are inconclusive. This paper tries to investigate why the relationship between inequality and growth is indeterminate in developed countries, and focuses on the channels of human capital accumulation and high skill-biased technological change. The hypothesis is that human capital accumulation and skill-biased technological change affect both income inequality and economic growth simultaneously. As a result, there is no clear causality between inequality and growth. Human capital accumulation increases the supply of high-skilled labor, while high skill-biased technological change increases the demand for high-skilled labor; both factors help economic growth. As a result, the relation between equilibrium relative wage (among high-skilled and low-skilled labors) and income inequality depends on the race between the rate of human capital accumulation and the rate of skill-biased technological change. University of Wisconsin – Madison Department of Economics NAME: Joanna Syrda Citizenship: Poland Address: Department of Economics University of Wisconsin-Madison Cell: (608) 320-6404 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/joannasyrda/ Degrees: Ph.D. Economics, University of Wisconsin, Madison, Expected 2015 M.S. Economics, University of Wisconsin, Madison, 2011 M.S. Economics, Warsaw School of Economics, 2008 Dissertation Title: “Three Essays in Economics” Abstract Summary: The first paper presents a modified logit model to analyze multiproduct firm behavior and industry dynamics in markets with significant endogenous sunk cost such as advertising. The model incorporates Sutton’s theory, showing that such markets as they grow in size, through associated competitive escalation of spending, become highly concentrated and predicts decline in product variety and highly skewed returns and skewed budget allocation observed in the entertainment industries. The second paper finds empirical evidence of nontransferable utility component in the marriage market, showing increased odds of separation as spouses’ physical fitness diverges and little evidence of compensating substitution patterns. The third paper examines the relationship between individuals’ risk attitudes and marriage market decisions. The empirical results are in line with the employment search theory, high risk aversion leads to earlier marriage and less likely divorce.Summary: The first paper presents a modified logit model to analyze multiproduct firm behavior and industry dynamics in markets with significant endogenous sunk cost such as advertising. The model incorporates Sutton’s theory, showing that such markets as they grow in size, through associated competitive escalation of spending, become highly concentrated and predicts decline in product variety and highly skewed returns and skewed budget allocation observed in the entertainment industries. The second paper finds empirical evidence of nontransferable utility component in the marriage market, showing increased odds of separation as spouses’ physical fitness diverges and little evidence of compensating substitution patterns. The third paper examines the relationship between individuals’ risk attitudes and marriage market decisions. The empirical results are in line with the employment search theory, high risk aversion leads to earlier marriage and less likely divorce. References: Kenneth Hendricks (Primary Advisor): [email protected] Alan Sorensen: [email protected] Amit Gandhi: [email protected] Gwen Eudey (Teaching): [email protected] Papers: “Economics of Music Chart Toppers: Market Size, Market Concentration and Product Variety” (job market paper), October 2014 “Divorce and Differential BMI: Till Death or Unfitness Do Us Part?”, 2013 “Risk Attitudes, Marriage and Divorce”, in progress Teaching Experience: TA at UW-Madison Department in Economics and School of Business Principles of Microeconomics (4 semesters), Game Theory (1 semester), Principles of Macroeconomics (3 semesters), Economics of Law (1 semester), IO (1 semester), International Trade and Finance (1 semester) Research Experience: Research Assistant to Prof. Robert Haveman, IRP Fields of Interest: Industrial Organization, Applied Microeconomics THREE ESSAYS IN ECONOMICS Dissertation Abstract JOANNA SYRDA University of Wisconsin-Madison Economics of Music Chart Toppers: Market Size, Market Concentration and Product Variety This paper presents a modified logit model to analyze multiproduct firm behavior and industry dynamics in markets with significant endogenous sunk cost such as advertising or R&D. In the years 1959-1999 the US Recorded Music Market has increased considerably in size and the associated competitive escalation of spending led to a highly concentrated market, where a large share of the industry profit is appropriated by a small number of extremely successful products. Music industry products are essentially priced uniformly or prices vary within a narrow range, hence in the proposed model firms engage in a non-price competition and decide on the optimal advertising spending allocation across an exogenous distribution of artists’ talent or market potential. Firms internalize demand linkages between their products and as they gain market power optimal allocation involves heavy promotion of fewer products. The developed theoretical framework endogenously generates an S-shaped advertising response function and growing incentives to advertise with the size of the market in line with Sutton’s theory of endogenous sunk cost. The model predicts increasing market concentration and highly skewed returns and skewed budget allocation observed in the entertainment industries. Using the model I present numerical simulations that are consistent with observed market dynamics. The results are largely driven by preference for variety and advertising effectiveness which are estimated using Billboard chart data and collected data on the industry ownership links. Divorce and Differential BMI: Till Death or Unfitness Do Us Part? If the transferable utility approach aptly explained the marriage market then all divorces would be mutual as there either would be a surplus to the match or there would be none. Marriage can be analyzed as a repeated game, where at each stage spouses choose their effort in multiple dimensions and upon observing the outcomes of that effort they decide whether to stay together or separate given their utility from marriage and from the outside option. Physical attractiveness is a characteristic that contributes to the utility derived from the match and may require effort and change over time decreasing the surplus from a marriage. Using Panel Study of Income Dynamics (PSID) dataset I show strong evidence of Positive Assortative Matching across numerous dimensions including BMI and investigate to what degree physical fitness is a fixity, a non-transferable utility component. The empirical result is an increase in odds of divorce given significant differences among spouses’ physical attractiveness, with little evidence of compensating substitution patterns. Risk Attitudes, Marriage and Divorce. A search model from employment literature predicts that, the more risk averse the individual, the shorter the time to first marriage. Holding the utility derived from a match and value of outside option equal, another parameter that affects individual's decision to marry or to divorce is risk aversion. A search model from the employment literature shows that, due to the uncertainty of the process, the more risk averse marry earlier and are less likely to divorce, due to the outcome uncertainty of reentering the matching market. Using Panel Study of Income Dynamics (PSID) dataset I approximate risk preference based on an income gamble survey results and confirm the theoretical predictions of high risk aversion leading to earlier marriage and less likely divorce. University of Wisconsin – Madison Department of Economics NAME: Jing Tao Citizenship: P. R. China Address: Department of Economics Cell: (608) 698-5582 University of Wisconsin-Madison E-mail: [email protected] Madison, WI 53706 http://www.ssc.wisc.edu/~jtao Degrees: Ph.D., Economics, University of Wisconsin-Madison, Expected May 2015 M.S., Economics, University of Wisconsin-Madison, January 2012 B.A., Economics (honors) & B.S., Mathematics, Peking University, June 2006 Dissertation Title: Essays on Semi-Nonparametric Econometrics Abstract Summary: The first essay provides inference methods for point and partially identified seminonparametric conditional moment models. Inference includes uniform confidence bands for the infinite-dimensional components of the parameter through an adaptation of the strong approximation methods in Belloni, Chernozhukov, and Fernandez-Val (2011) and related work. The second essay proposes criteria to simultaneously select the number of series terms for regressors and instruments in nonparametric instrumental variables estimation and establishes the asymptotic optimality of a new model averaging estimator. The third essay provides nonparametric estimation and inference methods for the bidders’ utility function and the density function of private values for risk-averse bidders in first-price sealed-bid auctions.Summary: The first essay provides inference methods for point and partially identified seminonparametric conditional moment models. Inference includes uniform confidence bands for the infinite-dimensional components of the parameter through an adaptation of the strong approximation methods in Belloni, Chernozhukov, and Fernandez-Val (2011) and related work. The second essay proposes criteria to simultaneously select the number of series terms for regressors and instruments in nonparametric instrumental variables estimation and establishes the asymptotic optimality of a new model averaging estimator. The third essay provides nonparametric estimation and inference methods for the bidders’ utility function and the density function of private values for risk-averse bidders in first-price sealed-bid auctions. References: Jack Porter (Primary) – [email protected] Bruce Hansen – [email protected] Xiaoxia Shi – [email protected] Papers: “Inference for Point and Partially Identified Semi-Nonparametric Conditional Moment Models” – Job Market Paper, October 2014. “Model Selection and Model Averaging in Nonparametric Instrumental Variables Models,” with Chu-An Liu, October 2014. “Empirical Likelihood Ratio Tests of Conditional Moment Restrictions with Unknown Functions,” R&R at Econometric Theory. “Nonparametric Estimation and Inference for Risk Aversion in First-Price Auctions under Exclusion Restrictions,” March 2013. Teaching Experience: Teaching Assistant at UW-Madison: Principles of Microeconomics (×2), Intro to Econometrics (×2), Economic Statistics and Econometrics (graduate), Econometrics (gradate). Research Experience: Project Assistant for Professor Bruce Hansen (September 2013-June 2014). Fields of Interest: Econometric Theory and Applied Microeconomics Essays on Semi-Nonparametric Econometrics Dissertation Abstract Jing Tao University of Wisconsin-Madison Inference for Point and Partially Identified Semi-Nonparametric Conditional Moment Models (Job Market Paper) This paper provides inference methods for functionals of parameters for semi-nonparametric conditional moment models, which include the nonparametric IV model as a special case. For point-identified models, my findings include (1) pointwise joint asymptotic normality of sieve GMM estimators of both finiteand infinite-dimensional components of the parameter; (2) strong approximation results for the estimates of functionals of the parametric and nonparametric components; (3) pointwise and uniform inference methods for (joint) hypotheses on functionals of both components. Based on these results, we can, for instance, construct uniform confidence bands for the infinite-dimensional component (unknown functions) and functionals of these unknown functions. If the model is partially identified, we show that the quasilikelihood ratio (QLR) statistic is still valid for a certain class of functional restrictions on the parameter space. Under partial identification, we can construct pointwise confidence regions by inverting the same QLR statistic that is employed under point identification. Furthermore, we can construct uniform confidence sets by inverting a sup-QLR statistic that is also employed under point identification. We provide a consistent weighted bootstrap procedure for obtaining critical values corresponding to the QLR. In application, I apply the new methods to construct pointwise confidence regions and uniform confidence sets for shape-invariant Engel curves. Model Selection and Model Averaging in Nonparametric Instrumental Variable Models (with Chu-An Liu) This paper proposes a simple Mallows criterion to simultaneously select the number of series terms for regressors and instruments in nonparametric instrumental variables estimation. We show that the proposed selection criterion is asymptotically optimal in the sense that the selected estimate asymptotically achieves the lowest possible mean-squared error among all candidates. To account for model uncertainty, we introduce a new model averaging estimator and demonstrate its asymptotic optimality. Monte Carlo simulations confirm that both selection and averaging methods generally achieve lower root mean-squared error than other existing methods. The methods are applied to the estimation of Engel curves and the return to a college education. Nonparametric Estimation and Inference for Risk Aversion in First-Price Auctions under Exclusion Restrictions This paper studies nonparametric estimation of the first-price sealed-bid auction model with risk-averse bidders. I provide an estimator corresponding to the identification established in Guerre, Perrigne and Vuong (2009). Compared with Zincenko (2014), I derive the asymptotic distribution for the nonparametric estimator of bidders' utility functions. I also propose inference methods to test restrictions on utility functions and inference methods on the density function of the private values. The methods are applied to the U.S. Forest Service timber auction. Empirical Likelihood Ratio Tests of Conditional Moment restrictions with Unknown Functions This paper develops empirical likelihood ratio tests for conditional moment models with unknown functions. I obtain two new results: (1) the limiting distribution of the sieve conditional empirical likelihood ratio test statistic for functionals of parameters under the null and local alternatives; and (2) the limiting distribution of a consistent specification test under the null and local alternatives. A simulation study suggests that the two tests behave well in small samples. University of Wisconsin – Madison Department of Economics NAME: Victoria Udalova Citizenship: U.S.A. Address: Department of Economics University of Wisconsin-Madison Cell phone: (608) 446-6583 1180 Observatory Drive E-mail: [email protected] Madison, WI 53706 https://sites.google.com/site/victoriaudalova Degrees: Ph.D., Economics, University of Wisconsin-Madison (Expected 2015) M.S., Economics, University of Wisconsin-Madison (2011) B.A., Economics, University of Wisconsin-Eau Claire (2007) Dissertation Title: “Three Essays on Health Economics” Abstract Summary: My dissertation research focuses on factors impacting the type of medical treatments patients receive. My first essay estimates the impact of increasing the availability of primary care providers on medical treatment choices. Using variation in the timing of passage of state laws governing the independence of practice for nurse practitioners, I find that in states that allow nurse practitioners greater freedom from oversight by doctors, the frequency of routine checkups increases, various measures of care quality improve, and emergency room use by patients with ambulatory care sensitive conditions decreases. My second essay examines how treatment choices are influenced by treatment choices of others in the same household. I document the existence and magnitude of peer effects among household members on the choice of prescription medications. My third essay focuses on the effect of physicians’ personal asset protection on treatment choices. Using variations in bankruptcy law, I find that malpractice premiums decrease and total hospital charges for patients with heart conditions decrease when bankruptcy exemptions increase with no corresponding change in mortality risk.Summary: My dissertation research focuses on factors impacting the type of medical treatments patients receive. My first essay estimates the impact of increasing the availability of primary care providers on medical treatment choices. Using variation in the timing of passage of state laws governing the independence of practice for nurse practitioners, I find that in states that allow nurse practitioners greater freedom from oversight by doctors, the frequency of routine checkups increases, various measures of care quality improve, and emergency room use by patients with ambulatory care sensitive conditions decreases. My second essay examines how treatment choices are influenced by treatment choices of others in the same household. I document the existence and magnitude of peer effects among household members on the choice of prescription medications. My third essay focuses on the effect of physicians’ personal asset protection on treatment choices. Using variations in bankruptcy law, I find that malpractice premiums decrease and total hospital charges for patients with heart conditions decrease when bankruptcy exemptions increase with no corresponding change in mortality risk. References: John Karl Scholz (Major Professor) [email protected] Chris Taber [email protected] Jason Fletcher [email protected] Corbett Grainger (Teaching Reference) [email protected] Papers: “Nurse Practitioner Independence, Health Care Utilization, and Health Outcomes” (Job Market Paper) (with Jeffrey Traczynski) “I'll Have What She's Having: Household Peer Effects in Prescription Medications” “Physician Asset Protection, Malpractice Insurance, and Defensive Medicine” (with Jeffrey Traczynski) “Person, Place, and Regulation: Predictors of CRC Screening by Endoscopy” (with Lee R. Mobley, Tzy-Mey Kuo, Jon Starnes, Jeffrey Traczynski, & Julia Koschinsky) “Macro-Level Factors Impacting Geographic Disparities in Cancer Screening” (with Lee R. Mobley, Tzy-Mey Kuo, Jeffrey Traczynski, and H.E. Frech III), Health Economics Review 2014, 4:13 Teaching Experience: Teaching Assistant, Principles of Macroeconomics (2010) Teaching Assistant, Environmental & Natural Resource Economics (2011) Fields of Interest: Applied Microeconomics, Public Economics, Health Economics Three Essays on Health Economics Dissertation Abstract Victoria Udalova University of Wisconsin – Madison My dissertation research focuses on factors impacting the type of medical treatments patients receive. The first essay estimates the impact of increasing the availability of primary care providers on medical treatment choices. The second essay examines how treatment choices are influenced by treatment choices of others in the same household. The third essay focuses on the effect of physicians’ personal asset protection on treatment choices. Chapter 1: “Nurse Practitioner Independence, Health Care Utilization, and Health Outcomes” (Job Market Paper) (with Jeffrey Traczynski) Over the last several decades, many states relaxed their occupational licensing restrictions to allow nurse practitioners (NPs) to practice and prescribe drugs without oversight by a medical doctor. Using variation in the timing of passage of state scope-of-practice laws governing the independence of medical practice of NPs, I estimate the effect of NP independence on utilization of primary care services and patient health outcomes. I find that in states that allow NPs greater freedom from oversight by medical doctors, the frequency of routine checkups increases, various measures of care quality improve, and emergency room use by patients with ambulatory care sensitive conditions decreases. Chapter 2: “I'll Have What She’s Having: Household Peer Effects in Prescription Medications” I document the existence and magnitude of peer effects on the choice of prescription medications among household members who share the same medical condition. Observing the experience of others with a drug may reveal information about the drug’s expected benefit to the patient and lead to a better patient-to-drug match. On the other hand, the experiences of others in the peer group may lead patients to demand or, instead, to reject a specific drug regardless of physician’s recommendations, perhaps leading to a worse patient-to-drug match. Both impacts have implications for health outcomes and lifetime health care costs. I find significant and robust interaction effects within households in their use of prescription medications. I also explore asymmetries in the flow of peer influences among household members and find that the effects are nonlinear in the number of peers and that the greatest influence comes from female peers on other female household members’ initial choice of drug. Chapter 3: “Physician Asset Protection, Malpractice Insurance, and Defensive Medicine” (with Jeffrey Traczynski) I estimate the effect of personal asset protection on physician practice decisions. Using variation in state bankruptcy exemption levels, I find that increases in bankruptcy exemption levels result in decreases in malpractice premiums for physicians, suggesting that the asset protection offered by bankruptcy is a substitute for the asset protection offered by malpractice insurance. I also find that total hospital charges for patients with heart conditions decrease when bankruptcy exemptions increase with no corresponding change in mortality risk, indicating that increases in exemptions decrease malpractice pressure and the practice of defensive medicine. My results suggest an imperfect substitutability between malpractice insurance, bankruptcy exemptions, and the insurance against lawsuits provided by defensive medicine. University of Wisconsin – Madison Department of Economics NAME: Haomin Wang Citizenship: China Address: Department of Economics Office: (608) University of Wisconsin-Madison Home: (608) 32