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(2021)ThesisIn Chapter 1, we provide conditions for the synthetic control estimator to be asymptotically unbiased when the outcome is nonlinear, and propose a flexible and data-driven method to choose the synthetic control weights. In the empirical application, we illustrate the method by estimating the impact of the 2019 anti-extradition law amendments bill protests on Hong Kong's economy, and find that the year-long protests reduced real GDP per capita in Hong Kong by 11.27% in the first quarter of 2020, which was larger in magnitude than the economic decline during the 1997 Asian financial crisis or the 2008 global financial crisis. In Chapter 2, we generalise the conventional synthetic control method to a multiple-outcome framework, where the time dimension is supplemented with the extra dimension of related outcomes. As a result, the synthetic control method can now be used even if only a small number of pretreatment periods are available or if we worry about structural breaks over a longer time span. We show that the bound on the bias of the multiple-outcome synthetic control estimator is of a smaller stochastic order than that of the single-outcome synthetic control estimator, provided that the unit of interest can be closely approximated by the synthetic control in terms of the observed predictors and the multiple related outcomes before the treatment. In the empirical application, we illustrate our method by estimating the effects of non-pharmaceutical interventions on various outcomes in Sweden in the first 3 quarters of 2020. Our results suggest that if Sweden had implemented stricter NPIs like the other European countries by March, then (1) there would have been about 70% fewer cumulative COVID-19 infection cases and deaths by July, and 20% fewer weekly deaths from all causes in early May; (2) temporary absence from work would increase by 76% and total hours worked would decrease by 12% among the employed in the second quarter, but the impact would vanish in the third quarter, and there would be no discernable effect on the employment rate throughout; (3) the volume of retail sales would shrink by 5%-13% from March to May, while the other economic outcomes including GDP, import, export, industrial production, and CPI would not be affected. In Chapter 3, we propose a method based on the interactive fixed effects model to estimate treatment effects at the individual level, which allows both the treatment assignment and the potential outcomes to be correlated with the unobserved individual characteristics. This method is suitable for panel datasets where multiple related outcomes are observed for a large number of individuals over a small number of time periods. To illustrate our method, we provide an example of estimating the effect of health insurance coverage on individual usage of hospital emergency departments using the Oregon Health Insurance Experiment data.
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(2021)ThesisThis thesis consists of three essays in political economics. In the first essay “Feigning Politicians,’’ I explore a model of politics where politicians have limited ability to influence policy. In this environment, I show that politicians face limited accountability and have an incentive to feign support for policies that voters demand: proposing policies that voters demand but then exerting little effort toward enacting such policies. A key implication of this feigning behavior is that, in some instances, less effective politicians will be reelected with a higher probability than more effective politicians. I provide empirical support for this key implication in U.S. House elections. In the second essay “Gridlock, Leverage, and Policy Bundling,” I explore a dynamic model of legislative bargaining where alternatives to the status-quo arrive stochastically during the bargaining process and the proposer can bundle multiple alternatives into a single proposal. Contrary to the prevailing wisdom that policy bundling reduces legislative gridlock, I show that policy bundling can increase gridlock via a leverage incentive; I call gridlock of this form leverage-based gridlock. Leverage-based gridlock is more likely to occur during periods of economic or political stability and, when it occurs, causes traditional measures of legislator ideology to overstate the true level of polarization between legislators. In the final essay “Political Capital,” we explore a two-period model of organizational decision making where the leader of the organization has a stock of political capital that she can choose to spend to influence decisions. The leader’s stock of political capital evolves dynamically and may increase or decrease depending on the leader’s decision to spend her capital and if her decision to spend was correct ex-post. This presents the leader with an intertemporal choice problem: spending political capital today will improve today’s decision (in expectation) but may result in less political capital—and hence less influence over organization decisions—in the future. We characterize the optimal use of political capital by the leader, the evolution of political capital over time, and identify different leadership styles that can emerge. We also explore the implications of our results for organizational design.
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(2021)ThesisThe productivity slowdown across industrialised countries since 2004 is a persistent puzzle. This thesis proposes new productivity decompositions, using both industry and firm-level administrative data sets, with a focus on innovative techniques to advance understanding of the drivers of firm, industry, and country productivity performance. Particular attention is paid to micro-theoretic foundations of the proposed techniques, and to the rigorous application of appropriate econometric and data science techniques. At the industry level, drivers of productivity change are identified from a micro-theoretic framework implemented using an index number approach. Drawing on a non-parametric model, Chapter 2 decomposes productivity growth into explanatory factors for 12 selected industries and 16 market sector industries in Australia. Technical progress is found to support increasing productivity, though its contribution is partly offset by production inefficiency. Production inefficiency is interpreted as lagged output, inactive operation or possible measurement errors on a case-by-case basis. The overall performance of productivity growth and its explanatory factors is affected by the market shares based on a weighted average industry aggregation. In addition to the industry-level productivity decomposition in Chapter 2, a firm-level productivity decomposition is developed in Chapter 3 for a market that consists of incumbents, entrants and exiters. This new method enables decompositions of productivity into components to be merged with firm dynamics. The framework is applied to Australian firm-level data and reveals the dominant contribution of incumbent firms to industry productivity and industry efficiency. A difference-in-differences approach is proposed that validates the firm dynamics from the counterfactual perspective. Price imputation is essential when detailed price information is unavailable to support productivity decompositions. Chapter 4 introduces tree-based machine learning models for estimating missing prices in cases where there is product entry and exit, or product “churn”. Model performance metrics from (electronic-point-of-sale) scanner data confirm the prediction accuracy of tree-based models. An economic explanation is proposed to link the decision tree structure and consumer preferences. Tree-based models are recommended for price imputation due to their prediction accuracy and compatibility with consumer utility types.
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(2021)ThesisIn this thesis, I examine the impacts of foreign competition and tariff liberalization on skill premium and product quality in developing countries. The first essay studies the effect of the growth in China's exports on the value, quantity, and quality of exports from Asian developing countries in the US market by applying the instrumental variable method on product-level trade data. I find that Chinese competition has a non-negative effect on the value and quantity of exports from Bangladesh, Vietnam, and Sri Lanka but a negative effect on exports from Indonesia, Malaysia, Philippines, India, Pakistan, and Thailand. All countries upgrade product quality when facing tougher competition from China, but a rise in China's exports leads to more quality upgrading for products close to the world frontier for Bangladesh, Vietnam, and Sri Lanka and short-ladder products for Indonesia, Malaysia, Philippines, India, Pakistan, and Thailand. The second essay investigates the effect of the rise of China's exports on the skill premium of Mexican firms by applying the instrumental variable method to the plant-level production data from Mexico and product-level trade data. We find that Mexican firms reduce their skill premium when facing a rise in Chinese exports, and the effect is more pronounced among non-exporters. We develop a model linking competition and wage inequality between skilled and unskilled workers by introducing a labor market with skilled and unskilled workers and endogenous wages of skilled workers to the model of heterogeneous plants and quality differentiation. Our model predicts that tougher competition leads plants to downgrade quality, which induces a decline in the skill premium. We document a downgrading effect of the rise of China on product quality, and the effect is less strong for exported products. These findings support the predictions of our model. The third essay analyses the effect of tariff reductions under the North American Free Trade Agreement on the product quality and skill premium of Mexican firms using plant-level production data from Mexico and bilateral tariff data between the US and Mexico. We find that output tariff reduction leads to the quality downgrading of domestic products, while there is no statistical association between tariff cuts and skill premium paid by Mexican exporters and non-exporters. It appears that there is no connection between tariff declines and skill premium through changes in product quality.
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(2021)ThesisI estimate the macroeconomic effects of monetary policy shocks between 1996-2013 using Inoue and Rossi (2018)'s functional shock approach based on identifying shocks as shifts in the entire term structure of the yield curve around monetary policy announcements. The empirical framework is unique in how it provides a tool to study monetary policy across conventional and unconventional periods within a unified model. The principal contribution of this work is documenting the relationship between the nature of shifts induced in the yield curve by a monetary policy announcement and its macroeconomic impact. I find that shocks in the conventional period that have a larger impact on the long-term yields elicit similar macroeconomic responses as those in the unconventional period, with the responses being in line with standard theory. I also find that shifts in the long-term rates are policy-relevant and cannot be ignored even in the conventional period. Additionally, I correct the shock measure for information frictions and find the results to be qualitatively similar, but with a roughly two-fold magnification of the responses.
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(2021)ThesisMost economic research aims to reveal truths about economic relationships. This thesis is different because it aims to progress how economists reveal those truths. It consists of three self-contained chapters, each about different elements of the research process. Chapter 1 explores a new econometric approach to data analysis. As the field of economics currently stands, researchers usually inform policymakers with conclusions that come from studying statistical expectations, or arithmetic means, of potential outcomes. Here I introduce other types of means to study, and show that often they will better respect the needs of policymakers. Chapter 2 is about a task that matters for macroeconomic research in particular: measuring price indexes that exclude the effects of quality change. I translate the task into the language of econometrics, showing that it amounts to estimating the fixed effects in a general model of quality adjustment. Earlier translations are less general and suffer from a misspecification relating to product weighting. To exemplify the value of the translation, I use it to challenge influential criticisms of the so-called "time-dummy hedonic" method of quality adjustment. Chapter 3 is about a behavioural element of research. With four collaborators, I investigate the credibility of central bank discussion papers by searching for traces of "researcher bias", which is a tendency to use undisclosed analytical procedures that raise measured levels of statistical significance in artificial ways. To conduct our investigation we compile a new dataset and borrow two popular bias detection methods. The results are mixed and, alone, do not call for changes in research practices. But they do challenge the merits of one of the bias detection methods we borrow.