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(2010)ThesisThis dissertation explores the issues of market design for emissions trading schemes by focusing on penalty designs and initial allocation mechanisms. Penalty design is defined in terms of penalty types and levels and the allocation mechanism compare free allocation with auctioning. The first essay employs a theoretical model to examine compliance incentives and market efficiency under three penalty types: the fixed-penalty rate (FPR), the make-good provision (MGP), and the mixed penalty design. Using a simple two-period model of firm’s profit maximisation, we analyse compliance decisions and the efficient penalty level under each penalty type. Our findings indicate that the penalty type does not affect compliance decisions provided that the efficient penalty level is applied. Market efficiency is retained regardless of penalty types. These findings are used as the hypotheses for the second essay. The behavioural implications of penalty designs on market performance are investigated in the second essay using an experimental method. Three penalty types and two penalty levels are enforced in a laboratory permit market with auctioning wherein subjects make compliance decisions by undertaking irreversible abatement investment decisions or by buying permits. In contrast to theory, we find that penalty levels serve as a focal point that indicates compliance costs and affects compliance strategies. The MGP penalty provides stronger compliance incentives than the other penalty types. Most importantly, a trade-off between investment incentives and efficiency is observed. Using a laboratory experiment, the third essay studies how the initial distribution of permits through free allocation or auctioning, may affect price discovery, allocative and static efficiency under the presence of three penalty designs. Price discovery is not influenced by the initial allocation mechanism. Permit prices remain above the efficient level due to the presence of irrational bidding and trading behaviour as well as risk aversion. Uncertainty regarding permit prices results in a modest allocative efficiency as over-investment prevails. Auctioning evidently generates higher static efficiency due to stronger price signals. This result supports the majority of literature which argues for auctioning. An appropriate auction design is crucial to avoid the risk of overbidding which will inflate the auction price and diminish efficiency.
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(2010)ThesisThis dissertation comprises three independent but complementary chapters, all of which use advanced time series and panel data econometric techniques to study asymmetries in consumer demand response to price changes, as well as industrial and state/territory responses to monetary shocks in Australia. The first contribution develops an autoregressive distributed lag model using Australian supermarket scanner data. Specifically, we use data from sales of similar products manufactured by the competitors Coca-Cola and Pepsi-Cola and find that demand response to price changes is not asymmetric for the market leader Coca-Cola but is strongly asymmetric for its competitor Pepsi-Cola. This suggests that consumers of the less expensive good stock up when prices go down but the consumers of the more expensive good do not. The second contribution analyses the industrial impact of monetary shocks in Australia. These impacts are quantified by constructing a structural vector autoregressive (SVAR) model for a small open economy. Our results show that construction and manufacturing industries exhibit a significant reduction in gross value added (GVAs) after an unanticipated rise in the official cash rate. In the finance and insurance; and mining industries, however, we find that there is a positive or neutral response to these shocks,. Based on the responses, we constructed a model to quantify which sources are more likely to be accountable for these different responses. The third contribution develops a SVAR and a structural vector error correction (SVEC) model to explore the impact of monetary policy across states and territories in Australia. Our results indicate that monetary shocks largely affect economic activity in Western Australia. In smaller proportion, those shocks generate contractions in New South Wales, Victoria and South Australia, while economic activity in Queensland and Tasmania is significantly less affected. In terms of state/territory exports response, our results indicate that monetary shocks contract exports in greater proportion in South Australia and Victoria than in other states and territories. Finally, the determinants of state/territory responses are studied. Our estimation indicates that the share of services, farm and mining exports is an important determinant of state/territory export responses.
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(2010)ThesisIn India, cataract surgeries are provided by both the private and public sectors. Free cataract surgeries (with minimal amenities), funded through subsidies/reimbursements by government and non-governmental organizations, are provided for underprivileged and poor patients. However, no evidence exists as to whether these free surgeries are used by those who could afford to pay for cataract surgery. This thesis evaluates the current assistance programme (with free surgery availability) in comparison to a hypothetical programme(without free surgery availability) using a cost-benefit analysis approach. The thesis also suggests an alternative programme that is sustainable, without any external support such as subsidies for conducting free surgeries. Data from a cross-sectional survey of 1272 households from four randomly selected rural household clusters in the Theni district, Tamilnadu state, India were used. Respondents from households were presented with ‘scenarios’ (with and without free surgery availability) to elicit their preferences and willingness to pay (WTP) for cataract surgery. Of those willing to undergo surgery, 57 % were willing to undergo ‘Paid Surgery’, 12% were willing to undergo ‘Free Surgery’ and 31% were willing to undergo ‘Paid Surgery if Free Surgery was not available’. In a multinomial logit model, household wealth items, income variables and a family history of cataract surgery largely distinguished the preferences. Results from interval regression models indicate that households with resources to pay have a positive WTP for cataract surgery. Results also show that ‘free surgeries’ are utilized by a significant proportion of people who might be willing to pay a positive amount. Free surgeries may be ‘crowding out’ surgeries from which costs can be recovered. From the results of a cost-benefit analysis it is clear that the cost benefit of the hypothetical programmes is greater than that of the current programme. On the basis of the results, a theoretical self-selection model is recommended as an alternative mechanism through which cataract surgery providers can screen patients based on WTP. The self-selection model is based on the intuition that a provider can offer cataract surgery packages with different pricing and different service levels and amenities by distorting service quality. Evidence of the suggested self-selection model in practice is also given by a leading eye care provider in India.
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(2010)ThesisThis dissertation examines the effect of trade on competition policy and R&D. We examine these issues in the form of three essays. The first essay explores the impact of trade policy on entry regulation in an open economy setup. We find that under an open economy framework free entry can lead to a socially insufficient number of firms can arise. This contrasts the results obtained under closed economy setup where a socially excessive entry would arise. Furthermore, we find that as trade is liberalized the possibility of socially insufficient entry becomes more likely. This implies that more restrictive merger policies should be pursued as trade barriers are. In our second essay, we expand upon this model by incorporating intermediate goods. In our model foreign firms produce an intermediate input which is used by the domestic firm to produce the final product. Under this framework we find that socially insufficient entry can occur under a wide range of parameterizations. Furthermore we find that as trade barriers are reduced the possibility of insufficient entry becomes less likely. In our final essay, we explore the effects of trade liberalization on R&D. We find that as trade is liberalized firms prefer to undertake more R&D. Furthermore, cooperation in R&D is preferred as trade barriers are reduced. Cooperation is not necessary beneficial for consumers, specifically if trade barriers and spillovers are low. Thus R&D tax credit and R&D taxes can assume a significant role to ensure that consumers’ interests are accounted for.
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(2010)ThesisThis thesis explores several aspects of the labour market in Serbia and Croatia during the process of transition from socialism to a market economy. First, it examines how women s position in the labour market has changed in Serbia. Using five annual Labour Force Surveys (2001-2005), I find that the gender wage gap is still very low in Serbia, and is even decreasing during this period. However, decompositions that apply the Oaxaca (1974) methodology reveal that the unexplained component of the gap is very large, and is increasing. Likewise, quantile decompositions suggest that while the raw gap is falling at each of the quantiles analysed, the unexplained component is increasing at most quantiles at the same time. Thus, the relatively small gap in earnings could be masking considerable discrimination in the labour market. Second, changes in men s wage inequality in Serbia in the period from 2001 to 2005 are analysed using five annual Labour Force Surveys. Changes in the distribution of earnings are examined using the Lemieux (2002) decomposition methodology. I find that the change in wage inequality is mostly driven by changes in wage premiums, while the effect of changes in the composition of the labour force is very small. Isolating the effect of the emerging private sector reveals that changes in the private sector size and wage premium account for an average 25 percent of the changes in inequality during this period. Third, the effect that the recent war in Croatia (1991-1995) had on the educational and employment trajectories of the 1971 birth cohort of men is investigated. This birth cohort was most affected by the armed forces draft. I treat the occurrence of the war as a natural experiment and use data from the Croatian and Slovenian Labour Force Surveys. Applying the difference-in-difference framework and comparing this cohort to adjacent cohorts, women, and to respective cohorts in Slovenia, a neighbouring country that did not experience war, I find that the war has had a negative effect on educational outcomes and a small positive effect on the employment and earnings outcomes of this cohort of men.
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(2010)ThesisAccounting for 24 per cent of total disability in Australia, mental health disorders result in significant social and economic costs. Health care costs alone amounted to $4.1 billion in 2004-05. Mental health sufferers are more likely to be in low income groups and they often lack the financial, educational and social resources required to seek appropriate treatment. To date, no economic studies in Australia have investigated income and price issues related to the demand for mental health care, nor have any previous studies considered the importance of concession prices associated with the Australian health card for accessing mental health medication. My first paper establishes the trend in the use of mental health medication in Australia from 1989 to 2004-05, which has previously not been documented. Using decomposition analysis to investigate the contributing factors to the three-fold increase in the use of mental health medication over this period, I show that socio-demographic characteristics account for only a small amount of the growth. An examination of trends in the association of income with mental health risk and with mental health medication use shows a negative income gradient for both. My second paper examines in greater depth the effect of income on mental health medication use in 2004-05. Selection methods are used to separate the effect of income on medication use from the effect of income on mental health risk. By estimating mental health medication use separately for those with and without the health card, I determine that having the health card improves access to mental health medication use and that a positive income gradient for mental health medication use exists for those without the health card. My third paper uses a natural experiment approach to determine the price responsiveness of mid-high income seniors for mental health medication following income eligibility increases in 1999 for the Commonwealth Seniors Health Card. The results indicate that after controlling for health status no significant change in mental health medication use occurred following the policy for this group of mid-high income seniors, confirming the greater importance of the health card for mental health sufferers with low income.
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(2010)ThesisThis thesis studies the incentive effects of the two main components of the Australian retirement income system on saving, residential transition and labour sup- ply of the elderly. The thesis focuses on a) the age-pension, a means-tested welfare program for those above the age of 65, and b) the Superannuation Guarantee, a mandatory defined contribution individual account program where individuals accumulate wealth over their working lives. A feature of the age-pension is that the family home is not counted as an asset in determining eligibility for welfare receipt. The thesis addresses four important questions. These are: • Does the means-test encourage wealth draw-down prior to retirement? • Does the exemption of the owner-occupier home from the means-test lead to lower mobility and trade-downs of the family home? • Is there a difference between the impact of wealth in superannuation and private financial wealth on retirement? • Should increases in part-time employment be interpreted as greater involvement in the labour force? These questions are examined using the Household, Income and Labour Dynamics (HILDA) panel data-set from Australia. The data tracks households and individual respondents from 2001 to 2007 and provides information on demographics, wealth and labour market outcomes. The methodological focus is discrete-choice econometrics. Dynamic panel-probit models are used to study mobility and trade-downs as well as retirement transitions. A selection model is used to study if those who move home between two years, trade-down conditional upon moving. The impact of a 2005 policy change to superannuation on retirement has been studied using a difference-in-difference estimation approach. Transitions out of part-time work have been estimated using a competing risks hazard model. Results indicate that only the relatively wealthy in the pre-retirement group claim to save for retirement and that these savings are on the family home which is exempt from the assets test. Pensioners are less likely to trade-down than non-pensioners indicating that owner-occupier exemption from the means-test discourages trade-downs. Wealth in superannuation is positively correlated with retirement and part-time work is used by elderly men following very different labour supply paths, and is very infrequently used as a means for maintaining labour market connections for greater periods of time.