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School Finance Reform in Vermont: Essays Evaluating Equity, Achievement, and Capitalization under Vermont's Equal Education Opportunity Act
Year of Dissertation:
This dissertation consists of three papers exploring the impacts of Vermont's Equal Education Opportunity Act, Act 60, on equity, student achievement, and property values. The first paper evaluates the equity implications of Vermont's Act 60. Using data on per-pupil spending at the town level, it appears that Act 60 did equalize resources across pupils. Further, the relationship between per-pupil spending and a town's income as well as the relationship between per-pupil spending and property wealth were reduced. However, the magnitude of the reduction is diminished when private donations, induced by the high tax price many towns faced under Act 60, are included. The second paper explores the impacts of spending changes under Act 60 on student achievement. Under Act 60, per-pupil resources changed from year-to-year for many Vermont towns. This paper asks whether these changes in resources were associated with changes in student performance as measured by pass rates on standardized tests. Data on spending and test score pass rates are available annually from 1999 through 2004. Using these data, fixed effects and instrumental variables estimation techniques are employed. Changes in town spending under Vermont's Act 60 appear to have had a positive impact on 4th grade math pass rates. However, these spending changes did not significantly impact 4th grade writing or reading or 2nd grade reading pass rates. There is suggestive, but inconclusive, evidence that additional resources were more effective at increasing test score pass rates in initially low spending schools. There is not, however, any evidence that money was more effective in schools that were initially low achieving. The final paper examines how aggregate property values in the state of Vermont responded to changes in spending, tax rates, and student achievement under Act 60. In contrast to much of the literature, this study finds no evidence that property values in Vermont respond to changes in test score pass rates. Aggregate property values, however, do respond negatively to changes in tax rates. The relationship between aggregate property values and school spending proves most interesting. Spending only appears to be positively related to aggregate property values in towns that choose to rely on private donations to supplement school spending provided under the state's school finance system. This could be taken as evidence that additional school spending is only valued in districts that are constrained from spending at the desired level under Act 60 and not by all communities in the state.
Asset Prices, Wealth, and Inflation Predictability
Francois de Paul Silatchom Foyou
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This study examines the relationship between wealth, consumption and inflation. The study investigates whether the movements in asset prices can, among other things, have significant impact on the level of inflation. The study finds, from a permanent-transitory decomposition analysis of the variables, that consumption shocks are transitory while wealth shocks are permanent. It also finds evidence that the consumption-wealth ratio significantly predicts not only future asset returns, but also future inflation, over the entire time-horizon considered. These results imply that asset values appear to give helpful information about inflation in advance of its appearance, and to that extent it can help guide monetary policy.
Essays on Foreign Direct Investment, Trade and Development
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Essay 1: Most of studies on developing countries have found evidence that international linkages, such as foreign ownership, exporting, or importing, affect productivity growth, but since these variables are correlated, it is hard to distinguish among their effects. This paper tackles this issue by explicitly investigating and comparing the productivity effects of all three international linkages at plant levels in case of Indonesian manufacturing plants during 1993-2001. Overall, the paper finds that foreign ownership, first, and importing, second, but exporting doubtfully, promoted productivity growth. Productivity jumps in the year when plants are acquired by foreigners or when plants first start to import, although the productivity effects from importing become smaller after two years following the initiation of imports. Methodologically, I first obtain a measure of plant productivity that corrects for the selection and simultaneity biases. Then I control for plant characteristics through matched sampling techniques to establish proper comparison sets between plants with and without international linkages. Thirdly I apply difference-in-differences model and plant-pair fixed-effects regressions on matched samples. The unobserved plant characteristics are effectively controlled this way. Essay 2: Studies have shown that foreign direct investment (FDI) is the main driver for China's rapid export growth in recent decades. This paper asks how China's export growth is associated with the exports from its investing countries. I first examine and compare the evolution of the export growth of China and its investing countries over time (1962-2006), and then assess the similarity between their present export bundles by trading partners and sectors. The results show that China's export content is increasingly similar to that of its investing countries, despite China's relatively low income levels. Lastly, I identify the impact of China's export growth on its investing countries' exports using gravity equation. The results show a complementary relationship between China's exports and its investing countries' exports. Essay 3: Borrowed from the literature of program evaluation, the combination of difference-in-differences and propensity score matching is becoming popular in the literature of foreign direct investment (FDI). This study evaluates the extent to which the matching estimator is sensitive to the choice of matching methods in the study of foreign acquisition and compares the matching estimator with various panel data techniques widely used in the related literature that resolve the endogeneity issue. Using the panel data on Indonesian manufacturing establishments for 1975-2005, I find that the different matching methods produce similar estimates when the balancing property is satisfied. Furthermore, the estimates from the matching estimator are most similar to the fixed effects estimates and dynamic panel estimates.
THREE ESSAYS ON REPRODUCTIVE HEALTH POLICIES AND THE ECONOMICS OF FERTILITY AND MARRIAGE
Year of Dissertation:
This dissertation is composed with three essays, each of which empirically examines the effects of reproductive health policy on marriage, fertility and risky sexual behavior. The first essay provides rigorous tests of the Akerlof, Yellen and Katz's (1996) hypothesis that legalization of abortion in the early 1970s changed young women's marriage decisions by making shotgun marriage unnecessary in the event of premarital pregnancy. The essay empirically investigates the role of greater abortion access in explaining changes in marriage rates, the age at first marriage and the probability of a shotgun marriage. The essay finds that the increase in abortion availability during the 1970s significantly reduced teen marriage rates and raised the age at first marriage. Empirical evidence also lends support to the Akerlof et al.'s hypothesis that legalization of abortion caused teenage women to be less likely to marry in response to premarital pregnancy. The second essay uses unique data on abortions performed in New York State from 1971-1975 to analyze the impact of legalized abortion in New York on abortion and birth rates of non-residents. The essay demonstrates that women travelled hundreds of miles for a legal abortion before Roe. Abortion rates declined by 12.2 percent for every hundred miles a woman lived from New York in the years before Roe. Each abortion was associated with approximately 0.60 fewer births among residents in states nearest to New York. The results suggest that if recent legislative policies were to eliminate abortion providers in some states, the change in population measures of birth and abortion rates would be small, but that they would have more substantial effects on the birth rates of teens and less advantaged women. The third essay tests whether the easier pharmacy access to emergency contraception (EC) induced teenager and young unmarried women to change their sexual risk-taking behavior in a way that leads to an increase in sexually transmitted diseases (STD) and abortions. Using synthetic control method, the essay evaluates the causal effect of easier access to EC on rates of gonorrhea and abortions in Washington State. The State approved pharmacy sell of EC in 1998 as part of a pilot program ten years prior to FDA's decision. The results indicate that Washington's pilot program had little effect on the prevalence of STD and abortion.
ESSAYS ON ROBUST ESTIMATORS FOR NON-IDENTICALLY DISTRIBUTED OBSERVATIONS IN SPATIAL ECONOMETRIC AND TIME SERIES MODELS
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This thesis proposal consists of three essays on the estimation methods and applications of spatial econometric models and one essay on the generalized autoregressive conditionally heteroskedastic (GARCH)-type models in financial time series. The first essay discusses the heteroskedasticity robust generalized method of moments estimator (RGMME) for the spatial models that allow for spatial dependence in both the dependent variable and the disturbance term (SARAR(1,1)). First, we show that the maximum likelihood estimator (MLE) is generally inconsistent in the presence of unknown heteroskedasticity. Then, we extend robust GMM approach in Lin and Lee (2010) to SARAR(1,1). The large sample properties are rigorously studied and presented for the RGMME. Through a comprehensive Monte Carlo study, we compare the finite sample properties of the RGMME with some other estimators proposed in the literature. The second essay focuses on the GMM estimation of the spatial autoregressive models which impose a moving average process for the disturbance term (SARMA). We extend the best GMM estimator (BGMME) of Liu et al. (2010) to the SARMA models and provide the best set of instruments for the SARMA(1,1) and the SARMA(0,1) specifications. The large sample properties are rigorously studied and presented for the BGMME. The finite sample properties are investigated through an extensive Monte Carlo study. To confirm our results from the Monte Carlo study, we replicate the results for the SARMA(1,1) specification in Behrens et al. (2012) in an empirical illustration. The third essay investigates the effect of foreign direct investment (FDI) on economic growth through a spatially augmented Solow growth model. The current literature on the relationship between FDI and economic growth uses canonical cross-country growth regression specifications that are derived from the textbook Solow growth model for closed economies. We claim that these specifications cannot reflect the relationship between economic growth and FDI, because they model each country as an isolated island that does not interact with the rest of the world. On the other hand, a spatially augmented Solow growth model allows for technological interdependence among countries through spatial externalities. The modified growth model yields regression specifications that properly account for spatial autocorrelations. We construct a panel of 85 countries for the period 1980-2010 and estimate the modified specifications with the tools from spatial econometrics. Our findings indicate that FDI inflows have a significant positive effect on the growth rate of host countries. The final essay proposes a flexible distribution for the maximum likelihood estimation of the GARCH-type time series models. The new distribution can better account for the potential skewness and leptokurticity in the driving noise sequence. We study the large sample properties of the new estimator following the methodology presented in Francq and Zakoïan (2004). To investigate the finite sample properties of the new estimator, we first conduct a Monte Carlo study. Furthermore, to test the relative out-of-sample predictive power of the new estimator, we test for its prediction power on two data sets using the methods described in White (2000) and Hansen et al. (2003).
ESSAYS ON FINANCIAL VOLATILITY
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Explaining the variation in asset prices is a fundamental problem of financial economics. As the financial volatility represents uncertainty and is taken as the risk component in financial analyses, its explanation is crucial for financial decision making. In this context, modeling the dynamics of volatility observed in financial asset returns has become the fundamental issue of finance literature. The first part of the thesis elaborates the issue of high volatility persistence in stock returns. From the previous literature, it is well known that ignoring regime changes in standard GARCH models results in overestimation of volatility persistence. In this study, volatility pattern in Istanbul Stock Exchange is re-examined by considering the potential regime changes in volatility. By applying the iterated cumulative sums of squares (ICSS) algorithm on weekly data of ISE30 and ISE100 indices, regime change points in variance are endogenously detected. This information is integrated to a GARCH(1,1) model and it is found that the volatility persistence is not as high as it has been previously shown in the literature. The results have important implications for financial investors and question the common perception that the volatility in financial markets is highly persistent. The last part of thesis deals with the issue of volatility spillover and examines the volatility transmission mechanism among the developed and emerging CDS markets by employing multivariate GARCH modeling. As the globalization resulted with more integration of financial markets, it is important for market participants to know how the shocks and volatility are transmitted over time across the markets. Significant transmission of shocks and volatility is found among different CDS markets. Contrary to previous studies showing one-way transmission of volatility from developed to emerging markets, interdependence detected among the different markets indicates the presence of cross-market hedging.
Year of Dissertation:
The hazard rate models used in recent bankruptcy literature assume censoring and default are two independent events, which means the censored company will eventually default. However we believe there will be a portion in the censored group that will be long-term survivors and we propose a mixture model of survivors and risky companies. Moreover this dissertation models the event and the timing of default incident at the same time. For the event of default and the timing of default we utilize a logistic regression. The results have justified the advantage of our model over the standard hazard rate models and proved its predictive power. The companies identified as high default risk by our model proved to deliver extremely low returns in the market.
EXCHANGE RATES, PRICES AND PROFITABILITY: THE TURKISH EVIDENCE
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This dissertation consists of three essays. The first essay, published in the Turkish Central Bank Review I, 2010, examines the impact of exchange rate movements on export prices and profitability, at sectoral and at firm level respectively, for Turkish manufacturing. The results suggest that i) Turkish firms tend to stabilize their local currency prices implying that they have market power in international markets, and ii) exchange rate movements affect the profitability of firms. The results also show that the profits of export oriented firms are more likely to be affected by exchange rate movements. In the second essay, I develop a two-country model of international trade, built on Melitz (2003) model, where plant level heterogeneity is the key assumption. In this framework I analyze the impact of currency appreciation on productivity thresholds using a Newton Algorithm. The numerical simulation suggests that exchange rate appreciation increases productivity thresholds for both exporting and domestic production. In addition, I incorporate liquidity constraints in line with Manova (2010) into a model of heterogeneous firms and numerically show that, in the presence of liquidity constraints, the productivity threshold for exporting increases. The third essay, co-authored with Professor Yazgan from Bilgi University, uses unique firm level dataset, to test the impact of currency appreciation on the survival behavior and sales of Turkish firms in traded and nontraded industries for 2002-2009. The results suggest that real exchange rate appreciation decreases the probability of survival in both traded and nontraded industries. We find that high (low) productivity firms have higher (lower) probability of survival than low (high) productivity firms in both traded and nontraded industries as a result of domestic exchange rate appreciation. We further test the impact of currency appreciations on the sales of continuing firms belonging to both traded and nontraded industries. Our results show that real exchange rate appreciations do not have any impact on continuing firms' sales in both traded and nontraded industries.
Robust Estimators for Finite Mixtures of Count Data Regression Models and their Applications
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Finite mixtures of count data regression models have been successfully used for modeling discrete responses arising from heterogeneous populations. But the maximum likelihood (ML) estimator for such models are sensitive to data contamination and extreme values. This dissertation develops two robust estimators for finite mixtures of count data regression models. One is the minimum Hellinger distance (MHD) estimator and the other is the minimum L2 error (L2E) estimator, a special case of the minimum density power divergence estimator. Two Monte Carlo simulation studies show that the MHD and L2E estimators are more robust than the ML one but come at the cost of efficiency. However, the robustness property of the MHD and L2E estimators is deteriorated as the mixing probability approaches one. For empirical application, this dissertation uses the data from Dionne et al. (1996), the extent of non-payments of personal loans in Spain, and from Deb and Trivedi (2002), counts of utilization from the RAND Health Insurance Experiment, respectively. The estimated results show that the two-component Poisson mixture regression model is the best fit model for the first data set and the two-component negative binomial one mixture regression model for the second data set. But both of the model specifications are preferred to be estimated by the ML estimation that could be attributed to the flexibility of the finite mixture model and data processing procedures.
Essays in corporate finance
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ABSTRACT ESSAYS IN CORPORATE FINANCE by Milos Vulanovic Adviser: Professor Armen Hovakimian This dissertation consists of two essays on corporate finance. In the first essay we test the pecking order theory by examining how firms finance maturing long-term debt. This allows us to accomplish three goals: resolve the issues of debt capacity and the endogeneity of financing deficit; examine the role of internal financing; and generate evidence regarding the order in which different sources of financing are used. We determine that firms use internal funds before they issue new debt to refinance maturing long-term debt. Firms with more cash on hand are less likely to issue new debt to refinance. On average, each marginal dollar of maturing long-term debt is fully financed with the issuance of new debt. In the second essay, we study characteristics of Specified Purpose Acquisition Companies (SPACs) and examine the performance of their securities over time. We find that SPACs represent a fairly unique way to raise capital, The incentives of their founders, underwriters, and investors are interdependent and successful business combinations generally result in significant returns to founders. We also show that different SPAC securities generate different reactions in response to the announcement news regarding their corporate status. While holders of all three securities realize abnormal returns on the announcement day, the strongest reaction is observed among the investors holding warrants, while common stock holders tend to react very mildly.