Alumni Dissertations

 

Alumni Dissertations

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  • AN ANALYSIS OF THE LABOR MARKET, INTERNATIONAL MIGRATION AND REMITTANCES DURING TRANSITION: THE CASE OF ALBANIA

    Author:
    ILIR HYSA
    Year of Dissertation:
    2013
    Program:
    Economics
    Advisor:
    Wim Vijverberg
    Abstract:

    This dissertation consists of four chapters exploring the transition dynamics of unemployment and migration of Albanian workers as well as the remittances sent by migrant workers to their households in Albania. The first chapter analyzes the duration of unemployment for unemployed Albanian workers during the time period 2002-2004. Survival and hazards functions of unemployment duration are generated to understand the relationship between the duration of unemployment and personal characteristics and worker occupation. The study finds that more than a decade since the beginning of the transition to a free market economy, many workers still face long unemployment spells. In an effort to help policy-makers design policies that deal with unemployment, within-sample and out-of-sample predictions are generated. Moreover, the models developed here can be replicated with future data to make predictions about future unemployment spells. The second chapter analyzes the impact of labor market performance on migration decision. It finds no evidence that labor market performance, as measured by the wage rate and the return to unobservable personal traits, affects the migration decision. Such conclusion may be the result of unrealistic assumptions of perfect labor mobility and perfect information implicitly assumed in the model. Moreover, given large wage differentials between Albania and neighboring countries, wage increases in Albania are not sufficient to entice changes in the decision to migrate. Therefore, the migration decision seem to go far beyond the labor market and included deep psychological and emotional factors associated with the long period of isolation under the communist dictatorship. The third chapter summarizes the theoretical models and predictions regarding the motives for remittances and provides the basis for the empirical work done in the following chapter. The final paper analyzes motives for migrants' remittances during transition. Specifically, it analyzes whether remittances indicate repayment of the schooling costs, a desire to inherit assets, and/or whether remitters respond to adverse shocks experienced by recipient households. Unlike studies to date, this study uses a Maximum Likelihood specification that jointly analyzes the migration decision and the decision to remit in a contractual setting, while correcting for migrants' self-selection. The study incorporates cultural elements, such as rights and responsibilities associated with being the youngest of siblings, burden-sharing etc. Our results show that highly educated migrants repay their schooling costs after a certain period of time. The evidence that migrants remit in order to maintain favor toward inheritance is weak at best. There is no evidence of any responses to adverse shocks. However, this does not exclude the possibility of altruism. In fact, the evidence of burden-sharing among migrant siblings points in that direction.

  • Effects of Health Status on the Decision to Retire with Corrections for Measurement Error

    Author:
    Kyung-Rae Hyun
    Year of Dissertation:
    2009
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    Many studies on the relationship between labor supply and health status generally do not illustrate a unanimous agreement on the usage of subjective and objective health due to the difficulty in employing the right measures to obtain the precise and up-to-date information on the health status of subjects in question. Thereby, to resolve this quandary, we propose two models; the first model addresses how a researcher could obtain more appropriate estimate in health measure with measurement error; the other model examines whether probabilities questions within and across waves could potentially result in another measurement error. In the first model allowing to justification bias, we found the health and financial compensation' lower and upper bounds for labor force exit and in views of bounds concept, health status plays a larger role in labor force exit than financial compensation. In the second model, we found that measurement error from survey effect has an impact on the survival probability along with the measurement errors from an inherent errors-in-variable bias by using two methods: the former employing the averaged survival probabilities and the latter incorporating the instrumental variables.

  • Essays on Labor Market Matching, Labor Mobility and Educational Mismatch

    Author:
    YAN JIANG
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Wim Vijverberg
    Abstract:

    This dissertation includes three essays on labor market matching, labor mobility and educational mismatch. Essay one is a literature survey on labor market matching. It is the first attempt in the literature to link various aspects of labor market matching. After an overview of the structural equilibrium search models, I elaborate on the micro-foundations of the matching function, a major modeling tool to capture the influence of frictions on equilibrium outcomes. Issues such as turnover theory, mismatch and dynamic income processes are also examined in this survey. Essay two considers the effect of voluntary job mobility on worker well-being. Using data from National Longitudinal Survey of Youth 79 (NLSY79), I construct measures of worker well-being that take into account various ingredients likely to factor into a worker's utility at workplace. I adopt a difference-in-differences matching strategy to uncover the otherwise unobservable potential outcomes of not changing jobs and identify the effect of voluntary labor mobility on worker well-being. The result shows that voluntary turnover increases the well-being at workplace for movers who are in the early stage of their career and conduct complex job changes involving different types of job. However, the positive effect of job mobility is insignificant and much smaller for movers taking simple job changes. This is in contrast with the fact that complex job movers actually experienced insignificant wage gains from the mobility. This result highlights the role of non-pecuniary job rewards in triggering voluntary turnover. Essay three considers the wage effects of educational mismatch using data from the 2003 wave of National Survey of College Graduates (NSCG 2003). I find that the average wage loss associated with educational mismatch is significant and persistent. Graduates who are mismatched for involuntary reasons incur greater wage penalty compared to those for voluntary reasons. In addition, graduates with advanced degree suffer more from mismatch relative to those with only bachelor's degree. Lastly, there are considerable amounts of variations in the distributional impacts. The wage penalty is quite large at lower quantiles and decrease sharply towards higher quantiles.

  • Essays on Firm Financials and Stock Returns-Evidence from Monetary and Asset Pricing Perspectives

    Author:
    Jun Jiang
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Thom Thurston
    Abstract:

    This dissertation studies the link between firms' external financial constraint and stock returns. Having identified the difference between financial distress and financial constraint (non-distressed), the paper investigates both problems separately. 1) Based on Bernanke, Gertler, Gilchrist (1999)'s theory on the financial accelerator, I show that firms' leverage can capture firms' exposures to distress risks. Sorting firms by their leverages and book to market ratios, the stock price only incorporates distress risk for value firms since the sensitivities of stock returns to unanticipated monetary shocks (measured in absolute values) are lower for highly leveraged growth firms. 2) I also explore the financial constraint puzzle in asset pricing literature by using Campbell and Vuolteenaho (2004)'s two-beta model. By decomposing stock's return into cash flow news and discount rate news, I am able to explain why financially constrained stocks do not yield a positive return premium over unconstrained counterparts and why financially constrained stocks tend to move together.

  • Three essays on the foreign exchange markets

    Author:
    Nengzhi Jiang
    Year of Dissertation:
    2010
    Program:
    Economics
    Advisor:
    Tao Wang
    Abstract:

    The first essay study the explanation power of the macroeconomic news for the foreign exchange fluctuation. We use Kalman filter and maximum likelihood method to extract several dynamic factors from 27 noisy and sparsely observed macroeconomic news deviations. We further input the news factors as independent variables in our VECManalysis. The fitted results show that the news factors' contribution is limited. The out of sample prediction yields the same conclusion. The uncovered interest rate parity hypothesis has frequently been rejected. This hypothesis, however, has seldom been tested at the very short end of the forecasting horizon where forward rates are measured in days. The second paper reinvestigate the UIRP puzzle in diversified horizons. Using overnight, two-dayand three-day forward rates, we find that the forward premia in these short forward horizons are stationary than the forward premia in longer horizons. This contrasts with recent findings that the forward premia, in longer forward horizons, are fractionally nonstationary. Estimation results indicate that forward premia are essentially unbiased estimates of the future spot returns. Once the interest rate differential is the dominant source of information in the foreign exchange market, the forward premium forecasts the spot returns relatively well. The last essay we have a empirical study of the VECM prediction power. we use the rolling regression method to generate series of parameters and dynamically predict the next period's foreign exchange rates. We compare the forecast errors from the rolling regression VECM and that of the random walk model. We also set up a trading strategy which longs or shorts the foreign currency based on the forecasts. Our trading simulation shows that this informed trading makes positive return in medium horizon, while the simple buy and hold strategy's return is insignificant.

  • Essays on Financial Market Volatility: Applications of Time-Varying Dynamics

    Author:
    Emily Johnston
    Year of Dissertation:
    2014
    Program:
    Economics
    Advisor:
    Randall Filer
    Abstract:

    This dissertation examines time-variation in asset volatility surrounding periods of financial market distress. In the first chapter we give a brief introduction of the overall theme of the project, and we outline the models used. The next chapters individually focus on the application of time-varying volatility to important themes in the literature. These include: the behavior of investor risk preferences across periods of stability and distress; inconsistencies in options pricing with regard to the behavior of the underlying asset; and the characterization of time-varying volatility dynamics in equity returns. The second chapter of this dissertation examines the impact of changing asset volatility on the estimation of investor risk preferences. We ask whether prior findings of time-varying behavior for risk preferences may be due in part to a failure to account for changes in volatility. This is an important issue, because there is evidence in the existing literature that suggests a contributing role of risk preferences during periods of crisis and contagion. We use a regime-switching GARCH model for pricing kernel estimation to show that much of the variation in estimated investor risk preferences can be explained by changing volatility instead. In the third chapter we examine stochastic volatility as an additional uncertainty factor regarding the future state of the market. We explore whether this inclusion affects prior findings of options pricing inconsistencies in the literature. Options mispricing is an important topic in debates concerning the role of investor sentiment in market behavior and asset pricing. Results from our investigation indicate that including this additional uncertainty factor does not fully explain away the inconsistencies. Our findings thus appear to support the existing evidence of options mispricing with respect to the behavior of the underlying asset. In the fourth and final chapter of this dissertation, we examine asset volatility dynamics over a long historical time frame from 1871-2013. We demonstrate best fit for the number of distinct volatility regimes and characterize these separate dynamics. There is growing evidence that some economic relationships themselves may change between periods of high and low volatility - understanding changing volatility dynamics is crucial for understanding these economic relationships as well. We also show in this chapter how the estimated high-volatility state matches up with well-documented historical financial market events.

  • Global Capital Flows, Time -Varying Fundamentals and Transitional Exchange Rate Dynamics

    Author:
    Suleyman Kal
    Year of Dissertation:
    2013
    Program:
    Economics
    Advisor:
    Tom Thurston
    Abstract:

    In this paper, I investigated the effects of cross border capital flows induced by the rate of risk adjusted excess returns (Sharpe ratio) on the transitional dynamics of the nominal exchange rate's deviation from its fundamental value. For this purpose, a two state time varying transition probability Markov (TVTPM) regime switching process is added to the sticky price exchange rate model with shares (SPERS). I estimated this model using quarterly data on the four most active floating rate currencies for the years 1973 to 2009: the Australian Dollar (AUD), the Canadian Dollar (CAD), the Japanese Yen (JPY) and the British Pound (UKP). The results provide evidence that the Sharpe ratios of debt and equity investments influence the evolution of transitional dynamics of the currencies' deviation from their fundamental values. In addition, I found that the relationship between economic fundamentals and the nominal exchange rates vary depending on the overvaluation or undervaluation of the currencies.

  • RAILROADS AND ECONOMIES OF SCALE AND SCOPE IN U.S. MANUFACTURING INDUSTRIES: 1850-1880. CHANDLER REVISITED

    Author:
    Michael Kalson
    Year of Dissertation:
    2010
    Program:
    Economics
    Advisor:
    Michael Edelstein
    Abstract:

    This study concerns the measurement and quantification of the relationship between railroadization in the United States in the mid-19th century and the subsequent evolution of the modern, large-scale, corporate form of industrial business organization marked by significant economies of scale and scope, as described in various writings by Alfred Chandler. Focusing on American industry as it developed from 1850-1880 using data uniquely suited to empirical analysis of economies of scale and scope, its aim is to determine whether the growth of the American railroad network, as Chandler contended, expanded markets and augmented the American financial sector such that the result was a more concentrated, large-scale mode of industrial organization characterized by extensive and increasing economies of scale and scope in sync with the growth of its extensive railroad system. Apart from some positive results found in the scope analysis of Chapter 6 showing an ascending scope pattern from 1850-1880 in a few key industries, our findings indicate an overall gloomy prognosis for the empirical validity of the Chandler hypothesis. With the cross-country analyses of Chapters 2 and 3 showing no evidence of a greater expansion of the railroad systems of the United States and Germany at mid-century and resultant vastness thereof with respect to Britain circa the 1870's as contributing to a more concentrated industrial sector in those countries, and the mixed evidence in support of a rise in efficient scale in American industry from 1860-1880 as shown in Chapters 4 and 5, not to mention the omnipresent dips at 1870 seen in both the scale and scope estimates, our findings reflect poorly upon Chandler's idea of that date as the benchmark period in which to begin to expect to see the effects of transportation improvements upon scale and scope economies in American industry. Rather, they indicate a far greater impact of the Civil War aftermath shock than Chandler accounted for--perhaps one that persisted on until the 1880's--and suggest a much later date of the full impact of the railroads upon scale and scope of industry than Chandler bargained for--perhaps 1900 as indicated by Atack (1985).

  • Analysis of Adult Obesity Based on New Measures of Fatness

    Author:
    Minchul Kim
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    During the past three decades, the United States and most of the rest of the developed world have experienced a rapid and sustained rise in the obesity rate. This trend has stimulated a considerable amount of research by economists and other social scientists dealing with its causes and with policies to combat it. To date, the focus has been on obesity defined by a body mass index (BMI, weight in kilograms divided by height in meters squared) greater than or equal to 30. This measure has been criticized because it fails to distinguish body fat from lean body mass. It is the former that is responsible for the detrimental health effects of obesity. Therefore, in my dissertation I introduce the percentage body fat (PBF, the ratio of body fat to total weight multiplied by 100) and an obesity indicator based on PBF as alternative measures of body composition. I generate equations by gender and race to predict these measures from height, weight, and age in the Third National Health and Nutrition Examination Survey and use the estimated coefficients to obtain PBF and obesity based on PBF in the Behavioral Risk Factor Surveillance System for the period from 1984 through 2009. I then examine the effects of socioeconomic characteristics and state-level measures pertaining the per capita number of restaurants, the prices of a meal in fast-food and full-service restaurants, the price of food consumed at home, the price of cigarettes, and clean indoor air laws on BMI, PBF, BMI-defined obesity, and PBF-defined obesity. My results suggest that most of the determinants at issue have similar qualitative and quantitative effects on the outcomes at issue. Finally, I assume that PBF-defined obesity correctly identifies obese and non-obese individuals, but BMI-defined obesity results in error. I use these assumptions to estimate the parameters of a binary choice model by nonlinear least squares. My results show that this procedure successfully corrects the downward bias in the marginal effects of a probit model for BMI-based obesity.

  • ESSAYS ON EFFECTS OF THE HOUSING MARKET COLLAPSE

    Author:
    Catherine Lau
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    David Jaeger
    Abstract:

    Abstract ESSAYS ON EFFECTS OF THE HOUSING MARKET COLLAPSE by Catherine Lau Adviser: Professor David Jaeger The housing market collapse of 2008 had a number of economic effects. Chapter One addresses the history of the AAA financial guaranty insurance industry, which began in the 1980's, grew rapidly in the first few years of the 21st century, but ceased to exist following the housing market collapse. The factors that led to the industry's growth are explored, while the weaknesses that existed in its AAA fa├žade all along are pointed out. This essay concludes that, while the collapse of the housing market was the immediate cause of the financial guaranty industry's downfall, any economic shock would have harmed this highly leveraged industry. Declines in home values over the past five years have affected many homeowners, decreasing their asset values, and leaving some with negative equity. Besides financial harm, high indebtedness may adversely affect health. Chapter Two looks at the research done to date on the effects of consumer debt and mortgage debt/foreclosure on health. Chapters Three and Four use different data sets to empirically test the effect of high mortgage loan to home value on a number of health outcomes. Chapter Three employs the Health and Retirement Survey (HRS), a rich, nationally representative sample of the population over 50 years of age and finds significant correlation between high mortgage loan to value and negative health outcomes. Changes in home values are used as an instrument variable to further identify the effect of loan to value on health; results are not conclusive of causality. Chapter Four uses the NLSY79 to explore the effect of mortgage debt on a younger cohort that, in comparison to the HRS, is more likely to rely on wage income and have lower net worth. Results point to higher loan to value in conjunction with unemployment as having a significant negative impact on health for this cohort, but higher loan to value alone does not significantly affect overall health. These results point to the need for greater financial literacy for homeowners and potential homeowners, given the more frequent spells of unemployment and the volatility in home prices. Further research with data post 2008 is needed to further test causality.