Alumni Dissertations

 

Alumni Dissertations

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  • 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.

  • The Economic Causes and Consequences of Overweight and Obesity in the United States

    Author:
    David Lempert
    Year of Dissertation:
    2014
    Program:
    Economics
    Advisor:
    David Jaeger
    Abstract:

    Obesity is a serious public health issue, associated with increased risks of premature death, heart disease, diabetes, cancer, breathing problems, arthritis, reproductive complications, and other diseases. There are economic causes and consequences of overweight and obesity. Researchers have recently suggested that the inability of Body Mass Index to appropriately distinguish between body fat and non-body fat components may lead to inaccurate results when analyzing the economics of obesity. I use Percentage Body Fat, defined as Body Fat divided by the sum of Fat-Free Mass and Body Fat, as the primary measure of body composition. A growing body of literature explores the relationship between body composition and income in the United States. There are two views: (1) overweight and obesity lead to lower wages; and (2) low family income and low wages contribute to overweight and obesity. I study both relationships using a dataset comprised of the most recent years of data available in the National Longitudinal Survey of Youth 1979. I find relatively larger effects of body composition on wage levels in Not Worth the Weight: The Relationship between Body Composition and Wages, and relatively smaller effects of family income on body composition in Poor Choices: The Effects of Family Income on Body Composition. In Not Worth the Weight, I hypothesize that the negative impact of body composition increases at higher wage levels because the associated positions require additional education and perhaps a slimmer figure. The results show that for women, the effects of body composition on wage levels are larger than for men, and a higher wage level is associated with a higher wage penalty for being overweight. Poor Choices is unable to prove that low family income has a significantly large impact on body composition. In The Heavy Cost of Healthcare: The Ex Ante Moral Hazard Effect of Health Insurance Possession on Body Composition, I use the National Longitudinal Survey of Youth 1979, augmented with state-level food and tobacco prices, in an attempt to prove there is ex ante moral hazard associated with the possession of health insurance such that the insured are more likely to be overweight or obese. I hypothesize that the effect is larger when an individual is covered by government health insurance and smaller when the individual is covered by private insurance. The analysis shows that the ex ante moral hazard effect is larger when Medicaid covers the individual. When I control for individual fixed effects as well as endogeneity, however, results are insignificant. Thus it is inconclusive whether insurance has an impact on body composition. I conclude with suggestions for future research and effective policies to combat the public health epidemic of overweight and obesity.

  • Essays in Health Economics

    Author:
    Leigh Leung
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    David Jaeger
    Abstract:

    Health is dened as an individual's mental or physical condition and being healthy means to be free from illness or injury. Health is relevant to both the supply and demand sides of the national economy. On the demand side, consumers derive satisfaction from being healthy. Consumers purchase goods and services to improve their health but also engage in activities that impair health such as smoking or drinking too much. On the supply side, firms produce health care goods and services to meet the market demand for health care derived from consumers' demand for better health. In addition, health augments labor inputs since the healthier the population, the larger the labor force and the higher the marginal productivity of labor, as in fewer sick days. This dissertation is comprised of three essays related to the eect of social environments and economic incentives on health and health behaviors. The first essay examines whether whether immigrants converge towards natives' level of smoking prevalence with assimilation. Results show that assimilation is associated with a greater likelihood of being a smoker for immigrants from lower smoking countries relative to the U.S. and a lower likelihood of being smoker for immigrants from higher smoking countries. Differences in responsiveness to taxes or smoke free air laws cannot explain the convergence in smoking rates between immigrants from higher and lower smoking countries. The second essay examines the effect of mortgage debt on health. Homeownership in the U.S. is promoted through the use of nancing. These policies improve the liquidity of the housing market and make homeownership more aordable. But it also encourages greater consumption of mortgage debt. Using mortgage loan to value (LTV) as a proxy for financial stress, I show that homeowners with high LTVs are more likely to be in poor health. The third essay examines the eect of unemployment duration on health. I hypothesis that unemployment duration aects health through nancial stress. Results show that high mortgage loan to value is not signicantly correlated with most measures of poor health but when interacted with high home leverage is positively and signicantly correlated with poor health. However, I cannot rule out reverse causality given that those in poor health have a significant likelihood of having high LTV in the next period.

  • THREE ESSAYS ON THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT

    Author:
    Haitao Liang
    Year of Dissertation:
    2010
    Program:
    Economics
    Advisor:
    Merih Uctum
    Abstract:

    At first, a literature review of over 150 articles on the determination of Foreign Direct Investment (FDI) proposes the main determinants of FDI. A meta-analysis tests the reliability of the previous studies on FDI. Then, a cluster analysis on FDI data reveals the necessary to segment economies, especially by income level, in FDI analysis. A large number of studies emphasize FDI determinants but ignore the income distribution on the results, which biases the estimates. In Chapter 3, I correct for heterogeneity due to income distribution by using the Blundell-Bond System GMM (Generalized Method of Moments), which controls for endogeneity problem as well. I categorize the countries according to their level of development: high, middle and low income. I further break down the middle income category into upper and lower segments. I consider level effects and various interactive effects. I find that income levels play a significant role in FDI determination model. Controlling for income levels corrects the sign and the magnitude of a number of estimates. In particular, results show that low income countries attract more FDI, ceteris paribus. This result is in stark contrast with the traditional consensus that capital flows to rich countries (Lucas 1990). Moreover, modeling income levels shows that lagged FDI has consistently positive effect on FDI, which is a dynamic model structure. Consistent with the literature, market potential and education boost FDI and results are robust to income levels. FDI increases with risk levels because during financial or economic crises it replaces other investments. Tax rates overall exert downward pressure on FDI, but mostly when the middle and low income levels are controlled for. This article also supports the Tariff Jumping FDI argument in middle and low income economies, according to which, FDI is a potential substitute for international trade. My results reject the hypothesis of the wealth effect of exchange rate, and there is weak evidence that the depreciation of local currency discourages FDI in particular in poorer countries. Results are stable for different specifications of income dummies (one intercept dummy, two intercept dummies, and slope dummies, etc).

  • Essays on Tail Behavior and Extreme Dependence Patterns in East Asian Financial Markets

    Author:
    Fangxia Lin
    Year of Dissertation:
    2011
    Program:
    Economics
    Advisor:
    Terence Agbeyegbe
    Abstract:

    Adviser: Professor Terence Agbeyegbe This dissertation comprises of three essays organized into three separate chapters on tail behavior and extreme dependence patterns, with each chapter focusing on a specific aspect of the financial markets in several East Asian countries. In chapter one, "Tail Behavior in East Asian Stock Index Returns and Foreign Exchange Rate Movements", I analyze the tail behavior of the daily stock index returns and foreign exchange rate movements of six East Asian economies: Hong Kong, Indonesia, South Korea, Malaysia, Singapore, and Taiwan. I use extreme value theory (EVT), in particular, the generalized Pareto distribution (GPD), to understand the probability of extreme events and estimate the level of fatness in the tails of stock index returns as well as foreign exchange rate returns. Empirically, I find that, whether stock index returns and currency movements of a country have fatter left or right tail is very country specific. And for countries in the same geographical region, the tails of the returns distribution do not behave similarly as often claimed in the literature. In chapter two, "Tail Dependence between Stock Index Returns and Foreign Exchange Rate Returns: A Copula Approach", I apply the concept of copula to model the dependence patterns, especially in the tail area, between stock index returns and foreign exchange rate returns for five East Asian economies: Hong Kong, Indonesia, South Korea, Singapore, and Taiwan. I first filter the raw returns series using AR(k)−GARCH(p, q) type models to make sure the probability integral transforms are i.i.d Uniform (0,1), and then I fit the resulting series to the copula models. Some major empirical findings are, for the two more advanced markets, namely Hong Kong and Singapore, there exists neither left nor right tail dependence between stock index returns and exchange rate returns for the period under examination. Two of the three emerging markets (Indonesia and South Korea) have much stronger left tail dependency than right tail dependency, indicating that the higher probability of double extreme loss than double extreme gain. Taiwan has symmetric tail dependence with similar right and left tail dependence coefficients. In chapter three, "Extreme Dependence across East Asian Financial Markets: Evidence in Equity and Currency Markets", I investigate pairwise extreme dependencies across regional financial markets by directly estimating the degree of tail dependence coefficients via unconditional and conditional copulas. I apply the two-step inference from the margins (IFM) method to model the extreme dependence patterns across stock markets as well as across currency markets. Empirically, I find significant asymmetric tail dependence in equity markets, with a larger left tail dependence coefficient than the right tail dependence coefficient. Mixed results are found for extreme co-movements in the foreign exchange markets. Extreme co-movements in the currency markets are much weaker, in several cases, with larger right tail coefficients. Using conditional copula, I also find significant changes in the degree of tail dependence for most of the equity pairs. These results serve as evidence that the degree of tail dependence in these stock markets changes over time, suggesting that these stock markets are in the process of becoming more integrated. In chapter four, "Summary of Findings", I summarize the empirical findings of this study and discuss the potential implications of these findings.

  • A Summary of Some Estimators of Dynamic Panel Data Models and Their Applications

    Author:
    Zhen Ma
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    Abstract A SUMMARY OF SOME ESTIMATORS OF DYNAMIC PANEL DATA MODELS AND THEIR APPLICATIONS by Zhen Ma Advisor: Professor Michael Grossman This thesis consists of two chapters. Chapter one summarizes three estimators of dynamic panel data models: Generalized Method of Moments (GMM) with fixed effects, Wooldridge Conditional Maximum Likelihood (CML) with random effects and a Maximum Simulated Likelihood (MSL) random effects dynamic probit. Chapter two presents their applications and empirical findings. I examine the impact of the large price increases in cigarettes after the Master Settlement Agreement (MSA) on drinking behavior using data from the Panel Study of Income Dynamics (PSID). Alcohol consumption, drinking participation and heavy drinking participation (three or more drinks per day) are considered for the full sample, as well as for sub-samples stratified by age group and gender. Estimation results are relatively stable across estimators. I find that the cross-price effects of cigarettes on alcohol consumption are insignificant showing that averaging on all consumption levels, the number of drinks consumed per day is not affected by the increases in cigarette prices; and that the cross-price effects of cigarettes on drinking participation are mostly positive and significant, indicating drinking is an economic substitute for smoking; also, cigarette prices do not affect heavy drinking prevalence.

  • Smoking, Drinking, and Binge Drinking: An Empirical Study of the Role of Price on Consumption by High School Seniors

    Author:
    Jorge Medina
    Year of Dissertation:
    2011
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    In this study, I estimate time-series demand functions using Ordinary Least Squares in order to examine the effects of real cigarette and alcohol prices on their respective consumption. My targeted population is high school seniors in the United States. The data I use come from Monitoring the Future, The Tax Burden on Tobacco, and the Bureau of Labor Statistics. Using the Ordinary Least Squares real price coefficients, I evaluate how much of the observed change in consumption is explained by the observed change in real price during a particular period of time between 1976 and 2008. Then, I repeat the same calculations for subsamples of male, female, white, and nonwhite high school seniors. Moreover, I incorporate a risk variable measuring whether or not subjects believe there is a great risk of harm when consuming cigarettes or alcohol in moderate or excessive quantities. Among high school seniors, my findings reveal that 73 percent of the observed decrease in cigarette consumption during 1997-2008, 28 percent of the observed decrease in alcohol consumption during 1989-1992, and 70 percent of the observed decrease in excessive alcohol consumption also during 1989-1992 are explained by increments in their respective real prices. The percentage of change in cigarette, alcohol, and excessive alcohol consumption explained by changes in their respective real prices remain substantial even after controlling for risk perceptions associated with these activities. Furthermore, greater awareness of the risks associated with smoking, drinking, and binge drinking strengthen the effect of real price on consumption.

  • Smoking, Drinking, and Binge Drinking: An Empirical Study of the Role of Price on Consumption by High School Seniors

    Author:
    Jorge Medina
    Year of Dissertation:
    2011
    Program:
    Economics
    Advisor:
    Michael Grossman
    Abstract:

    In this study, I estimate time-series demand functions using Ordinary Least Squares in order to examine the effects of real cigarette and alcohol prices on their respective consumption. My targeted population is high school seniors in the United States. The data I use come from Monitoring the Future, The Tax Burden on Tobacco, and the Bureau of Labor Statistics. Using the Ordinary Least Squares real price coefficients, I evaluate how much of the observed change in consumption is explained by the observed change in real price during a particular period of time between 1976 and 2008. Then, I repeat the same calculations for subsamples of male, female, white, and nonwhite high school seniors. Moreover, I incorporate a risk variable measuring whether or not subjects believe there is a great risk of harm when consuming cigarettes or alcohol in moderate or excessive quantities. Among high school seniors, my findings reveal that 73 percent of the observed decrease in cigarette consumption during 1997-2008, 28 percent of the observed decrease in alcohol consumption during 1989-1992, and 70 percent of the observed decrease in excessive alcohol consumption also during 1989-1992 are explained by increments in their respective real prices. The percentage of change in cigarette, alcohol, and excessive alcohol consumption explained by changes in their respective real prices remain substantial even after controlling for risk perceptions associated with these activities. Furthermore, greater awareness of the risks associated with smoking, drinking, and binge drinking strengthen the effect of real price on consumption.

  • Essays on the Impact of Carry Trade Activity on Exchange Rate Movements & Market Volatility

    Author:
    Takvor Mutafoglu
    Year of Dissertation:
    2010
    Program:
    Economics
    Advisor:
    Merih Uctum
    Abstract:

    Average daily turnover in FX markets were raised to $1.9 trillion in April 2004, a rise of 54% at current exchange rates and 36% at constant exchange rates. One of the reasons for such a strong growth in turnover is carry trading where investors borrow money in a currency with low interest rates in order to invest in a currency with higher interest rates. The first part of this thesis re-examines the relationship between the yen carry trade activity and the related financial variables. Although a recent study, employing structural vector autoregression methodology, finds that the U.S. stock market performance has a dominant impact in the activity of the speculative yen carry trade using monthly data, I illustrate that this finding is not robust when weekly data is introduced to the same methodology. Instead, I find that it is the fluctuations in the Japanese yen against the U.S. dollar exchange rate, rather than the interest rate spread between the two countries and the U.S. stock market performance, that determines the direction of the yen carry trade. The second part of the thesis investigates the role of carry trade transactions on exchange rate behavior since these transactions change the supply and demand for currencies initiated by the opportunity to exploit interest rate differentials. The net position of speculators in different currency futures are used as an indicator for carry trade activity. By employing vector autoregression methodology, the results indicate that exchange rates react instantaneously to shocks in speculators' positions and Granger causality tests suggest that these positions lead to price discovery in the spot market for exchange rates. Furthermore, out-of-sample forecasts perform better than the random walk model for three of the five currencies in our sample based on root mean square and mean absolute error forecasting evaluation criteria. The last part investigates the dynamic lagged relationship between trading activity in currency futures and exchange rate volatility in the spot market using the net positions of trader in various currency futures markets. I use weekly high-low estimate of volatility, historical volatility, and conditional volatility from the GARCH (1, 1) process. The results point that in most cases while speculators and small traders in currency futures increase volatility in the corresponding spot markets, hedgers seem to decrease it as indicated by generalized impulse response functions. Also, in most of the cases, speculators' demand for futures increase in response to increased volatility in the spot market meanwhile hedgers' demand decrease.

  • Essays on Firm Behavior

    Author:
    Priya Nagaraj
    Year of Dissertation:
    2012
    Program:
    Economics
    Advisor:
    Sangeeta Pratap
    Abstract:

    The Indian economy has received considerable interest in economic research in the last decade. Economic liberalization, greater participation in world trade and the availability of long panel of firm level data has encouraged empirical work on the Indian economy. My research adds to this growing empirical literature on the behavior and performance of Indian firms post liberalization. This thesis comprises three chapters. In the first chapter, I provide a brief summary of reforms in India, review some of the papers analyzing firm behavior and performance and put it in the perspective of the liberalization process in India. The literature on Indian liberalization and on various aspects of firm behavior and performance is plentiful. I have limited my review to the papers which have influenced my research. In the second chapter, I analyze the relationship between financial constraints faced by the Indian manufacturing firms and their export participation decision. I find that the firms that enter the export market are financially healthier than the firms that cater only to the domestic market. I also verify that financial health is the cause and not a consequence of exports. In the last chapter, I address the relationship between firm size and its total factor productivity in the Indian manufacturing industries (co-authored with Prabal De). While small firms have the advantage of smaller and more flexible management and lower response time to market changes, larger firms have advantages of economies of scale, political clout and better access to government credits, contracts and licenses, particularly in developing countries. We find that small Indian firms are more productive than their larger counterparts.