Theses and Dissertations - Department of Economics, Finance & Legal Studies

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Applied nonparametric density and regression estimation with discrete data: plug-in bandwidth selection and non-geometric kernel functions
(University of Alabama Libraries, 2017) Chu, Chi-Yang; Henderson, Daniel J.; University of Alabama Tuscaloosa
Bandwidth selection plays an important role in kernel density estimation. Least-squares cross-validation and plug-in methods are commonly used as bandwidth selectors for the continuous data setting. The former is a data-driven approach and the latter requires a priori assumptions about the unknown distribution of the data. A benefit from the plug-in method is its relatively quick computation and hence it is often used for preliminary analysis. However, we find that much less is known about the plug-in method in the discrete data setting and this motivates us to propose a plug-in bandwidth selector. A related issue is undersmoothing in kernel density estimation. Least-squares cross-validation is a popular bandwidth selector, but in many applied situations, it tends to select a relatively small bandwidth, or undersmooths. The literature suggests several methods to solve this problem, but most of them are the modifications of extant error criterions for continuous variables. Here we discuss this problem in the discrete data setting and propose non-geometric discrete kernel functions as a possible solution. This issue also occurs in kernel regression estimation. Our proposed bandwidth selector and kernel functions perform well in simulated and real data.
Baumol’s disease and health care inflation
(University of Alabama Libraries, 2015) Mann, Christopher; Pecorino, Paul; Chen, Susan; University of Alabama Tuscaloosa
This dissertation sets out to determine if the health care sector suffers from low productivity growth and the implications on government finances in the long run. I use the condition treatment approach to measure utilization and price growth in the health care sector with the Medical Expenditures Panel Survey data from 2003-2011. While official inflation estimates are found to be biased by up to 1% per year, health care prices were still growing much faster than other prices. However, this is only true for certain segments of the population. Diseases and other medical conditions experience different productivity growth rates and are distributed uniformly across the population. I also find that much of the inflation is concentrated in ambulatory care events. I test to see if technology is driving event-level inflation by controlling for individual procedures. Contrary to other studies, I find little evidence to support the claim that technology is the main reason behind health care inflation. The results suggest that the health care sector may suffer from the Cost Disease. To study the implication on taxes, I build a theoretical model of unbalanced growth between private and publicly provided goods. As long as the two goods are not substitutable, the tax rate is pushed to the top of the Laffer Curve and redistribution is crowded out in the long-run.
Cointegration tests with smooth breaks and co-movements of international reserves
(University of Alabama Libraries, 2019) Banerjee, Piyali; Lee, Junsoo; University of Alabama Tuscaloosa
In the first essay, we propose a new Autoregressive Distributive Lag (ADL) cointegration test in the presence of structural breaks approximated by a Fourier function. The test offers a simple way to capture a smooth structural change in time series data. Exact break dates are not required, and the suggested methodology can accommodate various types of models with an unknown number and form of gradual structural changes. An empirical example of real oil prices, oil production, and real economic activity using the new test shows that these variables are cointegrated, while a conventional ADL test ignoring structural breaks yields an opposite result. In the second essay, we develop a new Fourier Engle-Granger (FEG2) co-integration test to approximate structural breaks in time-series. We note that a common-factor-restriction (CFR) is imposed in the Engle-Granger (EG) test. The restriction implies the identical long-run and short-run dynamics in the relationship among the variables of interest. This chapter develops a new Engle-Granger (FEG2) co-integration test that not only prevents the power loss issue from the existing EG test but also accommodates underlying nonlinearity in the data through a Fourier transformation. We allow for different long-run and short-run dynamics of the variables. The new EG2 co-integration test with a Fourier approximation detects the co-integration relationship among the crude oil price, crude oil production, and real economic activity even when the data is subject to higher frequencies. In contrast, the conventional EG test with a Fourier function fails to detect the co-integration in a similar situation due to the restrictive assumption of the CFR. In the third and final essay, we examine global co-movements of international reserves (IR) and their effects on the variations of IR holding in each country. To begin with, we evaluate how pervasive global co-movements of international reserves are. For this, we estimate the global, regional and country-specific factors of international reserves by using a dynamic factor model with time-varying factor loadings and stochastic volatility. We find that a global factor is a dominant component and it causes co-movements among international reserves in the world. Then the degree of association of each country’s reserve holding with the common global factor is analyzed. Results show that after the great financial crisis (GFC) the correlation of each country with the global factor drops remarkably compared to the pre-crisis period. Following the fact, we examine the driving forces of the IR through the estimated global factors of key macro-economic variables and notice that the dynamics of the driving forces become opposite after the financial crisis. Lastly, we examine the inter-temporal effects of the global factor of IR with the global factors of the key control variables by using a VAR model.
The distribution of returns to education
(University of Alabama Libraries, 2019) Souto, Anne-Charlotte; Henderson, Daniel J.; University of Alabama Tuscaloosa
In this work, we revisit the traditional human capital framework and infer that risk as measured by the shape of the returns to education's distributions should be included. While education is often considered to be an investment good, human capital models often ignore the impact of risk on education investment decisions. This thesis has two aims. First, we want to find out how our different measures of risk evolved through time and between different groups. Second, we want to find out if those risks impacted education investment decisions through changes in the expected returns. That is, we investigate whether there exist risk-return trade-offs in education. In the first chapter, we overview nonparametric (spline and kernel) regression methods and illustrate how they may be used in labor economic applications. We focus our attention on issues commonly found in the labor literature such as how to account for endogeneity via instrumental variables in a nonparametric setting. We showcase these methods via data from the Current Population Survey. In the second chapter, we estimate the risk-return trade-off in the context of education. If education is treated like any other investment good, risk could play an important role in individual’s educational decisions. As portfolio theory predicts, there could be a trade-off between returns to education and risks concerning the returns: higher risks are generally associated with higher returns. We contribute to the literature by proposing various measures of risk based on the distribution of returns to education, which are in turn based on nonparametric regression results using the Current Population Survey dataset (1980-2015). We infer that risk-averse individuals prefer distributions with positive skewness and low kurtosis. Our results confirm the findings of the literature, i.e. we observe compensation for variance. We also find statistically significant compensation for the higher moments: skewness and kurtosis. Interestingly, we find that the relationship between expected returns and the higher moments skewness and kurtosis is non-linear. In the third chapter, we build on the second chapter to test two hypothesis: first whether there is heterogeneity in the risk of educational investments and if so whether there is compensation for that risk. We use our individual-level estimated rates of return to education and split them in three different ways: by occupation, by region and race, and by region and education-level. We infer that there is heterogeneity, not only in the expected returns (1st moment), but also in the risk faced by individuals (higher moments). We also add to the second chapter by testing whether risk-return trade-offs exist between occupations, whites and non-whites, and different education-level. We expect, for example, occupations that retain higher risk to be compensated by higher mean returns. Generally, we find risk-return trade-offs exist between states, occupations, whites and non-whites, and different education-level, for all three measures of risk. Surprisingly, we find that kurtosis matters more than skewness as a measure of risk. Moreover, the trade-offs between skewness, kurtosis, and expected returns are not always in the directions predicted by theory on decision making under uncertainty.
An econometric analysis of cocaine use by methadone
(University of Alabama Libraries, 2013) Nichols, Ezekiel Andrew; Cover, James P.; University of Alabama Tuscaloosa
This dissertation uses proprietary drug screening data, illicit drug prices from the DEA STRIDE database, and national and local macroeconomic variables to measure the price responsiveness and treatment effectiveness of methadone maintenance therapy (MMT) on patients in a voluntary, methadone-treatment program in a rural Alabama county. This is done using conventional, myopic, and rational models of demand. The demand for illicit drugs is found to be sensitive to national drug prices as estimated from the Drug Enforcement Agency's System to Retrieve Drug Evidence (STRIDE), length of time in treatment, previous consumption, and the local unemployment rate. An important innovation in this paper is the use of temperature data from coca-plant-growing regions as an instrument for the cocaine prices taken from the DEA STRIDE database. Use of this instrument yields estimation results more in line with the predictions one obtains from economic theory. The estimation results imply that methadone maintenance therapy is a substitute for all illicit drugs under analysis. The implied price elasticity of cocaine use by MMT patients ranges from -0.0003 to -0.01284 and the unemployment elasticity of cocaine use is -0.00385.
An economic analysis of abstinence-only sex education in Alabama
(University of Alabama Libraries, 2011) Collins, Sondra; Hoover, Gary Allen; University of Alabama Tuscaloosa
The purpose of this dissertation is to assess the demand for effectiveness of, and economic impact of Alabama's Title V funded abstinence-only sex education programs. The specific outcomes to be examined in this study are gonorrhea, Chlamydia, birth, and abortion rates among Alabama teens. The particular programs assessed in this study were created by Title V Section 510 of the Social Security Act and authorized under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The funding for Title V abstinence-only sex education programs became available from the federal government in 1998. The focus of this study is to determine what characteristics lead Alabama counties to adopt this particular type of sex education, the extent to which the decline in negative teen outcomes observed from 1998-2007 can be attributed to Title V funded abstinence-only sex education programs and the amount of public funds that were saved as a result of adopting these programs.
Empirical essays on uncertainty and economic behavior
(University of Alabama Libraries, 2014) Jones, Paul; Enders, Walter; University of Alabama Tuscaloosa
My dissertation looks at the new and growing field of macroeconomic uncertainty. It consists of three empirical essays on different measures of macroeconomic uncertainty and how uncertainty affects macroeconomic behavior. The first essay uses a new uncertainty index from Baker et al. (2012). We evaluate the time-varying correlation between macroeconomic uncertainty, inflation, and output. Estimation results from a multivariate DCC-GARCH model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s, whereas the correlation between uncertainty and output is consistently negative. In the second essay, we propose domestic uncertainty shocks may serve as a channel through which business cycles are transmitted internationally. To quantify uncertainty, we use two measures from the current literature and estimate structural vector autoregressions to evaluate the effects U.S. uncertainty shocks have on the Japanese and British economies. Our results suggest U.S. uncertainty shocks have international effects consistent with a demand shock in the context of an open-economy IS/LM model with sticky prices. For the final essay we estimate a number of macroeconomic variables as logistic smooth transition autoregressive (LSTAR) processes with uncertainty as the transition variable. Nonlinear estimation allows us to answer several interesting questions left unanswered by a linear model. For a number of important macroeconomic variables, we show (i) a positive shock to uncertainty has a greater effect than a negative shock, and (ii) the effect of the uncertainty shock is highly dependent on the state of the economy. Hence, the usual linear estimates concerning the consequences of uncertainty are underestimated in circumstances such as the recent financial crisis.
Endogeneity and dynamics in the impact of free trade agreements on trade and foreign direct investment
(University of Alabama Libraries, 2010) Lira, Cristina; Lee, Junsoo; Reed, Robert R.; University of Alabama Tuscaloosa
In the study of the impact of Free Trade Agreements on Foreign Direct Investments and on trade flows, there are some econometric issues that have not been fully addressed. This research aims to provide a discussion of these econometric issues and to present, using the most advanced econometric tools, new empirical results useful for understanding the relationship among regional integration, FDI and trade of goods. The research results in three self-contained, closely related papers. The first paper analyzes the relationship between FTA and FDI, focusing on the estimation bias that arises when the researcher does not consider the endogeneity of FTA, the fact that the relationship between FTA and FDI is dynamic, and the potential correlation between the current level of FDI and future participation in trade agreements as an additional source of endogeneity. This source of endogeneity did not receive attention in the international trade literature. Using the dynamic panel estimation method, the results show that, when the sources of bias are controlled for, trade agreements do not promote FDI in the way supported by previous empirical analysis and some theoretical arguments. The second paper focuses on the relationship between FTA and trade flows. Also in this case, not controlling for the econometric issues presented above produces a biased estimation of the impact of trade agreements. The paper addresses endogeneity, combining matching and difference-in-differences estimation. In addition, it applies two modifications of this methodology to evaluate the delayed impact of FTA and to control for the correlation between the current level of trade and future participation in trade agreements. The results show that the impact of trade agreements depends on the anticipated policy environment and that the benefits of trade agreements extend over time. The third paper analyzes the impact of FTA on FDI using a different methodology in order to strongly support a result in contrast to standard findings. Using matching combined with dynamic panel models, the results confirm that FTA does not promote FDI. This paper also illustrates the necessity of a dynamic specification, because the non-reversibility of the investments affects the impact of other variables.
Essays in applied spatial microeconomics
(University of Alabama Libraries, 2020) Herndon, James Dennis; Ross, Amanda; University of Alabama Tuscaloosa
In the first essay, I examine the price behavior of consumer goods in the strategically vital country of Pakistan. Results show that prices converge both temporally and spatially. A wage-adjusted Consumer Price Index shows that Pakistani cities have converging costs of living. Finally, a novel measure of cointegration ranks the most and least economically integrated cities. Divergence does not occur along provincial, linguistic, or ethnic boundaries. In the second essay, paper I examine private sector job growth in cities across the United States from 1990 to 2018. Defining “concentration” as a city’s sectoral Herfindahl-Hirschman Index, I find that cities with greater economic concentration subsequently experience more job growth than comparable cities with less concentration. However, the skewed distribution of job growth by sector means that cities face a trade-off between risk and reward analogous to an investment portfolio. In the third and final essay, we examine how changes in rainfall affect the persistence of conflict in Africa using fine-grained grid cell level data. Using Markov transition matrices, we examine the persistence of conflict in grid cells across the African continent and the likelihood of transitioning into and out of conflict. We incorporate the Markov probabilities into a panel logit model to analyze how monthly variations in rainfall affect the probability that an area transitions from peace to conflict. We find that peace is highly persistent across Africa, while violence is more transient. We also find that insufficient rainfall early in the wet season is associated with conflict in several regions.
Essays in global comovements
(University of Alabama Libraries, 2020-12) Isomitdinov, Hasan; Lee, Junsoo; University of Alabama Tuscaloosa
This dissertation looks into comovements in the global macroeconomic aggregates across countries by applying Bayesian econometric models. The first essay provides new results on the significance and relative importance of global and regional comovements in sovereign credit risk. I employ a dynamic factor model with time-varying stochastic volatility to examine the time-varying effects of global comovements. I find that the effects of the global comovements on individual countries are smaller than commonly perceived, especially after the end of the Eurozone debt crisis. Moreover, contrary to previous findings, I find that the net effects of the global and regional factors are greater than those of global macroeconomic variables. The second essay provides evidence of significant international co-movements of public debt in the form of the common global and regional factors. International events such as the global financial crisis and Eurozone sovereign debt crisis suggest the existence of global and regional factors that can generate synchronizations of public debt across countries. In contrast with previous studies that are focused mostly on domestic economic fundamentals in explaining public debt, I find distinct global factors in the public debt-to-GDP ratio, from both principal components analysis and the Bayesian dynamic factor model. I show that the global factor accounts for a significant fraction of the variation of public debt often more substantial than those explained by domestic variables in many countries. In the third and final essay, I develop a new panel cointegration model based on the well-known autoregressive distributed lag (ADL) models. I adopt the generalized method of moments procedure of Arellano and Bond, noticing that the ADL cointegration model is a special case of dynamic panel data models. The suggested procedure can overcome the difficulties found in the studies based on the panel vector auto-regressive models, which can be biased in the presence of cointegration. I apply the suggested procedure to the issue of defense-growth relationship, while capturing the inter-temporal dynamic relation between military spending and economic growth. The results reveal that there are multiple cointegrating vectors in the relationship of military spending and growth.
Essays in macroeconomics
(University of Alabama Libraries, 2011) Patterson, Bradford; Cover, James P.; Jindapon, Paan; University of Alabama Tuscaloosa
We investigate three topics in this dissertation. In Chapter 1 we investigate a matter related to Chapter 7 non-business bankruptcy in the United States. We find that state homestead exemptions tend to have a positive effect on state-level Chapter 7 non-commercial bankruptcy filing rates and tend generally to be statistically significant at the five-percent level or lower. Additionally, consistent with existing literature, we tend to find a positive and marginally statistically significant effect of past divorce rates on current filing rates. Moreover, our results suggest that unemployment has a positive effect on filing rates, while home prices have a negative effect. We use a balanced panel data set of U.S. states from the beginning of 2006 until the end of 2008. Homestead exemptions are chosen as a proxy for total asset exemptions. In Chapter 2 we investigate total U.S. household-sector debt and its relationship to several other variables using a vector error correction model and vector autoregression models. We find that per-capita household debt levels appear to be reduced by positive shocks to intermediate- and long-term interest rates. In addition, the permanent income hypothesis is corroborated in up to two areas. First, in some specifications consumption shocks, representing permanent income shocks, have a modest positive effect on debt levels. Second, shocks to home prices increase borrowing. Error variance decompositions suggest that current debt levels have a large portion of the predictive power for future debt levels. In Chapter 3 we investigate U.S. consumer revolving credit unsecured by real estate and its relationships to several other variables using vector autoregressions. We make several findings. For example, we find evidence that an increase in the average interest rate faced by credit card holders has no discernible downward effect on debt levels but that an increase in the federal funds rate does have a downward effect. Increases in the unemployment rate also seem to reduce credit use, probably due to supply constraints. Increases in permanent income, represented by consumption, and in asset prices have positive effects on credit use.
Essays on Attention Deficit Hyperactivity Disorder
(University of Alabama Libraries, 2018) Hampton, James; Chen, Susan; University of Alabama Tuscaloosa
In the first essay, we use stochastic dominance techniques to understand how the reporting of behavioral problems as well as ADHD prevalence has changed between 2000 and 2004. This time period coincides with changes in national educational policy which we hypothesize may have influenced the reporting of behavioral problems in children and a change in ADHD prevalence. We use stochastic dominance techniques and find that the distribution of behavioral problems in 2004 first-order stochastically dominates that of 2000. We then use decomposition techniques to study the primary drivers of changes in mother reported behavioral problems. We find evidence that changes in the educational policy between 2000 to 2004 led mothers of elementary school children to alter their reporting of child hyperactivity. In the second essay, we explore whether the introduction of school accountability policies can account for changes in ADHD diagnosis. We exploit differences across states and time in the introduction of school accountability laws to estimates differences in mean ADHD diagnosis. The results from our analysis suggest that one policy, state-level rewards given to high-performing schools, leads to approximates a 3 percentage point increase in the probability of an ADHD diagnosis among children. We find that the children most impacted by the policy are those whose mothers’ reported zero behavioral problems in the pre-policy period, perhaps indicating that prior to the policy these mothers did not believe that their child had behavioral problems. In the third and final essay, I study the impact of child ADHD on parental labor market and relationship dissolution outcomes. As unobserved characteristics may simultaneously impact the likelihood of having a child diagnosed with ADHD and outcomes of the parent, results using OLS estimation are likely biased. I mitigate issues of endogeneity using an instrumental variables framework where I utilize state-level educational policy as an instrument for child ADHD diagnosis. To be a valid instrument, the educational policy should be correlated with child ADHD, while exogenous to parental outcomes. While in several specifications, I find negative effects of child ADHD on parental outcomes using OLS, interestingly, IV estimates all lead to a switching of sign and are largely insignificant. Findings indicate that parental labor market and marital status outcomes are not impacted by child ADHD.
Essays on financial stability and the industrial organization of the banking system
(University of Alabama Libraries, 2020) Gao, Jiahong; Reed, Robert R.; University of Alabama Tuscaloosa
The focus of my dissertation is to study how the industrial organization of the banking sector affects the risk-taking behavior of financial intermediaries and the degree of instability within the banking system. In the first chapter, I ask whether the notion that market concentration promotes stability survives when the government intervention during a crisis is properly taken into account. To this end, I study suspension policies in an environment without commitment, following Ennis and Keister (2009). When the BA only values the welfare of depositors, the degree of fragility is independent of the competitive structure of the banking system. However, having a BA that puts some weight on the monopolist’s welfare can serve as a commitment device in suspending payments earlier to protect bank profits, which reduces fragility under a monopoly. The second chapter investigates how the industrial organization of the banking sector may be associated with different triggers for the system to be unstable. In particular, my analysis is based on a modern version of the Diamond and Dybvig (1983) framework in which a self-fulfilling run occurs at a non-trivial probability and banks lack commitment in determining the structure of liabilities as in Ennis and Keister (2010). I find that the possibility that the monopolistic bank may lose its rents in times of stress encourages it to be relatively illiquid. As a result, a monopoly is more stable (fragile) than perfect competition if the ex-ante probability of a financial crisis is below (above) some threshold. The last chapter examines the effects of bank failures and market concentration on credit market activity across United States. In particular, I employ a recent 17-year panel of all FDIC-insured commercial banks over the period 1994Q3 to 2010Q4 and construct state-specific measures of bank failures and deposit concentration. Using a seemingly unrelated regressions (SUR) model, I find that over the full sample, banks issued less loans if the likelihood of a bank failure in a given state increased. Further, banks in states with higher degrees of concentration also issued less loans. Interestingly, there appears evidence that market concentration serves as a buffer against instability.
Essays on housing, unemployment and monetary policy
(University of Alabama Libraries, 2014) Ume, Ejindu; Reed, Robert R.; University of Alabama Tuscaloosa
In this dissertation, I study the interconnections between the housing market and labor market, and the link between monetary policy and housing market activity. In the first chapter, I focus on the interplay between the housing and labor market. To do so, I construct a model of search and bargaining across two different markets: the labor market and the housing market. The model highlights that housing prices and frictions in the housing market have a profound impact on labor market activity through the desire of workers to eventually purchase a home, the "American Dream." The model also reveals that labor market frictions can impact housing market activity. I also perform a calibration exercise to evaluate economic activity in general equilibrium. I find that frictions in the housing market generate strong negative external effects on the labor market. More specifically, a tighter housing market is associated with higher unemployment rates and less job creation. Consequently, my findings suggest that policymakers should be very careful in implementing policies targeted towards housing -- housing markets are likely to generate significant external effects to other sectors of the economy, especially the labor market. To study the effects of monetary policy on housing market activity I develop an overlapping generations model in which housing is traded across generations of individuals. Incomplete information leads to a transactions role for money so that monetary policy can be effectively studied. Moreover, individuals face liquidity risk which interferes with their ability to accumulate housing wealth. Contrary to the existing literature, I demonstrate that it is important to disaggregate fixed investment between the residential and non-residential sectors. In particular, I find the effects of monetary policy are asymmetric across the components of the overall capital stock. I conclude this chapter with a policy experiment studying how optimal monetary policy depends on housing market fundamentals. In response to adverse supply conditions in the housing sector, monetary policy should be more aggressive in order to promote residential investment and the housing stock. However, monetary policy should be conservative in order to limit exposure to risk if fundamentals favor housing demand. The third chapter is an empirical look at the relationship between monetary policy and housing market activity. I analyze and quantify the effects of monetary policy on residential investment, housing starts, new private housing permits and new single family houses sold. To conduct the analysis I estimate a vector autoregression model (VAR) where the monetary policy shock is identified using sign restrictions. No restrictions are imposed on the variables of interest, however, in response to a monetary policy shock I impose sign restrictions on the impulse responses of price, output, reserves and the federal funds rate. I find that a contractionary monetary policy shock reduces housing market activity for up to a year after the shock. Interestingly, 2 to 3 years after the economy contracts, activity in the housing sector reverses course. The findings suggest that once the economy contracts the Federal Reserve Bank reverses course by lowering the federal funds rate, and this policy reversal stimulates housing market activity.
Essays on human capital heterogeneity and agglomeration
(University of Alabama Libraries, 2015) Patton, Michaela; Reed, Robert R.; University of Alabama Tuscaloosa
This dissertation consists of three essays exploring how human capital heterogeneity within cities enhances individual productivity. Agglomeration theory suggests productivity is driven by rapid and frequent interactions with others in spatially-constrained areas. Using formal education data from the 2011 American Community Survey, we empirically test that theory by estimating the effects of local human capital stock characteristics on individual wages. In essay one, we posit that some kinds of knowledge are harder to exchange remotely and thus workers possessing those knowledge types benefit more from close physical proximity to others. Our theoretical framework demonstrates the returns to finding a partner to exchange ideas with are heterogeneous across knowledge types. We propose agglomerative environments favor “soft skills” where creativity and informal networking are important. Our empirical results show people with non-STEM majors benefit more from locating within a city. Conversely, terminal degrees such as a J.D. or M.D. experience a smaller urban wage premium. Essay two studies the role of specialization of human capital types for individual productivity. Glaeser et al. (1992) finds local industrial specialization has a non-increasing effect on employment and wage growth. Our empirical results indicate specialization of knowledge can play an important role in promoting productivity when simultaneously controlling for a population size effect via the urban wage premium. We find STEM-related knowledge benefits greatly from local specialization of knowledge. However, the urbanization effect from city population size often exceeds the specialization effect. The third essay studies how workers in cities learn from one another in dense economic settings. Following Winters (2014), we estimate the impact of changes in the local stock of particular knowledge types on individual wages. The richness of our data allows us to estimate the productivity effects from over 400 different combinations of human capital interactions. We find most knowledge types are more productive when local STEM presence increases. The effect is strongest among workers with higher levels of educational attainment in the earlier stages of their careers. Similarly, areas such as government and psychology generate productivity gains among others. However, the lowest productivity gains occur from interactions with religious or education backgrounds.
Essays on public investment. private investment and foriegn investments
(University of Alabama Libraries, 2014) Williams, Miesha; Cover, James P.; University of Alabama Tuscaloosa
Economies have three investors: public investors, private investors and the foreign investors. This dissertation examines the response of each investor to economic shocks in the United States (US). Chapter 1 employs an over-identified, structural vector auto-regression (SVAR), examining the effects of gross, fixed government investment on private sector employment, consumption, and fixed nonresidential investment. An increase in government fixed investment likely causes a decrease in private sector economic activity. Government defense investment appears as the primary non-stimulant. Specifically, a one standard deviation shock to total government investment permanently increases government investment by 2.5%, and permanently reduces private sector investment by 1% by 5 quarters later. A one standard deviation shock to government defense investment, however, increases defense investments by 5% and permanently reduces private sector employment and investment. The final chapter examines the effect of a one standard deviation shock to exchange rates, inflation and interest rates on inflows of foreign direct investment (FDI) and sales of US securities abroad. We use two sets of 4-variable, over-identified SVAR's: one for FDI and one for securities. A one standard deviation shock to inflation reduces foreign direct investment inflows, but a positive shock to the interest rate reduces purchases of US securities. Shocks to FDI are independent of exchange rate shocks, securities may be indirectly affected by exchange rate shocks (although, they are directly affected by exchange rate shocks), and shocks to inflows lead to an appreciation in the dollar. Our results are stronger when we control for structural breaks in the data. Finally, our empirical model helps to explain the unusually large of FDI inflow from 1979:4 to 1982:3.
Essays on repurchase agreements, bailouts, and the macroeconomics effects of bank failures
(University of Alabama Libraries, 2015) Otto, Daniel Lee; Reed, Robert R.; University of Alabama Tuscaloosa
In this dissertation, I study different aspects of the financial system within times of crisis with special attention paid to money market mutual funds (MMMF) and their use of repurchase agreements ("repos"). Repos play a significant role in global credit market activity. Yet, research regarding the underlying components of repos remains nascent. In the first chapter, I examine the role of risk tolerance on lending and collateral within these agreements. In the second chapter, I study a model in which a risk-pooling intermediary engaging in the repo market, such as a MMMF, is exposed to runs. Inspired by events during the financial crisis, I show that bailouts are part of an efficient social insurance scheme in the event that a run emerges. However, this result does not imply that optimal intervention completely isolates shadow-banking intermediaries from a crisis. In fact, optimal public sector intervention imposes costs on money market funds by requiring them to liquidate some collateral. On the other hand, a commitment to no bailouts contributes to financial instability as the repo market collapses in the wake of a run without a public safety net. Chapter three expands my analysis of financial stress into the realm of traditional depository institutions. This chapter examines the effects of exogenous bank failures in the United States from 1973 - 2006. My results support the previous literature which suggests that real economic activity is lower following a shock. However, in addition to a linear model, I consider the possibility of a threshold value within banking shocks. Upon examination, I find that the effects of exogenous failures become asymmetric around $3 billion. Larger shocks are shown to impact the economy significantly. By comparison, smaller shocks have a completely ambiguous effect.
Essays on the Comovement of Commodity Prices, the Prebisch-Singer Hypothesis and the Convergence of CO2 Emissions
(University of Alabama Libraries, 2021) Islam, MD Towhidul; Lee, Junsoo; University of Alabama Tuscaloosa
My dissertation aims at developing econometric tests to study nonstationarity in panel data allowing for cross-correlations. The first chapter examines excessive comovement and nonstationarity in commodity prices. Pindyck and Rotemberg (1990) found excessive comovements among prices of a broad set of commodities. Wang and Tomek (2007) argue that commodity prices should be stationary and convergent though literature shows otherwise. I use both the principal component analysis (PCA) and dynamic factor models (DFM) to extract the comovements. We find some comovements, but they are not excessive. Then I control for the common factors and structural breaks in our unit root tests. I show that most commodity prices are non-stationary even after accounting for comovements and structural breaks. The second chapter studies the Prebisch-Singer (PS) hypothesis implying that commodity prices decline relative to industrial prices over the time. This has important implications for the growth of developing countries though the empirical evidence on the hypothesis is mixed. Using the dynamic factor models and principal component analyses I find significant comovements. I employ the residual augmented least squares (RALS) procedure to utilize the information contained in those factors and in the non-normal errors. I use Fourier function to model structural changes. Using data from 1900 to 2018, I find significantly negative trend in the common Fourier function and the dynamic common factor of the relative prices which supports the PS hypothesis. Out of the 24 individual relative commodity prices, I find negative trend in 12, positive trend in 6 and no clear pattern in others. I find an emerging positive trend in several of them from early 2000s. The last chapter develops a new unit-root test that accounts for dummy breaks and factors extend the two break tests of Lee and Strazicich (2003) in a factor structure to allow for cross-correlations using the PANIC procedure of Bai and Ng (2004). Then, we apply the new tests to examine the stochastic convergence of carbon dioxide (CO2) emissions for a set of 30 OECD countries during the period 1960-2018. Our results show that the null of no convergence is rejected only for a few countries.
Essays on unconventional monetary policy
(University of Alabama Libraries, 2015) Medina, Juan; Reed, Robert R.; University of Alabama Tuscaloosa
This dissertation is comprised of three essays in which we provide a theoretical framework to study the transmission mechanism of unconventional monetary policy on real activity and credit markets under differing degrees of banking sector concentration. In particular, the three chapters in this dissertation focus on expansionary balance sheet policies consisting of long-term asset purchases by a central bank. The overall results indicate that such expansionary policies stimulate economic activity in the form of capital formation, increased credit volume and financial easing under low short-term interest rate economies when the financial sector is perfectly competitive. However, when the banking sector is fully concentrated, the transmission mechanism of monetary policy can be distorted and thus the impact of a long-term security purchase program is hampered. Our results also suggest that the fiscal authority as well as the industrial organization of the banking sector play fundamental roles in the transmission mechanism of unconventional monetary policy.
Essays on yield curve models with markov switching and macroeconomic fundamentals
(University of Alabama Libraries, 2014) Levant, Jared; Ma, Jun; University of Alabama Tuscaloosa
This dissertation explores the interaction of the term structure of interest rates and the macroeconomy for the United States and United Kingdom. In particular, using a dynamic factor yield curve model, the three essays of this dissertation investigate the macroeconomic sources of parameter instability in the US and UK term structure. First, this dissertation explores if parameter instability in the term structures is reflected in structural breaks in latent yield curve factors - level, slope, and curvature. I test for a single and for multiple structural breaks. The results indicate that parameter instability in the US term structure is adequately captured by the structural breaks in the level and slope factors. Similarly, there is evidence that structural breaks in the level and curvature factors characterize parameter instability in the UK term structure. Next, I assume the dynamics of the US term structure follow a two-state Markov process. This allows interest rate dynamics to switch between the two states as frequently as the data dictates. A switching model is proposed which gives macroeconomic insight into an asymmetric monetary policy effect during expansions and recessions. A second proposed switching model provides evidence of a great moderation in the US term structure where there is a dramatic decrease in the volatility of yields. Lastly, I investigate the interaction of the UK term structure and macroeconomy. In order to establish a definitive one-to-one correspondence between macroeconomic fundamentals and latent yield curve factors, I estimate a dynamic yield curve model augmented with macroeconomic variables. Through impulse response analysis, I find that during the inflation-targeting period for the UK, the curvature factor is directly related to real economic activity. I then use this established interaction between the term structure and macroeconomy to gain macroeconomic insight into regime changes in the UK term structure. Using Markov-switching dynamic yield curve models, I estimate the term structure and find that periods of low volatility correspond to regimes where real economic activity and monetary policy have a greater effect on the bond market. Periods of high volatility are driven by inflation expectations having a greater influence on bond pricing.

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