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

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Browsing Theses and Dissertations - Department of Economics, Finance & Legal Studies by Subject "Environmental economics"

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    Industrial firm and household responses to energy price changes: evidence from energy subsidy reform in Iran
    (University of Alabama Libraries, 2020) Hasani, Karim; Henderson, Daniel J.; University of Alabama Tuscaloosa
    The rise in global average temperature due to greenhouse gas emissions is a serious international concern. Yet, one of the important barriers for clean energy transition in the world is the existence of energy subsidies. Consequently, examining how industrial and residential sectors in countries with heavily subsidized energy markets, like Iran, would respond to energy price reforms can shed light on developing more effective energy policies. In the first chapter, I discuss a broad range of related issues including the political economy behind the existence of high energy subsidies and the Targeted Subsidies Reform (TSF) conducted by Iran in 2010. Further, I review some of the most important studies on modelling energy demands. In the second chapter, I use a unique firm-level panel (2005-2011) and a translog cost system and estimate both price elasticities of demand and Morishima elasticities of substitution for Iranian manufacturing firms. The price elasticities show that labor is slightly more sensitive than capital to energy price reforms, but energy is more elastic than both. In addition, Morishima elasticities indicate the substitution of capital for energy, labor for energy, and capital for labor dominate the opposite directions. Finally, it is seen that firms exhibit heterogeneity in adjusting to energy price reforms according to labor structure and energy intensity. In the third chapter, I apply an Exact Affine Stone Index (EASI) implicit Marshallian demand system on Iranian Household Expenditure and Income Survey (HEIS) data on 10 commodity groups. I estimate the parameters of interest (elasticities, Engle curves, and welfare index) for 2008-2010 (before the subsidy reform) and 2011-2014 (after the subsidy reform). As household income level increases, the nature of energy changes from being normal to inferior. Further, the estimated nonlinear Engel curves for energy, furnishing, communication, and clothing exhibit the largest change between the two time periods. Finally, a simulated 90% increase in energy prices is estimated to be associated with an average of 4.7% rise in the cost of living before the reform and 2.6% afterwards.
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    Studies on behavioral decision making: theory and experimental evidence
    (University of Alabama Libraries, 2020) Wu, Fan; Price, Mike; Jindapon, Paan; University of Alabama Tuscaloosa
    My dissertation on behavioral decision making contains two independent chapters, both adopting the methodology of developing theoretical model, running parameterized simulations, and testing equilibrium predictions or hypotheses through experimental evidence. Through the independent applications of microeconomics theories in behavioral industrial organization and environmental economics, these two chapters have reached conclusions that inspire policy implications to mitigate real-world problems like holdup and climate change dilemma. Chapter 1 studies the effects of cancellation payment on the hold-up problem through parameterized modelling and lab experiment. Our experiment results conform to equilibrium predictions: setting the cancellation payment too low can lead to agents being held-up, resulting in inefficiently low investment; setting it sufficiently high can enhance the agent’s incentive and solve hold-up problem, but setting it too high could lead to the agent to invest inefficiently high, i.e. the reverse hold-up problem. Our study has policy implications that carefully designed cancellation clauses could be harnessed by policymakers and mechanism designers to achieve outcomes that maximize social welfare; Another takeaway from our experiment is learning effect, implying policymakers could expect a contract regime to become increasingly effective over time. Chapter 2 develops a novel framework and runs parameterized simulations to show how individual decisions, not unlike nations in climate policy-making and international negotiations, are determined in a scenario where the probability of climate catastrophe is ambiguous. Our calibration finds that: when players vary in their effectiveness of contribution and degree of ambiguity aversion, free-riding is predicted to happen. Our study has policy implications that strategic decision-makers need to be better educated about environmental uncertainty to elicit better cooperation, and the gaps between different players’ effectiveness of contributions also need to be closed towards that end. This paper also designs a lab experiment imitating international bargaining scenarios to test our theoretical predictions. The aim of our study is to develop and then test a model on individual’s decision making in their contribution to reduce the degree of ambiguity over a shared loss, just as in the scenario for nations to cut down carbon footprint to reduce the likelihood of catastrophic climate change on global scale.