Browsing by Author "John J. Seater, Committee Chair"

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Empirical Essays on the Elasticity of Substitution, Technical Change, and Economic Growth
(2003-07-28) Pereira, Claudiney M; John J. Seater, Committee Chair
We estimate the elasticity of substitution using two different production functions. The usual Constant Elasticity of Substitution (CES) production function and a Box-Cox production function for Japan (1890-1991), UK (1870-1991), and US (1890-1992; 1929-2000). The main results are that we find the ES to be non-unitary and changing over time. Our findings have implications for economic growth (theoretical and empirical), as production is an increasing function of the ES. The use of a Cobb-Douglas production function, as in most cases in the literature, hides the role of the ES not only as a source of increase in output but also as a source of technical change. Also, we found in a monte carlo simulation that usual CES production usually does not give reliable estimates for the substitution parameter. Finally, using a CES to calculate TFP across countries, we found that variance of TFP is lower than using a Cobb-Douglas. It implies that the importance of TFP to explain income differences across countries is diminished.
Essays on the Macroeconomics of Banking
(2006-04-26) Aliaga Diaz, Roger Agustin; John J. Seater, Committee Chair; Pietro F. Peretto, Committee Member; Paul L. Fackler, Committee Member; Alastair R. Hall, Committee Member
The role played by financial intermediaries and banks in modern economies is undeniably critical. However, explaining their importance in a theoretical general equilibrium framework presents some challenges. If firms and households have unrestricted access to complete financial markets, then at the competitive equilibrium banks make zero profits and the size and composition of the bank's balance sheet have no impact on the other economic agents. Imperfections in credit markets are key then to explain the unique role of banks when compared to alternative financing methods. The first chapter studies some of these financial frictions focusing on how can they introduce a specific need for bank financing as opposed to alternative methods. This study carries out a macroeconomics general equilibrium analysis of this topic, taking into account the feedback between firms' financing and investment decisions. Having established the relevance of bank financing for economic outcomes, the second chapter is devoted to study how bank lending can become a transmission channel of aggregate shocks to the rest of the economy. It particularly focuses on the role played by bank capital requirements, the most important banking regulation, as a financial accelerator mechanism in a model of real business cycles. Banks becomes more capital constrained during recessions as they suffer more loan losses that erode their equity, and this results in a reduction in loan supply which in turn worsens the severity of the recession. Bank-loan dependent firms suffer the most and aggregate investment and production fall. Following this line of research, the third chapter investigates yet another mechanism by which bank lending can become a transmission channel of aggregate shocks. This one hinges on the pricing of loans by banks and its variation over the business cycle. Price-cost margins can be seen as a wedge in credit markets that produce deadweight losses for the economy. Countercyclical price-cost margins uncover a financial accelerator mechanism by which deadweight losses are more severe during recessions. This is an empirical study in which the countercyclical behavior of price-cost margins in the US commercial banking sector is carefully documented.
Real Options Approach in Migration for two Specific Labor Markets
(2003-08-05) Sengupta, Bhaswati; John J. Seater, Committee Chair
This work uses a real options approach to model the migration decision of an individual under very specific labor market conditions where migration is analyzed as a "regime switching" phenomenon. A regime switching model is developed with the possibility of exogenous regime switches, the latter being an innovation of this work. The first migration decision analyzed is that of an individual considering migration from a rural to an urban labor market that is segmented in nature, consisting of a formal and an informal sector, a common phenomenon observed in many developing countries. A combination of exogenous regime switches are used in the model for an accurate treatment of the "opportunity nature" of finding formal employment once the migrant is in the city. The model also analyzes the value to a migrant of the option to move back and forth between the rural and urban sectors, which is new to the rural-urban migration debate. The exogenous switching formulation developed in this work may be used to model a wide variety of such economic phenomenon where a common dynamic programming problem is augmented to include the possibility of an opportunity arising, that an economic agent may or may not take. The second problem developed along similar lines concerns the decision of a prospective undocumented Mexican migrant crossing the border to work in the U.S. This model is solved numerically using parameter values obtained from data and qualitative policy prescriptions as suggested by the model are presented. Results suggest that the effectiveness of the INS to modify the probability of apprehension in the interior of the U.S. has a much bigger effect than apprehension at the border in deterring undocumented migration. Also, a decreasing probability of acquiring legal status inside the U.S. does not have a very big effect in deterring migration as compared to increasing border and interior apprehension probabilities or even raising the cost of being an undocumented worker in the U.S.
Revealed Preference and Time Series Analyses of U.S. Macroeconomic Aggregates
(2004-08-17) Maia Filho, Luiz Flavio; John J. Seater, Committee Chair; John S. Lapp, Committee Member; Douglas K. Pearce, Committee Member; Walter N. Thurman, Committee Member
This research extends the literature on the revealed preference analysis of macroeconomic aggregates in multiple ways. The relevance of recent methodological changes in data construction is our first topic, as Varian's (1982, 1983) nonparametric tests are run on U.S. consumption series built under NIPA's old and new methods. The results indicate that previous conclusions on the overall GARP-consistency of data and on weak separability of particular aggregates are affected by the methodological changes in data. Additionally, test results are observed to be sensitive to the adoption of series at different frequencies. The issue of temporal aggregation is examined in two ways. We initially show that those changes do not seem to have significantly altered the univariate time-series properties of aggregates or previous conclusions about the impacts of temporal aggregation on those properties; therefore, the aggregation of economic flows into annual figures is once more found to involve significant losses of information about the dynamic behavior of higher-frequency data. The power of the GARP test in datasets of different frequencies is then investigated from analytical and empirical standpoints. Time aggregation is found to reduce the power of the GARP test. Finally, we apply Varian's tools to study for the first time a dataset including the value of nonmarket services produced inside the household. The modification involves a more detailed picture of consumers' allocation of time, alternatively a source of utility (leisure) or a resource in household production. We observe that the changing number of hours spent on average in household production — due to the increasing participation of women in the civilian labor force over recent decades — can be characterized as a rational decision made by the representative agent in a standard utility maximization model.
Tax Rates: A Study of their Form and Effects
(2009-07-20) Alexander, M. Erin; John J. Seater, Committee Chair
This dissertation presents a series of three essays that examine the functional form of the U. S. federal income tax and its implications. In the first essay we introduce the convex functional form of the income tax which we believe is superior to the standard income-proportional form. We also describe the parameters within this function and their construction over the years from 1913 to 2005. The second essay discusses the characteristics of the time series of these parameters, the relation of these series to other tax series in the literature, the relation of the intertemporal variation in the tax parameters to the sharp reduction in volatility of macroeconomic time series after about 1950, and the interrelation of the tax parameters with other federal fiscal variables. In chapter three, we use a standard dynamic stochastic general equilibrium model and insert our tax function. We explore the implications that different tax policies will have on the macroeconomy by changing parameter values within this tax function. Specifically we compare the steady states values, second moments, and impulse response functions, of the usual variables, generated by these policies.
Uncertainty and Business Cycles Asymmetries
(2005-07-08) Sepulveda Umanzor, Jean Paul; John Lapp, Committee Member; Douglas K. Pearce, Committee Member; Matthew Holt, Committee Member; John J. Seater, Committee Chair
In this dissertation I investigate how macroeconomic uncertainty behaves during the business cycle, and then I present a model that can reproduce what I find in the data. I first present evidence, from surveys of expectations, that indicates that macroeconomic uncertainty is higher during expected slowdowns than during expected expansions in real GDP. I then, try to explain this theoretically. To do that, I show that the standard stochastic growth model can be expanded to include an endogenous depreciation rate, allowing it to deliver the findings previously discussed. The model generates asymmetric output fluctuations in response to symmetric productivity shocks. Business cycle asymmetries then reproduce the pattern of uncertainty described in the empirical chapter.