Browsing by Author "Tombe, Trevor"
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- ItemOpen AccessAn Examination of Alberta’s Minimum Wage(2018-08-30) Kosiorek, Keyli; Tombe, TrevorThroughout its history, the minimum wage has always been a controversial policy. Politicians, economists, businesses and citizens are continually engaged in debates over its effectiveness and its unintended consequences. Initially designed to protect workers from exploitation, the minimum wage has been gaining popularity as an anti-poverty tool. In fact, in recent history there has been a $15 minimum wage movement taking place across North America that aims to put more money into the pockets of those in need and thus reduce poverty. In 2015, under the newly elected NDP government, the Government of Alberta implemented the $15 minimum wage policy. Their plan to reach $15 consisted of a 47% increase of the minimum wage in just 3 years. Alberta was the first province in Canada to implement such a policy, but since then, Ontario and British Colombia have followed in their footsteps. There is an abundance of research on the minimum wage from both the US and Canada, much of which is focused on the impact of the minimum wage on employment. While researchers have not reached a consensus on the magnitude of the effects, most agree that increasing the minimum wage has a negative impact on employment, especially for low-skilled workers and youth. While the research is plentiful, there have been no studies that have examined the impact of the $15 minimum wage movement on employment. Additionally, there has been no study that has looked at Alberta specifically. This paper adds to the existing literature by analyzing the impact that a rapidly increasing minimum wage has had on employment and unemployment in Alberta. To understand the effects of Alberta’s increasing minimum wage on employment and unemployment, I used a natural/observation study of Alberta and Saskatchewan. Alberta was the treatment group in my study because its minimum wage increased significantly starting in 2015. Saskatchewan was the natural control group in my study because they did not increase their minimum wage arbitrarily and only adjusted it slightly each year for inflation. Because the two provinces are so similar in many ways including industry, political landscape, Saskatchewan’s data became the baseline measure of the experiment. Thus, any changes in Alberta’s employment rates that were not seen in Saskatchewan could attributed to the increase in minimum wage that Alberta experienced. For my study I used pooled time-series data collected from the Canadian Labour Force Survey to compare the two provinces in a regression analysis. The analyses were run on four different age groups: 15+, 15-24, 25-54 and 55+. The results from my empirical analysis were consistent with previous literature with coefficients for the employment rate between -0.068 and -0.434 for the period between 1997 and 2017 in Alberta. I also found coefficients for the unemployment rate between 1.064 and 2.327 in the same time period. These results indicate that the increase in the minimum wage in Alberta resulted in a reduction in the employment rate and an increase in the unemployment rate. In addition to this empirical analysis, I looked at the cost of Alberta’s minimum wage increases since 2015. I calculated that the increase from $10.20 to $15 per hour will cost Albertans over $725 million. This is over four times the cost of tax benefit programs such as Alberta’s Family Employment Tax Credit. Such programs are better targeted towards those who need support. In this section of my paper I compare these two policies and the pros and cons of each. It is important to consider the costs and benefits of each policy prior to implementation to ensure that all objectives are being met and that the policy does not create more harm than good. I conclude my paper with three suggestions for policy makers to consider when developing minimum wage policy: First, I suggest that policy makers should have a clear understanding of who earns the minimum wage prior to making any changes. Secondly, I suggest that policy makers should be clear about their objectives in order to create policies that best target their desired group. Finally, I suggest that all policy decisions should be based on detailed cost-benefit analysis and that all documents should be disclosed to the public for transparent debates.
- ItemOpen AccessAttitudes, behaviours and barriers to public health measures for COVID-19: a survey to inform public health messaging(2021-04-21) Lang, Raynell; Benham, Jamie L; Atabati, Omid; Hollis, Aidan; Tombe, Trevor; Shaffer, Blake; Burns, Katharina K; MacKean, Gail; Léveillé, Tova; McCormack, Brandi; Sheikh, Hasan; Fullerton, Madison M; Tang, Theresa; Boucher, Jean-Christophe; Constantinescu, Cora; Mourali, Mehdi; Manns, Braden J; Marshall, Deborah A; Hu, Jia; Oxoby, Robert JAbstract Background Public support of public health measures including physical distancing, masking, staying home while sick, avoiding crowded indoor spaces and contact tracing/exposure notification applications remains critical for reducing spread of COVID-19. The aim of our work was to understand current behaviours and attitudes towards public health measures as well as barriers individuals face in following public health measures. We also sought to identify attitudes persons have regarding a COVID-19 vaccine and reasons why they may not accept a vaccine. Methods A cross-sectional online survey was conducted in August 2020, in Alberta, Canada in persons 18 years and older. This survey evaluated current behaviours, barriers and attitudes towards public health measures and a COVID-19 vaccine. Cluster analysis was used to identify key patterns that summarize data variations among observations. Results Of the 60 total respondents, the majority of persons were always or often physically distancing (73%), masking (65%) and staying home while sick (67%). Bars/pubs/lounges or nightclubs were visited rarely or never by 63% of respondents. Persons identified staying home while sick to provide the highest benefit (83%) in reducing spread of COVID-19. There were a large proportion of persons who had not downloaded or used a contact tracing/exposure notification app (77%) and who would not receive a COVID-19 vaccine when available (20%) or were unsure (12%). Reporting health authorities as most trusted sources of health information was associated with greater percentage of potential uptake of vaccine but not related to contact tracing app download and use. Individuals with lower concern of getting and spreading COVID-19 showed the least uptake of public health measures except for avoiding public places such as bars. Lower concern regarding COVID-19 was also associated with more negative responses to taking a potential COVID-19 vaccine. Conclusion These results suggest informational frames and themes focusing on individual risks, highlighting concern for COVID-19 and targeting improving trust for health authorities may be most effective in increasing public health measures. With the ultimate goal of preventing spread of COVID-19, understanding persons’ attitudes towards both public health measures and a COVID-19 vaccine remains critical to addressing barriers and implementing targeted interventions and messaging to improve uptake.
- ItemOpen AccessDeterminants of Corruption in Auctions and the Self-Perpetuation of Political Networks(2024-01) Saucedo Cepeda, Abraham; Oxoby, Robert J.; Tombe, Trevor; Laliberte, Jean-William; Magesan, Arvind Nathan; Franceschet, Susan; Ferraz, Claudio; Oxoby, Robert J.This thesis is devoted to studying two different ways in which public power can be exploited for personal advantage to the detriment of society. The first involves a direct abuse of the public tender process when it is conducted through an auction. The second involves political elites and their tendency to attain and retain power by leveraging the boons of previously held government and political posts. The first chapter examines the role of auctioneers' payoff structure in determining their bribe solicitation preferences and the likelihood an auction is won by its highest-bidder. I conduct an auction experiment with bribery in which auctioneers' net-of-bribes payoffs depend on the size of the winning bid. When payoffs are highly dependent on winning bids auctioneers are less likely to solicit a bribe and more likely to choose the highest-bidder when requesting one. Therefore, aligning auctioneers' personal profit-maximization objectives with the desired outcome of the auction mechanism reduces the incidence and negative effects of bribery. The second chapter presents and describes a novel database of Mexican politicians who held public office between 1935 and 2009. The database includes data on politicians' educational backgrounds, elective and appointive positions in government, political party positions, special-interest positions, the private sector, and the military. It also contains information on documented personal family and social relationships of included individuals, which allows me to reconstruct political networks. For the third chapter I test the hypothesis of political elite self-perpetuation and present evidence this phenomenon involves political networks broader than families: The prominence of political and government posts a politician is able to attain increases with the prominence of positions previously held by that politician's relatives, but also those held by their friends and business and political associates. To establish the effect is causal, rather than the result of politically valuable resources and traits shared by network members, I use a peers-of-peers instrumental variables approach wherein I exploit the variation in political attainment of the friends and relatives of a politician's own friends and relatives.
- ItemOpen AccessEconomic Policy Uncertainty, Firms Behavior and Trade(2023-07) Fosu, Felix Atta; Tombe, Trevor; Beaulieu, Eugene; Tsuyuhara, KunioEconomic policy uncertainty has increased sharply, especially following the 2008 financial crisis. Policy uncertainty arises from a lack of clarity and predictability about the future course of policies. Consequently, a forum has emerged to identify and discuss its potential effect on economic activities. My thesis offers insights into some of these critical issues, including the significance of the impact of policy uncertainty on trade and investment, the relative impact of policy uncertainty on within-firm and between-firm trade. Also, it identifies the features of industries which amplify the investment effects of policy uncertainty, as well as the institutional mechanisms that can mitigate these effects. Contributing to these policy-relevant discussion expands the usefulness of my research beyond the academic circles to policy making fronts. The general insight from my research is that rising policy uncertainty will not only reduce the volume of trade but alter the organizational structure of multinational firms and hence, how trade is organized. Moreover, industries with competitive input markets and sunk investment costs respond significantly to changes in policy uncertainty. Further, my research maintains that international dispute resolution mechanisms such as the WTO can significantly reduce or eliminate some of the adverse effects of policy uncertainty on economic activities. First, I examine how policy uncertainty affects the organizational structure of multinational firms and the organization of trade. Using US industry data and the difference-in-differences method, I find that higher policy uncertainty reduces the share of trade that occurs between-firm. Second, I test a conjecture that the effect of policy uncertainty on within firm trade and between firm trade increases in the thickness of industry's input market. Using US industry-level trade data and difference-in-difference technique, I find that the differential effect of policy uncertainty increases in the thickness of the input market. Third, I consider the WTO, Free Trade Agreements and Diplomatic Exchanges as international dispute resolution mechanisms and examine their impacts on trade between country pairs that have a history of war. Using bilateral trade flow data, I find that international dispute resolution mechanisms can significantly to the trade growth among nations with a history of war.
- ItemOpen AccessEssays in International Trade and Environmental Policy(2019-06) Munzur, Alaz Safak; Beaulieu, Eugene; Tombe, Trevor; Muehlenbachs, Lucija; Staubli, Stefan; Migrow, Dimitri; Antweiler, WernerThis thesis comprises a collection of three essays on international trade and environmental policy. In Chapter 1, I examine Britain’s trade policy in the 19th-century. Britain, the dominant trading nation of the time, abolished protectionist import tariffs in the middle of the century. To quantify the effect of this shift in trade policy on Britain’s welfare, I employ a general equilibrium trade model with multiple industries and input-output linkages. Relying on a novel dataset of trade flows and import tariffs of Britain and its main trading partners, I show that trade liberalization improved Britain’s overall welfare. This result is driven by the increased volume of trade. Although its terms of trade deteriorated, Britain benefited as its tariff structure became less restrictive over the period. In Chapter 2, I present an analysis of Canada’s commitment under the Paris Agreement. I examine the effects of meeting the emission reduction target as described in Canada’s Nationally Determined Contribution on welfare, bilateral trade and carbon leakage at the provincial and national level. To do this, I incorporate pollution emissions as a by-product of production into a general equilibrium trade model. Provinces substantially vary in terms of their economic structures and emissions profiles, therefore the effects of a national environmental policy differ at the regional level. By considering interprovincial trade and linkages across industries, the results provide a comprehensive understanding of how the industry level effects of a national target are transmitted through the Canadian economy and inform the policy in terms of the “emission intensive and trade exposed” industries at the provincial level. Meeting the Paris Agreement target decreases aggregate Canadian output by 0.48% but the provincial effects vary primarily due to differences in emissions intensity of production. Finally, the policy leads to 10.8% of emissions to relocate out of Canada but the proposed Output-Based Pricing System partly alleviates the problem of carbon leakage. In Chapter 3, using a general equilibrium trade model with cross-border pollution externalities from production, I evaluate the potential for carbon tariffs as an instrument to enforce the commitments under the Paris Agreement. Employing a non-cooperative optimal policy framework, I investigate the strategic interactions across five regions, Canada, China, the European Union, the United States and the rest of the world. In light of the debates following the possible withdrawal of the United States from the Paris Agreement, the analysis specifically focuses on the effects of welfare-maximising carbon tariffs on imports from the United States. I find that optimal carbon tariffs at the industry level result in small reductions in the total emissions and real income of the United States but are not sufficient to enforce participation in emission mitigation efforts. Compared to meeting its emission reduction targets, the United States is better off by withdrawing from the Paris Agreement, bearing the cost of carbon tariffs and retaliating in response. The committing regions are worse off when the United States retaliates. The results show that the negative effects of a worldwide tariff war on real incomes are substantially larger than the compliance cost to the Paris Agreement for all regions.
- ItemOpen AccessEssays on International Trade(2016) Wan, Shan; Beaulieu, Eugene; Eaton, Curtis; Tombe, TrevorThis thesis investigates three questions in international trade. Chapter 1 develops a multi-product firm model of international trade with the endogenous decisions on export and import to study technology diffusion via goods trade. This chapter shows, both theoretically and empirically, that a firm will import a product in the category where it already has higher expertise, which is consistent with the theoretical prediction. This chapter finds that a firm's productivity in a category improves when it imports in the same category, but only product expertise is accumulated, not the firm's ability. Chapter 2 examines the export market reallocation and the dynamics of export prices to the Czech Republic, Poland, Slovakia Republic, and Slovenia induced by their import tariff reduction in 2004. The empirical results show that import tariff reduction in these countries induces market reallocation towards the high-income countries and highly-priced products, suggesting the transition from low quality to high quality products. Moreover, this chapter finds that the transition pattern is heterogeneous across countries: in some countries, the market share was reallocated towards the middle-high income countries at the costs of the richest countries. Import tariff reduction significantly raised the price of exports to some countries. For example, export prices to Slovakia will rise by 46.5 percent if Slovakia completely removes its import tariff. The market organization is crucial for the effects of tariff reduction on prices. Chapter 3 studies whether state visits paid by Chinese political leaders promote trade between China and the host countries by analyzing China's trade flows with 184 countries between 1998 and 2014. This chapter uses a valid instrument to address endogeneity problem of state visits.The empirical results show that state visits don't increase trade between China and the host country immediately after the visits are made. The trade promotion effects come two years after the visits. Moreover, this chapter finds that the promotion effects are biased towards the industries and firms that have close political connections with the government, and that trade barriers such as quotas and licences offset the promotion effects of state visits.
- ItemOpen AccessEssays on International Trade and Energy Economics(2020-07-16) Tabari, Mokhtar; Whalley, Alexander; Roberts, Edward P. L.; Tombe, Trevor; Muehlenbachs, Lucija A.This dissertation includes three essays examining topics related to international trade and energy economics. I use state-of-the-art empirical methodologies to investigate the effects of trade and energy policies on firm performance and investments in new technologies. Chapter 1 utilizes modern productivity-estimation techniques to investigate the channels through which globalization affects productivity. While there exists compelling evidence that trade increases aggregate productivity through reallocation of resources towards more productive firms, less is known about the effect of trade on firm-level productivity and the channels generating it. I fill this gap by taking an in-depth examination of the channels affecting firm-level productivity in response to rising import competition from China. I take advantage of a rich panel of firms in India to estimate productivity for all firms' products. Matching Indian-firm data to the product-level trade data, I then estimate the causal effect of the surge in imports from China on (i) the productivity of firm's products, and (ii) the reallocation across products. I find that greater Chinese import competition increases the productivity of existing products. However, I find no reallocation across products in response to the surge in imports from China. Back-of-the-envelope calculations suggest productivity gains related to Chinese import competition account for 20-30 percent of aggregate productivity growth in India. These productivity gains have important policy implications because moving from low- to middle-income requires rising productivity, and my results suggest that greater import competition accelerates that process. These gains can eventually lift millions out of poverty. Chapter 2, which is based on joint work with Alexander Whalley and Greg C. Wright, examines the effects of intellectual property right policies in international markets. We study the cross-border spillovers of national intellectual policy decisions on high-tech firms and domestic consumers. Specifically, we examine how export/domestic sales, prices, and markups of high technology firms in Taiwan are affected by a policy-driven demand shock in the United States from US patent policy. We document three results. First, the loss of access to the US market due to patent infringement decreases export sales and export quantities. Second, the loss of access to the US market increases domestic sales and domestic quantities. Third, domestic prices and domestic markups decrease, but marginal costs, export prices, and export markups remain relatively stable. Our results provide evidence on the transmission of export shocks to the domestic economy which are consistent with the new trade models combining non-constant marginal costs with the product differentiation and economies of scale. Chapter 3, which is based on joint work with Blake Shaffer, looks at the role market rules, or changes in these rules, have on deployment of energy storage in electricity systems. This chapter provides a key contribution in this area of growing importance, as it is the first to provide well-identified empirical estimates of the responsiveness of storage investment to changes in market rules. A recent policy change in the United States required system operators to compensate providers of frequency regulation services based on speed and accuracy. This seemingly subtle change had a beneficial effect for fast-acting storage resources. Using a difference-in-differences method, exploiting the fact that the order covers a subset of U.S. electricity regions, we find a greater than 30 percent increase in the likelihood of investment on new projects used for frequency response in the covered regions. While technological barriers are often described as the reason for limited deployment of storage to-date, our results suggest that policy reforms to properly compensate storage resources for the services they perform can have a material effect on deployment.
- ItemOpen AccessEssays on Networks, Volatility, and Trade(2018-09-04) Tweedle, Jesse; Tombe, Trevor; Beaulieu, Eugene; Taylor, M. Scott; Magesan, Arvind; Fung, LorettaThis is a collection of essays on networks, volatility and trade, based on confidential micro- data on manufacturing, trade, and input-output networks in Canada. I have chosen methods and data to support or challenge arguments around these subjects, and aim to show how ownership, production, and trading networks affect firm characteristics, and how, in turn, those firm characteristics affect aggregate volatility. These essays represent my contribution to the study of networks, volatility and trade in Canada. I show that firm input-output networks matter most for the firm size distribution and aggregate volatility; that firm ownership matters for volatility; that firm size distributions aren’t always distributed like a power law; and that there are barriers to domestic trade.
- ItemOpen AccessImpact of Aging Population on Healthcare Financing Needs in Canada(2023-02-13) Jalil Pour Kivi, Soghra; Tombe, TrevorWith rapid aging of the population in Canada, healthcare policies need to evolve to ensure sustainability of a free and universal healthcare system in the country. As population ages, the need for more medical interventions and physician care results in an increase in cost of delivery in healthcare. While provinces and territories (P/T) are primarily responsible for financing and delivery of these services, the Federal Government plays a critical role in financing healthcare delivery through the Canada Health Transfer (CHT) fund. In this report, I use historical healthcare expenditure data and available projections for population growth to estimate the per capita healthcare costs for different P/T between 2022 and 2043. Results highlight that healthcare expenses in Canada are expected to rise significantly in coming years. I also show that the rate of growth and distribution of seniors demographics is not consistent between different regions in Canada, which means despite an overall increase in healthcare costs, the future funding needs to support the healthcare system will be unique for each region. Finally, I propose four recommendations based on the results with a focus on the role of Federal Government in financing healthcare system to meet P/T financing needs in coming years.
- ItemOpen AccessLabor Market Adjustments: Evidence From British Columbia's Carbon Tax(2020-10-15) Yip, Chi Man; Tombe, Trevor; Muehlenbachs, Lucija A.; Staubli, StefanChapter 1 uses individual-level data to estimate the labor market consequences of environmental policies. The focus on workers rather than industries as the unit of analysis allows me to investigate previously unobserved outcomes, such as (i) unemployment rates, labor force participation rates, and the natures of layoffs and new hires and (ii) the distributional effects of these policies, both of which are critical to understanding costs and their distributions associated with environmental policies. Exploiting the introduction of a revenue-neutral carbon tax in British Columbia (BC), I find that environmental taxes, though revenue-neutral, tax away jobs. Chapter 2 exploits BC's carbon tax to study how jobs and wages are cut. It uncovers the dynamics of unemployment and wage effects. While the unemployment effect arrives without lags but decays quickly, the wage effect comes with lags but grows gradually. Chapter 2 provides strong evidence to conclude that a complete understanding of unemployment and wage effects requires an explanation of employment flows---the inflow and outflow of employment. Chapter 2 bridges between the literature and the public---it explains why prior studies may find the labor market effects of environmental policies weak and explains why the public is so concerned with potential job and wage losses created by environmental policies. Chapter 2 provides new micro-evidence on labor market adjustments and calls for attention to the transitional labor market adjustments to environmental policies. Chapter 3 exploits an aggregate shock of BC's carbon tax to study how replacing full-time (FT) staffers with part-timers shapes a labor market. Chapter 3 uncovers important yet underexplored mechanisms of labor market adjustments through PT switches. With employers increasingly hiring part-timers, PT switches reduce labor hours through labor turnover. Due to a significant wage differential between FT and PT new hires, the average hiring wage is cut: PT switches explain approximately 20 percent of the hiring wage cut. Chapter 3 offers new perspectives on labor market adjustments, quantifies the extent to which the adjustments through PT switches, and calls for policies mitigating labor market underutilization.
- ItemOpen AccessModel Uncertainty in Foreign Direct Investment: Greenfield versus Mergers and Acquisitions(2017) Odebunmi, Iyanuoluwa; Beaulieu, Eugene; Whalley, Alexander; Tombe, TrevorForeign direct investment (FDI) is marked with model uncertainty due to different theories and conclusions as to what variables should be included in the model. Using two specifications; the global sample and developing countries, I utilize the Bayesian Model Averaging (BMA) technique to determine the robust variables. Since the FDI modes; Greenfield Investment (GFI) and Mergers \& Acquisitions (M\&A) have different impacts on the economy, the BMA method is used to tackle separately model uncertainty in the two modes. My findings show that some of the variables identified by previous literature as determinants of FDI are not robust. In examining the FDI modes, I show that they behave in different ways having only six determinants in common. This study provides a better understanding of the robust determinants of FDI and the different ways GFI and M\&A responds to policies.
- ItemOpen AccessOne Network to Rule Them All: Three Essays on Behaviors in Social Networks(2022-05) Eslami, Mojtaba; Tombe, Trevor; Rokne, Jon George; Oxoby, Robert; Sezer, Deniz; Kattan, Lina; Agarwal, NitinThis thesis is an integration of research contributions on social networks and economic behaviors. The central recurring theme is showing how network structures affect individuals’ decision-making using game-theoretic approaches. Social variables such as friendship ties, and individuals’ social positions affect others’ behaviors. These variables are used in an interdisciplinary setting drawing insights from fields such as economics, social psychology, computer science, and mathematics. My aim is to highlight the importance of the very structures of social networks whose characteristics influence individuals’ behaviors. It is hard to discern these characteristics but the social structures can be mined to elicit such structures as individuals actively interact with them. The connections among individuals force us to ponder the consequences of actions in a broader sense. Although the social network paradigm doesn’t allow singled-out strategies they provide a holistic overview of social problems in general. Social networks break the symmetry of interactions among individuals. They allow more realistic standpoints for investigating some puzzling behavioral phenomena. Network economics shows the roles of individuals are underestimated in many mainstream models. We are small, but our measure is definitely not zero. Though individuals may seem to only communicate within their local circles, their interactions reverberate far and beyond affecting distant unknown individuals. Local behaviors do not necessarily translate into intended aggregate results. This is how the network structure interacts with individuals in an indiscernible way. In the first of the three research contributions, with the help of a game defined in an open-source software ecosystem, I structurally modified the network topology in order to manipulate the flow of the peer pressure on equilibrium. The second contribution illustrates that behavioral phenomena, such as pluralistic ignorance and the friendship paradox, can be explained by the help of the network paradigm. I proposed an effective strategy to create a significant change by targeting only a few carefully selected individuals. The third contribution focuses on the behavioral aspect of communications when conducted in a social network. I explained why people don’t say what they truly believe and how they would be able to balance their extreme thoughts through conversations.
- ItemOpen AccessOptimal Taxation and Innovation in the Presence of Externalities(2018-05-16) Hosseini , Hossein; Tombe, Trevor; Muehlenbachs, Lucija A.; Boyce, John R.The title of my thesis is “Optimal Taxation and Innovation in the Presence of Externalities.” It explores the effects of externalities on optimal income taxation and innovation. On the one hand, governments’ income redistribution policies among households affect pollution since households are different in terms of how much they pollute. This affects the design of an optimal income tax schedule. On the other hand, externalities affect the bias of technological change over time and also how much sectors (or countries) innovate. Firstly, scarcity rents induce biased innovation in the natural resource sector over time, which has important implications for fossil fuels’ prices and production. Secondly, spillovers from innovative activities among sectors (or countries) affect how much they innovate and necessitate policies, such as patents, to overcome this market failure. The first chapter of my thesis is titled “Optimal Income Taxation in the Presence of Consumption Externalities”. This paper characterizes an optimal income tax and transfer system considering the effects of income redistribution on pollution. Low-income households pollute more per dollar of consumption than high-income households. Therefore, redistributing income towards low-income households can increase pollution. This paper modifies an optimal income taxation model and derives the optimal tax rates that maximize welfare while considering pollution. Income tax provides revenue for the government and results in welfare loss to those who pay taxes. This paper takes into account the fact that income tax also affects pollution through both redistributing income and changing the amount that people work. I derive the optimal income tax rates using the pollution intensities of U.S. households at different income levels. The results show that optimal marginal tax rates are lower and the optimal tax schedule is substantially less progressive compared to models that ignore pollution. This is important because the effect of the current U.S. income tax and transfers on pollution is not trivial. I find that, annually, the U.S. income tax and transfer system contributes roughly 6-9 percent to aggregate pollution of households. This paper further demonstrates that income taxes can complement other policies to efficiently reduce pollution. Market power and scarcity rents, as other kinds of externalities, can bias technological change in the natural resource sector. The second chapter of my thesis is titled “The Upstream Bias in Technological Change with Exhaustible Resources”. This paper focuses on the implications of the bias of technological change in the natural resource sector. In this paper, I collaborate with Dr. John Boyce, a Professor of Economics at the University of Calgary. The main stylized fact that motivates the paper is that for eighty minerals over the past century, exhaustible resource prices have been falling relative to incomes and exhaustible resource production has been rising. In contrast to Hotelling’s theory of exhaustible resources, long-term trends show falling resource prices and rising resource production. We explain this using a theory of an exhaustible resource economy where R&D is endogenously targeted either to the upstream exhaustible resource sector or to the downstream final good sector. An upstream bias in technological change explains the observed trends. This bias is attributed to a low relative upstream state of technology and low scarcity for exhaustible resources. The bias in R&D eventually switches to the downstream sector. Thereafter, exhaustible resource prices rise and exhaustible resource production falls. Per capita consumption grows and the mining share of labor falls all along the equilibrium. In addition to the bias of innovation over time, spillovers of innovative activities among sectors (or countries) provide a positive externality that results in too little innovation in a competitive market. To overcome this market failure and fully reward innovative efforts, many countries commonly use Intellectual Property Rights (IPRs), such as patenting and copyrights. The third chapter of my thesis explores the effects of IPRs on innovation and economic growth. The title of this chapter is “Intellectual Property Rights and Innovation in a North-South Model”. IPRs encourage incentives for innovators but they also have welfare costs by providing innovators with monopoly power for a specific time frame. IPRs might also adversely affect future innovation since they make current discoveries less accessible for potential innovators. In the third chapter of my thesis, I incorporate this adverse effect of IPRs on subsequent innovators into a North-South dynamic general equilibrium model to investigate the overall effect of tighter IPRs on economic growth and welfare. In the model, the North innovates and the South imitates and tighter IPRs not only reduce the South’s imitation rate, but they also lower labour productivity in the R&D sector in the North. The model’s results indicate that tighter IPRs hurt innovation in the long run. Moreover, in contrast to previous models, the short-run effect could also be negative. In addition, I decompose the welfare effects to four components: changes in (a) terms of trade (b) production composition (c) available products, and (d) intertemporal composition of consumption. The model’s results show that tighter IPRs may hurt both the North and the South on account of all these four welfare components, except for the terms of trade from which the North benefits and the South loses.
- ItemOpen AccessReaching a Better Fiscal Balance: Alternative Spending and Revenue Arrangements Between the Federal Government and the Provinces(2019-09-10) Vito, Jesus Cicero; Tombe, TrevorOver the years, Canada’s equalization program has frequently attracted attention and controversy. Pointing to significant differences in equalization payments received by provinces, several premiers have publicly expressed their dissatisfaction with the program and have proposed various modifications to the current formula. But while equalization amounts to almost $20 billion for the 2019-2020 fiscal year, it represents only a part of Canada’s fiscal landscape. There are numerous ways by which hundreds of billions in spending and revenue dollars flow between the federal government and the provinces. The diversity in spending needs and tax capacities across regions contributes to the uneven distribution of federal expenditures and revenues collected. Taking stock of the entire fiscal landscape, rather than focusing on a single component like equalization, provides the necessary context when considering changes to Canada’s fiscal regime. This Capstone examines alternative fiscal arrangements between the federal government and the provinces and measures the potential impacts of these arrangements on provincial budgets and on overall parity in the federation. Arrangements investigated include modifying the equalization program, shifting more income and consumption tax revenues from the federal government to provincial governments in exchange for lower federal transfers, and adjusting the allocation of federal transfers based on the notion that provinces with larger populations potentially benefit from economies of scale. If economies of scale exist, more populated provinces are able to provide the same level of public service at a lower cost and their governments will receive a lower federal transfer amount per person. This paper finds that modifications to equalization leads to greater parity but places tremendous burden on regions that have lower fiscal capacities and need equalization the most. [vi] Assigning a greater share of government revenues to the provinces in exchange for lower federal transfers results in more manageable impacts to provincial budgets as well as conveying greater fiscal accountability on provincial governments. However, regions that have lower tax capacities still face greater impacts relative to others. Incorporating potential economies of scale in the allocation of federal transfers strikes a balance of desirable outcomes: the impacts to regions most in need of transfers are minimized, provinces with larger populations still receive a larger share of transfers, and the federal government keeps a significant portion of its transfer programs and influence on ensuring provincial governments deliver the level of public service Canadians expect. Since federal spending obligations will be lower, there is an opportunity to lower the federal tax burden on Canadians or to shift a greater share of the revenue base to provincial governments and further enhance fiscal accountability.
- ItemOpen AccessThe Rise (And Fall?) of Inflation in Canada: A Detailed Analysis of Its Post-Pandemic Experience(2022-09-10) Tombe, Trevor; Chen, YuCanada's inflation rate rose from 3.1 percent in June 2021 to 8.1 percent one year later. What's behind this rapid surge? And will higher interest rates ease the pressure? We explore these questions with a detailed analysis of recently rising inflation. We find a few items dominate, especially energy and items sensitive to oil prices. To separate demand- from supply-driven inflation, we use detailed household expenditure data and find rising inflation is primarily the latter. We also find items with normally transitory price changes or those highly sensitive to interest rates also account for nearly all of inflation's rise. While much uncertainty remains, time and tighter monetary policy may likely help decrease inflation.
- ItemOpen AccessThe Price of the Puck: Recommendations for Public Financing National Hockey League Arenas in North America(2019-08-31) Puppa, Isabelle; Tombe, TrevorPublic subsidization of private infrastructure has been a controversial policy. This topic becomes even more contentious in the area of professional sports stadiums and arenas. Governments use subsidies to stimulate production and increase employment. Yet, some argue that a $71 billion industry should not need assistance. Others argue that these subsidies fulfill their purpose, ensuring the existence of sports arenas. Every few years, a National Hockey League (NHL) team considers plans for a new arena. The median age of current arenas is 21.5 years, with most tenancy leases lasting 30 years. Recently, governments have split the cost of arenas with team owners. Historically, most arenas had been publicly owned and funded. Much literature exists about economic benefits of professional sport investments. From an economic perspective, funding a professional sports arena does not yield a positive return on investment. Economic benefits are inconsequential when compared to the initial investment capital. Also, funding an arena provides an opportunity cost. The opportunity cost becomes clear when cities lack other infrastructure or public supports. Controversy arises when a city chooses to invest in a sports arena rather than the best alternative use of funds. Nonetheless, sports arenas and teams provide non-economic benefits. The value of city pride and prestige from hosting a professional sports team is subjective but important to consider. Governments have tried to decrease public funding towards sports arenas. A key attempt occurred in the United States in 1986. In 1986, the federal government limited how much a private entity could contribute to pay off tax-exempt municipal bonds. The government assumed that cities would stop providing bonds if teams could not help pay off the debt. This assumption proved false. Cities continued to provide bonds even though it meant paying off a larger amount. Canadian governments also limit sports financing. Traditionally, the federal government only supports NHL arenas if they also serve a community event like the Olympics. For other arenas, funding must come from the provincial and municipal levels. More recently, Canadian governments have provided some NHL teams with operating subsidies. In addition, some cities and provinces provide infrastructure improvements and community revitalization levies. Assessing these financing trends involved researching every team in the NHL. No literature exists that examines the funding structure and features of all teams. This paper adds to the discussion by analyzing the purpose and value of public financing NHL arenas. This project also discusses fiscal policy and its impact on a team’s existence. Public subsidization of sports arenas is an important topic for many localities. Therefore, it is critical to have one source of comparable information. I first examined leases between governments and teams and construction records. This research helped me identify the most popular types of funding used in each country. I separated the countries because they differ in population size, currency rates, and legislation. Another comparison I made is privately-owned arenas versus publicly owned arenas. Most arenas are publicly owned. Generally, smaller cities received the highest percentage of public contribution towards capital costs. I discuss the reason behind this and pros and cons of publicly owning an arena. Examples in the United States and Canada are present throughout the paper. Analyzing the purpose of arena construction revealed a few trends. In the United States, the highest public contribution went to arenas to prevent team relocation. In Canada, most public funding went to arenas that replaced older facilities. In addition, I found that public financing arenas is more common in the United States than in Canada. Canada makes up a large number of total hockey fans and league revenues. However, lower tax rates, stronger currency value, and greater public support make the United States a more competitive environment for NHL teams. Still, the United States has had its fair share of unsuccessful NHL franchise teams. Later in this paper, I examine nine NHL teams that no longer exist today. After a city has a team and arena, it must ensure proper team management and high team performance. Otherwise, revenues will fall and the NHL can move the team out of the city. I conclude this paper with four options for policy makers in the United States and Canada. First, policy makers should consider city market size when deciding how to structure fiscal arrangements with the NHL. Although city size does not perfectly correlate with contribution, smaller cities generally need more public assistance. Second, policy makers should use present value when discussing public finances. Many cities in the United States grant arenas property tax exemptions. The value of a property tax exemption is not stated in construction costs. However, its value culminates to millions of dollars per year. Economic impact assessments must account for all forms of public contribution. Third, policy makers must track and systematically report its financing data. Research in this paper involved many sources of information. To learn from best practices, cities should track its contributions and outcomes. Finally, policy makers must consider if existing policies have unintended consequences. As I discuss in this paper, some federal policies have had unintended consequences on city decisions and are ineffective at achieving their goals.
- ItemOpen AccessThree Essays in Economic Analyses of Firms' Performance(2022-06-16) Wang, Longzhou; Tombe, Trevor; Muehlenbachs, Lucija; Staubli, StefanMany developing countries, such as China and India, have undergone dramatic changes during the past few decades. Two topics have gained widespread attention and discussion among these changes, namely environmental protection and transportation infrastructure construction. Although a large amount of literature discusses the impacts of environmental protection and transportation infrastructure on various economic outcomes, their findings are still controversial. My thesis contributes to this literature by analyzing the effects of environmental regulation and expressway construction in China on various economic outcomes using various moderate empirical methods, big datasets, and multiple software programs. Specifically, this thesis is a collection of three essays. The first two chapters theoretically and empirically study the effects of environmental regulation on firms' international trade, product quality, productivity, markups, credit constraints, profitability, and competitiveness. The last chapter studies the effects of transportation infrastructure on exports, productivity, markups, market competition, and misallocation. Chapter 1 explores the effects of two wastewater regulations on export product quality using disaggregated level data from China. Applying a difference-in-differences approach, I find that the first regulation improves product quality by 4.8%, while the second regulation with more rigorous standards declines product quality by 9.3%. However, decomposing analysis shows that both the intensive and extensive marginal effects of the two regulations almost equally improve the product quality at the firm-year level. The positive effect of the first regulation can be attributed to advanced technology adoption, innovation enhancement, and changes in the composition of firms and products. The negative effect of the second regulation is driven by firms' exit. Although the more rigorous regulation declines firms' competitiveness, the first regulation improves firms' competitiveness despite rising production costs and declining labor demand. Credit constraints have an essential impact on firms' performance, which might explain the controversial results of the effects of environmental regulation on firms' performance, especially for developing countries with the underdevelopment of financial markets. Chapter 2 develops a new dynamic general equilibrium model studying how environmental regulation affects firms' performance by considering their credit constraints. The model predicts that stricter regulation reduces labor demand and production due to the increases in firms' production costs. However, regulation increases firms' sales revenue, profits, and productivity through a selection effect. Moreover, most of these effects decrease with firms' credit constraints. These predictions are empirically tested by exploiting a quasi-natural experiment on firms in China's textile printing and dyeing industry. In addition to the growing pollution problem in developing countries, the construction of infrastructure has also undergone dramatic changes over the past few decades, which could significantly impact firms' performances. Chapter 3 identifies how proximity to new transportation infrastructure affects exports by combining highly disaggregated data on firm exports with novel datasets on firm geolocation and the Chinese national expressway expansion from 2000 - 2013. I find that accessing the expressway network increases export amounts by 7.1%, decreases export prices by 5.2%, and has an insignificant impact on export revenues. Exploiting the Ming Dynasty Courier Road (1587) as an instrument for the expressway network suggests that the expressway network’s design is exogenous. Decomposing the effect on export amounts across firms reveals that they are driven by incumbent firms, and not entry or exit dynamics. There are several potential mechanisms driving these results, including rising firm productivity, greater market concentration, higher markups, and decreases in resource misallocation. Overall, access to expressways increases firms' competitiveness by improving firm and market efficiency. This thesis provides rich analyses of the effects of different policies on multiple economic outcomes, which deepen the understanding of the economic impacts of environmental regulation and transportation infrastructure development and has reference significance for policymakers to improve policy effectiveness.
- ItemOpen AccessThree Essays in Economic Growth and Development(2017) Alam, Mohammad; Tombe, Trevor; Roberts, Joanne; Beaulieu, Eugene; Boyce, JohnIn this thesis, I ask four independent but interrelated questions regarding the sources of differences in economic growth and development across countries. Resource reallocation is a key factor in answering all four questions. My first two questions focus on resource reallocation, but in the context of recessions. First, how does capital misallocation move over business cycles? Secondly, what factors account for capital misallocation and its cyclicality? I provide empirical evidence that capital misallocation is countercyclical (i.e. higher during recessions and lower during booms). As for the factors that account for capital misallocation and its cyclicality, I find that net worth explains approximately seven percent of capital misallocation and around 20 percent of its cyclicality. My third question asks whether increased exposure to foreign competition generates more productivity gains from reallocating inputs in economies with a relatively large proportion of young firms. I find this to be the case. Firm age may matter for productivity gains from reallocating inputs for two reasons: 1) young firms are more likely to fail, and 2) those young firms that survive can possibly grow more quickly than older firms, perhaps because it is easier and cheaper for young firms to reallocate inputs. The fourth question asks: Do firms grow at a slower rate in poorer countries than in richer countries? The answer to this question has already been established by Hsieh and Klenow (2014) in their study of three countries. Using a broader collection of countries, I generalize their results, finding that firms do indeed grow at a slower rate in poorer countries than in richer countries.
- ItemOpen AccessThree Essays on Electricity Demand(2018-07-10) Shaffer, Blake Chai; Tombe, Trevor; Muehlenbachs, Lucija; McKenzie, Kenneth J.This dissertation examines how prices, policies and climate change affect electricity demand today and in the future. As an essential yet intangible commodity, electricity presents as a fascinating subject in which to study consumer behaviour. In a series of three essays, I employ an array of empirical techniques to identify the effect of different pricing schemes, policies such as daylight saving time, and the possibility of rising temperatures due to climate change have on demand. In each case, my research digs deeper than identifying average effects: I uncover underlying heterogeneous consumer behaviour that includes price misperception; rationalize differences in regional responses to DST based on differences in (natural) sun times and (societal) waking hours; and consider the effect climate change will have on the all-important intraday shape of demand for difficult-to-store electricity. Chapter 1 considers how consumers respond to prices. Specifically, I examine how residential electricity consumers in British Columbia respond to the introduction of a two-tier tariff, whereby the price of an additional unit of electricity rises when consumption goes beyond a threshold. I exploit a near-ideal natural experiment, where the provincial utility, BC Hydro, changed to a two-tier pricing scheme while the City of New Westminster, which sets its own rates, did not. Using household-level billing data, I find a significant reduction in demand for BC Hydro households near the threshold of the two-tier rate. This suggests a response to marginal prices, in contrast to findings from recent literature that found electricity consumers respond to average, not marginal prices. However, a deeper dive into heterogeneous responses across households leads to a different conclusion: consumers simply misunderstanding nonlinear prices. This result has implications for policy makers trying to achieve conservation goals in better understanding how consumer respond when faced with complex prices. Chapter 2 revisits the question of whether daylight saving time (DST) policy saves electricity. While the original premise of DST was energy savings, recent research has cast doubt on its efficacy of doing so. Using hourly electricity demand data across all the Canadian provinces, I estimate the causal effect of the DST transition on electricity consumption. I find the results differ across provinces in a predictable manner: in provinces with early sunrises and/or late waking hours, DST saves electricity. Whereas, in provinces with late sunrises and early waking hours, the DST transition causes otherwise sunlit woke morning hours to be darkened, and thus increases electricity use. The key contribution of this study is to provide an empirically-tested intuitive explanation as to the heterogeneous effect of DST on electricity use. The implication for policy makers considering whether to adopt, keep or abolish the policy is that location matters. Chapter 3 examines how climate change will affect both the level and timing of future electricity demand across Canada. Using an original dataset of hourly electricity demand across all Canadian provinces combined with household-level microdata on air conditioner ownership, we estimate temperature responsiveness including both the direct effect of temperature on demand for cooling services, as well as the indirect effect of increasing the stock of temperature-sensitive durables, such as air conditioners. We find only a small increase in total demand by end-century, although the result differs across provinces. The small aggregate result reflects the mitigating effect of rising temperature in a cold country such as Canada, whereby increases in electricity demand for air conditioning as summer temperatures rise is largely offset by reduced winter heating demand. Although we project limited change in overall electricity demand, we do project changes in the timing of demand, both seasonally and diurnally. In particular, we find seasonal peaks shift from winter to summer in most regions, as well as a large increase in intraday ramping requirements---the difference between minimum and maximum demand within a day---suggesting electricity systems of the future will place an even greater value on storage and flexibility. This result from the demand side adds to pressure already coming from the supply side, where more variable energy renewables are increasing the need for storage and flexibility in electricity grids.
- ItemOpen AccessThree Essays on Energy Economics(2018-06-25) Zheng, Xiaoli; Boyce, John Russell; Muehlenbachs, Lucija A.; Walls, W. D.; Tombe, Trevor; Mann, JanelleThis dissertation investigates the effect of a technology innovation, hydraulic fracturing, on the North American energy market and social welfare from both theoretical and empirical perspectives. Chapter 1 provides a theoretical framework to explain why the optimal path of oil and gas production by hydraulic fracturing can be different from conventional production. I argued that hydraulic fracturing has substantially reduced production uncertainty since the shale boom. I model production uncertainty as a random shock that continuously shifts realized productions from proved reserves. With this new feature incorporated into a standard extraction model, I conclude that the reduced production uncertainty caused by hydraulic fracturing affects the optimal path of expected production through two channels. First, the expected production is tilted from the future towards the present as producers become less patient. Second, it limits the increases in marginal costs in response to production shocks. Both of these two channels would accelerate expected extractions and hence proved reserves would deplete more rapidly by hydraulic fracturing. Chapter 2 examines the impact of the recent boom in U.S. oil production, caused by hydraulic fracturing, on the downstream U.S. petroleum refining industry. By using a panel dataset of 16 U.S. independent refinery firms from 2005 to 2015, the empirical evidence suggests that the shale boom caused by hydraulic fracturing was associated with an increased refinery profitability in U.S. Gulf Coast region, but leaving few benefits for U.S. gasoline and diesel consumers. Chapter 3 explores the effect of shale boom on three important measures of the natural gas market: the rig count of active drilling rigs, production, and storage. By using a large panel dataset including 48 U.S. states and 10 Canadian provinces, I demonstrate that the expansion of hydraulic fracturing has resulted in a significant change in the natural gas spot and storage markets. In the spot market, production from existing wells has become more elastic to spot prices with the expansion of hydraulic fracturing. Moreover, with drilling also being more elastic to future prices and more productive with the expansion of hydraulic fracturing, the production from newly established wells has become more elastic to price. Simultaneously, in the storage market, I document adjusting natural gas storage has become more flexible with the expansion of hydraulic fracturing. Since storage is primarily used to meet the demand shocks from temperature variations, hydraulic fracturing has significantly decreased the impact of temperature shocks. As a result, consumers can benefit from shale boom by avoiding paying abruptly raised prices for natural gas in the short run.