Essays on Labor Market Frictions, Technological Change and Macroeconomic Fluctuations

The dissertation consists of an introductory chapter and three essays that apply search-matching theory to study the interaction of labor market frictions, technological change and macroeconomic fluctuations. The first essay studies the impact of capital-embodied growth on equilibrium unemployment by extending a vintage capital/search model to incorporate vintage human capital. In addition to the capital obsolescence (or creative destruction) effect that tends to raise unemployment, vintage human capital introduces a skill obsolescence effect of faster growth that has the opposite sign. Faster skill obsolescence reduces the value of unemployment, hence wages and leads to more job creation and less job destruction, unambiguously reducing unemployment. The second essay studies the effect of skill biased technological change on skill mismatch and the allocation of workers and firms in the labor market. By allowing workers to invest in education, we extend a matching model with two-sided heterogeneity to incorporate an endogenous distribution of high and low skill workers. We consider various possibilities for the cost of acquiring skills and show that while unemployment increases in most scenarios, the effect on the distribution of vacancy and worker types varies according to the structure of skill costs. When the model is extended to incorporate endogenous labor market participation, we show that the unemployment rate becomes less informative of the state of the labor market as the participation margin absorbs employment effects. The third essay studies the effects of labor taxes on equilibrium labor market outcomes and macroeconomic dynamics in a New Keynesian model with matching frictions. Three policy instruments are considered: a marginal tax and a tax subsidy to produce tax progression schemes, and a replacement ratio to account for variability in outside options. In equilibrium, the marginal tax rate and replacement ratio dampen economic activity whereas tax subsidies boost the economy. The marginal tax rate and replacement ratio amplify shock responses whereas employment subsidies weaken them. The tax instruments affect the degree to which the wage absorbs shocks. We show that increasing tax progression when taxation is initially progressive is harmful for steady state employment and output, and amplifies the sensitivity of macroeconomic variables to shocks. When taxation is initially proportional, increasing progression is beneficial for output and employment and dampens shock responses.

The Macroeconomic Effects of Fiscal Policy in a Small Open Economy under a Flexible Exchange Rate Regime

This licentiate's thesis analyzes the macroeconomic effects of fiscal policy in a small open economy under a flexible exchange rate regime, assuming that the government spends exclusively on domestically produced goods. The motivation for this research comes from the observation that the literature on the new open economy macroeconomics (NOEM) has focused almost exclusively on two-country global models and the analyses of the effects of fiscal policy on small economies are almost completely ignored. This thesis aims at filling in the gap in the NOEM literature and illustrates how the macroeconomic effects of fiscal policy in a small open economy depend on the specification of preferences. The research method is to present two theoretical model that are extensions to the model contained in the Appendix to Obstfeld and Rogoff (1995). The first model analyzes the macroeconomic effects of fiscal policy, making use of a model that exploits the idea of modelling private and government consumption as substitutes in private utility. The model offers intuitive predictions on how the effects of fiscal policy depend on the marginal rate of substitution between private and government consumption. The findings illustrate that the higher the substitutability between private and government consumption, (i) the bigger is the crowding out effect on private consumption (ii) and the smaller is the positive effect on output. The welfare analysis shows that the less fiscal policy decreases welfare the higher is the marginal rate of substitution between private and government consumption. The second model of this thesis studies how the macroeconomic effects of fiscal policy depend on the elasticity of substitution between traded and nontraded goods. This model reveals that this elasticity a key variable to explain the exchange rate, current account and output response to a permanent rise in government spending. Finally, the model demonstrates that temporary changes in government spending are an effective stabilization tool when used wisely and timely in response to undesired fluctuations in output. Undesired fluctuations in output can be perfectly offset by an opposite change in government spending without causing any side-effects.

Dispersal and related life history traits in the Glanville fritillary butterfly

Most studies of life history evolution are based on the assumption that species exist at equilibrium and spatially distinct separated populations. In reality, this is rarely the case, as populations are often spatially structured with ephemeral local populations. Therefore, the characteristics of metapopulations should be considered while studying factors affecting life history evolution. Theoretical studies have examined spatial processes shaping the evolution of life history traits to some extent, but there is little empirical data and evidence to investigate model predictions. In my thesis I have tried to bridge the gap between theoretical and empirical studies by using the well-known Glanville fritillary (Melitaea cinxia) metapopulation as a model system. The long-term persistence of classic metapopulations requires sufficient dispersal to establish new local populations to compensate for local extinctions. Previous studies on the Glanville fritillary have shown that females establishing new populations are not a random sample from the metapopulation, but they are in fact more dispersive than females in old populations. Many other life-history traits, such as body size, fecundity and lifespan, may be related to dispersal rate. Therefore, I examined a range of correlated traits for their evolutionary and ecological consequences. I was particularly interested in how the traits vary under natural environmental conditions, hence all studies were conducted in a large (32 x 26 m) outdoor population cage built upon a natural habitat patch. Individuals for the experiments were sampled from newly-established and old populations within a large metapopulation. Results show that females originating from newly-established populations had higher within-habitat patch mobility than females from old populations. I showed that dispersal rate is heritable and that flight activity is related to variation in a gene encoding the glycolytic enzyme phosphoglucose isomerase. Both among-individual and among-population variation in dispersal are correlated with the reproductive performance of females, though I found no evidence for a trade-off between dispersal and fecundity in terms of lifetime egg production or clutch size. Instead, the results suggest that highly dispersive females from newly-established populations have a shorter lifespan than females from old populations, and that dispersive females may pay a cost in terms of reduced lifetime reproductive success due to increased time spent outside habitat patches. In summary, the results of this thesis show that genotype-dependent dispersal rate correlates with other life history traits in the Glanville fritillary, and that the rapid turnover of local populations (extinctions and re-colonisations) is likely to be the mechanism that maintains phenotypic variation in many life history traits at the metapopulation level.

Flight metabolic rate in the Glanville fritillary butterfly

Dispersal is a highly important life history trait. In fragmented landscapes the long-term persistence of populations depends on dispersal. Evolution of dispersal is affected by costs and benefits and these may differ between different landscapes. This results in differences in the strength and direction of natural selection on dispersal in fragmented landscapes. Dispersal has been shown to be a nonrandom process that is associated with traits such as flight ability in insects. This thesis examines genetic and physiological traits affecting dispersal in the Glanville fritillary butterfly (Melitaea cinxia). Flight metabolic rate is a repeatable trait representing flight ability. Unlike in many vertebrates, resting metabolic rate cannot be used as a surrogate of maximum metabolic rate as no strong correlation between the two was found in the Glanville fritillary. Resting and flight metabolic rate are affected by environmental variables, most notably temperature. However, only flight metabolic rate has a strong genetic component. Molecular variation in the much-studied candidate locus phosphoglucose isomerase (Pgi), which encodes the glycolytic enzyme PGI, has an effect on carbohydrate metabolism in flight. This effect is temperature dependent: in low to moderate temperatures individuals with the heterozygous genotype at the single nucleotide polymorphism (SNP) AA111 have higher flight metabolic rate than the common homozygous genotype. At high temperatures the situation is reversed. This finding suggests that variation in enzyme properties is indeed translated to organismal performance. High-resolution data on individual female Glanville fritillaries moving freely in the field were recorded using harmonic radar. There was a strong positive correlation between flight metabolic rate and dispersal rate. Flight metabolic rate explained one third of the observed variation in the one-hour movement distance. A fine-scaled analysis of mobility showed that mobility peaked at intermediate ambient temperatures but the two common Pgi genotypes differed in their reaction norms to temperature. As with flight metabolic rate, heterozygotes at SNP AA111 were the most active genotype in low to moderate temperatures. The results show that molecular variation is associated with variation in dispersal rate through the link of flight physiology under the influence of environmental conditions. The evolutionary pressures for dispersal differ between males and females. The effect of flight metabolic rate on dispersal was examined in both sexes in field and laboratory conditions. The relationship between flight metabolic rate and dispersal rate in the field and flight duration in the laboratory were found to differ between the two sexes. In females the relationship was positive, but in males the longest distances and flight durations were recorded for individuals with low flight metabolic rate. These findings may reflect male investment in mate locating. Instead of dispersing, males with high flight metabolic rate may establish territories and follow a perching strategy when locating females and hence move less on the landscape level. Males with low metabolic rate may be forced to disperse due to low competitive success or may show adaptations to an alternative strategy: patrolling. In the light of life history trade-offs and the rate of living theory having high metabolic rate may carry a cost in the form of shortened lifespan. Experiments relating flight metabolic rate to longevity showed a clear correlation in the opposite direction: high flight metabolic rate was associated with long lifespan. This suggests that individuals with high metabolic rate do not pay an extra physiological cost for their high flight capacity, rather there are positive correlations between different measures of fitness. These results highlight the importance of condition.

Mutations as molecular tools : The metabolic-rate dependent molecular clock and DNA barcoding of allied species

Mutation and recombination are the fundamental processes leading to genetic variation in natural populations. This variation forms the raw material for evolution through natural selection and drift. Therefore, studying mutation rates may reveal information about evolutionary histories as well as phylogenetic interrelationships of organisms. In this thesis two molecular tools, DNA barcoding and the molecular clock were examined. In the first part, the efficiency of mutations to delineate closely related species was tested and the implications for conservation practices were assessed. The second part investigated the proposition that a constant mutation rate exists within invertebrates, in form of a metabolic-rate dependent molecular clock, which can be applied to accurately date speciation events. DNA barcoding aspires to be an efficient technique to not only distinguish between species but also reveal population-level variation solely relying on mutations found on a short stretch of a single gene. In this thesis barcoding was applied to discriminate between Hylochares populations from Russian Karelia and new Hylochares findings from the greater Helsinki region in Finland. Although barcoding failed to delineate the two reproductively isolated groups, their distinct morphological features and differing life-history traits led to their classification as two closely related, although separate species. The lack of genetic differentiation appears to be due to a recent divergence event not yet reflected in the beetles molecular make-up. Thus, the Russian Hylochares was described as a new species. The Finnish species, previously considered as locally extinct, was recognized as endangered. Even if, due to their identical genetic make-up, the populations had been regarded as conspecific, conservation strategies based on prior knowledge from Russia would not have guaranteed the survival of the Finnish beetle. Therefore, new conservation actions based on detailed studies of the biology and life-history of the Finnish Hylochares were conducted to protect this endemic rarity in Finland. The idea behind the strict molecular clock is that mutation rates are constant over evolutionary time and may thus be used to infer species divergence dates. However, one of the most recent theories argues that a strict clock does not tick per unit of time but that it has a constant substitution rate per unit of mass-specific metabolic energy. Therefore, according to this hypothesis, molecular clocks have to be recalibrated taking body size and temperature into account. This thesis tested the temperature effect on mutation rates in equally sized invertebrates. For the first dataset (family Eucnemidae, Coleoptera) the phylogenetic interrelationships and evolutionary history of the genus Arrhipis had to be inferred before the influence of temperature on substitution rates could be studied. Further, a second, larger invertebrate dataset (family Syrphidae, Diptera) was employed. Several methodological approaches, a number of genes and multiple molecular clock models revealed that there was no consistent relationship between temperature and mutation rate for the taxa under study. Thus, the body size effect, observed in vertebrates but controversial for invertebrates, rather than temperature may be the underlying driving force behind the metabolic-rate dependent molecular clock. Therefore, the metabolic-rate dependent molecular clock does not hold for the here studied invertebrate groups. This thesis emphasizes that molecular techniques relying on mutation rates have to be applied with caution. Whereas they may work satisfactorily under certain conditions for specific taxa, they may fail for others. The molecular clock as well as DNA barcoding should incorporate all the information and data available to obtain comprehensive estimations of the existing biodiversity and its evolutionary history.

Monte Carlo Simulations of Molecular Clusters in Nucleation

A better understanding of the limiting step in a first order phase transition, the nucleation process, is of major importance to a variety of scientific fields ranging from atmospheric sciences to nanotechnology and even to cosmology. This is due to the fact that in most phase transitions the new phase is separated from the mother phase by a free energy barrier. This barrier is crossed in a process called nucleation. Nowadays it is considered that a significant fraction of all atmospheric particles is produced by vapor-to liquid nucleation. In atmospheric sciences, as well as in other scientific fields, the theoretical treatment of nucleation is mostly based on a theory known as the Classical Nucleation Theory. However, the Classical Nucleation Theory is known to have only a limited success in predicting the rate at which vapor-to-liquid nucleation takes place at given conditions. This thesis studies the unary homogeneous vapor-to-liquid nucleation from a statistical mechanics viewpoint. We apply Monte Carlo simulations of molecular clusters to calculate the free energy barrier separating the vapor and liquid phases and compare our results against the laboratory measurements and Classical Nucleation Theory predictions. According to our results, the work of adding a monomer to a cluster in equilibrium vapour is accurately described by the liquid drop model applied by the Classical Nucleation Theory, once the clusters are larger than some threshold size. The threshold cluster sizes contain only a few or some tens of molecules depending on the interaction potential and temperature. However, the error made in modeling the smallest of clusters as liquid drops results in an erroneous absolute value for the cluster work of formation throughout the size range, as predicted by the McGraw-Laaksonen scaling law. By calculating correction factors to Classical Nucleation Theory predictions for the nucleation barriers of argon and water, we show that the corrected predictions produce nucleation rates that are in good comparison with experiments. For the smallest clusters, the deviation between the simulation results and the liquid drop values are accurately modelled by the low order virial coefficients at modest temperatures and vapour densities, or in other words, in the validity range of the non-interacting cluster theory by Frenkel, Band and Bilj. Our results do not indicate a need for a size dependent replacement free energy correction. The results also indicate that Classical Nucleation Theory predicts the size of the critical cluster correctly. We also presents a new method for the calculation of the equilibrium vapour density, surface tension size dependence and planar surface tension directly from cluster simulations. We also show how the size dependence of the cluster surface tension in equimolar surface is a function of virial coefficients, a result confirmed by our cluster simulations.

Monte Carlo simulations of molecular clusters in nucleation

A better understanding of the limiting step in a first order phase transition, the nucleation process, is of major importance to a variety of scientific fields ranging from atmospheric sciences to nanotechnology and even to cosmology. This is due to the fact that in most phase transitions the new phase is separated from the mother phase by a free energy barrier. This barrier is crossed in a process called nucleation. Nowadays it is considered that a significant fraction of all atmospheric particles is produced by vapor-to liquid nucleation. In atmospheric sciences, as well as in other scientific fields, the theoretical treatment of nucleation is mostly based on a theory known as the Classical Nucleation Theory. However, the Classical Nucleation Theory is known to have only a limited success in predicting the rate at which vapor-to-liquid nucleation takes place at given conditions. This thesis studies the unary homogeneous vapor-to-liquid nucleation from a statistical mechanics viewpoint. We apply Monte Carlo simulations of molecular clusters to calculate the free energy barrier separating the vapor and liquid phases and compare our results against the laboratory measurements and Classical Nucleation Theory predictions. According to our results, the work of adding a monomer to a cluster in equilibrium vapour is accurately described by the liquid drop model applied by the Classical Nucleation Theory, once the clusters are larger than some threshold size. The threshold cluster sizes contain only a few or some tens of molecules depending on the interaction potential and temperature. However, the error made in modeling the smallest of clusters as liquid drops results in an erroneous absolute value for the cluster work of formation throughout the size range, as predicted by the McGraw-Laaksonen scaling law. By calculating correction factors to Classical Nucleation Theory predictions for the nucleation barriers of argon and water, we show that the corrected predictions produce nucleation rates that are in good comparison with experiments. For the smallest clusters, the deviation between the simulation results and the liquid drop values are accurately modelled by the low order virial coefficients at modest temperatures and vapour densities, or in other words, in the validity range of the non-interacting cluster theory by Frenkel, Band and Bilj. Our results do not indicate a need for a size dependent replacement free energy correction. The results also indicate that Classical Nucleation Theory predicts the size of the critical cluster correctly. We also presents a new method for the calculation of the equilibrium vapour density, surface tension size dependence and planar surface tension directly from cluster simulations. We also show how the size dependence of the cluster surface tension in equimolar surface is a function of virial coefficients, a result confirmed by our cluster simulations.

Molecular Dynamics Simulations of Homogeneous Nucleation

Nucleation is the first step in a phase transition where small nuclei of the new phase start appearing in the metastable old phase, such as the appearance of small liquid clusters in a supersaturated vapor. Nucleation is important in various industrial and natural processes, including atmospheric new particle formation: between 20 % to 80 % of atmospheric particle concentration is due to nucleation. These atmospheric aerosol particles have a significant effect both on climate and human health. Different simulation methods are often applied when studying things that are difficult or even impossible to measure, or when trying to distinguish between the merits of various theoretical approaches. Such simulation methods include, among others, molecular dynamics and Monte Carlo simulations. In this work molecular dynamics simulations of the homogeneous nucleation of Lennard-Jones argon have been performed. Homogeneous means that the nucleation does not occur on a pre-existing surface. The simulations include runs where the starting configuration is a supersaturated vapor and the nucleation event is observed during the simulation (direct simulations), as well as simulations of a cluster in equilibrium with a surrounding vapor (indirect simulations). The latter type are a necessity when the conditions prevent the occurrence of a nucleation event in a reasonable timeframe in the direct simulations. The effect of various temperature control schemes on the nucleation rate (the rate of appearance of clusters that are equally able to grow to macroscopic sizes and to evaporate) was studied and found to be relatively small. The method to extract the nucleation rate was also found to be of minor importance. The cluster sizes from direct and indirect simulations were used in conjunction with the nucleation theorem to calculate formation free energies for the clusters in the indirect simulations. The results agreed with density functional theory, but were higher than values from Monte Carlo simulations. The formation energies were also used to calculate surface tension for the clusters. The sizes of the clusters in the direct and indirect simulations were compared, showing that the direct simulation clusters have more atoms between the liquid-like core of the cluster and the surrounding vapor. Finally, the performance of various nucleation theories in predicting simulated nucleation rates was investigated, and the results among other things highlighted once again the inadequacy of the classical nucleation theory that is commonly employed in nucleation studies.

Association between molecular variation in the phosphoglucose isomerase (Pgi) locus and migration propensity in the Glanville fritillary butterfly

Habitat fragmentation produces patches of suitable habitat surrounded by unfavourable matrix habitat. A species may persist in such a fragmented landscape in an equilibrium between the extinctions and recolonizations of local populations, thus forming a metapopulation. Migration between local populations is necessary for the long-term persistence of a metapopulation. The Glanville fritillary butterfly (Melitaea cinxia) forms a metapopulation in the Åland islands in Finland. There is migration between the populations, the extent of which is affected by several environmental factors and variation in the phenotype of individual butterflies. Different allelic forms of the glycolytic enzyme phosphoglucose isomerase (Pgi) has been identified as a possible genetic factor influencing flight performance and migration rate in this species. The frequency of a certain Pgi allele, Pgi-f, follows the same pattern in relation to population age and connectivity as migration propensity. Furthermore, variation in flight metabolic performance, which is likely to affect migration propensity, has been linked to genetic variation in Pgi or a closely linked locus. The aim of this study was to investigate the association between Pgi genotype and the migration propensity in the Glanville fritillary both at the individual and population levels using a statistical modelling approach. A mark-release-recapture (MRR) study was conducted in a habitat patch network of M. cinxia in Åland to collect data on the movements of individual butterflies. Larval samples from the study area were also collected for population level examinations. Each butterfly and larva was genotyped at the Pgi locus. The MRR data was parameterised with two mathematical models of migration: the Virtual Migration Model (VM) and the spatially explicit diffusion model. VM model predicted and observed numbers of emigrants from populations with high and low frequencies of Pgi-f were compared. Posterior predictive data sets were simulated based on the parameters of the diffusion model. Lack-of-fit of observed values to the model predicted values of several descriptors of movements were detected, and the effect of Pgi genotype on the deviations was assessed by randomizations including the genotype information. This study revealed a possible difference in the effect of Pgi genotype on migration propensity between the two sexes in the Glanville fritillary. The females with and males without the Pgi-f allele moved more between habitat patches, which is probably related to differences in the function of flight in the two sexes. Females may use their high flight capacity to migrate between habitat patches to find suitable oviposition sites, whereas males may use it to acquire mates by keeping a territory and fighting off other intruding males, possibly causing them to emigrate. The results were consistent across different movement descriptors and at the individual and population levels. The effect of Pgi is likely to be dependent on the structure of the landscape and the prevailing environmental conditions.

Rate Control State-of-the-art Survey

The majority of Internet traffic use Transmission Control Protocol (TCP) as the transport level protocol. It provides a reliable ordered byte stream for the applications. However, applications such as live video streaming place an emphasis on timeliness over reliability. Also a smooth sending rate can be desirable over sharp changes in the sending rate. For these applications TCP is not necessarily suitable. Rate control attempts to address the demands of these applications. An important design feature in all rate control mechanisms is TCP friendliness. We should not negatively impact TCP performance since it is still the dominant protocol. Rate Control mechanisms are classified into two different mechanisms: window-based mechanisms and rate-based mechanisms. Window-based mechanisms increase their sending rate after a successful transfer of a window of packets similar to TCP. They typically decrease their sending rate sharply after a packet loss. Rate-based solutions control their sending rate in some other way. A large subset of rate-based solutions are called equation-based solutions. Equation-based solutions have a control equation which provides an allowed sending rate. Typically these rate-based solutions react slower to both packet losses and increases in available bandwidth making their sending rate smoother than that of window-based solutions. This report contains a survey of rate control mechanisms and a discussion of their relative strengths and weaknesses. A section is dedicated to a discussion on the enhancements in wireless environments. Another topic in the report is bandwidth estimation. Bandwidth estimation is divided into capacity estimation and available bandwidth estimation. We describe techniques that enable the calculation of a fair sending rate that can be used to create novel rate control mechanisms.