Essays on Uncertainty, Imperfect Information, and Investment Dynamics

Understanding how imperfect information affects firms' investment decision helps answer important questions in economics, such as how we may better measure economic uncertainty; how firms' forecasts would affect their decision-making when their beliefs are not backed by economic fundamentals; and how important are the business cycle impacts of changes in firms' productivity uncertainty in an environment of incomplete information. This dissertation provides a synthetic answer to all these questions, both empirically and theoretically. The first chapter, provides empirical evidence to demonstrate that survey-based forecast dispersion identifies a distinctive type of second moment shocks different from the canonical volatility shocks to productivity, i.e. uncertainty shocks. Such forecast disagreement disturbances can affect the distribution of firm-level beliefs regardless of whether or not belief changes are backed by changes in economic fundamentals. At the aggregate level, innovations that increase the dispersion of firms' forecasts lead to persistent declines in aggregate investment and output, which are followed by a slow recovery. On the contrary, the larger dispersion of future firm-specific productivity innovations, the standard way to measure economic uncertainty, delivers the ``wait and see" effect, such that aggregate investment experiences a sharp decline, followed by a quick rebound, and then overshoots. At the firm level, data uncovers that more productive firms increase investments given rises in productivity dispersion for the future, whereas investments drop when firms disagree more about the well-being of their future business conditions. These findings challenge the view that the dispersion of the firms' heterogeneous beliefs captures the concept of economic uncertainty, defined by a model of uncertainty shocks. The second chapter presents a general equilibrium model of heterogeneous firms subject to the real productivity uncertainty shocks and informational disagreement shocks. As firms cannot perfectly disentangle aggregate from idiosyncratic productivity because of imperfect information, information quality thus drives the wedge of difference between the unobserved productivity fundamentals, and the firms' beliefs about how productive they are. Distribution of the firms' beliefs is no longer perfectly aligned with the distribution of firm-level productivity across firms. This model not only explains why, at the macro and micro level, disagreement shocks are different from uncertainty shocks, as documented in Chapter 1, but helps reconcile a key challenge faced by the standard framework to study economic uncertainty: a trade-off between sizable business cycle effects due to changes in uncertainty, and the right amount of pro-cyclicality of firm-level investment rate dispersion, as measured by its correlation with the output cycles.

REDUCING TEACHER ATTRITION: THE ROLES AND RESPONSIBILITIES OF BUILDING PRINCIPALS IN A LARGE URBAN DISTRICT TO SUPPORT TEACHER RETENTION

The high rate of teacher attrition in urban schools is well documented. While this does not seem like a problem in Carter County, this equates to hundreds of teachers that need to be replaced annually. Since school year (SY) 2007-08, Carter County has lost over 7,100 teachers, approximately half of (50.1%) of whom resigned, often going to neighboring, higher-paying jurisdictions as suggested by exit survey data (SY2016-2020 Strategic Plan). Included in this study is a range of practices principals use to retain teachers. While the role of the principal is recognized as a critical element in teacher retention, few studies explore the specific practices principals implement to retain teachers and how they use their time to accomplish this task. Through interviews, observations, document analysis and reflective notes, the study identifies the practices four elementary school principals of high and relatively low attrition schools use to support teacher retention. In doing so, the study uses a qualitative cross-case analysis approach. The researcher examined the following leadership practices of the principal and their impact on teacher retention: (a) providing leadership, (b) supporting new teachers, (c) training and mentoring teaching staff, (d) creating opportunities for collaboration, (d) creating a positive school climate, and (e) promoting teacher autonomy. The following research questions served as a foundational guide for the development and implementation of this study: 1. How do principals prioritize addressing teacher attrition or retention relative to all of their other responsibilities? How do they allocate their time to this challenge? 2. What do principals in schools with low attrition rates do to promote retention that principals in high attrition schools do not? What specific practices or interventions are principals in these two types of schools utilizing to retain teachers? Is there evidence to support their use of the practices? The findings that emerge from the data revealed the various practices principals use to influence and support teachers do not differ between the four schools.