Three essays on trade and investment

From H. G. Johnson's work (Review of Economic Studies, 1953–54) on tariff retaliation, the questions of whether a country can win a “tariff war” and how or even the broader question of what will affect a country's strategic position in setting bilateral tariff have been tackled in various situations. Although it is widely accepted that a country will have strategic advantages in winning the tariff war if its relative monopoly power is sufficiently large, it is unclear what are the forces behind such power formation. The goal of this research is to provide a unified framework and discuss various forces such as relative country size, absolute advantages and relative advantages simultaneously. In a two-country continuum-of-commodity neoclassical trade model, it is shown that sufficiently large relative country size is a sufficient condition for a country to choose a non-cooperative tariff Nash equilibrium over free trade. It is also shown that technology disparities such as absolute advantage, rate of technology disparity and the distribution of the technology disparity all contribute to a country's strategic position and interact with country size. ^ Leverage effect is usually used to explain the phenomenon of asymmetric volatility in equity returns. However, leverage itself can only account for parts of the asymmetry. In this research, it is shown that stock return volatility is related to firms’ financial status. Financially constrained firms tend to be more sensitive to the return changes. Financial constraint factor explains why some firms tend to be more volatile than others. I found that the financial constraint factor explains the stock return volatility independent of other factors such as firm size, industry affiliation and leverage. Firms’ industry affiliations are shown to be very weak in differentiating volatility. Firm size is proven to be a good factor in distinguishing the different levels of volatility and volatility-return sensitivity. Leverage hypothesis is also partly corroborated and the situation where leverage effect is not applicable is discussed. Finally, I examined the macroeconomic policy's effects on overall market volatility. ^

On the fundamentals of research and development (R&D) spillovers in competitive markets

Rivals may voluntarily share Research and Development (R&D) results even in the absence of any binding agreements or collusion. In a model where rival firms engage in non-cooperative independent R&D process, we used optimization and game theory analysis to study the equilibrium strategy of the firms. Our work showed that, while minimal spillover is always equilibrium, there may be another equilibrium where firms may reciprocally choose high, sometimes perfect, spillover rates. The incentive for sharing R&D output is based on firms' expectations of learning from their rivals' R&D progress in the future. This leads to strategic complementarities between the firms' choices of spillover rates and thus policy implication follows. ^ Public research agencies can contribute more to social welfare by providing research as public goods. In a non-cooperative public-private research relationship where parallel R&D is conducted, by making its R&D results accessible, the public research agency can stimulate private spillovers, even if there exists rivalry among the private firms who can benefit from such spillovers. ^

Essays on emissions trading markets

This dissertation is a collection of three economics essays on different aspects of carbon emission trading markets. The first essay analyzes the dynamic optimal emission control strategies of two nations. With a potential to become the largest buyer under the Kyoto Protocol, the US is assumed to be a monopsony, whereas with a large number of tradable permits on hand Russia is assumed to be a monopoly. Optimal costs of emission control programs are estimated for both the countries under four different market scenarios: non-cooperative no trade, US monopsony, Russia monopoly, and cooperative trading. The US monopsony scenario is found to be the most Pareto cost efficient. The Pareto efficient outcome, however, would require the US to make side payments to Russia, which will even out the differences in the cost savings from cooperative behavior. The second essay analyzes the price dynamics of the Chicago Climate Exchange (CCX), a voluntary emissions trading market. By examining the volatility in market returns using AR-GARCH and Markov switching models, the study associates the market price fluctuations with two different political regimes of the US government. Further, the study also identifies a high volatility in the returns few months before the market collapse. Three possible regulatory and market-based forces are identified as probable causes of market volatility and its ultimate collapse. Organizers of other voluntary markets in the US and worldwide may closely watch for these regime switching forces in order to overcome emission market crashes. The third essay compares excess skewness and kurtosis in carbon prices between CCX and EU ETS (European Union Emission Trading Scheme) Phase I and II markets, by examining the tail behavior when market expectations exceed the threshold level. Dynamic extreme value theory is used to find out the mean price exceedence of the threshold levels and estimate the risk loss. The calculated risk measures suggest that CCX and EU ETS Phase I are extremely immature markets for a risk investor, whereas EU ETS Phase II is a more stable market that could develop as a mature carbon market in future years.

Essays on Emissions Trading Markets

This dissertation is a collection of three economics essays on different aspects of carbon emission trading markets. The first essay analyzes the dynamic optimal emission control strategies of two nations. With a potential to become the largest buyer under the Kyoto Protocol, the US is assumed to be a monopsony, whereas with a large number of tradable permits on hand Russia is assumed to be a monopoly. Optimal costs of emission control programs are estimated for both the countries under four different market scenarios: non-cooperative no trade, US monopsony, Russia monopoly, and cooperative trading. The US monopsony scenario is found to be the most Pareto cost efficient. The Pareto efficient outcome, however, would require the US to make side payments to Russia, which will even out the differences in the cost savings from cooperative behavior. The second essay analyzes the price dynamics of the Chicago Climate Exchange (CCX), a voluntary emissions trading market. By examining the volatility in market returns using AR-GARCH and Markov switching models, the study associates the market price fluctuations with two different political regimes of the US government. Further, the study also identifies a high volatility in the returns few months before the market collapse. Three possible regulatory and market-based forces are identified as probable causes of market volatility and its ultimate collapse. Organizers of other voluntary markets in the US and worldwide may closely watch for these regime switching forces in order to overcome emission market crashes. The third essay compares excess skewness and kurtosis in carbon prices between CCX and EU ETS (European Union Emission Trading Scheme) Phase I and II markets, by examining the tail behavior when market expectations exceed the threshold level. Dynamic extreme value theory is used to find out the mean price exceedence of the threshold levels and estimate the risk loss. The calculated risk measures suggest that CCX and EU ETS Phase I are extremely immature markets for a risk investor, whereas EU ETS Phase II is a more stable market that could develop as a mature carbon market in future years.

The effect of cooperative learning on the attitudes toward science and the achievement of students in a non-science majors' general biology laboratory course at an urban community college

The purpose of this study was to evaluate the effect of cooperative learning strategies on students' attitudes toward science and achievement in BSC 1005L, a non-science majors' general biology laboratory course at an urban community college. Data were gathered on the participants' attitudes toward science and cognitive biology level pre and post treatment in BSC 1005L. Elements of the Learning Together model developed by Johnson and Johnson and the Student Team-Achievement Divisions model created by Slavin were incorporated into the experimental sections of BSC 1005L.^ Four sections of BSC 1005L participated in this study. Participants were enrolled in the 1998 spring (January) term. Students met weekly in a two hour laboratory session. The treatment was administered to the experimental group over a ten week period. A quasi-experimental pretest-posttest control group design was used. Students in the cooperative learning group (n$\sb1$ = 27) were administered the Test of Science-Related Attitudes (TOSRA) and the cognitive biology test at the same time as the control group (n$\sb2$ = 19) (at the beginning and end of the term).^ Statistical analyses confirmed that both groups were equivalent regarding ethnicity, gender, college grade point average and number of absences. Independent sample t-tests performed on pretest mean scores indicated no significant differences in the TOSRA scale two or biology knowledge between the cooperative learning group and the control group. The scores of TOSRA scales: one, three, four, five, six, and seven were significantly lower in the cooperative learning group. Independent sample t-tests of the mean score differences did not show any significant differences in posttest attitudes toward science or biology knowledge between the two groups. Paired t-tests did not indicate any significant differences on the TOSRA or biology knowledge within the cooperative learning group. Paired t-tests did show significant differences within the control group on TOSRA scale two and biology knowledge. ANCOVAs did not indicate any significant differences on the post mean scores of the TOSRA or biology knowledge adjusted by differences in the pretest mean scores. Analysis of the research data did not show any significant correlation between attitudes toward science and biology knowledge. ^