Essays in Firm Responses to Demand and Competition Shocks

The aim of this dissertation is to examine, model and estimate firm responses to

demand shocks by focusing on specific industries where demand shocks are well

identified. Combining reduced-form evidence and structural analysis, this dissertation

extends the economic literature by focusing on within-firm responses of firms

to two important demand shocks that are identifiable in empirical settings. First,

I focus on how firms respond to a decrease in effective demand due to competition

shocks coming from globalization. By considering China's accession to the World

Trade Organization in 2001 and its impact on the apparel industry, the aim of these

chapters is to answer how firms react to the increase in Chinese import competition,

what is the mechanism behind these responses, and how important they are in explaining

the survival of the Peruvian apparel industry. Second, I study how suppliers'

survival probability relates to the sudden disruption of their main customer-supplier

relationships with downstream manufacturers, conditional on suppliers' own idiosyncratic

characteristics such as physical productivity.

Trade Shocks and Local Labor Markets' Linkages: Theory and Evidence

In the past few years, there has been a concern among economists and policy makers that increased openness to international trade affects some regions in a country more than others. Recent research has found that local labor markets more exposed to import competition through their initial employment composition experience worse outcomes in several dimensions such as, employment, wages, and poverty. Although there is evidence that regions within a country exhibit variation in the intensity with which they trade with each other and with other countries, trade linkages have been ignored in empirical analyses of the regional effects of trade, which focus on differences in employment composition. In this dissertation, I investigate how local labor markets' trade linkages shape the response of wages to international trade shocks. In the second chapter, I lay out a standard multi-sector general equilibrium model of trade, where domestic regions trade with each other and with the rest of the world. Using this benchmark, I decompose a region's wage change resulting from a national import cost shock into a direct effect on prices, holding other endogenous variables constant, and a series of general equilibrium effects. I argue the direct effect provides a natural measure of exposure to import competition within the model since it summarizes the effect of the shock on a region's wage as a function of initial conditions given by its trade linkages. I call my proposed measure linkage exposure while I refer to the measures used in previous studies as employment exposure. My theoretical analysis also shows that the assumptions previous studies make on trade linkages are not consistent with the standard trade model. In the third chapter, I calibrate the model to the Brazilian economy in 1991--at the beginning of a period of trade liberalization--to perform a series of experiments. In each of them, I reduce the Brazilian import cost by 1 percent in a single sector and I calculate how much of the cross-regional variation in counterfactual wage changes is explained by exposure measures. Over this set of experiments, employment exposure explains, for the median sector, 2 percent of the variation in counterfactual wage changes while linkage exposure explains 44 percent. In addition, I propose an estimation strategy that incorporates trade linkages in the analysis of the effects of trade on observed wages. In the model, changes in wages are completely determined by changes in market access, an endogenous variable that summarizes the real demand faced by a region. I show that a linkage measure of exposure is a valid instrument for changes in market access within Brazil. By using observed wage changes in Brazil between 1991-2000, my estimates imply that a region at the 25th percentile of the change in domestic market access induced by trade liberalization, experiences a 0.6 log points larger wage decline (or smaller wage increase) than a region at the 75th percentile. The estimates from a regression of wages changes on exposure imply that a region at the 25th percentile of exposure experiences a 3 log points larger wage decline (or smaller wage increase) than a region at the 75th percentile. I conclude that estimates based on exposure overstate the negative impact of trade liberalization on wages in Brazil. In the fourth chapter, I extend the standard model to allow for two types of workers according to their education levels: skilled and unskilled. I show that there is substantial variation across Brazilian regions in the skill premium. I use the exogenous variation provided by tariff changes to estimate the impact of market access on the skill premium. I find that decreased domestic market access resulting from trade liberalization resulted in a higher skill premium. I propose a mechanism to explain this result: that the manufacturing sector is relatively more intensive in unskilled labor and I show empirical evidence that supports this hypothesis.

Estimating dynamic models with aggregate shocks and an application to mortgage default in Colombia

We estimate a dynamic model of mortgage default for a cohort of Colombian debtors between 1997 and 2004. We use the estimated model to study the effects on default of a class of policies that affected the evolution of mortgage balances in Colombia during the 1990's. We propose a framework for estimating dynamic behavioral models accounting for the presence of unobserved state variables that are correlated across individuals and across time periods. We extend the standard literature on the structural estimation of dynamic models by incorporating an unobserved common correlated shock that affects all individuals' static payoffs and the dynamic continuation payoffs associated with different decisions. Given a standard parametric specification the dynamic problem, we show that the aggregate shocks are identified from the variation in the observed aggregate behavior. The shocks and their transition are separately identified, provided there is enough cross-sectionavl ariation of the observeds tates.

Why do so few hold stocks : theory and evidence

This study develops a life-cycle model where investors make investment decisions in a realistic environment. Model results show that personal illiquid projects (housing and children), fixed costs (once-off/per-period participation costs plus variable/fixed transaction costs) and endogenous risky human capital (with permanent, transitory and disastrous shocks) together are able to address both the non-participation puzzle and the age-effects puzzle. Empirical implications of the model are examined using Heckman’s two-step method with the latest five Surveys of Consumer Finance (SCF). Regression results show that liquidity, informational cost and human capital are indeed the major determinants of participation and asset allocation decisions at different stages of an investor’s life.

Subtropical subdivisions : toward a lot-rating methodology for subtropical climates

What role can climatically appropriate subdivision design play in decreasing the use of energy required to cool premises by maximising access to natural ventilation? How can this design be achieved? The subdivision design stage is critical to urban and suburban sustainability outcomes, as significant changes after development are constrained by the configuration of the subdivision, and then by the construction of the dwellings. Existing Australian lot rating methodologies for energy efficiency, such as that by the Sustainable Energy Development Authority (SEDA), focus on reducing heating needs by increasing solar access, a key need in Australia’s temperate zone. A recent CRC CI project, Sustainable Subdivisions: Energy (Miller and Ambrose 2005) examined these guidelines to see if they could be adapted for use in subtropical South East Queensland (SEQ). Correlating the lot ratings with dwelling ratings, the project found that the SEDA guidelines would need to be modified for use to make allowance for natural ventilation. In SEQ, solar access for heating is less important than access to natural ventilation, and there is a need to reduce energy used to cool dwellings. In Queensland, the incidence of residential air-conditioning was predicted to reach 50 per cent by the end of 2005 (Mickel 2004). The CRC-CI, Sustainable Subdivisions: Ventilation Project (CRC-CI, in progress), aims to verify and quantify the role natural ventilation has in cooling residences in subtropical climates and develop a lot rating methodology for SEQ. This paper reviews results from an industry workshop that explored the current attitudes and methodologies used by a range of professionals involved in subdivision design and development in SEQ. Analysis of the workshop reveals that a key challenge for sustainability is that land development in subtropical SEQ is commonly a separate process from house design and siting. Finally, the paper highlights some of the issues that regulators and industry face in adopting a lot rating methodology for subdivisions offering improved ventilation access, including continuing disagreement between professionals over the desirability of rating tools.

Causes of injuries resulting in hospitalisation in Australia : assessing coder agreement on external causes

Objective: To assess extent of coder agreement for external causes of injury using ICD-10-AM for injury-related hospitalisations in Australian public hospitals. Methods: A random sample of 4850 discharges from 2002 to 2004 was obtained from a stratified random sample of 50 hospitals across four states in Australia. On-site medical record reviews were conducted and external cause codes were assigned blinded to the original coded data. Code agreement levels were grouped into the following agreement categories: block level, 3-character level, 4-character level, 5th-character level, and complete code level. Results: At a broad block level, code agreement was found in over 90% of cases for most mechanisms (eg, transport, fall). Percentage disagreement was 26.0% at the 3-character level; agreement for the complete external cause code was 67.6%. For activity codes, the percentage of disagreement at the 3-character level was 7.3% and agreement for the complete activity code was 68.0%. For place of occurrence codes, the percentage of disagreement at the 4-character level was 22.0%; agreement for the complete place code was 75.4%. Conclusions: With 68% agreement for complete codes and 74% agreement for 3-character codes, as well as variability in agreement levels across different code blocks, place and activity codes, researchers need to be aware of the reliability of their specific data of interest when they wish to undertake trend analyses or case selection for specific causes of interest.

Joseph A. Schumpeter, capitalism, socialism, and democracy

This is a review of "Capitalism, socialism, and democracy", by Joseph A. Schumpeter, New York, Harper Perennial, 1942 (first Harper Colophon edition published 1975). "The public mind has by now so thoroughly grown out of humor with it as to make condemnation of capitalism and all its works a foregone conclusion – almost a requirement of the etiquette of discussion. Whatever his political preference, every writer or speaker hastens to conform to this code and to emphasize his critical attitude, his freedom from ‘complacency’, his belief in the inadequacies of capitalist achievement, his aversion to capitalist and his sympathy with anti-capitalist interests. Any other attitude is voted not only foolish but anti-social and is looked upon as an indication of immoral servitude." We might easily mistake this for a voice weary of contemplating the implications for neo-liberal nostrums of our current global financial crisis were it not for the rather formal, slightly arch, style and the gender exclusive language. It was in fact penned in the depths of World War II by Harvard economist Joseph Schumpeter, who fell off the map only to re-emerge from the 1970s as oil shocks and stagflation in the west presaged the decline of the Keynesian settlement, as east Asian newly industrialising economies were modelling on his insistence that entrepreneurialism, access to credit and trade were the pillars of economic growth, and as innovation became more of a watchword for post-industrial economies in general. The second coming was perhaps affirmed when his work was dubbed by Forbes in 1983 – on the occasion of the 100th anniversary of the birth of both men – as of greater explanatory import than Keynes’. (And what of our present resurgent Keynesian moment?)...

Youth, Sport and the Social Inclusion Agenda

The purpose of this paper is to assess aspects of the British Government's attempts to use sporting participation as a vehicle to re-integrate socially disadvantaged, excluded and 'at-risk' youth into mainstream society. A number of organisations, policy-makers, commentators, and practitioners with a stake in the 'sport and social inclusion agenda' were interviewed. General agreement was found on a number of points: that the field was overly crowded with policies, programmes and initiatives; that the field worked in a 'bottom-up' way, with the most significant factor determining success being effective local workers with good networks and cultural access; that the dichotomising rhetoric of inclusion/exclusion was counter-productive; that the notion of the 'at-risk youth' was problematic and unhelpful; and that they all now dealt with a marketplace, where 'clients' had to be enrolled in their own reformation. There was also disagreement on a number of points: that policy acts as a relatively accurate template for practice, as opposed to the argument that it was simply regarded as a cluster of suggestions for practice; that policy was exceptionally piecemeal in its formulation and application, as opposed to regarding policy as necessarily targeted and dispersed; and that the inclusion agenda was largely politically driven and transitory, as opposed to the optimistic view that it had become ingrained in local practice. Finally, the paper examines some issues that are the most likely points of contribution by researchers in the area: that more research needs to be done on the processes of identity formation associated with participation in sport; that more effective programme evaluation needs to be done for such forms of governmental intervention to work properly; and that the relationship between different kinds of physical activity and social and personal change needs to be more thoroughly theorised.

Response shift, recall bias and their effect on measuring change in health-related quality of life amongst older hospital patients

Background: Assessments of change in subjective patient reported outcomes such as health-related quality of life (HRQoL) are a key component of many clinical and research evaluations. However, conventional longitudinal evaluation of change may not agree with patient perceived change if patients' understanding of the subjective construct under evaluation changes over time (response shift) or if patients' have inaccurate recollection (recall bias). This study examined whether older adults' perception of change is in agreement with conventional longitudinal evaluation of change in their HRQoL over the duration of their hospital stay. It also investigated this level of agreement after adjusting patient perceived change for recall bias that patients may have experienced. Methods: A prospective longitudinal cohort design nested within a larger randomised controlled trial was implemented. 103 hospitalised older adults participated in this investigation at a tertiary hospital facility. The EQ-5D utility and Visual Analogue Scale (VAS) scores were used to evaluate HRQoL. Participants completed EQ-5D reports as soon as they were medically stable (within three days of admission) then again immediately prior to discharge. Three methods of change score calculation were used (conventional change, patient perceived change and patient perceived change adjusted for recall bias). Agreement was primarily investigated using intraclass correlation coefficients (ICC) and limits of agreement. Results: Overall 101 (98%) participants completed both admission and discharge assessments. The mean (SD) age was 73.3 (11.2). The median (IQR) length of stay was 38 (20-60) days. For agreement between conventional longitudinal change and patient perceived change: ICCs were 0.34 and 0.40 for EQ-5D utility and VAS respectively. For agreement between conventional longitudinal change and patient perceived change adjusted for recall bias: ICCs were 0.98 and 0.90 respectively. Discrepancy between conventional longitudinal change and patient perceived change was considered clinically meaningful for 84 (83.2%) of participants, after adjusting for recall bias this reduced to 8 (7.9%). Conclusions: Agreement between conventional change and patient perceived change was not strong. A large proportion of this disagreement could be attributed to recall bias. To overcome the invalidating effect of response shift (on conventional change) and recall bias (on patient perceived change) a method of adjusting patient perceived change for recall bias has been described.

The Secret Siphon

Although the siphon has been in use since ancient times, the exact mechanism of operation is still under discussion. For example, most dictionaries assert that atmospheric pressure is essential to the operation of a siphon rather than gravity. Although there is general agreement that gravity is the motivating force in a siphon, there is disagreement on how liquid enters a siphon – is it atmospheric push or tensile pull? This paper describes a classroom experiment that can serve as the basis for discussing how a siphon works. The experiment involves the construction of a siphon in which the water level in the upper reservoir is held constant during the operation of the siphon. Since the atmosphere is not doing any work on the water in the upper reservoir only gravity is at work. The special situation of a bubble-in-a-siphon is also discussed in which both atmospheric pressure and gravity are at work.

How to tell the difference between a positive image and a stereotype: reading Priscilla, Queen of the Desert

This paper intervenes in critical discussions about the representation of homosexuality. Rejecting the ‘manifest content’ of films, it turns to cultural history to map those public discourses which close down the ways in which films can be discussed. With relation to The Adventures of Priscilla, Queen of the Desert, it examines discussions of the film in Australian newspapers (both queer and mainstream) and finds that while there is disagreement about the interpretation to be made of the film, the terms within which those interpretations can be made are quite rigid. A matrix based on similarity, difference and value provides a series of positions and a vocabulary (transgression, assimilation, positive images and stereotypes) through which to make sense of this film. The article suggests that this matrix, and the idea that similarity and difference provide a suitable axis for making sense of homosexual identity, are problematic in discussing homosexual representation.

Clinical education for nephrology nurse practitioner candidates in Australia : a consensus statement

Objectives: To develop recommendations for the clinical education required to prepare Australian Nurse Practitioner candidates for advanced and extended practice in nephrology settings. Methods: Using the Delphi research technique a consensus statement was developed over a nine month period. All endorsed and candidate Nephrology Nurse Practitioners (NNP) were invited to participate as the expert panel. The Delphi research technique uses a systematic and iterative process. The expert panel were asked to generate a list of items which were then circulated to all NNPs. They were asked to determine their degree of agreement or disagreement with each statement using a 5-point Likert scale There was opportunity for free-text comments to be provided if desired. Results from each round were collated; the document was refined and circulated to the experts for a subsequent round. Consensus was demonstrated after three Delphi rounds. Results: The consensus statement comprises four components explaining the role and membership of the mentorship team, the setting and location of NNP clinical education, learning strategies to support the NNP, and outcomes of NNP clinical education. Demographic questions in the final survey revealed information about the qualifications, years of experience, and practice location of Australian NNPs. Conclusions: The consensus statement is not prescriptive but it will inform NNP candidates, university course providers and mentors about the expected extended nephrology specific clinical education that will enable the NNP to provide advanced nursing care for patients regardless of the stage of chronic kidney disease (CKD) and the practice setting.

The rademacher complexity of coregularized kernel classes

In the multi-view approach to semisupervised learning, we choose one predictor from each of multiple hypothesis classes, and we co-regularize our choices by penalizing disagreement among the predictors on the unlabeled data. We examine the co-regularization method used in the co-regularized least squares (CoRLS) algorithm, in which the views are reproducing kernel Hilbert spaces (RKHS's), and the disagreement penalty is the average squared difference in predictions. The final predictor is the pointwise average of the predictors from each view. We call the set of predictors that can result from this procedure the co-regularized hypothesis class. Our main result is a tight bound on the Rademacher complexity of the co-regularized hypothesis class in terms of the kernel matrices of each RKHS. We find that the co-regularization reduces the Rademacher complexity by an amount that depends on the distance between the two views, as measured by a data dependent metric. We then use standard techniques to bound the gap between training error and test error for the CoRLS algorithm. Experimentally, we find that the amount of reduction in complexity introduced by co regularization correlates with the amount of improvement that co-regularization gives in the CoRLS algorithm.