Browsing by Subject "Heterogeneous Firms"

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    Essays on tax policies and international trade.
    (2009-06) Tuzova, Yelena Andreyevna
    After a decade of high growth, all segments of the Russian economy are experiencing a slowdown caused by the global financial crisis. To boost growth and living standards, and to ensure that Russia emerges from this global crisis, the need for a correct and comprehensive economic policy response is of high importance these days. This dissertation addresses two important economic issues in Russia: tax evasion and tariff reform. Though these topics have been studied intensively over the last century, there have been only a few attempts made in the economics field that give a direct estimate of tax evasion and tariff elimination for the Russian economy. The primary reason for preventing a direct estimate is a lack of reliable and representative data. This dissertation uses the most recent industry data from Russia not previous used and provides a theoretical and quantitative analysis of tax compliance and tariff reform in Russia. The first chapter of this dissertation starts with an assessment of the role of taxation as a macroeconomic tool. It then reviews the problematic issues facing the tax system of developing countries such as tax evasion and tariff liberalization. The second chapter explores tax compliance behavior of companies in Russia. I develop a static industry model of tax evasion with heterogeneous producers to investigate the key determinants that give rise to tax evasion in Russia. Assuming that the probability of detection depends on the level of production, the model explains why small firms evade taxes. My quantitative experiments allow me to estimate how much the model economy gains if the tax burden, penalties, and probability of detection were changed. The third chapter discusses potential effects of trade liberalization on the Russian economy. I construct a static applied general equilibrium model and perform a series of numerical experiments, such as a partial and complete tariff elimination scenario. I construct a social accounting matrix for 2003 for Russia. I find that tariff elimination reform has a positive effect in terms of trade diversification, but a negative effect in terms of consumer and social welfare.
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    Movement of heterogeneous goods and people.
    (2009-08) Rolleigh, Michael M
    Applied General Equilibrium models of trade failed to predict the sectoral changes in trade volumes following the Canada-US Free Trade Agreement. These models utilized a representative firm framework and used econometric estimates for the elasticities of substitution between home and foreign goods. I take a different approach on both fronts, modeling plants as heterogeneous and calibrating the elasticities to match estimated markups in each sector. I introduce these features by adapting a \citeasnoun{hop92} model of plant entry and exit and embed this in a multisector trade model. I calibrate the model using trade data between the United States and Canada before their Free Trade Agreement and evaluate the model's performance using later data. I find that calibrating the elasticities to markups improves the fit between model predictions an d data significantly, from weighted correlations which are negative to values of 0.36. Incorporating plant heterogeneity and industrial data improves the weighted correlation to 0.77. After tax wages differ considerably across countries, providing strong economic incentives for individuals to migrate. Increasing political integration and regional trade agreements facilitate international labor mobility, making these economic motives more important relative to the costs of migration. I undertake an empirical analysis using economic incentives to explain the migration of college-educated Canadian workers to the United States in the 1980 to 2000 period. Young workers migrated at a rate over 10 percent during this period. I develop an overlapping generations model of migration with heterogenous agents and calibrate the model to match the total flow of young, college-educated Canadian workers to the US from 1980 to 1990. I verify the calibration by comparing migration predicted by the model to the actual migration of groups not used in the calibration. I use the calibrated model to perform two policy experiments, income tax harmonization and wage equalization. I find that tax harmonization only reduces overall migration by 30 percent, with large reductions in the migration of workers in the middle of the income distribution. Due to the large US wage premium for highly skilled workers, the migration rate for the top quintile of workers declines only slightly. This indicates that the US premium for skilled workers contributes more to migration flows than the varying tax codes.