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Browsing by Subject "Investment"

Now showing 1 - 6 of 6
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    Accessibility and the choice of network investments in the London underground
    (2014-08) Giacomin, David J.
    In 1863, the Metropolitan Railway of what came to be known as the London Underground successfully opened as the world's first subway. Its high ridership spawned interest in additional links. Entrepreneurs secured funding and then proposed new lines to Parliament for approval, though only a portion were actually approved. While putative rail barons may have conducted some economic analysis, the final decision lay with Parliament, which did not have available modern transportation economic or geographic analysis tools. How good were the decisions that Parliament made in approving Underground Lines? This paper explores the role accessibility played on the decision to approve or reject proposed early London Tube Schemes.
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    The dynamic relationship between firm capabilities, regulatory policy, and environmental performance: renewable energy policy and investment in the U.S. electric utility sector.
    (2009-09) Fremeth, Adam Ryan
    The choice by a firm to improve its environmental performance is a result of both characteristics that distinguish firms from one another and the public policy that compels such action. This dissertation examines how policy outcomes and subsequent firm responses are contingent upon the capabilities of the firms to respond to such policy. I present a theory of compliance specificity that ties firms and regulators together based on the heterogeneity of capabilities that firms hold with regards to a pending public policy of variable stringency. I test this theory within the context of the regulation and investment of renewable power in the U.S. electric utility sector and the growth of a utility scale renewable energy industry. I have identified that firms are able to shape the stringency of an environmental policy in the electric utility sector as the heterogeneity among firms can impact the potential costs that a regulator would face in the case that a policy is set that would leave firms out-of-compliance. Further, the choices that firms make with regards to their use of renewable power is conditioned on the contingent relationships of the capabilities that they possess and these same policies that they have influence over. My theoretical approach and empirical analyses provides a more sophisticated depiction of the interrelationships between firms and regulators within this industry context.
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    Essays in Industrial Organization
    (2022-06) Ponder, Mark
    This dissertation is comprised of three essays, each dealing with topics in empirical Industrial Organization and Applied Microeconomics. The second chapter was co-authored with Amil Petrin and Boyoung Seo and the third chapter was co-authored with Veronica Postal.\\ \noindent In the first chapter, I develop a dynamic model of the oil pipeline industry to estimate the impact of direct price regulation on investment. Since the shale boom began in 2010, crude oil production in the United States has surged over 100\% leading to a dramatic increase in demand for pipeline transportation. However, the profitability of investing in oil pipelines is constrained as transportation rates are set subject to a price cap. In this chapter, I examine the impact of direct price regulation on pipeline investment in response to the shale boom. I develop a theoretical model of the pipeline industry, where firms make production and investment decisions while being subject to a dynamically changing price ceiling. I estimate the model using detailed operational data derived from regulatory filings and compare welfare under three separate regulatory environments: price cap regulation, cost-of-service regulation, and price deregulation. I find that price cap regulation was superior to the alternative mechanisms considered, as it increased market entry by 15\% and incentivized firms to operate 17\% more efficiently. I find evidence suggesting that prices were allowed to increase too quickly. While this led to an increased rate of entry into new markets it came at the expense of higher prices in existing markets. This ultimately resulted in a transfer in consumer surplus from existing customers to new customers and a slight decrease in total relative to what could have been achieved under a fixed price ceiling. \\ \noindent In the second chapter, we propose a novel approach to estimating supply and demand in a discrete choice setting. The standard Berry, Levinsohn, and Pakes (1995) (BLP) approach to estimation of demand and supply parameters assumes that the product characteristic unobserved to the researcher but observed by consumers and producers is conditionally mean independent of all characteristics observed by the researcher. We extend this framework to allow all product characteristics to be endogenous, so the unobserved characteristic can be correlated with the other observed characteristics. We derive moment conditions based on the assumption that firms - when choosing product characteristics - are maximizing expected profits given their beliefs at that time about preferences, costs, and competitors' actions with respect to the product characteristics they choose. Following \cite{Hansen1982}, we assume that the ``mistake'' in the choice of the amount of the characteristic that is revealed once all products are on the market is conditionally mean independent of anything the firm knows when it chooses its product characteristics. We develop an approximation to the optimal instruments and we also show how to use the standard BLP instruments. Using the original BLP automobile data we find all parameters to be of the correct sign and to be much more precisely estimated. Our estimates imply observed and unobserved product characteristics are highly positively correlated, biasing demand elasticities upward significantly, as our average estimated price elasticities double in absolute value and average markups fall by 50\%. \\ \noindent In the third chapter, we estimate the benefit households derived from the introduction of light rail transit in Minneapolis. The primary goal of this chapter is to decompose this benefit into two components: the direct effect from improved access to public transportation and the indirect-effect from the endogenous change in local amenities. The literature has predominantly relied on two methods to estimate the impact of public transportation: difference-in-differences models and hedonic pricing models. Difference-in-difference models yield convincing treatment effect estimates but do not readily provide a decomposition of the direct and indirect effect. Hedonic pricing models can provide such a decomposition but have historically relied on parsimonious specifications that do not control for omitted variable bias. Recently, researchers have proposed refining the hedonic pricing approach by incorporating predictive modeling, where the researcher trains a predictive model on a control group using a high-dimensional dataset and then uses this model to predict what prices would have been in the ``but-for" world for the treatment group. The difference between actual and predicted prices provides a valid estimate of the average treatment effect. However, if important sources of heterogeneity are excluded from the model then this approach will still suffer from omitted variable bias. We propose augmenting the estimation of the predictive model with instrumental variables allowing us to control for the selection bias induced by unobserved heterogeneity. We find close agreement between our predictive model and the difference-in-differences approach, estimating an increase in house prices of 10.4-11.3\%. Using the predictive model, we estimate that prices increased by 5.5\% due to improved access to public transportation and 5.8\% due to improved access to amenities. \\
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    Essays on Asset Pricing
    (2018-06) Luo, Ding
    My dissertation studies the relations between macroeconomic quantities and asset prices. The first chapter takes a production-based approach and investigates how different types of business investment are linked to stock returns. The second chapter takes a consumption-based approach and investigates how the interaction between limited enforcement and preference heterogeneity affects individual consumption, risk sharing and asset prices. In Chapter One “Capital heterogeneity, time-to-build, and return predictability”, I study how two major types of business investment, equipment and structures, are differently linked to stock returns. I empirically show that the investment rate of equipment has a significantly stronger predictive power for stock returns than the investment rate of structures, both in-sample and out-of-sample, using US aggregate-, US asset-, US industry-, and UK aggregate-level data. To explain this empirical finding, I build a quantitative general equilibrium production model in which it takes a shorter time-to-build for equipment investment than for structures investment to transform into productive capital. In the model, equipment investment reacts to productivity shocks in a more timely manner, and thus it reflects more of the information contained in stock prices. In addition, the model provides theoretical support for previous empirical findings of return predictability from planned investment. In Chapter Two “Asset pricing and risk sharing with limited enforcement and heterogeneous preferences”, I introduce heterogeneous preferences (heterogeneity in risk aversion and time discount factor) into a two-agent endowment economy with enforcement constraints and aggregate and idiosyncratic income risk (Alvarez and Jermann (2001)), and study the corresponding asset pricing and risk sharing implications. I show that the relative time discount factor and the interaction between heterogeneous risk aversion and aggregate risk affect the evolution of the relative Pareto weight of agents over time. I demonstrate that preference heterogeneity can generate a positive equity premium with only idiosyncratic risk present, since the conditional pricing kernel is time-varying depending on which agent is the marginal pricer. I use a recursive Lagrangian method to solve a calibrated model and show that preference heterogeneity boosts the mean and volatility of equity premium quantitatively, when the more risk averse and/or the more patient agent cannot trade away most of his income risk with the other agent because of enforcement constraints.
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    Rural Roads, Investment and Disinvestment in a Minnesota County
    (1992-10) Fruin, Jerry; Halbach, Dan
    An adequate road system is essential for the economic and social well-being of the U.S. rural population. The typical rural family relies on the road system for essential communication between town and city service centers. Children are bused to school. Farm produce is shipped, farm supplies are delivered, and repair parts, groceries, and household supplies are purchased many times throughout the week. Many vehicles, such as school buses and milk trucks, require year-round accessibility. Many rural families have one or more members who commute to factory or service jobs just as regularly as families who live in the cities. It is neither possible nor desirable for rural families to live in isolation. This paper examines the impact of new vehicle technologies, weights and road uses have on rural roads in comparison with urban roads.