Essays in Macroeconomics with Institutions
2023-08
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Essays in Macroeconomics with Institutions
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2023-08
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This dissertation consists of three chapters. Chapter One studies the dynamic politico-economic theory in general equilibrium where repeated voting on an intergenerational tax and transfer system disproportionately aggregates policy preferences of households, and the relative political power depends on households' voting participation, i.e., endogenous turnout. In particular, I incorporate household's turnout decision in an otherwise standard overlapping generations model with capital accumulation. Political process is modeled by the probabilistic voting theory in which the political power emerges endogenously to household's primitives. I characterize the Markov perfect equilibrium and policy rules of the incumbent government and private sector saving. The Social Security tax exhibits a positive relationship with aggregate capital, in contrast to the independent relationship when voter turnout is exogenous. This suggests that agents are faced with a trade-off between political participation and economic welfare, and this trade-off depends on the extent to which the current generation extracts resources from the next unborn generation. The transitional dynamics shows that in response to population aging, capital accumulation and evolution of the endogenous tax rate are substantially different with exogenous and endogenous turnout. In Chapter Two, I study the role of technological change in explaining rising income inequality and non-increasing progressive taxes from 1978 to 2018. I first document that an increase in tasks requiring the use of a computer is salient in higher-paying occupations. Next, I link occupational-level data with individual responses on preferences for redistribution and document that occupations that experienced the largest increases in computerization also experienced larger declines in preferences toredistribute income. This computerization effect is significant and sizeable even controlling for occupational earnings. To rationalize this finding, I develop a tractable quantitative general equilibrium political economy model embedding technological change. In the model, workers more exposed to computerization have more to gain from skill investment, and thus are more hurt by more distortive taxes. Therefore, they are more opposed to progressive taxation. The quantitative model features multiple types of tasks, equipment, occupations, and demographic groups where workers consider college education before entering the labor market, select occupations based on comparative advantage, and vote for a redistribution policy modeled as the progressive tax system. In an estimated version of the model that matches the linked micro data, I find that a decline in equipment prices leads to an increase in income inequality, while tax progressivity is non-increasing. If workers' skill accumulation were not allowed during the technological change, the model generates an increase in tax progressivity. Chapter Three is a joint work with Sunghun Cho and Jaehyung Kim. By digitizing novel historical education data in South Korea from 1967 to 1986, we aim to investigate the role of human capital specificity in industrialization. With the newly constructed data, we plan to conduct empirical analysis in a quasi-experimental environment, which stems from a unique Korean industry-oriented education reform in the 1970s. Next, we develop a quantitative general equilibrium model consistent with the empirical result. Through the lens of the quantitative model, our goal is to shed light on how the industrially selective education reform contributed to industrialization. We also seek to explore how this industry-motivated education policywas associated with other policy measures during the growth miracle period.
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University of Minnesota Ph.D. dissertation. August 2023. Major: Economics. Advisor: Loukas Karabarbounis. 1 computer file (PDF); ix, 129 pages.
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Yeon, Jiheum. (2023). Essays in Macroeconomics with Institutions. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/259683.
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