Browsing by Subject "Investment"

In this dissertation I study the role of limited commitment in dynamic models. In the first part, I consider firms that face uncertainty shocks in a principal-agent setting but have only limited ability to commit to long-term contracts. Limited commitment firms expedite payments to their managers when uncertainty is high, a finding that helps to explain the puzzling large bonuses observed during the recent financial crisis. In the second part, I examine a dynamic investment model where firms invest in a risky asset but cannot hedge the risk of their investment because they lack the ability to commit to future repayments of debt. Once firms have access to exogenous supply of risk free assets they may, on the aggregate level, invest more in the risky asset because risk free technology allows them to grow richer in equilibrium. This result helps to explain the asset price booms in emerging countries when those countries experience substantial capital outflow.

This dissertation focuses on how economic markets provide channels for influence over government policy. Specifically, I examine three levels of analysis: the household, the financial security, and the foreign state. Economic constraints on government policy are particularly salient in today's financialized economy. Understanding these dynamics helps us forecast what will happen in the future. Getting these forecasts right is important because taxpayers, governments, and investors all have skin in the game of effective use of government resources. To paint a picture of these constraints, my dissertation contains three papers. The first argues that individuals with access to economic insurance are less likely to protest than those without. Using macroeconomic and survey data, I find evidence supporting my theoretical expectations. The second paper turns from household economics to the financial markets for government debt securities. Although the literature shows how governments make certain choices in debt issuance and the pricing dynamics of government bonds, it remains unclear how the ownership structure of debt affects yields. I argue that government bonds with more concentrated ownership structures have higher price volatility, which should incur volatility risk premium as a result. I find evidence supporting my theoretical expectations. This paper speaks to the relationship between debt ownership and power; it matters because governments with more concentrated debt ownership could see higher debt service payments over time. The third paper considers how state actors can use foreign investment as a policy tool. I argue that Chinese actors increase investment in target countries when future policy is more uncertain because investments act as a hedge against the possibility of unfavorable future policy. This runs counter to the traditional narrative, which suggests that foreign investment is more likely when policy is stable. Using a novel cross-national, high-frequency, machine-coded event data set, I find evidence supporting my expectations. My dissertation paints a picture of the breadth of ways that economic markets influence government policy. Governments contend with the economic interests of constituents who can demonstrate publicly, investors who can affect the price of their debt, and other states that can use investment to secure influence over future policy.

This dissertation extends the economics literature in industrial organization with three empirical essays on the strategic decisions of firms in imperfectly competitive markets. Using data from the U.S. airline industry, I combine reduced-form analysis with recent econometric advances in the estimation of dynamic games to examine the market-level and industry-level behavior of oligopolistic firms. The first essay presents a framework for sensitivity analysis in merger simulation. The second essay continues the market-level analysis of merger effects by examining how airline mergers influence price dispersion. The third essay shifts focus to industry-level investment behavior, examining the role played by bankruptcy policy in disciplining capital investment.

My dissertation seeks to enhance our understanding of how technology and fiscal policies shape firm behavior and implications for the aggregate economy and policy designs. In the first two chapters, I show empirically and quantitatively that information and communication technology (ICT) can widen firms’ geographic span of control by reducing internal communication costs. Combining comprehensive establishment-level datasets with ownership linkages, geographic locations, and ICT adoption, I document that firms with more advanced technology have both higher within-firm communication and larger geographic coverage. Exploiting natural experimental variation from the Internet privatization in the early 1990s, I show that better access to ICT helped firms expand geographically. Using a model where firms endogenously adopt ICT, choose multiple production locations, and trade domestically, I estimate that the Internet privatization increased overall efficiency by 1.1%. Compared to a trade-only model, a model with multi-unit firms predicts that efficiency gains are larger and more geographically dispersed. Policy counterfactuals show that to improve local welfare, a policy coordinated across locations that improves ICT access can be more effective than uncoordinated local policies.

The third chapter is joint work with Zhao Chen, Zhikuo Liu, Juan Carlos Suárez Serrato, and Daniel Xu. We study one of the largest tax reforms in China---the 2009 value-added tax reform that allowed firms to deduct input value-added tax from output tax and thus reduced user cost of capital for equipment investment. Using reduced-form analysis and a quantitatively firm investment model, we find that investment stimuli that shrink firms' inaction regions, such as value-added tax reduction and investment tax credits, are more effective: Given the same tax revenue loss, those policies lead to larger investment response.

I examine the long-term valuation consequence of over-investment in mergers and acquisitions (M&As) on acquiring firms through the "anticipation effect," in which forward-looking prices embed investors' expectations about the profitability of firms' potential future acquisitions. Using a sample of 1,451 firms with past acquisition activities, I find that their market valuations depend on both the profitability of their past acquisitions and their current free cash flow. Specifically, among firms with positive free cash flow, those with the worse history of value-destroying acquisitions experience lower market valuations. Among firms with negative free cash flow, the history of value-destroying acquisitions is not systematically associated with firm value. In addition, a significant portion of the discount is from lowered valuation of firms' cash holdings. These findings are consistent with investors forming expectations about the profitability of future possible acquisitions based on the realized performance outcomes of firms' past acquisitions and value these firms accordingly based on the likelihood of engaging in future acquisitions. They also provide empirical support for using observed market prices to proxy for investors' expectations about firms' future investment opportunities.

Purpose: To validate, assess, and utilize the Bugando Cancer Registry (BCR) of Bugando Medical Centre (BMC), Mwanza, Tanzania for radiotherapy (RT) services planning.

Methods: For BCR validation, we randomly sampled 63 total registry cases. Two reviewers not associated with the BCR manually collected data elements from medical records and compared them with BCR data to measure concordance and completeness.

For BCR assessment, we described the pattern of pediatric and adult malignancies from 2008 to 2016 and classified them by GLOBOCAN standards. Primary tumor sites, means of diagnosis, HIV status, and the number of AIDS-defining malignancies (cervix, non-Hodgkin lymphoma, and Kaposi sarcoma) were reported. The 2012 GLOBOCAN estimates for Tanzania were then scaled to the Lake Zone using 2012 national census data and adjusted for population growth to compare BCR cases in 2016.

Finally, for BCR utilization for RT planning, all notifiable cancer cases diagnosed in 2016 were used as the basis for analysis. RT utilization based on primary site was calculated using the latest version of the evidence-based estimation method from the Collaboration for Cancer Outcomes Research and Evaluation’s (CCORE-EBEST), a RT utilization model based on Australian incidence of notifiable cancers. CCORE-EBEST was modified to account for the high number of cases of Kaposi sarcoma seen at BMC. A time-driven activity-based costing (TD-ADC) model was used to compute the total resources and operational costs for three situations: the capacity to treat 500 patients per year, the required capacity to meet 100% of the clinical need, and the clinical need that could be met with maximal equipment and staff capacity (four teletherapy units, one orthovoltage unit, one brachytherapy afterloader, two simulators).

Results:

BCR validation: All 63 reviewed registry records had complete cancer site and morphology information included in the registry. For the majority (n=41), the basis of diagnosis was pathology. Of sampled registry cases, primary tumor site and morphology were 74% and 70% concordant, respectively. Of the fifteen parameters entered into the BRC, twelve (80%) were 100% complete and the overall completeness was 97%. The median concordance rate was 79% (interquartile range 72%-86%).

BCR assessment: A total of 2,772 cases were reported. 2,286 cases were adult (82.5%) and 486 cases were pediatric (17.5%). 2,522 patients (91%) lived in one of the six Lake Zone regions. Number of cancer cases reported in the registry by year increased from 19 in 2008 to 1,272 in 2016. Means of diagnosis were histologic or cytologic confirmation for 1,923 cases (85%), clinical investigations (e.g., radiologic studies) for 528 cases (19%), clinical diagnosis for 298 cases (11%), serologic tumor markers for 13 cases (0.5%), unknown for 7 (0.2%) cases, and death certificate for 3 (0.1%) cases. The most common adult cancers were cervix (n=520, 22.7%), breast (n=288, 12.6%), prostate (n=195, 8.5%), others (n=198, 8.7%), and Kaposi sarcoma (n=184, 8.0%). The most common pediatric cancers were non-Burkitt non-Hodgkin lymphoma (n=84, 17.3%), Burkitt lymphoma (n=80, 16.5%), Wilms tumor (n=71, 14.6%), soft tissue sarcoma (n=56, 11.5%), and leukemia (n=50, 10.3%). The number of unique BCR cases logged in 2016 was 12.2% of the expected number based on GLOBOCAN estimates (1,116 v. 9,165, p<0.001).

RT utilization: A total of 1,088 unique cancer cases were analyzed. Casemix was significantly different between BMC and the modified CCORE-EBEST model, with significantly higher cases of cervix (29.5% v. 1.0%, p<0.001) at BMC and fewer cases of breast cancer (9% v. 12.2%, p<0.001) and prostate cancer (10.1% v. 18.4%, p<0.001). The proportion of new cancer cases requiring RT at BMC was 56.4%, significantly higher than the original CCORE-EBEST expected rate of 48.4% (p<0.001). In 2016, had RT been available, 614 patients at BMC would have received RT for a total of 11,837 fractions. To treat 500 patients per year, BMC has sufficient teletherapy capacity with a single Co-60 teletherapy unit operating 12 hours per day, but a brachytherapy afterloader and C-arm are required. To scale up capacity to meet current clinical need in the least expensive fashion, an afterloader and C-arm are needed, as are 4 radiation oncologists, 3 medical physicists, 5 radiation therapists, and increasing the Co-60 workday from 8 to 14 hours. If BMC installed teletherapy equipment in every bunker, 1,900 patients could be treated a year. This would require 11 ROs, 6 MPs, 16 RTTs, 3 dosimetrists, 2 nurses, 0.3 information technologists, 0.5 mechanical engineers, and 1.4 electrical engineers.

Conclusions: Data quality metrics of the BCR indicate it is of sufficient quality for local planning. This first comprehensive report of the BCR shows a cancer diagnosis pattern typical of many hospital registries in low-income countries. For RT services planning. application of the CCORE-EBEST and TD-ADC models to a hospital-based cancer registry is feasible with minor modifications. The high RT utilization rate at BMC supports the clinical value of RT; however, current capacity at BMC is not sufficient to meet the clinical need. Scaling up RT services requires a combination of equipment and staffing to maximize efficiency and clinical outcomes.