Economics
Permanent URI for this collectionhttps://uwspace.uwaterloo.ca/handle/10012/9874
This is the collection for the University of Waterloo's Department of Economics.
Research outputs are organized by type (eg. Master Thesis, Article, Conference Paper).
Waterloo faculty, students, and staff can contact us or visit the UWSpace guide to learn more about depositing their research.
Browse
Browsing Economics by Title
Now showing 1 - 20 of 37
- Results Per Page
- Sort Options
Item An Analysis of Optimal Agricultural Fertilizer Application Decisions in the Presence of Market and Weather Uncertainties and Nutrient Pollution(University of Waterloo, 2023-01-12) Yang, XinyuanThis thesis addresses the questions of how uncertain corn market and weather factors affect optimal fertilizer application decisions of the farmer and the social planner, and what factors drive the divergence between the two. Nutrient runoff from agricultural activities has become a primary source of surface water quality deterioration worldwide. Over-application of fertilizer in agricultural production represents a non-point source pollution which is causing extensive nutrient loading in water bodies and has a severe impact on the global environment. There is evidence that farmers apply more fertilizer than is socially optimal and more than is recommended by government agencies. This thesis first investigates the farmer’s optimal fertilizer application under crop price uncertainty by constructing an inter-temporal farmer’s decision model under two alternative stochastic price processes. Closed form results are derived, which indicate that an increase in price uncertainty implies a reduction in the quantity of fertilizer applied in the farmer’s optimal decision problem. Numerous factors that could impact the optimal fertilization decision are examined as well. The farmer’s decision model is then enhanced by allowing for two possible fertilizer application times in the growing season and the inclusion of additional stochastic state variables such as rainfall and temperature, in the corn yield model. The model is parameterized for average conditions in Iowa corn growing regions. Employing a Monte Carlo approach, numerical results conclude that for a wide range of parameter assumptions the farmer’s optimal strategy is to apply fertilizer at planting rather than later as a side dressing. This thesis analyzes the impacts of price uncertainty, fertilizer cost and other economic parameters on the farmer’s optimal fertilizer application strategy. The thesis also analyzes the optimal decisions of a social planner whose objective function includes an estimate of the damages caused by nitrogen leakage and denitrification. Numerical results show that including the damages from pollution affect both the quantity and timing of fertilizer application. Assumptions about the frequency and quantity of rainfall have an important impact on the optimal decision. This is an important consideration for public policy as climate change affects weather patterns over the next decade and beyond.Item Applications of Machine Learning on Econometrics for Two-stage Regression, Bias-adjusted Inference with Unobserved Confounding, and Test for High Dimensionality(University of Waterloo, 2024-08-19) Xu, WenzuoNonparametric approaches have been extensively studied and applied when no assumption is made regarding the model specification. More generally, a sieve can be constructed as a collection of subsets of finite-dimensional approximating parameter spaces, over which the target function is estimated by an optimization of fitting without demanding a parametric specification. Although the concept of sieves is devised in such a general way, classic sieve estimation in literature has been mostly focusing on single-layer approximations. When the target functions are of intricate patterns, however, these single-layer estimators show limited capability despite allowance for data-generated sieve bases, whereas characterizing different attributes of the target functions progressively through multiple layers is often more sensible. Deep neural networks (DNNs) offer a multi-layer extension of the traditional sieves by modelling the connections among variables through data transformations from one layer to another. DNNs have a larger freedom than the single-layer ones in increasing the sieve complexity to ensure consistent estimation while maintaining a relatively simple structure in each layer for feasible estimation. This thesis contains three chapters developing methodologies and motivating applications of DNNs on Econometrics for two-stage regression, bias-adjusted inference with unobserved confounding, and test for high dimension.Item Commodity Prices, Stock Prices and Economic Activity in a Small Open Economy(University of Waterloo, 2018-05-10) McLeod, ShernetteThis thesis is comprised of three papers which jointly examine the role of commodity prices as well as other asset prices in influencing the evolution of economic activity in a small-open economy (SOE). Using Canada as the quintessential small-open economy, each chapter adopts a particular approach to investigating this dynamic relationship. It is hoped that the contribution made in this thesis to understanding the relationship will aid policy-makers as they attempt to address the associated policy questions which are often fraught with difficulties and uncertainty. In chapter 1 the use of a recursively identified Vector Auto-Regression (VAR) is employed to study the impact of commodity price shocks on Canada's macro-economy. While similar analysis has been carried out before, this has tended to focus solely on the impact of oil prices. Additionally, the analysis has tended to focus on aggregate output, while neglecting the specific sectoral impact. Given that each sectors' exposure to commodity price movements will be different, one would also expect varying sectoral responses to these shocks. Chapter 1 attempts to focus on this and thus offers a level of insight into the operation of the Canadian macro-economy which has not been extensively addressed in the literature. The results suggest that indeed there is divergent sectoral responses to commodity price shocks, using a broad measure of commodity prices. The commodity producing sectors of the economy respond favourably to an unexpected rise in commodity prices, whilst the manufacturing sector is negatively impacted by such movements. We also found evidence that policy-makers may attempt to contain any inflationary pressures emanating from rising commodity prices by raising interest rates. Chapter 2 delves even further into the dynamics of this relationship by employing a Dynamic Stochastic General Equilibrium (DSGE) model. In this chapter we extend the analysis undertaken in chapter 1, where we are again attempting to ascertain the sectoral responses to a commodity price shock. The use of this modelling framework however allows us to analyse that relationship in a manner which is internally consistent and also in-line with our beliefs about the behaviour of economic agents. Additionally, the DSGE model allows us to conduct counter-factual policy experiments which were not possible using the VAR framework. The results of the model are generally in-line with those found in chapter 1, as the commodity price shock has differing impacts on the various sectors of the economy. The results suggest that just examining the aggregate effects of commodity price shocks could overshadow important sectoral differences which are subsumed in these aggregate figures. Additionally, the counter factual policy exercises indicate that actions taken by the Central Bank during the Global Financial Crisis positively impacted Canada's economic performance during the crisis and the period immediately after. In the final chapter, co-authored with Jean-Paul Lam, we seek to quantify the interdependence between stock prices and monetary policy using an underidentified Structural VAR (SVAR) for Canada and the United States. We find that employing a recursive identification leads to counterfactual responses for the stock market following a monetary policy shock. In the underidentified VAR, the stock market and monetary policy are allowed to simultaneously react to each other's shock through a combination of short-run, long-run and sign restrictions. Unlike many studies in this literature, we impose a minimal number of restrictions on the short-run and long-run matrix, allowing the data to uncover the relationship between the variables in the SVAR. We find that an increase of 25 basis points (b.p.) in the policy rate of the central bank leads to a fall of about 1.75% in stock prices in Canada and to a fall of about 1.25% in stock prices in the U.S. This effect of monetary policy on stock prices is larger in Canada compared to the U.S. mainly because sectors that are interest rate sensitive, such as financials and energy account for a much larger share of the stock index in Canada compared to the U.S. Following a stock market shock, the short-term interest, industrial production, inflation and commodity prices rise both in Canada and in the U.S. A 1% increase in the stock market leads to an increase of about 27 b.p. in the overnight rate in Canada while it leads to an increase of about 10 b.p. in the Federal funds rate.Item Conspicuous Consumption and Inequality(University of Waterloo, 2023-11-27) Nesterova, IuliiaMy research is centered around understanding consumption behavior and its relationship with inequality. In Chapter 1, I study how consumption inequality in the United States has evolved over time, with a particular focus on distinguishing two major expenditure components: services and goods. I argue that such distinction is important to understand inequality between high and low income groups. I show that increases in consumption inequality over the period 1984-2018 were driven mostly by rising inequality in expenditure on services rather than goods. I further show that most of it was driven by increased inequality in young households expenditure in services, whereas older households have experienced no change in inequality of either good or service expenditures. As modern societies undergo the transformation into service societies, this research contributes to our understanding of the diverse effects of inequality and informs policy decisions to ensure that this transformation benefits all. Chapter 2 proposes a canonical model of intertemporal choice in which both current and future conspicuous consumption can distort household consumption behavior. What makes our model tractable is that we assume that each consumer cares about the expected comparison of relative consumption, which provides a parsimonious characterization of positional concerns. We show that equilibrium consumption behavior is a function of the distribution of conspicuous consumption in an individual’s reference group as well as her own permanent income. In turn, the distribution of conspicuous consumption is a function of the distribution of permanent income. The relevant empirical implication is that an individual’s consumption, by itself, is no longer a valid proxy for the individual’s permanent income if relative consumption matters. In Chapter 3, we document a robust effect of visible inequality on household expenditures in the United States over the period 2010–2018. To that end, we exploit variation in the cross-sectional distribution of visible consumption — expenditures in clothing, personal care, food away from home and vehicles — for younger and older households across regions of the United States and over time. We find that rising inequality in expenditure on visible goods within the different groups is associated with an increase in average spending on those same goods as well as an increase in total expenditures by the average household in the group. Our main findings are not likely to be a symptom of correlated differences in preferences across generations, selection effects across geographical locations, alternative sources of state-level variation over time, or measurement error. Rather, they most likely reflect actual distortions associated with consumption externalities. We conjecture that historically low interest rates and the rise of social media underlie our findings.Item Economics of Ramping Rate Restrictions at Hydro Power Plants: Balancing Profitability and Environmental Concerns(University of Waterloo, 2014-08-01) Niu, ShileiThis thesis consists of three essays on the economics of ramping rate restrictions at hydro power plants. The first essay examines the impact of ramping rate restrictions imposed on hydro operations to protect aquatic ecosystems. A dynamic optimization model of the profit maximizing decisions of a hydro operator is solved for various restrictions on water flow, using data for a representative hydro operation in Ontario. Profits are negatively affected, but for a range of restrictions the impact is not large. Ramping restrictions cause a redistribution of hydro production over a given day, which can result in an increase in total hydro power produced. This affects the need for power from other sources with consequent environmental impacts. The second essay uses a real options approach to study the impact of ramping rate restrictions on hydro power plants. We consider the effect on profits from electricity generation in order to inform policy decisions about ramping rate restrictions. A novelty of the essay is in examining the optimal operation of a prototype hydro power plant with electricity prices modelled as a regime switching process. We show that profits are negatively affected by ramping restrictions. Interestingly for a large range of restrictions, profit is not sensitive to ramping restrictions. The results point to the importance of accurately modelling electricity prices in gauging the trade offs involved in imposing restrictions on hydro operators which may hinder their ability to respond to volatile electricity prices and meet peak demands. The third essay investigates the impact of ramping rate restrictions on hydro power plants using a three regimes model with multiple jump sizes. We consider how the multiple jump sizes among these three regimes affect the impact of ramping restrictions on the prototype hydro power plant. The numerical experiments provide further evidence that ramping restrictions have a larger impact when the expected variation in price is increased such as through an increase in the jump size which makes it desirable to change water release rates relatively frequently. In both non-stochastic and stochastic settings, these three essays have highly consistent results on the impact of ramping restrictions on the hydro station's profit. We observe profits are significantly affected (by less than 7% in essay one, by less than 10% in essay two, and by less than 9% in essay three) in the case of the most severe ramping constraints, but we also observe a range of less severe ramping restrictions over which profits are not substantially affected (by less than 2% in essay one, by less than 3% in essay two, and by less than 2% in essay three). Results from this thesis should facilitate the implementation of ramping rate restrictions for environmental and economic benefits.Item The Economics of Waste Clean-Up from Resource Extraction Projects: Environmental Bonds versus Strict Liability(University of Waterloo, 2019-01-08) Aghakazemjourabbaf, SaraThis thesis contains three essays spanning the fields of environmental economics and investment in a non-renewable resource under uncertainty. All essays relate to the analysis of the clean-up of hazardous waste resulting from natural resource extraction. The first essay addresses the problem of inadequate hazardous waste clean-up by resource extraction firms. It compares the impacts of an environmental bond and a strict liability rule on a firm's ongoing waste abatement and eventual site clean-up decisions. The firm's problem is modeled as a stochastic optimal control problem that results in a system of Hamilton Jacobi Bellman equations. The model is applied to a typical copper mine in Canada. The resource price is modelled as a stochastic differential equation, which is calibrated to copper futures prices using a Kalman filtering approach. A numerical solution is implemented to determine the optimal abatement and extraction rates as well as the critical levels of copper prices that would motivate a firm to clean up the accumulated waste under each policy. We have found that the effect of an environmental bond relative to the strict liability rule depends on certain key characteristics of the bond - in particular whether the bond pays interest and whether the firm borrows at a premium above the risk-free rate to fund the bond. If the firm can borrow at the risk-free rate, and if the government pays the risk-free interest rate on the bond, the value of the mine prior to construction, optimal abatement rates, and optimal operating decisions are the same under the bonding policy and strict liability rule. In contrast, if no interest is paid on the bond, the value of the project is reduced compared to the strict liability rule and the firm undertakes a larger amount of waste abatement under the bond. Because the mine is less pro table, it is less likely that the firm will invest in this mine. In the more realistic case that the firm borrows to fund the bond at a premium over the risk-free rate, the value of mine is reduced further and waste abatement levels are increased. The prospect of investment in the mine is even less likely compared to the previous case. The model developed in the first essay allows that the firm temporarily mothballs the project, but eventually clean-up must occur at the end of the project life. However, the possibility of firm bankruptcy was not explicitly included in that model, and thus mothballing is the only option available to the firm to delay waste clean-up. The second essay contributes to our previous study by considering another important option available to the firm, i.e., the possibility of declaring bankruptcy. A firm's decision to declare bankruptcy is specified as a Poisson process that treats bankruptcy as an exogenous, risky event governed by a hazard rate. The hazard rate at a project level depends on waste stock and output prices, while at the company wide level depends on the commodity prices only. For both default scenarios, the paper demonstrates that the firm operating under a bonding policy, that covers the full cost of waste clean-up, is less able to avoid its liability costs, particularly if the bond is financed from retained earnings. If the firm borrows to finance the bond, it is possible that the firm avoids clean-up costs by defaulting on the loan following a bankruptcy. In contrast to the results of the first essay, if the firm finances the bond out of its retained earnings, and if the government pays the risk-free rate of interest on the bond, the bond and the strict liability rule do not give the same outcome when bankruptcy is possible. Such a bond encourages a higher abatement rate and makes site clean-up more likely compared to the strict liability rule. Firms operating under the liability rule have stronger incentives to delay their clean-up costs by sitting idle and they may eventually go bankrupt at the mothballed stage. Therefore, the possibility of bankruptcy makes the firm worse off under the bonding policy, while benefits the firm under the strict liability rule. Modelling uncertain commodity prices is a key component of the analysis of optimal firm behavior in hazardous waste clean-up. The third essay investigates the dynamics of copper prices by comparing and contrasting three different stochastic models, which are a one-factor mean-reverting model, a two-factor model, and a one-factor long-term model. These models are calibrated to copper futures prices using a Kalman filtering approach. The first model assumes spot prices are mean-reverting in drift. The second model defines two correlated stochastic factors that are spot prices and convenience yield. The third model transforms the two-factor price model into a single factor model. We have found that the first model fails to describe the term structure of copper futures prices with long maturities. In contrast, the two-factor and the long-term models are shown to provide a reasonable fit of the term structure of copper futures prices and can be applied to long-term investment projects. The results highlight the importance of stochastic convenience yield in copper price formation.Item The Economics of Water Conservation Regulations in Mining: An Application to Alberta's Lower Athabasca River Region(University of Waterloo, 2020-04-21) Huang, YichunLarge demands for water by the mining industry are of increasing concern around the world and access to water is seen as a significant constraint on future mine development. Citizens, environmental groups and other non-governmental organizations have called for better regulation of water consumption by the mining industry in many regions across the globe. This thesis analyzes the efficiency of a specific command and control water management policy in the Lower Athabasca River Region in Alberta, Canada applied to oil sands mining operations. This policy imposes different restrictions on water withdrawals from the river according to the severity of threat to the aquatic ecosystem due to low water levels. In developing the policy, the Alberta government focused on the potential environmental impacts of projected water use by the oil sands industry. Economic cost was considered only in terms of the cost to the oil sands industry of constructing water storage facilities. This thesis undertakes a more robust examination of economic cost by developing a stochastic optimal control model for an oil sands firm choosing production and water use rates, as well as the optimal timing to build a water storage facility. A Hamilton Jacobi Bellman equation is specified which incorporates uncertain oil prices as well as uncertain water flow volumes in the Athabasca River and a numerical solution is implemented using a finite difference approach. The price of oil is modelled as a log-mean reverting stochastic process. Uncertainty in river flows is captured by modelling the restrictions on water withdrawals as a regime switching stochastic process. The thesis estimates the economic cost of the restrictions in terms of the difference in value of the oil-producing asset with and without water restrictions. In Chapter 2, the model is used to analyze the Phase 1 water regulations, which were first applied in 2007. The Phase 1 regulations classified river water flows into green, yellow, or red zones with green implying abundant water and red implying reduced water flows. The water restrictions varied depending on river flow zone. In the thesis, the impact of these restrictions is captured by modelling the zones as different regimes with the probability of switching between regimes based on historical river flow data. The analysis also considers a number of cases in which the future river flow conditions are lower than those experienced historically. In Chapter 2, the total cost of the regulations is estimated as well as the marginal cost of increasing the water restrictions. For the Phase 1 restrictions, no information was available regarding the potential environmental benefits of the restrictions. Our conclusions show that the cost of the Phase 1 restrictions was quite small given the current reserve base and capacity of the industry. The chapter demonstrates how the marginal cost of tightening restrictions depends on the state variables, including resource stock and price. It is also shown that marginal cost is nonmonotonic with respect to price volatility. The marginal cost is shown to vary across individual oil sands projects depending on reserve levels and lease length. Chapter 3 undertakes an analysis of the Phase 2 regulations, implemented in 2015 as an update of the Phase 1 regulations. The development of the Phase 2 regulations was supported by a detailed scientific report (Phase 2 Framework Committee (P2FC) Report) outlining the likely environmental benefits of a suite of different water restrictions (rule sets) in terms of wetted area around the river. Wetted area was used as the indicator of ecosystem disturbance. The suite of water restrictions considered encompassed a much finer delineation of different water zones than in the Phase 1 regulations. The P2FC report presented an efficient frontier contrasting the effect on wetted area with the cost of water storage implied by the different restrictions. Based on their analysis the Committee chose one of the rule sets as the preferred option. This chapter uses the model developed in Chapter 2 to create a similar efficient frontier, comparing the change in wetted area with the economic cost to the oil sands. Assumptions regarding future river flows, operating costs, oil prices, future production and storage capacity and remaining established oil reserves are examined to determine their impact on the efficient frontier and the relative cost-effectiveness of the various options. The most important factors in determining the cost of the water restrictions are found to be the assumed storage capacity, cost of storage, projected river flow conditions, productive capacity and reserves. It is also found that given the significant growth of oil sands productive capacity assumed in the P2FC report, the recommended water restriction rule set is robust. However, for a smaller assumed growth in oil sands capacity, the proposed water restrictions impose very little cost on the oil sands industry. In this case, a different rule set would be recommended based on its better expected outcome in terms of maintaining the chosen ecosystem indicator. A key input to the analysis is the assumed model for oil prices. Chapter 4 applies different versions of the Kalman filter to estimate three one-factor stochastic models. The regime switching model turns out to outperform the other two single-regime models. However, the single-regime log mean-reverting model is judged to be adequate for the analysis in Chapters 2 and 3 and is preferred because it greatly reduces the complexity of the numerical computation and the interpretation of results.Item The Effect of Technological Innovations on Economic Activity(University of Waterloo, 2016-05-05) Oystrakh, MykhayloIn this PHD dissertation, the nature of technological shocks and their effect on economic activity are examined. The first chapter is dedicated to the analysis of general purpose technologies (GPTs) and their identification in the patent data. I argue that the previous literature has been identifying sub-technologies of a given GPT rather than the technology itself. Moreover, I argue that the quantity of active GPTs identified using the old methodology is substantially greater than theoretically possible. The first chapter of my thesis presents an alternative approach to the identification of a general purpose technology than the one used in the previous literature and provides an example of such a technology identified in the patent data. This technology is the microcomputer. The chapter examines its evolution, diffusion, and the effect it has on other patented technologies. The findings are in line with the theoretical GPT literature. In the second chapter of my dissertation, I examine the effect of a positive technology shock on aggregate hours worked. Compared to the previous literature, the novelty of the approach proposed in the current study comes from two directions: the choice of variables and the technique used to identify the technological shock. A patent-based measure is the main measure used to approximate the unobserved aggregate technological process. The second important novelty of the study is the use of the sign restriction Vector Autoregression (VAR) shock identification technique that is believed to be more robust than the alternative identification techniques used in the literature. The sign restrictions are determined using a general equilibrium model with skilled and unskilled labour featuring skill-specific and general technology shocks. The analysis shows that aggregate hours increase following both kinds of technological shocks. The results obtained in the study are robust to the technology measure used. When a patent-based measure is replaced with a production function residual measure the effect of the shock still improves the aggregate hours. Moreover, the results are robust to the way aggregate hours themselves are specified. Finally the results are supported when more conventional long run restrictions are applied on the VAR. However, with the long run restrictions it does matter how the aggregate hours are specified the same way it mattered in the previous studies. In the third chapter, I continue the analysis of the effect of a technological improvement on the labour market. In this study, I attempt to address the general criticism of the VAR methodology about the fact that only a limited number of variables can be processed. This limitation requires a researcher to make a choice in favour of certain variables and to justify this choice. Moreover, no matter which variables are chosen for the final modeling form, some information would still be excluded from the study. I overcome this limitation by incorporating factor analysis techniques into the VAR framework. I introduce Factor-tofactor VAR (F-FAVAR) that is an extension of the FAVAR approach that has already been succesfully used in the past.The F-FAVAR methodology allows an inclusion of a latent factor "impulse variable" besides the latent factor "response variables". As a result a large number of macroeconomic variables is examined and there is no necessity to exclude any of the variables. Moreover, there is no necessity to make a choice in favour of a particular measure of technology. All the relevant technological measures can be included into the model. As a result it is possible to examine the reaction of various economic and business variables to a technological shock. The reaction of the key economic variables to a technology shock is in accordance with the theory. The reaction of various labour measures to the shock was also examined. The results of the third chapter mainly support the findings of the second chapter about the positive effect of a technology shock on aggregate hours. In order to check the robustness of the results, instead of the F-FAVAR methodology, a simple FAVAR methodology was also used. For that methodology it was necessary to select a particular measure of technology to be included into the VAR model as well as to impose restrictions on the VAR. Several different technology measures with two alternative sets of restrictions were used. The results of the robustness analysis mainly support the findings of the F-Favar methodology.Item Empirical Essays in Water and Electricity Use(University of Waterloo, 2018-04-30) memartoluie, ghazalThis thesis consists of three self-contained essays evaluating the impacts of educational attainment and average income at the community level on water consumption, the effects of different sources of energy on wholesale electricity rates and the effects of eliminating coal-fired electricity generation on air quality. The first chapter looks at the impacts of educational attainment and average income at the community level on water consumption. The focus of this paper is on the three cities of Cambridge, Kitchener and Waterloo. In this chapter, we construct a unique household-level panel dataset that has monthly water consumption data of 22,000 households from 2012-2014. Our study shows that water consumption decreases as income at the Dissemination Area (DA) level increases. Our findings also show that educational attainment affects water use in a different way at different education levels in the following sense: increasing educational attainment at lower levels of education (from no certificate to high school certificate) increases water consumption, but the effect reverses when people receive post-secondary education. In addition, our study suggests that although education at different geographical levels affects household water consumption in different ways, there is a turning point where the explained relationship changes direction. By creating and utilizing a unique panel data from the Independent Electricity System Operator (IESO) and Statistics Canada, over 2009 to 2014, the second chapter intends to analyze the effects of different sources of energy on wholesale electricity rates to see how the considerable shifts in electricity fuel mix since $2009$ have impacted the Hourly Ontario Energy Price (HOEP) and Global Adjustment (GA). The study demonstrates that while less reliance on coal has resulted in an upward pressure on the HOEP, the increase in other sources of energy such as nuclear, hydro and wind power generations outweighed the effects of eliminating coal, which explains why the average HOEP fell from 26.4 $\$/MWh$ in 2012 to $23$ $\$/MWh$ in 2014. On the other hand, the GA in terms of $\$/MWh$, rose by almost $50\%$. Although less coal is significantly associated with higher GA payments, we do not find that more wind and nuclear power generation have resulted in higher GA payments. In addition, our results show that more gas power is correlated with a reduction in GA. Lastly, the third chapter uses the hourly air pollutant data associated with four cities of Toronto, Hamilton, Ottawa and Sarnia in addition to the data on hourly electricity generation from coal, gas, hydro, nuclear, wind and other (solar and biofuel) type of power plants for the period of $2009$ to $2016$. The pollution data are obtained from the Ontario Ministry of the Environment and Climate Change and the data on fuel mix are obtained from the Independent Electricity System Operator (IESO). We estimate the effects of hourly changes in fuel mix on Ozone ($O_{3}$), Nitrogen Oxide ($NO_{x}$), and Particulate Matter ($PM_{2.5}$) over a period in which coal-fired electricity generation was gradually eliminated from the electricity market. The paper also estimates the impacts of fuel mix on the probability of smog days. The results suggest that relative to coal, more nuclear and wind energy is correlated with decreased levels of $NO_{x}$ and $PM_{2.5}$. In addition, an increase in nuclear powered generation is associated with reduced $O_{3}$ levels. On the other hand, the results suggest that in general, the correlation between different types of fuel mix and the elimination of smog days are not statistically significant.Item Essays in Consumer Debt, Personal Saving Rate, and Household Insolvency in Canada(University of Waterloo, 2017-01-24) Ghaziaskar, MohamadThis thesis consists of three essays attempting to determine the key determinants of spending-saving behaviour and financial stability of Canadian households from both micro and macro economics. In the first chapter, we try to isolate and evaluate the socio-economic character- istics of households who accumulate debt by spending more than what they earn in a given year. In particular, with a focus on the right tail of spending distribution –households who tend to spend a larger fraction of their income– we use multivariate regression type analysis to isolate socio-economic factors that contribute to debt ac- cumulation and lead to insolvency. We aim to highlight the micro level factors that have contributed to the increase in the proportion of spender households in the population. Specifically, what are the marginal effects of age, income level, education, and family structure on the probability of a given households spends more than its income? Related to this question, we also consider the effect of budget allocation decisions on the probability of spending more than income and accumulating debt. We find that budget share of specific items in household consumption basket, has important information about the spending-saving behaviour of a household. Our analysis provides valuable information about what goods and services are the main outlays of expenditure for households in severe debt. The second chapter is about evaluating the relationship between household’s saving rate and its long-run income from a more technical perspective. This chapter is an attempt to address the possible endogeneity issue present in this relationship. In addition to the conventional and widely exercised methodology, three alternative approaches are considered, and in a Monte Carlo experiment, the performance of four approaches is tested in three different environments. Results of our analysis show that the conventional methodology outperforms only when there is a simple linear type of endogeneity in the model. However, when more complicated types of endogeneity are present, it fails to predict saving rate unbiasedly. In the end, using FAMEX and SHS datasets from Canada, we re-evaluate the question with all different methods. Our empirical analysis suggests that more affluent households do save a larger fraction of their income, and the results are consistent across different years not sensitive to different instruments. Finally, the third chapter looks at the household financial stability from a macroeconomic perspective. Using aggregate data, at the provincial level, on households insolvency rate, we try to point out important aggregate key factors in determining financial instability of households. In a series of panel regression analysis, we explore the effect of aggregate variables such as GPD, unemployment rate, housing prices, interest rate, and household debt level, on the insolvency rate of households. Moreover, in a panel vector autoregressive estimation, we attempt to investigate the interactive effects and consequences of insolvency rate and gross domestic product, while controlling for other related aggregate variables. The key finding is that higher levels of household debt are associated with higher insolvency rate, and insolvency rate has a negative impact on GDP.Item Essays in Earnings, Academic Productivity, and School Competition(University of Waterloo, 2017-08-31) gao, hangThis thesis consists of three self-contained essays evaluating current issues in earnings, academic productivity, and school competition. The first chapter, coauthored with Anindya Sen, looks at returns to post-secondary education and the gender gap in Ontario. We construct a unique individual level panel dataset consisting of earnings of public sector employees of the Government of Ontario, facilitated by the Ontario Salary Disclosure Act which reveals earnings of $100,000 or more. Individual earnings from 2005-2013 were merged with publicly available profiles on www.linkedin.com, which contains details on educational attainment, field of study, job experience, and specific occupation. There are significant field specific differences in returns to post-secondary education. In terms of graduate education, on average, while Ph.D.'s earn a premium relative to undergraduates, there is a modest gender gap in earnings of doctoral degree holders, which is not present among undergraduates. The sample period also experienced significant salary increases for female undergraduates. However, there are significant gender differences in the proportion of individuals who are managers and also in earnings of senior managers belonging to early cohorts. By creating and utilizing a unique panel data from several different sources including the Ontario Ministry of Finance, EconLit, Web of Science, Online CVs, and so forth on all tenured and tenure track professors in 16 Ontario economic departments over 1996 to 2012, the second chapter intends to analyze the pay and position of those professors to see how co-authorship affect an economist's research productivity and how research productivity impacts pay and promotion. The study demonstrates that there is a significant return to co-authored publications relative to solo-authored publications in Ontario universities. The investigation of the relationship between co-authorship and productivity reveals that co-authored publications are associated with higher citation counts. Our research has also demonstrated that higher quality publications have a greater effect on salary, and the likelihood of promotion is positively associated with past performance. The estimates also suggest that some gender differences exist concerning the impact of co-authored publications on the likelihood of promotion. Finally, we find that in Ontario, economists are more likely to co-author with their colleagues,who have the similar ability, experience, and research interest. We found no gender-sorting effect among Ontario economists. In the last chapter, I use a data set obtained from the Ontario Ministry of Education and the Educational Quality and Accountability Office (EQAO) to estimate whether average school performance is affected by competition from other nearby schools. The availability of data on a panel of schools allows me to control for the potentially confounding effects of unobserved school specific attributes. I employ fixed effects, random trend and Instrumental Variables estimation to eliminate the potential simultaneity bias associated with competition between schools. Following Gibbons, Machin and Silva (2008), I use proximity to school board boundaries as an instrumental variable for local school competition. IV estimates suggest a statistically insignificant association between school competition and school performance. Another important finding is that the estimated coefficient is stronger when the sample is restricted to the Toronto District School Board, which may suggest that competition may improve school performance where students are given more freedom to choose their school. This finding may lend support to the current policy which is designed to improve public school performance in Ontario.Item Essays in Risk Management for Crude Oil Markets(University of Waterloo, 2012-10-22T17:05:46Z) Al Mansour, AbdullahThis thesis consists of three essays on risk management in crude oil markets. In the first essay, the valuation of an oil sands project is studied using real options approach. Oil sands production consumes substantial amount of natural gas during extracting and upgrading. Natural gas prices are known to be stochastic and highly volatile which introduces a risk factor that needs to be taken into account. The essay studies the impact of this risk factor on the value of an oil sands project and its optimal operation. The essay takes into account the co-movement between crude oil and natural gas markets and, accordingly, proposes two models: one incorporates a long-run link between the two markets while the other has no such link. The valuation problem is solved using the Least Square Monte Carlo (LSMC) method proposed by Longsta ff and Schwartz (2001) for valuing American options. The valuation results show that incorporating a long-run relationship between the two markets is a very crucial decision in the value of the project and in its optimal operation. The essay shows that ignoring this long-run relationship makes the optimal policy sensitive to the dynamics of natural gas prices. On the other hand, incorporating this long-run relationship makes the dynamics of natural gas price process have a very low impact on valuation and the optimal operating policy. In the second essay, the relationship between the slope of the futures term structure, or the forward curve, and volatility in the crude oil market is investigated using a measure of the slope based on principal component analysis (PCA). The essay begins by reviewing the main theories of the relation between spot and futures prices and considering the implication of each theory on the relation between the slope of the forward curve and volatility. The diagonal VECH model of Bollerslev et al. (1988) was used to analyse the relationship between of the forward curve slope and the variances of the spot and futures prices and the covariance between them. The results show that there is a significant quadratic relationship and that exploiting this relation improves the hedging performance using futures contracts. The third essay attempts to model the spot price process of crude oil using the notion of convenience yield in a regime switching framework. Unlike the existing studies, which assume the convenience yield to have either a constant value or to have a stochastic behaviour with mean reversion to one equilibrium level, the model of this essay extends the Brennan and Schwartz (1985) model to allows for regime switching in the convenience yield along with the other parameters. In the essay, a closed form solution for the futures price is derived. The parameters are estimated using an extension to the Kalman filter proposed by Kim (1994). The regime switching one-factor model of this study does a reasonable job and the transitional probabilities play an important role in shaping the futures term structure implied by the model.Item Essays in Wealth Effect, Family Structure, and Female Labour Supply(University of Waterloo, 2020-04-27) Pan, YazhuoThis thesis consists of three self-contained essays evaluating topics in family structure, household wealth, and married women's labour decisions using Canadian data. The twentieth century has seen significant changes in family formation and dissolution in Canada. Chapter 1, co-authored with Ana Ferrer, investigates the role of family structure (family disruption or reconstitution) on cognitive outcomes of primary school Canadian children. We focus on reading and math scores of these children and look into differential effects by gender as well as child’s cultural background, which is an important dimension to consider in diverse societies. Using the rich panel data information from the National Longitudinal Survey of Children and Youth (NLSCY), collected biennially since 1994, we find substantial disadvantages in reading, but not math, scores among children in single parent families, relative to children in intact families. However, we find that single parenthood seems to affect boys more than girls in terms of their reading performance, but girls’ math performance suffers more than that of boys when in step families. In addition, when looking into differential effects across cultural/religious affiliations of family structure on cognitive performance, we typically observe differential effects in math, but no reading scores. These results suggest that exploring the heterogeneity of children’s performance responses to family disruption might be an important factor in assessing the benefits of programs aimed at helping children to cope with family disruptions. It is worth noting that changes in marital status of parents not only affect their children's performances but also influence their own welfare. The spouse (typically the wife), who usually has less labour market attachment compared to the other spouse (typically the husband) due to the traditional gender roles, is less likely to accumulate much assets during the marriage. Therefore, this spouse with less assets might have less intra-household bargaining power and could potentially face worse financial conditions in the event of a divorce compared to the other one. Chapter 2, co-authored with Stéphanie Lluis, studies a reform of the marital property law following the amendment of the Civil Code of Quebec to improve economic equality between spouses by imposing an equal division of the family assets when a marriage ends. This change created an unexpected shift in the bargaining power of the spouse with relatively lower investment in the family assets, usually the wife. We explore whether and if so how the changes in this redistributive divorce law impacted female spouses' labour market decisions and individuals’ marital decisions. We use a difference-in-difference approach and exploit detailed information on female labour supply and marital status from the Canadian Labour Force Survey (LFS) data to analyze outcomes before and after the reforms in Quebec, relative to other provinces which did not experience marital property law changes over that time period. We find that the reform of marital property law that improve economic equality between spouses in Quebec reduced married women’s hours of work and the adverse employment effect is relatively stronger for less educated women (the most disadvantaged spouse) and among couples with larger wealth as measured by the ownership of the couples’ property. At the extensive margin, we find that the redistributive law change significantly decreased the labour force participation of the relatively more educated married women but increased the labour force participation of the relatively less educated women (among married women who stayed married). This differential result by education among married women suggests that the labour supply impact of the redistributive law change likely depends on the decision to stay married as marital decisions are also part of the household bargaining outcome. We investigate this question by studying the Quebec amendment impact on divorce rates and the decisions of whom to marry. We find that the redistributive law change had no impact on overall divorce but significantly increased the likelihood of divorce/separations among less educated spouses. In addition, over the sample of young individuals deciding whether or not to marry, the Civil Code amendment contributed to increasing the proportion of marriages in which the wife is more educated than the husband. The intra-household bargaining position is not the only factor that could affect female labour supply as well as people's marital decisions. The wealth of a household is also another important factor that might influence spouses' decisions in the labour and marriage markets. Chapter 3 examines the impact that changes in household wealth due to the house price variations during the 1990s and 2000s had on the labour market behaviour of Canadian married women. House prices in Canada have tripled over the past decades. This dramatic rise has essential effects on households' wealth and the wealth effects might be different on house owners versus renters (potential house buyers). I use time-series average house prices data from the Canadian Real Estate Association's Multiple Listing Service data set (CREA MLS) which covers the entire Canada, 102 real estate boards (REBs), and provides detailed geographical variations in house prices in both urban and rural areas. Then, I link these house prices to each respondent in the confidential longitudinal household files - the Survey of Labour and Income Dynamics (SLID). Estimating the causal effects of housing wealth changes on female labour supply is challenging. For instance, The life-cycle theory of the labour supply emphasizes that unexpected gains in wealth should decrease household labour supply. However, wealth changes due to rising house prices could be anticipated by a household. Thus, there might be no effect if the household was forward looking and incorporated these expected wealth changes into their decisions. In addition, the reverse causality between house prices and female labour supply has been highlighted in literature. Rising housing prices induce more female spouses to participate in the labour market to offset the future housing purchase costs if their families intend to enter homeownership or balance rising rental prices. Nonetheless, it is also plausible that more working women in one area, which contributes to a higher proportion of two-earner households with stronger payment capacities, may bid up the house prices there. Therefore, I apply two strategies to overcome these challenges. My first strategy is to calculate a measure of house-price shocks which is aimed at capturing unexpected variations in local house prices, rather than variations that could be anticipated by people. My second strategy is constructing comprehensive and exogenous topography instruments to address the reverse causality between the house prices and female labour supply. After capturing unexpected changes in local house prices, among house owners, I find that an increase in (positive) house-price shocks causes a reduction in the likelihood of participation of married women. At the intensive margin, I find that an increase in the house price shocks induces a decrease in annual work hours of a woman at the low percentile. Additionally, I find heterogeneous effects of house-price shocks on women's labour supply depending on their education level and residence locations. These results are consistent with the prediction of family labour supply and life-cycle models, which indicates that unexpected gains in wealth should decrease household labour supply. There is no evidence showing that house-price shocks have labour effect on renters in this study, which might suggest that they choose to delay to enter homeownership or find a cheaper residence instead of adjusting their labour supply when an appreciation of house prices occurs. The IV approach which uses the fraction of buildable land and the difference in elevation as the instruments also provides consistent results as the house-price shock approach does.Item Essays on Empirical likelihood for Heaviness Estimation, Outlier Detection and Clustering(University of Waterloo, 2024-04-24) Zhang, ZhuojingEmpirical likelihood (EL) is a non-parametric likelihood method of inference. There are a large number of studies about the extensions and applications of EL. Most studies discuss the EL ratio for constructing confidence regions and testing hypotheses, while this thesis focuses on the EL weight assigned to each observation in the dataset by the EL ratio function. This thesis contains three chapters on studying the behaviour and application of EL weights. Specifically, chapter 1 provides a novel approach based on the EL weights to estimate a threshold that separates the bulk part and tail part of datasets of datasets with a heavy-tailed histogram. Because the transition between the bulk and tail parts can not be fully disjointed in many cases, we allow the threshold to be a random variable instead of a fixed number. In addition, the threshold is relative to a benchmark since heaviness is a relative concept. In Chapter 2, we focus on outlier detection. We develop an unsupervised method based on EL to identify outliers. In particular, we calculate the EL weights through the EL ratio function with the bootstrap mean constraint and show that the EL weights have different behaviours for datasets with and without outliers. Additionally, the EL weights provide a measure of outlierness for all observations, which might reduce the cost of time. In Chapter 3, I consider a clustering algorithm based on the EL weights. Clustering is an unsupervised method that aims to group unlabeled datasets based on their similarities. Numerous clustering methods have been proposed. The performance of these methods is typically related to the characteristics of the dataset in the specific applications. The proposed EL weights based clustering algorithm is available to work on datasets with outliers. Moreover, it might suggest the number of clusters for well-separated clusters.Item Essays on Innovation, Patents, and Econometrics(University of Waterloo, 2010-08-03T18:18:48Z) Entezarkheir, MahdiyehThis thesis investigates the impact of fragmentation in the ownership of complementary patents or patent thickets on firms' market value. This question is motivated by the increase in the patent ownership fragmentation following the pro-patent shifts in the US since 1982. The first chapter uses panel data on patenting US manufacturing firms from 1979 to 1996, and estimates the impact of patent thickets on firms' market value. I find that patent thickets lower firms' market value, and firms with a large patent portfolio size experience a smaller negative effect from their thickets. Moreover, no systematic difference exists in the impact of patent thickets on firms' market value over time. The second chapter extends this analysis to account for the indirect impacts of patent thickets on firms' market value. These indirect effects arise through the effects of patent thickets on firms' R\&D and patenting activities. Using panel data on US manufacturing firms from 1979 to 1996, I estimate the impact of patent thickets on market value, R\&D, and patenting as well as the impacts of R\&D and patenting on market value. Employing these estimates, I determine the direct, indirect, and total impacts of patent thickets on market value. I find that patent thickets decrease firms' market value, while I hold the firms’ R\&D and patenting activities constant. I find no evidence of a change in R\&D due to patent thickets. However, there is evidence of defensive patenting (an increase in patenting attributed to thickets), which helps to reduce the direct negative impact of patent thickets on market value. The data sets used in Chapters 1 and 2 have a number of missing observations on regressors. The commonly used methods to manage missing observations are the listwise deletion (complete case) and the indicator methods. Studies on the statistical properties of these methods suggest a smaller bias using the listwise deletion method. Employing Monte Carlo simulations, Chapter 3 examines the properties of these methods, and finds that in some cases the listwise deletion estimates have larger biases than indicator estimates. This finding suggests that interpreting estimates arrived at with either approach requires caution.Item Essays on Portfolio Selection, Continuous-time Analysis, and Market Incompleteness(University of Waterloo, 2023-04-05) Li, YixuanThis thesis consists of three self-contained essays evaluating topics in portfolio selection, continuous-time analysis, and market incompleteness. The two opposing investment strategies, diversification and concentration, have often been directly compared. Despite the less debate regarding Markowitz's approach as the benchmark for diversification, the precise meaning of concentration in portfolio selection remains unclear. Chapter 1, coauthored with Jiawen Xu, Kai Liu, and Tao Chen, offers a novel definition of concentration, along with an extreme value theory-based estimator for its implementation. When overlaying the performances derived from diversification (in Markowitz's sense) and concentration (in our definition), we find an implied risk threshold, at which the two polar investment strategies reconcile -- diversification has a higher expected return in situations where risk is below the threshold, while concentration becomes the preferred strategy when the risk exceeds the threshold. Different from the conventional concave shape, the estimated frontier resembles the shape of a seagull, which is piecewise concave. Further, taking the equity premium puzzle as an example, we demonstrate how the family of frontiers nested inbetween the estimated curves can provide new perspectives for research involving market portfolios. Parametric continuous-time analysis for stochastic processes often entails the generalization of a predefined discrete formulation to a continuous-time limit. However, unknown convergence rates of the frequency-dependent parameters can destabilize the continuous-time generalization and cause modelling discrepancy, which in turn leads to unreliable estimation and forecast. To circumvent this discrepancy, Chapter 2, coauthored with Tao Chen and Renfang Tian, proposes a simple solution based on functional data analysis and truncated Taylor series expansions. It is demonstrated through a simulation that our proposed method is superior in both fitting and forecasting continuous-time stochastic processes compared with parametric methods that encounter troubles uncovering the true underlying processes. When the markets are incomplete, perfect risk sharing is impossible and the law of one price no longer guarantees the uniqueness of the stochastic discount factor (SDF), resulting in a set of admissible SDFs, which complicates the study of financial market equilibrium, portfolio optimization, and derivative securities. Chapter 3, coauthored with Tao Chen, proposes a discrete-time econometric framework for estimating this set of SDFs, where the market is incomplete in that there are extra states relative to the existing assets. We show that the estimated incomplete market SDF set has a unique boundary point, and shrinks to this point only when the market completes. This property allows us to develop a novel measure for market incompleteness based upon the Wasserstein metric, which estimates the least distance between the probability distributions of the complete and incomplete market SDFs. To facilitate the parametrization of market incompleteness for implementation, we then consider in detail a continuous-time framework, in which the incompleteness specifically arises from stochastic jumps in asset prices, and we demonstrate that the theoretical results developed under the discrete-time setting still hold true. Furthermore, we study the evolution of market incompleteness in four of the world's major stock markets, namely those in China, Japan, the United Kingdom, and the United States. Our findings indicate that an increase in market incompleteness is usually caused by financial crises or policy changes that raise the likelihood of unanticipated risks.Item Female Labour Supply with Time Constraints(University of Waterloo, 2013-08-29T20:35:22Z) Franceschi, FrancescoThe Italian labour market seems unable to allocate a significant fraction of the working age population efficiently. The gap between the employment rate in Italy and in the other developed economies is foremost attributable to the low employment rates of youth, seniors and women. The low employment rates of these three groups are due to several factors limiting both labour demand and labour supply. For women in particular, constraints on the allocation of time play a crucial role in determining labour supply behaviour. In this thesis we try to understand how non-standard time constraints may affect the behaviour of women, and their labour supply in particular. In the first chapter we study how the constraints on work-schedules affect the time allocation of workers in Italy. For a large fraction of employed individuals the work schedule is very rigid, as a consequence of outdated industrial relations. In order to understand whether constraints on the work-schedule produce significant effects on the allocation of time of wage/salary workers in Italy, we exploit the intrinsic differences between them and self employed workers. In fact, one of the main features of self-employment is the greater control over the days worked and daily hours of work. We use the last wave of the Italian time use survey (2008-2009) to provide evidence that the distribution of hours of work of self-employed workers is much more dispersed than that of wage/salary workers and that average standard deviation of their daily minutes of work within a week is significantly larger. Then we show that self-employed workers respond more to shocks affecting the value of leisure. We show that on sunny days the increase of leisure and the reduction of work are significantly larger for self-employed workers. We address whether unobservable characteristics, such as preferences for leisure and for outdoor activities in particular, determine this differential response and find no evidence for this. We interpret the differential response to weather shocks as a consequence of the time constraints on work-schedules. This evidence is relevant for female labour force participation since in Italy a large fraction of women choose not to work because they would otherwise not be able to reconcile family and work responsibilities. In the second chapter we study the Added Worker Effect (AWE). The retrospective questions provided by the new labour force survey allow identification of transitions between labour market states in a 12 month time-window. Since we are able to identify the reason for the husband’s job loss, we distinguish between transitions associated with low or high income losses. We find that both the wife’s probability of joining the labour force and that of finding a job increase when the husband is dismissed or he is forced to quit his job for health reasons, two cases of usually high income losses. Moreover, we estimate the wife’s full transition matrix between labour market states and we find that the loss of a job by a husband increases the probability that his wife will enter the iv labour force. Finally, we provide some descriptive evidence that time constraints can also impact the magnitude of the AWE. Focusing on mothers with young children, we show that the estimated AWE is positively correlated with the regional provision of child care services. The third chapter is based on the time use files of the Canadian General Social Survey. We study how Sunday shopping deregulation changed the time allocation of women, with a particular focus on those with children. The empirical analysis relies on the provincial variation in the time of the policy change. Our results suggest that women with children, who usually face stringent time constraints, respond to the policy change by substituting weekday shopping with Sunday shopping. The amount of time these women save from doing shopping on weekdays allows them to increase their minutes of work. On Sunday, shopping increases at the expense of leisure. The main result of this chapter is that the labour supply of mothers may change even when non-obvious constraints on the allocation of time change.Item The housing market impacts of wastewater injection induced seismicity risk(Elsevier, 2018-11-01) Ferreira, Susana; Liu, Haiyan; Brewer, BradyUsing data from a county severely affected by the increased seismicity associated with injection wells since 2009 in Oklahoma, we recover hedonic estimates of property value impacts from nearby shale oil and gas development that vary with earthquake risk exposure. Results suggest that the seismic activity has enhanced the perceived risks associated with wastewater injection but not shale gas production. This risk perception is limited to injection wells within 2 km of the properties.Item The Labour Market Integration of Immigration and Their Role on Innovation(University of Waterloo, 2017-12-20) 张, 珏This thesis contains three chapters evaluating the role of labour market skills in determining immigrants' labour market integration and Canada's innovation rate. In Chapter 1, I estimate how the impact of entry economic conditions on immigrants' labour market outcomes varies by the versatility of their skills. Skill versatility is measured using information on the sectoral concentration of native-born workers with a particular education field and level. Entry economic conditions are measured using city-level unemployment rates among native graduates from a similar education field and level. Since immigrants' location choices can be endogenous to geographic local economic conditions, I address the endogeneity of immigrants' location choices by exploiting the historical settlement patterns of immigrants from the same countries of origin. I find that immigrants suffer a 5 to 8 percent decline in their annual earnings when there is a one percentage-point increase in entry unemployment rates. When I incorporate the skill versatility measure in the estimation, the earnings loss is mitigated by 1 to 3 percentage points, if there is a one standard deviation increase in immigrants' skill versatility level. This effect is less evident for highly educated immigrants and it may be due to their being more likely to have pre-arranged employment before landing. I also find that city-level onward migration is more likely for immigrants who face unfavourable labour market conditions at entry, and movers do fare better than stayers conditional on initial setbacks. Meanwhile, immigrants' geographical mobility is found to be strengthened to some extent by their skill versatility. Chapter 2 examines the effect of changes in skilled-immigrant population shares in 98 Canadian cities between 1981 and 2006 on per capita patents. The Canadian case is of interest because its `points system' for selecting immigrants is viewed as a model of skilled immigration policy. Our estimates suggest unambiguously smaller beneficial impacts of increasing the university-educated immigrant population share than comparable U.S. estimates, whereas our estimates of the contribution of Canadian-born university graduates are virtually identical in magnitude to the U.S. estimates. The modest contribution of Canadian immigrants to innovation is, in large part, explained by the low employment rates of Canadian STEM-educated immigrants in STEM jobs. Our results point to the value of providing employers with a role in the immigrant screening process. Lastly, in Chapter 3, using inventors' names to identify their ethnicity and Canadian Census and NHS data to estimate ethnic populations, we estimate patenting rates for Canada's ethnic populations between 1986 and 2011. The results reveal higher patenting rates for Canada's ethnic minorities, particularly for Canadians with Korean, Japanese, and Chinese ancestry, and suggest that immigrants accounted for one-third of Canadian patents in recent years, despite comprising less than one-quarter of the adult population. Human capital characteristics, in particular the share with a PhD and the shares educated and employed in STEM fields, account for most of the ethnic-minority advantage in patenting. Our results also point to larger patenting contributions by foreign-educated compared to Canadian-educated immigrants, which runs counter to current immigrant selection policies favouring international students.Item Modelling the dynamics of commodity prices for investment decisions under uncertainty(University of Waterloo, 2010-09-27T17:01:31Z) Chen, ShanThis thesis consists of three essays on commodity-linked investment decisions under uncertainty. Specifically, the first essay investigates whether a regime switching model of stochastic lumber prices is a better model for the analysis of optimal harvesting problems in forestry than a more traditional single regime model. Prices of lumber derivatives are used to calibrate a regime switching model, with each of two regimes characterized by a different mean reverting process. A single regime, mean reverting process is also calibrated. The value of a representative stand of trees and optimal harvesting prices are determined by specifying a Hamilton-Jacobi-Bellman Variational Inequality, which is solved for both pricing models using a fully implicit finite difference approach. The regime switching model is found to more closely match the behavior of futures prices than the single regime model. In addition, the optimal harvesting model indicates significant differences in terms of land value and optimal harvest thresholds between the regime switching and single regime models. The second essay investigates whether convenience yield is an important factor in determining optimal decisions for a forestry investment. The Kalman filter method is used to estimate three different models of lumber prices: a mean reverting model, a simple geometric Brownian motion and the two-factor price model due to Schwartz (1997). In the latter model there are two correlated stochastic factors: spot price and convenience yield. The two-factor model is shown to provide a reasonable fit of the term structure of lumber futures prices. The impact of convenience yield on a forestry investment decision is examined using the Schwartz (1997) long-term model which transforms the two-factor price model into a single factor model with a composite price. Using the long-term model an optimal harvesting problem is analyzed, which requires the numerical solution of a Hamilton-Jacobi-Bellman equation. I compare the results for the long-term model to those from single-factor mean reverting and geometric Brownian motion models. The inclusion of convenience yield through the long-term model is found to have a significant impact on land value and optimal harvesting decisions. The third essay investigates the dynamics of recent crude oil prices by comparing and contrasting three different stochastic price models, which are a two-state regime switching model, a two-factor model analyzed in Schwartz (1997) and a two-factor model examined in Schwartz and Smith (2000). Prices of long-term crude oil futures contracts are used to calibrate and estimate the model parameters. The performances of the two-factor models are comparable in terms of fitting the market prices of the long-term oil futures contracts and more closely match the behavior of oil futures prices than the regime switching model.