This collection of essays attempts to address the question: what are the main driving forces of the recent changes in entrepreneurship and business dynamics in the US? In the first chapter, I examine changes within businesses in the US by showing that the share of value added by pass-through entities (sole proprietorships, partnerships, LLCs, and S-corporations) almost doubled while that of C-corporations has declined by one-forth. During this period, there have been notable changes in the tax structure and tax avoidance within these entities. I develop a dynamic growth model with endogenous tax avoidance, occupation choice, and uninsurable entrepreneurial risk to study the extent to which changes in taxation can account for the observed reallocation of output. My model results show that changes in tax structure account for 14 percent of the reallocation of output share observed in the US. I also find that the cumulative effect of changes in taxation, borrowing ability, and tax avoidance accounts for about 26 percent of the reallocation of output. In Chapter 2, I examine a different perspective on business dynamics by documenting the decline in business formation and entrepreneurship in the US. In fact, I document that entrepreneurship is more prevalent in married households and amongmen, and that these groups have undergone a greater decline in entrepreneurship since the 1980s. Additionally, I document that changes in the number of married households and the increase in female labor force participation account for over 40 percent of the overall fall in entrepreneurship in this period. To understand the relationship between demographic composition factors and entrepreneurship, I develop a model with an occupation choice for individuals of different marital status, college skills, and gender. The model takes into account important features of the data, including the extent of marital sorting, the skill premium, the gender wage gap, and the gender business income gap. My results indicate that changes in the demographic composition (share of married households, fraction of skilled individuals, marital sorting) account for 76% of the decline in entrepreneurship, 68.4% of the fall in married entrepreneurs, and 70.5% of the decrease in male entrepreneurs. Moreover, considering all changes account for 82.8% of the observed fall in entrepreneurship.

These essays attempt to explore how technological change, technology diffusion and economic distortions shape the aggregate economy. The first chapter empirically documents that wage inequality within the group of skilled workers in the U.S. has significantly widened since 2000 and that the changing trend of wage inequality was entirely driven by the non-routine analytic occupation. The model I build demonstrates that the task allocation induced by investment- specific technical change can widen the within-group wage inequality because of the “composition effect”. The quantitative results provide a well-matched timing and magnitude of the non-linear expansion path in wage inequality that is observed in the data. In chapter two I explore the role human capital plays in the convergence of Asian growth miracles. I incorporate the idea that education could facilitate technology diffusion into a growth framework by developing a model of human capital investment, adding a role for human capital in the convergence of productivities towards the technology frontier. I then calibrate my model to the South Korea between 1960 and 2019. My model can remarkably match the ‘S Shaped’ convergence trajectory in South Korea well. More importantly, the quantitative exercises demonstrate that a significant extent of the externality is required to match the transition path of output in South Korea. A series of quantitative experiments suggest that if the externality is removed from the model, then it cannot quantitatively match South Korea’s convergence pattern well. Chapter three documents a fact that that firms in developing economies face both financing constraints and face size-dependent distortions. The two distortions, however, affect firms in opposite ways. I build a model showing that the adverse effects associated with size-dependent distortions drastically reduce, and may even reverse, if firms also face financing constraints. This occurs because the misallocation effects of the two may offset each other. The quantitative analysis shows that size- dependent distortions estimated from data lead to up to 25 percent of output drop if they are implemented alone, but have virtually no effect on aggregate output in the presence of empirically relevant capital financing constraints.

The demographic transition from high birth to low birth is a fundamental process that countries undertake. It can create substantial challenges for economic growth and social policy by straining public finance. This dissertation explores the sources of low fertility and examines the effects of government policies that aim to affect fertility behavior.In the first chapter, I use a static model of fertility choices to estimate to what extent different factors contribute to low fertility in South Korea and examine the effects of child-related policies on fertility. In the model, two key factors affect fer- tility choices: the minimum consumption level required to have a child and women’s opportunity cost of raising children. The model is calibrated to match the fertility behavior of Korean women and used to examine the impact of lump-sum transfers and childcare subsidies on their fertility. I find that transfers to households per child are more cost-effective than child care subsidies. Transfers per child can reach the target fertility at a lower cost by targeting women who already have children and whose wage is sufficiently low to choose to have another child rather than work. In the case of child care subsidies, on the other hand, women who are childless or have one child and whose wage is sufficiently high to choose working over having a child are the most responsive to the policy. Thus, transfers can achieve the target fertility most cost-effectively by inducing higher-order fertility among relatively lower-wage women. In the second chapter, I document the empirical relationships between homeown- ership and fertility in South Korea. First, there is a positive relationship between the home price and fertility among homeowners. A rise in home prices by 7,346,000 KRW, equivalent to 8734.94 USD in 2010, is associated with a 2.95% increase in the mean likelihood of giving birth. Second, for renters, the same increase in the local home price in the prior year is related to a 1.24% decrease in the mean likelihood of giving birth.

In this dissertation, I study two different sides of inequality. In the first part of this dissertation, I show what the role of unwanted childbirth is on women’s wages and education. I document that on average, mothers whose first childbirth was unwanted have lower levels of education, lower wages, and have their first childbirth at younger ages compared to the rest of the mothers. In the second part of this dissertation, I show how the introduction of a carbon tax affects individuals with different educational attainment. In particular, I show how the carbon tax affects their consumption, but also how the tax reduces air pollution and consequently affects individual mortality. I find that introducing this mortality channel reduces the aggregate welfare cost of a carbon tax by about half. In terms of the distributional effect of the policy, the mortality channel deepens the regressivity of the tax, since the benefits in terms of mortality reductions are similar for all individuals, the valuation of this benefit is higher for more educated individuals.

Using the Development Accounting methodology specified in Caselli (2004), we investigate the potential of PM2.5, a measure of pollution, as an explanation of cross-country differences in GDP using available Macroeconomic data from the Penn World Table and the WHO. We find that the addition of PM2.5 makes improvements to the model within the expectations of the literature. This adjustment shows promise for use in cooperation with other, more potent economic factors.

One of the most pressing questions in economics is “why are some countries richer than others?” One methodology designed to help answer the question is known as “Development Accounting,” a framework that organizes the determinants of income into two categories: differences in inputs and differences in efficiency. The objective of our work is to study to what extent differences in the levels of pollution can help explain income differences across countries. To do this, we adjusted a factor-only model to allow us to enter PM2.5, a measure of pollution that tracks the concentration of fine particulate matter in the air and looked to see if the model’s predictive power improved. We ultimately find that we can improve the model’s success in predicting GDP by .5 - 6%. Thus, pollution is unlikely to be a major force in understanding cross-country income differences, but it can be used with other economic factors to potentially magnify its impact with other additions in the future.

The field of behavioral economics explores the ways in which individuals make choices under uncertainty, in part, by examining the role that risk attitudes play in a person’s efforts to maximize their own utility. This thesis aims to contribute to the body of economic literature regarding risk attitudes by first evaluating the traditional economic method for discerning risk coefficients by examining whether students provide reasonable answers to lottery questions. Second, the answers of reasonable respondents are subject to our economic model using the CRRA utility function in which Python code is used to make predictions of the risk coefficients of respondents via a two-step regression procedure. Lastly, the degree to which the economic model provides a good fit for the lottery answers given by reasonable respondents is discerned. The most notable findings of the study are as follows. College students had extreme difficulty in understanding lottery questions of this sort, with Medical and Life Science majors struggling significantly more than both Business and Engineering majors. Additionally, gender was correlated with estimated risk coefficients, with females being more risk-loving relative to males. Lastly, in regards to the model’s goodness of fit when evaluating potential losses, the expected utility model involving choice under uncertainty was consistent with the behavior of progressives and moderates but inconsistent with the behavior of conservatives.

This dissertation consists in two chapters. In the first chapter I collected and digitized historical tax records from the Spanish colonial regime in Ecuador to estimate the long-run effects of a forced labor institution called concertaje on today’s economic performance. This institution allowed landlords to retain indigenous workers due to unpaid debts, and forced them to work as peasants in rural estates known as haciendas. In order to identify the causal effects of concertaje, I exploit variation in its intensity caused by differences in labor requirements from the crops a region could grow. I first report that an increase in 10 percentage points in concertaje rates is associated with a 6 percentage points increase in contemporary poverty. I then explore several channels of persistence. Districts with higher concertaje rates have been historically associated with higher illiteracy rates, lower school enrollment, and populations with fewer years of education. I also report that concertaje is associated with a higher fraction of people working nowadays in the agricultural sector.

In the second chapter I use administrative data on the ownership, management, and taxes for the universe of all firms in Ecuador to study the role of family management in firm dynamics and its implications for aggregate productivity. A novel finding I document is that family-managed firms grow half as quickly as externally-managed firms. This growth differential implies that family-managed firms account for half of employment, despite comprising 80% of firms. I construct a general equilibrium model of firm dynamics that is consistent with these facts. Entrepreneurs choose whether to utilize family members as managers or hire external managers. External managers allow firms to scale up production, but their efficiency is a affected due to contractual frictions. Changes in the contractual environment that lead to a drop in the presence of family-managed firms by half could increase output on the order of 6%, as firms that abandon family management enjoy rapid growth.

This dissertation consists of two parts. The first part is about understanding the mechanism behind female labor supply movement over economic development. Female labor force participation follows a U-shape pattern over per capita GDP cross nationally as well as within some countries. This paper questions if this pattern can be explained through sectoral, uneven technological movements both at market and at home. For that I develop a general equilibrium model with married couples and home production. I defined multiple sectors both at home and in the market. And by feeding the model with uneven technological growth, I observe how participation rate moves over development. My results indicate that a decrease in labor supply is mainly due to structural transformation. Meaning, a higher technology in a large sector causes prices to go up in that sector relative to other. Hence, labor allocated to this sector will decrease. Assuming this sector has a big market share, it will decrease the labor supply. Also, I found that the increase in female labor supply is mostly because of movement from home to market as a result of a higher technological growth in the market. The second part is about developing a methodology to verify and compute the existence of recursive equilibrium in dynamic economies with capital accumulation and elastic labor supply. The method I develop stems from the multi-step monotone mapping methodology which is based on monotone operators and solving a fixed point problem at each step. The methodology is not only useful for verifying and computing the recursive competitive equilibrium, but also useful for obtaining intra- and inter-temporal comparative dynamics. I provide robust intra-temporal comparative statics about how consumption and leisure decisions change in response to changes in capital stock and inverse marginal utility of consumption. I also provide inter-temporal equilibrium comparative dynamics about how recursive equilibrium consumption and investment respond to changes in discount factor and production externality. Different from intra-temporal comparative statics, these are not robust as they only apply to a subclass of equilibrium where investment level is monotone.

This dissertation studies two wide ranging phenomena and their socio-economic impacts: urban divergence in terms of geographical skill sorting and fast rising housing prices. The first essay explores the empirical pattern as well as the driving forces behind the American cities’ diverging path over the past forty years. Compared to the rest of the U.S. cities, the top 20 largest cities have been growing faster in several aspects, such as city-average wage, housing price, and measured innovation intensity (e.g., patents, venture capital). In addition, this geographical divergence has contributed substantially to the rising inequality in America. To explore the causes of this divergence, this paper constructs a spatial sorting model where entrepreneurs with different talents can freely move across cities. The key idea is that cities with advantages in innovation attract more productive entrepreneurs and more workers, thereby driving up wages and housing prices. Two things distinguish my models from others: 1. Large cities are having endogenous innovation advantage in equilibrium; 2. I can freely explore the driving forces behind the divergence, with an emphasis on how technology changes can reinforce the spatial sorting mechanism. Specifically, three types of technological changes have increased the benefits of skill clustering in innovative cities: general productivity increases; improvements in communications technologies; and declines in trade costs.

The second essay studies how heterogeneous households respond to the fast rising housing prices through their life-cycle behaviors. Chinese housing market has been undergoing a rapid booming period since 1998, causing the house prices increasing significantly. As a result, households endured severe financial burdens to buy homes at price-to-income ratios of around six. Along with the rising house prices, household savings rate has been increasing consistently since 1998. Can the rising house prices be an important factor to explain the increase in household saving rate? This paper develops a life cycle dynastic model with endogenous choice on housing, coresidence and intergenerational transfer, then quantitatively analyze the effect of housing price on household saving. It shows that housing is an important motive for saving, and it accounts for about 35% of the increase in household savings rate. The housing situation affects households’ saving behavior through three channels. First, households are financially constrained due to the down payment requirement and they choose to limit their consumption in order to buy houses. Second, young adults live in their parents’ houses for a long time and save more intensively, since they get to pay less for the housing expenses under coresidence. Thirdly, older parents make large sum of intergeneration transfer in aid of the children’s housing purchase, indicating the housing affordability issue also has influence on old parents’ saving decisions.