Date of Award

Spring 1-1-2018

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

First Advisor

Murat Iyigun

Second Advisor

Charles de Bartolomé

Third Advisor

Keith Maskus

Fourth Advisor

Sergey Nigai

Fifth Advisor

Stephen Billings

Abstract

My first chapter proposes a general equilibrium of an urban model that generates an industry hierarchy within a city cluster, with primarily the service industries exhibiting a hierarchical pattern. The main mechanism is composed of monopolistic competition, heterogeneous economies of scale and love for variety in the service sector. The two-city model generates a unique and asymmetric equilibrium, where the larger city supplies a superset service variety over the smaller city. The simulations show that a decrease in trade costs always leads to urban convergence. The empirical section shows that there is a spatial dynamic interaction between service employment and the neighboring population. A one percent growth in the neighboring population increases the high-order service employment share by 0.116 percent in the city. This phenomenon holds significantly only for the largest city, but not for smaller ones within a city cluster.

In my second chapter, I try to answer the question whether consumers adjust tastes and participate in boycott in response to political disputes. Using an online review data set, this study shows that the political tension in China toward Korea, which was triggered by the installation of an American missile defense system in Korea, reduced by 29% the visits to Korean restaurants in China and reduced by 54% the entry of new Korean restaurants in China. In addition, the online rating of the Korean restaurants declines after the events of political tension, which suggests that the political tension affect not only people's action but also their subjective quality judgment. I empirically find that the negative effects are more pronounced for lower priced, lower rated restaurants, and restaurants with more Korean-sounding names. Regions with higher economic openness tend to experience more consumption reduction. My conjecture for the cause, considering the fact that most of the Korean restaurants owned by Chinese, is that the worsening perception of a country reduces the taste for the foods of the associated country.

My third chapter builds an overlapping generations (OLG) model of endogenous growth, which is compatible with rapid urbanization in many emerging markets. A key assumption is that the rural-urban internal migration is motivated by maximizing lifetime earnings. When they arrive at the city, people with high talent receive education and expect to earn a higher income in the next period; people with low talent work in the informal sector for two periods. The formal and informal sectors coexist in the city. In the equilibrium, the expected incomes are equalized between the rural and the urban sector for migrants. Simulations of this model show that there's a continuous urbanization process accompanied by continuous growth. The urbanization rate starts from 10% and ends up at 80%, and total educated population and average human capital persistently increase.

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