UBC Theses and Dissertations
Essays in asset pricing and labor economics Esmkhani, Khalil
This thesis is a collection of four essays. In the first chapter, I build a model of a production network where each firm’s choice of debt is endogenous. For a realistic network calibrated to the US economy, the model predicts that more central firms are safer, pay less to borrow, and choose higher debt. I confirm these predictions empirically. The model also produces an important externality: due to bankruptcy costs and network connections, there is a wedge between the socially optimal capital structure and the decentralized equilibrium. This suggests that government policies could reduce the externality, for example by making the tax shield a function of the network position. In chapter 2, I study a standard CARA-normal asset pricing model with arbitrary information-sharing social networks. In the benchmark equilibrium, I show more central investors have access to more information transmitted via the network; and a more connected network always improves price informativeness. However, when there is uncertainty about the source of information and the quality of information varies across different sources, more information sharing could lead to a less informative market price. In addition more central investors' signals could become distorted, lowering their overall access to information via the network. In chapter 3, we quantify firm heterogeneity in skill returns and present direct evidence of worker--firm complementarities. Using population data linked to cognitive and noncognitive skill measures, we estimate a model of firm-specific returns to these attributes. We find evidence of significant return heterogeneity, sorting, and earnings convexification. In chapter 4, we study the introduction of Universal Basic Income (UBI) with a particular focus on how it affects real estate and the urban environment. In the baseline calibration with $5,000 UBI, about 38% of households see large welfare gains, but the remainder see smaller welfare losses. Prices, rents, and the ownership rate all fall. The wage rises and the makeup of the city's inner core versus outer suburbs also changes, although these changes depend on exactly how UBI is financed. The more progressive the financing scheme, the more likely high income households are to leave the city center.
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Attribution-NonCommercial-NoDerivatives 4.0 International