Two essays in applied microeconomics: Minivans and Chile.

This dissertation contains two empirical essays. Each one addresses a long-standing economics question. The first essay extends a measure of the benefits that new products bring to society and uses it to value the introduction of the minivan. The second essay estimates firm-level productivities in Chilean manufacturing industries to learn about the dynamics of productivity. The common theme of both essays is the econometrics used; in each case, estimators are formulated to accommodate the generality of the stochastic processes associated with the unbalanced panels used in these measurements. Measurement of new product benefits is typically frustrated by the lack of observed new product price variation. This shortcoming in observed data prevents the use of revealed preference alone in computing the change in consumer welfare. Past approaches estimate demands by imposing functional form assumptions on the distribution of consumer preferences over product attributes. Reservation prices are then inferred from these estimated tastes. In this essay, the distributional assumptions for tastes over the product attributes are explored and extended to permit both idiosyncratic taste variation and taste variation across observable consumer characteristics. This model of consumer demand is coupled with a Bertrand-Nash model of price competition between producers. The equilibrium framework is then used to compute the change in both consumer and producer surplus. The results suggest that the extension of the demand system is econometrically important for consistency of the welfare measure, and that households with larger families benefited significantly from the minivan's introduction. The second essay is motivated by the empirical observation that firms in panel data sets exhibit significant heterogeneity in productivity, and that estimators of productivity should be consistent with the richness found in firm-level data sets. This essay develops an estimation strategy that is better suited to some data sets, and that provides a simple link between the economic theory of the firm and the estimation strategy. Using this new strategy, results are obtained which shed light on how productivity growth takes place, and statistical tests are derived which evaluate the consistency of eight post-Pinochet Chilean manufacturing industries with theoretical models of productivity dynamics.Ph.D.EconomicsSocial SciencesUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/131304/2/9840626.pd