Graduate Thesis Or Dissertation
 

Three essays on constrained markets

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  • The three essays in this dissertation progressively answer the following questions: (a) How important are constraints? (b) Who benefits from removing constraints? (c) When does a constraint for a single market predominantly affect closely related markets? These questions are applied in the context of time, weather, and minimum wage constraints, respectively. The first essay demonstrates that constraints matter. A data envelopment analysis capacity utilization methodology is used to measure impacts on sales from a sequential relaxation of the time and income constraints. Using a subsample bootstrap to estimate confidence intervals, results show that time matters more than income, particularly in fall and winter when other activities compete for gardening time. The second essay shows that the poor are least likely to gain from the relaxation of non-income constraints. A theory of demand is developed in which consumers face multiple constraints. Then, a structural model is used to econometrically estimate the effect of global warming on demand, using nursery data on flowering plants. The model shows that there exists a tipping point around 64 degrees Fahrenheit, above which demand ceases to be climate-constrained. The third essay shows that a constraint in a single market can sometimes have more profound consequences on other, more distantly related markets. First, it is proven that if a series of markets are structured like a chain-- where only own and neighboring prices matter--then a shock to one market decreases with distance. The case of minimum wages in Oregon is investigated using a large panel dataset for all workers in Oregon using a first difference econometric model. It is determined that the ripple effects of the minimum have even larger effects on higher-wage earners, disconfirming the chain pattern. High substitutions between low and high wage groups may explain the pattern. Altogether the essays further the understanding of constraints to demonstrate that (a) constraints significantly affect economic outcomes, (b) if one constraint is lifted, those individuals alternately-constrained are left behind from any benefits, and (c) constraints to a single market may have unintended and sometimes larger effects on 'farther' markets.
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