Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Economics

Supervisor

Igor Livshits

Abstract

In the first chapter, I show that the economy’s production structure plays an important role in determining innovation. In particular, using patent data I document a set of empirical facts that are initially puzzling, but can be explained by recognizing that innovation decisions are related between sectors. A model is developed to explain the empirical findings, but it also has an important finding for the current debate on U.S. patent policy. I use the model to demonstrate that a perceived long-run decline could be explained by increased innovative opportunities in certain industries and the responses of inventors in other sectors of the economy.

The other two chapters seek to better understand how consumer credit markets function. We document that consumer bankruptcies and interest rates increase dramatically during recessions, and -- inconsistent with the standard theory of consumption smoothing – there is also a decline in consumer credit. In the third chapter, we use a quantitative model of consumer bankruptcy to show that income loss during recessions cannot account for the volatility in bankruptcies and interest rates we observe in the data, nor can it account for the cyclicality of the debt. The model matches the data better when lending standards become tighter during recession, but still misses on several other empirical observations. The last consumer credit paper empirically investigates these forces along with wealth shock. We also use micro data to find insolvency filers are more likely to have middle-class characteristics during a recession.

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