Essays on Public Policy
Abstract
In this thesis, I investigate how public policy influences economic behavior in both a macroeconomic and microeconomic environment. The first two chapters analyze the impact of local policy and its spillovers. The last investigates how fiscal austerity, when forced upon a country by outside authorities.To be specific, the first essay evaluates the return on state business tax credits to mobile firms. Policy makers aggressively compete for mobile firms with tax credits that incentives firms to locate in state with many states paying more in tax incentives than collecting in corporate tax revenue. An important question in this is estimating returns so that local governments are not over bidding for these mobile firms. I construct a novel data set of Kentucky subsides and exploit a policy that increases the subsidy value in distressed counties. This provides an exogenous shift to subsidy generation and circumvents many biases that are uncontrollable in the firm location decision. I find results that are consistent with past papers on the topic that these subsidies generate a three percent increase in employment at the cost of seven thousand dollars per job.The second essay investigates cross-border shopping for lottery goods. An important question in the area of taxation is estimating the extent to which local tax policy can be circumvented by cross-border shopping. This question is particularly relevant now as states have large differences in legality and tax rates on sin goods such as alcohol, cigarettes and marijuana. I contribute to this discussion by exploiting a natural experiment resulting in retailers in Illinois losing the ability to sell popular lottery tickets for eight days. I use this and a difference in difference estimation technique to estimate how lottery players in Illinois crossed the border to play games in bordering states. I find a large fraction of sales that would have occurred in Illinois crossed over. I further show that players in the interior of the state substituted in local Illinois games at a higher rate than players nearer to the border.The third essay explores how forced austerity impacted the Greek economy post the 2010 European financial crisis. There is an extensive literature surrounding fiscal austerity and how governments choose to change their spending and tax polices to achieve fiscal stability and the ramifications on the country’s economy. When outside authorities determine how a country should engage in austerity, they may have a comparative advantage in budget formation or the creation tax policy. On the other hand, local leaders may have institutional knowledge on how government finances should be ordered to maximize economic stability. I explore this tension by constructing a synthetic Greece that did not undergo forced austerity and find significant decreases in employment and output compared to the synthetic control.
Degree
Ph.D.
Advisors
Gallen, Purdue University.
Subject Area
Public policy|Economics|Labor relations|Political science
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