Labor Unions, Corruption, and Electric Vehicles: Three Essays on Applied Microeconomics

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Government intervention can lead to second-best economic outcomes when market failures occur. However, too much government intervention may result in lower social welfare. The first essay evaluates the welfare consequences of the regulation of labor markets. In the past five decades, there has been a trend of production base moving to the south instead of clustering in the union-heavy Midwest. Many foreign automakers operated their assembly plants in the southern right to work (RTW) states allowing them to hire non-union workers. However, due to the historical relationship between unions and the Big Three (Ford, General Motors, Chrysler), the Big Three have to pay higher labor costs wherever they produce. Through a hedonic analysis, we first demonstrate that unions increase automakers’ manufacturing costs. We then set up and estimate a market equilibrium model to quantify the impacts of unions on prices, costs, and market shares. Counterfactual analysis shows that labor unions led to a $0.83 billion loss in consumer surplus, a $0.21 billion loss in firm profits, and a $0.2 billion gain in union workers, resulting in a $0.84 billion loss in social welfare. The second essay examines the welfare consequences of policies aimed at reducing environmental damage and energy consumption. China has become the world's largest market for electric vehicles (EVs) since 2015 and the government promotes the technology aggressively by providing large subsidies for EV buyers. The amount of subsidy is based on the driving range instead of the battery capacity as in the U.S. This paper evaluates the impacts of the subsidy program using detailed vehicle registration data in China from 2010 to 2015 and a household survey of vehicle ownership. I develop and estimate a market equilibrium model for China’s automobile market in which the demand side consists of a random coefficient discrete choice model and the supply side characterizes automakers’ pricing decisions under the government subsidy program. The estimation suggests that while the subsidy program in 2015 contributed to 94 percent of EV sales in large cities, the program favored small and low-quality EV models that consumers do not value and led to a $2.88 billion loss in social welfare. The hypothetical subsidy program based on the battery capacity would have led to a $0.62 billion increase in consumer surplus and a $0.2 billion increase in social welfare compared with the subsidy program. The third essay uses the recent anti-corruption campaign as a natural experiment to examine the effect of anti-corruption campaigns on economic activities. First, we propose a novel measure of anti-corruption intensity at the city level based on the percentage reductions in the city's revenue share of expensive restaurants after the issuance of Eight-Point Regulations on December 4, 2012. Second, using the city-level anti-corruption intensity measures, we investigate its relationship with economic activities, particularly, city-level GDP growth, number and size (measured by registered capital) of new firms registered in different industries, the exit rate of existing firms, existing firm revenue, and industry revenue. We find that the anti-corruption intensity index in a city is not correlated with the city's GDP growth rate, and is primarily negatively related to economic activities only in directly targeted industries, “Retail”, “ Hotel and Catering”, and “ Culture, Sports, and Entertainment”.
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Environmental economics
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Union Local
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Li, Shanjun
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Liaukonyte, Jurate
Barwick, Panle Jia
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Applied Economics and Management
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Ph.D., Applied Economics and Management
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Doctor of Philosophy
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Government Document
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dissertation or thesis
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