Browsing by Author "Hokkanen, Topi"
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- Essays on optimal environmental regulation and information economics
School of Business | Doctoral dissertation (monograph)(2024) Hokkanen, TopiThis monograph studies optimal environmental regulation under asymmetric information and carbon leakage risk. I use tools from the fields of mechanism design and microeconomic theory to study how the possibility of firms' relocation to less regulated countries as a result of domestic regulation, i.e. carbon leakage affects incentive-compatible environmental regulation. To address this question, I build a stylized model of a single country which regulates global externalityproducing firms by way of incentive-compatible regulatory schemes, i.e. mechanisms. I allow the firms to possess private information on their costs of abatement and carbon leakage risk as typedependent outside options. In the first chapter of this monograph, I introduce my main model and derive the optimal secondbest regulatory mechanism for the monopolist country. I find that novel regulatory distortions arise from relocation risk and that the optimal second-best mechanism sometimes implements stricter regulation that would be socially optimal. Interestingly, I find that carbon leakage is also not necessarily an indication of a failed regulatory policy, but rather an optimally induced result of it. The second chapter of this monograph extends the basic model by relaxing the assumption that the domestic regulator cannot commit to cross-border transfers. I show that conditional crossborder transfers rectify the major drawback of the simple mechanisms discussed previously: the fact that the regulator is losing socially valuable firms and therefore also abatement. With crossborder transfers, the regulator is able to buy the otherwise leaked abatement directly from the relocating firms themselves, essentially outsourcing both the firms and their abatement. The second extension considers exogenous regulatory policies implemented in the other country. I show that the regulator benefits from any such policies - be they price or quantity-based, since they serve to decrease the outside options of the firms, thus making the firms more captive in the home country at the outset. The third and final chapter of this monograph analyzes a situation where two countries compete for externality-producing firms by way of incentive-compatible regulatory mechanisms. Using a simplified version of my main model, I show that a Bertrand-like race to the bottom results, where both countries' social welfare dissipates fully in the resulting equilibrium. The main cause of this is the lack of relocation frictions for the firm, pitting the countries against one another as Bertrand competitors. I extend the model to account for a fixed preference of a firm in favor of the other country and show that in this case, the preferred country reaps this preference for its own benefit in every resulting equilibrium. - Estimating technical efficiency in Finnish industry: A stochastic frontier approach
School of Business | Master's thesis(2014) Hokkanen, TopiOBJECTIVES: The objective of this thesis is to estimate the technical efficiency of Finnish industry in various sectors using stochastic frontier models. Furthermore this thesis provides a comparison between parametric and nonparametric estimation techniques utilized in the efficiency analysis literature. We estimate the technical efficiency for each sector separately, both as a cross-section and using panel data techniques. We discuss the various extensions to the models considered and identify further topics of research based on our estimation results. METHODOLOGY AND DATA: This thesis utilizes stochastic frontier estimation techniques to estimate technical efficiency for various sectors of industry. Production frontiers are estimated both parametrically and nonparametrically. The two main approaches to frontier estimation utilized in the thesis are Stochastic Frontier Analysis (SFA) and Stochastic Nonparametric Envelopment of Data (StoNED). The dataset we utilize is a cross-sectional panel dataset of companies operating in various sectors of the Finnish industry. Technical efficiencies are estimated with both cross-sectional and panel data methods, with various specifications. CONCLUSIONS: We find that the mean efficiency in most sectors is quite high in most models. The estimated efficiencies are sensitive to the model choice. Parametric and nonparametric estimates are found to be similar and of the same magnitudes for the majority of sectors considered. We find significant variability in technical efficiencies over time, particularly in models where firm-specific heterogeneity is controlled.