Three Essays in Applied Microeconomics

My dissertation is composed of three sections. The first section examines the effect of monetary incentives on student performance in public education in Texas. I address how to deal with non-random samples caused by self-selection bias by using propensity score matching method. For the second part, using household level panel data, it addresses the substantial heterogeneity across demographic groups. In addition, for the last section, I also investigate firm?s optimal innovation strategy. It addresses the relationship among firm growth, firm size and firm behavior in the U.S. manufacturing industry.

The first section investigates the causal relationship between a teacher incentive program (District Awards for Teacher Excellence (D.A.T.E.) Program) and student academic achievement in Texas by using school-grade level panel data. I find that D.A.T.E. schools obtain significantly higher student achievement gains in reading and math than non-D.A.T.E. schools after the implementation of the program. In addition, D.A.T.E. schools implementing selected school plan obtain greater student achievement gains than those implementing district wide plan. However, the causal effects are found mainly among middle school. Importantly, these findings imply that the teacher incentive program could be an effective policy tool in Texas for developing student performance, but should be cautiously implemented due to the difference in effects according to the U.S. school level.

The second section shows that while financial benefit and moral hazard appears to be the main cause of bankruptcy for less educated individuals, well-educated individuals file due to negative income shocks. This is consistent with some evidence suggesting that educated individuals face greater stigma and/or worse information regarding bankruptcy than less-educated individuals. Importantly, these results imply that optimal bankruptcy policy should likely vary across different demographic groups.

In the third section, I find that firm size is negatively related to firm growth and positively correlated with firm survivability in the manufacturing industry. R&D investment has a significantly positive effect on firm growth and survivability in the same industry. In the services industry, advertising investment causes a reverse effect on firm growth. This suggests that innovative activities should vary depending on the characteristics of each industry.