Topics in applied microeconomics : time allocation and natural resource use on Alaska's North Slope and market power in the U.S. motor carrier industry
This paper presents two applications of empirical microeconomics
based on choice theoretic optimization principles. The first topic
explores the determinants of subsistence time allocation in a utility
theoretic model of household production. The second topic examines firm
pricing behavior in a deregulated, but concentrated industry setting.
The first part of this applied microeconomic analysis estimates
the subsistence time versus wage labor time allocations of Alaska's
North Slope inhabitants using ordered probit based on a household
production model. The explanatory variables measure labor supply,
demographic, and cultural influences.
The major findings are as follows. First parameter estimates
differ statistically and substantially between Inupiat versus non-Inupiat residents, implying that optimal natural resource management
decisions may vary with the ethnicity of the resource owners. Second,
marital status, age, gender, and participation in generalized gift
giving and receiving are important determinants of subsistence time
allocations. Third, time spent in wage labor appears to be exogenous to
the subsistence time allocation decision, indicating that the time
allocation process is recursive. Fourth, we find an inverse
relationship between wage labor time and subsistence participation.
This means that reductions in wage employment opportunities lead to
increased subsistence activity. For the North Slope, this implies that
Prudhoe oil depletion will result in an increase in the use of
subsistence natural resources.
The second part of this study turns from the individual behavior
to firm behavior. During the 1980's, researchers have noted a trend
towards increased concentration in the general freight, less-than-truckload
(LTL) portion of the U.S. motor carrier industry. The purpose
of this study is to employ new empirical industrial organization (NEIO)
techniques to determine whether the more concentrated post-1980, LTL
motor carrier industry is exerting anti-competitive monopoly pricing
behavior.
The NEIO approach is used to formulate the relationship between
market price and marginal cost in what is referred to as the
representative firm's 'supply relation.' The firm's supply relation is
estimated jointly with the cost function and the factor share equations
under the assumption that cross equation disturbance terms are
correlated (SUR). An instrumental variables procedure is used to test
and control for correlation between output (on the right hand side) and
the disturbance terms in the cost and supply equations.
The results indicate that the trend toward increased industry
concentration does not imply anti-competitive performance in the sense
of rising price-cost margins
