Economics

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This is the collection for the University of Waterloo's Department of Economics.

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Distance functions and optimal taxation
(University of Waterloo, 2026-01-08) Burbidge, John
Governments use taxes to pay for some of their expenditures. Setting aside the benefits of the expenditures, the taxes economic agents have to pay reduce their well being. One objective of the optimal taxation literature is to find tax systems that minimize the loss of well being, given the government's revenue requirement. Thus one way to frame the optimization problem is to have the government choose tax rates (or prices) to maximize individual utility given the revenue requirement. Given the prevalence of price-times-quantity expressions in budget constraints, taking derivatives with respect to tax rates or prices yields rules expressed in terms of quantities. One of Terence Gorman's many insights was that if the objective is to find rules about prices, reframe the problem so that the government chooses quantities; derivatives of p times q with respect to q yield rules about p or tax rates. Below I show that some optimal tax problems are simplifi ed by assuming the government chooses quantities to maximize revenue subject to a fixed level of individual utility. The distance function, which is de nied as the number by which one must scale the arguments of the utility function to yield a particular level of utility, plays a central role.
Taxation for redistribution: Optimal tax structures along the utility possibility frontier
(University of Waterloo, 2026-01-08) Burbidge, John
Mirrlees (1971) examined taxation for redistribution with imperfect information - the government can observe earnings but not wage rates or hours worked. Mirrlees assumed a one-good model with a continuum of types. Stiglitz (1982) worked out the two-type example of the Mirrlees model. This paper extends the distance-function approach to the Ramsey (1927) problem in Burbidge (2025a) to study optimal tax structures along the utility possibility frontier, upf, with two types and two goods.
The Bounds of Algorithmic Collusion: Q-learning, Gradient Learning, and the Folk Theorem
(London School of Economics, University of Waterloo, 2026-03-03) Askenazi-Golan, Galit; Mergoni Cecchelli, Domenico; Plumb, Edward; Possnig, Clemens
We explore the behaviour emerging from learning agents repeatedly interacting strategically for a wide range of learning dynamics, including Q-learning, projected gradient, replicator and log-barrier dynamics. Going beyond the better understood classes of potential games and zero-sum games, we consider the setting of a general repeated game with finite recall under different forms of monitoring. We obtain a Folk Theorem-style result and characterise the set of payoff vectors that can be obtained by these dynamics, discovering a wide range of possibilities for the emergence of algorithmic collusion. Achieving this requires a novel technical approach, which, to the best of our knowledge, yields the first convergence result for multi-agent Q-learning algorithms in repeated games.
The Algorithmic Advantage: How Reinforcement Learning Generates Rich Communication
(Luiss University, University of Waterloo, University of Rome Tor Vergata, 2026-02-12) Calvano, Emilio; Possnig, Clemens; Tolvanen, Juha
We analyze strategic communication when advice is generated by a reinforcement-learning algorithm rather than by a fully rational sender. Building on the cheap-talk framework of Crawford and Sobel (1982), an advisor adapts its messages based on payoff feedback, while a decision maker best-responds. We provide a theoretical analysis of the long-run communication outcomes induced by such reward-driven adaptation. With aligned preferences, we establish that learning robustly leads to informative communication even from uninformative initial policies. With misaligned preferences, no stable outcome exists; instead, learning generates cycles that sustain highly informative communication and payoffs exceeding those of any static equilibrium.
Consumption taxation for redistribution
(University of Waterloo, 2026-01-08) Burbidge, John
This paper explores the optimal behaviour of a government intent on redistributing from the top to the bottom of the earnings distribution, whose tax-transfer instruments are weaker than those assumed by Mirrlees (1971) but stronger than those assumed by Sheshinski (1972). I prove that one may obtain fi rst-order welfare gains by switching from Sheshinski's linear progressive tax-transfer system to one based on consumption taxation. In addition, I show the Atkinson-Stiglitz Theorem rests on unrestricted nonlinear earnings taxation. In an optimal progressive earnings and consumption tax-transfer system the Corlett-Hague understanding of the Ramsey tax problem - tax goods more complementary with leisure, holding utility constant, at higher rates, even if leisure is additively separable from goods - plays an important role. As redistribution proceeds this force is counterbalanced by the Mirrleesian result that taxing the work effort of lower wage types is an efficient way to cope with incentive compatibility constraints.
Monitoring, Market Primitives, and the Stability of Algorithmic Collusion
(University of Waterloo, 2026-03-20) Possnig, Clemens
This paper develops an analytical framework to study when sophisticated machine learning algorithms may learn to collude. Algorithms observe a state variable and update policies to maximize long-term payoffs; their long-run policies correspond to the stable equilibria of a tractable differential equation. In a repeated Bertrand game, I derive necessary and sufficient conditions under which Nash equilibria are learned. This reveals how the interplay between monitoring technology (state variables) and market conditions determines whether competitive or collusive outcomes emerge. I apply these insights to evaluate two key regulatory policies: limiting algorithmic data inputs and imposing competition in the software provider market.
Zombie Prevalence and Bank Health: Exploring Feedback Effects
(University of Waterloo, 2025-08-04) Possnig, Clemens; Rotarescu, Andreea; Song, Kyungchul
This paper investigates feedback effects between bank health and zombie firms—financially distressed firms receiving subsidized credit. The literature focuses on how banks create zombies, overlooking zombies’ impact on bank health. Using Spanish firm-bank data (2005-2014), we document a vicious cycle: lower bank capital ratios are associated with higher zombie activity in served industries, while higher zombie prevalence is associated with reduced bank capital. We link this to a previously unexplored mechanism where banks respond appropriately to observable financial distress through higher provisioning, but overlook risks from relationship borrowers receiving subsidized rates. Our findings suggest that this feedback stems not from financial distress alone, but from the combination of distress with interest rate subsidies.
A Theoretical and Empirical Investigation into Payments for Watershed Ecosystem Services
(University of Waterloo, 2025-04-16) Mir, Khusro
This thesis contains three research chapters on the economics of Payments for Watershed Services (PWS). While each chapter covers a different aspect of PWS schemes, all three provide insights into the management of uncertainty in ecosystem services. The first chapter serves as an introduction to the problem and the main research question addressed by each paper. Forested watersheds provide a variety of ecosystem services. Their economic valuation has increased significantly over the past decades, but the literature is fragmented and heterogenous and little has been done to systematically analyse estimated values. This study presents a global analysis of the economic valuation of forested watershed services. We address two methodological issues in the literature: the impact of ecosystem service classification on value estimates and sensitivity to scale. The latter is measured as the forested watershed area size compared to common practices to measure overall area size including other land cover and use. In the former case, we compare the detailed Common International Classification of Ecosystem Services with more simple and informal classifications in the literature based for example on the Millenium Ecosystem Assessment. We show that both the explanatory and predictive power of the estimated meta-regression models increase as we include more details about the valued ecosystem services and use more accurate estimations of the forested area size. Findings are, where possible, cross-validated with the existing forest hydrology literature. The study highlights the economic significance of maintaining forest cover in watershed areas and emphasises the role economics can play in determining high-value uses for ecosystem services. The second chapter utilises the 2015 Survey of Drinking Water Plants, employing spatial regression models and mediation analysis to examine the relationships between land use, raw water quality, and treatment costs. The study reveals a significant and economically substantial impact of forest cover on reducing treatment costs, primarily through its influence on turbidity levels. Forest cover significantly reduces turbidity levels, thereby decreasing treatment costs. The results indicate that converting agricultural land to forest within a 5km buffer zone around a treatment facility can generate savings of $18.92 CAD per hectare per year, while the savings relative to urban cover can reach up to $21.37 CAD per hectare per year. These savings diminish as the distance from the facility increases, with lower per hectare savings observed at the 10km buffer and sub-sub drainage basin scales. Further, the study accounts for spatial auto-correlation and the effects of wildfires on treatment costs. Wildfires are shown to lead to substantial increases in turbidity, significantly impacting treatment costs. The spatial error and lag models used highlight the importance of considering spatial dependencies in ecosystem service valuations. This research underscores the economic value of forest conservation and management in supporting water treatment processes and provides valuable insights for policymakers and stakeholders in water resources management. The study represents a significant step forward in understanding the interplay between land use, water quality, and treatment costs in Canada. The main objective of the final study presented here is to develop a novel modelling framework in the context of Payments for Ecosystem Services (PES) to mimic and simulate behaviour of agents (e.g., landowners) providing ecosystem services and a principal (e.g., government, municipality) buying them under uncertainty. Uncertainty is defined as the case where the principal and agents lack precise knowledge on the parameters that govern ES output, but knows the range these parameters belong to. We compare contracts under two different decision-making paradigms, namely standard and robust optimisation. With robust optimisation, an uncertainty-averse principal designs a contract to maximise their worst-case outcome and obtain a performance guarantee, i.e., a minimum acceptable performance. The results show that with standard, input-based contracts, the only way for a principal to achieve this guarantee is to invest conservatively in ES. In this setting, the result holds with adverse selection and moral hazard. However, when input is unobservable, using output-based payments, the principal can achieve this performance guarantee only by sharing some of the value of ES output with the landowner.
Commuting, Spatial Allocations, and Inequalities
(University of Waterloo, 2024-11-14) Yu, Aidi; Gonzalez, Francisco; Stacey, Derek
This thesis examines the complex relationships between commuting times, wage disparities, gender differences, and urban spatial distribution, through the lens of three interconnected studies. The first chapter investigates the relationship between commuting times, wages, and the gender wage gap, with a focus on controlling for occupational choice endogeneity. Using data from the American Community Survey (ACS) and the Occupational Information Network (O*Net), the study highlights how gender differences significantly influence the positive correlation between commuting time and wages, especially among full-time working homeowners in U.S. cities. Through quantile regression analysis, it reveals that while men's returns on commuting diminish as income rises, the commuting gender gap remains relatively constant across the wage distribution. The second chapter delves deeper into the gendered impacts of commuting on wage disparities, addressing the endogeneity of commuting times. By constructing instrumental variables based on exogenous city characteristics from the 2016 ACS, the study isolates the causal effects of commuting on wages. The findings suggest that marital status drives the gender difference in commuting premiums, with married women and single men demanding higher wages to compensate for longer commutes. This chapter contributes to a broader understanding of wage-commute trade-offs and the socio-economic consequences of commuting time. The third chapter explores the interplay between job flexibility, residential location sorting, and wage determination through a monocentric city model. The model incorporates both high- and low-skilled workers and employs a bid-rent framework to determine housing prices and the spatial distribution of labour. The study finds that high-skilled workers' job flexibility significantly impacts their commuting decisions and urban spatial sorting patterns. In low-flexibility settings, high-skilled workers tend to live near the central business district, earning higher wages to offset the high cost of central real estate and commuting. Conversely, increased job flexibility enables these workers to relocate to more distant, affordable areas, thereby reducing the equilibrium skill premium. Together, these chapters provide a comprehensive analysis of how commuting, gender, and job flexibility interact to shape wage patterns and urban spatial structures in contemporary cities.
Applications of Machine Learning on Econometrics for Two-stage Regression, Bias-adjusted Inference with Unobserved Confounding, and Test for High Dimensionality
(University of Waterloo, 2024-08-19) Xu, Wenzuo; Chen, Tao
Nonparametric approaches have been extensively studied and applied when no assumption is made regarding the model specification. More generally, a sieve can be constructed as a collection of subsets of finite-dimensional approximating parameter spaces, over which the target function is estimated by an optimization of fitting without demanding a parametric specification. Although the concept of sieves is devised in such a general way, classic sieve estimation in literature has been mostly focusing on single-layer approximations. When the target functions are of intricate patterns, however, these single-layer estimators show limited capability despite allowance for data-generated sieve bases, whereas characterizing different attributes of the target functions progressively through multiple layers is often more sensible. Deep neural networks (DNNs) offer a multi-layer extension of the traditional sieves by modelling the connections among variables through data transformations from one layer to another. DNNs have a larger freedom than the single-layer ones in increasing the sieve complexity to ensure consistent estimation while maintaining a relatively simple structure in each layer for feasible estimation. This thesis contains three chapters developing methodologies and motivating applications of DNNs on Econometrics for two-stage regression, bias-adjusted inference with unobserved confounding, and test for high dimension.
Essays on Empirical likelihood for Heaviness Estimation, Outlier Detection and Clustering
(University of Waterloo, 2024-04-24) Zhang, Zhuojing; Chen, Tao
Empirical likelihood (EL) is a non-parametric likelihood method of inference. There are a large number of studies about the extensions and applications of EL. Most studies discuss the EL ratio for constructing confidence regions and testing hypotheses, while this thesis focuses on the EL weight assigned to each observation in the dataset by the EL ratio function. This thesis contains three chapters on studying the behaviour and application of EL weights. Specifically, chapter 1 provides a novel approach based on the EL weights to estimate a threshold that separates the bulk part and tail part of datasets of datasets with a heavy-tailed histogram. Because the transition between the bulk and tail parts can not be fully disjointed in many cases, we allow the threshold to be a random variable instead of a fixed number. In addition, the threshold is relative to a benchmark since heaviness is a relative concept. In Chapter 2, we focus on outlier detection. We develop an unsupervised method based on EL to identify outliers. In particular, we calculate the EL weights through the EL ratio function with the bootstrap mean constraint and show that the EL weights have different behaviours for datasets with and without outliers. Additionally, the EL weights provide a measure of outlierness for all observations, which might reduce the cost of time. In Chapter 3, I consider a clustering algorithm based on the EL weights. Clustering is an unsupervised method that aims to group unlabeled datasets based on their similarities. Numerous clustering methods have been proposed. The performance of these methods is typically related to the characteristics of the dataset in the specific applications. The proposed EL weights based clustering algorithm is available to work on datasets with outliers. Moreover, it might suggest the number of clusters for well-separated clusters.
Monetary Policy Analysis and its Contemporary Challenges
(University of Waterloo, 2024-01-26) Baker, John; Lam, Jean-Paul
This thesis contains three essays on the empirical analysis of monetary policy. While the subjects are diverse, they all share the goal of providing for a thorough, data-driven analysis of critical policy developments related to communications from North American central banks. The first chapter examines the effectiveness of central bank communications as a policy tool. To evaluate this otherwise qualitatively-oriented policy channel, a new dictionary of central banking sentiment is developed using natural language processing. This dictionary aims to capture the relative prevalence of positive (contractionary) versus negative (expansionary) words used in discussions of the monetary policy landscape. It is then applied to a large sample of news articles, where sentiment scores are computed and adopted in two forms of empirical analysis. The first form of analysis utilizes these sentiment scores in a high-frequency event study, which indicate that positive communication surprises lead to increased interest rates across various horizons on the yield curve, along with an appreciation of the Canadian dollar relative to other major currencies. The sentiment measure is also employed in a lower-frequency analysis, where the average score across all articles is computed on a monthly basis. VAR estimates support the findings from the high-frequency event analysis and allow exploration of other outcomes available only at a monthly frequency. The analysis suggests limited direct evidence of links between communication shocks, prices, and real measures of economic activity, except for the real estate market. In the second chapter, we profile an essential case study that emerged during COVID-related monetary stimulus, where central banks sought to dismiss concerns about rising inflation as "transitory." This chapter focuses on the United States and develops a separate tailored dictionary that is used to quantify the degree of belief (or disbelief) in the transitory inflation signal. It analyzes news articles and tracks changes in sentiment-derived signal credibility over time, revealing that overall levels of credibility declined as positive inflation surprises persisted throughout 2021. This measure is then adopted within the framework of a daily VAR model, showing that the signal credibility measure declines significantly to positive inflation surprises and that market-based inflation expectations rise even at extended horizons in response to negative shocks from the credibility measure. The final chapter explores the potential intersection between economic inequality and monetary policy in Canada. In the first exercise, a macro panel exercise reveals a "U-shaped" effect on income sourced from labour, meaning that expansionary policy benefits the bottom and upper ends of the income distribution most significantly in percentage terms. A similar pattern is observed for non-labour income, which tend to favour the wealthiest Canadians, and particularly since the 2008-2009 Financial Crisis. Time series evidence highlights a growing connection between policy surprises and real asset prices, with a more modest impact on unemployment. Altogether, these essays address crucial issues related to monetary policy, emphasizing the importance of evidence-based analysis and objective quantitative research in evaluating the effectiveness and consequences of central bank communications and policies.
Conspicuous Consumption and Inequality
(University of Waterloo, 2023-11-27) Nesterova, Iuliia; Gonzalez, Francisco
My research is centered around understanding consumption behavior and its relationship with inequality. In Chapter 1, I study how consumption inequality in the United States has evolved over time, with a particular focus on distinguishing two major expenditure components: services and goods. I argue that such distinction is important to understand inequality between high and low income groups. I show that increases in consumption inequality over the period 1984-2018 were driven mostly by rising inequality in expenditure on services rather than goods. I further show that most of it was driven by increased inequality in young households expenditure in services, whereas older households have experienced no change in inequality of either good or service expenditures. As modern societies undergo the transformation into service societies, this research contributes to our understanding of the diverse effects of inequality and informs policy decisions to ensure that this transformation benefits all. Chapter 2 proposes a canonical model of intertemporal choice in which both current and future conspicuous consumption can distort household consumption behavior. What makes our model tractable is that we assume that each consumer cares about the expected comparison of relative consumption, which provides a parsimonious characterization of positional concerns. We show that equilibrium consumption behavior is a function of the distribution of conspicuous consumption in an individual’s reference group as well as her own permanent income. In turn, the distribution of conspicuous consumption is a function of the distribution of permanent income. The relevant empirical implication is that an individual’s consumption, by itself, is no longer a valid proxy for the individual’s permanent income if relative consumption matters. In Chapter 3, we document a robust effect of visible inequality on household expenditures in the United States over the period 2010–2018. To that end, we exploit variation in the cross-sectional distribution of visible consumption — expenditures in clothing, personal care, food away from home and vehicles — for younger and older households across regions of the United States and over time. We find that rising inequality in expenditure on visible goods within the different groups is associated with an increase in average spending on those same goods as well as an increase in total expenditures by the average household in the group. Our main findings are not likely to be a symptom of correlated differences in preferences across generations, selection effects across geographical locations, alternative sources of state-level variation over time, or measurement error. Rather, they most likely reflect actual distortions associated with consumption externalities. We conjecture that historically low interest rates and the rise of social media underlie our findings.
Essays on Portfolio Selection, Continuous-time Analysis, and Market Incompleteness
(University of Waterloo, 2023-04-05) Li, Yixuan; Chen, Tao
This thesis consists of three self-contained essays evaluating topics in portfolio selection, continuous-time analysis, and market incompleteness. The two opposing investment strategies, diversification and concentration, have often been directly compared. Despite the less debate regarding Markowitz's approach as the benchmark for diversification, the precise meaning of concentration in portfolio selection remains unclear. Chapter 1, coauthored with Jiawen Xu, Kai Liu, and Tao Chen, offers a novel definition of concentration, along with an extreme value theory-based estimator for its implementation. When overlaying the performances derived from diversification (in Markowitz's sense) and concentration (in our definition), we find an implied risk threshold, at which the two polar investment strategies reconcile -- diversification has a higher expected return in situations where risk is below the threshold, while concentration becomes the preferred strategy when the risk exceeds the threshold. Different from the conventional concave shape, the estimated frontier resembles the shape of a seagull, which is piecewise concave. Further, taking the equity premium puzzle as an example, we demonstrate how the family of frontiers nested inbetween the estimated curves can provide new perspectives for research involving market portfolios. Parametric continuous-time analysis for stochastic processes often entails the generalization of a predefined discrete formulation to a continuous-time limit. However, unknown convergence rates of the frequency-dependent parameters can destabilize the continuous-time generalization and cause modelling discrepancy, which in turn leads to unreliable estimation and forecast. To circumvent this discrepancy, Chapter 2, coauthored with Tao Chen and Renfang Tian, proposes a simple solution based on functional data analysis and truncated Taylor series expansions. It is demonstrated through a simulation that our proposed method is superior in both fitting and forecasting continuous-time stochastic processes compared with parametric methods that encounter troubles uncovering the true underlying processes. When the markets are incomplete, perfect risk sharing is impossible and the law of one price no longer guarantees the uniqueness of the stochastic discount factor (SDF), resulting in a set of admissible SDFs, which complicates the study of financial market equilibrium, portfolio optimization, and derivative securities. Chapter 3, coauthored with Tao Chen, proposes a discrete-time econometric framework for estimating this set of SDFs, where the market is incomplete in that there are extra states relative to the existing assets. We show that the estimated incomplete market SDF set has a unique boundary point, and shrinks to this point only when the market completes. This property allows us to develop a novel measure for market incompleteness based upon the Wasserstein metric, which estimates the least distance between the probability distributions of the complete and incomplete market SDFs. To facilitate the parametrization of market incompleteness for implementation, we then consider in detail a continuous-time framework, in which the incompleteness specifically arises from stochastic jumps in asset prices, and we demonstrate that the theoretical results developed under the discrete-time setting still hold true. Furthermore, we study the evolution of market incompleteness in four of the world's major stock markets, namely those in China, Japan, the United Kingdom, and the United States. Our findings indicate that an increase in market incompleteness is usually caused by financial crises or policy changes that raise the likelihood of unanticipated risks.
An Analysis of Optimal Agricultural Fertilizer Application Decisions in the Presence of Market and Weather Uncertainties and Nutrient Pollution
(University of Waterloo, 2023-01-12) Yang, Xinyuan; Insley, Margaret
This thesis addresses the questions of how uncertain corn market and weather factors affect optimal fertilizer application decisions of the farmer and the social planner, and what factors drive the divergence between the two. Nutrient runoff from agricultural activities has become a primary source of surface water quality deterioration worldwide. Over-application of fertilizer in agricultural production represents a non-point source pollution which is causing extensive nutrient loading in water bodies and has a severe impact on the global environment. There is evidence that farmers apply more fertilizer than is socially optimal and more than is recommended by government agencies. This thesis first investigates the farmer’s optimal fertilizer application under crop price uncertainty by constructing an inter-temporal farmer’s decision model under two alternative stochastic price processes. Closed form results are derived, which indicate that an increase in price uncertainty implies a reduction in the quantity of fertilizer applied in the farmer’s optimal decision problem. Numerous factors that could impact the optimal fertilization decision are examined as well. The farmer’s decision model is then enhanced by allowing for two possible fertilizer application times in the growing season and the inclusion of additional stochastic state variables such as rainfall and temperature, in the corn yield model. The model is parameterized for average conditions in Iowa corn growing regions. Employing a Monte Carlo approach, numerical results conclude that for a wide range of parameter assumptions the farmer’s optimal strategy is to apply fertilizer at planting rather than later as a side dressing. This thesis analyzes the impacts of price uncertainty, fertilizer cost and other economic parameters on the farmer’s optimal fertilizer application strategy. The thesis also analyzes the optimal decisions of a social planner whose objective function includes an estimate of the damages caused by nitrogen leakage and denitrification. Numerical results show that including the damages from pollution affect both the quantity and timing of fertilizer application. Assumptions about the frequency and quantity of rainfall have an important impact on the optimal decision. This is an important consideration for public policy as climate change affects weather patterns over the next decade and beyond.
Plastic Pollution in the Canadian Great Lakes: Drivers, Barriers and Policy Recommendations
(University of Waterloo, 2022-12-23) Le, Trang; Brouwer, Roy
Plastic pollution is detrimental to the economy, the environment and human health. More research have been conducted on marine plastic pollution than on freshwater plastic pollution, even though rivers and lakes are substantial sources and sinks for plastic debris. Through Canada's voluntary international pledges at the G20 and G7, and national legislative development such as the Microbeads in Toiletries (2018) and Single-use Plastic Prohibition Regulations (2022), there are commitments towards full waste recovery and plastic pollution prevention. Plastic pollution in the Great Lakes is a complex problem because of the ubiquity of plastic debris. Moreover, there is a scarcity of studies being done on the incorporation of stakeholders' perceptions in pollution prevention decision-making. Because local stakeholders are agents of change, it is vital to investigate and utilize local perceptions and diverse expertise in decision-making. This study intends to fill this gap by exploring current challenges and interpreting best practices for pollution prevention, through eliciting local experts’ perceptions. To do so, this study adopted a hybrid methodology that combines a desk-based literature analysis and semi-structured interviews (n=21). Semi-structured interviews were performed with key informants from the private sector, public sector, non-profit organizations or NGOs, and academia, who have knowledge of or have participated in plastic pollution prevention in Canada. Content analysis using inductive and deductive coding of qualitative interview data yielded practical information on current challenges and suggestions to address them. Qualitative interview data were supplemented by triangulation of a Canadian national and Ontario provincial policy review and cross-validating concepts proposed by key informants. Results revealed a multifaceted picture of stakeholders' perspectives, including parallels and contrasts in viewpoints. Using the CCME waste hierarchy as a methodological framework, this study revealed stakeholders' preference for preventive instruments above value recovery or clean-ups of plastic waste. First, respondents identified two significant sources of pollution that must be addressed, being (1) multi-source plastic leakage and (2) individual consumer consumption and poor behaviors that led to plastic leakage. Second, important barriers to overcome were highlighted as (1) deficiency in enforceable binational, national, and provincial policies, (2) inaction from the private sector, governments, and the average consumers, and (3) a lack of capacity on several frontiers, particularly in accommodating alternatives to using single-use plastics. Third, taking multiple perspectives into account, the findings of this study identified relevant rights-based, policy-based, and behavior-based voluntary and mandatory instruments that would assist policy development and future action plans in the Canadian Great Lakes. Future inter-disciplinary investigations should include assessing the effectiveness of voluntary and regulatory instruments, building consensus among stakeholders from various sectors, and investigating effective techniques to facilitate behavior changes that can be incorporated into all future preventive efforts.
A theoretical and empirical investigation into the economic relationship between forested watersheds and water treatment costs
(University of Waterloo, 2021-12-13) Pan, Zehua; Brouwer, Roy
Forests around the world are believed to perform important chemical and nutrient retention functions. Chemical concentration levels have been found to be lower in surface water bodies located in areas with a higher forest cover. There is increasing interest from both academics and policymakers in understanding the economic value behind these nature-based services provided by forests. Including forest cover as green infrastructure in integrated source water protection and management strategies is believed to enhance their overall economic efficiency by improving water treatability. However, the empirical evidence base linking forest cover and forest management to water treatability and treatment costs is limited, and largely absent in Canada, one of the most resource-abundant regions in the world. In order to justify investments in forest cover as green infrastructure it is vital to understand the economic benefits involved, in particular in relation to drinking water treatment. The main objective of this PhD thesis is to further analyze the relationship between forest land and water treatment, both theoretically and empirically using Canada as a case study area. The first chapter of this PhD thesis aims to provide a theoretical framework for better understanding the costs and benefits of investment decisions in the provision of safe drinking water. More specifically, a cost minimization function is specified to reach a given water quality standard, for example based on World Health Organization guidelines. The costs are based on two possible treatment approaches that can be adopted, denoted as grey and green infrastructure, where grey infrastructure represents the traditional water treatment technologies and green infrastructure consists of forest cover (e.g. forest protection or re-afforestation). Compared to grey infrastructure, green infrastructure has been found to be less costly, but riskier to implement than grey infrastructure to improve water treatability due to the lack of engineering control and environmental uncertainties surrounding causal dose-response relationships between forest cover and water quality. An optimal control model is developed to guide social planners in combining these two complementary types of infrastructure in the most cost-effective way given assumptions about the age structure of forests, risk levels, risk aversion, and the discount rate used to value future water service delivery from green infrastructure. Any optimal allocation between grey and green infrastructure is based on balancing the marginal net benefits of both types of infrastructure. Including wildfires as an additional risk, makes green infrastructure less attractive, among others because of the introduction of additional costs such as forest protection costs and reforestation costs. More forest means a higher risk of forest fires and hence damage costs and increases the uncertainty surrounding the delivery of the water service. Accounting for the co-benefits of forests as a carbon trap increases the likelihood of investing in green infrastructure, because it reduces the risk of forest fire in the long term and hence the forest protection costs, but is highly dependent on the applied discount rate to factor these long-term benefits into present-day decision-making. The second chapter in this PhD makes use of available empirical data for the province of Ontario in Canada, and focuses on the potential role of forest cover in potentially reducing drinking water incidents, reflecting on concerns in the first chapter about the effectiveness of green infrastructure as a means of source water protection. The publicly available Ontario drinking water quality and enforcement data base contains all drinking water incidents over a particular fiscal year that failed existing water quality standards in Ontario. The database lists all incidents, so-called adverse events, related to municipal water sources. By linking this database (n=228) to geographical information retrieved from the Ontario Land Cover (GIS) database, a set of interconnected spatial regression models are estimated, aiming to assess the relationship between forest cover and drinking water rates and between drinking water rates and drinking water safety. In the latter case, the drinking water rates are used as a proxy for the drinking water treatment costs. To this end, a spatial instrumental variable model is estimated to improve our understanding about the aforementioned (reverse) causal relationships, i.e. how drinking water rates influence incidence rates and vice versa incidence rates in turn impact water rates. A key finding is that forest cover significantly reduces the number of adverse events and drinking water rates. In the third and final chapter of this PhD thesis, use is made of another important database, the biennial Drinking Water Plants Survey conducted by Statistics Canada for the country as a whole. The survey aims to gain insight into the financial treatment costs, water treatment characteristics, and water plant customers. The survey data are confidential and can only be accessed on-site in Statistics Canada in Ottawa after requesting permission and going through an extensive (legal) screening procedure of both student and supervisor. The collected data provides detailed insight in different treatment cost categories that can help to assess how specific cost categories are influenced by surrounding land cover across Canada. Using the detailed water treatment costs in similar spatial econometric regression models (n=1,373), accounting for potential spillover effects between neighbouring water service units, a significant negative relationship is found for Canada as a whole between forest cover and total drinking water treatment costs and the material costs incurred in drinking water treatment, whilst accounting for a range of individual water treatment plant characteristics, such as treatment capacity, treatment technology, and population served. In conclusion, in this PhD thesis I demonstrate that surrounding forest cover has a significant negative effect on water rates and incidence rates in Ontario and I show that surrounding forest cover significantly reduces water treatment costs across Canada as a whole. However, the regression models estimated in this PhD thesis are based on various far-reaching assumptions which could not be verified. These include, most importantly, the assumption that there exists a direct relationship between water rates and water treatment costs in Ontario and the assumption that the spatial analysis conducted at the level of census sub-divisions in both Ontario and Canada as a whole is able to capture upstream-downstream relationships between land cover upstream and the quality of the water intake downstream in the watersheds providing water to the drinking water treatment plants. More research is needed to validate these key assumptions.
The time-use of Canadian immigrant families: differences in time inputs on child raising
(University of Waterloo, 2021-09-21) Mascella, Allison; Ferrer, Ana
This thesis contains three chapters in cultural effects and integration experienced by parents born abroad and their Canadian-born children empirically measured using daily time diary records. Immigration policy introduced a point system to select immigrants in 1967. In the following decades, source countries for newcomers to Canada changed from predominantly U.S and European countries to the majority of newcomers now sourced from countries in which are more distanced culturally such as Asia, Africa and South America. Immigrant parents incur large initial settlement costs and, in many cases, may have dynastic motives for their children’s future well-being as adults behind moving decisions. Current and future well-being and economic prosperity of children depends in large part on the nuances of decisions made by parents with respect to familial resources. This thesis investigates the time-use of foreign-born parents and their children as measured by their daily time-use records to learn whether their cultural background, as captured by source country region, and their integration into Canadian society affects time-use allocation decisions. The focus of chapter one is on the inclination of immigrant parents to invest more (less) time with their children and on the measurement of the time inputs of their children into school related activities. Time spent by parents with their children is an input into the production function for children’s cognitive and non-cognitive skill development. With increased time spent by parents, children experience boosts in IQ and non-cognitive skills which can impact future labour outcomes. I model this relationship considering both the participation and intensity of time-use decisions. By investigating the difference in daily time spent with children, I find that conditional on participation, Asian parents spend between 37 and 22 more minutes on education related activities with their children on a daily basis than their Canadian-born counterparts. Moreover, Asian fathers are 10% more likely to participate in education related activities with their children than Canadian-born fathers, while Asian mothers are equally likely to participate than Canadian-born mothers. Given participation, South-Central American mothers and European and African fathers are each spending around 20 more minutes on education activities with their children than their Canadian-born counterparts. Both the children of Asian-born and African-born parents spend at least over 46 more minutes on homework activity than students with both Canadian-born parents. Although no difference by area of origin is apparent in the total care-time parents provide for their children, there are significant differences in terms of time specifically devoted to human capital investment activities by immigrant parents, and in the amount of time the children of African and Asian immigrants devote specifically to the completion of homework. The second chapter considers that the time parents spend with their children could be a compensating factor for household income deficits. Household income is a commonly used factor to measure the well-being of children and gage their prospects as adults. However, a broader interpretation of well-being is being adopted in Canada and Europe, which includes non-economic dimensions that center around support for family and relationships as part of strategy for economic growth. Current empirical evidence documents financial hardships experienced by adult newcomers to Canada with respect to otherwise similar Canadian-born adults. This fact suggests that the competing nature of a parent’s time into labour and household activities may be particularly relevant for immigrants. I use a CES utility function to estimate a two-dimensional poverty line that allows for compensation of an abundant resource (time) to become non-poor in a multidimensional sense. We find that immigrants parents are more likely to be poor in income, but not in time spent with children and although they are 2.5-5% more likely to be simultaneously poor in both time and income, only about 4-7% of immigrant parents spend enough time with their children to sufficiently compensate for income deficits. These results redefine poverty status for immigrant groups since they indicate that immigrant parents place a high value on this time (over labour activities). This could be due to lack of sufficiently valuable employment opportunities or a lack of adequate support network that provides quality time spent with children. Chapter three addresses the interdependence of several categories of time allocation, as mediated by the immigration process and gender. Paid work and the decision to trade-off with leisure and other household duties has changed significantly in households over the past 50 years with the incorporation of women into the labour force. Traditionally, economics modelled time-use decisions with dichotomous labour-leisure choices. This resulted in family decisions where the highest wage earner specialized in work outside the household. However, recent research in children’s development highlighted other essential categories of pertinent family time-use, such as care provided to children. The decision to work and, at the same time, raise children, forces changes to the traditional economic plan of time-use with notions of opportunities for women to specialize in both critical aspects of family functioning and the need of fathers to be involved in child rearing. I model four categories of time-use – paid work, household production, leisure and child service – by a Seemingly Unrelated Regression Model (SUR) with particular focus on the immigrant integration process as mediated by gender. Compared to mothers born in Canada, mothers from Africa, Asia, Europe, and South-Central America spend up to 50 minutes less in daily leisure time, but there is not a significant difference in time spent with children. The result vanishes for Asian and South-Central American mothers once I control for years since migration, suggesting that sacrificing leisure may be involved in the process of integration. Parental time-use decisions play a role in the intergenerational mobility of children and as such, I also model four categories of time-use spent by young adults as I do for parents, but with time spent on total education activities – attending classes, finishing assignments - in place of child service with particular focus on time spent by young adults with a mother or father born abroad. I find that second generation young adults with Asian mothers or fathers are spending 41 and 31 less minutes in paid work and 54 and 58 more minutes on education activities and, likewise for young adults with a European mothers or fathers, 41 and 16 less minutes and 27 and 23 more minutes respectively. These results support previous research indicating that aspirations and expectations of parents and their children can vary by culture.
Psychological Prices at Retail Gasoline Stations: The Policies of 0-, 5-, and 9-Ending Prices
(Taylor & Francis, 2021-07-12) Huck, Nicolas; Chenavaz, Regis Y.; Dimitrov, Stanko
Psychological prices are known to impact consumer behaviour and to depend on retailers’ characteristics. Less understood is last digit pricing, especially in the context of retail gasoline stations. We study price endings in the French gasoline market with 11,471 gas stations and 4,775,300 prices for oil companies, supermarkets, and independent retailers during five years. Raw data suggest that 0-ending prices are more expensive. Yet, these last digit effects do not survive careful scrutiny focusing on the individual behaviour/distribution of each gas station. Plus, 9-, 0-, and 5-ending prices are over-represented. Our evidence better informs administrative authorities investigating market irregularities and consumers interested in better deals.
The Relative Performance of International Students and Their Academic Program Choices
(University of Waterloo, 2021-01-18) Chen, Zong Jia; Skuterud, Mikal
Canada is increasingly looking to international students as a source of postsecondary tuition revenues and new immigrants. In Chapter 1, we examine the relative course grades of international undergraduate students in an Ontario university with a large and growing foreign student presence. We identify grade gaps across fields of study, which appear to primarily reflect admission errors from less predictive secondary school grades. While the gaps appear related to English-language proficiency, they are larger among graduates of Canadian secondary schools and in upper- than in first-year courses. Our estimates also suggest that relative foreign student quality has improved over time, despite increasing foreign enrolment. The academic programs that students choose to pursue have strong implications for their career prospects. In Chapter 2, I shed light on students’ academic program choices by examining how co-ethnic peers influence their decisions to change programs during the course of their undergraduate studies. Examining data from a publicly-funded Ontario university with an ethnically diverse student population, I find that students are highly ethnically concentrated within academic programs at the time of their initial enrolment. Moreover, nearly one-quarter of all students change programs at least once during their studies and these program changes further increase the ethnic concentration of students within academic programs. Assuming a model in which students prioritize their grades over co-ethnic peers, the presence of more co-ethnic peers is found to significantly increase the probability of a program change. This suggests that the ethnic concentration of students across programs at the university, which appears to increase over time, may be academically and socially efficient. International students are considered to be the best source of immigrants. In chapter 3, we compare the labour market performance of former international students (FISs) through the first decade of the 2000s to their Canadian-born-and-educated (CBE) and foreign-born-and-educated (FBE) counterparts. We find FISs outperform FBE immigrants by a substantial margin, but underperform CBE graduates from similar postsecondary programs. We also find evidence of a deterioration in FIS outcomes relative to both comparison groups. We argue that this deterioration is most consistent with a quality tradeoff as the supply of international students has not kept pace with the growth in demand.

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