Dissertation Defense: “Three Essays on Transboundary Bio-economics”, Shu Chen Tsao, University of California, Santa Barbara
Speaker
Shu Chen Tsao, University of California, Santa Barbara
Biography
Shu-Chen is a Ph.D. Candidate in Economics at UC Santa Barbara. His research spans resource and environmental economics, applied game theory, and public economics. He studies how environmental change and globalization shape innovation incentives in the presence of biological dynamics, integrating spatial dynamic games and structural estimation with ecological and public health modeling. He is also affiliated with the Marine Science Institute and the Environmental Markets Lab as a graduate student researcher. Shu-Chen holds a B.A. in Economics from National Taiwan University and an M.A. in Applied Economics from UCLA. Outside academia, he enjoys traveling and listening to music with his cockatiels.
Title
“Three Essays on Transboundary Bio-economics”
Abstract
This dissertation consists of three essays. The first chapter studies how the spread of transboundary biological threats stimulates innovation. Developed countries often possess the capacity to innovate technologies that mitigate global biological threats, such as vaccines for infectious diseases, but innovate little when not directly exposed. This chapter develops a spatial dynamic game to study endogenous innovation incentives as biological threats expand into developed countries. In the model, all countries can control threats locally, while only a few can innovate. I decompose how two externalities—threat diffusion and technology spillovers—and their interaction shape strategic innovation incentives. Using evidence of dengue-transmitting mosquitoes expanding into the U.S., I estimate that endogenous U.S. vaccine innovation could reduce dengue cases in the Americas by 54\% relative to a no-innovation scenario and assess the resulting global welfare implications. Finally, I show that greater exposure may fail to spur innovation when sustained eradication through local control is optimal for a class of biological threats.
The second chapter, joint with Christopher Costello, prices the transboundary externality of mobile public bads such as diseases and invasive species. We focus on the marginal cost to country B of an increase in the stock (i.e., an outbreak) in country A. These cross-jurisdiction marginal costs depend not only on economic, ecological, and spatial features of both jurisdictions but also on jurisdictions’ strategic reactions to the outbreak. Using a spatial dynamic game, we calculate the “cross-jurisdiction shadow costs” of an outbreak of mobile public bad under the Markov-perfect Nash equilibrium of control efforts. We find that under reasonable conditions, the source country has private incentives to control the outbreak itself, which can lead to a situation where the cross-jurisdiction shadow cost is, in fact, zero. We also derive conditions where a country optimally fails to control the outbreak (for example, damages in that country are small), in which case cross-jurisdiction shadow costs are positive. Finally, we note that since cooperative control of the mobile public bad delivers substantially higher welfare than non-cooperative control, we derive an externality pricing instrument that perfectly internalizes the externality and induces cooperative control among all countries.
The third chapter, joint with Yihong Liu, proposes a novel structural estimation method for transboundary bio-economic problems. Nonlinear dynamics, such as fish reproduction or disease transmission, are central to many resource models, and economic insights often hinge on these nonlinearities. In such settings, linearization is inadequate, and the presence of strategic interactions makes structural estimation challenging. We develop a tractable estimation method for a general class of these dynamic games using the Generalized Method of Moments (GMM). Our approach accommodates heterogeneous agents and nonlinear, interactive equations of motion. We derive sufficient conditions under which GMM estimation is feasible and establish consistency and asymptotic normality. We apply the method to a fishery game involving Japanese anchovy harvesting by China, Japan, and the Republic of Korea and estimate their strategic harvest responses to climate-induced shifts in ocean currents.
JEL Codes: C57, C73, H23, H87, O30, Q20, Q55
Event Details
Join us to hear Shu Chen’s dissertation defense. He will be presenting his dissertation titled, “Three Essays on Transboundary Bio-economics”. To access a copy of the dissertation, you must have an active UCSB NetID and password.
