Zeyu Zhao defends his PhD thesis at the Department of Economics

Candidate:

Zeyu Zhao, Department of Economics, University of Copenhagen

Title:

Essays on Political and Organizational Economics

Supervisor:

• Morten Bennedsen, Professor, Department of Economics, University of Copenhagen

Assessment Committee:

• Nikolaj A. Harmon, Associate Professor, Department of Economics, University of Copenhagen
• Astrid Kunze, Professor, NHH Norwegian School of Economics
• Steffen Andersen, Professor, Head of Research, Danmarks Nationalbank

Summary:

The advancement of technology and the increased availability of data over the past few decades have significantly expanded the scope of empirical economic research. Utilizing advanced econometric methods and rich datasets, researchers are increasingly able to investigate the nature and functioning of various aspects of our world. In my PhD thesis, I focus on two prominent fields of empirical economic research: political economics and organizational economics. By exploring rich and novel data, these studies contribute to our ever-expanding understanding of political processes and organizations.

In the first chapter of my PhD thesis, I focus on political economics and investigate how athlete activism, which is becoming increasingly common over time, affects political outcomes. This chapter provides evidence that National Basketball Association (NBA) players' activism in between 2016 and 2020 has affected the political outcomes in the US. More specifically, I find that if a county has one active NBA player between the 2016 and the 2020 U.S. presidential election, the percentage of people voting for the Democratic Party would increase by around one percentage point. This result is obtained by using a difference in differences approach that compares these counties with a control group of counties that have an active minor league basketball player over the same period. I interpret this as the result of the role model effect by the local NBA athletes. To support this hypothesis, I show that these counties also have an increase in protests of more than 30 percent, one or two months after the police killing of George Floyd. Despite the increase in protests, polarization does not rise in these counties as a result. I further show that having NBA athletes mainly increases the white population's awareness of racial inequality. These results support the role model effect channel and provide evidence that public leaders and activism play a significant role in social movements.

I focus on organizational economics for the rest of my thesis. More specifically, I examine the interactions between organizations and labor. The second chapter of my thesis studies organizations' hiring behaviors and decisions. My coauthors Antoine Bertheau and Birthe Larsen and I design an innovative survey of firms and link it to the Danish administrative data to yield new insights about factors that can influence firms' hiring decisions. We find several important results. First, search and training frictions and economic uncertainty are as important as labor costs in hiring decisions. Second, search and training frictions are more likely to affect younger and smaller firms. Third, firms that prefer to hire employed rather than unemployed workers are more likely to report that labor market frictions and labor cost considerations alter their hiring decisions. Lastly, firms with inaccurate beliefs about their wages are more likely to report that labor cost considerations alter their hiring decisions. Overall, this chapter expands the existing understanding of and sheds new light on the hiring process and behaviors of organizations.

The third chapter of my PhD thesis investigates how the working environment is linked to the outcomes of organizations and employees. Together with my coauthors Mario Daniele Amore, Morten Bennedsen, and Birthe Larsen, we use a large-scale survey and register data from Denmark to construct firm-level measures of the working environment, which allows us to capture its physical, psychological, and social dimensions. We document three stylized facts about firms with better working environments. First, they exhibit higher profitability. Second, they have higher innovation quality, as captured by patent citations and survey data. Third, their employees are healthier and have longer tenure. Overall, these findings are consistent with the belief that both shareholders and employees would benefit significantly from improvements in the working environment.

An electronic copy of the thesis can be requested here: lema@econ.ku.dk