Essays in demand estimation and wealth dynamics: Applications to cultural economics and the life cycle

This dissertation consists of three chapters about demand estimation and wealth dynamics. Although, each one of the chapters explores different issues and settings, their underlying unifying thread is the consumption decision faced by the individual. Therefore, seemingly unrelated choice situations come together.;The first chapter entitled "Quality Effects on the Demand for Broadway Shows" presents an estimation of live theatre demand using a discrete choice model commonly used in industrial organization applications with aggregate data. The focus of this paper is the identification of the effect of quality on attendance to a Broadway show. Quality is defined as the number of Tony awards won by each show. A positive correlation between admission price and show's quality has produced upward sloping demand curves in previous studies in the economics of the Arts, contradicting economic theory. The application in this chapter uses an unique panel dataset created by matching weekly Broadway show attendance, theatre gross revenue, and capacity figures with show attributes for all plays performing between December 1995 and June 2003. Using a discrete choice model with instrumental variables the results show Broadway show demand slopes down, the Tony award has a positive impact on demand, individuals like Musicals more than Plays, and Hollywood actors draw bigger crowds. Obtaining consistent estimates of the demand for Broadway shows opens several avenues for future work in this topic such as market concentration and competition among firms and survival analysis for plays.;The second chapter entitled "Efficiency Analysis of the Market for Pension Retirement Funds in Mexico: A Demand and Supply Perspective" presents an analysis of the Mexican market for pension retirement funds from both demand and supply perspectives. From the demand side we look at how net returns and advertising affect the firm's market shares. We then disaggregate the net return into individual components: rates of return and management fees, while keeping advertising in the model. We employ a discrete choice methodology with instrumental variables to account for possible endogenous variables. Our findings suggest advertising has considerable impact on changes in market shares. The effect of other variables is mixed and sometimes contradictory to economic theory. From the supply side, first we propose new definitions for the output firms operating in this market produce. We propose as outputs (1) the average amount of money in the account per month per affiliate; (2) the firm's market share measured with affiliates; and (3) the firm's market share measured with the amount of money in the accounts. With these definitions we look at the presence of economies of scale. We estimate Cobb Douglas and Translog variable cost functions accounting for endogenous variables. The parameter estimates fall in line with expectations taken from production theory. The presence of returns to scale is sensitive to the definition of the output. Thus, economic policy should consider not only the possible presence of economies of scale, but also the definition of the output of the firms in the market to achieve greater efficiency.;The third chapter entitled "Approximating Wealth" revisits the concept of wealth to provide a consistent measure for this variable. Earlier studies have used "net worth" as a measure for wealth. These proxies bias results downward because they constantly omit human capital. I econometrically fit a two parameter lognormal distribution to summary statistics detailing the lower limits of the four quintiles and top 5% of the US income distribution. I then discount the estimated parameters bringing them to net present value to generate yearly wealth distributions for the United States for the period between 1910 and 2005. I find that as the century evolved the wealth distributions become more spread out and the area under their tail increased. The wealth distributions provide an approximation to the initial stock of money in the budget constraint an individual would have for life cycle consumption. In addition, these wealth distributions are a building block in ultimately comparing living standards across individuals measured by life cycle consumption trajectories according to the Life Cycle Permanent Income hypothesis.