Essays in productivity and competition

This thesis is composed of two chapters. In the first chapter, I consider a model of production where the firm’s labour input is the product of an endogenously organised hierarchy of workers of increasing skill. Production of the labour input is benefited by a kind of labour-augmenting technological shock, which I show can be identified using additional information about the composition of the firm’s workforce and wages. I illustrate that the parameters of the model can be consistently estimated using Monte Carlo simulations. In the second chapter, co-authored with Martin Pesendorfer and Julien Martin, we study the sale of oil and gas leases in New Mexico and assess the degree to which bidder behaviour is consistent with competitive equilibrium play. We use publicly available production and drilling cost data to reconstruct the value to bidders of each lease in our sample. We then test the implications of competitive bidding and reject the hypothesis that bidders cannot improve their expected payoffs by altering their bidding strategy. We find that an annual discount rate of over 17% is necessary to make submitted bids consistent with competitive bidding behaviour.