Research

Standard macro-finance models treat capital as homogeneous. Financially constrained firms can therefore adjust only the quantity of capital they operate, not its vintage. This assumption is at odds with the data: young, small, and credit-excluded firms use second-hand equipment disproportionately. I build a dynamic macro-finance model in which firms rent both new and used capital. The second-hand market lets constrained firms operate closer to their efficient scale, even when they cannot meet the collateral requirements for new capital. It thereby reduces the dispersion of marginal revenue products of capital and weakens the dependence of entrepreneurship on initial wealth. I calibrate the model to Vietnamese firms and find that used capital substantially mitigates the allocative and occupational distortions created by financial frictions.

Firms can choose new versus used capital. The lower purchase price of used capital relaxes financing for constrained firms, letting them scale earlier with more self-financing, improve short-run survival, and reduce the mass of chronically small firms. This shifts the vintage mix and aggregate misallocation. This paper builds a firm-dynamics model without an entry margin. Firms face a collateral-style affordability cap and a shadow cost of funds that captures financing tightness. The key feature is a vintage choice between new and used capital, treated as two distinct goods: a unit bought as new remains new, and a unit bought as used remains used. There is no conversion from new to used and no additional within-type quality downgrading beyond standard type-specific depreciation. Because used capital has a lower upfront price, constrained firms can expand capacity sooner with less external finance, while self-financing builds assets. Large, unconstrained firms change their vintage mix little.

Using monthly data from January 2013 to December 2017 and an autoregressive distributed lag model, this paper examines the relationship between WTI crude-oil prices and U.S. high-density polyethylene prices during the shale-gas expansion. The results identify a positive and significant long-run effect of oil prices on polyethylene prices, no significant short-run effect, and one-way causality from oil to polyethylene prices. The findings explain how inexpensive shale-based ethane, combined with polyethylene prices that remained connected to oil-market conditions, contributed to the competitive advantage of U.S. petrochemical producers.

This thesis studies how the U.S. shale-gas revolution changed global petrochemical competitiveness and examines the implications for Iran's petrochemical industry. It combines international energy-price analysis, evidence from Iranian petrochemical companies, and an institutional analysis of Iran's feedstock-pricing system. The empirical work includes a time-series analysis of WTI crude-oil and U.S. polyethylene prices during the shale-gas expansion, a panel-data analysis of polyethylene prices and the stock-market performance of major Iranian petrochemical companies, and a company-level analysis of Shazand Petrochemical Company. The findings show that Iran's petrochemical competitiveness depends on more than access to natural-gas resources: feedstock costs, international product prices, exchange-rate conditions, technology, capacity utilization, and access to export markets jointly determine investment attractiveness. The policy analysis argues that cheap feedstock alone cannot create a sustainable advantage, and proposes a transparent, predictable feedstock-pricing formula that balances a fair public return, regional competitiveness, and incentives for downstream production and technological upgrading.

The thesis materials document the evolution of Iran's petrochemical feedstock-pricing system—from subsidized and administratively controlled rates to the 13-cent floor and later formulas linked to international gas prices and exchange rates. The policy problem was not simply that feedstock was always too cheap or always too expensive. Low and frozen prices generated economic rents and encouraged investment in relatively simple upstream gas-based products. Abrupt increases and volatile benchmark-based formulas subsequently compressed producers' margins and made long-term investment more difficult. The policy implication is that cheap feedstock alone cannot create a sustainable petrochemical advantage. Iran requires a transparent and predictable pricing formula that balances three objectives: capturing a fair public return from natural-gas resources; maintaining regional industrial competitiveness; and encouraging downstream production, technological upgrading, energy efficiency, and export diversification. A potential reform would combine domestic opportunity cost with regional competitor prices, use a moving average and price collar to reduce sudden shocks, and make preferential pricing conditional on measurable investment and performance. This institutional policy analysis complements the econometric findings; it is not presented as a causal result estimated by the U.S. price model.

My research on Iran's petrochemical sector illustrates how domestic industrial policy, export support, and international trade restrictions interact. Government-administered gas feedstock prices affect petrochemical production costs and export competitiveness, while sanctions increase banking, insurance, and shipping costs and redirect trade toward markets able to maintain alternative financial and logistical links with Iran. This helps explain why Iran's polyethylene exports are highly concentrated in China, with Turkey, Iraq, Pakistan, and Azerbaijan serving as smaller regional markets. Iran's Export Guarantee Fund can reduce some commercial and political risks through export-credit insurance and guarantees, but it cannot fully offset systemic restrictions on international payments and transportation. The main trade-policy implication is that Iran needs predictable feedstock pricing, effective export-credit support, and greater destination diversification to preserve competitiveness while reducing dependence on a single foreign market.