Publications

Goeree, JK, Louis, P & Zhang, J 2020, 'Improving on Simple Majority Voting by Alternative Voting Mechanisms' in Oxford Research Encyclopedia of Economics and Finance, Oxford University Press.
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Majority voting is the predominant mechanism for collective decision making. It is used in a broad range of applications, spanning from national referenda to small group decision making. It is simple, transparent, and induces voters to vote sincerely. However, it is increasingly recognized that it has some weaknesses. First of all, majority voting may lead to inefficient outcomes. This happens because it does not allow voters to express the intensity of their preferences. As a result, an indifferent majority may win over an intense minority. In addition, majority voting suffers from the “tyranny of the majority,” i.e., the risk of repeatedly excluding minority groups from representation. A final drawback is the “winner-take-all” nature of majority voting, i.e., it offers no compensation for losing voters. Economists have recently proposed various alternative mechanisms that aim to produce more efficient and more equitable outcomes. These can be classified into three different approaches. With storable votes, voters allocate a budget of votes across several issues. Under vote trading, voters can exchange votes for money. Under linear voting or quadratic voting, voters can buy votes at a linear or quadratic cost respectively. The properties of different alternative mechanisms can be characterized using theoretical modeling and game theoretic analysis. Lab experiments are used to test theoretical predictions and evaluate their fitness for actual use in applications. Overall, these alternative mechanisms hold the promise to improve on majority voting but have their own shortcomings. Additional theoretical analysis and empirical testing is needed to produce a mechanism that robustly delivers efficient and equitable outcomes.

Agarwal, R, Brown, PJ, Bajada, C, Stevens, P & Green, R 2020, 'The effects of competition on management practices in New Zealand – a study of manufacturing firms', International Journal of Production Research, vol. 58, no. 20, pp. 6217-6234.
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© 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group. Competition is a key factor in driving performance improvements across a range of firm activities including reductions in costs, increasing the levels of productivity, promoting entrepreneurial efforts, fostering innovation, driving better management practices, and exercising strategic managerial decisions. The questions of how and why competitive market forces influence management practices are the focus of this paper. Using data on management practices from 152 New Zealand manufacturing firms, and competition data obtained for various industries of the NZ economy, we examine the association between different dimensions of competition and management practices. Notably, we find little or no association between better management practices and competition when utilising simpler measures of competition, namely the number of competitors, industry concentration measured by HHI and the price-cost margin are used. However, using a more refined measure of competition, competition intensity characterised by profit elasticity, has a positive and significant association with the quality of management practices adopted by firms.

Anufriev, M, Gardini, L & Radi, D 2020, 'Chaos, border collisions and stylized empirical facts in an asset pricing model with heterogeneous agents', Nonlinear Dynamics, vol. 102, no. 2, pp. 993-1017.
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© 2020, Springer Nature B.V. An asset pricing model with chartists, fundamentalists and trend followers is considered. A market maker adjusts the asset price in the direction of the excess demand at the end of each trading session. An exogenously given fundamental price discriminates between a bull market and a bear market. The buying and selling orders of traders change moving from a bull market to a bear market. Their asymmetric propensity to trade leads to a discontinuity in the model, with its deterministic skeleton given by a two-dimensional piecewise linear dynamical system in discrete time. Multiple attractors, such as a stable fixed point and one or more attracting cycles or cycles and chaotic attractors, appear through border collision bifurcations. The multi-stability regions are underlined by means of two-dimensional bifurcation diagrams, where the border collision bifurcation curves are detected in analytic form at least for basic cycles with symbolic sequences LR n and RL n. A statistical analysis of the simulated time series of the asset returns, generated by perturbing the deterministic dynamics with a random walk process, indicates that this is one of the simplest asset pricing models which are able to replicate stylized empirical facts, such as excess volatility, fat tails and volatility clustering.

Bochet, O, Nikiforakis, N, Reuben, E, Wooders, J & Wooders, M 2020, 'An introduction to the second special issue commemorating works of James Andreoni, Theodore Bergstrom, Larry Blume, and Hal Varian', Journal of Public Economic Theory, vol. 22, no. 2, pp. 279-284.
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This special issue, and Issue 5, Volume 21, of the Journal of Public Economic Theory commemorate 30 years since the publication of three path‐breaking contributions to public economic theory and to economics more generally: Bergstrom, Blume, and Varian's “On the private provision of public goods” (Bergstrom, Blume & Varian, 1986), well known in public economics as “BBV”, and Andreoni's “Why free ride? Strategies and learning in public goods experiments” (Andreoni, 1988a) and “Privately provided public goods in a large economy: The limits of altruism” (Andreoni, 1988b). The voluntary contributions game model of BBV played a major role in the beginnings of game theory as a central part of the concepts and techniques of public economic theory. The two papers by Andreoni led the way in the introduction of behavioral public economics and heralded the important area that it has become. Issue 5, Volume 21 of JPET began with a survey of James Andreoni's two papers and their impact. This issue begins with a survey of some of the research arising from BBV. One of the very central results of public economics, due to Warr (1983) and extended by Bergstrom, Blume, and Varian (1986) to a voluntary contributions game, is that the total level of contributions to provision of a public good is unaffected by any reallocation of income among contributing consumers that leaves the set of contributors unchanged. The elegant, yet simple, model of BBV assumes quasi‐linear preferences and one private good; providing it does not change the set of contributors, a transfer of income among contributing consumers induces those receiving income to raise their contributions to the public good, and that this increase is exactly offset by a reduction in contributions of those losing income; that is such transfers are neutral. The exact offset is a consequence of the individual rationality conditions for Nash equilibrium of the voluntary contributions game. Unlike the contribution of Warr, BBV's a...

Carvalho, L & Di Guilmi, C 2020, 'Technological unemployment and income inequality: a stock-flow consistent agent-based approach', Journal of Evolutionary Economics, vol. 30, no. 1, pp. 39-73.
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The paper presents a stock-flow consistent agent-based model with effective demand, endogenous credit creation, and labor-saving technological progress. The aim is to study the joint dynamics of both personal and functional distribution of income as a result of technological unemployment, together with the effect on household debt. Numerical simulations show the potentially destabilizing effect of technological unemployment and reveal that an increase in the profit share of income amplifies the negative effect of income inequality on the business cycle and growth. The sensitivity analysis provides indications on the effectiveness of possible mixes of fiscal and redistributive policies, but also demonstrates that the effectiveness of policy measures is strongly dependent on behavioral and institutional factors.

Chen, Y & Zhang, J 2020, 'Signalling by Bayesian Persuasion and Pricing Strategy', The Economic Journal, vol. 130, no. 628, pp. 976-1007.
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Abstract This article investigates how a privately informed seller could signal her type through Bayesian persuasion and pricing strategy. We find that it is generally impossible to achieve separation through one channel alone. Furthermore, the outcome that survives the intuitive criterion always exists and is unique. This outcome is separating, for which a closed-form solution is provided. The signalling concern forces the high-type seller to disclose inefficiently more information and charge a higher price, resulting in fewer sales and lower profit. Finally, we show that a regulation on minimal quality could potentially hurt social welfare, and private information hurts the seller.

Chiarella, C, Di Guilmi, C & Zhi, T 2020, '“Animal spirits” and bank’s lending behaviour, a disequilibrium approach', Studies in Nonlinear Dynamics & Econometrics, vol. 24, no. 2, pp. 1-21.
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Abstract The paper analyses from a disequilibrium perspective the role of banks’ “animal spirits” and collective behaviour in the creation of credit that, ultimately, determines the credit cycle. In particular, we propose a dynamic model to analyse how the transmission of waves of optimism and pessimism in the supply side of the credit market interacts with the business cycle. We adopt the Weidlich-Haag-Lux approach to model the opinion contagion of bankers. We test different assumptions on banks’ behaviour and find that opinion contagion and herding amongst banks play an important role in propagating the credit cycle and destabilizing the real economy. The boom phases trigger banks’ optimism that collectively lead the banks to lend excessively, thus reinforcing the credit bubble. Eventually the bubbles collapse due to an over-accumulation of debt, leading to a restrictive phase in the credit cycle.

Docherty, P 2020, 'Prudential bank regulation: a post-Keynesian perspective', European Journal of Economics and Economic Policies: Intervention, vol. 17, no. 3, pp. 399-412.
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Banks play an important role in the post-Keynesian theory of endogenous money but post-Keynesians have not paid much attention to the prudential regulation of banks. Do post-Keynesian insights into the role of banks cast any light on the way they ought to be regulated, or can the conventional treatment of prudential bank regulation be grafted onto post-Keynesian theory without any significant modification? This paper begins a process of reflection on these questions. It argues that conventional prudential regulation theory can be utilised by post-Keynesians but with important modifications including a renewed emphasis on liquidity and greater recognition of endogenously generated systemic risk. A post-Keynesian approach to prudential bank regulation is shown to be characterised by both liquidity and capital requirements, as well as by a macroprudential framework that facilitates the counter-cyclical adjustment of these requirements in response to endogenous variations in systemic risk.

Doiron, D & Kettlewell, N 2020, 'Family formation and the demand for health insurance', Health Economics, vol. 29, no. 4, pp. 523-533.
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AbstractWe study how demand for health insurance responds to family formation using a unique panel of young Australian women. Our data allow us to simultaneously control for the influence of state dependence and unobserved heterogeneity and detailed information on children and child aspirations. We find evidence that women purchase insurance in preparation for pregnancy but then transition out of insurance once they have finished family building. Children have a large, negative impact on demand for insurance, although this effect is smaller for those on higher incomes. We also find that state dependence has a large impact on insurance demand. Our results are robust to a variety of alternative modelling strategies.

Edwards, M, Brown, P, Benn, S, Bajada, C, Perey, R, Cotton, D, Jarvis, W, Menzies, G, McGregor, I & Waite, K 2020, 'Developing sustainability learning in business school curricula – productive boundary objects and participatory processes', Environmental Education Research, vol. 26, no. 2, pp. 253-274.
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© 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group. Sustainability learning is holistic and complex as it draws on diverse disciplines and can be interpreted differently within individual pedagogies. Embedding sustainability across and within business schools relies on developing suitable boundary objects. These may include representations such as models, frameworks or classificatory schemes that are malleable enough to be adapted for use within the disparate disciplines and pedagogies, yet durable enough to be recognisable and to maintain consistency across them. Boundary objects thus allow the sharing of ways of knowing or practice across various social boundaries. This paper outlines how participatory curriculum development processes can enable sustainability to be embedded in a business school curriculum. Distinct phases of the process were marked by different ways of knowing, as disciplinary-specific academics developed and embedded sustainability into and across curricula. Boundary objects were both outcomes and productive facilitators of this process. They acted as catalysts and attracted ongoing processes of dialogue, debate and meaning-making between these academics. The institutional context provided enabling conditions to legitimize outcomes from the participatory process. The process may be replicable in other business schools by the use of boundary objects.

Gauriot, R, Heger, SA & Slonim, R 2020, 'Altruism or diminishing marginal utility?', Journal of Economic Behavior & Organization, vol. 180, pp. 24-48.
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Girsberger, EM, Méango, R & Rapoport, H 2020, 'Regional migration and wage inequality in the West African economic and monetary union', Journal of Comparative Economics, vol. 48, no. 2, pp. 385-404.
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This paper investigates the impact of regional migration on average wages and wage inequality in the West African Economic and Monetary Union (UEMOA). We exploit a unique data from a unified labour force household survey which covers natives and migrants in the seven economic capitals of the region. We estimate the counterfactual wage distributions of UEMOA migrants in absence of migration to evaluate the effect of regional migration. We find that regional migration increases the average wage by 1.8% and it entails a decrease in inequality in the UEMOA region between -1.5% (for the Gini coefficient) and -4.5% (for the interquartile ratio). The decrease in inequality in the UEMOA region is driven by a reduction in inequality between countries, while the migration effect on within-inequality differs across countries and remains overall small. When accounting for possible general equilibrium effects of migration on stayers’ wages, we find a similar or even stronger decrease in inequality, yet a smaller increase in the average wage. With general equilibrium effects, (negatively-)intermediately selected UEMOA migrants depress the average wage of natives in their host country and lead to a slight increase of the average wage among natives in the sending country, with the former effect dominating. Moreover, regional migration in the UEMOA mostly flows from countries with low wages to countries with higher wages. In combination with the general equilibrium effects described above this leads to a larger decrease in between-country inequality than in a setting with exogenous wages.

Heger, SA, Slonim, R, Garbarino, E, Wang, C & Waller, D 2020, 'Redesigning the Market for Volunteers: A Donor Registry', Management Science, vol. 66, no. 8, pp. 3528-3541.
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This paper addresses volunteer labor markets where the lack of price signals, nonpecuniary motivations to supply labor, and limited fungibility of supply lead to market failure. To address the causes of the market failure, we conduct a field experiment with volunteer whole blood donors where we introduce a market-clearing mechanism (henceforth: the Registry). Our intention-to-treat estimates suggest that subjects invited to the Registry, regardless of joining, are 66% more responsive to critical shortage appeals than control subjects. While the Registry increases supply during a critical shortage episode, it does not increase supply when there is no shortage; thus, the Registry significantly improves coordination between volunteer donors and collection centers, thereby improving market outcomes. We find evidence that the Registry’s effectiveness stems from crowding-in volunteers with purely altruistic motives and volunteers with a preference for commitment. This paper was accepted by Yan Chen, decision analysis.

Kettlewell, N 2020, 'Policy Choice and Product Bundling in a Complicated Health Insurance Market', Journal of Human Resources, vol. 55, no. 2, pp. 566-610.
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© 2020 by the Board of Regents of the University of Wisconsin System Understanding how consumers choose health insurance and the quality of those choices is crucial information for policymakers. This paper uses a choice experiment to evaluate choice quality and how this interacts with an important form of complexity—product bundling. The results indicate that consumers are likely to make choices that violate expected utility theory, use heuristic decision strategies, and overinsure relative to minimizing out-of-pocket costs. Product bundling is found to exacerbate all of these tendencies. The experimental approach used overcomes some limitations of revealed preference research in this area, such as the endogeneity of choosing bundled insurance.

Kettlewell, N, Morris, RW, Ho, N, Cobb-Clark, DA, Cripps, S & Glozier, N 2020, 'The differential impact of major life events on cognitive and affective wellbeing', SSM - Population Health, vol. 10, pp. 100533-100533.
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© 2019 The Authors Major life events affect our wellbeing. However the comparative impact of different events, which often co-occur, has not been systematically evaluated, or studies assumed that the impacts are equivalent in both amplitude and duration, that different wellbeing domains are equally affected, and that individuals exhibit hedonic adaptation. We evaluated the individual and conditional impact of eighteen major life-events, and compared their effects on affective and cognitive wellbeing in a large population-based cohort using fixed-effect regression models assessing within person change. Several commonly cited events had little, if any, independent effect on wellbeing (promotion, being fired, friends passing), whilst others had profound impacts regardless of co-occurring events (e.g., financial loss, death of partner, childbirth). No life events had overall positive effects on both types of wellbeing, but separation, injury/illnesses and monetary losses caused negative impacts on both, which did not display hedonic adaptation. Affective hedonic adaptation to all positive events occurred by two years but monetary gains and retirement had ongoing benefits on cognitive wellbeing. Marriage, retirement and childbirth had positive effects on cognitive wellbeing but no overall effect on affective wellbeing, whilst moving home was associated with a negative effect on cognitive wellbeing but no affective wellbeing response. Describing the independent impact of different life events, and, for some, the differential affective and life satisfaction responses, and lack of hedonic adaptation people display, may help clinicians, economists and policy-makers, but individual's hopes for happiness from positive events appears misplaced.

Krishnan, R, Agarwal, R, Bajada, C & Arshinder, K 2020, 'Redesigning a food supply chain for environmental sustainability – An analysis of resource use and recovery', Journal of Cleaner Production, vol. 242, pp. 118374-118374.
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© 2019 Elsevier Ltd Food supply will need to increase by around 70% from its current levels in order to meet the world population growth of 9.6 billion by 2050. Food waste is the biggest challenge in global food security, wherein approximately 20–30% of food waste occurs in the post-harvest stage of the food supply chain (FSC) in developing countries. This food waste generates significant negative environmental effects in addition to the unnecessary usage (and wastage) of resources consumed in producing the wasted food. Whilst India is the major producer and exporter of many agricultural crops, there is a lack of research that evaluates the environmental impact of the Indian FSCs. The environmental impact of the same product varies according to the resources consumed and so it is important that the environmental impact of individual supply chains be considered. Also, there is a lack of studies that uses the result of environmental impact assessment to identify the operational and resource inefficiencies in FSC and develop a framework for sustainable FSC. Thus, this study aims to identify operational and resource inefficiencies present in FSC through environmental impact assessment and propose a framework for redesigning the FSC to improve environmental sustainability. Life cycle assessment approach is used for assessing the environmental impact. This framework has been applied to a mango food supply chain.

Lemus, J & Temnyalov, E 2020, 'Pay-for-Delay with Follow-On Products', Review of Industrial Organization, vol. 56, no. 4, pp. 697-714.
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Li, M & Mendieta‐Muñoz, I 2020, 'Are long‐run output growth rates falling?', Metroeconomica, vol. 71, no. 1, pp. 204-234.
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AbstractThis paper studies the evolution of long‐run output and technical progress growth rates in the G‐7 countries during the post‐war period by considering the concept of the natural rate of growth. We use time‐varying parameter models that incorporate both stochastic volatility and a Heckman‐type two‐step estimation procedure that deals with the possible endogeneity problem in the econometric models. Our results show a significant decline in long‐run growth rates that is not associated with the detrimental effects of the Great Recession, and that the rate of growth of technical progress appears to be behind the slowdown in long‐run GDP growth.

Li, M, Koopman, SJ, Lit, R & Petrova, D 2020, 'Long-term forecasting of El Niño events via dynamic factor simulations', Journal of Econometrics, vol. 214, no. 1, pp. 46-66.
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We propose a new forecasting procedure which particularly explores opportunities for improving the precision of medium and long-term forecasts of the Ni~no3.4 time series that is linked with the well-known El Ni~no phenomenon. This important climatic time series is subject to an intricate dynamic structure and is interrelated to other climatological variables. The procedure consists of three steps. First, a univariate time series model is considered for producing prediction errors. Second, signal paths of the prediction errors are simulated via a dynamic factor model for the errors and explanatory variables. From these simulated errors, ensemble time series for Ni~no3.4 are constructed. Third, forecasts are generated from the ensemble time series and their sample average is our nal forecast. As part of these dynamic factor simulations, we also obtain the forecast of the El Ni~no event which is a categorical variable. We present empirical evidence that our procedure can be superior in its forecasting performance when compared to other econometric forecasting methods.

Maruyama, S & Heinesen, E 2020, 'Another look at returns to birthweight', Journal of Health Economics, vol. 70, pp. 102269-102269.
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We revisit the causal effect of birthweight. Because variation in birthweight in developed countries primarily stems from variation in gestational age rather than intrauterine growth restriction, we depart from the widely-used twin fixed-effects estimator and employ an instrumental variable - the diagnosis of placenta previa, which provides exogenous variation in gestation length. We find protective effects of additional birthweight against infant mortality and health capital loss, such as cerebral palsy, but in contrast to sibling and twin studies, no strong evidence for non-health long-run outcomes, such as test scores. We also find that short-run birthweight effects have diminished significantly over the decades.

Suzuki, T 2020, 'Efficient communication and indexicality', Mathematical Social Sciences, vol. 108, pp. 156-165.
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Since sending explicit messages can be costly, people often utilize “what is not said,” i.e., informative silence, to economize communication. This paper studies the efficient communication rule, which is fully informative while minimizing the use of explicit messages, in cooperative environments. It is shown that when the notion of context is defined as the finest mutually self-evident event that contains the current state, the efficient use of informative silence exhibits the defining property of indexicals in natural languages. While the efficient use of silence could be complex, it is also found that the efficient use of silence can be as “simple” as the use of indexicals in natural languages if and only if the information structure satisfies some centrality and dominance properties.

Zheng, B & Xiao, J 2020, 'Corruption and Investment: Theory and Evidence from China', Journal of Economic Behavior & Organization, vol. 175, pp. 40-54.
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Buckley, NJ, Mestelman, S, Muller, RA, Schott, S & Zhang, J 2020, 'Decoding Cheap Talk: How communication influences effort coordination in output-sharing partnerships'.