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Current research in Economics

The Department of Economics at the University of Otago produces outstanding research

From macroeconomic dynamics and global trade to economics education and interdisciplinary research – our staff are highly research productive. Take a look at some of our research in progress, conducted by:

David Fielding

Explaining price dispersion across locations (with Chris Hajzler, Central Bank of Canada)

Our most recent paper is “Distance, language, religion, and the Law of One Price: Evidence from Canada and Nigeria” (forthcoming in the Journal of Money, Credit & Banking). Our results confirm that the connectedness of local markets (as measured by e.g. the size of average price variations across cities or the length of time it takes prices to converge) depends not only on physical distance and transportation costs but also on differences in language and religion. In Nigeria, the most important factor is the proportion of people in each city who share a common language, and shared English language fluency is especially important. One of the benefits of language education is to generate better trading links. These links might also reduce political extremism (see 2).

The dynamics of ethnic and religious fractionalization (with Stephen Knowles, and Charles Butcher, Peace & Conflict Studies, University of Otago)

We are embarking on a ‘big data’ project that uses information from the USAID Demographic and Health Survey, a household survey which runs every 5-6 years in almost every low-income country in the world. We’re going to try to create a dataset that shows the pattern of ethnic and religious diversity within countries: e.g., if there are two or three main ethnic groups in a country, are they mixed together or do they live in separate regions? As far as we know, there is no systematic data of this kind in existence. Using different rounds of the survey, we can do this for different years, and look at how changing patterns of diversity interact with economic shocks (e.g. droughts which force people to migrate) and with changes in the intensity of violent conflicts. This project is focussed mainly on low-income countries, but I am also working on historical European data that might be able to help us track the dynamics of ethnic fractionalisation over centuries. One preliminary finding here is that English towns which allowed Jews to settle in the 12th and 13th centuries have much lower levels of antipathy towards immigrants in 21st century opinion polls, and lower support for UKIP. This result holds even when we allow for a whole range of other factors that might explain attitudes to immigrants (e.g. education and unemployment). Edward III expelled all the Jews from England in 1290, and modern anti-immigrant sentiment focusses mainly on Muslim and Eastern European immigrants, so it seems that the persistence is in some generic characteristic that is not specific to a certain socioeconomic context.

African banking (with Svetlana Adrianova (Leicester), Panicos Demetriades, (Leicester), Robert Lensink (Groningen), Badi Baltagi (Syracuse), Thorsten Beck (Cass Business School), Peter Rousseau (Vanderbilt), Johan Rewilak (Huddersfield), Steven Koch (Pretoria) and Stephen Hall (Leicester)

The group has just finished putting together a database that allows us to construct a range of alternative measures of financial fragility and susceptibility to banking crises. We were originally going to focus just on Africa, but the database has been expanded to cover most parts of the world. One question to work on is: how do our measures compare with private agencies’ credit ratings?

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Murat Genç 

Participation and Wage gaps in the New Zealand Labour Market: An Analysis Using Copulas - Murat Genç (with Murray D. Smith, University of Nottingham)

Using data from the Statistics New Zealand’s 2003 CURF (Confidentialised Unit Record File) data set, we estimate wage regressions taking account of sample selection bias arising from the exclusion of individuals with no market income. We use the copula approach in the specification of sample selection models. We find evidence of a statistically and economically significant female/male differential. Ethnicity, however, is found to matter for certain groups only, not for Māori.

A Novel Approach to Improving Price Elasticity Estimation: An Experimental Study Using a Virtual Supermarket and Bayesian Methods - Murat Genç (with Tony Blakely, Nhung Nghiem, and Nick Wilson, University of Otago, Wilma Waterlander, Helen Eyles, and Cliona Ni Mhurchu, University of Auckland, and Linda Cobiac, University of Oxford)

The aim of this study is to quantify precisely the impacts of price changes on food purchases. The research will be undertaken using a combination of experimental, econometric and biostatistical methods, and using a 3-D web-based virtual supermarket research setting. Virtual Supermarkets (VS) have previously been used to estimate changes in purchasing in response to price and labeling changes – but not (to our knowledge) to generate a full experimental dataset of price and food purchasing that is then analysed with econometric methods to estimate price elasticities. We will implement a VS experiment with 1000 New Zealand shoppers using price variations that are most relevant to food tax and subsidy policies of interest so as to improve estimation of PEs.

International Trade Costs of Turkey - Murat Genç (with Selim Çağatay, Akdeniz University)

The purpose of this research is to measure overall international trade costs of Turkey and to determine the relative significance of the different factors that contribute to these costs. The econometric methodology makes use of a recently developed comprehensive measure of trade costs.

Educational Performance, ‘Clicker’ Engagement and Ethnicity: Evidence from Finance 101 - Murat Genç (with Ivan Diaz-Rainey and Helen Roberts, University of Otago)

We explore the nexus between academic performance, ethnicity and student engagement via learning technologies. More specifically, we explore three research questions (1) What factors determine student ‘clicker’ based engagement? (2) Does engagement improve academic performance? (3) Do Māori and Pacific Island (MPI) students under perform their peers and do the determinants of performance differ to those of their peers?

The Determinants of Regulatory Responses to Risks from Financial Innovation: Survey Evidence from G20 - Murat Genç (with Ivan Diaz-Rainey, Max Yap, and Rosalind Whiting, University of Otago, John K. Ashton, Bangor University)

Which factors shape the extent and scope of financial regulation? This question is addressed through determining whether distinct institutional characteristics and the extent of lobbying have affected the response of G20 countries to a Financial Stability Board (FSB) recommendation aimed at mitigating the risks from financial innovation. Using a formal content analysis of the FSB’s Implementation Monitoring Network Surveys of 2010 to 2012, we develop an index of disclosed strength of regulatory responses and a count variable of implemented measures; these are employed to ascertain if regulatory responses are systematically influenced by the structure of the regulatory system, role of the central bank, the legal system, financial history and prevailing forms of firm financing.

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Paul Hansen

Decision-making and conjoint analysis, myriad applications - Paul Hansen (with Franz Ombler, 1000Minds Ltd, and colleagues from Otago’s Department of Economics and around the world)

1000Minds software (www.1000minds.com) is an online suite of tools and processes for ranking, prioritising or choosing between alternatives in decision-making situations where a variety of objectives or criteria need to be considered simultaneously; i.e. Multi-Criteria Decision Analysis (MCDA) and Conjoint Analysis (a.k.a Discrete Choice Experiments). Depending on the application, budgets or other scarce resources can be allocated across competing alternatives – typically in pursuit of ‘value for money’. 1000Minds emerged from our research into methods for prioritising patients for elective surgery, and was quickly acknowledged as being an exciting new approach to MCDA and Conjoint Analysis. 1000Minds is used by researchers at 100+ universities and other organisations worldwide, and also for teaching. More than 400 research projects involving 1000Minds have been completed or are underway – see www.1000minds.com/academic. Free licenses for research and study that’s not funded commercially or from research grants are available from www.1000minds.com/academic/academic-awards. If you are looking for inspiration for research topics, visit www.1000minds.com/academic/research-ideas.

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Alfred Haug

The impact of oil shocks on exchange rates - Alfred Haug (with Syed Basher, East West University, Bangladesh, and Fikra Research & Policy, Qatar, and Perry Sadorsky, York University, Canada)

This project examines the empirical relationship between oil shocks and real exchange rates for oil-importing and oil-exporting countries. A non-linear framework is used for modelling the effects of various oil shocks, depending on their origin. In this research, we detect significant appreciation pressures in oil-exporting economies after oil demand shocks, but no such pressure is detected for oil supply shocks. Global economic demand shocks affect both oil-exporting and -importing countries, but the adjustments of exchange rates may differ according to their relative competitiveness in international markets. The results lend support to the presence of regime switching in real exchange rates. Various extensions of the basic model are possible and we are pursuing those.

Combining monetary and fiscal policy for small open economies - Alfred Haug (with Anna Sznajderska and Tomasz Jędrzejowicz, both at the National Bank of Poland)

This research combines a monetary structural vector-autoregression (SVAR) with a fiscal SVAR for Poland. A novel feature is that fiscal foresight, in the form of implementation lags, is accounted for with respect to both discretionary government spending and tax changes. We demonstrate the importance of combining monetary and fiscal transmission mechanisms, which has mostly been ignored in the literature. However, we find that ignoring fiscal foresight has no statistically significant effects. We calculate an initial government spending multiplier of 0.70, which later peaks at 1.61. This multiplier is much larger than multipliers estimated in previous studies not combining monetary and fiscal policy. On the other hand, the tax multiplier is close to zero.

Timeliness in civil justice - Alfred Haug (with Kim Economides, Flinders Law School, Australia, and Joe McIntyre, Charles Darwin University, Australia)

This project proposes a new perspective on ‘timeliness’ through developing novel statistically testable hypotheses and methodologies to explain behavioural and structural determinants of civil case disposition time. Our proposed more comprehensive methodology presents a powerful explanatory tool to inform future empirical investigation, as well as laying foundations for the creation of robust time standards against which civil courts can be more accurately measured, monitored and compared across jurisdictions.

The macroeconomic effects of discretionary tax changes - Alfred Haug (with Tugrul Vehbi and Oscar Parkyn, The Treasury, New Zealand)

Legislated discretionary tax changes in New Zealand are studies in regards to their empirical effects on output, interest rates, inflation and exchange rates over time. The methodology is based on narrative methods and allows for the estimation of tax multipliers. Their size has been a controversial issue in macroeconomics in the aftermath of the recent global financial crisis and the ensuing sovereign debt crises in European countries. This research tries to pin down the size of the multiplier for New Zealand using recently developed state-of-the-art empirical methods.

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Viktoria Kahui

Price matters for size: optimal foraging theory and selective harvesting of alligators in Florida - Viktoria Kahui (with B. Moyles, Massey University, and A. Brunell, Florida Fish and Wildlife Conservation Commission)

We analyse alligator harvest data in Florida between 2000 and 2012, which includes information on length, location, prices and output of harvested animals. Optimal foraging theory suggests that hunters will always take alligators of higher length, while alligators of smaller length move in and out of the optimal foraging set according to price variation, i.e. when revenue goes up (primarily driven by changes in the price of hides), the minimum length of alligators hunted goes up.

Bioeconomic analysis of habitat-fishery connections – fishing on cold water coral reefs - Viktoria Kahui (with C. Armstrong and G.K. Godwin, University of Tromso)

We develop a bioeconomic model to study habitat-fishery connections such as cold water coral habitats, which are negatively affected by bottom trawling but remain unaffected by stationary gear harvest. We find that when coral is a preferred habitat, the fish and coral stocks become substitutes in terms of unit cost savings of harvest, while an essential habitat implies competing cost and growth effects. We apply data from a case study of the North East Atlantic cod fishery, which suggests that the model results are reasonably robust.

A bioeconomic model for orange roughy fisheries on cold water corals in New Zealand - Viktoria Kahui (with C. Armstrong, University of Tromso)

We extend the standard bioeconomic fisheries model to include interactions with a habitat that induces fish aggregations. Bottom trawling for orange roughy fish in New Zealand occurs both on known tracks and on seamounts with pristine cold water coral, which are excessively slow-growing. Fishers face a trade-off between trawling on known tracks with low catch per unit of effort (CPUE) or investing in exploratory efforts to find unfished seamounts where CPUE is high, i.e. bottom trawling has the effect of destroying the cold water coral irreversibly and rapidly declining CPUE motivates fishers to progressively move from fished to unfished seamounts. Our model captures the trade-off in unit harvest costs and exploratory effort for orange roughy theoretically, explaining why a profit-maximising industry may rationally opt to drive an optimal fish stock level to a very low level, and maybe even extinction.

A production function analysis of fisheries and habitat - open access versus optimal management - Viktoria Kahui (with N. Foley and C. Armstrong, University of Tromso)

We apply a bioeconomic production function approach to fisheries and habitats, in order to assess possible consequences of habitat loss. Unsurprisingly, it is shown that habitat levels matter under optimal management as they directly impact upon profits, but exogenous habitat degradation impacts upon profits disproportionally more at low levels of habitat. Marginal harvest gains from preserving habitat depend on both the management regime and the equilibrium stock size. The harvest gains from reducing negative habitat effects may be greater under open access in a high cost fishery, but greater under optimal management in a low cost fishery. Using time series data for Icelandic redfish fisheries and estimates of cold water coral decline, we estimate parameters for the model, and indicate potential losses for open access and optimal management when habitat is not taken into account in this fishery. The results support the theoretical predictions, underlining the importance of taking into account habitat -fisheries interactions.

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Alan King

The income convergence hypothesis - Alan King (with Carlyn Dobson, Nottingham Business School, Nottingham Trent University)

This research investigates whether per capita income levels in developing economies are converging to that of the United States using linear and nonlinear unit root tests.

The anchoring effects of an inflation target - Alan King

This research examines the time-series properties of inflation expectations in New Zealand to determine whether agents’ expected long-run rate of inflation conforms to the official inflation target.

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Stephen Knowles

Emphasising the Problem or the Solution in Charitable Fundraising for International Development - Jeremy Clark (University of Canterbury), Arlene Garces-Ozanne and Stephen Knowles

International Development NGOs (INGOs) are often criticised for using, in their advertising material, narratives and images about human suffering and deprivation in developing countries. Critics are concerned, for example, that such solicitations stereotype people from developing countries as “miserable, passive and helpless” Such concerns provide the motivation for this project. We test whether minimising information on current deprivation, in favour of emphasising what a donation may achieve, is likely to lead to a reduction in donations to INGOs. We analyse this question using a laboratory experiment – a double-blind Dictator Game where subjects earn payment, and may then elect to donate some portion of it to a prominent charity working in the African country of Mali. We find that varying the information/emphasis has no significant effect on total donations, nor on the probability of donating. We find suggestive evidence that an emphasis on current deprivation may raise the variance of donations, and thus the size of donations conditional on donating, but the effect is not significant in hurdle models that explicitly recognize this.

When Does It Matter How You Ask? Cross-Subject Heterogeneity in Framing Effects in a Charitable Donation experiment - David Fielding, Stephen Knowles and Kirsten Robertson (Department of Marketing, University of Otago)

Charities which depend on donations from the general public employ a range of strategies to encourage greater donor generosity. For example, they can engage with donors using written messages (such as letters or e-mails) or verbal ones (such as radio advertisements or telephone calls), these messages can appeal directly to altruism or instead suggest benefits to the donor. Which strategies are most effective - and whether the effectiveness of a particular strategy depends on donor characteristics - are questions yet to be resolved in the academic literature. In this research we present the results of a charitable donation experiment designed to test for the size of two different types of policy-relevant framing effect that could vary systematically according to the personal characteristics of the subject. Firstly, we test the effect of a solicitation appealing to pure altruism versus one suggesting a self-interest motive. Secondly, we test the effect of an oral appeal versus a written one. We find strong evidence for the first type of framing effect and for the heterogeneity of this effect across different types of participant, which suggests that knowledge of donor characteristics could be valuable in the design of charitable appeals. However, we do not find evidence for the second effect.

Deadlines, Procrastination, and Inattention in Charitable Giving: A Field Experiment - Stephen Knowles and Maroš Servátka (University of Canterbury) and Trudy Sullivan

We conduct a field experiment to analyse the effect of deadline length on charitable giving. Participants, drawn at random from the New Zealand electoral roll, are invited to complete an online survey, with a donation going to charity if they do so. Participants are given either one week, one month or no deadline by which to respond. Donations are lowest for the one month deadline, and higest when no deadline is specificed, consistent with the model of inattention developed in Taubinsky (2014), and also with the idea that not specifying a deadline sends a singal that an urgent response is required, reducing the scope for procrastination.

Giving to local versus international charities - Stephen Knowles and Trudy Sullivan

When giving to charities, do private donors have a preference for giving to charities who help people in need in the home country, or to international development charities who help people in need in poor countries overseas? What reasons do people give for choosing to support a charity with a local or overseas focus? To answer these questions we conduct a field experiment where participants are told that if they complete an online survey, the researchers will make a donation to one of two charities, with the participant choosing the charity. The two charities are World Vision and the Salvation Army. Both are high profile charities, and both are faith-based. The key difference between the two charities is that donations to World Vision help families in need in poor countries overseas, whereas donations to the Salvation Army help people in need in New Zealand. We also give participants the opportunity to comment on why they chose the charity they did, and conduct a qualitative analysis of the reasons given. The Salvation Army is chosen by 71 percent of participants, with the most common reason for choosing the Salvation Army being that “charity begins at home”. We plan to quantitatively analyse whether any of the demographic characteristics of participants (e.g. gender, age group, income level) are correlated with the choice of charity.

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Dorian Owen

Does institutional quality resolve the Lucas Paradox? (with Muhammad Akhtaruzzaman, Toi Ohomai Institute of Technology, Rotorua, and Chris Hajzler, Bank of Canada)

The Lucas Paradox observes that capital flows predominantly to relatively rich countries, contradicting the neoclassical prediction that it should flow to poorer capital-scarce countries. Alfaro, Kalemli-Ozcan, and Volosovych (2008) (AKV) argue that cross-country variation in institutional quality can fully explain the Paradox, contending that if institutional quality is included in regression models explaining international capital inflows, a country’s level of economic development is no longer statistically significant. We replicate AKV’s results using their cross-sectional IFS capital flow data. Motivated by the importance of conducting inference in statistically adequate models, we focus on misspecification testing of alternative functional forms of their empirical model of capital flows. We show that their resolution of the Paradox relies on inference in a misspecified model. In models that do not fail basic misspecification tests, even though institutional quality is a significant determinant of capital inflows, a country’s level of economic development also remains a significant predictor.

Competitive balance and competition design in sports leagues

Competitive balance (CB), how evenly teams are matched, is a central concept in the economic analysis of sports leagues. This study develops measures of CB that take into account key characteristics of competition design (especially the nature of playing schedules, draws worth different proportions of a win, bonus points, and ‘multiple prizes’ in a single league), features generally ignored in commonly used CB measures. Econometric analysis of different sports is used to reveal which of these measures are most relevant for fans’ interest and the implications for competition design are considered.

Fundamental determinants of economic development

Several recent influential empirical studies have used simple models to attempt to identify the fundamental factors that underpin long-term growth and development. This empirical literature is characterised by the ingenious nature of many of the instruments used. However, scepticism remains about their ability to provide a valid basis for causal inference. This research examines the extent to which more emphasis on the statistical dimensions of selecting instrumental variables, through consideration of the statistical adequacy of the implicit reduced form, can usefully complement economic theory as a basis for assessing instrument choice.

Information technology and labour productivity in New Zealand (with Nathan Spence, NZ Treasury)

Using panel time-series data for 26 industries over the period 1980-2010, this study examines the average effect of information and technology (IT) capital on labour productivity growth in New Zealand. Unlike the majority of the literature on the productivity effects of IT, the estimation and testing methods adopted allow for heterogeneous relationships between IT and labour productivity across industries, unobserved industry common factors and cross-section dependence, as well as non-stationary time-series properties of the data.

Health and economic growth

Theoretical and micro-level studies suggest that improved health status has a positive effect on productivity. However, recent work by Acemoglu and Johnson (2007) argues that, even though health improvements may directly enhance welfare, their effect on economic growth at the aggregate level does not significantly increase per capita income. This research project analyses different aspects of the two-way aggregate relationship between improvements in health status and economic growth using cross-section, time-series and panel data methods.

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Arlene Garces-Ozanne

Wealth, Empowerment, Health and Happiness - Arlene Garces-Ozanne (with Temitope Ransome-Kuti, University of New Brunswick and Rick Audas, Dunedin School of Medicine, University of Otago)

Extending the work of Garces-Ozanne, Kalu and Audas (2016), we examine how empowerment or the idea that an individual has control over one’s own destiny affects various health outcomes including happiness. We hypothesise that where there is a greater sense of self-determination, or empowerment, that this will have positive health and happiness benefits. We believe this sense of empowerment can be captured by the entrepreneurial environment and the level of corruption that exists in that nation. We further hypothesise that happiness – which economists and others with interests in social policy are increasingly treating as an important economic outcome – will also be positively affected by this sense of empowerment. For this study, we use a larger data set covering more than 150 countries over the period 1980 to 2015, and include data on different measures of health, well-being and happiness.

Disasters, Resilience and Empowerment - Arlene Garces-Ozanne (with Rick Audas, Dunedin School of Medicine, University of Otago)

War, terrorism and other catastrophic events such as the Chernobyl disaster are all found to have significant adverse effects on individual wellbeing. It has already been shown that terrorist attacks affect trust, stress level and well-being. Other unexpected catastrophic events include earthquakes which can be expected to affect individual well-being. There are a few articles examining the effect of earthquakes on individual well-being in the medical and psychiatric literature, however, there is no research that examines the effect of natural disasters on individuals’ economic well-being. This study aims to examine the factors that contribute to countries’ resilience following a natural disaster. We take a social determinants of health perspective, paying particular attention to political and economic freedom, civil rights, economic justice and social capital as potential contributors to enhanced resilience, while controlling for more conventional determinants such as GDP, education and availability of health services.

Who cares? Trends and Issues on Overseas-Born Careworkers in New Zealand and Their Policy Implications on Japan - Arlene Garces-Ozanne (with Ruth Carlos, Ryukoku University)

Health workers from overseas play a critical role in health service provision in NZ. Specifically, the changing demography of NZ (and many other developed nations) has created a growing demand for elderly care workers. This demand is projected to significantly increase over time in correlation with the ageing population. How it will be met is critical to regional healthcare providers and government agencies who will need to contend with intensified demand on the system from the baby boomer generation. This study looks closely at the employment and retention mechanisms of overseas-born caregivers in the institutional elderly care sector in New Zealand (NZ) using both qualitative and quantitative research methodologies with the end goal of identifying some feasible solutions that Japan can adopt to address its serious labour shortage in this sector. NZ has seen a growing reliance on overseas-born caregivers even without formally opening its labour market to them. Such move has both positive (such as alleviating shortage and providing work to migrants) and negative (for example, high turn-over rate for caregivers, limited caregiving skills) impacts in the elderly care sector. This study contributes to the literature by providing an empirical investigation of migrant elderly care workers from the perspectives of stepwise migration and migrant integration. We focus on the roles of three migrant integration policies (1) conditions in the workplace; (2) access to permanent residency/ citizenship; and (3) family reintegration, in the decision making of the migrant care worker.

Revisiting the Decline in India’s Female Labour Force Participation:The Rise of the Machines and Security Risks - Arlene Garces-Ozanne (with Avtar Singh)

Despite remarkable economic progress in India, aggregate female labour force participation rate still show a declining trend since the late 1970s. Traditional explanations such as decreasing fertility rates, rising wages and education levels could not completely explain this trend in female labour force participation. This study explores both the labour demand and supply side aspects in order to determine the cause of the decline in the female labour force participation rate in India. We hypothesise that in India, where 67% of the population live in the rural area and 66% of economically active workers work in the agriculture sector, the share of agriculture to the GDP and the mechanisation of agriculture, along with security risks are the important determinants of female labour force participation. Using time-series data from 1980, we find evidence that the mechanisation of agriculture and security risks have significant negative effects on India’s female labour force participation rate.

Factors affecting the resilience of Filipino migrants: Evidence from the 2011 Christchurch earthquake and the Great East Japan earthquake and tsunami - Arlene Garces-Ozanne (with Maria Ikeda, Kyoto Sangyo University)

This study explores the social and economic vulnerability of Filipino migrant communities in New Zealand and Japan following the Canterbury earthquakes in 2010 and the Great East Japan earthquake and tsunami in 2011. We compare the (1) demographic, social and economic characteristics of migrants who stayed to help in the rebuild and recovery efforts in the disaster-struck areas and discuss the (2) self-help and mutual support coping strategies in post-disaster and recovery stages in Japan and New Zealand. We also aim to determine specific characteristics that contribute to migrants’ resilience and vulnerability in times of disaster


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Trent Smith

The Economics of Information, Deep Capture, and the Obesity Debate (with ATTILA TASNÁDI, Corvinus University of Budapest)

The economic theory of regulatory capture predicts that industry groups will attempt to influence their regulators (for example, by lobbying for rules that exclude competition). It has been suggested that the same logic applies to any powerful institution with the ability to affect industry profits. When the aim of industry is to alter the public’s perception of its product (for example, by disseminating favourable messages to the news media or via an advertising campaign, or by funding industry-friendly scientific research), the end result has been dubbed deep capture. We develop a formal model of deep capture, in which consumers have imperfect information about product quality, and a dominant producer is able to increase his profits by altering the parameters of the consumer’s search problem. We demonstrate the empirical relevance of the phenomenon with a
discussion of the food industry response to the obesity epidemic.

Waiting for the invisible hand: Novel products and the role of information in the modern market for food (with Hayley H. Chouinard, and Philip R. Wandschneider, Washington State University)

This paper places the modern spread of diet-related chronic disease in the United States within the context of more than a century of innovation in food processing technology, discovery in nutrition science, and corrective policy measures aimed at improving public health. We ask whether the current state of affairs represents a market failure, and—if so—what might be done about it. We argue that while today’s industrial food system has its advantages, the asymmetric information problems inherent to this system have resulted in a ‘‘lemons-style’’ breakdown in the market for processed foods. The appropriate policy response to such situations (namely, verifiable quality standards) is well known, but such policies are likely (in the short run) to reduce profits for existing large industrial producers of food. In light of the food industry’s long history of success at regulatory capture, we propose the formation of a new independent food standards agency devoted to protecting the interests of the American consumer.

The U.S. Obesity Epidemic: New Evidence from the Economic Security Index (With Steven Stillman, and Stuart Craig (Yale University)

A growing body of research supports the \economic insecurity" theory of obesity, which posits that uncertainty with respect to one's material well-being may be an important root cause of the modern obesity epidemic.
This literature has been limited in the past by a lack of reliable measures of economic insecurity. In this paper we use the newly developed Economic Security Index to explain changes in U.S. adult obesity rates as measured
by the National Health and Nutrition Examination Surveys (NHANES) from 1988{2010, a period capturing much of the recent rapid rise in obesity. We find a robust positive and statistically significant relationship between
obesity and economic insecurity that holds for nearly every age, gender, and race/ethnicity group in our data, both in cross-section and over time.

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Paul Thorsnes

Housing market effects of exogenous urban amenities - Paul Thorsnes (with Robert Alexander, University of the Sunshine Coast)

We take advantage of an unusual house-sales data set to estimate the short-run effects on sale prices and long-run effects on house and neighbourhood characteristics of local variation in natural and historical amenities.

Residential response to time-of-use electricity pricing - Paul Thorsnes (with Rob Lawson and John Williams, University of Otago Department of Marketing)

We analyse survey and electricity usage data from a sample of Auckland households who participated in a one-year experiment with static daily peak/off-peak electricity pricing.

Energy cultures: barriers to household adoption of energy efficient technologies and practices - Paul Thorsnes (with Rob Lawson, University of Otago Marketing, Gerry Carrington, University of Otago Physics, Janet Stephenson, University of Otago Centre for Sustainable Agriculture, Food and Environment, and Barry Barton, University of Waikato Law)

With funding from the Foundation for Research, Science and Technology we take an inter-disciplinary approach to gain insight into householder decision-making with respect to adoption of energy efficient space and water heating technologies and practices.

Combining market with survey data to estimate willingness to pay for heating-efficiency improvements - Paul Thorsnes (with Colin Smithies, Tim Bishop and Ben Wells)

With funding from a University of Otago research grant we measured heating efficiency and improvements in a sample of houses that sold in 2005. The householders completed a choice modelling exercise to provide data for estimation of demand parameters.

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Murat Üngör

De-industrialization of the Riches and the Rise of China

This paper studies the impact of the industrialization of China on the U.S. industrial employment share. A comparison of the predictions of open and closed economy models suggests that a common explanation of de-industrialization in the literature, which is based on increased productivity in industry relative to services in a closed economy setting, is not compelling. Counterfactual experiments show that if the Chinese economy had experienced productivity in industry equal to that of the U.S., then the role of openness would have been diminished. The higher the elasticity of substitution between home and foreign industrial goods is the more accelerated structural transformation in the U.S.

The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck? (with Tarek M. Harchaoui, University of Groningen)

The growth revival of the Sub-Saharan African (SSA) economy since the early 1990s, following a long torpor, is now well known. What is less known is whether this growth path has translated into a gradual process of convergence to the U.S. level which reverses the long-term fall so far behind. With the benefit of major upgrades in the source data, we employ well–tested and familiar methods in the development literature to sort out the quantitative importance of the fundamentals behind the process of convergence. While the SSA growth resurgence has triggered local pride, foreign envy, and enthusiasm from international policy makers, our results suggest a more sober tone. At the aggregate level, per capita income and labor productivity levels in 2010 relative to the U.S. are well below those reported during the pre-1990 period. Relative factor input endowments constitute the primary force that impedes SSA relative labor productivity—a major departure from conventional wisdom. While the story from the sectoral level remains broadly consistent with the one obtained at the aggregate level, additional insights emerge. These include disproportionately lower relative levels of sectoral labor productivity that led to a considerably slow and atypical process of structural transformation. Although relative intersectoral labor productivity gaps have been reduced, sources of allocative inefficiency remain large.

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Dennis Wesselbaum 

Delays in Public Goods - Dennis Wesselbaum (with Santanu Chatterjee (University of Georgia) and Olaf Posch (University of Hamburg)

The provision of public infrastructure is often characterized by unexpected delays in implementation and escalation of costs, both in developed and developing countries.
In this paper, we analyse the consequences of time and cost overruns associated with the provision of public infrastructure in the context of a growing economy. Our results indicate that these delays generate too much consumption and too little private investment relative to the first-best optimum. From a social planner’s perspective, however, the infrequent arrival of public capital requires a reallocation of resources away from consumption towards private investment in order to maintain an optimal flow of output. We also show that the presence of unanticipated delays in the provision of public capital not only lowers equilibrium growth, but also leads to a diverging growth path relative to that implied by the canonical model without delays. This suggests that delays in public capital provision may be a determinant of cross-country differences in income and economic growth.

Central Bank Communication and Social Media #FED - Dennis Wesselbaum (with Marc-Andre Luik (Helmut Schmidt University Hamburg)

Central bank communication has changed dramatically over the last decades. This paper develops a new approach to identify and quantify the effects of central bank communication on asset prices and the real economy. We use Twitter data to identify monetary policy announcements.
Using tweets by the Federal Reserve Board we show that announcements significantly affect asset prices: they flattened the yield curve over the time span from 2012 to 2016. We then estimate a mixed-frequency VAR to identify real effects of central bank communication. We find that the FED’s communication had the desired real effects: higher output and inflation and lower unemployment.

Jobless Recoveries: The Interaction between Financial and Search Frictions - Dennis Wesselbaum

This paper establishes a causal link between labour market frictions and financial market frictions. We present empirical evidence about the relation between search and financial frictions. We argue that this link, being negative from 2007 to 2009, had large effects on labour market outcomes and helps to explain the jobless recovery. Then, we build a stylized DSGE model that features this channel. Simulation exercises show that the model with this channel generates a strong internal propagation mechanism, replicates stylized labour market effects of the Great Recession, and, most importantly, creates a jobless recovery.

Bubbles, Systemic Risk, and Macroprudential Policy - Dennis Wesselbaum (with Alexander Falter (Bundesbank) and Marc-Andre Luik (Helmut Schmidt University Hamburg)

The financial crisis has shown that non-fundamental deviations of asset prices, i.e. bubbles, are able to create long-lasting adverse effects towards the global, real economy. To counter the recessionary pressures and to ensure a fast recovery, policy makers used a wide range of fiscal and monetary policy measures. A consensus emerged that this ex-post "cleaning" policy is only second-best compared with macroprudential policies, i.e. "leaning". Those policies are aimed at ensuring financial stability, reducing the volatility of the credit cycle, and limiting macroeconomic costs. In this paper, we build and estimate a DSGE model for the U.S. economy with systemic risk allowing for asset and house price bubbles. Within this framework we study the effects of various macroprudential tools.

Happiness over the Financial Crisis - Dennis Wesselbaum

This paper adds to the literature on the macroeconomic driving forces of happiness. Using data for 106 countries over the financial crisis we estimate a dynamic panel data model. We find that there is no evidence in support of the Easterlin Paradox. Further, individuals have a stronger aversion against unemployment than against inflation. We perform robustness checks including cultural differences and additional driving factors such as gender inequality and macroeconomic policies.
Finally, we identify happiness shocks in a Panel VAR and show that happiness creates business cycles. Interestingly, happiness shocks increase GDP on impact but decrease it after one year.

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