Kent Economics Research Seminars, Autumn Term 2023

Ali Sen (University of Cambridge)

Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters

Abstract: I analyze a disaggregated structural change model that takes into account the heterogeneity within the broadly defined sectors of the economy. The positive correlation between nominal and real value-added shares of the services, a fact that discredits CES preferences commonly applied in the structural change literature, largely reflects the heterogenous make-up of the services. I show that a model where the service industries with high-productivity growth are separated from the rest of the services can generate this positive correlation without any income effects. Consistent with the stylized facts, the disaggregated structural change model I consider implicates a hump-shaped pattern for the relative price of investment against consumption. Concerning structural change within investment the results of the disaggregated model in general contrast with the existing literature.

Fri September 29, 12:00-13:00, SIBSR7


Esther Gehrke (Wageningen University)

Regulating Manufacturing FDI: Local Labor-Market Responses to a Protectionist Policy in Indonesia

Abstract:We analyze the effect of rising protectionism towards foreign direct investment (FDI) on employment and domestic firm creation, exploiting revisions in Indonesia’s highly-granular negative investment list, and spatial variation in the exposure of the manufacturing sector to these investment restrictions. Rising restrictions caused employment gains at the local level, both in the manufacturing as well as in the services sector. The documented employment gains go along with a reorganization of the local production structure: local exposure to FDI restrictions is linked to new firm entries in the manufacturing sector that are concentrated among micro and small enterprises. Spillover-effects to the services sector seem to be driven by a rise in immigration and benefited medium to large enterprises the most, potentially because these were better able to respond to the increased demand for local services.

Wed 4th October 13:00-14:00


Tim Willems (Bank of England)

Battle of the markups: conflict inflation and the aspirational channel of monetary policy transmission      

Abstract: After the post-Covid rise in inflation, a debate has emerged whether this inflation is “seller-driven” and, if so, how policy should respond. We build a model to capture the underlying distributional conflict between wage- and price-setters both wishing to attain a certain markup. We highlight a new “aspirational channel” of monetary transmission: by influencing cyclical conditions, a central bank can control inflation through affecting markup aspirations of workers and firms. We establish conditions under which an inflationary situation characterized by inconsistent aspirations requires a reduction in economic activity, to push demands of workers and firms towards consistency. We find that countercyclical markups and/or a flat Phillips curve call for more “dovish” monetary policy (responding less to inflation deviations, more to the output gap). Estimating price markup cyclicality across 43 countries, we find that contractionary monetary shocks indeed have stronger anti-inflationary effects in countries with greater markup procyclicality.

Friday October 6, 12:00-13:00, KENSR7


Laura Mayoral (Institute for Economic Analysis and Barcelona School of Economics)

Economic development in pixels: The limitations of nightlights and new spatially disaggregated measures of consumption and poverty

Abstract: Satellite measures of nightlights are frequently used as proxies for economic development, even though they are limited by their lack of a substantively interpretable metric and by substantial measurement error. This paper develops a method for estimating consumption and poverty in 10x10km cells that addresses both limitations. The foundation of the method is a mathematical framework for combining individual-level surveys of asset ownership with country level economic data to produce a new measure of spatially disaggregated consumption per capita. We use the new data to illustrate why analyses using nightlights can be expected to generate biased results due to non-classical measurement error. By revisiting two papers on institutions and economic development, we show that the measurement error can lead to both amplification bias and attenuation bias.

Wednesday October 11th, 13:30-14:45, SIBSR7


Christian Ghiglino (University of Essex)

Paper: TBC

Friday October 13th, 12:00-13:00, SIBSR7