Author Archives: tjg

Dr Zaki Wahhaj

Early marriage and the persistence of traditional gender norms

An article based on research by the School’s Dr Zaki Wahhaj, Reader in Economics and his co-author Professor M. Niaz Asadullah from the University of Malaya, has been published in VoxDev titled ‘Research in Bangladesh shows how early marriage contributes towards women expressing more traditional gender attitudes’:

‘Traditional gender norms play a potentially important role in shaping women’s economic opportunities and outcomes. This idea is a key theme in Esther Boserup’s seminal account of women’s role in economic development (Boserup 1970). A growing body of empirical work also provides support for this hypothesis (e.g. Fernandez and Fogli 2009, Alesina et al. 2013). However, how these norms are sustained and recreated in each new generation, and how the cycle may be broken, are not understood nearly as well. In recent work (Asadullah and Wahhaj forthcoming), we present new evidence on a distinct social process for the transmission of traditional gender norms, namely, the experience of adolescent marriage among women. Marriage postponement increases disagreement with these gender norms – expressed, for example, in statements of the form “Boys require more nutrition than girls to be strong and healthy” – even among women who never went to school.’

Read the full article here.

Workshop: Microeconomic Approaches to Development Economics

The School of Economics is hosting a workshop, sponsored by the Royal Economic Society, on Microeconomic Approaches to Development Economics: Organisations, Institutions and the Mind.

The workshop will take place on 24-25 June 2019 at the University of Kent, and will bring together internationally leading and junior academics from the fields of Political Economy, Organisational Economics and Development Economics working on questions relating to identity, norms, motivation, belief formation and their effect on the functioning of institutions and organisations.

Confirmed speakers include Professors Sonia Bhalotra (University of Essex), Maitreesh Ghatak (LSE), Lakshmi Iyer (University of Notre Dame), Gilat Levy (LSE), and Dilip Mookherjee (Boston University).

Research presented at the workshop will include work that touches upon issues of direct policy relevance today, such as the effective functioning of political institutions in developed and developing countries, motivating workers in the public sector, changing cultural practices that entrench social inequality or economic inefficiency.

A call for papers for the workshop is now open. Submissions from early career researchers are especially welcome. Funding for accommodation (up to two nights) and travel (from within Europe) will be provided for one participant per accepted paper. The closing date for submissions is March 15, 2019. Papers should be sent to Amrit Amirapu at A.Amirapu@kent.ac.uk.

For further information, see https://www.kent.ac.uk/economics/research/micro-group/events/workshop-24-25-jun-19.html

Undergraduate Surveys – update

Join us to complete either the NSS or the UGS in a computer room this week. We’re providing a FREE drink and chocolate!!

Week 20
Thu 7 Mar 13.30-14.30 (KSA1)

National Student Survey (NSS)
All eligible students who complete the NSS will be entered into a prize draw for an iPad* and four £50 vouchers!

If you’re eligible to participate in this year’s survey, you will have received an email invitation from Ipsos MORI on Thursday 31 January.

To enter the School of Economics prize draw, complete the survey and forward your NSS survey completion confirmation email to economics@kent.ac.uk.

If you’ve already completed the survey, email your confirmation to economics@kent.ac.uk to enter the prize draw, or come along and join us for a drink!

* The prize draw for an Apple iPad will take place if the School of Economics reaches its 80% student completion target.

The NSS is an annual independent survey giving students across the UK the opportunity to give their feedback on their experiences of university study – both what you liked and what you think could be improved. It will run from Monday 28 January 2019 until Tuesday 30 April 2019 and takes about 10 minutes to complete.

For more information, and to take the survey, visit http://www.kent.ac.uk/student/surveys

Undergraduate Survey (UGS)

The University is also running the Undergraduate Survey (UGS) – the UGS is an internally run survey of all students on Undergraduate level programmes at the University of Kent (excluding those who are eligible to complete the NSS).

If you are eligible, you will have received an email from Professor April McMahon, Deputy Vice-Chancellor Education. Completing this survey helps the University understand what we do well and what we need to do better and is one of the most powerful ways you can have your voice heard at Kent.

The survey asks the same questions that are in the NSS as well as a section about accommodation and some research questions for the Q-Step Centre and the Student Success Project. It should take no longer than 15 minutes to complete.

Keynes College

Kent Economics Summit

The first Kent Economics Summit – ‘Economics in Today’s World’ – will take place on Saturday 2 March in Templeman Lecture Theatre (11am – 5pm).

This student-led initiative, involving both the Kent Economics Society and Kent Invest will include inspiring talks from:

  • Dr Linda Yueh, economist, broadcaster and writer
  • Dr James Warren, research economist and School of Economics alumnus
  • Iria Camba Florez de Losada, Senior Analyst at Compass Lexecon and School of Economics alumna

The day will also include an entertaining debate on the topic ‘Is Economics Useless?’, featuring Economics lecturers, Drs Alfred Duncan and Amrit Amirapu. Plus there will be a chance to network with speakers and other students over lunch and refreshments.

It promises to be an interesting and fun day – so make sure you book your place here.

The summit is open to all Kent students and is sponsored by the Kent Opportunity Fund.

Professor Miguel Leon-Ledesma

Miguel appointed Fellow of CEPR

Congratulations to Professor Miguel León-Ledesma on his appointment as Fellow of the Centre for Economic Policy Research (CEPR). The prestigious CEPR is a research network of economists established in 1983 to enhance economic policy making in Europe. Based in London, CEPR’s network of Research Fellows and Affiliates includes over 1,000 of the top economists in the world conducting research on issues affecting the European economy. Miguel has been appointed Fellow of the Macroeconomics and Growth programme area.

University of Kent campus

Still chance to apply for new degree-level apprenticeship in economics

The deadline for applications to the UK’s first degree-level apprenticeship in economics, provided by the University’s School of Economics, is 20 January.

The partnership between the University and the Government Economic Service (GES) will see Kent’s School of Economics deliver the apprenticeship in conjunction with its Centre for Higher and Degree Apprenticeships.

The Government Economic Service Degree Level Apprenticeship programme will create new routes to careers in the Civil Service for young people who would prefer to study for a degree whilst working at the heart of government.

The apprenticeship standard on which the programme is based was developed by a group of economist employers. These included HM Treasury and the Bank of England as well as a range of consultancies and third sector organisations.

A range of central government departments and agencies will provide placements through the new programme, including: HM TreasuryDepartment for Work and PensionsDepartment for Education and the Department for Environment, Food & Rural Affairs.

The apprenticeship is available in locations across the UK: Manchester, Bristol, Leeds, Sheffield, Newcastle, London and York. Apprentices will receive a starting salary of about £22k in London and in excess of £20k nationally.

The apprenticeship is fully funded therefore there are no tuition fees, and apprentices are guaranteed that 20% of work time will be spent on university-based education, which will be closely related to the job.

The programme is open to candidates with GCSE maths at grade B (6) or above and 96 UCAS points – equivalent to CCC at A-level, MMM for a BTEC Diploma, DD for a BTEC Certificate.

There are no age limitations, and enthusiastic applicants with other relevant qualifications or previous experience are welcomed. Once the apprenticeship has been successfully completed, apprentices will have four years work experience, an economics degree and the offer of a permanent job in the Government Economic Service.

Original article by Martin Herrema, University of Kent News Centre

Professor Iain Fraser

De-linking final Basic Payments from farming: hardly ‘public money for public goods’

An interesting piece by Professor Iain Fraser in the Food Research Collaboration blog Food Voices on 12 December 2018 on ‘De-linking final Basic Payments from Farming’:

‘In September 2018 the Government published a new Agriculture Bill. It marks a profound change in the design, delivery and rationale of agricultural policy in the UK. It is proposed that farming can only expect to obtain public financial support for the production of public goods, such as the provision of biodiversity, improving soil management and quality, and planting of trees. There is a great deal of emphasis on the environment and the delivery of the promises that have recently been made in the 25 Year Environment Plan. As a result, the most striking aspect of the Bill is the minimal amount of actual agriculture policy in any traditional sense.

What this means for agricultural and rural policy in the UK is that the support payments currently made to farmers under Pillar I of the Common Agricultural Policy (CAP) in the form of the Basic Payment Scheme (BPS) will be removed. These payments are substantial – significantly greater than £200 per hectare in 2017. Although these payments are “decoupled” from historical levels of agricultural production it is difficult to defend them as anything other than a subsidy to farming.’ …

…Read the complete article here.

Keynes College

The Effects of Risk and Ambiguity Aversion on Technology Adoption: Evidence from Aquaculture in Ghana

by Dr Christian Crentsil, Dr Adelina Gschwandtner and Dr Zaki Wahhaj, University of Kent. Discussion paper KDPE 1814, December 2018.

Non-technical summary:

Small-scale farmers in developing countries frequently make production decisions in a situation of uncertainty because of the prospect of weather-related shocks, crop failure, price fluctuations, etc. They are often compelled to make choices that reduce consumption risk at the cost of future expected profits. The adoption of productivity-enhancing technologies is a domain where these trade-offs can become particularly important. New technologies may be inherently more risky, or require additional investments that increase the risk exposure of farmers.

In this paper, we study how aversion to risk and ambiguity affects the adoption of new technologies by smallholder aquafarmers in Ghana where, over the years, the government and other development agencies have introduced improved technologies to enhance productivity and profitability in fish production.

In the present study we consider the adoption of three distinct technologies: (i) Akosombo strain of Tilapia (AST), a fast-growing breed of tilapia fish that offers farmers the potential to harvest twice a year compared to once only for the existing local breed; and the use of (ii) floating cages; and (iii) extruded feed for the fish under cultivation.

Our results show that, for all three technologies, risk aversion accelerates their adoption. This is in contrast with most of the literature which finds that risk aversion delays the adoption of new technologies. We explain this result by arguing that all three technologies under consideration are risk reducing. On the other hand, we find differential effects of ambiguity aversion on the adoption of the three technologies: ambiguity aversion among farmers slows down the adoption of floating cages but has no effect on the rate of adoption of the two other technologies. We attribute this finding to the significantly higher cost of adopting floating cages, which prevents farmers from small-scale experimentation with the technology. Additionally, we find that the presence of other adopters in the locality attenuates the negative effect of ambiguity aversion on the adoption of floating cages.

The results suggest that the implementation of these technologies might provide fish farmers in Ghana with limited access to credit and insurance a means to negotiate an uncertain environment. Moreover, providing practical information about new agricultural technologies with the help of extension agents and existing farmers in neighbouring villages may mitigate the effects of ambiguity and ambiguity aversion on technology adoption. Our findings also suggest that informing farmers about technologies that mitigate the effects of adverse shocks may accelerate the adoption of new agricultural technologies.

You can download the complete paper here.

Dr Katsuyuki Shibayama

A Simple Model of Growth Slowdown

by Dr Katsuyuki Shibayama, University of Kent. Discussion paper KDPE 1813, October 2018.

Non-technical summary:

After the Great Recession around 2007-8, the U.K. has experienced the slowdown of the labour productivity; known as ’productivity puzzle’. Although it is widely recognized as the stagnation of the labour productivity, not surprisingly, it coincides with the flattening of the total factor productivity (TFP). Japan also has experienced a similar but much longer and deeper phenomenon after the bubble burst at the beginning of 1990s. Interestingly, both countries have experienced the growth slowdown after some financial turmoil. This paper aims to explain these growth slowdowns quantitatively in a reasonably realistic economic growth model.

A growth slowdown is a long-lasting, significant decline of growth rate. It is not specific to high-income countries. The economic model developed in this paper also encompasses the “middle income trap”; typical examples include Latin American countries. The standard economic growth theory tells us that low-income countries should grow faster because they tend to accumulate production capital at a faster rate (Solow effect). Actually, many countries has successfully escaped from low income levels, but, out of 101 middle income countries in 1960, only 13 of them is classified as high income countries in 2008; see Larson, Loayza and Woolcock (2016, World Bank).

Extending Romer’s (1990) seminal paper, our model has an additional state variable, which we call the R&D environment, to capture social culture (scientists ’attitudes toward business, etc.), legal system (including patent laws and property rights), R&D infrastructure (such as innovators’ networks and education systems), and so on. We can regard the R&D environment as an intangible social capital, which has the following two properties; (a) society accumulates the R&D environment as an (intangible) asset by conducting R&D; and (b) the R&D activities are more productive when the R&D environment takes a higher value. For (a), an important assumption is such an accumulation of social asset is a positive externality of the R&D activities; i.e., the researchers do not intend to improve the R&D environment, when they engage in R&D. For (b), we want to capture, for example, higher education institutions are better prepared for the commercialization of academic findings when business innovations and inventions are more active.

In our model, there are two stable balanced growth paths (BGPs, long-run equilibria); one with positive R&D activities and the other without them. This is intuitively because of vicious and virtuous cycles. Around the BGP with no R&D, there is a vicious cycle; once R&D becomes inactive, it deteriorates the R&D environment, which itself discourages the R&D activities. Similarly, there is a virtuous cycle in the good BGP.

If there are no shocks (or only small shocks) in the model, then the fate of an economy depends on its initial condition. In our model, depending on the initial state, its final destiny – good BGP or bad BGP – is predetermined. Note importantly that in our model, even an economy moves toward the bad BGP, still it grows at a faster rate in early periods through the capital accumulation (Solow effect); it fails to switch from the capital accumulation as a growth engine to the R&D driven growth. We argue that countries that successfully transited from the middle-income level have had a R&D environment good enough to attain this transition; such as Japan and West Germany after the WWII. This is the explanation of the middle-income trap in our model.

If there are some shocks in the model, even if they are temporary, still they can have long-run effects. We assume that after a successful innovation, innovators can set up a firm, meaning that the firm value is the reward to innovations. Like Comin and Gertler (2003, AER), because the firm value is the present value of the current and future profits, R&D is more active in booms. Unlike Comin and Gertler’s ’medium cycle’ effects, however, business cycle fluctuations can have very persistent effects in our model; this is because a shock may push out an economy from one BGP to the other. For example, if an economy experiences a bad external shock, output, firm profit and firm value decline, which in turn discourages innovations. If such a bad shock is large enough and lasts long enough, the dormant R&D activities during the recession may deteriorate significantly, which hampers R&D even after the end of the negative external shock. In our model, this is the mechanism behind the growth slowdown in Japan and the U.K.

There are several policy implications. First, to help escape from the middle-income trap and the long-lasting growth slowdown, we need a ’big push’. For example, a large scale ODA as a positive external shock may be required. Second, however, the type of ODA matters. In our model, improving production efficiency and increasing final goods demand do not help escape from the low BGP, because there are two effects that offset each other. On the one hand, these shocks increase the firm profit and firm value, which stimulates the R&D activities. However, on the other hand, the production sector and the R&D sector compete each other in the factor market (labour market in our model). Hence, in our model, if the production efficiency improves, the production sector absorbs more labour, squeezing out the R&D sector from the labour market. There is anecdotal evidence of type of phenomenon; e.g., Wall Street and City have taken many scientists from universities and other research institutes such as NASA. In addition, this story is in parallel with the leading exposition about the natural resource curse; if the extraction of natural resources are very profitable, the natural resource sectors absorb too much production factors such as labour, squeezing out high productivity growth sectors such as manufacturing. Hence, if they only improves production efficiency, building bridges, roads and power plants, for example, has little effect in total. Third, our numerical experiments suggest that the financial sector efficiency has a strong effect. If the financial market is malfunctioning, the firm value may be discounted unduly. In our model, because the firm value is the reward to successful R&D, such a mispricing of the firm value discourages the R&D efforts. This is reminiscent of the fact that the U.K. and Japan have experienced the growth slowdown after the financial market turmoil.

In conclusion, this paper asserts that a sort of intangible social assets such as culture, legal system, etc. are important for R&D. Our model has multiple BGPs. Even though an economy has experienced a rapid growth via capital accumulation (Solow effect), it may fail to switch to the R&D driven growth (middle-income trap). In addition, even though a country successfully achieved a high-income level, it could slip down from the good BGP, particularly if it suffers from deep and long financial turmoil (like Japan and the U.K.). To regain the sustainable R&D environment, the model suggests the following policy prescriptions; (i) policy measures that directly affect the R&D productivity such as the subsidy to higher education and R&D tax credit and (ii) policies to improve the efficiency in the financial market.

You can download the complete paper here.

Measured Productivity with Endogenous Markups and Economic Profits

by Dr Anthony Savagar, University of Kent. Discussion paper KDPE 1812, October 2018.

Non-technical summary:

A standard way to measure productivity is to take output growth and subtract input growth. Typically input growth is growth in capital and growth in labor weighted by their share in production. Whatever remains after subtracting is known as total factor productivity (TFP).

Under specific circumstances, this productivity measure also reflects underlying technology growth. This is important for economists because they struggle to measure underlying technology at an aggregate level, but it is a key variable to understand the behaviour of the economy.

However when we diverge from some basic assumptions, such as perfect competition, the TFP measure no longer reflects underlying technology. Therefore using our TFP measure to represent technology could lead to incorrect conclusions.

In this paper I show that when we recognize the slow adjustment of firms to arbitrage profits and the effect that slowly entering firms have on competition, the relationship between our measure of TFP and technology becomes much more complex. In fact, when we observe changing TFP, it will compose changing technology, changing profits and changing markups. This decomposition allows us to understand how we can get a true measure of underlying technology from our calculated TFP measure. It emphasizes that the composition of profits and markups vary in importance as firm entry takes place.

You can download the complete paper here.