Introduction
It is our pleasure to invite you to read the latest edition of our department research newsletter. As always, here we share the exciting research achievements and contributions of our colleagues over the past year.
Here you will read more about research life in the department, including the vibrant research culture amongst our PhD students and the creative, influential and award-winning papers published by our colleagues. The sheer depth and breadth of research done in our department is a matter of pride for us, and we are equally proud to share this with you.
You will find members of the department crisscrossing the globe, not only invited to talk about their own research by the best institutions of many countries but also learning about developments in their fields at top international conferences. But we don’t just go places, you will also find us bringing the world to Essex in the form of top class international workshops featuring high quality and diverse speakers. It is this engagement and drive that makes our research environment so special, in fact recognised by being ranked 3rd in the UK in the REF.
We hope you enjoy reading about our work just as much as we enjoy producing it.
Our academic staff
My paper, ”Behavioural Risk Profiling: Measuring Loss Aversion of Individual Investors,” was accepted for publication in the Journal of Banking and Finance. The paper presents two large-scale implementations of a theoretically sound measure of loss aversion - people’s tendency to overweight losses relative to gains - in risk profiling in financial institutions in Belgium and Ireland. Our findings show that incorporating loss aversion enhances traditional risk-return profiling methods. I have presented this research to financial regulators in the UK, Germany, and the European Commission, and our method is now being adopted by banks in several European countries.
My paper “High Stakes Failures of Backward Induction,” has been accepted for publication in Games and Economic Behavior. This study analyzes over 40 years of data from the American TV game show The Price Is Right to evaluate how well people make strategic decisions and to explore why they sometimes fail. A summary of the findings can be found here.
I launched the Essex Centre for Behavioural Science last June, bringing together over 120 researchers from all faculties at the University of Essex to collaborate on topics within behavioural science.
This year is the beginning of a five-year grant I am leading on lying costs in economic theory. This is a £1.4 million UKRI Frontier Research Grant titled “Endogenous Lying in Economic Environments” (the project was originally selected as an ERC Consolidator Grant). The grant will support a small team at Essex (including already Aditya Kuvalekar) working on problems on costly lying in economics, especially in contracting and incentive problems.
Lying is central to economic models of incentives and allocation problems. But most of the existing theory disregards lying costs, which could include things like psychological costs and social stigma.
The fact that many people don’t like to lie affects the kinds of incentives they should be offered in different settings such as labour contracts or insurance. Many incentive problems take place over time, and one of the important goals of the research is to study how tastes towards lying can change over time, and how dynamic incentives should be properly designed to account for this.
I published a project about how to reduce wasteful spending in the International Economic Review. In it, I show that allowing for a partial roll-over of unused funds to the next financial year can lower wasteful year-end spending.
With co-authors, I also published a second study on work from home in Scientific Reports, where we investigate how WFH and hybrid work affects innovation in a firm. Australian state TV has used some of my interview responses about our work from home research in a report.
Finally, my article lamenting the poor state of peer review in economics (and how to improve it) has been published in a peer reviewed journal.
I have just finished two big research grants (ERC and Philipp Leverhulme Prize) and I am looking forward to starting to teach again. Last year, I published a few research articles and gave several talks and presentations.
One of the papers I published is called “Non-Bayesian Statistical Discrimination” and it is published in Management Science. In this paper we show, using theory and experiments, that if people display certain typical failures of Bayesian rationality they tend to discriminate more in hiring decisions compared to Bayesians. On the other hand affirmative action policies that are ineffective or even counter-productive when people are Bayesian can be effective in this case.
In other work we have studied how working from home (WFH) impacts productivity (Paper 1) and innovation (Paper 2). This work was covered in several news media and has had quite a bit of impact. You can find some of the news articles here. The picture shows me talking about this work at the Regius Lecture at the University of Essex 2024.
During the 2023/2024 academic year, my research has focused on the intersection of Search, Finance and Sovereign Default literatures. I've had the privilege of collaborating with colleagues from several institutions on these topics, including the University of Rochester, Indiana University, University of North Carolina, University of Wisconsin, the Federal Reserve Bank of Richmond and the Bank of Canada. The paper "Sovereign Debt and Credit Default Swaps", published in the Journal of International Economics, investigates the relationship between sovereign debt markets and credit default swaps (CDS). It utilizes a novel model and regulatory data to quantify the impact of CDS trading on sovereign-bond prices and government decisions. The study highlights the importance of considering asset liquidity and search frictions when evaluating policies related to CDS.
In addition, the paper "Is Money Essential? An Experimental Approach", published at the Journal of Political Economy, explores the essentiality of money through both theoretical modelling and laboratory experiments. It examines scenarios where fiat currency can have value in finite-horizon settings and the conditions under which money leads to improved economic outcomes. The research also delves into the role of strategic recommendations and social preferences in influencing participants' behavior in monetary exchange.
I'm also working on projects that delve deeper into rollover crisis, financial intermediation and municipal bond issuances. I anticipate these projects will contribute to our understanding of the complex dynamics of debt markets, the role of financial institutions in shaping market outcomes, and the factors influencing local government financing decisions.
In the past academic year, two papers I wrote on banking were accepted for publication. In “Oligopoly Banking, Risky Investment, and Monetary Policy”, published in the European Economic Review, my co-author Zijian Wang and I study how bank market structure affects monetary policy transmission. Among other things, we show that higher bank market power reduces the effectiveness of monetary policy, and rationalise why an increase in the policy rate does not affect the interest rate on deposits close to the zero-lower bound.
In “Systemic Bank Runs without Aggregate Risk: How a Misallocation of Liquidity May Trigger a Solvency Crisis”, forthcoming at the Journal of Financial Economics, Hugo van Buggenum, Lukas Voellmy and I show that a purely belief-driven systemic bank run can lead to a recession, and in turn the recession can worsen the banks’ solvency and thus lead to bank failures. In this scenario, measures which usually prevent bank runs, such as deposit freezes, become ineffective as they only worsen the recession that follows the bank run. Instead, we show that the provision of emergency liquidity by the central bank is effective in preventing runs in such scenarios.
Besides this, I have finished two new papers which are now in the review process. In one of them, my co-authors and I study conditions under which e-monies such as Bitcoin may coexist with traditional fiat money, in particular if the e-money cannot be used as a means of payment but only as a store of value instead. We use this framework to study whether e-monies can be a good hedge against inflation, to rationalise the market valuation of Bitcoin, and to understand possible sources of its volatility. In the other paper, my co-authors and I study why economies may end up at the zero-lower bound, and we show that zero-lower bound episodes can be caused not only by economic fundamentals, but also by beliefs about future economic conditions.
In the past academic year, I published two papers: First was titled Buying from a Group, joint with Nima Haghpanah (Penn State University) and Elliot Lipnowski (Yale University). This was published in The American Economic Review, one of the most prestigious journals in economics. The paper studies the problem how selling a jointly owned asset, such as a large land parcel, to a single buyer. Developing countries routinely face problems in land acquisition for large projects. Motivated by this challenge, we studied the problem using tools from mechanism design (a rich subfield of economic theory) to understand the nature of optimal buying mechanisms.
In particular, our work showed the buyer needs to discriminate the terms of trade by favouring more productive agents, i.e., agents who value the resource more in per unit terms. The second paper was titled A Fair Procedure in a Marriage Market, joint with Antonio Romero-Medina (U Carlos III de Madrid). This paper was published in The Review of Economic Design. The paper was motivated by the observation that several existing mechanisms in situations such as allocating students to schools, favour one side of the market.
Our goal was to correct this obvious unfairness and propose a mechanism that treats both sides equally. We did so by proposing a new procedure that is simple and also computationally easy to implement. Besides finishing these two projects, I began work on my British Academic Small Grant to further a research agenda I am developing with Deepal Basak (Indiana University) and Joyee Deb (New York University). We are studying various implications of changing similarity of information in strategic interactions such as protests and bank runs. This project was also awarded the NSF Grant in the US in the past academic year.
In the past academic year, my paper, “The Gender Gap in Household Bargaining Power: A Revealed-Preference Approach,” was accepted for publication in the Review of Financial Studies. The paper examines how bargaining power within households shapes investment decisions, revealing a persistent gender gap across three major economies: Australia, Germany, and the United States. We find that husbands, despite being typically riskier investors, overwhelmingly dominate investment decisions over their wives. We identified two main drivers of this imbalance: gender norms and individual characteristics like income and employment. In more traditional households, husbands often make all the investment decisions without consulting their spouse. This power imbalance exposes wives to unwanted financial risk and insecurity, highlighting the need for more equitable decision-making in household finances.
On 20 June 2024 I gave a keynote talk on Central Bank Digital Currency (CBDC) and Financial Resilience at the Reserve Bank of India (Mumbai) College of Supervisors Annual Conference (https://www.linkedin.com/in/sherimarkose) and on 13 August 2024, I was on a panel discussion, chaired by Bert van Roosebeke on CBDC and Deposit Insurance at the RBI hosted Annual Asia-Pacific International Association of Deposit Insurance Conference in India. These and other invitations have followed my appointment in January 2024 to the CBDC Academic Advisory Group of the Bank of England and HM Treasury. I am in the middle of developing a population scale data driven agent-based model for UK CBDC adoption. Due to network effects and the power of incumbency of an efficient extant card payments system, it is a non-trivial problem to get citizens to adopt CBDC.
As pointed out by the House of Lords CBDC Report, only SME merchants have a cost saving incentive to adopt the Digital Pound due to high merchant fees for card payment receipts. An app is being developed for UK SME merchants to assess what savings can be made by accepting the Digital Pound and how much of this should be passed on to customers to encourage them to accelerate the use of the Digital Pound.
On 22-23 July 2024, I helped organize the International Fintech Ecosystem Conference at University of Essex's Wivenhoe House where a number of practitioners and policy makers joined us. It is a capstone of a three-year ESRC project with Thankom Arun (EBS) where the contrast between UK and India in FinTech Services is covered. A number of high quality research papers on FinTech eco-systems in UK and India, the role of Regulatory Sandboxes and FDI for FinTech are forthcoming.
In January 2024 PLOS One has published my paper with Semanur Soyygit - EU27 regional trade networks for medical products in fight against Covid-19 pandemic: Quantifying vulnerability and self sufficiency in critical inputs. Finally, my paper on how our unique epistemic capacity to think outside the box and produce strategy innovation, which has long been missing in Behavioral Economics and Game Theory, is forthcoming in the 2024 Routledge Handbook of Complexity Economics.
Kate enjoyed research leave in spring and summer of 2024. She wrote, worked with students, gave seminars, and received valuable feedback on early work, which she hopes will speed completion of various projects over 2025. A highlight of the leave was an internship at the Competition Commission of Mauritius, both learning about how competition policy in a small island economy differs from that in a large economy like the UK and assisting in their newly established outreach programme. This work educates the public about the Commission and more generally about economic competition, why it matters, and how.
Upon returning to the UK, Kate was accepted to the Economic Advisory Group on Competition Policy at the European Commission and also prepared a written submission to the consultation on the incorporation of EU technology transfer regulation to the UK, following up on earlier interactions with the UK Competition and Markets Authority.
I was awarded a Leverhulme Research Project Grant in March 2024 and this project has commenced a few weeks ago, to last for two years. I am delighted to be collaborating on this project with Camila Comunello, one of our own former PhD students. I have also spent much of this academic year working on new projects and presenting those that are in a more advanced stage at conferences and seminars.
Visiting universities and colleagues all over the world is a privilege of this job, and this year has been no different. I was able to talk about my research, and indeed the entire department’s research, at several Mexican universities. I also presented my research in invited seminars and conferences in Aarhus University, University of Ljubljana, Queen Mary, Grenoble, Warwick, Cluj-Napoca and Singapore. The last visit was combined with a week-long stay at the National University of Singapore to work on a joint project with a co-author based there.
This year, I completed a two-year large-scale project focused on adolescent empowerment. As part of the project, we developed an empowerment curriculum and assigned senior students, who were centrally located within their school’s social networks, to deliver the curriculum to their juniors. The idea behind the intervention is to empower students by giving them responsibility and fostering self-persuasion.
A key policy-relevant finding is that the program significantly increased the likelihood of students to be admitted to selective high-schools. We discuss the results of the study in a recent VoxEU article.
I also presented this paper in various universities as an invited speaker such as the University of Konstanz, University of Cagliari and University of Stavanger.
Additionally, I collaborated with two researchers to write a research proposal for the impact evaluation of a city-wide social assistance program called “Pay-it-Forward." The program is designed and implemented by the Istanbul Metropolitan Municipality in Turkey, and won the Global Mayor’s Challenge, which is launched by the Bloomberg Center for Public Innovation. Our research proposal has been selected to evaluate this program and our budget (USD 120K) has been approved by Bloomberg. We will kick off the project in October, 2024 – stay tuned!
Pictured is field experiments in Diyarbakir, Turkey.
Our research students
Emmanuel Offei served as an able host and co-organiser for a SeNSS-sponsored advanced training module, Empirical Methods for Demand and Auction Estimation, held on 28-29 February and 6 March 2024, and initiated by Katharine Rockett. Emmanuel dealt with all issues that arose in delivery and provided all logistical support. The first two days covered approaches to demand estimation, including AIDS models, logit estimation, and the BLP method. The last day focused on auction theory, estimation, and policy. Dr Farasat Bokhari (UEA) and Professor Dakshina De Silva (Lancaster) delivered the training, with participants from UK universities, the Competition and Markets Authority (CMA), Oxera, and remote attendance from Competition Authorities abroad, including from the Mauritian Competition Authority. The reviews were very positive. Emmanuel presented his research on digital food waste platforms at the UK Digital Economics Conference at the University of Cambridge in November 2023, receiving helpful feedback. For the same project, he was also awarded Runner-Up for Best PhD Paper at the Network of Industrial Economists (NIE) conference in June 2024. Additionally, the University of Essex honoured him as Best Senior Residents Assistant for his positive contributions to student life.
Networks, conferences and workshops
PhD Conference
The Department of Economics and ISER jointly organised the second edition of the Essex PhD Conference in Applied Economics on 15-16 April 2024 at the Essex Business School. The conference was supported by an organising committee of 12 PhD students at different stages of their studies in either the Department of Economics or at ISER - Dipanwita Ghatak, Bin Yu, Hettie Burn, Elena Faieta, Mohsen Eshraghi, Harpreet Singh, Richie Dilip Kurian, Emmanuel Offei, Taichi Yoshida, Devisri, Alex Anthony and Natasha Brooks.
The call for papers received an enthusiastic response, especially from PhD students across the UK and Europe, and a scientific committee of faculty members from the Department of Economics (Shunsuke Tsuda, Catherine van der List, Michele Rosenberg, David Zentler-Munro, Angus Holford, Michel Serafinelli) volunteered their time to review the applications. The final programme included 12 full presentations and 8 ‘flash’ presentations over two days, all held in person. Session topics ranged from Health and Crime, Urban and Environmental Economics to Gender and Racial Inequality, and Development and Policy.
Our keynote speakers were Professor Thomas Cornelissen from the University of Essex and Professor Christian Dustmann from UCL. The event received overwhelmingly positive feedback from both participants and attendees, proving there is strong interest in the conference and demonstrating the importance of continuing it in future editions.
