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Getting a healthy start
By: Stephanie von Hinke
'Our analyses, however, shows that the vouchers increased spending only among distorted households'
Getting a healthy start
Rates of diet-related disease are increasing across the developed world. Policy makers are exploring different ways to improve individuals' dietary choices. One of these is to target benefits on the purchase of healthy food, such as fruit and vegetables. The UK Healthy Start scheme, introduced in November 2006, did just that: it distributes vouchers to low-income households with young children, where the vouchers can only be spent on fruit, vegetables and milk. The aim of the scheme was to increase fruit and vegetables spending, but did it work? And if so, who responded to the scheme?
These are the questions we ask in our paper "Getting a Healthy Start? The effectiveness of targeted benefits for improving dietary choices". We use 'scanner data' of supermarkets to compare low-income eligible households' grocery baskets before and after the introduction of the scheme to low-income ineligible households' grocery baskets before and after the introduction of the scheme. Eligibility for the vouchers is determined by the age of children: low-income households with children aged 0-3, or where the woman is at least three months pregnant, are eligible, whereas low-income households with a woman in the period just befor being pregnant or with children aged 4-8 act as a control group of ineligbles. We find that the mean of monthly spending on fresh fruit and vegetables among eligible households increased by approximately £2.43 per month, equivalent to a 15% increase compared to pre-reform levels.
The fact that we observe households' entire food basket allows us to look at the broader effects of the scheme on the nutrient content of foods purchased, as well as at the potential effects of the scheme on purchases of other foodstuffs. Using the same approach, we show that the scheme improved the total nutrient composition of the household shopping basket. We find that levels of fibre, beta-carotene (vitamin A), potassium, iron and zinc increased, while levels of sugar and fat did not change. Furthermore, we find a significant increase in the proportion of households meeting their recommended Reference Intakes for iron and potassium, suggesting an overall improvement in the nutritional content of the shopping basket.
We next explore who responded to the scheme. For this, there are two predictions. First, standard economic theory predicts that the effect of the vouchers will be greatest for distorted consumers (i.e. those who, in the absence of the vouchers, would spend less than the value of the vouchers on the targeted good). It also predicts that the effect is equivalent to cash for infra-marginal consumers (i.e. those who, in the absence of the vouchers, would spend at least the value of the vouchers on the targeted good).
Second, behavioural theory predicts that all households (whether distorted or infra-marginal) are affected similarly. Indeed, some features of the programme might have been expected to affect behaviour beyond the direct economic incentive effects. For example, the actual label of the "Healthy Start" vouchers could signal the importance of healthy eating, in particular of fruit and vegetables. Under this more general behavioural theory, one would expect all households to be affected similarly.
Our analyses, however, shows that the vouchers increased spending only among distorted, not inframarginal, households. Since any behavioural mechanisms would affect all households, while standard economic incentives are stronger for distorted households, the results suggest that these other features did not have an effect in this context, and that the financial incentives provided the main channel through which the benefits worked.
This article is based on 'Getting a healthy start: The effectiveness of targeted benefits for improving dietary choices' by Rachel Griffith, Stephanie von Hinke and Sarah Smith, published in the Journal of Health Economics.
Explaining the gender pay gap after graduation
By: Anne Boring
‘More female students view the year abroad as an opportunity to discover a foreign culture'
Explaining the gender pay gap after graduation
Bettter bankers
By: Job Harms
‘We find that in many cases employees did not provide advice that best served the client'
Better Bankers
To reduce misbehaviour in banks, various "soft measures" have been implemented, such as the bankers' oath where employees promise to place their clients central. However, it remains unclear how effective such measures are. Together with a commercial bank we implemented an experiment to test the effect of a program where employees jointly discuss ethical dilemmas. Results indicate this program did not promote client-focused behaviour. This suggests other measures are needed to turn around culture in the banking sector.
Recurring cases of fraud and self-enrichment remind us that not all is well in our financial industry. While such "misbehaviour" is not unique to this particular industry, it does have the potential to cause grave economic problems, as illustrated by the 2007-08 financial crisis. In response to these challenges, governments and the industry have implemented a range of measures.
Hard and soft measures
To curtail unethical behaviour among bank employees, various "hard measures" have been implemented, such as caps to employee bonuses and the possibility of professional bans for bank employees acting contrary to the interests of their clients. In line with classical economic theory, such policies increase the financial costs and decrease the benefits of various forms of misbehaviour, and are thus expected to foster more ethical behaviour among bank employees.
However, as is becoming apparent by research in the field of behavioural economics, people are not only motivated by personal cost/benefit considerations. People sometimes also value fairness and honesty, even when it is more profitable to behave unfairly and dishonestly. Culture seems to be one important factor in this respect, and previous research suggests that the professional culture in the banking sector promotes dishonest behaviour. Building on this, several soft measures have been implemented to promote a more ethical culture, such as the "bankers oath" introduced in the Netherlands in 2015, where bank employees promise to behave ethically. But do these measures actually change employee behaviour?
Testing the theory
While experiments in the lab suggest that soft measures could promote ethical behaviour in the banking sector, solid evidence from the field is still lacking. To address this gap, we conducted a field experiment with a large commercial bank. Half of the bank offices were assigned to a prgram where employees jointly discussed ethical dilemmas with their colleauges, while the other offices served as a control group. We then sent "mystery shoppers", actors pretending to be clients, to the bank offices to obtain advice from employees about various financial products. Using this method, we measured to what extent employees placed the client's interest before the bank's interest.
The results were somewhat sobering. We find that in many cases employees did not provide advice that best served the client. Moreover, the ethics program did not promote client-focused behaviour. Possible explanations for this are that there was limited support among managers for the program, and the group meetings may have served as a platform for less ethical employees to negatively influence their colleagues. These results suggest that "soft measures" to promote ethical behaviour in banks do not automatically work, and more measures need to be designed and tested if we really want to promote ethical behaviour in the banking sector.
Can hosting the World Cup be profitable?
By: Thomas Peeters
'The prospects for Russia are even more gloomy'
Can hosting the World Cup be profitable?
For the kick off of the 2018 FIFA World Cup the Luzhniki Stadium in Moscow got an impressive make-over. In addtion, the Russians built another 9 brand new stadiums and renovated 2 more venues. The reported total investment, largely from public funds, lies above $10 billion. This is a handsome amount for a country with a GDP per capita less than half that of the Netherlands. With Russian life expectancy at 72 years, equal to the life expectancy in Bangladesh and Libya, one might argue tax payer money could have been spent on more urgent matters.
Proponents of major sport events typically argue that these investments pay for themselves, as events generate additonal economic activity and thus create new tax revenue to the host. While this economic impact may seem easy to measure, this is not straightforward in practice. Consider for example a Russian football fan who cuts back on going to the movies to save money for a ticket to the games. Her spending for the tournament is no gain to the Russian economy, as the same amount would have been spent at the movie theatre, had there not been a World Cup.
Economists have therefore focused on income generated from outside the host country. Foreign visitors are likely to truly bring additional spending to the host's economy, in particular when they would not have visited in the absence of the World Cup. If Russia is to recoup its investments, it needs to attract an abundance of rich foreign tourists with favourable spending habits. Is Russia likely to succeed in this endeavour?
To shed light on this issue, Stefan Szymanski, Victor Matheson and I investigated the tourism impact of the FIFA World Cup in South Africa. South Africa is an interesting case to consider, because, much like Russia, it was not an established destination prior to the World Cup. The South African Cup faced similar criticism about its use of tax payer money, as it also took place in a middle-income country facing fundamental socio-economic challenges. By comparison to Russia however, the South African Cup was a bargain, with total tax payer investments of $3.9 billion, of which 'only' $1.3 billion went to stadiums.
For our analysis we were able to investigate the historic records of monthly arrivals into South Africa split by country of origin. Obtaining these figures was crucial to answering our question, because we had to estimate how many people would have visited South Africa in the absence of a World Cup. By looking at, for example, the amount of Dutch tourists traveling to South Africa before the World Cup period, we could infer which factors, such as economic growth in the Netherlands or the exchange rate between the euro and the South African Rand, affect tourism in 'normal' times. We could then use this model to predict how many Dutch tourists would have come to South Africa had there not been a World Cup in which 'Oranje' made it all the way to the final.
According to this analysis, around 220,000 additional tourists came to South Africa during the World Cup, an increase of more than 100% over the 'normal' levels for June and July 2010. The participating countries are responsible for around 80% of this increase. This surge further caused a modest long-run increase in tourism of about 5%. This still implies that, even in our most conservative estimates, South Africa spent about $5,000 per extra tourist, an amount it is very unlikely to recoup through additional tax receipts.
The prospects for Russia are even more gloomy. First, a number of major football tourism countries, in particular the USA and th Netherlands, failed to qualify for the tournament. Second, in contrast to South Africa, the event took place in the peak of the Russian tourist season, so probably more 'normal' tourism was displaced. Finally, the Russian World Cup was much more expensive. This makes it very unlikely that Russian taxpayers are about to see a positive return on their investment.
Getting a healthy start
By: Stephanie von Hinke
'Our analyses, however, shows that the vouchers increased spending only among distorted households'
Explaining the gender pay gap after graduation
By: Anne Boring
‘More female students view the year abroad as an opportunity to discover a foreign culture'
Better bankers
By: Job Harms
‘We find that in many cases employees did not provide advice that best served the client'
Can hosting the World Cup be profitable?
By: Thomas Peeters
'The prospects for Russia are even more gloomy'
Research in a nutshell
The impact of higher education and research on society, and the interchange between science and everyday life and vice versa, is a well-established and essential aspect of Erasmus School of Economics. Did you know that the
professors of Erasmus School of Economics conduct very interesting research next to their teaching responsibilities? For example, Thomas Peeters, assistant professor at Erasmus School of Economics, conducted research concerning
the FIFA World Cuup in Moscow. Or Anne Boring, assistant professor at Erasmus School of Economics, who discusses the gender pay gap. Read more about the research in 'a nutshell' of your professors!