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Publication Erasmus School of Economics, Erasmus University Rotterdam Editors Ronald de Groot, Babette den Daas, Lotte van de Laak, Yasmine van der Straten, Yrla van de Ven, Annemarieke Dumay-Roest, Madeleine Kemna Concept, design and realization Kris Kras context, content and design Print De Bondt grafimedia communicatie BV Illustrations Carolyn Ridsdale Photography & Video Kees Stuip, Gerhard Nel, Chris Gorzeman, Sanne Donders, Iris van den Broek, Sophie van den Hoek, Fabian Calis, Sjoerd van der Hucht, Rosa Quist, Jan de Groen, Ka-Chun Lo, Heritage Foundation EUR, Rotterdam Topsport, Rotterdam Imagebank, Koala Koncepts
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 Cup 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!
'Our analyses, however, shows that the vouchers increased spending only among distorted households'
Getting a healthy start
By: Stephanie von Hinke
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 before being pregnant or with children aged 4-8 act as a control group of ineligibles. 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 the households' entire food basked 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 inframarginal) are affected similarly. Indeed, some features of the programme might have 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.
'More female students view the year abroad as an opportunity to discover a foreign cultures'
Explaining the gender pay gap after graduation
By: Anne Boring
In most OECD countries, women now outnumber men in higher education. However, the gender pay gap persists on the labour market. There is some evidence that the pay gap starts right after graduation. For instance, in France, the average pay gap across fields of study is 4.8% eighteen months after graduation for students with a Master's degree. In my research, I try to understand how students' educational choices at the university level explain different labour market outcomes for men and women.
First, I analyse gender differeces in the fields that students choose to study. Women tend to specialise in fields that lead to lower-paying jobs, where there are higher unemployment rates, and fewer opportunities for upward career trajectories. Even within high-paying fields such as economics, women tend to specialise in areas that lead to lower paying jobs. In France, the country where I have conducted most of my studies, I find that the largest gender pay gap is in economics: thirty months after obtaining a Master's degree in economics, women earn 12% less than men. One of the reasons why the gap is so large in this field is because female students are underrepresented in speciailisations such as banking or finance.
Why are there these gender differences in fields of study? Gender stereotypes are one explanation. Research suggests that a lack of female instructors, who could act as role models in some fields of study such as economics, may discourage women from pursuing studies in these fields. Research suggests that average female students in introductory courses in economics may choose less often to pursue a Master's degree in economics compared to average male students. The dropout rate of female students may be reduced when the introductory instructor is a woman. In this stereotypically male field, the gender of the instructor appears to have less of an impact on male students' choices to pursue a Master's degree in economics.
Higher education and career opportunities
Second, even within a given field of study and specialisation, male and female students make higher educational choices that can have a large impact on their career opportunities and future earnings. Competition among students and self-confidence are likely to play a role in students' choices. At university, students benefit from unique opportunities to explore their academic interests. Yet, higher education is a competitive environment: students compete to get into top academic programs, in order to benefit from better labour market opportunities. The economics literature suggests that competitive environments tend to be more favourable to men than to women, especially in stereotypically male domains. Men choose more often to enter a competitive setting compared to women, and tend to exert more effort and perform better in such environments.
In research conducted with Jen Brown, we examine the choices of male and female students, within the context of a competitive higher educational environment. We study the choices of undergraduate students at an elite public university in France. At this university, students are required to spend their third year abroad, either studying at one of nearly 400 participating foreign universities or completing an internship. To participate in the exchange program, students submit a ranked list of six universities that they would like to attend. Students compete for the limited number of seats offered by each university.
Accounting for students' underlying ability, we find evidence that male and female students within the same academic program make different choices that may lead to disparate future opportunities and labour market outcomes. Despite having slightly better course grades on average, we find that female students tend to request lower-ranked universities than their male counterparts. The difference is particularly pronounced among high-achieving students. On average, female students request universities that are worse than their academic standing. Women may be asking for lower-ranked universities because they underestimate their chances of being admitted. However, our analysis also suggests that male and female students have, on average, different expectations regarding the experiences they want to obtain from this study abroad program. In particular, more male students believe that the academic reputation of the foreign university is very important to them. More female students view the year abroad as an opportunity to discover a foreign culture. This difference could result from a larger societal pressure on men to perform well on the labour market.
Education as a signalling device
Education is an important driver of employers' perceptions of resume quality, and prestigious college education has been associated with labour market premia. Employers may use education as a signal of individuals' true ability. Our results suggest that quality signals on graduates' resumes may not be reliable. Some high ability students may appear weaker on the job market than their less-able classmates. Noisy signals may explain, in part, the persistent gender wage gaps observed right after graduation.
'We find that in many cases employees did not provide advice that best served the client'
By: Job Harms
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 interst of their clients. In line with classical economic theory, such policies increase the financial costs and decrease the benefit 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 program where empoloyees jointly discussed ethical dilemmas with their colleagues, while the other offices served as a control group. We then sent "mystery shoppers", actors prentending to be clients, to the bank offices to obtain advice from eployees 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.
'If Russia is to recoup its investments, it needs to attract an abundance of rich foreign tourists with favourable spending habits'
Can hosting the World Cup be profitable?
By: Thomas Peeters
For the kick off of the 2018 FIFA World Cup the Luzhniki Stadium in Moscow got an impressive make-over. In addition, 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 sports events typically argue that these investments pay for themselves, as events generate additional 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. Given the cash-strapped situation of Russian, households, most Russian consumers probably have not increased their total spending on leisure very much, and hence this has not generated additional economic activity.
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 arrrivals 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 travelling 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 toursim 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 the 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.