WEMCH · Warwick Economics Marie Curie Host Fellowships

Final Activity Report Summary - WEMCH (Warwick Economics Marie Curie Host Fellowships)

O’ Sullivan’s work comprised three papers. The first examined the effects of parental education and earnings on the educational outcomes of children and was written in collaboration with Walker, Harmon and Chevalier. An instrumental variable strategy was used. Paternal earnings had a positive effect, a measure of permanent income had a large effect and positive shocks income had smaller effects. The second paper, written with the collaboration of Doyle and Denny, was an evaluation of a programme providing support to socio-economically disadvantaged students at an Irish University and results showed that it was very effective. The third paper examined the effects of the educational maintenance allowance (EMA) in the United Kingdom and was written with Chevalier. The timing and manner in which EMA was introduced, i.e. pilots followed by national roll-out, was used to identify the policy effects. Saborowski’s research was concerned with the workings of foreign exchange markets. One paper was on ‘Inflation targeting as a means of achieving disinflation’ while another was a high frequency analysis of ‘Bank of England interest rate announcements and the foreign exchange market’, written in collaboration with Melvin, Sager and Taylor. This was an empirical paper which identified the high frequency impact of interest rate announcements on the foreign exchange market. He showed that unexpected interest rate announcements generated a systematic regime switch in the data, thus generating process of the exchange rate from a low variance liquidity trading state to a high variance informed trading state. Bracco’s research was concerned with political economy. One paper was a theoretical model on the welfare effects of ‘gerrymandering’. In subsequent work he ran some econometric simulations on data on the United States state legislatures’ lower houses in the nineties. A final paper was an econometric analysis of the financial reports of Italian municipalities. The idea was to check if political alignment between mayors and the prime minister had an effect on intergovernmental grants. Hunt’s work was concerned with economic issues relating to migration. Her first paper was informative about the differences in earnings of immigrants compared to natives across the conditional wage, not just the mean differential, distribution. She discussed the hypothesis and methodological issues in a subsequent paper. Dalton worked on understanding how psychological variables interacted with individual decisions, i.e. on how emotions, feelings, aspirations, values etc, were affected by, and affected, our choices. His approach focussed on the key challenges that standard economic theory would face if those variables were to be introduced in a general way. With this theoretical motivation in mind, he developed a general and comprehensive theoretical framework from the primitives of the economic theory, i.e. the preferences, which allowed him to achieve a clearer understanding of his initial concerns and highlight some open questions for future research. Acosta-Ormaechea’s first paper was entitled ‘Why credit market imperfections and currency mismatches did not affect traditional Mundell-Fleming results’. This work constituted a general framework that would be used to explore economic policy questions. The work attracted the attention of leading authorities in the field, such as Charles Engel from the University of Wisconsin-Madison, and he was awarded the University of Wisconsin-Madison graduate fellowship in order to spend the academic year 2007-2008 as a research scholar. As a by-product of this project a second paper was written, in collaboration with Macaya from Buenos Aires, entitled ‘An alternative method to obtain the Blanchard and Kahn solutions of rational expectations models’. Finally, Salvatori worked on the wellbeing effects of labour contract regulations and the relationship between unionisation and the use of temporary employment by firms, as well as on the effect of regulation on the duration of temporary employment. This research contributed to explaining the recent growth of temporary employment in Europe.

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