ÐÓ°ÉÂÛ̳

Overview 

The goal of this proposal is to explore the connections between expectations, risk aversion, and intertemporal substitution. Understanding these connections will shed light on several economic phenomena and clarify the restrictions and limitations of existing economic models.

Aims and Research Questions

This research agenda will be developed in two lines of work.

The first line will investigate how beliefs shape choices under uncertainty. We will study how different informational environments generate psychological search frictions and how these frictions differ from traditional ones. Unlike search costs, psychological frictions depend on the information being collected and the payoffs involved. They provide an explanation for the empirical observation that individuals often fail to search for better options in high-stakes settings. We will also use this theory to study how the informational environment shapes people's willingness to start new businesses, take financial risks, and buy insurance.

The second line of work will study how time and risk preferences relate to Stochastic Impatience, a behavioural property that generalises impatience to stochastic environments. We will study the restrictions that Stochastic Impatience imposes and test its validity with experiments. Our aim is to provide guidance on models and parameters used to fit Macroeconomic and Finance data and to open a new avenue for identification and testing.

Objectives

The objective of this research agenda is to improve our understanding of the connections between expectations, risk aversion, and intertemporal substitution. This will be done in two lines of work. The first line will study expectations-based reference-dependent preferences (EBRD). With EBRD, individuals have preferences over changes in beliefs, exhibiting a greater aversion to losses as their appreciation of gains.

EBRD recasts decision-making under uncertainty as attempts to manage news. For example, risk aversion corresponds to the willingness to reduce consumption to avoid news about fluctuations in consumption. Precautionary savings follows from a desire to reduce the impact of future news about consumption. This line of work will characterize preferences over information in EBRD and use this characterization to study the implications to many economic settings.

For example, our results will show that EBRD generates “psychological search costs.” Unlike traditional search costs, psychological search costs depend on the type of information being gathered, the payoff from succeeding, and the speed of the learning. They can provide a rationale for the empirical observation that individuals often fail to search for better options in high-stake settings.

The second line of work will study how the separation between time and risk preferences relates to a behavioural property that generalizes impatience to stochastic environments: Stochastic Impatience.

Expected Discounted Utility (EDU) requires the inverse of the elasticity of intertemporal substitution (EIS) to be equal to the coefficient of relative risk aversion. However, an enormous literature in macroeconomics, finance, and experimental economics has pointed to the need to separate them. Empirically, observations from lab experiments, longitudinal data, and the desire to fit macroeconomic and financial data require risk aversion to exceed the inverse EIS. Conceptually, attitudes towards risk and intertemporal smoothing belong to different domains, and there is no compelling reason why they should be tied together. To deal with these issues, several models that separate risk aversion from EIS have been developed. Given the central role of risk aversion and EIS in economics, understanding the implications of this separation is of primary relevance.

The goal of the second line of work is to show that Stochastic Impatience imposes severe bounds on the difference between risk aversion and inverse IES. Our study will improve our conceptual understanding of the relationship between these two fundamental notions in economics, help identify preference parameters, and provide new tests of well-known models.

People 

ÐÓ°ÉÂÛ̳:

• Professor Daniel Gottlieb (Principal Investigator)

Project Funder

Overview

The conventional wisdom on sources of economic growth emphasises ‘inclusive institutions’: constraints on state elites, which allow open access to political and economic power. Yet, in many contexts where we have seen economic growth emerge, we see economic partnerships between powerful, coercive (often non-democratic) states and private enterprises: from Industrial Revolution Britain to the post-Second World War economic tigers to post-Mao China. These partnerships have involved military efforts to secure resources; the application of state power to open or protect markets; and, state coercion to ensure a steady supply of cheap labour at home and abroad. 

Aims and Research Questions

This project aims to understand how states’ coercive capacities have been used to promote innovation and economic growth historically and in contemporary contexts.

One set of questions surrounds the success of China’s AI sector: how is innovation maintained despite autocratic politics that are typically seen as harmful for frontier innovation? We explore the role of China’s monitoring and public security apparatus in stimulating AI innovation. In one paper, my co-authors Martin Beraja, David Yang, and I ask whether Chinese government data is a valuable input into commercial facial recognition AI innovation. In a second paper, Martin, David, Andrew Kao, and I ask whether AI innovation and autocratic political control are mutually reinforcing in China. Work in progress is studying whether autocrats around the world are strengthened by China’s exports of AI.

A second set of questions is focussed on the emergence of modern growth in the British Empire. My collaborators Ernesto Dal Bo, Karolina Hutkova, Lukas Leucht, and I aim to understand the economic role played by Britain’s powerful military – and the relationship between the mutually reinforcing relationship between a strong navy and the expansion of trade. One project models the aligned interests of the state and private merchants arising from the opportunity to fight profitable wars during the age of mercantilism. This alignment arose because military victories enriched merchants (through expanded trade) and expanded trade enhanced military power (through loans to the state and through taxes extracted from trade). A second project documents the historical sources of British government revenues, identifying the central role of taxes on traded goods. A third project aims to empirically link the outcomes of conflict in a region to changes in trade volumes linked to that region, and subsequently to increased tax revenues. This would document a “power and plenty” cycle that historians have argued was important to the rise of the British Empire.

People

ÐÓ°ÉÂÛ̳:

• Professor Noam Yuchtman (Principal Investigator)
• Dr Karolina Hutkova (Co-investigator)

Harvard University:

• Professor David Yang (Co-investigator)
• Andrew Kao (Co-investigator)

MIT:

• Professor Martin Beraja (Co-investigator)

UC-Berkeley:

• Professor Ernesto Dal Bo (Co-investigator)
• Lukas Leucht (Co-investigator)

Project Funder

Overview

Consumers, producers and governments around the world are increasingly concerned about the social and environmental sustainability of trade flows. Through the development and roll-out of adequate ICTs, there is hope to be able to reward farmers for, and remove barriers that hinder, the adoption of sustainable practices (e.g., re-forestation, carbon sequestration). However, progress has been hindered by severe last-mile challenges in the roll-out and adoption of such technologies, often exacerbated along gender lines.

Traceability is a pre-requisite to create an efficient eco-system in which farmers are rewarded, through market-based premia, for such sustainability efforts. While private companies have adopted traceability solutions in their supply chains, such platform technologies inherently entail both horizontal and vertical externalities along the supply chain. Governments are in many contexts taking the initiative to develop and roll-out such technologies across the entire supply chain.

Objectives

In this project, we build on a long-term partnership with National Agricultural Export Board in Rwanda to evaluate last mile challenges and complementarities in the adoption of a traceability platform, that will enable the digitization of all transactions from the coffee farmer to the buyer accessed through the system and will record farm activities. In partnership with NAEB, we aim to randomize the intensity of training and other roll-out activities aimed at encouraging farmers, washing stations and exporters to adopt and use the digital technology. The study will generate some of the first evidence on the adoption of traceability solutions in agricultural supply chains and will contribute knowledge to the implementation of policies aimed at facilitating sustainable trade in Rwanda and elsewhere.

People 

ÐÓ°ÉÂÛ̳:

• Dr Rocco Macchiavello (Principal Investigator)

Università degli Studi di Napoli "Parthenope":

• Davide Del Prete (Co-Investigator)

Project Funder

Overview

Smallholder farmers in developing countries face multiple constraints to improve productivity: poor access to credit, labour, information, and capabilities. In such settings, alleviating any one constraint may not be enough, bundled interventions may be more effective in improving agricultural outcomes. Furthermore, the severity of these constraints often varies significantly across gender. We partner with a multi-national coffee buyer to provide and evaluate a bundle of services (Farmer Upgrading ‘Program’) that simultaneously relaxes resource and knowledge constraints faced by coffee farmers in the buyer’s supply chain in Rwanda. 

Aims and Research Questions

We experimentally test the effectiveness of improving access to knowledge through digital technology, both as stand-alone and in combination of interventions relaxing resource constraints. We test these interventions stratifying by gender and measure impact on take-up of productivity enhancing practices, yields, sales, profits, and investments, and on the gender gap in these outcomes. We will generate evidence on digital bundles of services which are likely to increase agricultural productivity and foster convergence between male and female smallholder farmers in Sub-Saharan Africa.

Objectives

Overall, our research proposal is motivated by the key challenge in increasing income of coffee farmers in Rwanda, and which we show (using our RCT insights) requires a bundle providing both resource and knowledge services. Our intervention uses digital technologies as a key component of the bundle, in order to accelerate knowledge transfer to female farmers (who find it harder to attend sessions and access knowledge than male farmers (e.g., Quisumbing (2010). We aim to generate scalable evidence on bundling resource and information services to smallholder farmers.

People

ÐÓ°ÉÂÛ̳:

• Dr Rocco Macchiavello (Principal Investigator)
• Ameek Singh (Co-Principal Investigator)

Bocconi;

• Iris Steenkamp (Co-Principal Investigator) 

Project Funder

Overview

Our societies and economies are becoming increasingly reliant on digital infrastructures, constituting ecosystems of large, complex, dynamic, and highly distributed systems, connected through interfaces. Digital innovations including Platforms, Big Data, the Internet of Things, Smart Cities, Cloud Computing, and Artificial Intelligence, involve a myriad of interacting systems owned and operated by different companies. In addition, the provision of online services to customers and citizens, increasingly involves the interconnection of systems and IT capabilities from many different organizations. It is expected that the complexity and scale of systems’ interdependence will increase by orders of magnitude in the next few years. This raises important technical and managerial challenges, and societal implications which are still not well understood.

To give answer to these questions, the Interface reasoning for interacting systems (IRIS) project aims to research the interfaces and communication between complex, large-scale systems, and to develop a systematic theory for the correct functioning of digital interfaces from technical, social, managerial, and organisational perspectives. This £6+ million EPSRC-funded large project is formed by Computer Science researchers from UCL, QMUL, and Imperial College, and Information Systems and Digital Innovation researchers from the Department of Management at the ÐÓ°ÉÂÛ̳. The project also has various industrial partners: Amazon Web Services UK, GridPP, BT, HP Research Laboratories, Facebook, Methods Group. It started in January 2018, and it will run until 2025.

Aims and Research Questions

The computer science side of the project in UCL, QMUL, and Imperial College aims to develop a systematic theory and automated verification tools for reasoning about interfacing and communication between complex, large-scale systems. We need to develop a better understanding of the potential sources of vulnerability (threats to efficiency, reliability, and security) of these complex ecosystems of systems. Their smooth functioning is arguably not only dependent upon the correctness of programs but also on the correct and robust interaction between systems. We contend that interfaces supporting such interactions are therefore the critical mechanism for ensuring that systems and the complex ecosystems they conform behave as intended. We aim to study how the interfaces between the components constituting these ecosystems work, and to verify them against their intended use. We will use verification/modelling techniques that have been effective in ensuring reliability of low-level features of programs, protocols, and policies, but which have not yet been applied to reasoning about such large-scale systems and their interfaces. In so doing, we will drive the use of verification techniques and improve the reliability of large systems.

In addition, we need to consider the social context in which such ecosystems are embedded to better understand how these develop in practice and with what consequences. Drawing on management and social sciences theories, at the ÐÓ°ÉÂÛ̳ we will study how the organisations involved in such innovations define digital interfaces, and the challenges they face. We will also explore the organisational or management commitments embedded within digital interfaces, how coordination and control is achieved through the management of digital interfaces, and the role that digital interfaces play in the emergence of new organisational forms. We will also explore the involvement, dynamics, and consequences of digital interfaces in boundary making and in constituting digital infrastructures formed of complex amalgams of systems and platforms.

Objectives

This project draws on a range of disciplines, including logic, program verification, security, discrete mathematical modelling, economics, management science and social science. While interfaces at different degrees of abstraction and criticality can be studied independently and from different perspectives, it is unlikely that any one level of abstraction or perspective will offer all the answers. Our goal is to integrate various approaches, so that they can inform each other. For instance, our understanding of the challenges faced by organisations in developing or managing digital interfaces can inform and be informed by the mathematical modelling of systems.

People

ÐÓ°ÉÂÛ̳:

• Dr Will Venters (Co-Investigator)
• Anushri Gupta (Research Officer)

UCL:

• David Pym (Principal Investigator)
• James Brotherston (Co-Investigator)
• Tristan Caulfield (Co-Investigator)            
• Byron Cook (Co-Investigator)      
• George Danezis (Co-Investigator)             
• Peter O'Hearn (Co-Investigator) 
• Max Kanovich (Research Associate)
• Estibaliz Fraca (Research Fellow)
• Timo Lang (Research Fellow)
• Quang Loc Le (Research Fellow)
• Enrico Rossi (Research Fellow)
• Marius-Constantin Ilau (PhD Student)

QMUL:

• Edmund Robinson (Co-Investigator)
• Kang Feng (Research Fellow)
• Alessio Santamaria (Research Fellow)

Imperial College:

• John Wickerson (Co-Investigator)
• Alastair Francis Donaldson (Co-Investigator)
• Vasilis Klimis (Research Fellow)

Project Funder

Overview

This project investigates the expansion of Employee Volunteering (EV) programmes in the UK, as part of corporate social responsibility (CSR) activities. It seeks to address the lack of academic research on the design, implementation, organisational and individual outcomes of these programmes designed to enhance the social value produced and delivered by corporations. Utilising qualitative methods, the aim of the research is to provide a comprehensive understanding of the current state of EV programmes, both from employer and employee perspectives. It seeks to examine employers’ motivations for launching EV programmes; investigate the role of programme managers and external actors in their design and implementation; analyse the relationships between EV programmes and equality and work-life balance policies; evaluate the impact of these programmes on existing performance and talent management practices; investigate employees’ experiences and the impact of volunteering on working and family lives.

Aims and Research Questions

This study seeks to investigate the expansion of CSR activities through the lens of employee volunteering programmes that extend corporate activity to the sphere framed as ‘social’ and require an active engagement of the employees in comparison to other CSR strategies.

Overall, the aim of the research is to provide a comprehensive understanding of the current state of EV programmes in the UK, both from employer and employee perspectives. The research aims are divided into five: (i) examine employers’ motivations for launching these programmes, along with details of the characteristics of the programme; (ii) investigate the role of programme managers and external actors in their design and implementation; (iii) analyse the relationships between EV programmes and HR management policies, including equality, diversity and WLB initiatives; (iv) evaluate the impact of these programmes on existing performance and talent management practices; (v) investigate employees’ experiences and the impact of volunteering on working and family lives.

People

ÐÓ°ÉÂÛ̳:

• Dr Bethania Antunes (Co-Investigator)

University of Surrey:

• Dr Cécile Guillaume (Principal Investigator) 

Project Funder

Overview

The majority of the global poor live in rural areas and earn their livelihoods in agriculture. Linking farmers in developing countries (LDCs) to global markets, therefore, could potentially spur growth and reduce poverty. Market imperfections in agricultural chains in producing countries, however, limit these gains. Which policy tools, if any, help farmers in LDCs realize and share the gains from trade? Dr Rocco Macchiavello proposes three broad projects that develop the tools to answer this question.

The first project designs and implements the first randomized control trial (RCT) to test for the causes and consequences of market failures interacting along multiple layers of agricultural value chains. This is a necessary step to design targeted policy responses.

The second project develops and estimates the first structural model of an agricultural value chain to evaluate different regulatory interventions. Historically, as well as today, governments have intervened in agricultural chains through a diverse array of policies and regulations. RCTs are not sufficient to evaluate these policies. The project develops flexible tools to perform counterfactual analysis and evaluate the merits of alternative policies and regulations in a variety of contexts.

The third project studies voluntary sustainability standards (VSSs) (e.g., Fair Trade, Rainforest Alliance). VSSs are increasingly popular responses to market failures in agricultural chains in LDCs. Unlike regulatory interventions, VSSs directly affect only market participants that take them up. The project combines quasi- experimental and structural techniques to evaluate the direct impact, the indirect spillover effects, and the broader distributional consequences of VSSs.

The three projects form a coherent research agenda that develops a comprehensive set of tools to evaluate existing agricultural policies and design better ones so that small producers in developing countries can realize and share the gains from globalization.

People

ÐÓ°ÉÂÛ̳: 

• Dr Rocco Macchiavello (Principal Investigator)

Project Funder