Discussion Papers

Papers from 1998 onwards are available on-line as .PDF files.

If you would like to submit your paper to Repec, please email econplone@le.ac.uk

10 Most Recent Papers

17/13 Panicos O. Demetriades, Peter L. Rousseau & Johan Rewilak

Adobe Acrobat (PDF) 17/13 Finance Growth and Fragility

We utilise a new international database of financial fragility indicators for 124 countries from 1998 to 2012 to investigate the effects of fragility on the finance-growth nexus. Cross-country growth regressions suggest that both financial fragility and private credit have negative effects on GDP growth over this period. The results are robust to controlling for systemic banking crises, confirming that financial fragility has additional negative effects on growth, even if a banking crisis is avoided.  We also present results using interactions which suggest that (a) a large volume of impaired loans can amplify the negative effects of private credit on growth and (b) a sufficiently high z-score can eradicate the negative effects of private credit on growth.

17/12 Sanjit Dhami & Ali al-Nowaihi

Adobe Acrobat (PDF) 17/12 Dominance concepts for discrete Fehr-Schmidt preferences with a focus on income inequality*

The evidence for other-regarding preferences is extensive. How should an individual with other regarding preferences compare two distinct distributions of income? We show that the classical concepts of first and second order stochastic dominance are inadequate to answer this question. We develop the relevant stochastic dominance concepts for the case of the popular other-regarding preferences in Fehr and Schmidt (1999) that we call FS preferences; we consider the linear and non–linear forms of FS preferences. These new dominance concepts, that we call first and second order FS dominance provide sufficient conditions for ranking income distributions. We showthat our concepts can be extended to uncertainty and are applicable to some other models of other-regarding preferences. Our use of a discrete framework is empirically realistic and avoids measure theoretic issues arising under the continuous case.

17/11 Philippe De Donder & Francisco Martinez-Mora

Adobe Acrobat (PDF) 17/11 The Political Economy of Higher Education Admission Standards and Participation Gap

We build a political economy model in order to shed light on the empirically observed simultaneous increase in university size and participation gap. Parents differ in income and in the ability of their unique child. They vote over the minimum ability level required to attend public universities, which are tuition-free and financed by proportional income taxation. Parents can invest in private tutoring to help their child pass the admission test. A university participation gap emerges endogenously with richer parents investing more in tutoring. A unique majority voting equilibrium exists, which can be either classical or “ends-against-the-middle” (in which case parents of both low- and high-ability children favor a smaller university). Four factors increase the university size (larger skill premium enjoyed by university graduates, smaller tutoring costs, smaller university cost per student, larger minimum ability of students), but only the former two also increase the participation gap. A more unequal parental income distribution also increases the participation gap, but barely affects the university size.

17/10 Caterina Calsamiglia & Francisco Martinez-Mora & Antonio Miralles

Adobe Acrobat (PDF) 17/10 Sorting in public school districts under the Boston Mechanism

We show that the widely used Boston Mechanism (BM) fosters ability and socioeconomic segregation across otherwise identical public schools, even when schools do not have priorities over local students. Our model includes an endogenous component of school quality - determined by the peer group - and an exogenous one. If there is an exogenously worse public school, BM generates sorting of types between a priori equally good public schools: an elitist public school emerges. A richer model with some preference for closer schools and flexible residential choice does not eliminate this effect. It rather worsens the peer quality of the nonelitist school. The existence of private schools makes the best public school more elitist, while reducing the peer quality of the worst school. The main alternative assignment mechanism, Deferred Acceptance, is resilient to such sorting effects.

17/09 Rui Luo

Adobe Acrobat (PDF) 17/09 Skill Premium and Technological Change in the Very Long Run: 1300-1914

This paper sets out to explain the historical development of the skill premium in western Europe over a period ranging from the pre-modern era to the modern era (circa 1300 to 1914). We develop a model of the skill premium and technological change over the very long run which endogenously accounts for the transition across different growth regimes in this period. The model integrates two key elements in long-run growth, the human capital investment and the capital-human capital ratio, into the analysis and successfully explains the declining skill premium from 1300 to 1600 and the stable skill premium from 1600 to 1914. The explanation elucidates a number of well-known historical facts that have not been previously examined in the study of the skill premium.

17/08 Martin Foureaux Koppensteiner & Jesse Matheson & Réka Plugor

Adobe Acrobat (PDF) 17/08 Project 360: An intervention to address victim-police engagement in repeat domestic violence cases

17/07 Mengxing Wei & Ali al-Nowaihi & Sanjit Dhami

Adobe Acrobat (PDF) 17/07 Can quantum decision theory explain the Ellsberg paradox?

We report the results of an experiment we performed to test the matching probabilities for the Ellsberg paradox predicted by the quantum decision model of al-Nowaihi and Dhami (2016). We fi…nd that the theoretical predictions of that model are in conformity with our experimental results. This supports the thesis that violations of classical (Kolmogorov) probability theory may not be due to irrational behaviour but, rather, due to inadequacy of classical probability theory for the description of human behaviour. Unlike earlier quantum models of the Ellsberg paradox, our model makes essential use of quantum probability. It is also more parsimonious than earlier models.

17/06 Dimitrios Varvarigos

Adobe Acrobat (PDF) 17/06 Economic Growth and the Cultural Transmission of Attitudes towards Education

This analysis investigates path-dependencies in a growing economy where altruistic parents try to inculcate their children with a behavioural trait that is conducive to human capital formation. The initial stock of physical capital is critical because it shapes the population dynamics of behavioural traits which, in turn, impinge on the formation of physical and human capital. Despite the absence of a complementarity in the process of cultural instruction, the long-run equilibrium can also depend on the initial distribution of behavioural traits among the population, as long as the efficiency of the external elements of cultural transmission is sufficiently low for households with parents who did not adopt the human capital-promoting trait when they, themselves, were young.

17/05 Dimitrios Varvarigos & Nikolaos Kontogiannis

Adobe Acrobat (PDF) 17/05 Entrepreneurial Status, Social Norms, and Economic Growth

We offer a behavioural approach on the relation between growth and volatility, based on a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods. In addition to their varying pecuniary returns, different projects also vary with respect to the status they confer to the entrepreneurs who operate them. We show that social status promotes capital accumulation. We also show that, even when the status-induced increase of marginal utility is constant over time, the interaction between status and inflation is an additional source of transitional dynamics. When a social norm links this increase of marginal utility to past outcomes, however, the dynamics can generate endogenous cycles in the transition to the balanced growth path.

17/04 Arkadiusz Szydłowski

Adobe Acrobat (PDF) 17/04 Endogenously Censored Median Regression with an Application to Benefit Elasticity of US Unemployment Duration

We provide first set estimates for benefit elasticity of median unemployment duration that are robust to assumptions on the censoring mechanism.

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