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The Warwick Monash Economics Student Papers (WM-ESP) gather the best Undergraduate and Masters dissertations by Economics students from the University of Warwick and Monash University. This bi-annual paper series showcases research undertaken by our students on a varied range of topics. Papers range in length from 5,000 to 8,000 words depending on whether the student is an undergraduate or postgraduate, and the university they attend. The papers included in the series are carefully selected based on their quality and originality. WM-ESP aims to disseminate research in Economics as well as acknowledge the students for their exemplary work, contributing to the research environment in both departments.
WM-ESP Editorial Board
- Sascha O. Becker (Monash University and University of Warwick)
- Mark Crosby (Monash University)
- Atisha Ghosh (University of Warwick)
- Cecilia T. Lanata-Briones (University of Warwick)
- Thomas Martin (University of Warwick)
- Vinod Mishra (Monash University)
- Choon Wang (Monash University)
- Natalia Zinovyeva (University of Warwick)
17 - Transport Access and the Labour Market in the United StatesLachlan Priest
In this paper I analyse the effects that car ownership has on one’s outcomes in the labour market, and the barriers that a lack of car access presents in the United States. I also analyse the transport mismatch hypothesis. I do this by looking at time series regressions using car ownership as the explanatory variable. I also look at how trip distances, and public transport wait time are affected by income, and the types of cities people live in. I find evidence that car access is associated with increased participation in the labour force overall, as well as commute times, but has a varied impact on salaries. The results also show that higher income is associated with longer travel distances. Higher income is also associated with shorter wait times for public transport, but this is less pronounced in cities that have a good public transport system.
16 - Do Political Actors Engage in Strategic Deception on Social Media?Simon Ricketts
We examine whether political actors engage in strategic deception on social media. We find evidence that certain groups of politicians engage in deception in response to an election. To infer deception, we construct a novel wealth inference model from text of political social media accounts. We use machine learning and natural language processing, which is accurate to within half an order of magnitude when compared to real wealth disclosures as required by law in the United States. Wealth exaggeration is not homogenous ; in an election year, the wealthiest political actors minimise their perceived wealth, while the poorest exaggerate their perceived wealth. We do not find evidence that there are differences in exaggeration due to sex, party or experience.
15 - Predicting Specialty Coffee Auction Prices Using Machine LearningZoltan Aldott
This paper aims to contribute to the coffee pricing literature pertaining to the Cup of Excellence (CoE) competitions by revising the feature set used and extending the modelling approach using machine learning. The specific dataset used is merged from data provided by the Alliance for Coffee Excellence and information collected through scraping public information from the Cup of Excellence website. The paper compares popular supervised learning algorithms exploring multiple interpretations of tasting notes to attain an efficient predictive model of prices. The algorithms compared include OLS, regularised linear algorithms, the decision tree, as well as, bagging and gradient-boosting ensemble methods. The best-performing models are further optimised using hyperparameter tuning and the most efficient one is selected. Based on a gradient-boosting regression, the final model is analysed to find the key relationships driving model predictions. Permutation feature importance and accumulated local effects analyses are used to provide insights into the non-linearities present in the data generating process.
14 - Has access to health insurance through the Indonesian social security system improved people’s understanding of health issues? Evidence from a national surveyMuhammad Indra Kurniawan
This essay studies the national health insurance system’s impacts on health awareness in Indonesia. I estimate the effects of the insurance enrolment on health knowledge and health behaviour changes after the launch of compulsory social health insurance. Individuals who are less aware of their health may contribute to moral hazard in health insurance. I apply the difference-in-differences method to compare treatment and control groups and the before-after period of the intervention in 2014. Data from the Indonesia Demographic and Health Survey is utilised in this study. Results indicate that social health insurance is negatively correlated with the propensity of knowing certain diseases and contraceptive methods. The scheme adversely affects individuals’ smoking behaviour. Therefore, improving promotive and preventive programs throughout the insurance’s benefits is essential.
13 - Labour demand in the UK during the COVID-19 pandemic : evidence from online job postingsStepan Vacha
The COVID-19 pandemic hit the labour market significantly through its impact on human health. This paper uses job posting data to measure the effect of the pandemic on labour demand in the UK throughout 2020, including estimates of recovery. It demonstrates the advantage of using online job vacancies to monitor the labour market compared to lagged estimates or surveys used by the Office for National Statistics (ONS). The labour demand shock is found to be of a similar size to those reported in the US or Sweden. Total weekly vacancies posted online were down by 39% during the fist wave and 12.5% in the second half of 2020, representing a significant, but not full recovery. The significance and size of the shock vary among different industries of the economy. All industries except Human health & social work activities have seen a significant drop in job postings due to the pandemic, with the Accommodation & food service activities sector being hit the most. Although the ONS estimates have grasped the main impact of the pandemic on vacancies, using real-time data can provide the policymakers with a much-needed timely information when dealing with a shock like the global health pandemic.
12 - Timor-Leste quarterly Gross Domestic Product (GDP) indicatorFaviana Bosco de Sousa
This paper evaluates the performance of the Denton method in estimating quarterly GDP using indicators [QGDPi(E)] and explores alternative indicators for GDP components that have big errors. This report uses Timor-Leste quarterly data on GDP expenditure and its components from 2010 to 2019 sourced from GDS (Statistical office of Timor-Leste). The QGDPi(E) is temporally disaggregated through the Denton method, and the results will be evaluated in two ways. Firstly, I compare the Denton results to the Cholette-Dagum results. Secondly, I compare the Denton findings to the published (adjusted) quarterly GDP series. Overall, results show that the Cholette-Dagum approach disaggregates the GDP better than the Denton method, based on the mean absolute error estimation. However, the estimation error of GDP and its components for every quarter are similar for both methods. Therefore, it is concluded that the performance of both procedures is very similar. This result could be used as a guide to disaggregating annual GDP into quarterly series using both approaches, which would be beneficial for Timor-Leste. Finally, this study suggests that GDS continues to use the Denton method in the short term. However, it recommends using a more transparent time series regression-based model to estimate quarterly GDP for a better result in the future.
11 - Machines and Markets : Assessing the Impact of Algorithmic Trading on Financial Market EfficiencyKaran Garg
The rise of machine learning has revolutionised finance. Institutions across the world have increasingly turned to data science and machine learning to create trading models without the need for human intervention. This has had various implications for the financial markets that they operate in, including market efficiency. This paper simulates a financial market with agent-based modelling and Monte-Carlo style simulations, to motivate a qualitative discussion about the implications of increased algorithmic trading on financial market efficiency. It finds that algorithmic traders (ATs) can seemingly increase market efficiency through better liquidity management and more complete extraction of information from prices. However, this also comes with increased instability and potential convergence to an unstable equilibrium. The Adaptive Market Hypothesis (Lo, 2004) is suggested as an alternative framework for analysing AT behaviour.
10 - Finance and Growth of SMEs in South Asia: Evidence from Bangladesh, Pakistan, and Sri LankaPalak Sharma
This paper studies the determinants of access to finance in small and medium enterprises (SMEs) in three South Asian economies, Bangladesh, Pakistan, and Sri Lanka. The data for this study is from the World Enterprise Survey data set for each country collected by the World bank. The paper uses logistic regression for empirical analysis. Findings of this paper confirm that access to formal and informal finance is significantly determined by the size, age, and formalization of firms. The gender of the owner-manager, sales performance, location, and legal status of the firm are insignificant predictors of a firm’s ability to raise finance. Results from this paper can help governments shape policy and develop programs that can augment a firm’s ability to raise financing from formal sources.
9 - Do mobile phones empower women? A perspective from rural IndiaJingjing Chen
Empowerment for girls and women, Goal 5 for the Sustainable Development Goals, is the key for economic development. As mobile phones become cheaper and more prevalent, a growing number of researchers are investigating their impact on women's empowerment. Most previous research has relied on interviews and cross-sectional data, so their conclusion limited to the association rather than establishing the causal relationship between mobile phones and female empowerment. This paper used Indian Human Development Survey 2005 and 2011-2012 to study the association between mobile phone ownership and women's empowerment in rural India. Then difference in- difference strategy was applied to identify the causal impact of village mobile phone service installation on female empowerment. Like previous studies, the results from this paper suggest that mobile phone ownership was associated with higher women's empowerment. Moreover, mobile phone service installation increased women's involvement in decision-making process but it decreased female labour force participation and contraceptive usage in rural India.
8 - Dynamic Personalized Pricing with Active ConsumersXiaolei Wang
We study a two-period duopoly model where firms gather consumer data from first period customers then use them for second-period personalized pricing, with a focus on active consumers who can bypass price discrimination with identity management (IM). As a result, IM weakens competition and allows firms to adopt perfect price discrimination which gives massive profit for firms in the personalized-pricing stage. Anticipating this, firms engage in below-cost pricing in the first stage to compete for consumer data. This strategy is similar to predatory pricing not only because of below-cost pricing but firms can also recoup losses later, however, we show that in this case below-cost pricing is driven by competition and beneficial to consumers.
7 - Does boardroom diversity impact the financial performance of FTSE 350 firms?Iarina Corniciuc
This paper examines the impact of diversity on a firm's financial performance, a topic which requires more research due to the fast changes in boardroom composition and the inconclusive previous literature. The main analysis utilises panel data with a fixed effect model to examine FTSE 350 UK firms between 2001 and 2020. Results show that the percent of females is positively and significantly correlated with the two firm performance variables, Tobin's Q and ROA. Initial results also show that a higher count of nationalities have a positive and significant impact on firm performance. These results are in line with various theories which state that diverse groups are found to be more innovative as they cover a wider range of knowledge. The paper provides empirical proof of token theory, which states that gender diversity below a threshold of 15% has a negative impact on a firm's performance. This could be due to being perceived as a minority causing isolation, which in turn impacts performance. Results also show that the critical mass point, where most benefits are reaped in the relationship, lies at 40% and above female directors. This is in line with the proposed EU directive of a quota of 40% female directors.
6 - Gender and Disadvantage in the Evolution of Test Score GapsMolly Paterson
This paper details the evolution of numeracy test score gaps based on gender and socioeconomic status, particularly considering children’s early circumstances. We use the rich dataset: The Longitudinal Study of Australian Children (LSAC) to bring together two strands of literature on gaps between students on a gender and a socioeconomic basis. We establish an interrelationship between socioeconomic gaps, based on early life household income and parental education, and the gender gap in numeracy. We find that between Grades 3 to 9, boys have an advantage in numeracy scores over girls, which widens over time. By Grade 9, poorer female students are doubly disadvantaged compared to richer female students and male students. We confirm that early life circumstances continue to impact student’s achievement into adolescence, demonstrating the importance of early interventions to address gender and socioeconomic gaps.
5 - When does the winner take more? The role of political alignment in transfers to Romanian municipalitiesGeorgiana Puscas
This paper explores whether the political alignment between mayors and the central government brings additional financial benefits to municipalities in Romania, using a novel dataset over 2012-2018. Analysing close municipal elections, I apply a regression discontinuity design to identify the effect of political alignment on several categories of transfers. I find that politically aligned municipalities receive per capita about 19% more equalisation transfers, 46% more subventions and 30% more transfers for roads. The results indicate that transfers for decentralised costs at municipality level are nondiscretionary
4 - Weather Shocks and Economic Activity. Evidence from the PhilippinesMarvin Pardillo
As global temperatures continue to rise, strategies to mitigate the adverse effects of weather shock events become crucial. While previous studies have analysed the effect of climatic variation on economic activity at the national level, there is a lack of understanding of the developmental effects of weather shocks at the subnational level. This study uses monthly night light data captured by Visible Infrared Imaging Radiometer Suite (VIIRS) and weather data to examine the effect of weather shock events at the municipal level in the Philippines. We find that excesses and shortages in monthly rainfall are associated with a decrease in the level of economic activity. We also find that lower temperatures are associated with an increase in the level of economic activity whereas higher temperatures are associated with a decrease in economic activity.
3 - Estimating the Impact of Natural Disasters on Caribbean ExportsEleni Sandi
This paper aims to estimate the impact of natural disasters on exports in the Caribbean countries using a panel fixed effects regression. The paper’s main contribution lies in identifying the manufacturing industries that are disproportionately affected by natural disasters in the given region. It finds that an additional natural disaster in the Caribbean leads to a significant short-run decrease in total exports, whilst mineral, chemical, paper, textile and metal industries suffer the most. Using alternative disaster measures reveals that deaths have the largest impact on exports, emphasising the Caribbean’s high vulnerability to natural shocks. Interestingly, a dynamic model reveals a long-term negative effect on exports that strengthens over time. The main results remain robust to a variety of alternative model specifications. Total disaster effects seem to be driven by disasters in Haiti, although further research on country heterogeneity is recommended. Taken together, these findings are especially alarming in the context of climate change and global warming, as natural disasters are expected to increase in intensity and frequency. Drawing on these results, the policy implication is decreasing the Caribbean’s vulnerability by tackling the moral hazard problem of unconditional donor aid.
2 - What About Super? Financial Literacy as a Barrier to Market EntryPaul Boykett
A majority of households do not invest their savings and fewer make voluntary contributions to superannuation. This may increase their risk of financial hardship in later life and has raised questions about the role of governments and educators in addressing barriers to market entry. Our probit model framework measures the effect of financial literacy on market participation and contributes new evidence by analysing superannuation and demographical heterogeneity in market barriers. Results indicate that poor financial literacy deters voluntary superannuation contributions and traditional investment, particularly for low-income households. Evidence also suggests that financial advice facilitates market entry while improving financial literacy could shift investor’s financial market exposure towards superannuation in later life. These findings enrich our understanding of market barriers and help to guide superannuation policy.
1 - Joint estimation of time and risk preferences using a representative sample of UK households' subjective perceptions of timeAidan Aungles
I use real money choices from the Innovation Panel of the UK Household Longitudinal Survey to jointly estimate time and risk preferences via Maximum Likelihood Estimation using dfferent specifications of subjective time. First, survey-elicited individual estimation of subjective time is utilised. Second, I use two sample-level estimations of subjective time based upon psychophysical laws which have been found to hold for the perception of stimuli such as light and heat, and apply them to the perception of time (To clarify, here, the sample's average curvature of subjective time is estimated). These specifications are examined closely and compared to that of objective time. Lastly, I also add to the literature on the heterogeneity of time and risk preferences utilising the wide range of variables available.