Research projects in 2017
February 19, 2018
In 2017 employees and PhD students of the Faculty of Economic Sciences conducted 67 national and international projects for a total amount of over 14 billion PLN. 28 new grants were granted for the amount of over 5.5 billion PLN. Faculty maintained high success rate reaching 45% in regards to proposals accepted for funding by the National Science Center Poland in 2017.
LIST OF NEW GRANTED PROJECTS:
European Commission HORIZON 2020
- EU Engineroom - dr hab. Katarzyna Śledziewska ‘Explorations in Next Generation Internet Emerging Research Opportunities, Technologies and Methods’
- EU sharOn - dr hab. Katarzyna Śledziewska ‘Opportunities for European Entrepreneurs in the Sharing Economy ’
National Science Center
- BEETHOVEN joint Polish-German research project
In recent years economists have provided much evidence confirming the significance of constitutions operating in states for the functioning of their economies. The main link here is the role that constitutional provisions have for constraining the discretion of actors in power and for inducing them to make decisions aiming at long run pro-development goals and not short run goals of their own or of particular groups. However, this literature mainly found that it is the factual implementation of constitutions and not their formal wording (text) that matters. This leads to important questions, what causes the rise of discrepancies between constitution texts and constitutional reality (in other words, what can explain the so-called de jure – de facto constitutional gaps) and what the consequences of this phenomenon are. In the ECC project we undertake this topic, offering for the first time a comprehensive and systematic economic account of the constitutional compliance problem.
The research planned in the project develops in three main steps. Firstly, to allow for its measurement, the conceptualization of the de jure – de facto constitutional gap is inevitable. This encompasses answering questions such as: What are the relevant legal norms and who has to comply with them? Secondly, we undertake the challenge to indicate the determinants of the gap between de jure and de facto constitutions. These can be characteristics of the rules themselves, characteristics of the constitutional document, or country characteristics in terms of culture, politics and socio-economic conditions. Distinct sets of factors may play a role as determinants of different constitutional rules. Thirdly, we explain the consequences of the gap between de jure constitutional norms and their de facto implementation. We argue that the existence (and size) of such gaps is not only relevant for the effectiveness of these constitutional norms, but also e.g. for trust in government and public sector corruption.
The conducted research has its fundaments in cross-disciplinary approaches in economics such as new institutional economics and political economy. In the empirical part we make use of econometric tools allowing for analysis of data for states, as well as (for the first time in constitutional economics) experiments allowing to study individual behavior with regard to (non)compliance with the constitution.
Understanding the causes and consequences of the discrepancies between constitution texts and their interpretation is not only a valuable supplement of economic studies of constitutions conducted to date, but also has fundamental practical relevance. Namely, it helps to design better (i.e. more effective) legal institutions and creates awareness among legislators and political decision-makers of the limits of what planned constitutional reforms can achieve.
The Polish-German cooperation on this project allows not only to combine the expertise and potential of two important centers of research in constitutional economics, but it also provides a unique opportunity to conduct experiments in Germany, Poland, and Egypt (where the University of Cairo is a partner of the University of Hamburg) and compare the perceptions of constitutions and constitutional compliance across countries with substantial differences in many characteristics ranging from income levels to historical legacies and political regime experience.
- SONATA BIS for establishing a new research team
The main goal of the project is an assessment of the impact of big infrastructure projects on regional development. We also want to verify whether the amount of financial means devoted to the big projects is adequate as compared to the real costs associated to their completion. The results of the project will allow to expand the knowledge concerning the relationship between public investment and productivity. Aschauer, who pioneered the research in this field in the late 1980s, shows strong and positive relationship between public infrastructure investment and economic growth in the US. Other authors shed certain doubts on his results (e.g. Munnel or Holtz-Eakin). In Europe, the positive correlation between public investment and economic development has been found by Alvarez Pinilla et al. or de la Fuente. They argue though that that the infrastructure is more productive in regions with higher level of economic development. Similar results have been reported by Cieślik and Rokicki for Poland.
It should be noted that none of the existing studies verify the possible differences between big and small infrastructure projects. However, in Poland only between 2004 and 2015 over 130 projects worth more than euro 100 million each were implemented. It seems important though to verify whether they really improve regional economic development and if their budgets are adequate to their costs. The latter is particularly important taking into account the criticism by Flyvbjerg.
Proposed project deals also with the methodological shortcomings of existing studies – most of them rely on the estimation of neoclassical production function. This approach has however, many theoretical and econometric limitations. Hence, we will apply different methodological approaches such as CGE modelling, spatial econometrics or actuarial methods. The main reason behind the choice of the research topic is the lack of the studies that would focus on the specific features of big infrastructure projects. As a result there exists a gap in the literature that can be, for the first time, at least partially filled due to the completion of proposed project.
- OPUS - senior researchers
Understanding intergenerational transfers within the family is a key factor for designing of effective policies on health and social care or education policy. While, the topic of resource allocation in a two-generation household, i.e. consisting of parents and children, has been well established, surprisingly, the analysis of economic behavior in relation to the oldest generation (grandparents) has attracted limited attention so far. Assuming the increasing life expectancy among European citizens the issue of transfers in three-generation households will gain in importance.
An important class of empirical and theoretical studies shows that resource allocation between parents and children can be explained by altruistic behavior towards children in a two-generation framework. In this project, we are going to examine how the distribution of resources is affected by the inclusion of the third generation (the generation of grandparents) in households, where resources are mainly provided by middle-aged working generation (parents). In particular, we will investigate if altruism, e.g. direct and indirect reciprocity, can explain the distribution of resources in the three generation framework. Additionally, we are going to explore whether decisions regarding the distribution of resources in the three-generation households are less effective than those in the two-generation households and under which conditions the needs of grandparents are being sacrificed to needs of the children. The context of our study will be health care.
In this project we are going to apply both: an experimental method, and a Choice Experiments (CE) non-market valuation method based on stated preferences. We plan to conduct two major surveys: an experimental survey in the Laboratory of Experimental Economics at the Faculty of Economic Sciences in the University of Warsaw and the CE on the nationwide sample carried out by the professional polling agency. In the experimental study, we would like to mimic the financial relationships between family members in three- and two-generation households and then to manipulate potentially relevant factors (such as e.g. income, individual or common decision taking) to see how this influence willingness to pay (WTP) for particular family members. The sample composition will allow us to analysis the differences in valuation between the three- and two-generation households. The advantage of experimental study is that the choices made by individuals are not hypothetical.
Subjects decisions have real financial consequences (the payment from the lab experiment). The advantage of the second study – the CE valuation study is possibility to estimate WTP for improving the health of individual household members, and estimate the marginal rate of substitution between the valuation of the health of the middle generation of the valuation of the health of their children and parents (the oldest generation). The Choice Experiment method is based on stated preferences. The theoretical basis of this method is the characteristic demand theory by Lancaster, the random utility theory and the experimental design theory. In the project we will attempt to design a theoretical model on the resources allocation including intra-household altruism in the three-generation families.
As far as we know, our study would be the first to investigate how including a third generation alters household decision making over resources using experimental methods and non-market valuation methods. The current structure of Polish households give an unique opportunity to conduct such a study, as the share of three-generation households in Poland is relatively large and equals to 10%. For comparison, in the UK three-generation households consist only 2% of all household. The results of our study may provide guidance for policy makers to design policies to improve the situation of the elderly in particular in the context of health care.
The proposed research project entitled “Wealth inequality in Central and Eastern Europe” aims at empirical measuring and explaining wealth inequality in post-socialist Central and Eastern European (CEE) countries, which have become EU New Member States after 2004. In economic science, inequality has been usually measured in terms of disparities of income or consumption. Economists paid less attention to wealth inequality largely due to scarcity of reliable data on household wealth. Household wealth is usually measured as net worth, which is a difference between household (real and financial) assets and household debts. Scientific research shows that wealth is of prime importance as a determinant of individual economic well-being and its distribution in the society. Parental wealth is positively associated with greater educational and cognitive results for children, transitions to home and business ownership, and children’s labor market outcomes. The fact that wealth is usually very unequally distributed (much more unequally than income) translates into very unequal opportunities for children and adolescents coming from different economic backgrounds. According to recent empirical research, wealth inequality is also negatively related to economic growth.
Although there is extensive research on wealth inequality in rich countries, the problem has been much less studied in the context of CEE countries. The project can therefore fill an important gap in the economic literature. Specifically, the project will measure the degree of wealth inequality in CEE countries correcting for the problem of the missing data on wealth of the super-rich in household surveys. Such corrected estimates of wealth inequality for CEE countries do not exist yet. The project will provide first insights on the mechanisms that determine wealth inequality in the CEE countries.
The results of the project will help to understand how economic growth, business cycles and structural transformations from centrally planned to market economies have affected wealth of the richest persons, its distribution and mobility among the richest. New facts about wealth inequality and insights into mechanisms driving changes in wealth of the super-rich in CEE region will add to the stock of knowledge about wealth inequality in advanced countries. It will be interesting to see whether the economic processes determining wealth inequality and wealth of the super-rich in the CEE countries are similar to those operating in Western advanced economies.
An additional objective of the proposed project is to throw a new light on the problem of income inequality in Poland. The existing substantial literature on income inequality in Poland, based on household survey data, suggests that the rise of inequality was rather limited during the transformation to market economy. However, inequality estimates in this literature could be seriously biased downward due to the problem of missing top incomes in household survey data. New research based on tax returns data suggests that income inequality grew in Poland much more substantially. This project will provide new estimates of income inequality trends in Poland using combined household survey and tax returns data. In addition, the improved income inequality estimates will be used to compute inequality-corrected measures of real incomes and well-being. We will use these measures to reevaluate whether the Polish transition to market economy was successful in terms of raising overall societal well-being as well as the well-being of the poor and the rich in Poland.
Public goods (such as national parks, or highways) are goods that can be used by an unlimited number of individuals and no individual can be excluded from using them. The problem with public goods is that the free market is a mechanism that does not ensure that their efficient quantities are delivered. People generally believe that others will contribute to public goods and consequently, they can free-ride (use the good once that is provided by others). Therefore, it is one of the commonly accepted cases in which a government should intervene and become a provider of those goods. However, what quantity should be provided?
The theory of economics has developed several methods that allow the value of non-market goods (goods that are not bought and sold in markets; for example, public goods) to be estimated. The most comprehensive of these methods is the contingent valuation method. This method is based on respondents’ stated preferences, which implies that data regarding how much consumers are willing to pay for having a specific good (for example, a new public good) is obtained through specially designed surveys. In these surveys, respondents are presented with scenarios of delivering a public good (its characteristics and costs per person that are related to its delivery) and asked to assign a value to the scenarios; for example, through choosing their most preferred option from a set of alternatives. The data collected via such surveys allows the modeling of consumer preferences and their willingness to pay for each of the considered programs or (in certain variants of the contingent valuation method) each of the programs’ components.
Our ground-breaking research project addresses the incentive compatibility of questions that are used in contingent valuation surveys. An incentive compatible question is a question that is constructed in such a manner that a respondent provides a truthful answer to the question, or more specifically, aligns with his/her personal preferences. When responding to an incentive compatible question, a self-interested respondent will not benefit from understating or overstating his/her willingness to pay for a considered program. The theoretical literature suggests that there are numerous necessary conditions to maintain incentive compatibility of contingent valuation surveys. However, their practical significance has not yet been adequately verified. Our project seeks to address this gap.
Specifically, our research project will answer the following questions:
1. Are incentive compatibility conditions necessary for respondents to truthfully reveal their preferences in contingent valuation surveys and if so, are these conditions sufficient?
2. Do any of these conditions (consequentiality, the number of choice situations, or the number of choice alternatives) play a dominant role for truthful preference revelation?
3. How to econometrically account for the extent, to which these conditions are satisfied, to potentially correct biased estimates?
4. What is the extent of the bias that results from violating these conditions in a typical (field) study using contingent valuation?
Our research will verify the importance of theoretically proposed conditions for the incentive
compatibility of studies that use the contingent valuation method. Furthermore, this study will provide empirical evidence to evaluate the practical limitations due to the trade-off between incentive compatibility and statistical efficiency. Surveys that include more than one choice situation per respondent or more than two alternatives in a single question reveal broader information about the respondent’s preferences and considerably reduce the costs of conducting the survey. Despite growing interest in this topic that is related to the fundamental role of the contingent valuation method for cost-benefit analyses of investment projects or government regulations, extant literature does not provide a comprehensive empirical analysis, econometric solutions and the common practice of designing valuation studies significantly diverges from the postulated conditions of incentive compatibility. Our project will fill this gap. Our results will prove meaningful for the top academic journals that are devoted to the economics of public goods, environment, health and transport. The results of our novel research project may be ground-breaking for current practices.
Our project will provide valuable methodological recommendations that are necessary for properly designing surveys that are used for consumer preference modeling. This project will allow scholars to formulate clear practical guidelines regarding how contingent valuation surveys should be constructed; therefore, this project will promote a more precise valuation of non-market goods.
The proposed project aims at providing at least partial answer to the question about the impact that informal institutions (understood as social norms or common behavioural patterns) may have on voter turnout in local elections, competitiveness of these elections, and economic outcomes, with a particular attention paid to the issue of the distribution of economic resources. The planned research will look at these relationships using the local level data for Poland during the period of transition from a centrally planned economy to a market economy. The analysis of the role of informal institutions will focus on the importance of secularisation process, which translates, among others, into the decreased religious attendance. Taking into account that many social norms are directly or indirectly derived from religion, changes in religious attendance, which were observed during the transition period, can provide a good approximation of the differences between municipalities as far as informal institutions are concerned.
The project aims at verifying the following research hypotheses: a) in municipalities in which the secularisation process during the transition period was more intense, currently the voter turnout in local elections is lower; b) in municipalities in which the secularisation process during the transition period was more intense, currently the competitiveness of elections is smaller; c) in municipalities in which the secularisation process during the transition period was more intense, currently the distribution of economic resources is more unequal.
The proposed research will heavily draw on political economy theories. These theories allow us to argue that informal institutions, as well as their changes, may importantly affect the electoral behaviour of the citizens, the level of political competition and the distribution of political power.
Further, these theories allow us to build the linkages between informal institutions and economic outcomes and the distribution of economic resources which are crucial for undertaking production processes. In order to better understand the causes and potential consequences of the secularisation process, the project will also draw on the achievements of the literature from sociology and political sciences.
The research hypotheses will be tested using econometric analysis. To do so, panel data techniques will be mostly employed. Data on (changes in) religious attendance will come from the Statistical Institute of the Catholic Church (ISKK). Data on elections and voter turnout will be taken from the National Electoral Commission (PKW). Data to illustrate various socio-economic characteristics at the municipality level will come from the Central Statistical Office of Poland (GUS). Finally, the distribution of economic resources will be measured with the distribution of agricultural land based on the data published by the Ministry of Agriculture and Rural Development.
The presented project tries to contribute to the broader literature interested in the impact of institutions on economic and political outcomes. By focusing on issues which are relatively poorly understood (i.e. on the linkages between informal institutions, political participation, competitiveness of elections and economic outcomes), the planned research will attempt to complement the existing debates with the topics which have not been widely studied until now. In this way, the presented project should improve our understanding of the complex interactions between informal rules which structure individual behaviour, political outcomes and economic processes. The planned research will also fill the existing gap in the Polish economic literature in which the role of informal institutions in general, and the importance of religious attendance in particular, for economic and political outcomes has hardly arisen.
We live in a more and more globalized world – almost each year the trade and financial flows increase substantially and thereby remove power from the hands of individual policymakers across the world to an ambiguous entity known as „external/imported shocks” or more generally “global conditions”. These conditions have an asymmetric impact on various economies, since financial assets and the capital stocks of the economy are not distributed equally across the world. While the obviousness of these statements makes them sound trivial, the consequences of this asymmetric state are not the least trivial for the small open economies.
Since the beginning of the financial international market, these smaller countries fared worse than others. Mostly because smaller countries were not able to borrow in their own currencies; not because of their inherent problems, but because the larger countries' currencies were more liquid due to larger markets. Initially this asymmetry was attributed to the fact that some of these countries led an inconsistent monetary policy based on fixed exchange rates that made them prone to crises. This resulted in a policy advice suggesting a move to more flexible exchange rate regimes and inflation targeting strategies that should in theory insulate these economies from the global external conditions.
As indicated in numerous theoretical studies – a central bank should not respond to such external events, which have no direct impact on inflation in the form of second-round effects. This claim is based on the observed in the 1970s and 1980s transient nature of supply shocks; therefore, those had not required a significant monetary response. In contrast to these assertions, the recent crisis indicated that the observed phenomena such as financialization of trade, increase in carry trade and dependence on capital inflows are permanent and structural. This is a challenge for central banks, whose role is also maintain the stability of the financial system.
The main objective of the research project is thus to identify on empirical grounds, the impact of external economic shocks for monetary policy in open economies.
The proposed research program involves a series of theoretical and empirical monetary policy analysis (including Polish) grouped into three interrelated groups. The Group I investigates a range of responses to capital flows; the Group II analyzes the extent of the reaction to changes in commodity prices (including energy), the Group III connects Group I and Group II with the analysis of an exchange rate corridor, beyond which a non-linear response of monetary policy occurs.
The proposed research attempts to complement the existing state of the art on monetary policy and financial stability. Thus, the investigation of monetary policy response to external shocks has fundamental consequences for the assessment of the effects of the inflation targeting strategy. Possible confirmation of the main hypothesis would challenge the widely accepted view that before the financial crisis the sole aim of the monetary policy was to combat inflation. This would be particularly important when, despite the existing normative consensus assuming no reaction of the monetary authorities – in fact, such a reaction would have taken place. The proposed studies also extend the knowledge on the post-crisis policies of central banks.
On this basis, main challenges facing the monetary policy will be indicated. The conclusions obtained from studies conducted in the proposed project will allow for a better understanding of the relationship between monetary policy and financial markets, and the actual functioning of the inflation targeting strategy.
Compliance with the EU climate policy will require a switch towards lower carbon energy generation in Poland. There are several potential scenarios of decarbonisation that involve increased shares of renewable energy as well as increased openness to imports of factors of energy production (e.g. gas) as well as imports of energy itself. Moreover, nuclear energy seems very efficient and should be considered as a viable option.
Decisions on the choice of the actual policy mix are difficult due to several reasons. These decisions require substantial investment outlays. They require long-term planning over periods of decades (due to both the aforementioned investments as well as a long implementation times). Moreover, changes in the use of resources have a direct impact on the structure of industry and they lead to changes in employment and living conditions of the population directly involved with the mining sector and the energy sector. Last but not least, the energy sector reform will in the long run affect the relative prices in the economy and this will in turn affect the economic conditions and economic welfare both in the short and the long term.
Energy policy requires long term planning and affects all economic agents. As a part of the project we propose a significant extension to the existing tools used to assess reform-related costs and benefits. Our economic model allows for simulations of behavior of economic agents: enterprises, government as well as households in the short and long run. Our model will take into account the investment decisions of the enterprises as well as the consumption and savings decisions of the households based on the changing prices of goods, services and energy. The energy sector will be modelled in a particularly detailed way, with a special focus on the nuclear technology.
Our model will allow us to analyze the effects of changes in several scenarios of changes in the energy policy. It will allow us to obtain the optimal energy mix that complies with the required reform goals at the minimum economic cost. Our model will allow us to trace the reaction of the households by looking at the changes in their consumption and savings. Moreover, it will enable us to evaluate short and long run changes in the structure of production of industry and service sectors including the changes in international trade.
One of the feature of many economic phenomena is the possibility to assign them to a specific geographical location. When collecting data on such phenomena, many times one can include in databases information about the place of their occurrence. Not always, however, economic analyses take into account both the fact of linking them to a specific location, as well – even being aware of such connection – the use of geolocation information already held. The results of such models, known as a-spatial, describe reality not always in a precise way. A milestone in the economic research was the introduction of the so-called spatial models, which allow to consider economic phenomena in the context of their occurrence in predefined regions, what requires the identification of the structure of the neighbourhood, which – in case of a permanent division into regions – remains constant during analysis.
This allows to identify and take into account the possible effects of the influence of neighbouring regions on the phenomenon in the other regions, the spread of economic phenomena between spatial units or the existence of the larger areas with similar level of examined variable (i.e. agglomeration areas), or to identify areas with extremely different values of tested variables (called hot spots). Predetermined constant neighbourhood structure works relatively well in case of phenomena of regional character (e.g. macroeconomic ones), but the problem arose in the analysis of phenomena which could be attributed to a precise spot location (usually microeconomic “events”). Examples of such phenomena might be the location of companies or the prices of a given real estate property (and many others).
Previously developed types of spatial models do not fully worked well for such cases. One of the reasons is that the emergence of new data (e.g. a new company, a new real estate transaction) significantly affects the structure of the neighbourhood, i.e. the relationship between (close) observations. Taking into account a new structure is inconvenient, and may cause the worse or even opposite results, mainly because of instable structure and dependence of neighbours in the phenomena examined.
The purpose of the proposed project is to develop the method for the identification of such "space division", which – independently from the occurrence of any new observation – would describe as precisely as possible the structure of the neighbourhood and the links between the location of examined phenomenon. At the same time this structure would be stable, and therefore would allow for including it to the already known spatial models. Due to the fact that for the microeconomic data, we have usually only a small sample of the whole population, the results of the models, and thus conclusions about the spatial effects of examined phenomenon, can be very dependent on the available sample data. Hence, another objective of the project is to develop a method that will allow to get the stable results for population not only for a sample. Obtaining the distribution of many possible results for the analysis, enables selecting those which are most likely (also indicating the possible range of results for a given level of confidence, i.e. with the maximum accepted by a researcher error).
The two indicated above objectives of the project will be implemented using (already known in statistical or econometric research) bootstrapping method, the method of the re-sampling of new subsamples with replacement from the date already possessed. The novelty the project brings, is the use of the proposed method to the design of adequate spatial models. On the basis of a number of randomly selected "new" samples the most probable structure of the neighbourhood for the entire population will be chosen. It will be also possible to identify the most probable, i.e. the most corresponding to the reality, spatial effects, which include the identification and describing characteristics of the area in the context of examined phenomenon and possible impacts of the events in the neighbouring locations. All of this allows for better forecasting of microeconomic point spatial phenomena in the future.
In practice, the above mentioned works will be realized on the basis of already owned database containing the information about the location of companies and real estate transaction price data. These data are geo-located point data. Owned research sample allows to carry out the entire postulated process of finding the best structure of the neighbourhood, that is the links between close or more distant units, whether in relation to the location of companies or real estate transactions, and then to develop a model that would better describe the current state and forecast the future development of the location of companies or transaction prices on the real estate market in specific points in space. This will also allow, compared to the current methods of spatial analysis, for more precise identification of areas that are characterized by a greater flow from new companies or the lack thereof, and the reasons that promote clustering of companies with similar profile. In relation to the real estate market, the project should result in forming the models that will better distinguish the areas with the similar prices, and indication of the reasons responsible for this. Due to the fact that the data used in the research have the typical point nature, the developed methods and solutions can easily be transferred to the other analyses of phenomena with the similar characteristics.
Why do people play lotteries? Given current pay-out rates, about half the money spent on coupons will on average be lost; only a handful of lucky ones out of millions of players will actually win the jackpot (and, as studies show, will probably not spend it wisely and within a few years will not be much happier than they were before winning anyway). Several potentially appealing explanations of lotteries’ surprising popularity have been put forward, but it is often difficult to put them to a proper test.
In this project we will try to conduct several experiments in the field, trying to verify various reasons for which people could perceive lotteries as more attractive than they really are. For example, we will let customers choose between coupons with randomly selected numbers and coupons with numbers could choose themselves. Observing the fraction that strictly prefer the latter, we will have a better understanding of how many customers (erroneously) believe that they are able to hand pick the numbers that will give them a better chance.
Another group of studies in this project will look at the advertisements. It is often claimed that marketing of lotteries is responsible for pushing people towards excessive play. We will conduct content analysis of the ads, aimed at identifying motives for and beliefs about playing that they try to capitalize upon. We will then link this classification with perceived persuasive potential of each clip or slogan. This will provide us with some ideas of which (mis)conceptions about lotteries may most effectively be utilized by marketers. We shall also investigate the manipulative techniques used by firms and individuals offering “systems” or “guides” to lottery play, allegedly helping become a millionaire.
Finally, we will look at actual sales data and conduct novel econometric analyses. For example, we will look at the games in which customers have a choice between a greater chance for a smaller amount and a smaller chance for a greater amount of money. Popularity of each of the options will provide us with evidence on the distribution of types of distortions in perception of low probabilities.
The project will thus result in the progress of scientific inquiry in the gambling industry and decision making in risky situations in general. It will also result in development of a website aimed at the general public, with education materials debunking popular myths associated with lottery play, especially those often cleverly used by marketers and fraudsters.
There are two main goals of the project. First, we want to verify the impact of regional price indices on the results of regional wage determinants analyses. In this sense we will take into account 2 main approaches present in the literature: market potential model based on the New Economic Geography (NEG) theoretical previsions and the wage curve proposed first by Blanchflower and Oswald (1990). In the case of the former, the inclusion of regional price indices should allow for more precise estimation of market potential coefficient, as compared to the existing studies. In the case of the latter, the inclusion of regional price deflators should allow for verifying the hypothesis concerning possible overestimation of the relationship between regional wages and the local unemployment rate. Finally, following Fingleton and Palombi (2013, 2016) we will verify which of the above approaches is more adequate in terms of explaining regional real wage differentials. We assume the wage curve approach to be more adequate.
Second, we want to verify empirically one of the main assumptions present in the NEG models concerning the price index and develop a model that takes into account new empirical findings. Here, we focus on the supposition that the core regions should have a lower price index of manufacturing goods. We believe the above assumption is not correct. In order to verify the above, we will calculate regional price indices for manufacturing goods in the case of Poland. Next, if our research hypotheses are correct (the one concerning the wage curve approach and the one concerning the higher price level of manufacturing products in core regions) we will develop a new theoretical model that would include both features within the NEG framework.
The main reason behind the choice of the research topic is the lack of the studies that would include data related to regional price indices. As a result there exists a gap in the literature that can be, for the first time, at least partially filled due to the completion of proposed project.
The project will provide climate assessment models with realistic behavioral foundations, by incorporating into existing models a variety of behavioral tendencies and biases. New models will be developed, which account for heterogeneity and bounded rationality of agents. So far, the analysis of climate policies relies on the model, which assumes that people act as perfect utility maximizers.
Empirical evidence shows that the model is an invalid description of how people actually behave. Many behavioral models have been proposed so far, which incorporate into economic theory a variety of realistic behaviors. Recently, such models have been increasingly used in macroeconomics. It has been shown that they can explain empirical macro phenomena beyond a rational-agent model. However, so far, behavioral-macro models have not been used for the assessment of climate policies. In this project, we will study how the estimates of the social cost of carbon (SCC) differ under a variety of behavioral assumptions, as well how behavioral tendencies may undermine the effectiveness of climate policies. For instance, the SCC is an estimate of the economic damages associated with a small increase in carbon dioxide (CO2) emissions or it represents the value of damages avoided for a small emission reduction. U.S. Environmental Protection Agency and the EU Commission rely on the social cost of carbon (SCC) to estimate the benefits and costs of environmental policies. We will compare our findings to existing estimates, and evaluate when behavioral failures may undermine the effectiveness of climate policies.
Foreign banks play an important role in the financial markets of emerging European economies. They are important source of financing of private sector spending, including investment. However, they also extend credit to governments and hold public bonds. The first objective of the proposed research is to study the impact of sovereign borrowings from foreign banks on their willingness to finance private expenditures.
Foreign banks presence involves also some risks because their activity and credit supply may depend on parent countries’ economic conditions which may not be synchronized with the domestic business cycle and domestic credit demand. The second objective of the project is to analyze the determinants of the mismatch between the demand for and supply of external financing due to divergent business cycle dynamics in emerging European countries and the parent countries of foreign banks penetrating their financial markets. We conjecture that fiscal policy in general, and sovereign debt and deficit in particular are among the aforementioned determinants of the mismatch between external financing demand and supply.
The research addresses two issues which are important in light of high and growing levels of sovereign debts and massive international flows of capital. It will show the influence of fiscal policy on the availability and stability of external financing provided by foreign banks for private sector.
A quantitative analysis will be conducted to achieve both goals of the research. The data on foreign banks assets, the levels of output and fiscal indicators in 20 emerging European countries in the 2000-2015 period will be analyzed by means of econometric methods to uncover causal relations between the variables of interest.
- SONATA - senior researchers
The project refers to one of the most important population processes, which is population ageing. Steady increase of percentage of old people in the population is the outcome of increase in the average life expectancy and also of a low fertility rate. Forecast by Eurostat show that until year 2060, in the European Union member countries percentage of people above 65 years old will be 30%, which is now 17% (from 14% to 35% in Poland).
Increase in the proportion of older people is related to providing these individuals decent living conditions both in terms of health and financial security . This becomes a challenge for both families and for the state. With an ageing population the costs to the state budget are increasing. These costs are related to pensions, as well as expenses associated with health care and long-term care.
The aim of the project is to assess fiscal sustainability in Poland, taking into account the projected budgetary impact of population ageing. In this study, basing on the SHARE database, we will modify the underlying demographic assumptions, made in the European Commission’s Fiscal Sustainability Report 2015, concerning elderly people. In addition, using data on physical activity and health condition of elderly people, we will try to verify whether an increase in physical activity would lead to decrease in public expenditure on health care and long term care.
The proposed project is of great significance for the fiscal policy and public finances. The results may indicate that the risks associated with unsustainability of public finances in Poland, caused by population ageing, are higher in longer term than it may be concluded from the latest European Commission’s Fiscal Sustainability Report. On the other hand, the assessment of an impact of physical activity of elderly people on their health condition and the sensitivity of public expenditures on health care and long term care, depending on the physical activity, may indicate the importance of promoting physical activity among the older part of the society.
The main research objective is to analyse microeconomic mechanisms of social capital formation. The study will cover different factors determining joining social networks and activity in them, inclination to trust others, reciprocity, and creation of collaborative attitudes. There is a focus on explaining how participation in social networks (including both active membership in organisations and taking part in more informal social networks) transfers into trust, norms of reciprocity and collaborative attitudes.
Researchers of social capital, in order to explain its origins, often rely on the presumption, that participation in voluntary associations has positive external effects. They assume that by acting in organizations, people learn to cooperate and communicate, not only within one group, but in general. However this rule is not generally applicable, because there are numerous empirical studies questioning it. If we are interested in social capital at the level of the whole community or country, and at the same time, we assume that it arises as a result of bottom-up interactions, we must try to understand the conditions under which investment in social capital at the micro level translates into its aggregation.
Both quantitative and qualitative methods are going to be used. There will be performed an analysis of data from Social Diagnosis, in order to investigate determinants of general trust and collaborative attitudes. Particular attention will be paid to participation in organisations and informal networks. However, in order to investigate the grassroots mechanisms associated with the formation of social capital, the analysis of secondary data is not sufficient. For this reason, it will be complemented by an in-depth case study of Polish and non-commercial, local exchange system and trading (LETS), based on social currency. As shown in the international literature, the creation of such a system may have beneficial socio-economic effects and contribute to building social capital in the local community. LETS allows, through the use of the internet platform, to extend the traditional neighbourly help to a wider group of people, and also contributes to the formation of social ties, especially if transactions include direct interpersonal interactions, and if they are accompanied by additional events strengthening the existence of the community. This system allows users to access social resources existing in the neighbourhood and enables the development of entrepreneurship, and the use of own abilities and following own interests.
This study will examine socio-economic mechanisms operating in the system and its impact on social capital. The main focus is to determine how interpersonal interactions within LETS may influence social norms and attitudes. It will utilise data obtained from the webbased platform, supporting the transactions and enabling to give recommendations. This data will be supplemented by information acquired from in-depth interviews and on-line survey.
Researchers of social capital agree that it constitutes an important factor for economic development. Its insufficient level may hinder further development and some scholars claim that this may be a case of Poland. The question is if it is a long-term barrier, embedded in cultural background and practically irremovable, or if we can hope to supplement the amount of social capital by some way of creating it. It is in nature of social capital that it originates from grassroots movements, however little is known about mechanisms causing this formation. Learning and understanding those mechanisms is crucial if we want to consider a possibility to stimulate or even create social capital, by developing proper institutions, including providing proper incentives within programs directly aiming to build social capital.
- PRELUDIUM - junior researchers
In the recent century, information technology revolution and the Internet together with the fast pace of globalization gave birth to digital economy that created new opportunities to produce, deliver, trade and consume goods and services all over the world. Consequently, global economy as well as international trade is broadly affected by the recent waves of digitization. In this context, deployment of Information Communications Technology (ICT) gets the vital sense, since it is ICT that enables using recent technological advancements and reaping benefits of digitization.
While US and other large economies as well as western European countries are broadly covered in scientific analysis, the literature related to ICT effects on trade performance of Central and Eastern European Countries (CEEC) is quite scarce. The goal of my research is to analyze the effects of ICT on trade performances of CEEC at the micro as well as at the macro level.
In both type of analysis, I will examine impact of ICT infrastructure, ICT use and human capital that enables usage of ICT. In the micro-level analysis, my study will additionally test ICT as a general purpose technology (GPT). The latter implies that ICT generates positive effects if its utilization is augmented with complementary organizational changes in the management of firms. This approach will allow to draw more precise conclusions about ICT effects – my estimations may find that ICT infrastructure and ICT use do not generate sufficient positive effects due to the absence of changes in management processes that are necessary to fully utilize ICT.
In the macro-level analysis, I will furthermore test the results obtained at the micro level. However, as it is not possible to analyze ICT as GPT at the macro level, I will introduce knowledge economy in the analysis as indicator of the general technological environment in CEEC. Additionally, since data on the macro-level allows identifying destinations of trade flows, I will check whether ICT increases trade of CEEC with high-income countries. Moreover, macro-level data will allow examination of ICT network effects (implying that ICT benefits to its users increases when ICT is intensively used in both trading countries). To derive precise results, I will examine exports and imports of CEEC separately.
The proposed research is innovative by studying impact of ICT on trade performances of CEEC based on micro as well as macro data. It has both empirical and theoretical values. As for theoretical contribution, my research suggests extension of trade models from the micro and macro studies by including human capital ICT variables. As for empirical values, this study will outline the impact of ICT on trade performances of CEEC at the firm level and furthermore will test findings at the country level. Results of this study will lead to policy recommendations on how to uptake all the advantages of ICT in a more efficient way.
Poland experienced a substantial education boom. The share of tertiary educated workers rose from 10.0% to 32.5% in 1992-2014. Similar intensity of education structure change was observed also in other EU new member states. The immense expansion of tertiary education raises question whether it was accommodated by the labour market. In fact, there is a lot of anecdotal evidence that university graduates are forced to take jobs that are below their education level. We call those people ‘overeducated’. However, there is surprisingly little scientific evidence on overeducation incidence and its change over time in Poland.
This project will investigate changes in overeducation incidence, characteristics of overeducated individuals and impact of overeducation on job and wage mobility in Poland and certain new member states. Hence, the project will contribute to better understanding of overeducation in economies undergoing rapid education shift
A believe that the currently observed, fast climate changes are caused mainly by human activity is widely spread among scientists dealing with climate. Global Warming has its roots in the industrial revolution, which enabled people to reach high, never before attainable, level of living. Unfortunately, the negative side effects of the development of civilisation become a growing threat for the rest of life on Earth, and in a long run for people themselves. Causes and possible consequences of Global Warming are already well recognised by the experts working in this field. There are also developed solutions which could effectively counteract this problem.
The paradox of this situation is that despite the massive importance of the problem and detailed expert analyses of both: the causes and the possible outcomes, negative tendencies are getting even stronger. The intuitive assumption that presenting righteous information concerning the problem is an effective way of convincing society that actions in this field are indispensable, turned out to be faulty. The situation is complicated even further by the political and industrial lobbies which try to manipulate people's believes concerning environmental problems.
Experts dealing with the issue of Global Warming agree that the threats resulting from this phenomenon are serious and they require immediate preventive actions (such as: reduction of CO2 emissions, adapting cities and agriculture to weather anomalies occurring more often etc.) However, there is an important and often mentioned in the literature barrier which hinders or even disables introduction of such actions - low social support.
The project will allow to check what is the impact of various factors indicated in the scholar literature of the subject on the support for actions counteracting Climate Change. The study is based on social psychology, experimental economy and ecological psychology. Such interdisciplinary approach enables to look at the problem from a different angle and carries great possibility of discovering new, important knowledge. Comparing in one project the significance of e.g. understanding of the causes of the phenomenon, assessment of its consequences, feeling responsible, susceptibility for the mechanism of denial of cumbersome information etc., would allow to evaluate relations between the factors and assess their impact on support for actions reducing negative effects of Global Warming.
Moreover, the strong point of the research is conducting it in two countries – in Poland and in Germany. They are similar when it comes to geography, culture and structure of population, but they differ significantly with their climate and energy policies.
The intention of the applicant is to better understand the factors shaping attitudes towards Anthropogenic Climate Change and thus to contribute in creation of more effective ways of reaching people with knowledge concerning this problem and solutions recommended by the experts.
Our research projects aims to determine how the structure of the social network and which characteristics of developers involved in the creation of Open Source software favor creation of innovation in the Open Source community. By innovations, we mean new software and improvements which are created through cooperation among developers.
Our analyses will be based on the unique database, obtained by web scrapping GitHub, which is currently one of the largest repository services used for Open Source software development. The database contains publicly available information about the developers registered on GitHub. Developers are related to each other in various ways (e.g., they express interest in new activity by other developers, new activity about specific projects, or develop software cooperatively), hence they can be represented as nodes of a social network.
Utilizing the data above we will check whether the developer’s reputation (measured e.g. as the number of people who have asked to be informed about the developer’s activity, or the number of distinctions awarded to the projects) increases the probability of generating innovations by cooperating with the developer. We will also study to what extent the phenomenon of homophily affects the creating of innovations, i.e., whether programmers who have similar characteristics are more likely to cooperate.
The first task is to organize the raw data obtained from GitHub and publicly accessible databases: GHTorrent and GithubArchive. Information about developers is publicly available, but it is distributed among various sites, and may contain errors. It needs to be aggregated and cleaned up.
The second task is to prepare our data set for the needs of the analytic models estimated in our research. We have to harmonize and aggregate the data. Furthermore, we will create a hyperbolic map of the social networks. Application of hyperbolic geometry to represent social networks is a relatively new approach, which allows to describe relationships in the social networks which are created based on a combination of popularity and similarity between nodes.
In the third task, we will study how the probability of creation of innovation between two developers depends on the structure of the social network. We will also study the characteristics of programmers which favor collaboration with them.
The four task is to validate the results obtained in the previous tasks. We will collect a second snapshot of the social network, and try to predict whether an innovation between two programmers has been created, based on the previously obtained models. We will compare the predicted graph with the real one. This step will allow us to verify the extent of possible generalization of our results.
Already existing studies of the Open Source community were usually based on samples of 100-300 developers, working on a specific project. There were almost no studies which applied econometrics and the theory of social networks to analyze the community. The presented project aims to fill these gaps. Our project is interdisciplinary: it combines computer science, economy, and other social sciences, and is based on a unique database representative for the Open Source community.
In Poland, year-after-year there is an increase in electricity demand. Technical constraints and the necessity to shut down old plants cause the problems for the Electrical System: power shortages and difficulties with balancing supply and demand. Electric Power Efficiency is high on the political agenda, what is expressed in regulations. The proposition that can make the system secure is the control of consumption. Demand Side Management (DSM) is a method to control the demand for electricity. It consists in the modification of consumer demand of electricity through various methods used by the distributor. DSM is not a popular approach in Poland. There is a need for investigating demand side flexibility and the results of DSM programs.
The main objective of the study is to evaluate the value consumers put in the change of their habits connected with electricity use (e.g. shifting consumption in time) and the impact of social norms of this value. It will examine the impact of social norms on the willingness to accept (WTA) energy demand management programs: external control and sharing of information about electricity usage. The study will evaluate potential disutility associated with the introduction of DSM. It will be the first research about consumers’ preferences toward DSM in Poland using the Choice Experiment (CE). It will open new field of studies: introduction of the social norms into the analysis of DSM potential. It will expand conclusions from the Theory of Planned Behaviour.
The Choice Experiment method will be applied to analyze household attitudes to DSM inspired contracts. The research group consisting of 1000 participants will assure the representativeness. In the CE, consumers will imagine the hypothetical situation of having an automated metering infrastructure in their houses. Households will be faced with hypothetical electricity contracts and their choices will reveal preferences for different attributes of the contracts. By econometric methods it is then possible to explicitly estimate the compensations needed to be “flexible” in different dimensions at the household level. The dimensions of flexibility considered in the contracts are related to the types of electricity use (domestic electricity), time of the day (morning/evening) and dissemination of information about the usage of electricity. The social norms questionnaire will make it possible to analyse the impact of social norms on consumers’ choices about electricity usage.
DSM has many beneficial effects (both economic and environmental), including mitigating electrical system emergencies, increasing the reliability of the system and reducing the number of blackouts. Possible benefits can also include deferring high investments in generation, transmission and distribution networks. Demand Side mechanisms improve energy efficiency and help balance electricity supply and demand. The better understanding of consumers’ preferences toward DSM programs is needed to implement them in the most effective way.
The innovative character of the study is that the CE will be used to investigate the potential of using demand side management in Polish households. The results of the study will support company control demand as well as help the government's plans with implementing smart meters in Poland. In the study, it will be possible to estimate a value on the disutility a household experiences, for instance, from not being able to use the washing machine, or disutility from a lower/higher indoor temperature during the peak hours and the utility/disutility associated with peer comparisons of electricity consumption. These values are highly policy relevant by showing how much money households need to change habits, for example, moving electricity use from peak load hours. For the first time the impact of social norms on preferences toward DSM mechanisms will be examined.
Recent body of research shows that the ability of consumers to make informed decisions about their Internet privacy is seriously hampered due to insufficient control over personal data they share online. The uncertainty with respect to ‘who’, ‘when’ and ‘for what purpose’ collects this data undermines trust in online providers which has negative consequences for the development of digital economy. In recognition of this challenges the EU has recently introduced General Data Protection Regulation (GDPR) which will enter into force in 2018 setting minimal rules of conduct with respect to privacy protection.
The project will apply a discrete choice experiment (DCE) method to determine consumer preferences towards protection of online privacy. The project will focus on: (a) user preferences towards different ’scopes’ of control mechanisms which might evolve from upcoming privacy reform in the EU and (b) welfare assessment of ’minimal’ vs ’maximal’ privacy protection. The specific project objectives are: (i) to provide evidence on how individual users assign value to the specific aspects of privacy protection, such as data portability, right to be forgotten or objection towards profiling and secondary use of data; (ii) explore heterogeneity of preferences towards privacy with respect to relevant characteristics of users; (iii) explore to what extent preferences towards privacy protection are sensitive to different framing of disclosure risks (in order to examine existence of so called ’privacy paradox’); (iv) based on scenario simulation, assess welfare effects of ’minimal’ and ’maximal’ scopes of privacy protection which may evolve after 2018.
To elicit customers’ preferences for specific instruments of online privacy protection, we will implement a dedicated discrete choice experiment. The choice attributes will represent various aspects of data protection, specifically: (i) information obligations of online service providers; (ii) objection to profiling and secondary use of personal data; (iii) data portability between providers of online services; (iv) possibility to remove personal data. Next we will apply random utility approach (specifically: mixed logit model to account of observed and unobserved preference heterogeneity) to estimate parameters of utility function, calculate consumers’ willingness-to-pay for various levels of data control mechanisms as well expected welfare effects of different scopes of protection. The advantage of chosen stated preference approach is an opportunity to explore benefits of regulatory interventions before their actual implementation. We deal exactly with such situation in this project.
Opinion surveys conducted by the EC show that the protection of personal data remain significant concern for the majority of EU citizens. More than eighty percent of the respondents across EU feel that they do not have complete control over their personal data provided during online activities. Internet users are concerned with consequences of collecting, managing and using of their personal data for other purposes than actually agreed to. More than sixty percent do not trust online service providers in this regard. These results rise concerns about the growing asymmetry between online providers and users but also growing informational advantage of dominant platforms vis-a-vis new entrants.
Upcoming GDPR regulation in the EU sets only minimal (weak) standards of privacy protection and member states are free to implement more restrictive level of protection. Hence the issue of practical solutions available for users remains unspecified. The significance of the proposed project lies in the estimation of economic benefits of various practical scenarios, assuming different scopes of ’effective’ privacy control for users. Specifically the project results shall address the following questions: Do users demand strong regulation? Which control aspects are crucial? How different users characteristics and usage profiles impact evaluation of data protection? Are users sensitive to the different framing of risks and consequences related to personal data fraud or disclosure?
By providing answers to these questions, the proposed research will enrich debate on the implementation of the EU reform of online privacy protection with sound economic arguments. The results of the project will be relevant for establishment of the most effective practical solutions toward rising awareness and use of privacy enhancing rights.
"Who are you?" - To such a question, a first thought is to answer with occupation. "I'm a lawyer", "I'm a doctor," "I'm an astronaut" - there are few choices in our lives that in such a comprehensive manner determine who we are or even what we feel we are. The choice of profession is therefore unique in many ways. Admittedly, the decision is taken in high school, but also undeniably it becomes a turning point in the lives of virtually everyone.
What are the drivers of the choice of profession? Why do we want to be a dancer and not a scientist? A doctor and not a firefighter? While there are possibly many factors, in economic theory it is assumed that the decision is based on two pieces of information: the cost of acquiring education and future earnings. If we were all alike, the logic of this model implies we would all choose the same profession. But we are not - we differ in ability to learn various subjects and acquire specific skills, finally we also differ in how productive we are at many tasks.
Although the theoretical model shows the way, to achieve highest gains for individuals and economy at large - perfect assign of people to occupations in practice does not happen. Not everyone who has the ability to perform very complex work has the means to learn them. Some workers are (sometimes even at the level of education) discriminated against because of characteristics that do not affect their productivity, for example due to gender or race. These factors have already been at the interest to economic research.
This study takes a different starting point, focusing on internal factors, most notably: preferences. So far, majority of the literature takes the preferences as given, a "black box". Yet, preferences are not something we are born with, but rather an outcome of formation during childhood and adolescence. They are thus undoubtedly affected by parents.
Our study will inquire the extent to which parents' example and beliefs have an impact on the shaping of preferences and, consequently, the choice of occupation by youth. Parents listening, watching and giving advice build an image of the world. Why this mechanism may be important? It affects the perception of costs and benefits evaluated at the moment of choosing the profession.
Analyzing the impact of parents on children's career decisions seem particularly relevant to the so called, "problem of self-selection". When we look at the labor market and then who goes to which the profession, we can easily extract the professions dominated by men and those dominated by women. So the question arises: whether the distribution stems from preferences or maybe influenced by other factors? The labor market is changing - both men and women are increasingly opting for professions traditionally reserved for representatives of the other sex. This would suggest that differences in preferences are not only nature, but also nurture. At the same time the gap in participation, in some professions still remains wide. Moreover, women often choose lower paid professions, resulting in the wage gap between women and men. From this perspective, exploring the mechanism of formation of the professional preferences seems not only interesting but also important from the point of view of development.
This research project addresses the problem of valuing ecosystem services provided by urban trees, that is a part of a broader issue in ecological economics: the interdependence and coevolution of human economies and natural ecosystems over time and space.
In particular, the research will examine the contribution of ecosystem services provided by urban trees to quality of life in cities, yet these services are rarely explicitly considered in environmental policy targets. The goal is to quantify regulating services provided by urban trees and evaluate their contribution to comply with policy targets of air quality and climate change mitigation in the municipality of Warsaw, Poland. The project will address key economic and policy questions.
In order to develop specific policy recommendations, as a first step first - the i-Tree Eco tool will be adjusted and applied to quantify – in biophysical terms. To express the result in monetary terms, BenMAP tool will be applied. BenMAP is intended as a tool for estimating the health impacts, and associated economic values, associated with changes in ambient air pollution. It accomplishes this by running health impact functions, which relate a change in the concentration of a pollutant with a change in the incidence of a health endpoint.
As a second step the Principal-Agent model will be created, and by that an analysis of optimal incentive contracts characterized by asymmetric information and externalities generated will be made. The study will focus on the joint provision of ecosystem services, which are a public good, by urban trees managed by a principal (high-level city officials that are supposed to react to citizens' needs) and an agent ("urban green" administration). For concreteness, we will frame the model with the specific example of environmental policy targets for Warsaw in mind.
The following steps sketch the overall research plan:
1. Collecting a detailed and comprehensive review of the current theoretical and
empirical literature about valuating ecosystem services provided by urban trees;
2. i-Tree Eco modelling;
3. BenMAP modelling;
4. Elaborating on research results;
5. Principal-Agent model application;
6. Disseminating results through publications and conference presentations.
There are at least three reasons, why the research is so important to carry on:
Development of ecological economics
The project’s research will contribute to the development of ecological economics by providing adjusted model for valuating of ecosystem services provided by urban trees in the climate and social-economic conditions of central and Eastern Europe country.
Practical meaning of the research
In the context of a rapidly urbanizing world, understanding complexity and managing human–environment interactions within urban areas is vital if we are to balance the interdependent social and ecological goals of sustainability.
Adjustment to UE regulations by an innovative way of applying Principal-Agent model
In this research an analysis of optimal incentive contracts characterized by asymmetric information and externalities generated will be made. The study will focus on the joint provision of ecosystem services, which are a public good, by urban trees managed by a principal (high-level city officials that are supposed to react to citizens' needs) and an agent ("urban green" administration). For concreteness, we will frame the model with the specific example of environmental policy targets for Warsaw in mind.
Technological change has an enormous impact on every aspect of our lives, including how we work. The prominent framework to understand the effects states that computers can be programmed to perform some of the tasks that were carried by workers, but not all of them. Workers still have a comparative advantage on tasks that require creativity, interpersonal skills and motor abilities. The adoption of new technologies not only shifted the demand for workers from some routine intensive occupations to nonroutine; but also it might have affected the task composition within occupations.
In this research project, we will study how new technologies affected wage inequality within occupations. By doing so, we attempt to contribute to the literature on skill-biased technological change in two ways: first, we attempt to incorporate a dynamic dimension to it. We will focus not only on the levels of tasks, but also on the scope and pace of those changes. Second, we shift our interest from differences across occupations, which are usually the center of the literature, to inequality within occupations.
Both changes are relevant from a policy perspective. Analyzing dynamics could help us to understand how occupations change, and how workers cope with those changes. Focusing on inequality within occupations, we can understand better who were the winners and losers from the adoption of new technologies, and possibly consider what policy instruments would be more effective to ameliorate the negative consequences of technological progress.
In particular, we want to test two hypothesis. First, we test whether changes in the task composition towards more complex tasks were followed by increases in relative wages. This hypothesis is driven both by considerations on changes in relative productivity, inasmuch as changes in the demand for workers. Our second hypothesis states that occupations that experienced larger changes in their tasks contents present higher wage inequalities. The hypothesis is driven by considerations on worker and firm heterogeneity.
In order to test these hypotheses, we need first to characterize the changes on the task component of different jobs and verify that in fact the share of complex tasks increased over the last twenty years. For this, we will employ the O*NET database and its predecessor the DOT. This analysis requires that we go beyond a simple description and provide a measure of the size and scope of the changes. Such index is currently lacking in the literature and its construction is one valuable contribution of our research as it might become an input for future development of the discipline.
Our analysis then provides three valuable innovations. First, an innovation in the approach to technological change, as we take into consideration the dynamic aspects of technological progress and the (in)ability of workers and firms to keep pace with those advances. Second, we innovate with the method, as there are no available, synthetic measures of changes in the task content of occupations. Third, we produce our analysis in a new set of countries, transition and developed countries, who have not yet received the attention they deserve.
As stated before, our research has important policy implications, especially in the field of active labor market policies. A confirmation of our research hypotheses would indicate that workers had difficulties in acquiring the necessary skills to profit from technological change, and will provide further arguments for the development of lifelong learning programs. At the same time, our proposed index of task change could help to identify those occupations, and consequently those individuals who are at higher risks of falling behind due to fast technological change.