Project acronym BEHAVIORAL THEORY
Project Behavioral Theory and Economic Applications
Researcher (PI) Botond Koszegi
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary "This proposal outlines projects to develop robust and portable theories studying the impact of psychological phenomena in economic settings. The proposed work falls in three broad research agendas.
My first main agenda is to formally model and economically apply a simple observation: that when people make decisions, they do not focus equally on all attributes of their available options, and overweight the attributes they focus on. I will build a set of portable models of focusing in attribute-based choice and risky choice based on the idea that a person focuses more on attributes in which her options differ more. I will also use the framework to develop novel, focus-based, theories of intertemporal choice and social preferences, as well as analyze the implications of focusing for product design, principal-agent relationships, and other economic questions.
My second main agenda is to explore some implications for market outcomes, welfare, and policy of the possibility that consumers misperceive certain aspects of products. I will investigate the circumstances that facilitate the profitable deception of consumers; firms' incentives for ""innovating"" deceptive products, including novel financial products aimed at exploiting investors; how firms' ability to distinguish naive and sophisticated consumers affects the consequences of deception; whether learning on the part of consumers will help them to avoid making mistakes; and how regulators and other observers can detect consumer mistakes from market data.
Two further projects apply the model of reference-dependent utility I have developed in earlier work to understand the pricing and advertising behavior of firms. I will also aim to disseminate some of my work, along with other cutting-edge research in psychology and economics, in a Journal of Economic Literature survey on ""Behavioral Contract Theory."""
Summary
"This proposal outlines projects to develop robust and portable theories studying the impact of psychological phenomena in economic settings. The proposed work falls in three broad research agendas.
My first main agenda is to formally model and economically apply a simple observation: that when people make decisions, they do not focus equally on all attributes of their available options, and overweight the attributes they focus on. I will build a set of portable models of focusing in attribute-based choice and risky choice based on the idea that a person focuses more on attributes in which her options differ more. I will also use the framework to develop novel, focus-based, theories of intertemporal choice and social preferences, as well as analyze the implications of focusing for product design, principal-agent relationships, and other economic questions.
My second main agenda is to explore some implications for market outcomes, welfare, and policy of the possibility that consumers misperceive certain aspects of products. I will investigate the circumstances that facilitate the profitable deception of consumers; firms' incentives for ""innovating"" deceptive products, including novel financial products aimed at exploiting investors; how firms' ability to distinguish naive and sophisticated consumers affects the consequences of deception; whether learning on the part of consumers will help them to avoid making mistakes; and how regulators and other observers can detect consumer mistakes from market data.
Two further projects apply the model of reference-dependent utility I have developed in earlier work to understand the pricing and advertising behavior of firms. I will also aim to disseminate some of my work, along with other cutting-edge research in psychology and economics, in a Journal of Economic Literature survey on ""Behavioral Contract Theory."""
Max ERC Funding
1 275 448 €
Duration
Start date: 2012-11-01, End date: 2018-10-31
Project acronym BIOSYNCEN
Project Dissection of centromeric chromatin and components: A biosynthetic approach
Researcher (PI) Patrick Heun
Host Institution (HI) THE UNIVERSITY OF EDINBURGH
Call Details Starting Grant (StG), LS2, ERC-2012-StG_20111109
Summary The centromere is one of the most important chromosomal elements. It is required for proper chromosome segregation in mitosis and meiosis and readily recognizable as the primary constriction of mitotic chromosomes. Proper centromere function is essential to ensure genome stability; therefore understanding centromere identity is directly relevant to cancer biology and gene therapy. How centromeres are established and maintained is however still an open question in the field. In most organisms this appears to be regulated by an epigenetic mechanism. The key candidate for such an epigenetic mark is CENH3 (CENP-A in mammals, CID in Drosophila), a centromere-specific histone H3 variant that is essential for centromere function and exclusively found in the nucleosomes of centromeric chromatin. Using a biosynthetic approach of force-targeting CENH3 in Drosophila to non-centromeric DNA, we were able to induce centromere function and demonstrate that CENH3 is sufficient to determine centromere identity. Here we propose to move this experimental setup across evolutionary boundaries into human cells to develop improved human artificial chromosomes (HACs). We will make further use of this unique setup to dissect the function of targeted CENH3 both in Drosophila and human cells. Contributing centromeric components and histone modifications of centromeric chromatin will be characterized in detail by mass spectroscopy in Drosophila. Finally we are proposing to develop a technique that allows high-resolution mapping of proteins on repetitive DNA to help further characterizing known and novel centromere components. This will be achieved by combining two independently established techniques: DNA methylation and DNA fiber combing. This ambitious proposal will significantly advance our understanding of how centromeres are determined and help the development of improved HACs for therapeutic applications in the future.
Summary
The centromere is one of the most important chromosomal elements. It is required for proper chromosome segregation in mitosis and meiosis and readily recognizable as the primary constriction of mitotic chromosomes. Proper centromere function is essential to ensure genome stability; therefore understanding centromere identity is directly relevant to cancer biology and gene therapy. How centromeres are established and maintained is however still an open question in the field. In most organisms this appears to be regulated by an epigenetic mechanism. The key candidate for such an epigenetic mark is CENH3 (CENP-A in mammals, CID in Drosophila), a centromere-specific histone H3 variant that is essential for centromere function and exclusively found in the nucleosomes of centromeric chromatin. Using a biosynthetic approach of force-targeting CENH3 in Drosophila to non-centromeric DNA, we were able to induce centromere function and demonstrate that CENH3 is sufficient to determine centromere identity. Here we propose to move this experimental setup across evolutionary boundaries into human cells to develop improved human artificial chromosomes (HACs). We will make further use of this unique setup to dissect the function of targeted CENH3 both in Drosophila and human cells. Contributing centromeric components and histone modifications of centromeric chromatin will be characterized in detail by mass spectroscopy in Drosophila. Finally we are proposing to develop a technique that allows high-resolution mapping of proteins on repetitive DNA to help further characterizing known and novel centromere components. This will be achieved by combining two independently established techniques: DNA methylation and DNA fiber combing. This ambitious proposal will significantly advance our understanding of how centromeres are determined and help the development of improved HACs for therapeutic applications in the future.
Max ERC Funding
1 755 960 €
Duration
Start date: 2013-02-01, End date: 2019-01-31
Project acronym CHROMATINRNA
Project The role of CpG island RNAs and Polycomb-RNA interactions in developmental gene regulation
Researcher (PI) Richard Gareth Jenner
Host Institution (HI) UNIVERSITY COLLEGE LONDON
Call Details Starting Grant (StG), LS2, ERC-2012-StG_20111109
Summary A great challenge in developmental biology research has been to understand how cell type specific expression programs are orchestrated through regulated access to chromatin. The interaction between non-coding RNAs and chromatin regulators is emerging as an exciting new research area with the potential to explain how chromatin modifications are targeted.
Polycomb repressive complex 2 (PRC2) modifies chromatin to maintain developmental regulator genes specific for other cell types in a repressed state and is essential for embryogenesis across Metazoa. We have recently determined that CpG islands targeted by PRC2 generate a class of short non-coding RNAs. The RNAs are produced independently from mRNA, indicative of hitherto uncharacterised transcriptional processes. Furthermore, we have found that the PRC2 subunit Suz12 is an RNA binding protein and directly interacts with these short RNAs and with other RNAs in cells. The role of ncRNA in targeting PRC2 to CpG islands and the importance of PRC2 RNA binding activity for development remains to be understood. Our aims are to:
1. Determine the functional properties of CpG-island RNAs by A. identifying their conserved features, B. determining their role in polycomb targeting of CpG islands and C. investigating whether such a role relates to the antagonism of polycomb targeting by DNA methylation.
2. Establish the biological role for Suz12 RNA binding activity by A. determining the structural determinants for Suz12 binding in vitro, B. verifying these features play a role in PRC2 RNA binding in cells and C. determining the role for PRC2-RNA interactions for polycomb function and development.
This work promises to characterise a potentially fundamental aspect of cell biology and will open a number of avenues for understanding the function of ncRNAs, the RNA binding activity of chromatin regulators, how transcription and chromatin structure are regulated, and how cell state is maintained and reshaped during development.
Summary
A great challenge in developmental biology research has been to understand how cell type specific expression programs are orchestrated through regulated access to chromatin. The interaction between non-coding RNAs and chromatin regulators is emerging as an exciting new research area with the potential to explain how chromatin modifications are targeted.
Polycomb repressive complex 2 (PRC2) modifies chromatin to maintain developmental regulator genes specific for other cell types in a repressed state and is essential for embryogenesis across Metazoa. We have recently determined that CpG islands targeted by PRC2 generate a class of short non-coding RNAs. The RNAs are produced independently from mRNA, indicative of hitherto uncharacterised transcriptional processes. Furthermore, we have found that the PRC2 subunit Suz12 is an RNA binding protein and directly interacts with these short RNAs and with other RNAs in cells. The role of ncRNA in targeting PRC2 to CpG islands and the importance of PRC2 RNA binding activity for development remains to be understood. Our aims are to:
1. Determine the functional properties of CpG-island RNAs by A. identifying their conserved features, B. determining their role in polycomb targeting of CpG islands and C. investigating whether such a role relates to the antagonism of polycomb targeting by DNA methylation.
2. Establish the biological role for Suz12 RNA binding activity by A. determining the structural determinants for Suz12 binding in vitro, B. verifying these features play a role in PRC2 RNA binding in cells and C. determining the role for PRC2-RNA interactions for polycomb function and development.
This work promises to characterise a potentially fundamental aspect of cell biology and will open a number of avenues for understanding the function of ncRNAs, the RNA binding activity of chromatin regulators, how transcription and chromatin structure are regulated, and how cell state is maintained and reshaped during development.
Max ERC Funding
1 499 094 €
Duration
Start date: 2013-09-01, End date: 2019-04-30
Project acronym Disasters
Project Market Beliefs and Optimal Policy in the Presence of Disasters
Researcher (PI) Ian William Richard Martin
Host Institution (HI) LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE
Call Details Starting Grant (StG), SH1, ERC-2014-STG
Summary My proposal consists of two strands linked by a common theme--namely a concern for the impact of disasters, in financial markets and more generally--and by a shared methodology.
In the first of these strands, I propose to develop ways of using observable asset price data to infer the beliefs of market participants about various quantities that are central to financial economics, including (i) the equity premium; (ii) the forward-looking autocorrelation of the market (i.e., time-series momentum); (iii) the risk premia associated with individual stocks; (iv) the correlation between stocks; and (v) measures of asymmetric risk, such as the forward-looking probability of a significant downward jump in the stock market over some prescribed time period.
This work will exploit theoretical techniques that I have developed in previous research, and that allow for the possibility of jumps and disasters in financial markets. I will therefore be able to avoid the unpalatable assumption—which is made, implicitly or explicitly, in much of the finance literature—that uncertainty is driven by conditionally Normally distributed shocks (or, in continuous time, by Brownian motions). The importance of doing so is underscored by the turmoil in financial markets over the last few years.
These techniques will also be applied in the second strand of my proposal, which focuses on issues related to catastrophes more generally, including for example climate change; highly contagious viruses on the scale of the influenza pandemic of 1918; or nuclear or bio-terrorism. This project will be joint with Professor Robert S. Pindyck of MIT. The goal is to provide a framework within which policymakers, faced with multiple different types of potential catastrophe, can determine how society’s limited resources should best be used to alleviate the associated risks.
Summary
My proposal consists of two strands linked by a common theme--namely a concern for the impact of disasters, in financial markets and more generally--and by a shared methodology.
In the first of these strands, I propose to develop ways of using observable asset price data to infer the beliefs of market participants about various quantities that are central to financial economics, including (i) the equity premium; (ii) the forward-looking autocorrelation of the market (i.e., time-series momentum); (iii) the risk premia associated with individual stocks; (iv) the correlation between stocks; and (v) measures of asymmetric risk, such as the forward-looking probability of a significant downward jump in the stock market over some prescribed time period.
This work will exploit theoretical techniques that I have developed in previous research, and that allow for the possibility of jumps and disasters in financial markets. I will therefore be able to avoid the unpalatable assumption—which is made, implicitly or explicitly, in much of the finance literature—that uncertainty is driven by conditionally Normally distributed shocks (or, in continuous time, by Brownian motions). The importance of doing so is underscored by the turmoil in financial markets over the last few years.
These techniques will also be applied in the second strand of my proposal, which focuses on issues related to catastrophes more generally, including for example climate change; highly contagious viruses on the scale of the influenza pandemic of 1918; or nuclear or bio-terrorism. This project will be joint with Professor Robert S. Pindyck of MIT. The goal is to provide a framework within which policymakers, faced with multiple different types of potential catastrophe, can determine how society’s limited resources should best be used to alleviate the associated risks.
Max ERC Funding
1 287 755 €
Duration
Start date: 2015-05-01, End date: 2020-04-30
Project acronym GENEPAD
Project Genetic and Epigenetic Determinants of Paget's Disease of bone
Researcher (PI) Omar Albagha
Host Institution (HI) THE UNIVERSITY OF EDINBURGH
Call Details Starting Grant (StG), LS2, ERC-2012-StG_20111109
Summary Paget’s disease of bone (PDB) is a common disease characterised by focal areas of increased bone turnover leading to symptoms of bone pain, deformity, osteoarthritis and other complications. Genetic factors play an important role in PDB and mutations in SQSTM1 gene are responsible for ~10% of PDB cases with high penetrance. We have recently identified seven additional susceptibility loci for PDB using genome-wide association studies (Albagha et al, 2011; Nat Genet). These recently identified loci have a combined effect that explained about 13% of familial risk suggesting that other genetic factors remain to be identified. The aims of this project are three fold: 1) to define the functional variants in the recently identified susceptibility loci using targeted DNA sequencing, 2) To identify novel genetic variants for disease susceptibility using exome sequencing in PDB patients without SQSTM1 mutations, 3) To investigate the role of epigenetic factors and their interaction with genetic factors in the pathogenesis of PDB. We will study genome-wide DNA methylation patterns in PDB patients and controls to identify differentially methylated sites associated with PDB. The contribution of epigenetic factors to the focal nature of PDB will be studied using an animal model of PDB to assess if epigenetic changes are specific to bone lesions and to determine if these changes contribute to disease development or occur as a consequence of the disease. Identification of genetic and epigenetic factors that predispose to PDB will increase our understanding of disease mechanisms and could also identify novel molecular pathways that could form targets for new therapeutic treatment not only for Paget’s disease, but also other diseases associated with increased bone turnover. These factors could be used as markers for disease susceptibility to assess people at risk of developing PDB later in life and target those with the highest risk for early treatment.
Summary
Paget’s disease of bone (PDB) is a common disease characterised by focal areas of increased bone turnover leading to symptoms of bone pain, deformity, osteoarthritis and other complications. Genetic factors play an important role in PDB and mutations in SQSTM1 gene are responsible for ~10% of PDB cases with high penetrance. We have recently identified seven additional susceptibility loci for PDB using genome-wide association studies (Albagha et al, 2011; Nat Genet). These recently identified loci have a combined effect that explained about 13% of familial risk suggesting that other genetic factors remain to be identified. The aims of this project are three fold: 1) to define the functional variants in the recently identified susceptibility loci using targeted DNA sequencing, 2) To identify novel genetic variants for disease susceptibility using exome sequencing in PDB patients without SQSTM1 mutations, 3) To investigate the role of epigenetic factors and their interaction with genetic factors in the pathogenesis of PDB. We will study genome-wide DNA methylation patterns in PDB patients and controls to identify differentially methylated sites associated with PDB. The contribution of epigenetic factors to the focal nature of PDB will be studied using an animal model of PDB to assess if epigenetic changes are specific to bone lesions and to determine if these changes contribute to disease development or occur as a consequence of the disease. Identification of genetic and epigenetic factors that predispose to PDB will increase our understanding of disease mechanisms and could also identify novel molecular pathways that could form targets for new therapeutic treatment not only for Paget’s disease, but also other diseases associated with increased bone turnover. These factors could be used as markers for disease susceptibility to assess people at risk of developing PDB later in life and target those with the highest risk for early treatment.
Max ERC Funding
1 493 544 €
Duration
Start date: 2012-10-01, End date: 2018-03-31
Project acronym GENES, DRUGS AND BREAST CANCER
Project Discovering Gene-Drug Interactions in Breast Cancer With a Systematic and Genetically Tractable Model
Researcher (PI) Sebastian Nijman
Host Institution (HI) THE CHANCELLOR, MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD
Call Details Starting Grant (StG), LS2, ERC-2012-StG_20111109
Summary Biomedical research has been very successful in finding the individual genes that are deregulated in cancer and it is estimated that ~2% of all genes can be classified as “cancer genes”. However, it has proven challenging to translate this genomics knowledge into effective treatments.
One complication is that cancer cells typically carry many molecular aberrations and every tumor displays a unique pattern. This heterogeneity complicates the application of drugs and biologicals as it often interferes with patient response. Thus, unraveling the complex interplay between cancer genes and drugs is of great importance for effective patient-stratified cancer therapy.
Besides playing a role in drug resistance, the molecular changes also result in cancer cells becoming uniquely dependent on certain gene products or pathways. These cancer “vulnerabilities” offer opportunities targeted therapies, including those based on oncogene addiction and synthetic lethality. Therefore, these concepts have attracted much interest as they can help bridge the gap between cancer genomics and effective treatments.
I propose to identify cancer vulnerabilities and drug resistance mechanisms in breast cancer by developing a genetically tractable model system. Designed to capture relevant constellations of genetic aberrations found in patients, it extends our recently developed, systematic screening platform. Combined with bioinformatics integration of cell line data, this will result in a unique and powerful approach.
I aim to identify functional interactions between breast cancer genes and experimental or approved drugs. Detailed characterization of gene-drug interactions will reveal their translational potential for targeting specific cancer vulnerabilities in patients, or as biomarkers. Together, this project aims to improve therapies in breast cancer by identifying patient cohorts that are most likely to benefit from a given drug and revealing novel cancer Achilles’ heels.
Summary
Biomedical research has been very successful in finding the individual genes that are deregulated in cancer and it is estimated that ~2% of all genes can be classified as “cancer genes”. However, it has proven challenging to translate this genomics knowledge into effective treatments.
One complication is that cancer cells typically carry many molecular aberrations and every tumor displays a unique pattern. This heterogeneity complicates the application of drugs and biologicals as it often interferes with patient response. Thus, unraveling the complex interplay between cancer genes and drugs is of great importance for effective patient-stratified cancer therapy.
Besides playing a role in drug resistance, the molecular changes also result in cancer cells becoming uniquely dependent on certain gene products or pathways. These cancer “vulnerabilities” offer opportunities targeted therapies, including those based on oncogene addiction and synthetic lethality. Therefore, these concepts have attracted much interest as they can help bridge the gap between cancer genomics and effective treatments.
I propose to identify cancer vulnerabilities and drug resistance mechanisms in breast cancer by developing a genetically tractable model system. Designed to capture relevant constellations of genetic aberrations found in patients, it extends our recently developed, systematic screening platform. Combined with bioinformatics integration of cell line data, this will result in a unique and powerful approach.
I aim to identify functional interactions between breast cancer genes and experimental or approved drugs. Detailed characterization of gene-drug interactions will reveal their translational potential for targeting specific cancer vulnerabilities in patients, or as biomarkers. Together, this project aims to improve therapies in breast cancer by identifying patient cohorts that are most likely to benefit from a given drug and revealing novel cancer Achilles’ heels.
Max ERC Funding
1 497 982 €
Duration
Start date: 2013-05-01, End date: 2018-04-30
Project acronym Identification
Project Identification, Estimation and Implementation of Structural Economic Models
Researcher (PI) Dennis Kristensen
Host Institution (HI) UNIVERSITY COLLEGE LONDON
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary Structural economic models are getting increasingly complex. This complicates their implementation. In particular, for many models, (i) identification of the relevant components from data is still unresolved; (ii) estimation and testing procedures tend to be somewhat ad hoc and with no theoretical underpinning; (iii) the implementation of model and estimators often require numerical approximations since model solutions are not available on closed form.
The proposed research aims at addressing these three issues, (i)-(iii), by developing new methods and results for identification, estimation, testing and implementation of structural models. Particular emphasis is put on the use of nonparametric techniques. Many of the projects involve empirical applications where the proposed methods will be taken to data.
The individual projects making up the proposal are: Identification and inference in discrete choice models; identification and inference in continuous choice models; Implementation and estimation of parametric structural models; Filtering and likelihood inference in dynamic latent variable models; Bandwidth selection in estimation and testing of non- and semiparametric models.
Summary
Structural economic models are getting increasingly complex. This complicates their implementation. In particular, for many models, (i) identification of the relevant components from data is still unresolved; (ii) estimation and testing procedures tend to be somewhat ad hoc and with no theoretical underpinning; (iii) the implementation of model and estimators often require numerical approximations since model solutions are not available on closed form.
The proposed research aims at addressing these three issues, (i)-(iii), by developing new methods and results for identification, estimation, testing and implementation of structural models. Particular emphasis is put on the use of nonparametric techniques. Many of the projects involve empirical applications where the proposed methods will be taken to data.
The individual projects making up the proposal are: Identification and inference in discrete choice models; identification and inference in continuous choice models; Implementation and estimation of parametric structural models; Filtering and likelihood inference in dynamic latent variable models; Bandwidth selection in estimation and testing of non- and semiparametric models.
Max ERC Funding
1 067 000 €
Duration
Start date: 2012-10-01, End date: 2017-09-30
Project acronym INFO TECHNOLOGY
Project Information Technology and Institutions Supporting Human Capital Accumulation and Exchange
Researcher (PI) Jeremiah Edward Dittmar
Host Institution (HI) LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE
Call Details Starting Grant (StG), SH1, ERC-2014-STG
Summary Information technology revolutions transform the production and exchange of ideas and drive profound institutional and cultural change. History provides unique settings to document the causal impact of changes in information technology and institutions, and the best evidence on their long-run effects.
The objective of the research is to document the impact of revolutionary transformations in information technology and institutions using evidence from the European Renaissance. Printing was the new information technology of the Renaissance and is arguably the best parallel to the internet. Print media transmitted ideas that led to significant institutional change. But no quantitative research systematically documents the impact of these innovations.
The research will innovate by constructing ground-breaking micro-data on media markets, human capital, and institutions; developing cutting edge estimators for high-dimensional data to measure ideas in the media; and using historical sources of exogenous variation to identify cause and effect.
The research has three strands. The first will document the impact of competition on idea diffusion and institutional change during the Protestant Reformation. The research will construct firm-level data on all known books in German-speaking Europe 1450-1600, use high-dimensional estimators to measure ideas in print, and identify exogenous variation in competition from archival data.
The second strand will document the origins of persistent differences in human capital accumulation by constructing new data on city laws that set up the first experiments in public education and on virtually all German university students 1400-1550, and by using local shocks to support causal inference.
The third strand will document the impact of organizations supporting knowledge diffusion that were complementary to printing by constructing data on all European scholarly societies and journals and using historical shocks to identify their impact.
Summary
Information technology revolutions transform the production and exchange of ideas and drive profound institutional and cultural change. History provides unique settings to document the causal impact of changes in information technology and institutions, and the best evidence on their long-run effects.
The objective of the research is to document the impact of revolutionary transformations in information technology and institutions using evidence from the European Renaissance. Printing was the new information technology of the Renaissance and is arguably the best parallel to the internet. Print media transmitted ideas that led to significant institutional change. But no quantitative research systematically documents the impact of these innovations.
The research will innovate by constructing ground-breaking micro-data on media markets, human capital, and institutions; developing cutting edge estimators for high-dimensional data to measure ideas in the media; and using historical sources of exogenous variation to identify cause and effect.
The research has three strands. The first will document the impact of competition on idea diffusion and institutional change during the Protestant Reformation. The research will construct firm-level data on all known books in German-speaking Europe 1450-1600, use high-dimensional estimators to measure ideas in print, and identify exogenous variation in competition from archival data.
The second strand will document the origins of persistent differences in human capital accumulation by constructing new data on city laws that set up the first experiments in public education and on virtually all German university students 1400-1550, and by using local shocks to support causal inference.
The third strand will document the impact of organizations supporting knowledge diffusion that were complementary to printing by constructing data on all European scholarly societies and journals and using historical shocks to identify their impact.
Max ERC Funding
1 275 044 €
Duration
Start date: 2015-05-01, End date: 2020-10-31
Project acronym KNOWLEDGEFLOWS
Project Channels and Consequences of Knowledge Flows
from Developed Economies to Central and Eastern Europe
Researcher (PI) Miklós Koren
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary In this project, I study how economic development is shaped by cross-country knowledge flows via trade, foreign direct investment (FDI), and other channels. Using novel micro data for several Central and Eastern European (CEE) countries, I measure the quantitative importance of three channels: technical knowledge embodied in imported machinery, technical and organizational knowledge embodied in expatriate managers, and disembodied knowledge transfers taking place within multinational firms. I then analyze what impact foreign knowledge has on the firms and the workers of the host economy, and what are its implications for aggregate productivity and income inequality.
The project relies on several existing databases for Hungary and Romania, which will be complemented with newly purchased, collected and compiled data. The outcome of the project will be seven research studies and a collection of firm-level data sets covering CEE countries, including a large cross-country firm survey on the local supplier linkages of multinational companies.
My proposed project improves upon the state of the art in four ways. First, as a comprehensive study using novel micro data, it uncovers new facts about the relative importance of the channels of knowledge flows. Second, it improves the identification of causal effects relative to existing studies by exploiting the detailed micro data. Third, it uses the micro estimates to quantify the aggregate impact of foreign knowledge on the economy. Fourth, it discusses how foreign knowledge affects different firms and workers differently, and, more specifically, how it may contribute to income inequality.
More broadly, the research findings help evaluate the relative efficacy of trade, FDI, and immigration policies in promoting economic growth and can inform theories about the channels and barriers of productivity convergence.
Summary
In this project, I study how economic development is shaped by cross-country knowledge flows via trade, foreign direct investment (FDI), and other channels. Using novel micro data for several Central and Eastern European (CEE) countries, I measure the quantitative importance of three channels: technical knowledge embodied in imported machinery, technical and organizational knowledge embodied in expatriate managers, and disembodied knowledge transfers taking place within multinational firms. I then analyze what impact foreign knowledge has on the firms and the workers of the host economy, and what are its implications for aggregate productivity and income inequality.
The project relies on several existing databases for Hungary and Romania, which will be complemented with newly purchased, collected and compiled data. The outcome of the project will be seven research studies and a collection of firm-level data sets covering CEE countries, including a large cross-country firm survey on the local supplier linkages of multinational companies.
My proposed project improves upon the state of the art in four ways. First, as a comprehensive study using novel micro data, it uncovers new facts about the relative importance of the channels of knowledge flows. Second, it improves the identification of causal effects relative to existing studies by exploiting the detailed micro data. Third, it uses the micro estimates to quantify the aggregate impact of foreign knowledge on the economy. Fourth, it discusses how foreign knowledge affects different firms and workers differently, and, more specifically, how it may contribute to income inequality.
More broadly, the research findings help evaluate the relative efficacy of trade, FDI, and immigration policies in promoting economic growth and can inform theories about the channels and barriers of productivity convergence.
Max ERC Funding
1 313 776 €
Duration
Start date: 2012-12-01, End date: 2017-11-30
Project acronym LTI
Project Long-Term Investment
Researcher (PI) Alexander Edmans
Host Institution (HI) LONDON BUSINESS SCHOOL
Call Details Starting Grant (StG), SH1, ERC-2014-STG
Summary The typical 20th-century firm was capital-intensive and competed on cost efficiency. The 21st-century firm is different. Competitive success increasingly depends on product quality, which in turn hinges on intangible assets such as brand strength, innovation, and corporate culture. Unlike tangible investment such as buying a factory, the fruits of intangible investment may take several years to appear. A manager pressured to maximise short-term earnings may fail to invest, jeopardising the long-term future of his firm. This project will study the determinants and consequences of long-term investment through three linked components.
Financial Markets. The traditional view is that financial markets dissuade investment by forcing firms to cater to short-term shareholders. I will study two channels through which markets promote investment. First, traders gather information about a firm’s past investments and incorporate it into stock prices by trading - rewarding the manager for good investment. Second, traders can gather information about a firm’s future investment opportunities - informing the manager about his future investment decisions. I aim to analyse what determines the efficiency of both channels.
Incentives. Most research on incentives focuses on either the level of pay, or the sensitivity of pay to performance, but it is the horizon of incentives that is key to promoting investment. I will theoretically analyse the optimal incentive horizon, and empirically demonstrate how it affects long-term decisions. Moving beyond managers, I will study how to incentivise teachers to focus on their pupils’ long-run development rather than “teaching-to-the-test.”
Effects of Investment. A key to inducing long-run investment is to demonstrate its benefits, but this is difficult due to data availability. I aim to gather data on a firm’s corporate social responsibility – its investment in its stakeholders – and link it to firm value.
Summary
The typical 20th-century firm was capital-intensive and competed on cost efficiency. The 21st-century firm is different. Competitive success increasingly depends on product quality, which in turn hinges on intangible assets such as brand strength, innovation, and corporate culture. Unlike tangible investment such as buying a factory, the fruits of intangible investment may take several years to appear. A manager pressured to maximise short-term earnings may fail to invest, jeopardising the long-term future of his firm. This project will study the determinants and consequences of long-term investment through three linked components.
Financial Markets. The traditional view is that financial markets dissuade investment by forcing firms to cater to short-term shareholders. I will study two channels through which markets promote investment. First, traders gather information about a firm’s past investments and incorporate it into stock prices by trading - rewarding the manager for good investment. Second, traders can gather information about a firm’s future investment opportunities - informing the manager about his future investment decisions. I aim to analyse what determines the efficiency of both channels.
Incentives. Most research on incentives focuses on either the level of pay, or the sensitivity of pay to performance, but it is the horizon of incentives that is key to promoting investment. I will theoretically analyse the optimal incentive horizon, and empirically demonstrate how it affects long-term decisions. Moving beyond managers, I will study how to incentivise teachers to focus on their pupils’ long-run development rather than “teaching-to-the-test.”
Effects of Investment. A key to inducing long-run investment is to demonstrate its benefits, but this is difficult due to data availability. I aim to gather data on a firm’s corporate social responsibility – its investment in its stakeholders – and link it to firm value.
Max ERC Funding
899 105 €
Duration
Start date: 2015-04-01, End date: 2018-03-31