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Choosy consumers drive a near 1000% spike in vanilla prices

iain fraser 120x120"If you had been a canny investor back in 2008, you could have done a lot worse than make a substantial bet on upmarket ice cream futures. The price of vanilla beans has rocketed from as little as US$25 per kilo eight years ago up to US$240 at the end of 2016. Some forecasts predict it will reach as much as US$450 per kilo by the middle of 2017. Even by the standards of volatile prices in agricultural commodities such as rice and grains this is exceptional.

Unlike other price increases that were shortlived and the result of policy decisions, the price of vanilla beans is being driven by something else. In short, it is all down to us, the fickle consumer and our love of authentic cones, custard and crème brûlée..."

This is an excerpt from an article by the School's Professor Iain Fraser, published in The Conversation on 27 February 2017. Click here to read the full article.

Regional business cycle and growth features of Japan

keynes collegeA new discussion paper by Masaru Inaba and Keisuke Otsu, KDPE 1705, March 2017.

Non-technical summary

The objective of this paper is to construct a dataset of Japanese prefecture level production, income and expenditure data and analyze the Japanese regional growth and business cycle features. The 47 prefectures are analyzed individually and also as 10 regional groups; Hokkaido, Tohoku, Kanto, Chubu, Kinki, Chugoku, Shikoku, Kyushu and Okinawa.

Targeted fiscal policy to increase employment and wages of unskilled workers

keynes collegeA new discussion paper by Konstantinos Angelopoulos, Wei Jiang and James Malley, KDPE 1704, January 2017.

Non-technical summary

The evolution of inequality has been well documented in the data. Inequality in earnings has increased in recent decades and, in particular, wage inequality has increased dramatically since the beginning of the 20th century. As a result of this rise and its deleterious implications for the welfare of a large part of the population, societies and policymakers at large are paying increasing attention to better understanding causes and consequences of inequality.

Why does the productivity of investment vary across countries?

keynes collegeA new discussion paper by Kevin S. Nell and A. P. Thirlwall, KDPE 1703, March 2017.

Non-technical summary

‘New’ (endogenous) growth theory seeks to explain growth rate differences between countries outside the confines of orthodox neoclassical growth theory, but also to rehabilitate the neoclassical model with diminishing returns to capital by introducing other variables into the equations to explain why there has not been unconditional convergence of per capita incomes across the world as predicted by the basic neoclassical (Solow) growth model.

The willingness to pay for organic attributes in the UK

keynes collegeA new discussion paper by Adelina Gschwandtner and Michael Burton, KDPE 1702, January 2017.

Non-technical summary

The main objective of the present project is to analyse and understand what drives purchases of organic food in the UK and how much UK consumers are willing to pay for organic food products so that new perspectives can be developed and proposed to policy makers. This is important since there has been almost no recent formal economic analysis of the willingness to pay for organic products in the UK. The existing organic markets in the UK allow us to understand real purchasing behaviour but this is limited to current market conditions. Stated preferences techniques allow to explore new, yet inexistent aspects of the market in a controlled, experimental way. However, by far the strongest criticism brought to stated preferences techniques is the hypothetical bias derived from the hypothetical nature of the experiment. The present study is intending to resolve this issue by collecting data on both real and hypothetical behaviour.

Spatial differencing for sample selection models


keynes collegeA new discussion paper by Alex Klein and Guy Tchuente, KDPE 1701, December 2016.

Non-technical summary

This paper offers an identification strategy in the situation when researchers work with crosssectional data, face unobserved heterogeneity causing endogeneity problem, lack instrumental variables and, on top of it, face sample selection problem. To accomplish that, we take advantage of recent advances of spatial econometrics. What motives us to consider the case of cross-sectional data which data generating process involves sample selection and seemingly unsolvable problem of endogeneity and no instrumental variables?

Appropriate technology and balanced growth

keynes collegeA new discussion paper by Miguel A. León-Ledesma and Mathan Satchi, KDPE 1614, November 2016.

Non-technical summary

In macroeconomics, we typically model production by specifying a ‘production function,’ which tells us how much output is produced with given quantities of the ‘factors of production,’ often taken simply as capital and labour. Factor shares refer to the proportion of the income earned by production that goes to each factor, so the labour share is the proportion of this income that is earned by workers through supplying labour. There are various issues with how we measure factor shares, but a key aspect of what is known as ‘balanced growth’ is the idea that as income grows over long periods of time, the labour share remains approximately constant.

Harmful effects of the ageing population on the economy

keynes college

A study from the School of Economics has found that an increase in Asian elderly population share will significantly lower economic growth due to decreased labour participation in the region.

The results of the study implies that governments facing population ageing have a challenging task to provide social security and public services for the aged while maintaining economic growth. This fundamental issue is common across all economies around the world.

Many Asian economies are currently faced with the challenge of rapidly ageing population, which can be harmful to the economy in the long run. The study, conducted by Dr Keisuke Otsu and Dr Katsuyuki Shibayama from the University’s School of Economics with the results published in Asian Development Review, analysed the effects of projected population ageing on potential growth in Asian economies over the period 2015–2050 using quantitative assessment.

On the relationship between lifestyle and happiness in the UK

keynes collegeA new discussion paper by Adelina Gschwandtner, Sarah L. Jewell and Uma Kambhampati, KDPE 1613, December 2016

Non-technical summary

Diet and life style diseases have become the main causes of morbidity and mortality worldwide. Both in the US and in Europe, the consumption of meat, dairy products, oil and  fat,  sugar,  and  alcoholic  beverages  has  increased  in  the  second  half  of  the  20th century. This, together with drug abuse, tobacco and lack of exercise, has increased the risk of developing certain chronic diseases like some types of cancer, heart disease, stroke and obesity. In particular obesity, with its attendant impact on health, has become a central problem in many Western economies.

What drives firm profitability? A comparison of the US and EU food processing industry

keynes collegeA new discussion paper by Adelina Gschwandtner and Stefan Hirsch, KDPE 1612, December 2016

Non-technical summary

The present project analyses what drives profitability in the food sector and compares the results with the manufacturing industry in general but also between the European Union and the United States.

One of the main findings is that competition is stronger and profitability is lower within the food sector as  compared with the manufacturing sector in general. This is mainly attributable to a high market saturation and to the fierce competition between the big retail companies. While the competition profits the consumer, it puts strong bargaining pressure on the producers. Therefore, one of the main drivers of profitability and profit persistence within the food sector is firm size. Larger producers seem to be in a better bargaining position against the retail sector and this seems to be both the case in the EU and in the US.