Our objective is to engage in innovative research that extends the frontiers of the discipline, deepening our understanding of the operation of modern economies. Research spans almost all the major sub-fields of economics with particular strengths in microeconomic theory, including behavioural economics; econometrics, both micro-econometrics and time series; economic history and development and international economics.

The University of Oxford is ranked 8th in the world and 2nd in Europe in the most recent Tilburg University ranking of Economics departments, based on research contribution for the period between 2012-2016.

In the most recent Research Excellence Framework (REF 2014) to evaluate the research output of UK Universities, Oxford was first in overall research strength in Economics and Econometrics, with more research ranked as ‘world-leading’ than any other participating institution. In a submission of 84 FTE academics, 56% of our research was rated as ‘world-leading’ (4*) and a further 33% rated as ‘internationally excellent’ (3*).

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As one of Europe’s leading Economics departments, Oxford aims to inform and improve the development and implementation of economic and public policy in the UK and around the world. We do this by producing innovative research that extends the frontiers of the discipline and deepens our understanding of the operation of modern economies.

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Working Papers

Authors: Vanessa Berenguer Rico, Ines Wilms

Jun 2018

Abstract

Given the effect that outliers can have on regression and specification testing, a vastly used robustification strategy by practitioners consists in: (i) starting the empirical analysis with an outlier detection procedure to deselect atypical data values; then (ii) continuing the analysis with the selected non-outlying observations. The repercussions of such robustifying procedure on the asymptotic properties of subsequent specification tests are, however, underexplored. We study the effects of such a strategy on the White test for heteroscedasticity. Using weighted and marked empirical processes of residuals theory, we show that the White test implemented after the outlier detection and removal is asymptotically chi-square if the underlying errors are symmetric. Under asymmetric errors, the standard chi-square distribution will not always be asymptotically valid. In a simulation study, we show that - depending on the type of data contamination - the standard White test can be either severely undersized or oversized, as well as have trivial power. The statistic applied after deselecting outliers has good finite sample properties under symmetry but can suffer from size distortions under asymmetric errors.

JEL Codes: C01, C10

Keywords: Asymptotic theory, Empirical processes, Heteroscedasticity, Marked and Weighted Empirical processes, Outlier detection, Robust Statistics, White test

Individual View

Authors: Pawel Adrjan

Jun 2018

Young firms are an engine of job creation, but little is known about the quality of the jobs that they offer. I use a matched employer-employee dataset to study how starting wages and lifecycle earnings of employees differ between young and mature firms. I find that young firms pay a small premium to new hires, but subsequent wage growth is better at mature firms, both within continuing job matches and when individuals change jobs. These results are confirmed by several approaches to addressing sorting and selection of employees into firms of different ages. There is substantial heterogeneity of outcomes: the few young firms that survive and become highly productive pay higher wages to employees from the outset than less successful young firms. Overall, highly-paid and stable jobs at young firms are rare. Policies that aim to stimulate job growth by encouraging the formation of new firms should therefore pay close attention to the types of firms that form as a result.

JEL Codes: J21, J23, J31, L26

Individual View

Authors: Rahul Nath

May 2018

This paper studies how flexible labour decisions affect asset pricing in a Real Business Cycle model. It uses Jaimovich-Rebelo preferences with internal habits in consumption and distinguishes between two income effect channels (i) the ‘habit income effect’ channel and (ii) the ‘separability income effect’ channel. I find that asset prices are superior when the first channel is strong and the second is weak, this is the case of using GHH preferences with internal habits in consumption.

JEL Codes: E13, E32, E44, G12

Keywords: Asset Pricing, Income Effects, Jaimovich-Rebelo Preferences

Individual View

Authors: Rahul Nath

May 2018

This paper derives explicitly an equity pricing relationship in a simple New Keynesian model. This relationship is used to study the equity pricing implications of New Keynesian models. I find that New Keynesian models suffer from the same asset pricing shortcomings as more traditional RBC versions and that this can be attributed to the presence of nominal rigidities. I then add capital adjustment costs to study how the interaction of both investment adjustment costs and capital adjustment costs affect the results.

JEL Codes: E12, E22, E44

Keywords: Asset Pricing, New Keynesian, Nominal Rigidities, Investment Adjustment Costs, Capital Adjustment Costs

Individual View

Authors: Douglas Hay

May 2018

Abstract

Many economic historians agree that increased labour inputs contributed to Britain’s primary industrialisation. Voluntary self-exploitation by workers to purchase new consumer goods is one common explanation, but it sits uneasily with evidence of poverty, child labour, popular protest, and criminal punishments explored by social historians. A critical and neglected legal dimension may be the evolution of contracts of employment. The law of master and servant, to use the technical term, shifted markedly between 1750 and 1850 to advantage capital and disadvantage labour. Medieval in origin, it had always been adjudicated in summary hearings before lay magistrates, and provided penal sanctions to employers (imprisonment, wage abatement, and later fines), while giving workers a summary remedy for unpaid wages. The law always enforced obedience to employers’ commands, suppressed strikes, and tried to keep wages low. Between 1750 and 1850 it became more hostile to workers through legislation and judicial redefinition; its enforcement became harsher through expansion of imprisonment, capture of the local bench by industrial employers, and employer abuse of written contracts. More work in manuscript sources is needed to test the argument, but it seems likely that intensification of labour inputs during industrialisation was closely tied to these legal changes.

Keywords: coercion, contract of employment, labour law, industriousness, punishment, work time

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