Recent Research
Recent Publications
Some can be downloaded: click title to download Acrobat file.
1997-2003 2004-forthcoming Full list of publications
Barbara Tomasino, Gianni De Fraja, Ilaria Guarracino, Tamara Ius, Serena D’Agostini, Miran Skrap, and Raffaella I. Rumiati, “Cognitive Reserve and Individual Differences in Brain Tumor Patients”, Brain Communications, forthcoming.
Abstract
The aim of the paper is to determine the effects of the cognitive reserve (CR) on brain tumor patients’ cognitive functions and, specifically, if CR helps patients cope with the negative effects of brain tumors on their cognitive functions.
We study a large sample of around 700 patients, diagnosed with a brain tumor. Each received an MRI brain examination, and performed a battery of tests measuring their cognitive abilities before they underwent neurosurgery. To account for the complexity of CR, we construct our CR proxy by combining three predictors of patients’ cognitive performance, namely patients’ education, occupation, and the environment where they live. Our statistical analysis controls for type, side, site, and size of the lesion, for fluid IQ, and for age and gender, in order to tease out the effect of cognitive reserve on each of these tests. Clinical neurological variables have the expected effects on cognitive functions. We find a robust positive effect of CR on patients’ cognitive performance. Moreover, we find that CR modulates the effects of the volume of the lesion: the additional negative impact of an increase in the tumor size on patients’ performance is less severe for patients with higher CR. We also find substantial differences in these effects depending on the cerebral hemisphere where the lesion occurred and on the cognitive function considered. For several of these functions, the positive effect of CR is stronger for patients with lesions in the left hemisphere than for patients whose lesions are in the right hemisphere. The development of prevention strategies and personalized rehabilitation interventions will benefit from our contribution to understanding the role of cognitive reserve, in addition to that of neurological variables, as one of the factors determining the patients’ individual differences in cognitive performance caused by brain tumors.
Gianni De Fraja, Konstantinos Eleftheriou, and Marilou Ioakimidis, “A Note on University Admission Tests: Simple Theory and Empirical Analysis”, The B.E. Journal of Economic Analysis and Policy, 22, 2022, pp. 623-632.
Abstract
University admission mechanisms are often quite complex. This paper examines one effect of their design on the students'} incentives to exert effort in preparation for the test. We adapt a multi-unit all-pay model of auction to draw the conclusion that abler students work harder: this conclusion is in line with the behaviour of a sample of students who apply for admission to the Greek university system with the complex rules newly introduced in 2013.
Gianni De Fraja, Sara Lemos and James Rockey “The Wounds That Do Not Heal.The Life-time Scar of Youth Unemployment.”, Economica, 88, 2021, pp. 896-941.
Abstract
This paper uses a UK administrative dataset to study the long term effects of unemployment on earnings. We find that unemployment shocks affect young workers for the rest of their lives. This scar of youth unemployment is concentrated in the first few years after entry into the labour market: each month of unemployment between the ages of 18 and 20 causes a permanent income loss of 2%. However, unemployment after that age has limited term effect. The result is robust to different specifications, and it affects most the individuals at the lower end of the ability distribution.
Carlo Ciccarelli, Gianni De Fraja and Daniela Vuri “Effects of Passive Smoking on Prenatal and Infant Development: Lessons from the Past”; Economics and Human Biology,
Abstract
This paper studies the effect of passive smoking on child development. We use data from a time when the adverse effects of smoking on health were not known and when tobacco was not an inferior good. This allows us to disentangle the effect on foetuses and infants of smoking from that of other indicators of social and economic conditions. We exploit a set of unique longitudinal historical datasets defined at a detailed level of geographical disaggregation, namely the 69 Italian provinces. The datasets record precise information on the per capita consumption of tobacco products, the heights of twenty-year old conscripts in the second half of the 19th century Italy, and other relevant controls. We find a strong negative effect of smoking in the period immediately before and after birth on the height at age 20. Results are robust to changes in specification and consistent across the height distribution..
Gianni De Fraja, Jesse Matheson, and James Rockey “Zoomshock: The Geography and Local Labour Market Consequences of Working from Home”; Covid Economics: Vetted and Real Time Papers, 64, 2021, pp. 1-41.
Abstract
The increase in the extent of remote working determined by the Covid-19 health crisis has led to a substantial shift of economic activity across geographical areas. When a person works from home rather than at the office, their work-related consumption of goods and services provided by the local consumers service industries will take place where they live, not where they work. Much of the clientele of restaurants, coffee bars, pubs, hair stylists, health clubs, taxi providers located near workplaces is transferred to establishment located near where people live: this is the Zoomshock. In this report we create a Zoomshock index, which associates to each geographical area in the UK the change in number of workers located and the change in their demand of local consumer services.
Daniele Checchi, Alberto Ciolfi, Gianni De Fraja, Irene Mazzotta, and Stefano Verzillo “Have you read this? An empirical comparison of the British REF peer review and the Italian VQR bibliometric algorithm”; Economica, 88, 2021, pp. 1107-1129.
Abstract
This paper determines the ranking of the publications units of assessment which were submitted to the UK research evaluation carried out in 2014, the REF, which would have been obtained if their submission had been evaluated with the bibliometric algorithm used by the Italian evaluation agency, ANVUR, for its evaluation of the research of Italian universities. We find very high correlation between the two methods, especially in regard to the funding allocation, with a headline figure of 0.9997 for the funding attributed to the institutions.
Daniele Checchi, Gianni De Fraja and Stefano Verzillo “Incentives and Careers in Academia: Theory and Empirical Analysis”; Review of Economics and Statistics, 103, 2021, pp. 786-802.
Abstract
We study career concerns in Italian academia. We mould our empirical analysis on the standard model of contests, formalised in the multi-unit all-pay auction. The number of posts, the number of applicants, and the relative importance of the criteria for promotion determine academics' effort and output. In Italian universities, incentives operate only through promotion, and all appointment panels are drawn from strictly separated and relatively narrow scientific sectors: thus the parameters affecting payoffs can be measured quite precisely, and we take the model to a newly constructed dataset which collects the journal publications of all Italian university professors. Our identification strategy is based on a reform introduced in 1999, parts of which affected different academics differently. We find that individual researchers respond to incentives in the manner described by the theoretical model: roughly, more capable researchers respond to increases in the importance of the publications for promotion and in the competitiveness of the scientific sector by exerting more effort; less able researchers do the opposite..
Carlo Ciccarelli, Gianni De Fraja and Silvia Tiezzi “How Hard Is It to Maximise Profit? Evidence from a 19th Century Italian State Monopoly”; Oxford Economic Papers, 72, 2020, pp. 1-24.
Abstract
In this paper we study the ability of the 19-th century Italian government to choose profit maximising prices for a multiproduct monopolist
We use very detailed historical data on the tobacco consumption in 62 Italian provinces from 1871 to 1888 to estimate a differentiated product demand system. The demand conditions and the legal environment of the period made this market as close to a textbook monopoly as is practically possible. The government's stated aim for this industry was profit maximisation: since at the time tobacco revenues constituted between 10 and 15 percent of the revenues for the cash-strapped government, the stated aim was very likely the true one. Cost data for the nine products suggest that the government was not wide off the mark: the tobacco prices were ``not far'' from those dictated by the standard monopoly formulae for profit maximisation with interdependent demand functions.
Gianni De Fraja, Giovanni Facchini and John Gathergood “Academic salaries and public evaluation of university research: Evidence from the UK Research Excellence Framework”; Economic Policy, 34 (99), (2019), 523-583. (Appendix)
Abstract
We study the effects of public evaluation of university research on the pay structures of academic departments. A simple model of university pay determination shows how the pay-performance relationship can be explained by the incentives inherent in the research evaluation process. We then analyse the pay-performance relationship using data on the salary of all UK university full professors, matched to the performance of their departments from the 2014 UK government evaluation of research, the Research Excellence Framework (REF). A cross sectional empirical analysis shows that both average pay level and pay inequality in a department are positively related to performance. It also shows that the pay-performance relationship is driven by a feature of the research evaluation that allows academics to transfer the affiliation of published research across universities. To assess the causal effect of the REF on pay structure, we take advantage of the time dimension of our data and of quasi-experimental variation in the performance of academic departments generated by the research evaluation rules. Our results indicate that higher achieving departments benefit from increased future hiring and higher professorial salaries with the salary benefits of REF performance concentrated among the highest paid professors. De Fraja, Gianni, Giovanni Facchini, and John Gathergood. "Academic salaries and public evaluation of university research: Evidence from the UK Research Excellence Framework." Economic Policy 34, no. 99 (2019): 523-583.
Daniele Checchi, Gianni De Fraja and Stefano Verzillo “Selections from Ordered Sets”, Social Choice and Welfare, 50, 2018, 677-703.
Abstract
We study the problem of evaluating whether the selection from a set is close to the ordering of the set determined by an exogenously given measure. Our main result is that three axioms, two naturally capturing ``dominance'', and a stronger one imposing a form of symmetry in the comparison of selections, are sufficient to evaluate how close any selection from any set is to the given ordering of the set. This closeness is given by a very simple index, which is a linear function of the sum of the ranks of the selected elements. The paper ends by relating this index to the existing literature on distance between orderings, and also offers a practical application of the index.
Gianni De Fraja “Optimal Public Funding for Research: A Theoretical Analysis”, RAND Journal of Economics, 47, 2016, 498-528.
Abstract
This paper studies government funding for scientific research. Funds must be distributed among different research institutions and allocated between basic and applied research. Informational constraints prevent less productive institutions to be given any government funding. In order to internalise the beneficial effects of research, the government requires the most productive institutions to carry out more applied research than they would like. Funding for basic research is used by the government to induce more productive institutions to carry out more applied research then they would like.
Gianni De Fraja and Francisco Martínez-Mora “The Desegregating Effect of School Tracking”, Journal of Urban Economics, 80, 2014.
Abstract
This paper makes the following point: “detracking” schools, that is preventing them from allocating students to classes according to their ability, may lead to an increase in income residential segregation. It does so in a simple model where households care about the school peer group of their children. If ability and income are positively correlated, tracking implies that some high income households face the choice of either living in the areas where most of the other high income households live and having their child assigned to the low track, or instead living in lower income neighbourhoods where their child would be in the high track. Under mild conditions, tracking leads to an equilibrium with partial income desegregation where perfect income segregation would be the only stable outcome without tracking..
Carlo Ciccarelli and Gianni De Fraja “The Demand for Tobacco in Post-Unification Italy”, Cliometrica, 8, 2014, pp. 145-171.
Abstract
This paper studies the demand for tobacco products in post-unification Italy. We construct a very detailed panel dataset of yearly consumption in the 69 Italian provinces from 1871 to 1913, and use it to estimate the rational addiction model originally proposed by Becker and Murphy (1988). We find support for the presence of rational addiction; we also find that, in the period considered, tobacco was a normal good in Italy: its consumption increase with income. Subsequently, we separate the analysis of the components of the aggregate tobacco consumption (fine-cut tobacco, snuff, cigars and cigarettes), and tentatively suggest that habit formation was a stronger factor on the persistence of consumption than physical addiction. The paper ends by showing that the introduction of the Bonsack machine did not coincide with changes in the structure of the demand for tobacco, suggesting cost driven technological change.
Gianni De Fraja and József Sákovics “Exclusive Nightclubs and Lonely Hearts Columns: Non-monotone Participation in Optional Intermediation”, Journal of Economic Behavior & Organization, 84, 2012, pp. 618-632.
Abstract
In many decentralised markets, the traders who benefit most from an exchange do not employ intermediaries even though they can easily afford them. For other traders, those who benefit little from trade, intermediaries are too expensive. Together, these observations lead to empirically observed participation choices which are non-monotone in ``type''. This paper provides a theoretical foundation for this hitherto unexplained phenomenon. We build a dynamic model, where the equilibrium bargaining share of a trader is a convex increasing function of her type. This characteristic ensures the existence of equilibria where only traders of middle type employ the intermediary, while the rest, the high and the low types, prefer to search for a trading partner directly.
Appendix: Files containing the numerical simulations: Maple 8 file of the procedure to draw Figure 3 (runs in Maple 8, and perhaps in newer versions of Maple); pdf file, printout of the previous programme.
Gianni De Fraja and Paola Valbonesi “The Design of the University System”. Journal of Public Economics, 96, 2012, pp. 317–330
Abstract
This paper studies a general equilibrium model suitable to compare the organisation of the university sector under private provision with the structure which would be chosen by a welfare maximising government. To attend university, and earn higher incomes in the labour market, students pay a tuition fee, and each university chooses its tuition fee to maximise the amount of resources that can be devoted to research. Research bestows an externality on society; government intervention needs to balance labour market efficiency consideration - which would tend to equalise the number of students attending each university -, with efficiency considerations, which suggest that the most productive universities should teach more students and carry out more research.
Gianni De Fraja “The Source of Differences in Population Distributions”. Mathematical Social Sciences, 62, 2011, pp. 130–132.
Abstract
This note shows that when the distribution of a variable in different populations is affected by two or more factors, differences in population distributions may be due exclusively to differences in the distribution of one factor only.
Gianni De Fraja Emanuela Michetti and Piercarlo Zanchettin “Toc 'n' Roll: Bargaining, Service Quality and Specificity in the UK Railway Network”. Journal of Transport Economics and Policy, 45, 2011, pp. 383—414.
Abstract
The paper studies the regulatory design in an industry where the regulated downstream provider of services to final consumers purchases the necessary inputs from an upstream supplier. The model is closely inspired by the UK regulatory mechanism for the railway network. Its philosophy is one of vertical separation between ownership and operation of the rolling stock: the Train Operating Company (TOC) leases from a ROlling Stock COmpany (ROSCO) the trains it uses in its franchise. This, we show, increases the flexibility and competitiveness of the network. On the other hand, it also reduces the specificity of the rolling stock, thus increasing the cost of running the service, and the TOC's incentive to exert quality enhancing effort, thus reducing the utility of the final users. Our simple model shows that the UK regime of separation may in fact be preferable from a welfare viewpoint.
Gianni De Fraja, "The Origin of Utility: Sexual Selection and Conspicuous Consumption" Journal of Economic Behavior & Organization, 72, 2009, pp. 51-69.
Abstract
This paper proposes an explanation for the universal human desire for increasing consumption and the associated propensity to trade survival opportunity off conspicuous consumption. I argue that this desire was moulded in evolutionary times by a mechanism known to biologists as sexual selection, whereby an observable trait -- conspicuous consumption in this case -- is used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex. It then shows that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness, the ability to pass genes to future generations, and thus establishes a rigorous theoretical foundation for including conspicuous consumption in the utility function.
The estimation procedure for Section 6.1: it is a STATA do file (version 9) and requires the polychoric routine constructed by Stas Kolenikov, and available at www.unc.edu/~skolenik/stata/. A CD rom with the data used is available from the World Cultures journal website.
CEPR Discussion Paper 5859, October 2006
Gianni De Fraja, Tania D’Oliveira and Luisa Zanchi, "Must try harder. Evaluating the role of effort on examination result" Review of Economics and Statistics, 92, 2010, pp. 577-597. CEPR DP 5048 version.
Abstract
This paper is based on the idea that the effort exerted by children, parents and schools affect the outcome of the education process, that is, the students' educational attainment. We test this idea using the National Child Development Study. We find that the effort exerted by the three types of agents needs to be treated as endogenous in the estimation of the education production function. Our analysis can be used to determine which factors affect examination results directly and which indirectly via effort, and may also suggest whether affecting effort directly has an impact on results.
Appendix: Generation of the variables used in the paper.
2009
Gianni De Fraja and Barbara Roberts, "Privatisation in Poland: What Was the Government Trying to Achieve?", The Economics of Transition, 17, 2009, pp. 531-557.
Abstract
This paper uses the sequencing of privatisation to infer the objective pursued by the Polish government in the privatisation of its large manufacturing firms in the second half of the 1990's. We construct a model of mixed oligopoly, and use it to evaluate the privatisation process; our analysis is based on the assumption that firms which furthered the government's objective function the most would be chosen to be privatised first. Our empirical analysis identifies the features of the firms that were chosen for early privatisation, and suggests that the welfare maximisation was more important than the desire to maximise the revenues from privatisation and the government's budget, or to minimise employment losses.
Appendix (Algebraic Calculations): it is a TeX file.
2008
Gianni De Fraja and Alberto Iozzi, "Bigger and Better: A Dynamic Regulatory Mechanism for Optimum Quality", Journal of Economics & Management Strategy, 17, 2008, pp. 1011-1040. CEPR DP 4502 version.
Abstract
Vogelsang and Finsinger's seminal paper (Bell Journal of Economics 1979) proposes a mechanism for price regulation with some desirable properties, such as convergence to a second best optimum. This mechanism applies to situations where quality is fixed: in practice, quality can be varied by the firm, and regulators have typically imposed constraints on the firm's quality choice. This paper lays a rigorous theoretical foundation to the inclusion of quality measures in the constraints faced by a regulated firm. We identify a potential pitfall in the approach taken in practice by regulators, and show that, in order to avoid it, the regulated firm should be subject to an additional constraint, which, loosely speaking, requires firms' choices not to be too erratic.
Gianni De Fraja, "Market and Public Provision in the Presence of Human Capital Externalities", Journal of Public Economics, 92, 2008, pp. 962-985 . CEPR DP 5471 version. Earlier version.
Abstract
This paper suggests that human capital externalities are important in determining whether goods and services should be privately or publicly provided. We study situations where that the cost incurred by an individual provider for providing quality is affected by the human capital of her colleagues. This is the case for goods such as health, education, legal services, police protection, and so on. The mode of provision (private or public) affects a supplier's incentive to acquire human capital and therefore her colleagues' cost of provision. The paper shows that either mode of provision may be preferable, depending on the nature of the human capital externality: private provision of the final goods and services provides stronger incentives to human capital acquisition (and may therefore be socially preferable) if own human capital and one's colleagues' human capital are substitutes, and suppliers with high human capital benefit more benefit more than suppliers with low human capital from their colleagues' human capital, but not excessively so.
2007
Gianni De Fraja, “Publish or Perish: il meccanismo di valutazione della ricerca del Regno Unito” (Publish or Perish: The Mechanism for Evalutation of Research in the UK), Rivista Italiana degli Economisti, 12, 2007, pp. 231-252.
Abstract
In questo capitolo presento dapprima le caratteristiche salienti del sistema di valutazione della ricerca nel Regno Unito, in particolare del Research Assessment Exercise (da qui in avanti RAE); in seguito analizzo più in dettaglio gli effetti dei meccanismi di incentivi messi in atto dalle regole di valutazione, sia dal punto di vista delle istituzioni sia dal punto di vista dei ricercatori individuali. .
2006
Gianni De Fraja and Pedro Landeras, "Could Do Better: The effectiveness of Incentives and Competition in Schools, Journal of Public Economics; 90, 2006, pp. 189-213.
Abstract
This paper studies the effects of incentive mechanisms and of the competitive environment on the interaction between schools and students, in a set-up where the students' educational attainment depends on their peer group, on their effort, and on the quality of the school's teaching. We show that increasing the power of the incentive scheme and the effectiveness of competition may have the counterintuitive effect of lowering the students' effort. In a simple dynamic set-up, where the reputation of the schools affects recruitment, we show that more powerful incentives and increased competition lead to segregation of pupils by ability, and may also determine lower attainment in some schools.
Download Maple file with the programme to carry out numerical simulations.
Download pdf file with the algebraic details of the proof of Proposition 1.
2005
Gianni De Fraja, "Reverse Discrimination and Efficiency in Education", International Economic Review; 46, 2005, pp. 1009-1031.
Abstract
This paper shows that affirmative action policies can find a justification purely on efficiency grounds. We study the optimal education policy when households belong to different groups, differing in the distribution of the potential to benefit from education among individuals. The main result is that the high potential individuals from groups with relatively few high potential individuals should receive more education than otherwise identical individuals from groups with a more favourable distribution of these benefits. (Appendix)
2004
Gianni De Fraja, "Education and Redistribution", Rivista di Politica Economica, 94/5-6, 2004, pp. 3-44.
Abstract
At first sight, education is a suitable instrument to redistribute resources from the better-off to the worse off: as a proportion of income it is consumed more by the poor than the rich, especially if the latter opt out of the public system, the fact that the government imposes its consumption raises very limited libertarian concerns, and is politically acceptable to the tax-payers. Education, however, is a very expensive way of carrying out redistributive policies. This is because of the technology of education provision: this is such that those who have been more favoured by nature/luck are also those who benefit most from the investment in education: if educational resources are distributed according to the ability to benefit, as efficiency would require, then the better off should receive more, which is clearly inequitable. The paper illustrates how some counterintuitive or unexpected features of the provision of education can be understood by keeping in mind this conflict between equity and efficiency. The paper considers electoral preferences for the provision of university subsidies, the distributive consequences of having admission tests, and how house prices and the quality of schools interact.
Gianni De Fraja, "Hierarchies in Organisations and Labour Market Competition", Labour Economics, 11, 2004, pp. 669-686.
Abstract
This paper studies the endogenous determination of hierarchies in firms. Firms can design a hierarchy with a continuum of ranks, one for each ability level. Nevertheless, in the market equilibrium, they choose to have only a finite number of ranks, so that in each rank there are workers of different abilities, who produce different output, and receive the same wage. It is also shown that an increase in the extent of labour market competition reduces the number of ranks in the hierarchy.
1995 Draft (University of York, Discussion Paper 95/9)
Gianni De Fraja and Claudio Piga, "Strategic Debt in Vertical Relations: Theory and Evidence", Research in Economics, 58, 2004, pp. 103-123.
Abstract
We study a vertical relationship between two firms, and we show that the extent of the downstream firm's borrowing affects the contract offered by the upstream firm. We establish a negative relationship between the level of debt and the downstream firm's probability of bankrupt. We also show that, unless the interest rate is very high, there exists a conflict of interest between the upstream and the downstream firm: the latter wants to take on more debt than the former would like it to. We interpret this finding as an explanation of the constraint imposed by franchisors on the debt level of their franchisees.
Gianni De Fraja and George Norman, "Product Differentiation and the Location of International Production", Journal of Economics & Management Strategy, 13, 2004, pp. 151-170.
Abstract
This paper analyses the role of product differentiation in firms’ choices between exporting and foreign direct investment as ways to supply overseas markets. When the degree of product differentiation is exogenously fixed, we show that the overseas firm favors exporting at low and high degrees of product differentiation while local production is favored at intermediate values: there can be a "double switch" in location choice. Moreover, if firms have the same location, we show that they can be trapped in a prisoners’ dilemma in their choice of location, in which each firm chooses overseas production at degrees of product differentiation such that exporting would be more profitable. We then consider a three-stage location/product specification/price game in which the firms choose their product specification. Irrespective of the mode of market serving, there is no symmetric solution to the product specification subgame. One firm chooses a "fighting brand", while the other selects a more passive product specification. The cost disadvantage incurred by an exporting firm translates into a disadvantage in the product specification subgame, with the implication that overseas production is favored if this gives the investing firm the ability to adopt a more aggressive product specification.
Alberto Bacchiega and Gianni De Fraja, "Constitutional Design and Investment in Cooperatives and Investor-Owned Enterprises", Annals of Public and Cooperative Economics, 75, 2004, pp. 265-293.
Abstract
This paper studies the role of the corporate governance system in cooperatives and in investor-owned enterprises. We abstract from all possible differences between the two forms except the type of majority needed to take decisions: one head one vote for cooperatives and proportional to capital invested in investor-owned firms. We show that the institutional form chosen matters for the initial investment decision of the agents: in particular we find that members of a cooperative invest less than they would in an investor-owned enterprise. This finding tallies with empirical evidence suggesting that cooperatives are undercapitalised. (Appendix)
Gianni De Fraja and Clive Stones, "Risk and Capital Structure in the Regulated Firm", Journal of Regulatory Economics, 26, 2004, pp. 69-84.
Abstract
This paper studies the role of capital structure in a regulated firm. We show that it affects the prices set by the regulator: the expected price is lower the higher the proportion of debt finance. However, when debt is increased beyond a certain level, the benefit of lower expected prices is offset by their increased variability. We also study the socially preferred capital structure. This is such that consumers carry some risk, in the form of higher prices in adverse economic conditions.
1997-2003 2004-forthcoming Full list of publications