Research in progress

Daniele ChecchiGianni De Fraja and Stefano Verzillo Incentives and Careers in Academia: Theory and Empirical Analysis”.

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 CiccarelliGianni De Fraja and Silvia Tiezzi How Hard Is It to Maximise Profit? Evidence from a 19th Century Italian State Monopoly”.

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.

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.

Gianni De Fraja, Giovanni Facchini and John Gathergood Professorial Salaries and Research Performance in UK Universities. (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.

Paolo BertaGianni De Fraja and Stefano Verzillo Optimal Healthcare Contracts: Empirical Evidence from Italy.

Abstract

In this paper we investigate the nature of the contracts between a large health-care purchaser and health service providers in a prospective payment system. We model theoretically the interaction between patients choice and cream-skimming by hospitals. We test the model using a very large and detailed administrative dataset for the largest region in Italy. In line with our theoretical results, we show that the state funded purchaser offers providers a system of incentives such that the most efficient providers both treat more patients and also treat more difficult patients, thus receiving a higher average payment per treatment.