Research at HEC Workshop Underlines Potential of New Generation of Economists

The informal labor markets in Sub-Saharan Africa; training in imperfect labor markets; the political consequences of Affirmative Action in Brazil; the links between coffee booms and schooling in Rwanda. These were four among a score of research papers presented by doctoral students from round the world at the HEC Economics PhD Conference in June. The student-led workshop, organized by the HEC doctoral candidates in the Economics department provided a unique opportunity to share breakthrough research and obtain valuable feedback from their peers. Here are a few examples, space not allowing for several other valuable contributions.

“This second edition of the HEC Economics PhD Conference, which I had the pleasure of also organizing last year, has been a valuable learning experience,” said Andrew Funck, with a smile. “It’s allowed us to engage deeply with a wide array of economics research and to build a research community.” "Indeed, the conference featured a diverse range of economic topics which the organizers selected essentially within their domain of expertise (entitled Development Economics, Labor Economics, Political Economy, Behavioral Economics, Decision Theory, Applied Microeconomic Theory and Macroeconomics). They arranged the best ones into thematic sessions tailored to their research needs and interests, but also open to new areas of interest and methods. “It’s very easy to become entrenched within only one topic due to the necessity of specialization and the pressure to produce research output,” admitted Funck. “Yet, maintaining curiosity and openness to other domains is essential, and organizing a conference like ours provided a structured way to achieve this.” On top of the research aspect, the organizing team learnt how to blend the funding, logistics, promotion, and communication efforts necessary for such a two-day event. “It provided valuable learning experiences and a refreshing break from daily academic work, which was also enjoyable.”

Impact of Informal and Formal Labor Sectors for Mexican Women

The diversity and engagement of PhD researchers at the conference was manifest in several presentations over the two days. Warwick University’s Angelica Martinez Leyva, for example, shared research which offers a fresh perspective on the roles women occupy within the Mexican workforce. In a country where labor dynamics are as complex as its cultural tapestry, Leyva focuses on the interplay between labor, gender, and the informal sector in Mexico, shedding light on how these elements converge to shape women's lives. “I’m Mexican,” the British-based scholar said, “and the informal sector plays a huge role not only in Mexico but across Latin America.” Leyva’s research is driven by the question of why women gravitate towards certain types of jobs, and how the informal sector might offer them opportunities that the formal sector cannot. “I'm not saying informal jobs are better,” she clarified. “But they can provide certain amenities that women, especially those with children, may value, like flexibility in balancing work and childcare responsibilities.”

As Leyva continues her research, she hopes to deepen the understanding of how informal employment affects women's economic outcomes and overall well-being. Her work not only highlights the unique challenges faced by women in Mexico but also underscores the need for policies that recognize and support the diverse ways in which women engage with the labor market. And, in a world where the boundaries between formal and informal work are increasingly blurred, Leyva’s research is a crucial step toward addressing gender disparities and empowering women within the workforce.

At the HEC Economics PhD Conference, she found the exchanges particularly valuable. “There’s a lot of new PhD conferences post-COVID,” she said. “These conferences provide a platform for emerging scholars to share their work in a more casual environment, fostering a sense of community and collaboration. You don't feel so stressed, it’s a chance to practice presenting, get feedback from peers, and refine your theories before hitting the job market.”

Unveiling the Strategic Role of Training in Imperfect Labor Markets

Staying in the field of labor markets, but with a very different context, Giacomo Rostagno’s research sheds light on what he titled "Training in Imperfect Labour Markets." Rostagno is entering his fifth year as a PhD candidate at HEC Paris, working under the supervision of HEC associate professor Raphaël Levy. In Rostagno’s workshop presentation he reflected on today's rapidly evolving job market and how firms are investing unprecedented amounts in training programs for their employees. But what drives this surge in spending, and how does it impact both workers and employers, he wondered? Rostagno’s work explores how strategic timing and targeted training can serve as potent incentives for workers. “In recent years, companies like Amazon have committed billions to training programs,” Rostagno noted in an exchange during the conference. “But interestingly, much of this investment occurs after employees have been with the company for some time.”

Rostagno’s study proposes that these training programs are more than just a means to upskill employees. They also act as a mechanism for firms to signal the quality of their best workers, thus motivating them to perform better. “By committing to training, firms effectively promise their workers future career opportunities, This not only incentivizes employees to work harder but also showcases their abilities to potential competitors, thereby increasing their market value.” However, this strategy comes with a caveat. While precise information transmission through training boosts worker incentives, it can also lead to higher wages for these workers in the future, potentially reducing firm profits. Firms must therefore strike a delicate balance in designing their training programs to optimize both worker motivation and profitability.

Rostagno’s model also highlights a significant downside: the creation of a stark wage disparity between workers who receive training and those who do not. “This mechanism can lead to large salary divergences,” he explained. “Workers who don’t receive training are often perceived as less productive, exacerbating the wage gap.” Despite the theoretical nature of his current research, Rostagno draws on anecdotal evidence from major firms across Europe, including Italy, the UK, and France. “Many large companies, such as Toyota and Marsh, prominently feature their executive training programs,” he observed. “These programs are widespread and highly influential in the business world.”

Reflecting on his participation in the HEC Economics PhD Conference, Rostagno expressed gratitude for the feedback and camaraderie. “Presenting my research here has been extremely useful,” he shared. “I received valuable input from both senior researchers and fellow PhD students. The social activities and informal discussions during breaks also provided great opportunities to refine my ideas.” Rostagno's research underscores the multifaceted role of training in labor markets, revealing it as a strategic tool that extends beyond mere skill development. As firms continue to navigate the complexities of employee motivation and retention, his insights offer a crucial perspective on the interplay between human capital and economic incentives.

Exploring the Information Economy Through Digital Lenses

Another preoccupation for companies at all levels is the rapidly evolving landscape of the digital economy. And in this sector, information has become a crucial asset. Pia Ennuschat, a PhD student at Universitat Pompeu Fabra in Barcelona, explores this realm for her doctorate. She focuses on how information influences transactions, especially as commerce increasingly shifts online. During the HEC Economics PhD Conference, Ennuschat shared a unique perspective on the digital marketplace's dynamics, centering on the growing significance of information in economic transactions. "Information is becoming an increasingly important economic resource," the German scholar explained. With the rise of online platforms, sellers and retailers gain access to a wealth of data, enhancing the role of information in shaping market behaviors.

While her primary focus is on online interactions, Ennuschat acknowledged that traditional forms of information, such as books and written articles, also play a vital role. However, the shift towards digital platforms has amplified the availability and impact of information, prompting her to concentrate on this modern aspect. Despite the extensive study of information economics, Ennuschat aims to bring more realism to existing models. Traditional models often assume a single entity controls all information in a transaction. She challenges this notion by emphasizing the diverse sources from which information is obtained. "I'm trying to push on this dimension of saying, well, this might actually not be true because we obtain information from multiple sources," she noted. Her innovative approach seeks to reflect the complexity of real-world transactions, where information is multifaceted and dynamic.

Reflecting on the HEC Economics PhD Conference, Ennuschat highlighted the benefits of interdisciplinary dialogue. "As my PhD progressed, I interacted less and less with people from diverse backgrounds," she admitted. The June conference provided a refreshing opportunity to engage with varied perspectives, enriching her understanding and sparking new ideas. It also challenged her to think critically about her methods and assumptions. "I had individual conversations about how to estimate what I'm doing in the data, which is not something I typically focus on," she said. This cross-pollination of ideas underscored the importance of stepping outside one's academic bubble.

Human Costs of Competition in Informal Markets: Insights from South Africa's Minibus Taxi Industry

The fertile nature of the conference also marked Leonard Le Roux. He’s a South African PhD candidate from Sciences Po based in Marseille and his focus is on his homeland. Indeed, in the bustling streets of South Africa's urban centers, minibus taxis serve as a critical lifeline for millions of commuters. However, beneath this essential service lies a darker reality of intense competition and violence. Le Roux has been exploring this complex dynamic for his ongoing research presented at HEC’s academic workshop. His study, titled "Human Costs of Competition in Informal Markets: Evidence from South Africa," explores the intricate relationship between economic competition and violence within the country's minibus taxi industry. This sector, prevalent not only in Le Roux’ native South Africa but across many African nations, comprises numerous small private transport firms that dominate urban mobility in areas where public transport is inadequate. "The minibus taxi sector is crucial for urban mobility in many African countries," Le Roux explained. "These small firms often organize into associations, and in South Africa, this industry is marked by severe and persistent violence, including targeted assassinations of taxi owners and drivers."

Le Roux's research focuses on how these associations responded to a significant decline in the commuter rail sector in South Africa. This led to a surge in demand for minibus taxis. By examining geocoded administrative data on operating licenses, newly collected data on prices, and a unique dataset of violent crimes within the taxi industry, Le Roux seeks to uncover the economic structures underlying this violence. "My study shows that associations more exposed to this demand shock grew rapidly but were less active in opening new taxi routes," he continued. "Preliminary evidence suggests these associations also experienced an increase in violence. This can be understood through contest theory literature, which posits that when the value of a price increases, so does the effort actors put into contesting it."

Reflecting on his experience at the Economics workshop on the Jouy-en-Josas campus, Le Roux noted: "This has been one of the top workshops I've attended during my PhD. The organizers did an excellent job matching presentations and allowing ample time for networking and feedback. It's a friendly environment where one can receive valuable insights on their work."

Le Roux's findings highlight the human costs of economic competition in informal markets, raising important questions about the governance and regulation of these essential industries. As his research progresses, it promises to offer deeper understanding and potential solutions to mitigate the violence plaguing South Africa's minibus taxi sector.

Other Noteworthy Research at the Workshop

Laura Perez Cervera from Queen Mary University of London examined the unintended political consequences of Brazil's Law of Quotas, which mandated racial quotas in federal university admissions. Cervera's research found that the policy increased enrollment rates for non-White students while displacing White students, leading to a racial divide in voting behavior. Non-White voters began to favor candidates of their own race, potentially reducing the overall quality of elected officials. This study highlights the complex interplay between affirmative action policies and electoral dynamics.

Another scholar from Queen Mary University, Antonio Leon, is exploring how increased political accountability, through randomized anti-corruption audits in Brazil, can improve bureaucratic selection. Leon found that these audits enhance the quality of bureaucracy, particularly for frontline positions, by incentivizing better performance in office.

Samuel Marshall from the University of Warwick in the UK is studying the role of small firms, self-employment, and migration in the labor markets of Sub-Saharan Africa. Marshall's research, using a spatial monopsony framework, revealed that labor market power is concentrated in rural areas where fewer firms and higher migration costs prevail. This results in lower wages and a misallocation of workers into less productive self-employment roles. Marshall suggests that policies aimed at rural development, rather than reducing migration frictions, would enhance welfare and output in these regions.

Daniel Kammer of the University of Konstanz also focuses his research on sub-Saharan Africa. He’s investigating the impact of coffee price fluctuations on education in Rwanda. Kammer’s research showed that during periods of coffee price booms, children in coffee-growing regions were more likely to be enrolled in school and complete more years of education. The positive effects were particularly pronounced near privately organized specialty coffee washing stations, indicating that income increases from coffee booms primarily drive these educational improvements.

Meanwhile, Thomas Monnier from CREST is developing a general equilibrium model to analyze the impact of informal employment on labor market efficiency in South Africa. His preliminary results suggested that enforcing formal employment could reduce both welfare and output, highlighting the complex role of informal employment in economic development.

Finally, Ali Bakhtawar from Aix-Marseille School of Economics presented causal evidence on how anti-corruption campaigns can be exploited for political persecution in Pakistan. Bakhtawar's research reveals that narrowly winning opposition politicians faced higher conviction rates in corruption cases, while those aligned with the incumbent government were less likely to be convicted.

Conclusion

As these research papers indicate, the HEC Economics PhD Conference showcased challenging, innovative and impactful research being conducted by doctoral students worldwide. The diverse range of topics and the collaborative atmosphere of the conference underscored the importance of such academic gatherings in advancing economic knowledge and fostering future research. Andrew Funck and his team's efforts in organizing the conference have provided a platform for young economists to build valuable connections, contributing to the broader economics community. They firmly believe that the insights gained from the research presented at the conference are poised to influence economic policies and practices globally. "We had great success in both this year’s and last year’s editions, receiving around 200 submissions for each workshop,” said Funck. “This allowed us to select extremely high-quality works from top institutions. It speaks not only to our ability to promote and attract interest in the event but also to the significant demand that exists for such PhD conferences. Doctoral students have outstanding projects and are highly eager to present them.”

The conference was enhanced by two keynote speakers who shared their insights and experience from a professorial perspective. Nicolas Coeurdacier of Sciences Po Paris and Laurent Bach from ESSEC Business School.