Department of Economics - ARC-funded Research Projects

Administering Institution: The University of Melbourne

Discovery Projects

Linkage Projects


Relative Income, Social Preferences, and Charitable Giving: An Experimental Analysis

ARC Discovery Project DP1094676 (2009 for funding commencing 2010)

Understanding people's incentives to give to others (i.e., what motivates private donations) is important in regulating social interactions, achieving fair outcomes, and designing optimal responses to natural disasters like floods and bushfires. Australia's social and economic fabric is strengthened by good public polices relating to redistribution and taxation. The cross‑cultural aspect of our study will increase awareness about differing beliefs across countries about the determinants of income and how policy makers can use this information to design appropriate policies to help people in need. This research project will also increase the level of academic interactions between Australian and foreign universities.

A/Prof L Gangadharan; Dr N Erkal; Dr N Nikiforakis
2010: $73,703
2011: $63,849
2012: $45,729
Primary RFCD: 3499 - OTHER ECONOMICS

Econometric Estimation and Analysis of Country, Regional and Global Income Distributions

ARC Discovery Project DP1094632 (2009 for funding commencing 2010)   

The project will provide valuable information on characteristics of the income distribution for Australia, and the distributions for countries of socio‑economic significance to Australia. The findings will enable Australian government and non‑government organisations and international agencies to assess the effects of various policies such as those designed to reduce world poverty. The project can help Australia understand the most immediate needs of countries in the region, information that is useful for formulating Australian policy responses that can alleviate poverty and lead to improved living standards in the region, thereby creating a harmonious and safer environment within the Asia‑Pacific region.

Prof WE Griffiths; A/Prof D Chotikapanich; Prof DP Rao
2010: $127,552
2011: $100,000
2012: $166,302

Primary RFCD: 3404 - ECONOMETRICS

A New Class of Statistical Methods for Analysing Long Memory Time Series Models with Heteroskedasticity

ARC Discovery Project DP1094010 (2009 for funding commencing 2010)               

This project will result in a class of statistical methods that will aid policy makers and financial analysts when examining and predicting key international and Australian macroeconomic and financial variables that exhibit long memory. Leading applications of long memory modelling in the literature include GDP, CPI, asset pricing models, stock returns, exchange rates and interest rates. It will be possible to robustly and efficiently analyse such series in the presence of changes in variability, such as the overall reduction in variability that has occurred since the 1970's, called the "Great Moderation". The utility of the new methods will be demonstrated by a robust and efficient analysis of the Purchasing Power Parity hypothesis.

A/Prof DC Harris; Dr HY Kew
2010: $61,164
2011: $64,327
2012: $67,490

Primary RFCD: 3404 - ECONOMETRICS

Technological Innovation, Trade Liberalization, Unemployment, and Policy Design

ARC Discovery Project DP1096379 (2009 for funding commencing 2010)               

Prof IP King
2010: $53,398
2011: $53,067
2012: $55,016
Primary RFCD: 3402 - APPLIED ECONOMICS

Australia, like all economies, is heavily influenced by technological changes and shifting trade patterns. Understanding these influences, and the impact they have on the distribution of income, the unemployment rate, and the job mix, is very important for the design of appropriate policy initiatives. The proposed research aims to achieve exactly this by developing a mathematical model which incorporates technological change, trade, and unemployment. The model will be used to analyse the effects of these changes and, thus, to design optimal policy. The results from this project should also stimulate policy discussions both within Australia and abroad ‑ enriching academic relations between domestic and international universities.

Economics of Continuous-time Financial Markets and Endogenous Pricing

ARC Discovery Project DP1094656 (2009 for funding commencing 2010)   

This research has the potential to benefit society by improving the accuracy of pricing in securities markets. First, because the research leads to specific predictions about the interaction of prices for different type of assets, it should lead to more accurate pricing across markets, such as housing, stocks and bonds, which currently function largely independently. Second, it should lead to more accurate pricing of derivatives in the situations where the exercise price of the derivatives differs significantly from the current price of the underlying stock.

Dr R Raimondo
2010: $26,079
2011: $26,079
2012: $26,079

Primary RFCD: 3401 - ECONOMIC THEORY

Socioeconomic Status and Health in Australia: An Econometric Investigation into Causality and Pathways

ARC Discovery Project DP1095065 (2009 for funding commencing 2010)   

This project aims to provide new policy‑relevant research focusing on the role of socioeconomic status (SES) in determining health outcomes for children and adults in Australia, and in reducing health‑related inequalities. This project will use high‑quality Australian longitudinal data and the most advanced econometric models to provide new insights into the pathways underlying the SES gradient. The project will also use similar data for Britain as a valuable comparison point. The research will contribute to a better understanding of health outcomes relating to a healthy start to life and strengthening Australia's social and economic fabric.

A/Prof M Shields; Dr DW Johnston
2010: $50,000
2011: $50,000
2012: $20,000

Primary RFCD: 3402 - APPLIED ECONOMICS

Community Led Sanitation Interventions: The Role of Social Capital

ARC Discovery Project DP0987011 (2008 for funding commencing 2009)

The economic and social wellbeing of its neighbours is important for Australia. This interest is often expressed through financial aid and the sharing of expertise. This research aims to enhance the effectiveness of financial aid by investigating the extent to which social capital is important in determining the success of a community-led development project. Thus, this research contributes to a body of knowledge that informs development policy, leading to more effective use of aid funds and to a more prosperous and safe region.

A/Prof LA Cameron; Dr M Shah; Ms RS Purnamasari
2009: $170,000
2010: $130,000
2011: $94,000
Primary RFCD: 3402 - APPLIED ECONOMICS
APD: Ms RS Purnamasari

State and Territory Economic Performance and National Economic Policy

ARC Discovery Project DP0987494 (2008 for funding commencing 2009)

The research is intended to provide a better understanding of the relationship between national and state & territory economic behaviour in Australia and the relative strengths of common and idiosyncratic factors affecting economic performance across the states and territories. The results of the research will help to inform both national and sub‑national economic policies and hence contribute to better economic and social outcomes in Australia.

Dr RJ Dixon; Prof GC Lim; Prof D Shepherd
2009: $59,000
2010: $45,000
2011: $47,000
Primary RFCD: 3402 - APPLIED ECONOMICS

Scarcity of Ideas and Design of Optimal Incentive Schemes for Innovation

ARC Discovery Project DP0987070 (2008 for funding commencing 2009)

Since innovation is the driving force behind economic growth, enhancing its innovative capacity is an important consideration for Australia. From an economics point of view, this requires the design of optimal incentive schemes in the institutional structures which are central to promoting innovation. The proposed research aims to achieve exactly this by developing a definition of innovativeness and analyzing its implications. Its results will contribute to the policy discussions on innovation in Australia and will enhance the academic interactions between Australian and international universities.

Dr N Erkal
2009: $50,000
2010: $40,000
2011: $26,140
Primary RFCD: 3402 - APPLIED ECONOMICS

The US Interest Rate Conundrum and its Implications for Australia

ARC Discovery Project DP0987589 (2008 for funding commencing 2009)

The project generalises existing factor models of interest rates. The project will result in several benefits nationally as well as internationally. As U.S. interest rates and U.S. monetary policy in general are important determinants of interest rates in Australia, the project will lead to an improved understanding of the international mechanism linking interest rates. This will also provide a better framework in which to understand and monitor monetary policy in Australia. An important aspect of the project is the development of new testing procedures that improve upon existing nonparametric methods.

Prof VL Martin
2009: $70,000
2010: $50,000
2011: $50,000
Primary RFCD: 3404 - ECONOMETRICS

Australian Real Time Data: Construction, Analysis and Implications for Real Time Policy Making

ARC Discovery Project DP0988112 (2008 for funding commencing 2009)

This first comprehensive macroeconomic real time database for Australia recording the actual data available to policy makers at the time of making decisions will serve as a standard reference for accurate ex post macroeconomic policy evaluation and for accurate forecasts and decision making which are robust to data revisions. The free database will be of interest to Australian researchers, economists, forecasters and policy makers. Readily applicable and interpretable forecasts of the business cycle and the current state of the Australian (and US) economy (e.g. likelihood of recessions or inflation) will be of direct relevance to Australian policy‑makers in Government, the Reserve Bank of Australia, and to the Australian decision‑makers.

A/Prof K Shields; Prof N Olekalns; Prof K Lee
2009: $108,000
2010: $83,000
2011: $77,000
Primary RFCD: 3404 - ECONOMETRICS

The Pricing and Risk Management of Reverse Mortgages in the Australian Market

ARC Discovery Project DP0878575 (2007 for funding commencing in 2008)

This project will develop new methodologies for the pricing of reverse mortgages and will examine how sensitive prices are to demographic and financial assumptions in our models. This will increase transparency in the reverse mortgage market for retired Australians and ensure they get a fair deal. Increasing pricing transparency will also reduce risks to the issuing banks both by facilitating securitization and by allowing more accurate modelling of capital costs for mortgages that remain on their balance sheet.

A/Prof MS Joshi; Prof DC Dickson; Dr DG Pitt
2008: $70,000
2009: $72,000
2010: $74,000
Primary RFCD Code: 3503 – Banking, Finance and Investment

Bayesian Analysis of Treatment Effects in Experiments with Imperfect Compliance

ARC Discovery Project DP0880069 (2007 for funding commencing in 2008)

This research has a potential to benefit society by providing methods to evaluate the effectiveness of medical treatments and socio‑economic and health related interventions and policies based on experiments with imperfect compliance. The proposed methods are directly relevant to the second national research priority, as they can be used to test potential measures for preventative health care and to evaluate measures for strengthening Australia's social and economic fabric. The usefulness of our methods is demonstrated in the analysis of the effectiveness of a training program for the unemployed in alleviating negative mental health effects from job loss.

Dr L Jacobi
2008: $37,518
2009: $29,000
Primary RFCD Code: 3404 - Econometrics

New Perspectives on Australian Economic History: Geography, Institutions and Major Episodes

ARC Discovery Project DP0772302 (2006 for funding commencing in 2007)

This project will contribute directly to an improved knowledge of the determinants of the structure of economic activity, and macroeconomic performance and economic growth in Australia. Having a better understanding of the main influences on Australian economic growth will assist in the development of policies to promote these outcomes. The project will also make a significant addition to international knowledge in the field of new comparative economic history by adding an extra body of evidence to cross‑country perspectives on the determinants of national economic performance that draws on Australia's distinctive geography and institutions. Finally, the project will provide valuable research training and skills.

Prof JI Borland; Dr AJ Clarke; Dr RH Hillberry; Dr LL Uren
2007: $65,000
2008: $95,000
2009: $65,000
Primary RFCD Code: 3403 – Economic History and History of Economic Thought

New Econometric Evidence on the Roles of Socio Economic Characteristics and Lifestyle Choices in Determining Child and Adult Health Outcomes

ARC Discovery Project DP0770354 (2006 for funding commencing in 2007)

This research is directly relevant to the National Research Priority 'Promoting and Maintaining Good Health'. It will provide detailed information on issues such as the extent of socio‑economic differentials in child and adult health, the role of income redistribution in reducing health inequalities, the effectiveness of the national health system in protecting the health of children from the poorest families, and the role of lifestyle choices in determining health outcomes. Attention will be paid to the effects of alcohol consumption, smoking, exercise and diet in the context of adult and childhood obesity. There will also be new insights on the relative importance of 'nature' versus 'nurture' in determining child health.

A/Prof M Shields
2007: $45,000
2008: $37,000
2009: $50,000
Primary RFCD Code: 3402 – Applied Economics

An Econometric Analysis of Labour Market, Health and Educational Consequences of Cannabis Use

ARC Discovery Project DP0770580 (2006 for funding commencing in 2007)

This research will provide comprehensive empirical knowledge about the linkages between cannabis use, health, education, employment and earnings in Australia. Understanding these linkages is important because although cannabis is a commonly used drug, it is unclear how its use impacts on these important aspects of overall wellbeing and productivity. The knowledge gained from this research will contribute towards designing policies that encourage Australians to make choices that lead to positive pathways, so that they may achieve healthy lifetime outcomes. Productive and healthy outcomes for individuals will contribute to healthy economic outcomes for Australia.

Dr J Williams; Dr CL Skeels; Prof JC van Ours; Dr RL Pacula
2007: $100,000
2008: $90,000
2009: $100,000
Primary RFCDCode: 3404 – Econometrics

DISCOVERY ARC GRANTS AWARDED TO OTHER INSTITUTIONS WITH FACULTY CO-INVESTIGATORS

Higher Order Moment Contagion Testing: Implications of the US Subprime Mortgage Crisis for Australia

ARC Discovery Project DP0985783 (2008 for funding commencing 2009)

Even though crises are usually short lived, the long term implications of changes in asset values may be profound, particularly for superannuation assets. Implications of financial crises are also profound for institutions such as the RBA who change policy to achieve domestic objectives. The understanding of how internationally based financial crises affect Australia is important particularly when domestic inflationary pressures would appear to precipitate the need for the RBA to take the opposite policy stance to that prevalent of central banks internationally. This proposal highlights these relationships to provide insights into portfolio allocation decisions and provides information to facilitate well founded decisions by policy makers.

Dr RA Fry; Prof VL Martin; Dr LC Tang
2009: $130,000
2010: $90,000
2011: $90,000
Primary RFCD: 3404 - ECONOMETRICS

Bayesian Inference for Welfare Comparisons of Income Inequality and Poverty

ARC Discovery Project DP0771334 (2006 for funding commencing in 2007)

The major expected outcome of this research is an array of techniques for making welfare comparisons involving income inequality and poverty within a framework of Bayesian inference. Various applications of the techniques are expected to yield useful information on inequality comparisons over time and space and on changes in the level of poverty.

Dr D Chotikapanich; Prof WE Griffiths
2007: $65,000
2008: $53,236
2009: $55,000
Primary RFCD Code: 3404 - Econometrics
Administering Organisation: Monash University

Estimation and Inference in Weakly Identified Models

ARC Discovery Project DP0771445 (2006 for funding commencing in 2007)

Economic and social systems are made up of interacting components leading to complex structures that are difficult to predict and manage. Consequently policy analysis and decision‑making must be informed by statistical analysis of data. In many situations the informational content of observations is minimal; examples of such situations are found in the areas of education, health, finance and various aspects of macroeconomic analysis. This project aims to develop methods of estimation and inference that make more efficient use of the information available in data. This will lead to more precise statistical analyses, resulting in a clearer understanding of economic and social systems, and better informed policy analysis and decision making.

Prof DS Poskitt; Dr CL Skeels; Dr G Forchini
2007: $100,000
2008: $80,000
2009: $100,000
Primary RFCD Code: 3404 – Econometrics
Administering Organisation: Monash University

Auctions of Standing Trees

ARC Linkage Project LP0990130 (2008 Round 2 for funding commencing in 2009)

This project is critical to the ecological well‑being of Australia. Standing trees are extremely important in Australia because they prevent soil erosion and stabilize water tables; their location influences fire risks. Much timber is sold at auction. While it is possible and desirable to learn how other nations use auctions to sell standing trees, information from those locales needs to be used with care when adapting it to the Australian experience. The project will use state of the art theory and methods to implement novel public policy. It will also develop expertise necessary to implement modern economic methods in environmental policy settings.

Prof HJ Paarsch; Prof J Rust; Mr GC Stoneham; Mr M Eigenraam; Dr V Nemes
2009: $ 27,950
2010: $ 41,020
2011: $ 26,140
2012: $ 26,140
2013: $ 23,070
2014: $ 10,000
Primary RFCD Code: 3402 - Applied Economics
APA(I) Award(s): 1
Collaborating/Partner Organisation(s): Victorian Department of Sustainability and Environment

LINKAGE ARC GRANTS AWARDED TO OTHER UNIVERSITY OF MELBOURNE DEPARTMENTS WITH FACULTY CO-INVESTIGATORS

Understanding Cycles in Mineral Commodity Price, a Market Model with Uncertainty

ARC Linkage Project LP0882686 (2006 Round 1 for funding commencing in 2007)

Mining accounts for more than 8% of Australia's GDP, and almost 50% of Australia's total merchandise exports. Understanding phenomenological mechanisms for price fluctuations and using our dynamic price model can help determine better timing of investments in mining infrastructure. This knowledge will help Australia benefit from the upside of commodity 'cycles', super or not. The market model that will be developed in this project can be used to assist in better planning for commodity cycle upside, improving the overall efficiency of capital utilisation in the long term.

A/Prof FJ Vazquez-Abad; Prof D Dufresne; Dr M Menabde; Prof A van den Nouweland
2008: $77,000
2009: $75,000
2010: $88,000
Primary RFCD Code: 3402 – Applied Economics
Collaborating/Partner Organisation(s): BHP Billiton
Awarded to the Department of Mathematics and Statistics