The surprising impact of innovation on reducing climate change

New research by the Department of Management’s Dr Fred A. Yamoah and colleagues explores the relationship between innovation input, governance and carbon dioxide emissions.

Picture of a wind farm

There is no doubt that the humanitarian and economic impact of climate change is a matter for global concern. However, prior research tells us that it is emerging and developing economies that are likely to be hit hardest by the impact of global warming.

In their 2019 report, the Intergovernmental Panel on Climate Change (IPCC) found that emerging and developing economies, with their heavy reliance on agriculture, forestry and tourism, were more at risk from the adverse impact of climate change than more developed economies. Indeed, the IPCC found that every one-degree centigrade increase in temperature would lead to a 1.3% drop in economic growth in an emerging economy.

What role does innovation play in the fight against climate change?

Typically, the fate of countries in this position has been viewed somewhat fatalistically, with little known about what can be done to mitigate the damage caused by the poor climate choices of more developed countries. However, since innovative technologies are known to have a positive impact on climate change factors by conserving energy and reducing emissions, we wanted to know whether increased innovation input could support developing economies in the fight against climate change.

Our study involved an analysis of data from the World Bank database on 29 emerging countries over the period from 1990 to 2018. My colleagues Godfred Adjapong Afrifa, Gloria Appiah (both Kent Business School), Ishmael Tingbani (Bournemouth University) and I examined whether investment in cutting-edge technologies could help address climate change problems in emerging economies, and how this relationship is supported or mitigated by governance factors.

The impact of governance

Why is it important to consider governance alongside innovation and climate change? First of all, it is good for business: stakeholder theory tells us that organisations that please their stakeholders by following ethical norms of fairness, trustworthiness and respect are likely to see improved overall performance in the long term.

When it comes to climate change targets, governments and international governing bodies such as the EU or ECOWAS are among the most critical stakeholders, as they are more likely to take a long term view and possess the necessary regulatory powers to ensure best practices are upheld.

How innovation benefits emerging economies

The introduction of innovative technologies and practices can benefit emerging economies in a number of ways. For farmers, genetic technologies can develop resilient crops that adapt to environmental challenges in agriculture. New technologies also typically conserve energy and reduce harmful fuel emissions.

Looking at the data, our results suggest that emerging countries with high innovative competencies reduce climate change problems by approximately 26.8%, with a 10% increase in cutting-edge technology.

While these findings show the dramatic impact of innovation on mitigating the negative effects climate change, it is important to note that the positive results were moderated by governance factors, as the quality of governance influences countries’ investment in innovative technologies towards curbing environmental damage.

Contrary to the typically deterministic view of climate change, our results suggest that emerging economies’ innovation efforts could have a significant impact on national and global success in the fight against climate change.

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The economics of public sector employment

Our Dr Pedro Gomes has been researching public employment for nearly fifteen years. He shares why it is so important to understand how the public sector works and the key findings from his research.

Public employment is a significant consideration in any national economy. In developed countries, public employment makes up 15-30 percent of total employment and represents the large majority of government consumption. In the US, for example, the government spends 60 percent more on general government employees than on the purchase of intermediate goods and services.

The public sector also operates according to different rules than the rest of the economy, as governments do not face the same competitive forces, nor have the same objectives as private sector firms.

Considering that the public sector is responsible for delivering many key services in our society, from education to healthcare, it is essential to have a good understanding of how its employment operates. The recent COVID-19 pandemic has again put focus on the importance of having a modern public sector, with an employment force prepared to face difficult, unpredictable and unlikely crises, but its aftermath with high public debt, also puts emphasis on the costs of the public sector workforce.

Below are three of the key findings from my research into this area.

Governments hire disproportionately more educated workers

In the paper Public Employment Redux, my colleagues Pietro Garibaldi, Thepthida Sopraseuth and I explore the phenomenon whereby governments hire more educated workers than the private sector.

We noticed that governments hire very few workers with low qualifications. In the US, for example, one third of workers have a masters or a PhD qualification, and one third of these work for the government.  We documented empirical evidence for this education bias in the US, UK, France and Spain.

There are a few different explanations for this trend:

  • The government needs more educated workers to provide its highly technical goods and services, such as healthcare, education and the judicial system.
  • Higher educated workers take more of a wage penalty to work in the public sector, so are relatively less expensive to hire.
  • Public sector jobs that require low qualifications pay more than similar level jobs in the private sector, so they attract workers with more qualifications.

Within our model, we found that the technological skills needed for the public sector was the main driver of the disproportionate representation of educated workers, but that wage setting and excess underemployment explain 12-15 percent of the education bias.

Unlike other sectors, the government is able to set wages more freely, as the cost is financed from tax revenue. If the government chooses to pay very high wages, too many people will choose a skilled role in the public sector as their first choice. However, if wages are too low, too few workers will want to join the government.

In reality, a balance is needed, so the government can always attract the workers it needs, without leading to underemployment in the public sector.

Nepotism in hiring practices allows friends and family to ‘jump the queue’ for government roles

Public sector hires are often based on nepotism: Scopa (2009) found that the probability of working in the public sector is 44% higher for individuals whose parents also work in the public sector, while Colonnelli et al. (2020) found that politically connected individuals in Brazil enjoy easier access to public sector jobs.

In my research into this topic with Andri Chassamboulli, we suggest that workers can use their connections to find jobs in the public sector faster. We created a search and matching model with private and public sectors to test this theory.

Surprisingly, we encountered some positive side effects to nepotistic practices. Conditional on high public sector wages, our findings suggest that hiring through connections reduces unemployment, as people who do not have connections will instead find roles in the private sector. Conversely, if the government sets the optimal wage possible for the successful running of the public sector, nepotism is reduced.

We conclude, therefore, that nepotism is a symptom of a problem in the public sector, rather than the disease, and the problem is created when wages are set too high.

Women prefer working in the public sector

In most countries, the public sector hires disproportionately more women than men. My colleague Zoë Kuehn and I developed a model to try to make sense of this imbalance.

Our findings show that the gender imbalance in the public sector is driven by supply, meaning that women self-select to work in the public sector more than men. One explanation for this is that the type of job carried out by the government is coincidentally the type of work preferred by women, such as healthcare and education. However, even discounting these sectors, women’s public employment remains 20-25% higher than men.

This remaining imbalance can be explained by the different characteristics of public and private employment. The gender wage gap and working hours are both reduced in the public sector, making this an attractive choice for women who may be factoring family commitments alongside work opportunities in their choice of employment. Alongside reduced working hours, the public sector offers additional benefits such as more sick days, flexible hours and employer-provided childcare, ensuring an overall better work-life balance in the public sector.

 

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Decision making under uncertainty: Ambiguity preferences

David Schröder, Associate Professor in Finance at Birkbeck’s Department of Economics, Mathematics and Statistics, and Elisa Cavatorta, Associate Professor in the Department of Political Economy at King’s College London, have developed a questionnaire to measure how members of the public make decisions under uncertainty. Take the survey online to find out your ambiguity preferences.

Cartoon of a figure at a crossroads

This article was originally posted on the Research Outreach blog and is licensed under a Creative Commons Attribution 4.0 International License.

Every decision and action that we take in life is associated with a degree of uncertainty; whether we cross a road, what we invest our money in, what career we follow and the thousands of other decisions that we make on a daily basis. Over the years, economists and psychologists have studied different factors that affect how individuals make decisions under uncertainty so that they can better understand what drives the behaviours that we see in the world.

One of the underlying factors that explain individual behaviour under uncertainty is the different degree of tolerance anyone has for situations of uncertainty, in other words their individual preferences. To apply the behavioural models proposed in the scientific literature, it is important to accurately measure these preferences driving our behaviour. Elisa Cavatorta, Associate Professor at the Department of Political Economy at King’s College London, and David Schröder, Associate Professor in Finance at Birkbeck, University of London, noticed that existing approaches to measure uncertainty attitudes are overly complex and therefore rarely used to measure preferences outside economic laboratories. To improve the ability to measure uncertainty attitudes and make their measurement more accessible, they designed a new questionnaire to facilitate the assessment of the preferences guiding everyday decision making under uncertainty.

Understanding risk and ambiguity

The most common factor that people associate with decision making under uncertainty is risk, and how tolerant an individual is towards risky scenarios. In a risk-based situation, we have a sense of the likelihood of the different outcomes that our decisions could deliver. For example, if you roll a fair dice, you know that you have a one in six chance of getting a specific number. Likewise, outcomes of recurring situations may involve known likelihoods: if your parent cooks their usual signature dish, you know the chances that it tastes delicious.

In many situations however, there is an additional degree of uncertainty about the potential outcomes of our decisions and actions. For example, if you hear that the dice that you are about to use has a flaw that means it will not roll fairly, you can no longer accurately predict the likelihood of rolling the number four. If a stranger cooks for you, the probability that the dish is delicious can be vague. Thanks to the work of Knight (1921) and Ellsberg (1961), this degree of uncertainty over vague or unknown probabilities is referred to as ambiguity. Different people have a different “taste” for the lack of accurate information about the probabilities of given outcomes and will respond differently.

Our preferences towards ambiguity guide the decisions that we make under uncertainty. There isn’t an optimal decision that fits all. Optimal decisions for everyone depend on one’s own preferences. If we can accurately measure ambiguity preferences, then we have a powerful insight into human behaviour, that is, how people make choices subject to limited information.

Measuring ambiguity preferences

Traditionally, ambiguity attitudes have been measured within a controlled economic laboratory environment. Ambiguity tests have focused on specific decision tasks involving known and unknown probabilities, often complex to understand and requiring lengthy explanations. This method has produced very accurate results; however, the complexity of these tasks makes them impractical to roll out on a large enough scale to understand the decision-making behaviours that we see in the general population.

Elisa Cavatorta and David Schröder researched ambiguity preferences in great detail. They started from the results in a laboratory setting, but the researchers were motivated to find a more practical way of measuring ambiguity preferences outside of these experiments. They knew that an online survey questionnaire or a questionnaire that could be conducted by telephone would be a far more practical mechanism for collecting data from much larger groups of participants and be more practical for researchers who conduct field studies.

Survey design

Cavatorta and Schröder have designed a simple survey questionnaire, which accurately measures ambiguity preferences. Their work has been inspired by various studies that recommended using surveys to measure other economic preferences. In their 2019 paper, they develop a measurement for ambiguity preferences, adding to existing ones designed to elicit preferences for risk, trust and impatience.

The research team developed their questionnaire using a sample of 121 students from various colleges of the University of London. The idea was to find the best combination of survey questions that would most accurately predict ambiguity preferences elicited with the well-established approach in the laboratory setting. The challenge was to find the best combination of these survey questions. The research team selected around 50 possible candidate survey questions of various types. Some of these questions are short thought-experiments where participants make choices in some hypothetical games (e.g. selecting the preferred option between one unknown, i.e., ambiguous, probability and one with known probability, i.e. risky). Some questions are attitudinal questions from the psychology literature, in which participants assess how much they like or dislike a situation.

The researchers considered the predictive power of all combinations of the candidate questions. Using a selection process that evaluates all possible combinations and then selects the best predictors is a data-driven method that minimises forms of bias in the selection process. The result is a five survey-item questionnaire that provides an individual ambiguity preferences score that correlates well with the ambiguity preference score that would come out in a laboratory setting. This means the survey questionnaire is an accurate substitute when measurement in the laboratory is impractical or unavailable.

Possible uses of the new measurement

The professors recommend their measurement whenever incentivised experiments in a laboratory are not feasible, for example, when researchers need to gather ambiguity preferences of a large number of participants, field-studies, or in scenarios where time or money is limited.

This questionnaire provides the opportunity to conduct large-scale studies into the impact of ambiguity preferences on economic and social behaviour. Given the uncertainty surrounding many decisions in every-day life, applications of the measurement can be wide-ranging. The current pandemic demonstrates people have different preferences for ambiguity and this guides different reactions and health behaviour. Another application concerns the financial services industry: the industry has traditionally focused on risk preferences when recommending the most suitable investment options to its clients. Risk preference assessments help us to understand one element of what makes an investment a good match for an individual. However, investments often involve unknown risks (i.e. ambiguity), so the measurement can assist financial services professionals to better tailor their product recommendations to the client’s tastes and needs.

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Hypermasculine organisations and barriers to women’s career progression in Nigeria

Dr Vanessa Iwowo shares the findings from her latest research into gender inequality in the workplace in Nigeria.

Discussions around the barriers to women’s career progression are not new to the public agenda, especially during the COVID-19 pandemic, which has highlighted the unequal division of domestic labour and caring responsibilities in the home.

However, the majority of research in this area has been developed in the global north and thus overlooks the significance of specific economic, social and cultural conditions that exist in other contexts.

With my colleagues Toyin Ajibade Adisa (University of East London), Chima Mordi and Ruth Simpson (Brunel University), I sought to uncover the specific barriers facing women’s career progression in Nigeria.

Why Nigeria? Often referred to as the “giant of Africa”, the country is notable both for its economic prosperity and entrenched patriarchal values. The barriers to women advancing their careers in Nigeria could have wider implications for gender equality in the global south.

Gender inequality and Social Dominance Theory

Despite legislation which supports gender equality and Nigeria’s participation in international agreements to eliminate gender discrimination, the problem persists. Prior research into 190 Nigerian companies found that just 10.5% of board seats are held by women. In the civil service, where women account for 24% of the workforce, they hold less than 14% of overall management positions.

Examined through the lens of Social Dominance Theory (SDR), which purports that social groups are hierarchically positioned, we see how cultural ideologies and institutional discrimination work together to produce group-based inequality. A gender-based hierarchy dominates, where men are consistently favoured, gaining disproportionate positive social and material value at the expense of the subordinate group, women.

This group-based oppression is driven by systemic individual and institutional discrimination and supported by stereotypes, attitudes and beliefs which dictate the norms that govern institutions. These hierarchies are especially hard to break down as they are embedded in social systems.

Challenges to career advancement faced by women in Nigeria

Entrenched stereotypical attitudes about the role of women in Nigeria means that management and leadership are viewed as the exclusive domain of men, while women are seen to belong in the domestic sphere.

This hypermasculine context only serves to exacerbate the barriers faced by women in their careers. In interviews with 43 women working in the five major administrative capitals of Nigeria, we identified three key barriers to progression at work:

  1. Systemic and excessive male-group-based domination

Every woman that we spoke to identified a bias in recruitment and promotion decisions in their organisation, which inhibits women’s progression to more senior roles. An approach based on merit is overruled by a preference for a male candidate, regardless of capability. What is more, this bias is openly acknowledged, with the allocation of male candidates to senior roles seen as a foregone conclusion.

  1. Corruption and the exchange of favours

The vast majority of women that we spoke to (39 out of 43 interviewees) had personally encountered corruption in the workplace in the form of “godfatherism”, the practice wherein a woman is expected to exchange money or sexual favours for progression in the workplace.

The consequences of godfatherism are both devastating and wide-reaching: either a woman is cut off from career advancement, or she is coerced into a sexual relationship in order to progress. Such is the commonality of this practice, that the promotion of a woman is often associated with this exchange in the eyes of employees.

  1. Domestic responsibilities

The expectation that women will take full responsibility for domestic arrangements is entrenched from a young age, when girls are made to take on household responsibilities while boys are left to play. A few women also reported being overlooked for a university education in the family, due to the assumption that this was an unnecessary expense for them to fulfil their predetermined roles as wives and mothers.

A unique national context

Our research suggests that Nigerian women are being held back in their careers by discrimination and corruption particular to their national context, such as entrenched patriarchal values, assumptions about the role of women and ingrained cultural and religious beliefs.

While male dominance and barriers to women’s career progression are not unique to Nigeria, the way in which patriarchal structures are embedded across all systems and institutions is particular to the national context.

For example, there are some potential commonalities to be drawn between godfatherism and the western #MeToo movement. However, where corruption in the west is widely challenged, godfatherism is normalised. Indeed, it forms part of a wider cultural context in which it is seen as fundamentally “un-African” for a woman to lead.

Aside from denying women the right to self-actualization and economic independence, hypermasculine organisations which exploit and enforce entrenched gender roles are limited by a lack of diversity in the workforce. Social Dominance Theory would suggest that the way to overcome these barriers is through challenging the status quo and “mainstreaming” hierarchy-attenuating attitudes from non-dominant groups. A deeper understanding of these attitudes and how they manifest in the workplace may go some way towards challenging entrenched beliefs and practices and working towards a more equal future.

This blog is based on the paper ‘Social dominance, hypermasculinity and career barriers in Nigeria’ in Gender, Work & Organization.

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