All posts filed under: Research

Heinz and Kraft Merger

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In case you missed it over the summer, Heinz and Kraft announced a merger which will turn them into a single Kraft Dinner and ketchup superpower. Heinz’s shareholders, which includes Warren Buffet’s Berkshire Hathaway, will now own 51% of the company, while Kraft shareholders take the other almost-half. As with any merger of this size, the Competition Bureau took a look to see whether the agreement should be deemed anticompetitive or fair. Long story short, it was not. But The Curious Econ wouldn’t be The Curious Econ if we weren’t curious about the economic rationale behind their conclusion. The Competition Bureau is of course a government regulator, and as such they are usually pretty tight-lipped about the statistical methods and robustness checks they use in their analyses. What is clear though is that they didn’t seem overly concerned about the merger. To begin their analysis, they examined both companies’ products and determined which ones share the same market. Turns out that only barbeque sauce and salad dressing were deemed close enough competitors to warrant a full …

Education in Senegal

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Development economics has many interesting aspects to it but I find the education facet particularly thought-provoking. Maybe its because education, especially at the primary level, is such a fundamental indicator of progress in third-world countries. Considering that the opportunity for education is not a given, and the quality is even more elusive, it’s crucial that whatever limited resources there are should be allocated as effectively as possible. With that I turn it over to the group of researchers who recently looked at whether or not transferring cash from centralized school boards to specific schools improves the quality of primary education in Senegal. Their basic thought is that local school members, teachers, etc, will have a better understanding of what the schools need in terms of resources. They chose Senegal because of a randomized control trial that took place which allocated a certain number of schools to take part in this decentralized funding program, while another group of schools did not. They proceeded to randomly assign surveys and tests to primary school students, some of who were at …

Early Childhood Development in Columbia

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Keeping on the topic of development economics, the Institute of Fiscal Studies researched the impact of an early childhood intervention program in Columbia on the development of cognitive and socio-emotional skills in children. This is another example of the “randomized control trial” setup being used for statistical analysis. The program has many aspects but the one the researchers focus on is the part where the mothers of young children are visited once per week to discuss and simply observe parenting techniques. Econometric analysis is used to produce a model that captures the mothers’ investment in their children’s development, as well as a separate model measuring the child’s accumulation of cognitive and socio-economic skills. The parents are split into treatment and control groups, the treatment ones being those participating in the program while the control groups are those not participating, and they observe the changes in the two models. They find that parental investments in material goods leads to an improvement in cognitive skills for the child, while investments in time with children leads to stronger socio-emotional skills. …

The UK Film Sector

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The economic consulting firm Nordicity partnered with Oldsberg SPI in London to commission a report on the contribution of the domestic film, video games, animation programming, and high-end television industries to the UK economy in 2013. The report is very large so I’ll focus on just the film industry as a specific area of interest. They find that the UK film sector contributes 97 300 full time employees, £3.7b in total gross value, and £1.1b in tax revenue to the economy. The data comes from a wide variety of sources including annual business surveys, employment records, government reports, as well as other surveys done by partner organizations. Out of the four industries studied, film is the largest by a fair margin, and the total value of all the “screen” industries in the UK is around £6.1b (video games was the second largest, then tv, then animation). Interestingly, the largest impacts on gross value came through indirect channels, otherwise known as multiplier effects. These include the value added by outside suppliers such as construction companies who …

UK Event Tickets

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Across the pond, the Competition and Markets Authority (CMA) has helped clean up the market for secondary tickets. Resellers such as StubHub now have to provide information on entry restrictions, the face value of the ticket and any extra charges, a phone number in case something goes wrong, and whether or not the multiple seats you purchased are actually beside each other. The goal is to ensure that the secondary market remains a safe and viable place for customers to buy tickets. The press release has plenty more information on what else the CMA is looking to do to protect consumers in this market. For the record, I’ve used StubHub and Viagogo in London and elsewhere, and think it’s a great way to get access to tickets that are otherwise really difficult to obtain (like a Chelsea football game). Likewise, it’s a smart way for season-ticket holders of all types of events to sell their tickets without going through the hassle and risk of Craigslist or Kijiji. So I’m glad the CMA is actively promoting the …

US Pharma

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The Federal Trade Commission (FTC) released a news bulletin outlining their concerns regarding an acquisition between two large pharmaceuticals, Impax Laboratories and CorePharma. Impax is looking to acquire CorePharma, but the FTC argues that doing so would make the market for dry mouth and liver disease medication anti-competitive. There are only a few existing firms who are in the market to begin with, and CorePharma is one of only a small handful currently capable of market penetration. By acquiring CorePharma, Impax is absorbing this potential source of competition, allowing them to keep prices higher than they otherwise would be. The FTC decided that CorePharma must divest its assets related to medical know-how in this particular market in order for the acquisition to go through. The assets will be sold to an Irish pharmaceutical with operations in the US, and that company will now possess the ability to enter as an independent competitor. Impax and CorePharma still get the merger they desire, and consumers are still protected from anti-competitive prices. If you live in the US and …

NHS Nurses

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A working paper done by the Institute of Fiscal Studies in the UK looks at the relationship between wage levels offered by the NHS (National Health Service) to nurses in the UK and the nurses’ subsequent responsiveness to a change in wages (short run elasticity of labour supply). The purpose of the research is to determine how likely nurses are to seek alternative employment if NHS wages drop, or conversely how many will be likely to join the NHS if they increase wages. The NHS is considered a monopsonist power, which means they are the dominant employer of nurses in the UK (in the same way the military is with respect to soldiers). This means theoretically that the changes in wages should have little influence on the nurses’ employment decisions since they have little alternative options. The research indeed supports this theory, with a 10% increase in wages leading to only a 0.7% increase in the amount of qualified nurses joining the NHS. This represents a strong case of labour supply inelasticity, and the authors note …

Obamacare

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A Stanford University study looks at the way the Affordable Care Act (Obamacare) is distributed across different regions of the country, and how the distribution can affect the welfare of its consumers. Each state is allowed to set the number of geographical regions, or marketplaces, for insurance firms to compete in. The theory is that smaller the region, the less firms there will be in that market. The researchers provide evidence backing up the conventional idea that having less firms in a  market makes it relatively worse for consumers, mainly because the firms are able to exercise their pricing power and charge a higher rate. The study finds those states that have elected to go with very small regions are harming rural consumers more because of their lack of alternatives. Insurance firms are more reluctant to move into a market with so few people. Conversely, the urban regions see large amounts of firm competitiveness, thus driving down insurance premiums for them. The authors conclude that small, rural counties benefit from being in a much larger geographical …

US Utilities

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An article recently published by Charles River Associates (CRA) An article recently published by Charles River Associates (CRA) talks about how major utility companies in some US states should deal with the emergence of solar energy and other micro-renewables as a viable alternative. The key aspect of this lies in the fact that traditional energy sources such as coal and natural gas plants act as a sort of central server for everybody, but solar energy and its similarities are what is known as distributed resources. This is because solar panels can literally be distributed across the state and serve as micro-sized power plants that are suitable for small areas or even single buildings. CRA outlines some of the questions that utilities need to ask themselves with regards to this developing source of power. How could distributed resources impact the demand for centralized power units? How could they impact the customer rate structure for electricity (fixed or more variable prices)? Impact the bottom line of utilities? What is the best way for utilities to build and distribute the new technologies? …

Online Education

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Researchers out of Harvard University recently completed a study which illustrates that  universities who offer online study options are charge a lower rate for that channel of education than what they charge to be on campus. Their study focuses on undergraduate education, mostly at state colleges and other less-selective institutions. The authors find that a 10% increase in the enrolment of online students corresponds with a 1.5% decrease in the price. They note however that the result is only significant for public institutions (state schools) and not the private colleges. They contest that it is because private institutions face stronger nationwide competition for students as opposed to state run schools, so they have less pricing power in the market. The authors also note some issues with regards to their research, the bulk of which are related to the assumption that the quality of online education is as good as classroom education. Other studies they refer to in their paper have done randomized control trials that suggest moving from the classroom to the computer has a negative …