#14 December 2006 - Melbourne Institute News

Melbourne Institute News December 2006 ISSN 1442-9500 (print)

ISSN 1442-9519 (online)

Print Post Approved PP381667/01204

Issue 14

A Message from Our Director 2006 has been an exciting and productive year for the Melbourne Institute. To a large extent this reflects the enthusiasm and dedication of all staff. In this report I note some of the activities.

Women Rare among Long Hours Workers Women are relatively rare among long hours workers according to new research based on data from the HILDA Survey.

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High Interest Rates Kill Young, Innovative Companies A new study from the Melbourne Institute has found that higher interest rates are likely to have adverse effects on the success of young, innovative companies.

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2007 University Rankings The University of Melbourne is once again placed highly according to the latest University Rankings study

by Professor Ross Williams and Dr Nina Van Dyke.

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The fourth Economic and Social Outlook Conference, ‘Making the Boom Pay’, jointly organised by the Melbourne Institute and The Australian was held at the University of Melbourne on 2 and 3 November. Over 375 people attended, and 37 papers were presented. Some of the key points made are as follows.

While current high commodity prices are expected to fall in the future when supply catches up with demand, sustained rapid economic growth in the world economy, and especially in China and India, will continue to support rapid growth of the resources sector. Mining sector expansion, together with increased global competition in the labour intensive and low technology manufactures and services, will bring pressures on other parts of the economy to adjust. The commodity boom, along with improvements in macroeconomic policies and the extensive microeconomic reforms of the 1980s and 1990s, contributed to a 25 per cent increase in average real per capita incomes over the last decade.

These benefits have been widely spread, although there are notable areas of continuing disadvantage, including indigenous Australians, and over 700,000 children living in homes where there is no employed parent.

Some of the key policy challenges for the future to sustain prosperity and to provide equity of opportunity for all include: education at pre-school, school and tertiary levels; the funding of, and more efficient supply of, health and aged care services; a better balancing of regulations in facilitating market competition and targeting

www.melbourneinstitute.com Melbourne Institute of Applied Economic and Social Research - Page 1

A Message from Our Director documented areas of market failure; and reformulating policy strategies for water, greenhouse gases and urban congestion. A recurring theme of the conference was the critical importance of re-thinking more effective federal– state relationships to make progress on the next stage of a microeconomic reform agenda to lift Australian productivity towards world best practice.

The Melbourne Institute Economics Forums held each quarter in Canberra and Melbourne proved popular with excellent audience questions and comments. Topics covered were ‘Reforming the Health Care System: Lessons and Future Directions’, ‘Are Deficits a Problem?, ‘The Dynamics of Economic and Social Change: Insights from HILDA’, and ‘A Skilled Workforce for the Future’.

Quarterly issues of the Australian Economic Review with a good mix of quality articles have been released on schedule. It is pleasing to report that the Review will now be included in the prestigious Social Sciences Citation Index (more in a later article).

(Cont’d)

on time. As a result of a concerted effort over many years, the number and quality of refereed publications have been rising, with most academic staff succeeding in this core objective.

I am delighted to record two specific instances of recognition of staff excellence in research over 2006. Dr Penny Smith was awarded the Chancellor’s Prize for best PhD thesis in the Social Sciences in the University of Melbourne. Associate Professor Guyonne Kalb (with coauthor Denise Doiron of UNSW) was awarded the Best Paper Prize for an article in the Economic Record.

Thank you to all staff, to members of the Melbourne Institute Advisory Board, our funders and customers, and participants in our conferences and forums for their continued support. To all, enjoy the Festive Season and to those taking a break a fun holiday.

The level of research activity funded by commissioned projects, Commonwealth competitive research grants and base support from the University and the Faculty increased over the year. This year, staff were successful in winning four new ARC grants with a total value of $1 million. Commissioned research projects were delivered

2007 HILDA Survey Research Conference The 2007 HILDA Survey Research Conference will be held on 19–20 July 2007 at the University of Melbourne.

The aim of the conference is to provide a forum for the discussion of research based on the Household, Income and Labour Dynamics in Australia (HILDA) Survey.

Attendance at the conference is open to all persons interested in the HILDA Survey and in longitudinal survey research.

Submissions of papers are now being sought.

Contributions towards the travel and accommodation costs of paper presenters will be available. As in past years we hope to be able to cover the cost of an economy airfare and two nights accommodation for all Australianbased presenters (but limited to one per paper).

Conference registration fees will also be waived. Partial subsidies will also be available for a limited number of overseas-based speakers.

For the 2007 conference there will be two submission streams: a refereed paper stream and a non-refereed paper stream. Selection of papers for the refereed stream will be on the basis of full papers while selection of papers for the non-refereed stream will be on the basis of abstracts. All papers, however, will have ‘discussants’ at the conference.

Competition for places is expected to be high, with priority being given to papers that exploit the longitudinal nature of the data. Papers on methods and cross-national comparisons are also welcome.

For further information about submitting papers or attending the conference, please refer to our website www.melbourneinstitute.com.

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Women Rare among Long Hours Workers The study analysed how that mismatch persists and changes over time, and what factors are associated with these changes.

Long hours were set at 50 hours or more per week for this research. Conscripts are people who would prefer not to work long hours, whereas volunteers are working their preferred hours of 50 or more.

‘Particular attention was paid to the roles played by household debt, ideal worker characteristics and gender’ said one of the authors, Professor Mark Wooden, Deputy Director of the Melbourne Institute and Director of the HILDA Survey.

‘The research highlights the importance of distinguishing conscripts and volunteers to understand the prevalence and dynamics of long work hours’ said Professor Wooden.

Women are relatively rare among long hours workers, and especially long hours volunteers, according to new research from the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne.

The results from the study suggest that: (i)

In the report, ‘Long Work Hours: Volunteers and Conscripts’, panel data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey are used to study the prevalence of work hours mismatch among long hours workers.

high levels of debt are mainly associated with conscript status;

(ii) ideal worker types (essentially educated professional and managerial workers) can be found among both volunteers and conscripts, but are much more likely to be conscripts; and (iii) women are relatively rare among long hours workers, and especially long hours volunteers, suggesting long hours jobs may be discriminatory.

You can download a free copy of this report from our website www.melbourneinstitute.com.

Manpower Melbourne Institute Employment Report The Manpower – Melbourne Institute Employment Report provides forecasts of the growth in trend employment for Australia and the states of Victoria, New South Wales, Queensland, Western Australia, South Australia and Tasmania.

The forecasts are based on a time series model which utilises historical information as well as exclusive forward information contained in surveys conducted by the Melbourne Institute and by Manpower. To reflect uncertainty, this report contains both point and interval forecasts of expected employment.

The report will be updated monthly to provide timely ongoing information about the outlook for employment.

For further information on this new report, please check our website www.melbourneinstitute.com for updates.

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Melbourne Institute Wages Report The Wages Report records employees’ (self-reported) wage changes over the previous 12-month period. Unlike other surveys which measure the level of earnings per person, this survey has been designed to capture the growth in wage rates. This series adds to our knowledge about wages and provides a useful alternative to ABS measures of earnings per person and a complement to the labour price index. The report is produced quarterly and around three months ahead of the labour price index.

It also includes a breakdown of wage changes by employment contract type which the labour price index does not. The new industrial relations legislation Work Choices has generated some interest in this section of the report over the past year.

contracts versus those on enterprise agreements. For example, workers on enterprise agreements are generally more likely to receive a pay rise. An average of 77 per cent of workers in this group reported a change in their total pay in 2006, compared with 64 per cent of those on individual contracts. However, those on individual contracts generally reported a larger average increase in their pay packets, which increased by 5 per cent as a group, compared with 3 per cent for those on enterprise agreements.

The reason why wages changed also varied according to the type of employment agreement held. Workers on enterprise agreements cited variations in the basic company pay scale (47 per cent) as the most important sources of wage change in 2006. Those on individual contracts, on the other hand, cited performance loading and bonuses (24 per cent) as the main reason why their wages changed.

Workers on individual contracts seem to be more optimistic about their prospects for wage growth. As a group, they expected their wages to increase by 3 per cent over the coming year, compared with 2 per cent wage growth expected by those on enterprise agreements.

Averaging the responses of all workers surveyed in 2006 provides us with some interesting insights into the different patterns of wage change for those on individual

Australian Economic Review The Australian Economic Review is now included in the Social Sciences Citation Index (SSCI) compiled by the USbased Thomson Scientific. This is tremendous news for the Melbourne Institute, the Faculty of Economics, the University of Melbourne and the economics profession in Australia.

For a journal to be included in the SSCI it must pass a rigorous process of review over a number of issues.

Publications and citations in SSCI-listed journals are the dominant means by which the international academic standing of individuals, departments and institutions

in the social sciences are judged. The database is a key component of the two major international rankings: those compiled by Shanghai Jiao Tong University and by the Times Higher Education Supplement. Inclusion in the SSCI will also further raise the number and quality of submissions to the Australian Economic Review—some researchers will submit only to journals included in the SSCI. The Australian Economic Review December issue begins with an article by L. Alan Winters entitled ‘International Trade and Poverty: Cause or Cure?’ Amongst the other pertinent articles, this issue pays particular attention to the economics of sport.

The Australian Economic Review can be subscribed to online at www.blackwellpublishing.com/aere.

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High Interest Rates Kill Young, Innovative Companies A new study from the Melbourne Institute has found that higher interest rates are likely to have adverse effects on the success of young, innovative companies.

prices all had separate and additive negative effects on business closures.

‘Losing the most innovative companies not only reduces employment opportunities, but also undermines the long-term competitiveness of the Australian economy’ according to Dr Webster.

‘Our findings confirm case studies from overseas that suggest young companies are more innovative than established companies. Young companies are also much more sensitive to macroeconomic conditions, such as the interest rate.’

In a study of over 250,000 Australian companies from 1997 to 2003, economists Dr Paul Jensen, Dr Hielke Buddelmeyer and Associate Professor Elizabeth Webster from the Melbourne Institute found that young companies—those under seven years old—were more prone to failure than more established companies.

However, they also found evidence that young companies are more innovative.

The working paper is entitled ‘Innovation, Technological Conditions and New Firm Survival’ and is available for free downloading at www.melbourneinstitute.com.

More specifically, they found that declines in aggregate demand, rises in interest rates and falls in stock market

Best Paper Prize

ARC Discovery Grant Successes

The Melbourne Institute and its staff would like to congratulate Associate Professor Guyonne Kalb for her recent prize from the Economic Society of Australia.

Guyonne was awarded a prize for having contributed the best paper of 2005 in the Economic Record, 81(254), 215–36. She won this prize jointly with Dr Denise Doiron from the University of New South Wales. The paper, entitled ‘Demands for Child Care and Household Labour Supply in Australia’, is available for download from our website.

The Melbourne Institute was very successful in the recently announced ARC Discovery Grants, with the following staff successful in obtaining funding:

Guyonne Kalb joined the Melbourne Institute in January 2001 and is involved primarily in research in the Labour Economics and Social Policy research program. Guyonne has a PhD (econometrics) from Monash University and a Master’s degree in econometrics from Erasmus University Rotterdam (Netherlands). She was most recently employed at Monash University. Prior to her PhD study, she worked as a researcher in a social insurance administration office in the Netherlands from 1989 to 1994.

Associate Professor Guyonne Kalb (with Professor John Creedy, Department of Economics), ‘The Effects of the Tax and Social Security System on Labour Supply and Social Welfare’, funding of $345,000 over three years; Professor Guay Lim (with Associate Professor Greg Schwann and Dr Qi Zeng, Department of Finance), ‘Consumption, Financial Wealth and Housing Wealth over the Long Run’, funding of $194,011 over three years; Professor Tony Scott and Dr Paul Jensen (with Associate Professor Helena Britt, Faculty of Medicine, The University of Sydney), ‘Blended Payment Systems for Doctors: Evaluation of an Experiment’, funding of $165,000 over two years; and Dr Yi-Ping Tseng (with Associate Professor Garry Barrett, School of Economics, University of New South Wales and Professor Tom Crossley, Department of Economics, McMaster University), ‘Understanding the Saving Behaviour of Australian Households: Private Retirement Provision and the Policy of Forced Saving’, funding of $300,000 over three years.

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2007 University Rankings

by Professor Ross Williams and Dr Nina Van Dyke

The University of Melbourne is placed highly in the University Rankings by broad discipline categories according to research undertaken by Professor Ross Williams and Dr Nina Van Dyke. Presented below is an executive summary of their findings.

While the choice of university by undergraduates may be based heavily on the standing of an institution as a whole, for others, such as PhD students and researchers, standing in the discipline is often more important.

In previous work we rated Australian universities as single entities using as the criterion, ‘international academic standing’. In the full paper we extend our work to the discipline level.

The seven disciplines or groupings of disciplines that we evaluate are Arts and Humanities; Business and Economics; Education; Engineering; Law; Medicine; and Science.

We evaluate academic standing using both qualitative and quantitative measures. We obtained qualitative rankings and ratings by surveying leading scholars in the fields, both within Australia and overseas. The quantitative data relate to research performance, research training and teaching.

In the surveys, we asked the scholars to both rate the international academic standing of their discipline in each Australian university where it is taught, and to rank the top five universities. We asked respondents in each discipline to place each university in one of five categories: comparable to top 100 in world; comparable to top 101–200 in world; comparable to top 201–500 in

Table A: Top Rankings in Surveys and Performance Measures Humanities

Business and Economics

Education

Law

Survey

Performance

Survey

Performance

Survey

Performance

Survey

1 2 3 4 5 6 6 8 9 9 11 12 12

1 2 3 4 5 6 7 8 9 10 11 11

1 2 3 4 5 6 7 8 9 9 11 12

1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4 5 6 7 7 9 10 10 10 10 10

1 Queensland 2 Melbourne 3 Monash 4 Curtin 5 Sydney 6 QUT 7 La Trobe 8 Deakin 9 UWS 10 Griffith 11 ECU 12 Adelaide 12 USA 12 Murdoch

1 2 2 4 5 6 7 8 9 10 10 12 12

ANU Melbourne Sydney Monash Queensland La Trobe UNSW UWA Adelaide Macquarie Griffith Flinders Tasmania

ANU Melbourne Sydney Monash Queensland UNSW La Trobe UWA Macquarie Flinders Adelaide UNE

Melbourne UNSW Sydney ANU Monash Queensland UWA Macquarie Adelaide UTS QUT La Trobe

Engineering

Melbourne UNSW ANU Monash Queensland Sydney UWA UTS QUT Griffith Macquarie Curtin

Melbourne Monash Sydney Queensland QUT Deakin Curtin UWA Macquarie Griffith UNSW USA UTS Wollongong

Medicine

Science

Survey

Performance

Survey

Performance

Survey

Performance

1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4 5 6 7 8 9 10 10 12 12 12

1 2 3 4 5 6 7 8 8 10

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10 11 11

1 2 3 4 5 6 7 8 9 10 11 12

Melbourne UNSW Sydney Monash Queensland ANU UWA Newcastle Adelaide RMIT QUT Wollongong

UNSW Sydney Melbourne Queensland Monash ANU Newcastle UWA Wollongong Adelaide QUT Curtin Griffith UTS

Melbourne Sydney Monash UNSW Adelaide Queensland ANU Flinders UWA Newcastle

Melbourne Sydney Queensland Monash UNSW UWA Adelaide ANU Flinders Newcastle

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ANU Melbourne Sydney Queensland UNSW Monash Adelaide UWA Macquarie JCU La Trobe Tasmania

ANU Sydney Melbourne Queensland UNSW UWA Adelaide Monash Tasmania JCU Macquarie Murdoch

Melbourne ANU Sydney UNSW Monash Queensland UWA Adelaide Macquarie Griffith QUT Tasmania Bond

world; not comparable to top 500 in world; and don’t know well enough to rate.

In Table B, we combine the international ratings obtained from the surveys with the overall performance measures to list the disciplines considered to be in the top 50 and top 100 in the world.

We also asked respondents to state whether they considered their top five ranked universities to be comparable to the top 25 or top 50 in the world.

The total number of responses was 543, which we convert into four indexes (ratings and rankings by both domestic and overseas scholars), giving the top university in each index a score of 100. We combine the separate indexes into a single series using equal weights for the four components.

We then compare the survey results with direct measures of performance: publications and citations from Thomson Scientific, academy membership, NHMRC funding and ARC project success, doctoral completions, SSRN downloads, student entrance scores, student evaluations, and staff–student ratios. (Not all data are available for all disciplines or for all of the 39 universities we study.) For each performance measure we convert the data to index form, with the best performing institution given a score of 100. We obtain an overall measure of performance by averaging the scores. (We do not calculate a measure of overall performance for Law owing to the lack of suitable data on publications.)

We find that the survey results and the overall performance measures are broadly consistent, with correlation coefficients of 0.86 for Education, 0.93 for Medicine and 0.95–0.96 for the other disciplines. In Table A, we compare the list of the top 12 universities in each discipline (top 10 in Medicine) based on the survey results with the lists based on the overall performance measures.

On the basis of the survey results, we find 23 cases of discipline groups being in the top 100 in the world; we have added to the 23 the only two cases in which the survey results were inconsistent with the performance measures. These two additions were for Education and Medicine at the University of Queensland, a university which typically ranks lower in the surveys than in the performance measures. The standout performers using both datasets are Medicine at the University of Melbourne and Science at the Australian National University.

Whereas there is a high correlation between the various measures of research performance and the survey results, these measures have a low correlation with student evaluations and staff–student ratios.

Our study shows that there is a high correlation between the different research measures and between peer opinion and research measures. If correlations are high then the simplest and cheapest methods for measuring research performance are preferred. There are lessons in this for governments trying to develop research measures for the purpose of allocating funds.

A copy of the full report is available from our website www.melbourneinstitute.com.

Table B: World Class Performers World Rank

Humanities

Business

Top 50

ANU Melbourne

Melbourne

Economics

Education

Engineering

Law

Medicine

Science

Melbourne Sydney** UNSW

ANU Melbourne Sydney

Melbourne

ANU

Top 51–100

Sydney

UNSW

ANU Melbourne

Melbourne Queensland*

ANU Monash Queensland

Monash Sydney

Melbourne Sydney

# responses

81

75

50

61

74

60

86

56

Universities are included if at least 40 per cent of respondents classify in the range. Exceptions are those marked with one asterisk, which have been added on the basis of performance data, and that marked with two asterisks, which has moved up a category on the basis of performance data. Universities are listed alphabetically in each range.

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Recent Melbourne Institute Working Papers 27/06, ‘Long Work Hours: Volunteers and Conscripts’, Robert Drago, Mark Wooden and David Black.

26/06, ‘Innovation, Technological Conditions and New Firm Survival’, Paul H. Jensen, Elizabeth Webster and Hielke Buddelmeyer.

25/06, ‘Parallel Imports, Market Size and Investment Incentive’, Alfons Palangkaraya and Jongsay Yong.

24/06, ‘Designing Choice Experiments with Many Attributes: An Application to Setting Priorities for Orthopaedic Waiting Lists’, Julia Witt, Anthony Scott and Richard H. Osborne.

23/06, ‘Dynamic Properties of Income Support Receipt in Australia’, Yi-Ping Tseng, Ha Vu and Roger Wilkins.

22/06, ‘Inflation Targeting, Learning and Q Volatility in Small Open Economies’, G. C. Lim and Paul D. McNelis.

21/06, ‘Fiscal and Current Account Balances in a Model with Sticky Prices and Distortionary Taxes’, G. C. Lim and Paul D. McNelis.

20/06, ‘Bayesian Inference for a Threshold Autoregression with a Unit Root’, Penelope Smith.

Working papers can be downloaded for free from www.melbourneinstitute.com.

New Research Fellows Sung-Hee Jeon Sung-Hee commenced at the Melbourne Institute in September 2006. She is currently involved in the Labour Economics and Social Policy research program as a Research Fellow. She is an applied microeconomist, specialising in the areas of labour economics and health economics. She has a particular interest in the analysis of the labour supply of women and has conducted research on the effects of tax and public policies on labour supply.

Chin Nam Low Chin joined the Melbourne Institute in May 2006 as a Research Fellow with the Applied Macroeconomics research program after completing his PhD in econometrics from Monash University. Before embarking on his academic career Chin had spent almost 20 years in the private and public sectors holding various senior positions. His research interests are in the forecasting of macroeconomic and financial time series using various non-linear models, such as time-varying regime switching models and continuous time models with jump diffusion processes.

Seamus McGuinness Seamus is an applied labour economist who obtained his PhD in 2003 from Queen’s University Belfast, writing his thesis on graduate overeducation in the Northern Ireland labour market. Seamus joined the Melbourne Institute in June 2006, previously having worked as a Senior Research Economist for the Economic Research Institute of Northern Ireland. His research interests are focused around the economic returns to schooling, firm-level impacts of skill shortages, low pay, job insecurity and small business economics.

Melbourne Institute News Views expressed by the contributors to Melbourne Institute News are not necessarily endorsed or approved by the Melbourne Institute. Neither the Melbourne Institute nor the Editor of Melbourne Institute News accepts any responsibility for the content or accuracy of information contained in this publication. Editor: Laura A’Bell, tel: 8344 2154, fax: 8344 2111, email: labell@unimelb.edu.au. Sub-Editor: Nellie Lentini. Contributors: Professor John Freebairn, Dr Penny Smith, Dr Nina Van Dyke, Dr Elizabeth Webster, Professor Ross Williams, Professor Mark Wooden.

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