Research

• Old Published work of particular interest
• Long-term research plans.
• Popular Science projects.
• Abandoned projects: please steal.

Published work of particular interest

1. Explorations of welfare and well-being (Ph.D. thesis)

In this book, an attempt is made to show that the economic analysis of self reported levels of satisfaction is meaningful and fills a void in economics. As such, this book incorporates case studies of the determinants of satisfaction with income, termed welfare, and of satisfaction with life as a whole, termed well-being. The case studies looking at welfare are based on Russian data, whereas the case studies looking only at well-being are based on Russian and German data.

The analysis of welfare in Russia in the period 1991-1996 revealed that welfare poverty, which is very low in Western Europe, reached very high levels in 1991 and has not changed substantially ever since. An analysis of the reliability of self reported income levels revealed that it was likely that incomes are substantially under-reported in Russia. If the methodology used is validated, the results indicate that the unreported, ‘gray’ economy, is as big as the reported, ‘official’, economy.
The cold climate affected welfare and well-being negatively in Russia, indicating that global warming is likely to have some beneficial effects on the welfare of Russian individuals.

Russian and German individuals were more likely to intend to change and to actually change aspects of their lives if they were unsatisfied with that area of their lives. Also, they seemed to value and remember those areas of their lives more if they were satisfied with that area. These findings give limited support to the hypothesis that individuals try to maximize well-being. If this hypothesis is true, satisfaction levels could be used as the basis of micro-economics and as the basis of public choice.

no. 196 in the Tinbergen Institute Research Series. Published by Thela Thesis publishers Amsterdam.

2. The effect of climate on Russian welfare and well-being.

Frijters, P. and B.M.S. Van Praag, “Climate equivalence scales and the  effects of climate change on Russian welfare and well-being”,  Climate Change, 39, pp. 61-81.

This paper measures the concepts of welfare and well-being in Russia on the basis of two large Russian household surveys, carried out in 1993 and 1994. Welfare refers to satisfaction with income and well-being refers to satisfaction with life as a whole. This paper investigates how climate conditions in various parts of Russia affect the cost of living and well-being. Climate equivalence scales have been constructed for both welfare and well-being. The method has also been used to examine the costs and benefits of climate change under various scenarios.

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3. Discrimination and job uncertainty.

Frijters, P. “Discrimination and job uncertainty”, Journal of Economic Behaviour and Organisation, 36(4), pp. 433-446.

In this paper I incorporate group behaviour into a model of the labour market and show that discrimination can be the result of competition between coalitions of workers and bosses for jobs. If the probability of correctly assessing the productivity of individual workers decreases, coalition formation on the basis of recognisable characteristics becomes relatively more rewarding than coalition forming on the basis of productivity. I thus identify the conditions under which each individual in the endogenously defined group actively discriminates persons with different recognisable characteristics, independent of productivity.

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4. A three factor search model

Frijters, P. “A three factor search model”, Economics Letters, 64 (1999), pp. 319-324.

A search model is constructed where three different types of workers with complementary skills search each other. With search frictions, wages of identically skilled workers may then differ according to the type of workers they work with. Unemployment can then consist of frictional, structural, induced, and voluntary unemployment.

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5. Fashion cycles

Frijters, P. “A model of fashion and status”, Economic Modeling, 15, pp. 501-517.

This paper presents a model of fashion cycles based on the idea that individuals purchase fashion goods because their displayed status increases with the personal status of other consumers who buy the same good. Fashion cycles occur in the model because demand now is a rising function of future prices: if future prices are high, only rich consumers will buy it in the future and the good will have a higher status value in the future and will be more desirable now, even though demand now is a decreasing function of current price. The time inconsistency problem is solved by repeated cycles which allows for reputation building.
The crucial assumption made is that there is perfect information about the price path of all firms and the average status of the purchasers of each product. This limits possible profits in fashion markets in competition as imitation of price paths is then possible.

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6. Discrimination and expected productivity in a South African clothing firm

Frijters, P. "Hiring on the basis of expected productivity in a South African clothing firm", Oxford Economic Papers, 51, pp. 345-354.
Using information from the personnel files of a South African clothing firm, I explore the in- and outflow of weekly paid workers. These employees form a separate labour market within the company. Data was available concerning both the productivity of current workers, and the characteristics of rejected applicants and fired workers. This makes it possible to identify the characteristics which are screened out at entry and the characteristics that influence productivity. This allows for an empirical analysis of discrimination at job entry.
Hiring decisions were found to be consistent with expected productivity. The observed screening out of African workers at job entry could be explained by statistical discrimination, i.e., the actual productivity of African workers in this firm was found to be significantly lower than the productivity of workers of other ethnic backgrounds. The effect of education on productivity was found to be very small.

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7. The use of subjective information in economics

B.M.S. Van Praag and P. Frijters (1999), “Different data sources for studying behaviour”, in Fase, M.M.G., Kanning, W., Walker, D.A. (eds) Economics, welfare policy and the history of economic thought. Essays in honour of Arnold Heertje, Edward Elgar, Cheltenham UK, pp. 290-309.

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8. A survey of the Leyden method, which is a Dutch school of economists who take self-reported evaluations of individuals as the best way forward to base economics on empirically founded utility functions instead of ad hoc ones chosen for some desirable theoretical property.

B.M.S. Van Praag and P. Frijters (1999), “The measurement of welfare and well-being; the Leyden approach”, in Kahneman, D., Diener, E., Schwarz, N.  (Eds), Well-being: the foundations of hedonic psychology, New York: Russel Sage Foundation, pp. 413-432.

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9. Do individuals try to maximize general satisfaction?

Journal of Economic Psychology, 21, pp. 281-304, 2000.
Analyzed is the hypothesis that individuals try to maximize their life-satisfaction. The approach was to derive empirically testable predictions as to the relationships between intentions, actions, importance weights, and satisfaction levels that would be consistent with the hypothesis, and to test these predictions on a Russian and a German panel data set.

The respondents investigated were more likely to intend to change those areas they are unsatisfied with this period, were more likely to actually have changed those areas they were unsatisfied with last period, and tended to find the areas of their lives they were dissatisfied with less important. The relationships were not very strong though and were more reliable for the German data set than for the Russian data set. The findings therefore give only limited support to the hypothesis examined.

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10. The sale of relational capital through tenure profiles and tournaments

Frijters, P. 2000, ‘The sale of relational capital’, Labour Economics, 2, pp. 373-84.
In this paper, a specific form of human capital is analyzed, relational capital, which consists of matches between market parties. Search and information costs make these matches valuable to both parties. Its peculiarity is that the control over such matches is transferred within firms from those who initially control it to anyone who works with it for a period.
This characteristic allows someone who approaches the end of his working life to sell his relational capital to junior partners. This sale can explain upward sloping tenure profiles and can result in tournaments if juniors are budget constrained and perfect contracting is not possible. The need to keep the amount of relational capital constant implies a generational balanced workforce within each firm.

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11. Interpreting inequality measures based on administrative categories.

Frijters, P. (2001), ‘Interpretation problems with changes in indices based on categorizations’, Economic Letters.
A simple paper in which I argue that categorisations inevitably become less relevant over time. The argument is that researchers will categorisation such that it is relevant at the time of their research. Given a random process through which different categorisations become relevant, discrimination indices based on any initial categorisation will then inevitably show decreases in segregation over time.

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12. The non-parametric identification of lagged duration dependence

Economic Letters, 75(3), pp.289-292.
A small paper with a non-parametric existence proof for the MPH model with 2 durations, no individuals regressors, a baseline hazard and a lagged-duration dependence function.

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13. A break-down of life satisfaction into domain satisfactions.

B.M.S. Van Praag, Frijters, P. , Ferrer-i-Carbonel, A., (2002), ‘Happiness unfolded’, Journal of Economic Behavior and Organisation, forthcoming.
This paper follows on Chapter 5 of my thesis and puts domain satisfactions (job satisfaction, financial satisfaction, health satisfaction, environment satisfaction, housing satisfaction) between general satisfaction and individuals inputs. We find that health and financial satisfaction are the most important determinants of general satisfaction and that income by and large only positively influences financial and job satisfaction. By tracing the effect of inputs via the different routes, we get an idea as to the various avenues in which inputs work.

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Other interests/ long term projects:

1. Project x. Cultural Convergence.

(with Mike Shields:)
This is a project started in 1992 where several key ideas about economic development, power politics, and cultural traits are brought together. Some key aspects are:
- (like Norbert Elias): Working together requires a psychological make-up that is mostly learned by force. Different types of production and different places in the hierarchy need different make-ups. 
- (somewhat like Michel Foucault): power is about lines of communications, also known as contacts, linkages, and networks. Economies which thrive on ever changing networks thus have vastly different implications for the political game than those with everlasting networks (deliberately vague).
- (like Machiavelli): united we stand, divided we fall: in normal times, small interest groups will free-ride on the majority. This argument is extended to the cultural sphere.
- (like the Relational Capital project): modern economies require the destruction of old ties to achieve technological growth. See Research section for more details.
- (like the argument in God's Phone Number): human loyalties are crucial for understanding group cohesion and group action. They essentially get shaped by power.
These ideas are coupled together, using insights from all the social sciences we can lay our hands on. The ultimate aim is to get reasonable predictions on whether world cultures will converge, what the shape of future political systems will be, and how policies affect cultures.
This 'magnum opus' will take many more years to finish. 

2. FISSS: Free International Society for Social Sciences

This society, which is yet to be formally founded, sees as the main problem in social sciences that there is a tremendous amount of prestige and money to be made with social science. This gives people incentives to build empires, to disagree with each other not out of principle but out of opportunism, and in a million other ways to erect artificial boundaries whose main purpose is to corner a piece of the pie. Youngsters growing up within these boundaries then internalise these boundaries as 'true' and perpetuate them. Coupled with the fact that social science deals in 'soft evidence' which requires the highest standards of detachment to analyse fruitfully, these artificial barriers are almost impossible to break down because there is no recognised way to disprove anything in social science. The current situation thus resembles like tribal warfare without 'prediction success' as an available arbiter for the outside world. Whilst recognising that the pie will never go away and that the tribes will thus remain and indeed flourish, this society would aim to undo some of its disastrous effect on progress in social science by forming a focal point for interest-free social science. It would aim to provide 2 things: the first thing is a research dissemination and discussion forum for interest-free social science. It should be a research haven for those researchers who do not need to earn their keep disseminating research, publishing research of long-term value. The second thing FISSS would aim to provide is free online education material of high quality for anyone anywhere. The benefit of that is to wrestle social science from the hands of the so-called 'professionals' and make it possible for 'interested amateurs' to participate. The tentative founding document of FISSS is here . It is envisaged that FISSS would only become up-and-running if the founders would be above the suspicion that they are trying to get a piece of pie themselves (which at the moment is something they could not credibly claim).

3. The psychology of mass-murders during more general conflicts.

This is an international research project headed by Sheldon Grant Levy of Wayne State University (US) into the psychological aspects of mass murders. It includes researchers from the UK, Russia, China, US, and the Netherlands. My side of the research is to provide a basis for survey gathering in the Netherlands and to start a theoretical inquiry as to how mass-murders come about in a political context and what the role is of existing attitudes of individuals in the prevention or occurrence of mass-murders.

Popular science projects

God's Phone Number: how to find the meaning of life and spirituality according to an atheist.
Pandora's Box: the economic policies that sound bad but are good and those that sound good but are bad.
The Golden Age of Humanity: a statistical look at whether humans as a species are doing well or not.
These projects are simmering slowly but are expected to one day lead to readable books.

Abandoned ideas

(unpublished work because either it appeared to be costly in time to write the embryonic paper into something referees would find interesting, or because it turned out that referees were more demanding than was cost-effective, or no referees liked it. In any case, if you want it, you can have it. There is no copyright on them. In case you do use them, mentioning the origin would be appreciated. The ideas are evaluate in terms of their potential for further use. A 1 implies absolutely no chance, 2 a reasonable chance, 3 a very good chance given sufficient effort):

1. How to measure unofficial incomes in Russia

"The extent to which incomes are under-reported in Russian surveys." by Paul Frijters

It is well known that in some countries like Russia, individuals obtain incomes from many sources, some of which are `unofficial'. This chapter tries to deal with the problem how to estimate incomes for such situations. In a large scale Russian survey, respondents were asked how much an employer would have to pay them if they had to work full-time for him, thus requiring all other money-earning activities to be stopped. This is an income measure which should incorporate all the sources of income an individual at the moment has, be they legal, highly illegal, monetised, or non-monetised. This income measure, called one-job equivalent income, is therefore probably an upper bound for monetary incomes. The results suggest that on average incomes are underreported by some 190%. Some 96% of the respondents to our questionnaires were probably earning more than their reported incomes suggested. Although yielding reasonable results for Russia, the alternative measure should be validated in other surveys before it can be used.
Reason for abandonment: no-one trusted the data and no time or resources to get this question into other surveys. May be taken up a later date when data becomes available. Evaluation: 2.

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2. Unemployment and capital costs in the European Union

"Skill-biased technological change, minimum employment costs, unemployment and fixed natural resources." by Paul Frijters. TI discussion report 173/3, 1996

This paper considers the effect of skill-biased technological change on unemployment, if there are minimum employment costs and there are non-transferable fixed-supply resources such as land, infrastructure and social capital. Firstly the existence of minimum resource costs per worker implies that if skill levels increase workers must have ever higher productivities to obtain any wages at all. Secondly, if non-transferable resources are not only production inputs, but are also consumer goods, growing output and growing consumption increases the price of the nontransferable goods even higher, thereby increasing again the minimum wages one needs to avoid unemployment. The different unemployment experiences of the US and some Western-European countries in the last 20 years could therefore be related to the the different population densities, resource endowments and skill distributions.
Reason for abandonment: no referee liked the basic idea that some people had negative net productivities. Some thought it too simple. Some didn't get it. Others did get it but just didn't believe it. Differing presentational options were tried, but to no avail. Evaluation: 1.

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3. Price coordination and complementarities

"Consumption complementarities, monopolies, and coordination" by Paul Frijters. TI discussion report 048/3, 1998

Price-coordination and investment coordination are analyzed in a monopolistic multi-sector general equilibrium model with consumption complementarities.
Possible solutions to the investment coordination problem are consistent with historical examples of government intervention in investment, the different roles of banking sectors in different countries, and the effect of optimism on the development of new sectors.
Price coordination within sectors between monopolists of complementary intermediaries lowers prices and increases welfare because the competition between the final goods of different sectors then becomes the paramount concern of each monopolist. With no price coordination, each monopolist sets infinite prices as the effect of price increases on demand is shared by all other intermediary monopolists due to the complementarities.
Reason for abandonment: main idea turned out to have already been thought of by someone else and had appeared in a handbook of development economics. Besides that, the model in this paper was too specific to be really interesting. Would make a good student's paper though. Evaluation: 1.

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4. Uncertainty, reference incomes and the shape of the utility function
by Paul Frijters

In this paper, we examine the hypothesis that individuals use a reference income when they evaluate how satisfied they are with their own income. The reference income hypothesis allows us to predict the temporal pattern of changes in welfare as a result of changes in income; it allows us to empirically examine to what extent the income of others affects the welfare of an individual; it allows us to take a look at the welfare effects of uncertainty; lastly, the reference income allows an empirical look at the shape of the welfare function itself: if future incomes are uncertain, the reference income will be uncertain and the precise effect will depend on the shape of the welfare function. We find that the log-normal distribution performs better than the logarithmic or Cobb-Douglas utility function.
Reason for abandonment: the empirical work further needed cost too much time and such indirect evidence of reference incomes and utility shapes is not very convincing anyway. Never submitted. Evaluation: 1.

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5. Why do families have to pay a dowry for their girls?

" A hard working bride and money too ? Some theoretical considerations and empirical evidence on the Indian dowry system"
by Paul Frijters

If ever a cultural practice seems bizarre to economists convinced that all humans are selfish utility maximizers, the Indian dowry system must be it. Existing in many parts of India for more than two thousand years and still widely practiced beyond its traditional birthplace in rural North India, this cultural system guides marriage agreements between households whereby the household of the groom receives not only the services, off-spring, and labour of the bride, but a handsome bride treasure as well. Such a seemingly voluntary transfer of resources from one household to another is surely irrational?
The main reason for the existence of a dowry in my model is that the marginal productivity of workers are below subsistence levels. Hence the marginal person in a household produces less than he or she consumes. Couple this with the wish for each household to continue itself via a son who will occupy the household land, the problem arises what to do with the daughters, whose marginal benefit is negative to the household that has to marry them off. As no household can procreate without women it is argued that cultural institutions, laws and religious customs prevent infanticide and bride murders.
Reason for abandonment: model too simple. Setting up a proper model which would satisfy referees would cost too much time whilst most likely not adding any more insight. Never submitted. Evaluation: 2.

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6. The influence of the media on the outbreaks of wars.

"Wars, information and media morality" by Paul Frijters
Why do groups who have lived together for hundreds of years, suddenly turn on each other? Why does the media play such an important role in creating stereotypes about the ''enemy'' and often seems to be the primary way in which groups are turned against each other? Put more generally, where does the manipulative power of the media come from? The answer in this paper is simple: individuals basing their decisions partly on information obtained by media will give some credibility to whatever they hear from the media because they find it in their interest in general to do so. The idea is that media gives information on K aspects of life, while the media itself is only interested in 1 area of life: the utility of the person(s) controlling the media only depends on one factor. Because the media can be trusted to give correct information on the K-1 other aspects of life, individuals will assign a positive probability to everything the media claims. If a fraction of individuals do not know with certainty what the interest of the media is, all the information given by the media will have effect.
Reason for abandonment: reading the relevant literature necessary to sell the paper to political scientists would cost too much time and would have a large chance of failure anyway. Never submitted. Evaluation: 2.

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7. Poverty in Russia

Frijters, P. and B.M.S. Van Praag (1998), “Estimates of poverty ratios and
equivalence scales for Russia and parts of the former USSR”, revised version
of the Tinbergen Discussion Paper no. 95-149.

The extent of poverty in Russia and the former USSR has been analysed with the use of relative and subjective poverty lines. Relative poverty lines based on the distribution of income suggest that poverty has slightly decreased from 1991 to 1995, although income inequality rose sharply. Analysis based on subjective poverty lines indicates that some 83% of the Russian households felt poor in 1991, compared to 78% in 1995. The costs of adults rose sharply while the costs of children and old age rose slightly during the period.
Reason for abandonment: all referees rejected the paper because of the basic weakness of the data, despite a massive effort of us to deal with this. Might be used in the future though if it turns out these estimates were more reasonable than those dominant at the time. Evaluation: 2.

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8. Irreversible investments with private information and complementarities.

Consider the case that investments are irreversible, and that different investors have different private information about the profitability of investments. Then, the proportion of investors that actually invests is smaller when there are complementarities and further decreases with the number of investors. In most circumstances, higher volatility decreases the proportion of investors that actually invest.
Keywords: uncertainty, coordination, complementarities, information.
YEL-codes: C72, D82, E22, F21.
Reason for abandonment: though several referees liked the ideas, they wanted a much bigger model, which did not seem cost-effective or intellectually worthwhile. Evaluation: 2.

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9. Income and subjective well-being: what can we learn from regional differences?

In this paper, we look at the relationship between income and subjective well-being (SWB) at the aggregated level. From country-comparisons it is known that higher average income and higher levels of trust are positively correlated with higher SWB. Because there are many other characteristics that co-vary with average incomes the causality is in question. By using regional variation we can control for any relationship between incomes and social indicators at the country level. Controlling also for regional variation in equality and trust, we find no positive relationship between income and SWB, which we attribute to comparison effects and to the negative effects of greater economic activity, such as noise, pollution and the loss of local social cohesion.
Key-words: Subjective well-being, trust, income, aggregation issues.
Reason for abandonment: although all referees liked the idea and even the editor urged me on to stick to this one, each simply wanted to see this idea accompanied by a large load of not very relevant extra work. Evaluation: 3.

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10. Crime, investments, and government lethargy: when being slow to react can be a good thing. by P. Frijters and A.F. Tieman

Conventional wisdom has it that one of the major disadvantages of the democratic legislative system, compared for instance with dictatorial legislation, is that it takes very long for any major intended change in the law to go through all the different procedures and to be effectuated (see Olsen, 1982). In this paper it is argued that this lethargy of the democratic legislative
system can also be an advantage from the viewpoint of utility maximization because it implies pre-commitment of laws. We present two illustrative models which explore some of the issues.
Reason for abandonment: this paper was universally disliked by referees. Though none disagreed with the basic idea, most seemed to think it was already though of before. Evaluation: 1.

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11. Simple estimation strategies for dynamic discrete choice models
by P. Frijters

A simple small paper that looks at the behavioural assumptions under which one can estimate discrete-choice models by rough simulation techniques. It turns out that the full rationality models or the total ignorance models are best suited for simulation techniques, whereby the currently dominant limited rationality models are suited.
Reason for abandonment: too simple for the referee's taste. Getting the paper further than just the simple idea and a short illustration would take way to much time. Evaluation: 2.

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12. Limited rationality in general equilibrium
by P. Frijters.

This minor note is just really a basic idea in some simple math that attempts to make the argument that if there are strong equilibrium effects, then only a fraction of the population need play rational for the 'as if' assumption to hold. Basically, when there are strong equilibrium effects, then the behavioural reaction of a few rational people will make a new equilibrium rational too in the sense that in the equilibrium no person can improve their action by choosing differently. This is illustrated in an extremely simple 2-sector model.
Reason for abandonment: though it has a point, I couldn't convince myself it was worthwhile pursuing. Never submitted. Evaluation: 1.

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The papers indicated by a Tinbergen Institute Discussion Paper number (format: TI <year>-<paper nr>/<research group nr>) can be obtained from (or through) the website of the Tinbergen Institute or else upon request from the Tinbergen Institute ( Tinbergen@tinbergen.nl ). If this doesn't work, you can always contact the main author. Barring that, a copy is available of all the papers mentioned above on request at mail to:p.frijters@qut.edu.au