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Economic Decisions Talk at the British Science Festival
Oriana Bandiera, Nava Ashraf, Maitreesh Ghatak

People aren't always as selfish as economists assume. This event was part of the British Science Festival held in Brighton in September 2017, and examined how our social preferences affect our decision making and explored the economic consequences.

The expert panel, including Oriana Bandiera, Nava Ashraf, and Maitreesh Ghatak, discussed how we can incorporate personal motivations into economic models and discussed the implications on the organisation of firms, the use of monetary incentives, and the delivery of public services.

You can listen to the discussion from this link


News Posted: 07 September 2017      [Back to the Top]

New Anthony Atkinson Chair of Economics at LSE
Oriana Bandiera

We are proud to announce the creation of the new Anthony Atkinson Chair in Economics at the LSE. The chair is named in memory of Professor Anthony Atkinson, who sadly died in January this year. Professor Atkinson was a giant in the world of economics. His work has has a profound influence on the study of inequality, and on the thinking of the next generation of academic economists across the globe.

The Chair has been awarded to Professor Oriana Bandiera, Director of STICERD and Professor of Economics. STICERD was home to Tony for much of his career- he served as Director for many years and always remained close to the centre. Oriana worked closely with Tony and recalls that "[h]is perfect alignment of intellect and morality gave him the calm and clarity to tackle the difficult path from rigorous research to effective policy design."


News Posted: 21 July 2017      [Back to the Top]

CASE Report launch.
Income directly affects children's outcomes

Poorer children have worse cognitive, social-behavioural and health outcomes because they are poor, and not just because poverty is correlated with other household and parental characteristics, according to a new report from the London School of Economics and Political Science (LSE).

Kerris Cooper and Kitty Stewart of the Centre for the Analysis of Social Exclusion (CASE) and the Department of Social Policy at LSE found the strong evidence of the causal effect between household income and children’s outcomes after reviewing 61 studies from OECD countries including the US, UK, Australia, and Germany.

Ms Cooper commented: “There is abundant evidence that children growing up in lower income households do less well than their peers on a range of wider outcomes, including measures of health and education. We wanted to find out if money is important in itself, or do these associations simply reflect other differences between richer and poorer households, such as levels of parental education or attitudes towards parenting.

“Our conclusions are clear: there is a strong causal effect. Money makes a difference to children’s outcomes.”

The report, Does Money Affect Children’s Outcomes: An Update, shows that income itself is important for children’s cognitive development, physical health, and social and behavioural development.

Looking to explain why income matters, they found evidence in support of two central theories, one relating to parents’ ability to invest in goods and services that further child development, and the other relating to the stress and anxiety parents suffer caused by low income. There is particularly strong evidence that increasing income is likely to reduce maternal depression, which is known to be important for children’s outcomes.

In terms of how much money matters they found effect sizes were similar to spending on schools, however the effects of increased income are likely to be wider-reaching as income affects more household members and impacts children’s outcomes across multiple domains as well as impacting the home environment.

They also confidently conclude that increases in income make more difference to families who have low income to begin with.

The report, funded by the Joseph Rowntree Foundation, updates an original review from 2013, with the most recently available evidence. The authors conclude that reducing income poverty would have “important and measurable effects both on children’s environment and on their development”.

It says: “Given rising levels of child poverty in the UK, and much steeper increases projected for the next few years, this conclusion could not be more important or topical, especially in light of stated government commitment to promoting social mobility. Certainly any strategy that seeks to improve life chances and equalise opportunities for children without turning the tide against growing levels of child poverty is going to face an uphill struggle and place an even greater burden on services that seek to alleviate various negative effects of inadequate family resources.

The report is available here: http://sticerd.lse.ac.uk/case/_new/research/money_matters/report.asp


News Posted: 12 July 2017      [Back to the Top]

Low-cost schemes to help people get on
the housing ladder have ‘little' impact on social mobility

Flagship Government schemes to help more people get on the UK housing ladder have little impact on improving social mobility as better-off buyers are most likely to benefit from the support.

A new LSE report for the Social Mobility Commission into the impact of low-cost homeownership schemes has found that those benefitting from schemes - such as Help to Buy - earn more than one and half times the national working age median income.

Around three in five first time buyers said they would have bought anyway and that the scheme merely enabled them to buy a better property, or one in a better area, than they were originally looking for.

In the UK, promoting ownership for first time buyers is a current Government priority. Since the 1990s, around 1.8 million properties have moved into ownership through right to buy, 200,000 were provided through the affordable homes home ownership route, and 300,000 households were assisted through reduced costs of attaining ownership.

The report builds on prevous Government-commissioned research which found that Help to Buy Equity Loans had generated 43 per cent additional new homes over and above what would have been built in the absence of the policy - contributing 14 per cent to new build output.

However that research found that the average income for these Help to Buy buyers was £41,323 - similar to other first time buyers who had average incomes of £39,834. Fewer than half of all working age households have incomes over £30,000, meaning that this scheme is unlikely to be able to help those households without more specific targeting.

This latest research points out that the high cost of housing means many low-cost homeownership schemes are beyond the reach of almost all families on average earnings. Only 19 per cent of Help to Buy Equity Loan completions to date were for homes worth less than £150,000. If households put down a five per cent deposit, the researchers found that this exceeds the 40 per cent limit of affordability for a median-income working age household.

It recommends new action to help more low-income buyers including targeting financial subsidies on households with incomes up to 1.5 times median income and setting different levels for different regions.

It calls on the Government to provide more advice and guidance to households without a history of ownership to help them into ownership by managing risks and expectations. It also calls for restricting access to subsidies where a first time buyer has unfettered access to alternative sources of financial and other support to become an owner, such as capital from parents or other relatives.

Earlier this year, the Social Mobility Commission published research which found that the proportion of first time buyers relying on inherited wealth or loans from the bank of ‘mum and dad’ has reached an historic high and the trend looks set to continue. Increasingly, young people are relying on their parents to help them get a foot on the housing ladder. Over a third of first time buyers in England (34 per cent) now turn to family for a financial gift or loan to help them buy their home compared to one in five (20 per cent) seven years ago. A further one in ten rely on inherited wealth.

For 25-29 year olds, home ownership has fallen by more than half in the last 25 years from 63 per cent in 1990 to 31 per cent most recently. Many of those who do manage to buy eventually can only do so at an older age.

The Rt Hon Alan Milburn, chair of the Social Mobility Commission, said: “This research provides new evidence that the UK housing market is exacerbating inequality and impeding social mobility.

“While it is welcome that the Government is acting to help young people get on the housing ladder, current schemes are doing far too little to help those on low incomes to become home owners.

“The intent is good but the execution is poor. Changes to the existing schemes are needed if they are to do more to help more lower income young people and families become owner-occupiers. Without radical action, particularly on housing supply, the aspiration that millions of ordinary people have to own their own home will be thwarted. ”

In its State of the Nation 2016 report, the Commission recommended that the Government should:

  • Commit to a target of three million homes being built over the next decade with one-third - or a million homes - being commissioned by the public sector.
  • Expand the sale of public sector land for new homes and allow targeted house-building on Green Belt land.
  • Modify its Starter Home initiative to focus on households with average incomes and ensure these homes when sold are available at the same discount to other low-income households.
  • Introduce tax incentives to encourage longer private sector tenancies.
  • Complement the Heseltine Panel’s plans to redevelop the worst estates with a matching £140 million fund to improve the opportunities social tenants have to get work.

The report’s lead author Dr Bert Provan, from LSE's Centre for Analysis of Social Exclusion and the Department of Social Policy, said: “Most research on low-lost home ownership schemes has focused on the age profile of first time buyers and impact on supply. This research looks at whether they open up home ownership to different and more diverse groups of low income households in the UK. It finds that while there are some positive effects of such schemes - such as increasing supply - the impact on improving social mobility is small.”

The report is available here: www.gov.uk/government/organisations/social-mobility-commission


News Posted: 03 July 2017      [Back to the Top]