Melbourne Institute of Applied Economic and Social Research - Research Publications

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Intergenerational disadvantage: Learning about equal opportunity from social assistance receipt

Cobb-Clark, DA ; Dahmann, SC ; Salamanca, N ; Zhu, A (Elsevier BV, 2022-12)

We use variation in the intergenerational persistence across social assistance benefits over 18 years to study the drivers of intergenerational disadvantage. Young people are more likely to receive social assistance if their parents received disability, caring, or single parent benefits, and less likely if they received unemployment benefits. Disparity in intergenerational persistence across benefit types suggests that parental bad luck has broader consequences for youth disadvantage than do their personal choices. Using the intensive margin and timing of parental social assistance to account for unobserved heterogeneity indicates that intergenerational disadvantage is more likely driven by poverty traps than welfare cultures.
Measuring Financial Wellbeing with Self-Reported and Bank Record Data

Comerton-Forde, C ; De New, J ; Salamanca, N ; Ribar, DC ; Nicastro, A ; Ross, J (WILEY, 2022-06)

We develop scales of the financial well‐being of customers of a major Australian bank using self‐reported survey data matched to customer financial records. Using item response theory (IRT) models, we develop: (1) a Reported Financial Wellbeing Scale from information about people’s experiences and perceptions of financial outcomes; and (2) an Observed Financial Wellbeing Scale from financial record measures of customers’ account balances, net spending and payment problems. Each scale reliably differentiates between a wide range of outcomes, and the scale components have similar power to discriminate. We confirm the validity of the scales by estimating predictive models using other measurable characteristics.
Parents’ responses to teacher qualifications

Chang, S ; Cobb-Clark, DA ; Salamanca, N (Elsevier BV, 2022-05)

We identify the causal effect of children being assigned to more highly qualified teachers on their parents’ investments. Exploiting a unique setting in which teachers are randomly assigned to classes, we show that parents respond to more qualified teachers by increasing their children’s private tutoring. A potential mechanism is an increase in parents’ belief that achievement is driven by student effort—for which tutoring is instrumental. Teacher qualifications are unrelated to test scores, however. Instead, they weaken students’ beliefs that effort is important for achievement, suggesting that private tutoring may have a demotivating effect on students. We conclude that family-wide behavioral reactions are important in educational production.
Introduction

Salamanca, N ; Zhu, A (WILEY, 2017-09-01)

This book builds on the burgeoning evidence-informed practice movement in social welfare that evolved from evidence-based medicine some twenty years ago.
Are Professors Worth It? The Value-added and Costs of Tutorial Instructors

Salamanca Acosta, N ; Zölitz, U ; Feld, J (University of Wisconsin Press, 2020)

A substantial share of university instruction happens in tutorial sessions— small group instruction given parallel to lectures. In this paper, we study whether instructors with a higher academic rank teach tutorials more effectively in a setting where students are randomly assigned to tutorial groups. We find this to be largely not the case. Academic rank is unrelated to students’ current and future performance and only weakly positively related to students’ course evaluations. Building on these results, we discuss different staffing scenarios that show that universities can substantially reduce costs by increasingly relying on lower-ranked instructors for tutorial teaching.
Implications of COVID-19 labour market shocks for inequality in financial wellbeing

Botha, F ; de New, JP ; de New, SC ; Ribar, DC ; Salamanca, N (SPRINGER, 2021-04)

Australia's economy abruptly entered into a recession due to the COVID-19 pandemic of 2020. Related labour market shocks on Australian residents have been substantial due to business closures and social distancing restrictions. Government measures are in place to reduce flow-on effects to people's financial situations, but the extent to which Australian residents suffering these shocks experience lower levels of financial wellbeing, including associated implications for inequality, is unknown. Using novel data we collected from 2078 Australian residents during April to July 2020, we show that experiencing a labour market shock during the pandemic is associated with a 29% lower level of perceived financial wellbeing, on average. Unconditional quantile regressions indicate that lower levels of financial wellbeing are present across the entire distribution, except at the very top. Distribution analyses indicate that the labour market shocks are also associated with higher levels of inequality in financial wellbeing. Financial counselling and support targeted at people who experience labour market shocks could help them to manage financial commitments and regain financial control during periods of economic uncertainty.
Locus of control and investment in risky assets

Salamanca Acosta, N ; de Grip, A ; Fouarge, D ; Montizaan, R (Elsevier, 2020-09)

Internal locus of control is an important personality trait strongly related to many economic outcomes. We show that the probability to own equity and the share of equity in household portfolios increase with people’s internal locus of control. We explore, and find no evidence for, the hypothesis that this relation is driven by a link between internal economic locus of control and subjective expectations about the return and risk of investment in equity. The relation between locus of control and investment in equity also remains after controlling for risk and time preferences, financial literacy, overconfidence, optimism, trust, and other personality traits. We also show that locus of control has a stronger relation with investment in equity for financially illiterate investors. Our results document a strong and robust relation between locus of control and investment behaviour that cannot be explained by leading behavioural investment theories.
Students are almost as effective as professors in university teaching

Feld, J ; Salamanca, N ; Zölitz, U (Elsevier, 2019-12-01)

In a previous paper, we have shown that academic rank is largely unrelated to tutorial teaching effectiveness. In this paper, we further explore the effectiveness of the lowest-ranked instructors: students. We confirm that students are almost as effective as senior instructors, and we produce results informative on the effects of expanding the use of student instructors. We conclude that hiring moderately more student instructors would not harm students, but exclusively using them will likely negatively affect student outcomes. Given how inexpensive student instructors are, however, such a policy might still be worth it.
Parenting style as an investment in human development

Cobb-Clark, DA ; Salamanca, N ; Zhu, A (Springer (part of Springer Nature), 2019-10-01)

We propose a household production function approach to human development that explicitly considers the role of parenting style in child rearing. Specifically, parenting style is modeled as an investment that depends not only on inputs of time and market goods, but also on attention. Our model relates socioeconomic disadvantage to parenting style and human development through the constraints that disadvantage places on cognitive capacity. We find empirical support for key features of our model. Parenting style is a construct that is distinctive to standard parental investments and is important for young-adult outcomes. Effective parenting styles are negatively correlated with disadvantage.
A Short Note on Discrimination and Favoritism in the Labor Market

SALAMANCA ACOSTA, N ; Feld, J (De Gruyter, 2017)

We extend Becker’s model of discrimination by allowing firms to have discriminatory and favoring preferences simultaneously. We draw the two-preference parallel for the marginal firm, illustrate the implications for wage differentials, and consider the implied long-run equilibrium. In the short-run, wage differentials depend on relative preferences. However, in the long-run, market forces drive out discriminatory but not favoring firms.