Portsmouth Business School
Economics and Finance
Economics is the science of understanding human behaviour and interaction, be at the level of the individual, organisation or government. Economics surrounds us in our everyday lives and almost all of the decisions we make can be analysed, understood and even improved through economic analysis. All the while, economists are pushing forward the frontier of our subject through cutting-edge research involving the proposal and testing of new theories that explain the evolving nature of human and institutional interrelationships in a rapidly changing world.
Research informed teaching is a central component of economics and finance courses at both undergraduate and postgraduate levels. The subject group has a strong culture of research, with consistently excellent activity and output focused around a number of key areas, including international macroeconomics, social policy, development economics and cultural economics to name just a few examples. The findings and unique perspectives offered by this research permeate into all levels of our teaching and emphasise the real-world relevance and power of economics, which helps bring the subject to life for our students. Below are a selection of case studies to illustrate how research informed teaching is embedded in our curriculum.
Many economics students at Portsmouth Business School are interested in pursuing a career in the financial sector. As a consequence, much of Dr. Achim Hauck’s teaching on the Intermediate Macroeconomics unitis devoted to financial markets. The unit is designed to familiarise students with the latest developments in these markets and how economic theory can explain the ways in which institutional frameworks of financial markets affects the evolution of market outcomes over time.
Dr. Hauck’s teaching on this unit is based on his research into interbank money markets in the Euro zone. In a series of recent papers, he has developed a theoretical framework that explicitly accounts for the main institutional features of these markets and market frictions. The framework has been used to explain key developments over the course of the recent financial crisis, such as the massive drop in trading volumes and the interbank rate as well as the significant recourse of the ECB's standing deposit and credit facilities. This research has also served as a basis to investigate the reserve management of commercial banks and to discuss implications for monetary policy in times of financial turmoil.
The Development Economics unit provides students with the tools to understand why some societies fall behind in matters of economic development. Economic growth is a key aspect of economic development and some of the known determinants of growth covered in this unit include physical capital accumulation (investment), human capital accumulation (e.g. education and health) and institutions (e.g. corruption, governance and the political system). The research of Dr. Petros Sekeris on the political economy of regime type and the link with the economic growth of countries helps students to better comprehend how politics and economics are closely interlinked, and how this impacts upon economic development.
After studying traditional theories of economic growth and their limits, students on this unit are exposed to the theory and evidence coming from cutting-edge research into economic development. For example, in a recently published study on ‘growth-friendly dictatorships’, Dr. Sekeris and his co-authors give particular emphasis to the relationship between income inequality and support for dictatorial regimes. Students are shown that when a small and influential part of the population owns a significant share of the country’s productive resources, these individuals will rationally favour a growth-friendly dictatorial regime as opposed to a democratic regime taxing the rich to redistribute to the poor majority. Students also see how empirical evidence supports this theory, which helps explaining the longevity of market-oriented dictatorships such as Augusto Pinochet in Chile (1974-1990).
Competition Policy and Regulation
In the Competition Policy and Regulation unit, Dr. Evangelos Mitrokostas integrates the findings from his research into regulation policies and competition strategies, corporate social responsibility (CSR), innovation, managerial delegation and advertising. In lectures dedicated to current CSR issues, Dr. Mitrokostas examines corporate governance and certification of CSR activities in imperfectly competitive markets, showing how firms can demonstrate their commitment to CSR by designing appropriate compensation schemes for their managers.
Classes in this unit also examine the role of regulatory authorities, non-government organisations and private companies with respect to the certification of CSR activities. Students benefit from this research by seeing how the basic models of oligopoly can be extended to examine a range of topical issues, such as quality differentiation through CSR, signalling practices through the use of strategic delegates, or the pricing of new innovations. These findings clearly demonstrate how strategic incentives to depart from the assumed objective of profit maximization can ultimately affect a firm’s position in the market.
Economics of Crime and Social Issues
In the Economics of Crime and Social Issues unit, research from both Staff and Dr. Joe Cox show how economic principles and techniques can be used to understand a broad range of different problems and issues facing society. Professor Collins has published widely in the area of economics and crime. His research is used to show students how consumers and producers respond to incentives in a range of criminal markets, such as illegal drugs and prostitution. The combination of theoretical modelling and empirical evidence arising from his research demonstrates to students how these markets can be controlled and how behaviours can be changed by policy makers to minimise the extent to which they cause social harm.
Dr. Cox has published research into illegal file sharing, highlighting key differences between different types of piracy and the ways in which these distinctions can help regulation and policy making mitigate the social harm caused by the practice. In his classes, Dr Cox explores motivations for piracy and how economic theory can show how illegal downloading is a rational activity based upon an assessment of expected costs and benefits. Dr. Cox also explores ways in which piracy may have resulted in hidden gains for the creative industries, including the sampling and networking effects which expose consumers to new artists and encourage the formation of online fan communities that pay to attend live shows and purchase merchandise.
Discrimination is a core topic covered on the Labour Economics unit. Dr. Judy Rich begins by introducing students to the traditional wage regression approach used by economists, which decomposes the wage gap between two groups into a component explained by differences in productivity and an unexplained component reflecting differences in reward for the same productivity. However, this technique has been criticised for its inability to control for unobserved characteristics affecting the productivity of individuals, meaning that alternative experimental approaches are increasingly being advocated by researchers.
Dr. Rich has undertaken an extensive range of controlled experiments to test for discrimination in markets on the basis of race, gender and age. Her research involves sending matched pairs of applications for jobs, purchasing products or making enquiries for rental properties to detect discrimination. A number of similar studies have been undertaken by economists across ten countries and have found recurring evidence of statistically significant discrimination on the basis of these characteristics in all markets. On the Labour Economics unit, students are exposed to the methods and findings of these studies and are required to explore the implications for policy-making.
The Economics and Finance subject group has enjoyed a long-standing partnership with MediaCom, the UK’s largest global communications agency. The company undertakes strategic market analysis on behalf of several household brands such as Nokia, Universal, Mars, Direct Line, Lucozade, Sky, EA Games and Ribena. MediaCom use econometric techniques to help identify optimal investment levels, advertising channels, sales forecasting and portfolio management.
On the Econometric Methods and Econometric Analysis units taught by Dr. Robert Gausden, analysts from MediaCom give an annual ‘guest lecture’ to discuss the use of econometrics and statistics in the commercial world and how the company makes use of the specialist software to which students are introduced in classes. Additionally, MediaCom awards a prize to the Independent Study Unit group which makes the best use of Econometrics in their final project. Recipients of the prize, as well as any other suitably qualified final year students, are guaranteed an interview with the company for the position of Graduate Econometrician each year.