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Recent Studies Aid Luxury Companies in Combating the Allure of Fake Products

Enthusiasts of upscale fashion and luxury items often prioritise distinguishing between authentic and counterfeit products. However, the question remains: Does their perceived expertise influence their likelihood of engaging with counterfeit items? This query is paramount to marketing managers in the luxury sector, battling against the proliferation of counterfeit goods—a market projected to balloon to a staggering $1.79 trillion by the decade’s end.

“Lots of consumers recognise the ethical problems associated with counterfeits, yet continue to buy them despite knowing it’s wrong,” commented Ludovica Cesareo, an assistant professor of marketing at the Lehigh University College of Business. Understanding how an individual’s self-perceived knowledge about luxury items impacts their ethical stance on counterfeits could provide valuable insights for developing effective strategies to address this persistent issue. Cesareo, alongside her colleague Silvia Bellezza from Columbia University, delved into this topic in their recent research published in the Journal of the Association for Consumer Research.

The study posits that the luxury market thrives on consumer beliefs about the products’ quality, craftsmanship, and heritage. The researchers theorised that individuals with extensive “subjective knowledge”—how knowledgeable they perceive themselves in this field—would be less attracted to counterfeit goods. Conversely, those with limited knowledge might find such products more appealing. A series of four experiments that assessed participants’ subjective knowledge and attitudes towards counterfeits revealed that individuals with lesser knowledge were more prone to gravitate towards counterfeit goods.

“Those who are not particularly well-versed in high-end fashion and luxury goods tend to prefer counterfeits more than their more fashion-savvy counterparts and are likelier to promote the original brand on social media,” Cesareo explained. She attributed this tendency to the lesser-known consumers’ greater capacity to disconnect from ethical considerations concerning counterfeits. Individuals often resort to “moral disengagement” to justify actions they know are unethical. This psychological mechanism includes tactics such as ethical rationalisation, spreading responsibility, or minimising the repercussions.

According to Cesareo, consumers with limited knowledge may not fully grasp the origins of the items but remain attracted to the aesthetic and status associated with luxury brands and the social prestige they confer on platforms like Instagram and Facebook. In contrast, those with a profound understanding of luxury goods’ origins, processes, and details tend to maintain consistent ethical views regarding counterfeits. For low-knowledge individuals, it is easier to justify counterfeit purchases. Their rationalisations might range from beliefs that “everyone does it,” that major brands suffer no harm from these lower-market practices, or that their counterfeit purchase is merely “temporary,” until they can afford the real thing.

“Low-knowledge consumers not only overlook the moral aspects of counterfeits but also perceive a greater cost-benefit in purchasing them compared to those with more knowledge,” said Cesareo. The study also found that individuals with limited knowledge could be more readily swayed by messages about the relative morality of purchasing counterfeits. To enhance the robustness of their conclusions, the researchers interviewed leaders in anti-counterfeiting from prestigious luxury brands like Louis Vuitton, Moët Hennessy, Ralph Lauren, and Moncler.

“These managers confirmed that most of their clientele lacks deep knowledge about fashion and luxury goods, are primarily drawn by the brands’ prestige, and do not truly appreciate the brands’ historical, heritage, and craftsmanship nuances,” the researchers noted. The advice to anti-counterfeiting managers is clear: In markets dominated by low-knowledge consumers, efforts should focus on shifting perceptions about the immorality and illegality of buying counterfeits through educational initiatives. This could involve targeted advertising and communication campaigns by governments and other agencies. Conversely, in markets where consumers are more knowledgeable, there should be a push to further enhance their understanding through more informative advertising and communication highlighting the brand’s symbolic imagery and ephemeral qualities and educating about its history and craftsmanship. “Understanding how to tailor anti-counterfeiting strategies based on the knowledge level of the target market is crucial for marketers and brand managers,” Cesareo concluded.

More information: Ludovica Cesareo et al, Knowledge, Morality, and the Appeal of Counterfeit Luxury Goods, Journal of the Association for Consumer Research. DOI: 10.1086/733111

Journal information: Journal of the Association for Consumer Research Provided by Lehigh University

Trump’s 2024 Election Win: A Mixed Blessing for the US Stock Market

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The financial markets’ response to Donald Trump’s re-election extends beyond his mere return to the White House, reflecting more profound uncertainties tied to his leadership style. Recent research from the University of Surrey suggests a critical strategy for investors involves diversifying portfolios to mitigate risks associated with political turbulence and potential market fluctuations. According to this study, published in Economics Letters, there was an initial surge in stock prices following Trump’s election victory, a typical market reaction fueled by optimism over his business-friendly policies. However, this buoyancy was quickly tempered by investor worries about potential trade conflicts and international tensions, highlighting the complex interplay between politics and market dynamics.

The research involved a collaborative effort among scholars from various institutions, including the University of Surrey, Macquarie University in Australia, The Memorial University of Newfoundland in Canada, and the Paris School of Business. They used an event study methodology to analyze the impact of Trump’s 2024 election win on the stock market, focusing on the performance of over 1,500 companies listed on the Standard & Poor’s 1500 index. The data revealed significant abnormal returns around the election date, with notable effects on smaller companies and specific sectors like energy, which were anticipated to benefit from regulatory changes under the new administration.

Dr Shaker Ahmed, the study’s lead researcher and a Lecturer in Finance at the University of Surrey, discussed the dual impact of Trump’s presidency on market sentiments. He highlighted that while general optimism about the pro-business agenda Trump is expected to follow, there’s also considerable anxiety about the geopolitical unrest that could ensue, potentially leading to market volatility. This reflects the market’s wrestling with two contrasting expectations: the “Hope Hypothesis,” which foresees a boost in business climates, and the “Fear Hypothesis,” which warns of disruptions from trade tensions and policy unpredictability.

Concluding the discussion, Dr Ahmed emphasized the importance of understanding the full spectrum of political and economic implications of such political events for investors. He advised that grasping these dynamics is crucial for developing sound investment strategies, particularly during significant political changes. This perspective underscores the need for investors to remain vigilant and adapt to the evolving economic landscape, balancing their portfolios to align with immediate opportunities and long-term risks.

More information: Shaker Ahmed et al, The comeback effect: Market responses to Trump’s 2024 election victory, Economics Letters. DOI: 10.1016/j.econlet.2025.112170

Journal information: Economics Letters Provided by University of Surrey

Deceive Yourself: How Individuals Subconsciously Bend Rules to Boost Their Intelligence and Well-being

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“Fool me once, shame on you; fool myself, and I might end up feeling more intelligent,” says a new study led by Sara Dommer, an assistant professor of marketing at Penn State. Dommer explored why individuals might cheat on tasks like completing crossword puzzles or using apps like Wordle and tracking calories, especially when the only rewards are intrinsic, such as feeling brighter or healthier. She discovered that when cheating provides a chance to enhance self-perception, individuals engage in what she terms ‘diagnostic self-deception’. This involves cheating while deceiving themselves into believing their improved performance is due to their abilities rather than the dishonest act. Her research has been published in the Journal of the Association for Consumer Research.

According to Dommer, “People do cheat when there are no extrinsic incentives like money or prizes. However, the intrinsic rewards, such as feeling better about oneself, drive this behaviour. For the self-deception to be effective, I must convince myself that I am not actually cheating, which in turn allows me to feel smarter, more accomplished, or healthier.”

Dommer’s investigation involved four studies to determine if people would cheat when the rewards are solely intrinsic and to understand what fuels the sense of achievement despite the cheating. In the first study, 288 undergraduate students were given menu details for three days’ worth of meals and tasked with entering calorie information into a food-tracking app. The students were divided into two groups: one received additional calorie details with their meal descriptions, while the other did not.

The app provided five potential calorie counts for each item entered, and the group without specific calorie details tended to enter lower calorie counts than those supplied with detailed information. This indicated that people might cheat to gain intrinsic benefits—feeling healthier.

In a second study, 195 participants from Amazon Mechanical Turk were split into a control group and a cheat group and asked to complete a 10-question multiple-choice IQ test. The cheat group was informed that correct answers would be highlighted, allowing them to track their performance. They were then asked to enter their scores post-test while the control group estimated theirs. Despite the assistance, the cheating group not only reported higher scores but also overestimated their abilities on a subsequent test without the possibility of cheating, indicating a belief in their enhanced intelligence that wasn’t matched by their actual performance.

The third study replicated the second but used a task where participants unscrambled words. The correct answers were revealed after three minutes, and those in the cheating group reported more success in unscrambling the words than the control group. They were likelier to attribute this performance to their intelligence and consider the task a legitimate intelligence test.

The final study focused on financial literacy, where 231 participants took a test under controlled conditions, with some informed about the generally poor performance on financial literacy among American adults. Dommer found that introducing doubts about their abilities led participants to seek more accurate assessments, thus reducing cheating.

Dommer argues that our understanding of cheating needs to expand beyond the view of it as a deliberate, conscious act. She believes that cheating can occur without full awareness, driven by the desire to maintain positive self-illusions. While these illusions may offer temporary boosts to self-esteem, they can be harmful, particularly when assessing one’s financial or physical health, as they may lead to the underuse of helpful products and services. She stresses the importance of recognising these deceptive practices and striving for more accurate self-evaluations to prevent potential harm.

More information: Sara Loughran Dommer, Acting Immorally to Self-Enhance: The Role of Diagnostic Self-Deception, Journal of the Association for Consumer Research. DOI: 10.1086/732915

Journal information: Journal of the Association for Consumer Research Provided by Penn State

Employment Rises with Oversight on Tax Incentives

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In 2019, a significant shift occurred in the economic strategy of Kansas and Missouri, states that share the bustling metropolis of Kansas City. For a decade, these neighbours had aggressively competed for business relocations through generous tax incentives, a rivalry that eventually amounted to a staggering expenditure of $350 million yet yielded a modest return of just 1,500 jobs. Recognising the inefficacy of their approach, they agreed to cease offering tax breaks aimed at enticing businesses to relocate across their mutual borders.

Lisa De Simone, a professor of accounting at Texas McCombs, points out that this scenario indicates a broader trend where business tax subsidies have increased threefold over the past thirty years. However, these financial incentives often fail to meet job creation promises. Despite these challenges, the outright elimination of subsidies has not been widely advocated. Instead, several states have pursued an alternative strategy to ensure these fiscal incentives yield tangible economic benefits. They have implemented disclosure laws that mandate reporting key details about the subsidies, such as the financial amounts and the number of jobs expected to be created. The rationale is that transparency fosters a commitment to fulfilment from companies and governmental bodies, holding each accountable.

In her recent study, De Simone reveals that disclosure laws can enhance local employment, albeit only specific laws prove effective. Specifically, she highlights the success of internal disclosure laws, which necessitate that state agencies responsible for granting tax breaks report these details to other state bodies. These laws not only increase job creation but also offer savings to taxpayers. Conversely, external disclosure laws that require the public release of subsidy details have minimal impact on employment levels.

The study, which also involved Rebecca Lester of Stanford University and Aneesh Raghunandan of Yale University, delved into data from the nonprofit Good Jobs First, covering 48,243 subsidies across 27 states from 2008 to 2015. The subsidies examined were generally smaller in scale, such as tax credits and grants, which are more prevalent and attract less media scrutiny than larger, multimillion-dollar deals.

By correlating these subsidies with employment data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau, the researchers assessed the effectiveness of internal disclosure laws. They discovered that states with such laws could reduce the subsidies required to generate employment, significantly lowering the cost per job created – a cumulative saving of $594 million nationwide. De Simone notes that with internal monitoring, the benefits derived from a single subsidy are comparable to those from two subsidies in states without such regulations.

Several factors contribute to the ineffectiveness of external disclosure laws. Governments may sidestep these laws by opting for other incentives that do not require disclosure or by providing outdated information, thus impeding effective public scrutiny. De Simone suggests concerns about potential backlash or more dubious motives, such as favouritism, might discourage transparency.

De Simone hopes her findings will catalyse public demand for more accurate and timely information on business tax subsidies. Improved monitoring could deter less committed companies from seeking subsidies merely on the promise of job creation and could lead to more efficient and effective use of taxpayer money. She believes better transparency could compel governments to improve their disclosure practices, potentially leading to more accountable and fruitful economic policies.

More information: Lisa De Simone et al, Tax Subsidy Disclosure and Local Economic Effects, Journal of Accounting Research. DOI: 10.1111/1475-679X.12591

Journal information: Journal of Accounting Research Provided by University of Texas at Austin

Health-Oriented Nutrition Labels May Deter Food Purchases

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Recent research by the University of Florida has revealed that food labels intended to guide Americans towards healthier dietary choices may inadvertently produce the opposite effect. This discovery is particularly significant as it emerges when the U.S. Food and Drug Administration (FDA) is considering the implementation of mandatory front-of-package food labels. This prospective regulation introduced by the FDA would involve labels that prominently display the amounts of saturated fat, sodium, and added sugars—each quantified as a percentage of the recommended daily intake and categorised into one of three levels: low, medium, or high.

The study, published in the journal Food Policy by researchers from the UF/IFAS, focused on labels that declare the product within as “healthy.” It was observed that these labels generally reduced the amount consumers were willing to pay for yoghurt unless the claim was substantiated by official FDA endorsement and an explanation of the criteria used by the agency to classify the food as healthy.

Jianhui “Jeffrey” Liu, a doctoral candidate in the UF/IFAS food and resource economics department and the study’s lead author, emphasised the importance of clarifying label meanings to consumers. Liu and his colleagues conducted experiments with 308 participants, who were shown various label designs on packages of strawberry Greek yoghurt and asked to state their willingness to pay. These designs included one with a ‘healthy’ label, one with a ‘great taste’ label, one that combined both labels and a control design without any labels. The findings were telling: compared to the control, the price consumers were prepared to pay dropped by 18% for yoghurts labelled as “healthy” and by 25% for those labelled as both “healthy” and having “great taste”. However, yoghurts with a “great taste” label did not significantly influence willingness to pay positively or negatively.

The results suggest that health labels trigger an assumption of compromised flavour and enjoyment. Liu noted, “Merely stating ‘healthy’ on a product might not suffice and could actually have adverse effects if consumers are uncertain about what makes the food healthy or if they presume the label implies a sacrifice in taste.”

Interestingly, the negative perception linked with the ‘healthy’ label was alleviated when it was accompanied by explanatory text stating, “The product you have just observed features a ‘healthy’ symbol. This label indicates that the product meets the FDA’s proposed criteria for being designated as ‘healthy,’ which specifically requires the product to be low in saturated fat, added sugar and sodium.”

The study further indicated that although consumers might be confused or sceptical about health claims, their trust in the credibility of authoritative sources can significantly influence their purchasing decisions.

Liu hopes that these insights will assist policymakers and industry professionals create more effective packaging labels that enable consumers to make more informed food choices. He believes this research supports a broader cultural shift towards healthier eating habits, which could enhance public health and lessen the impact of diet-related diseases nationwide. According to Liu, “This study has the potential to affect every consumer and food manufacturer in the country by laying the groundwork for more transparent, effective, and impactful public health interventions.”

More information: Jianhui Liu et al, Assessing consumers’ valuation for Front-of-Package ‘Health’ labeling under FDA guidelines, Food Policy. DOI: 10.1016/j.foodpol.2025.102804

Journal information: Food Policy Provided by University of Florida

Study Shows Hybrid Job Training Enhances Female Participation in Nepal

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Globally, the participation of women in the workforce is approximately 25% lower than that of men, frequently due to obstacles such as domestic duties and cultural norms. Although vocational training has the potential to broaden employment prospects, women often face difficulties in attending programmes that necessitate extended periods away from home. A pioneering study conducted by the University of Illinois Urbana-Champaign, in conjunction with an international research collaboration, has examined whether a hybrid distance learning model could enhance the accessibility of job training for rural women in Nepal.

The research team had been actively engaged in Nepal through their work with Heifer International, assessing various livestock transfer initiatives for many years. A significant challenge they aimed to address was increasing the number of animal healthcare providers in rural regions. Specifically, there was a keen interest in training rural women to deliver these services, as explained by Sarah Janzen, an associate professor in the Department of Agricultural and Consumer Economics at Illinois’s College of Agricultural, Consumer, and Environmental Sciences.

Community Animal Health Workers (CAHWs) provide essential veterinary services in these remote areas. To become a CAHW in Nepal, candidates must complete a government-certified training programme, which typically involves a 35-day residential course. Janzen highlighted that recruiting women for this training was difficult despite removing financial obstacles. The reluctance often stemmed from the women’s domestic responsibilities, which made it impractical for them to leave their homes for the duration of the training.

In response, the research team collaborated with Heifer International and the Nepalese government to devise a hybrid training scheme that minimises time spent away from home. This new format required participants to attend a training centre for a five-day orientation and a further ten-day practical module involving direct interaction with livestock. The remainder of the training was conducted remotely, with participants using tablets to access educational videos and interactive modules on various subjects, including animal breeding, anatomy, drug administration, disease diagnostics, castration, fodder production, and bookkeeping. Upon completion of the programme, participants were required to pass a comprehensive final examination to register as certified CAHWs with local authorities.

To evaluate the effectiveness of this new training approach, local livestock marketing cooperatives were asked to nominate women for the CAHW training programme. These nominees were randomly assigned to traditional in-person training or the new hybrid model. The demographic data showed that most women were around 27 years old, had completed ten years of schooling, and about 80% were married. Additionally, 97% owned livestock and 40% to 50% lived below the poverty line.

Janzen was enthusiastic about the potential of the hybrid training model, stating, “We developed this training programme to see if women are more inclined to participate when offered the opportunity to train remotely at home. The results were significantly positive. We observed that completion rates of training increased from 30% to 51% through distance learning.”

The study also found that the knowledge and skills of women trained under the hybrid model were comparable to those who underwent traditional training, with no significant differences in job performance. Janzen acknowledged that additional barriers, such as cultural norms and expectations, could inhibit participation. The research specifically focused on whether the necessity to leave home for an extended period impacted training completion rates.

A particularly noteworthy finding was the increased willingness among mothers of infants to participate in the training when the requirement to stay away was reduced. While no women with infants enrolled in the traditional training programme, 45% of those with an infant completed the hybrid course. Furthermore, the data revealed that 60% of women who had their sources of income, such as those running small businesses, completed the hybrid training, in contrast to just 7% in the traditional format, underscoring the more excellent compatibility of distance learning with existing work commitments.

The implications of these findings are profound, not only for implementing similar programmes in other contexts but also for broadly boosting women’s participation in the workforce through hybrid and remote training models. As Janzen concluded, the adaptability of the training platform, initially designed using the Nepalese government’s curriculum and tailored to local needs, suggests that with minimal adjustments, this model could be effectively replicated in other regions, thereby extending its benefits across various developing countries.

More information: Sarah Janzen et al, Going the distance: Hybrid vocational training for women in Nepal, Journal of Development Economics. DOI: 10.1016/j.jdeveco.2024.103414

Journal information: Journal of Development Economics Provided by University of Illinois College of Agricultural, Consumer and Environmental Sciences

Boost Sales Performance: Adopt ‘Buy Now, Pay Later’ to Elevate Customer Expenditure

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The Buy-Now-Pay-Later (BNPL) system is gaining traction globally as a favoured method of payment. It allows customers the convenience of distributing the cost of their purchases into interest-free instalments over several weeks or months. In 2023, global expenditures via BNPL reached a staggering $316 billion and are projected to rise to $450 billion by 2027. Renowned retailers such as Walmart and H&M are collaborating with prominent BNPL providers like Affirm, Klarna, and Afterpay, which has led to more than 45 million U.S. consumers adopting this payment method.

When customers opt for BNPL instalments at the checkout of participating retailers, the full amount is initially covered by the BNPL provider. The consumer then pays the first instalment at the point of purchase and completes the remaining payments without interest for a brief period.

Despite its increasing adoption, BNPL’s effect on retail sales remains underexplored. A recent study published in the Journal of Marketing utilises transaction data from a major U.S. retailer to demonstrate that BNPL instalments significantly enhance consumer spending. By breaking down payments into smaller, manageable chunks, BNPL increases the frequency of purchases and the average transaction value.

This study examines the effects of BNPL compared to traditional payment methods like upfront and delayed lump sum payments, showing consistent spending increases across various products and instalment plans. Whether consumers are buying party supplies, apparel, or airline tickets and splitting the cost into three, four, or six payments, BNPL consistently encourages higher expenditures.

One key finding of the study is alleviating perceived financial constraints through BNPL. The research suggests that BNPL instalments enable customers who typically rely on credit cards and purchase smaller baskets to feel less financially restricted. The mental accounting of smaller, individual payments (“four instalments of $15”) as opposed to the total cost (“$60 total”) appears less daunting, encouraging more significant expenditure. Additionally, BNPL helps consumers manage their budgets more effectively by focusing on shorter time frames, which contrasts with the longer-term focus required for traditional credit card payments.

Professor Maesen points out that BNPL’s psychological impact, making payments seem less costly and giving consumers better budget control, significantly reduces financial constraints, leading to increased spending.

This study contrasts with prior research by not only focusing on the framing of prices but also on the actual payment practices. BNPL’s structure requires customers to make payments over specified periods, thus extending the research into the practical implications of how payment segmentation affects consumer behaviour over time. This comprehensive approach allows for a deeper understanding of consumer spending patterns, especially regarding their previous spending habits and credit usage.

This research offers valuable insights for chief marketing officers. Consumers using BNPL will likely feel more in control of their finances, which can translate into more frequent and larger purchases. According to Mr Ang, retailers see a notable benefit, with instalment payments boosting transaction frequency by about 9% and amounts by approximately 10%.

Moreover, policymakers and societal stakeholders need to consider BNPL’s substantial influence on consumer spending to craft regulations that balance consumer protection with financial flexibility. This balance is essential as BNPL continues redefining the shopping experience, offering opportunities and challenges in the retail sector.

In summary, the BNPL payment method not only changes how consumers approach their finances but also significantly benefits retailers by increasing the frequency and size of consumer purchases. Understanding these dynamics is crucial for all stakeholders in the retail and financial sectors as they navigate the evolving landscape of consumer finance.

More information: Stijn Maesen et al, Buy Now, Pay Later: Impact of Installment Payments on Customer Purchases, Journal of Marketing. DOI: 10.1177/00222429241282414

Journal information: Journal of Marketing Provided by American Marketing Association

New Research Provides Insight into the Most Effective Methods for Organising People to Generate Ideas

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Managers at every level within corporations, huge ones, face a common challenge: determining the optimal way to organise employees to foster the best creative outputs. The question remains whether it’s more beneficial to assemble large or smaller groups or mix individuals with similar or differing backgrounds.

Recent insights from Binghamton University, part of the State University of New York, have shed light on these questions, with some findings that might surprise many. Over nearly two decades, Professor Shelley D. Dionne—currently the dean of Binghamton’s School of Management—and Distinguished Professor Hiroki Sayama have delved into the complexities of group dynamics and their impact on organisational performance. Their latest findings have been documented in a new study published in npj Complexity, focusing on how different group compositions handle creative challenges.

Contributors to this research include a mix of graduates and academics from Binghamton, such as Yiding Cao, Yingjun Dong, Minjun Kim, Neil G. MacLaren, Sriniwas Pandey, and Distinguished Professor Emeritus Francis J. Yammarino. Between 2018 and 2020, they orchestrated experiments involving 617 students from the university. These students collaborated anonymously via a digital platform similar to Twitter to create a catchy marketing slogan for a new laptop or write a fictional story. Within their groups, which ranged from 20 to 25 members, participants would log on daily for over ten working days to submit and refine ideas.

Before these experiments, the researchers conducted language analyses on self-introduction essays from the participants to determine if grouping by similar viewpoints or backgrounds influenced the creative process. The communication structure within these groups varied; some participants could engage with their entire group, while others were restricted to interacting with only those next to them in a ring-shaped organisational model.

The quality of the resulting ideas was assessed by PhD candidates specialising in marketing or management for the slogan task and by staff from the university’s communications and marketing division for the storytelling exercise. Interestingly, the researchers noted several counterintuitive findings. For instance, when all participants in the social networks could see each other’s ideas, the ideas’ diversity was reduced. Conversely, increased communication among participants enhanced their happiness despite the isolation felt by those who interacted less but generated higher-quality ideas.

When diverse individuals were grouped, the ideas tended to be more conservative, influenced by the participants’ varying areas of expertise, which nudged the group towards safer, more universally acceptable ideas. Random connections among participants, however, were most likely to yield the best ideas, according to Sayama. He likens the process of idea generation to evolutionary biology, where ideas are akin to organisms in an ecosystem, adapting and thriving or failing based on environmental pressures.

The researchers believe implementing such a detailed experimental framework in a standard office setting poses challenges. Using artificial intelligence to analyse participants’ backgrounds and contributions is not typically feasible in most workplaces. Nonetheless, managers can distil this research into a simple guiding question about their objectives: whether to foster biodiversity of ideas or to protect and nurture a singular concept.

Dionne points out that the study’s strength lies in its interdisciplinary approach, applying theories from evolutionary biology to explore how networks influence creative tasks. While the study provides a foundation, it also opens up new avenues for further exploration, underscoring the non-conclusive nature of the findings but their potential to inspire further research.

The research team was interrupted by the onset of the COVID-19 pandemic, which shifted their focus to urgent public health decision-making. This hiatus meant a delay in analysing the wealth of data collected. However, as the situation has stabilised, the publication of their findings marks a significant advancement in understanding the dynamics of creativity within organisational structures, especially concerning the use of modern analytical tools like artificial intelligence, which was not widely discussed in management studies back in 2018. As they resume their research, the team remains excited about the potential to push the boundaries of this field further.

More information: Hiroki Sayama et al, Effects of network connectivity and functional diversity distribution on human collective ideation, npj Complexity. DOI: 10.1038/s44260-024-00025-9

Journal information: npj Complexity Provided by Binghamton University

Preventing the Next Cryptocurrency Crash: A Recent Study Reveals the Causes of Crypto Exchange Failures

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Imagine opening your cryptocurrency exchange platform one morning to discover the site unavailable, your funds missing, and no one available to address your concerns. This scenario, which sounds like a nightmare, has become a stark reality for thousands of investors, with nearly 500 cryptocurrency exchanges collapsing. A new study by the University of Vaasa in Finland sheds light on the risk factors associated with cryptocurrency exchanges.

In his research, which has been published in the esteemed Journal of International Financial Markets, Institutions & Money, Assistant Professor Niranjan Sapkota examines data from 845 cryptocurrency exchanges to explore the reasons behind the failure of nearly half of these platforms since 2014 and how to foresee such defaults. He points out several critical indicators, such as transparency, centralisation, geographical access, fee structures, cryptocurrency offerings, and referral programs, providing crucial insights into mitigating risks in this rapidly evolving sector.

The study delves into the paradox of transparency. While centralised exchanges in advanced, well-regulated jurisdictions like the United States and Singapore are often viewed as the most secure, they are surprisingly vulnerable. This vulnerability stems from various pressures, including strict regulatory requirements, high compliance costs, and sophisticated infrastructures that can be manipulated for malicious purposes. Conversely, such pressures are significantly lower in developing countries where cryptocurrency adoption is still under discussion.

Interestingly, the study reveals that exchanges that permit U.S. customers to trade are more likely to fail than those that do not allow U.S. clients. This insight underscores the unique risks associated with operating in the U.S. market.

Regarding exchange models, centralised exchanges, which manage wallet custody for users like banks manage accounts, exhibit a higher default risk than decentralised exchanges (DEXs). DEXs, where users maintain control over their assets and transactions occur directly on the blockchain, have a 31.2% lower chance of failure. This reduced risk is attributed to the distributed nature of DEXs, which helps avoid issues related to fraud, operational mismanagement, and liquidity crises.

The research also identifies warning signs of potential exchange failures: high withdrawal fees, limited cryptocurrency offerings, and poor user ratings. Exchanges that have defaulted in the past tended to charge withdrawal fees that were, on average, 1.5 times higher than those still operational. Furthermore, platforms offering a diverse array of cryptocurrencies and maintaining high user ratings were more robust due to their ability to attract a more extensive user base and generate stable revenue streams. Additionally, exchanges offering referral incentives were found to be less likely to fail.

Assistant Professor Sapkota highlights the practical applications of his findings, advising policymakers to utilise this knowledge to formulate policies that enhance user protection and market stability. Meanwhile, investors and traders can use these insights to identify critical warning signs—poor ratings, excessive withdrawal fees, limited coin offerings, reliance on centralised systems, and accessibility to U.S. clients—to avoid unreliable platforms and secure their investments.

The robust nature of this research not only fills a crucial gap in understanding cryptocurrency exchange risks but also offers actionable solutions to navigate the market with greater confidence and establish more secure digital asset trading platforms. The study further underscores the effectiveness of traditional statistical methods like logit and probit models, which achieved an accuracy rate of about 81% in predicting exchange bankruptcies. Advanced machine learning techniques such as Random Forest, Support Vector Machine, and Stacked Ensemble were used to validate these findings, highlighting the value of combining classical and modern analytical methods in this field.

More information: Niranjan Sapkota, The crypto collapse chronicles: Decoding cryptocurrency exchange defaults, Journal of International Financial Markets Institutions and Money. DOI: 10.1016/j.intfin.2024.102093

Journal information: Journal of International Financial Markets Institutions and Money Provided by University of Vaasa

Study Reveals Politically Linked Corporations Gained More US Tariff Exemptions on Chinese Goods

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A recent publication in The Journal of Financial and Quantitative Analysis unveiled that companies with political ties were more likely to be exempted from tariffs on imports from China during the Trump era. The study conducted by Veljko Fotak from SUNY Buffalo, Grace Lee from Fordham University, William Megginson from the University of Oklahoma, and Jesus Salas from Lehigh University highlights that firms with significant Republican connections before and during Trump’s presidency were more likely to receive tariff waivers on certain products.

The research also discovered a negative correlation between companies that donated to Democratic politicians and their chances of getting tariff exemptions approved. Jesus Salas commented on the findings, suggesting that tariff exemptions were used strategically to reward political allies and penalize opposition supporters, effectively turning the exemption process into a tool for political favouritism.

Introduced in 2018, the Section 301 tariffs were designed as a countermeasure against Chinese trade policies deemed harmful to U.S. businesses. Initially targeting $34 billion worth of imports, the tariffs expanded to cover around $550 billion over 14 months. The U.S. government established a process for companies to apply for exemptions, considering factors like potential harm to American business interests, availability of substitute products outside China, and the strategic importance of the products to China.

The exemption process, exclusively managed by the Office of the U.S. Trade Representative (USTR) without Congressional oversight or an appeals process, stands in contrast to other tariff regimes, such as those for steel and aluminium, which are overseen more transparently. Interestingly, the study found no significant link between political activity and exemption outcomes for steel and aluminium tariffs.

The study examined 7,015 exemption applications, correlating the outcomes with political activity data from OpenSecrets and business data from Compustat. It became evident that investing in political connections benefited companies, mainly when those connections were with the ruling party. Notably, firms that had lobbied or contributed to Republican candidates saw a higher probability of approval for exemptions.

This pattern of political influence and potential quid pro quo suggests a complex landscape where political donations and lobbying serve dual purposes: helping companies navigate regulatory environments and securing tangible rewards for political support. The study’s findings are particularly significant as they document the punitive measures against companies supporting opposition parties, marking a novel discovery in political-economic research.

Moreover, these findings have profound economic implications. Economists from both sides of the political spectrum generally oppose tariffs due to their propensity to provoke retaliatory actions and economic downturns. However, the study found that companies benefiting from exemptions experienced notable increases in stock prices, highlighting the substantial economic stakes involved.

This study’s revelations offer critical insight into the intersection of business and politics in the U.S., demonstrating how political connections can dramatically influence regulatory outcomes and economic fortunes. This research contributes to our understanding of political influence on monetary policy and underscores the broader implications of such dynamics on market behaviour and democratic processes.

More information: Veljko Fotak et al, The Political Economy of Tariff Exemption Grants, Journal of Financial and Quantitative Analysis. DOI: 10.1017/S0022109024000437

Journal information: Journal of Financial and Quantitative Analysis Provided by Lehigh University

Study Connects India’s Nutritional Programme to Improved Health and Higher Earnings

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Despite our world’s scientific advances and interconnected economies, malnutrition remains a persistent global issue. The United Nations reported that in 2023, an estimated 2.33 billion people were moderately or severely food insecure.

Researchers from UC Santa Barbara, the Indian Institute of Management, and the University of Calgary embarked on a study to explore the efficacy of the most extensive food aid programme globally. Their findings, published in the American Economic Journal, illustrated that this initiative’s health and economic benefits extend well beyond the nutritional value of the food provided at a subsidy.

Kathy Baylis, a co-author of the study and a professor in UCSB’s Geography Department and the Environmental Markets Lab (emLab), commented on the nutritional challenges in India, stating, “Malnutrition in India has been a long-standing problem.” She highlighted that despite India’s relative wealth, stunting rates among children are comparable to those in some of the poorest regions of sub-Saharan Africa. India implemented the Public Distribution System (PDS), the world’s most extensive food transfer programme and a significant component of the country’s social safety net to address this.

The PDS is akin to the food stamp programmes in the United States in previous decades. It allows eligible individuals and families to purchase staples like rice and wheat at significantly reduced prices. Serving about 800 million people, the PDS accounted for 60% of India’s social assistance budget from 2019 to 2020.

The paper also details changes made to the food assistance programme. Historically managed at a state level, the PDS transformed in 2013 when the federal government of India set minimum standards for the programme, compelling many states to enhance their support by increasing grain allotments or reducing prices.

To assess the impact of these changes, the researchers utilised data from a comprehensive five-year survey conducted by the International Crops Research Institute for the Semi-Arid Tropics. This survey, which the Gates Foundation supported, included 30 villages across eight states. The researchers focused on tracking children’s height for age. This metric indicates long-term nutritional status better than body mass index and is linked to various adverse health and cognitive development outcomes affecting education and income levels.

The expansion of the PDS led to a notable reduction in stunting rates, from 36% to 28.8%. This significant decrease was especially prominent in children between zero and two years old, a critical period for child development where nutritional intake is crucial.

The PDS’s benefits were more evident during times of poor rainfall, underscoring its role as a nutrition-sensitive safety net that buffers childhood nutrition from local climatic disturbances. The researchers aim to explore this aspect of the programme further.

Despite some criticisms that subsidised grains might replace more nutritious options, leading to diets rich in empty calories, the study found that participants in the PDS had more diverse diets. Families could allocate more of their budget to nutrient-rich foods like meat and dairy by lowering the cost of basic staples. This shift was significant enough to contribute to the observed increase in children’s heights.

The study also revealed broader impacts on household finances. The researchers observed an increase in household expenditure that exceeded what could be attributed to the savings on food alone. They theorised that well-nourished individuals might work additional hours, thus increasing their wages. Moreover, the security provided by the programme allowed people to be more selective in their job choices, a trend notably observed among hourly wage earners.

These findings underscore that the benefits of food transfer programmes extend well beyond mere caloric intake. They contribute significantly to income, health, and human capital development. Kathy Baylis remarked on the broader implications, suggesting that even modest social safety nets can have substantial and far-reaching benefits, influencing aspects of life beyond basic nutritional needs. This insight is particularly relevant as economists and policymakers deliberate on various strategies, including direct cash transfers, which have been shown to increase food prices in areas where they are implemented. Conversely, subsidised food can lead to lower food prices, reinforcing the focus on nutritional security within budget allocations.

More information: Kathy Baylis et al, Food Transfers and Child Nutrition: Evidence from India’s Public Distribution System, American Economic Journal: Applied Economics. https://www.aeaweb.org/articles?id=10.1257/app.20220505

Journal information: American Economic Journal: Applied Economics Provided by University of California – Santa Barbara

16-Year Analysis of US-Canada Free Trade Agreement Shows Workers Unaffected by Increased Trade Freedom

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In a contemporary study amidst ongoing and occasionally contentious discussions on U.S.-Canada trade policies, researchers analysed the enduring impacts of the 1989 Canada-U.S. Free Trade Agreement (FTA) on the Canadian workforce, leveraging data from the mid-1980s to the early 2000s. Their findings indicated that the significant escalation in trade between the two nations did not detrimentally affect Canadian workers.

The research, conducted jointly by experts from Carnegie Mellon University and the University of Toronto, has been published in the Review of Economic Studies. Brian K. Kovak, a professor of economics and public policy at Carnegie Mellon’s Heinz College and one of the study’s coauthors, elucidated that the bilateral framework of the FTA enabled a thorough examination of both the competitive pressures from imports and the opportunities arising from increased exports following the policy shift. He highlighted that the results carry valuable practical implications, notably that Canadian workers face fewer disruptions when engaging in trade with the United States than with China.

The team employed longitudinal administrative records from Statistics Canada, covering the period from 1984 to 2004, to probe the employment impacts spurred by heightened export activities and intensified import competition in Canada. The study meticulously tracked the career paths of individuals initially employed in sectors that later experienced varying Canadian and U.S. tariff adjustments under the FTA.

Although the research identified some negative impacts from Canadian tariff reductions and positive impacts from U.S. tariff reductions on Canadian workers, these effects were minimal and transient. Workers swiftly regained any lost income by moving to different companies, industries, or sectors.

The study revealed that Canadian tariff reductions neither reduced the total years worked nor the cumulative earnings of workers over the 16 years following the implementation of the FTA. Even in cases where Canadian tariff reductions led to decreased employment and wages, the corresponding U.S. tariff reductions generally balanced out these adverse effects. In essence, while the tariff adjustments had the anticipated impacts, workers adapted quickly and effectively to the shifting demands in the labour market. This suggests that the bilateral nature of the FTA played a crucial role in facilitating these transitions.

Moreover, the study found that Canadian tariff reductions predominantly slowed industry employment growth through reduced hiring rather than increased layoffs, thereby protecting existing workers in the impacted sectors. This finding starkly contrasts the effects of the so-called China Shock, which resulted in significant layoffs and reduced incomes for incumbent workers and newcomers.

The study’s authors, including Peter Morrow, an associate professor of economics at the University of Toronto, remarked that their findings were comparatively optimistic and contradicted those of several other studies. They observed that Canadian workers swiftly exited affected industries, finding new opportunities in different manufacturing sectors, construction, and services. The bilateral nature of the FTA provided those competing with imports alternative employment prospects in manufacturing sectors that benefitted from more considerable U.S. tariff reductions. These comprehensive insights challenge prevailing narratives and underscore workers’ adaptive capacity within the context of bilateral trade agreements.

More information: Brian K Kovak et al, The Long-Run Labour Market Effects of the Canada-U.S. Free Trade Agreement, The Review of Economic Studies. DOI: 10.1093/restud/rdae113

Journal information: The Review of Economic Studies Provided by Carnegie Mellon University