Australian Research Council Discovery Projects

7 Dec 2016

Some Academics from the UQ School of Economics have received Australian Research Council Discovery Projects (ARC DP) funding totaling around $670,000. Two of the projects are in econometrics (1403) and one is in theory (1401).

One of the projects in econometrics is “Inequality of opportunity in Australia.” Investigators from the UQ School of Economics are first chief investigator Professor Prasada Rao, Associate Professor Kam Tang and Professor Pravin Trivedi. This project aims to develop econometric approaches for identifying opportunity gaps in Australia and other developed countries. Inequality of opportunity arises when the birth lottery or external factors in later life, rather than personal efforts, determine a person’s chances of economic success. A high level of inequality of opportunity holds people back from realising their potential and from contributing productively to society. The project will focus on the effect of inequality of opportunity on income, health and education with special emphasis placed on Indigenous and migrant populations. The findings should help formulate cost-efficient policy interventions aimed at levelling the economic playing field.

Associate Professor Kam Tang has been working on health inequality for a number of years. In relation to this ARC Discovery Project he stated “The findings from this project are expected to be useful for designing redistribution and intervention policies……and to contribute to improving social and economic participation in society.”

On winning this grant, he said it “allows us to have the much needed resources to pursue this project in a timely fashion (and to) help foster our international collaboration network.”

The economic theory based project to win a grant was “Productivity, growth and unemployment in economies with frictions.” The investigator on this project from the UQ School of Economics is Professor Ian King. This project aims to examine decisions driving productivity, growth, and unemployment in macroeconomies with frictions. It examines how government (fiscal, monetary, and education) policies determine these decisions, and identifies the best configurations of these policies. It will construct dynamic general equilibrium models of economies to analyse the causal structure behind productivity changes, growth and unemployment. It will conduct quantitative experiments using simulations, to estimate optimal government policy design settings. This project expects to identify policies that promote productivity, growth and employment.

Professor Ian King said “the research in this proposal examines the investments that firms make (in physical capital) and that workers make (in human capital) and how these are affected by government policy variables such as taxes, unemployment insurance, education policies, and monetary policies. We intend to provide a comprehensive guide to the joint effects of these policies on productivity, growth, and unemployment”

He went on to say “the grant will enable the researchers (from 4 different institutions) to work more effectively as a team, by providing resources to work together, to hire research assistants and to bring one of the very top economists in the world (Professor Randall Wright) to Australia for extended periods to work on this project”

Rounding out the projects to win a grant is the econometrics based “Reliability of purchasing power parities from the World Bank.” Investigators from the UQ School of Economics on this project are Professor Prasada Rao and Associate Professor Alicia Rambaldi. This project aims to provide an econometric framework to estimate purchasing power parities (PPPs) and a method to compute standard errors associated with the World Bank’s International Comparison Programme (ICP)’s PPPs. The ICP regularly compiles and publishes estimates of PPPs of currencies and real incomes. These results are used for study of global inequality and poverty; macroeconomic analysis; the Human Development Index; and cross-country productivity comparisons. However, no estimates of ICP PPPs’ reliability are available. Results from this project are likely to improve the quality of widely used data sets including the Penn World Tables and the University of Queensland International Comparison Database (UQICD).

This is the third ARC Discovery Project received by Rao and Rambaldi over the last ten years for their research into purchasing power parities of currencies used for international comparisons of standards of living, productivity and competitiveness. Further information on this long-standing project is available at

Click here for more info on Australian Research Council Discovery Projects.