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Expectations and Social Influence Dynamics in Economics

Periodic Reporting for period 2 - ExSIDE (Expectations and Social Influence Dynamics in Economics)

Reporting period: 2019-01-01 to 2021-06-30

Expectations influence the behavior of decision makers in many economic contexts. The financial and economic crisis 10 years ago has highlighted again the importance of expectation dynamics for economic development as well as for the success of firm strategies and public policies. However, many aspects of the formation and implication expectations in Economics are still not well understood. The Innovative Training Network ExSIDE aims at improving our understanding of the role of expectation formation and social influence for economic dynamics and for the optimal design of economic policy.

ExSIDE is driven by the several main research and training objectives. With respect to research work is structured in several closely interlinked research goals:
a) Gain a better understanding of expectation formation processes relying on insights from behavioural (experimental) Economics and Psychology.
b) Explore the role of social networks for the diffusion of opinions.
c) Integrate expectation formation and social influence dynamics in market models in order to gain a better understanding of the feedback between real dynamics and expectation dynamics. Extend further to macroeconomic models.
d) Explore effects of different policies (and firm strategies) in dynamic (macro-) economic frameworks with adaptive expectation dynamics.

This research agenda is combined with a structured training program for Early Stage Researchers (ESR) adressing the following main objectives:
a) Provide doctoral fellows with the necessary interdisciplinary background to and perfect environment to carry out research of highest level in the area of expectation formation and social influence.
b) Complement the focussed training in the key areas of ExSIDE with a solid general graduate education in Economics.
c) Facilitate the early development of an own research profile as well as the ability for critical reflection on own and others’ research.
d) Foster the interaction of doctoral fellows with different research environments as well as with non-academic environments and integrate them in the relevant international communities.
e) Provide doctoral fellows with crucial transferrable skills needed to pursue a successful career in the academic and non-academic sector or to launch their own company. In particular, time management, presentation skills, academic writing, effective communication, as well as the necessary self-reflection and management of self-confidence.
f) Facilitate female career perspectives.

ExSIDE aims to strengthen the higher education system in Europe and at the same time will boost research on different approaches for the analysis of expectation formation and social influence dynamics and will provide guidance for policy design. Furthermore, ExSIDE generates the largest network of European universities pursuing a joint structured doctoral program in Economics with a common research and training agenda delivering joint respectively double degrees.
Concerning the reearch agenda substantial progress has been made with respect to all objectives. Two experiments have been carried out to study issues of expectation formation. The analysis of dynamics of opinion diffusion and of social influence in networks has been expanded considerably addressing issues of conformist vs. anti-conformist behavior and farsighted behavior on networks as well as the implications of social influence for the evolution of cooperation in strategic settings. Series of innovative models capturing the role of social influence and adaptive expectations on labor markets, financial markets and in macroeconomic settings have been implemented and are in the process of being used for economic analysis in these areas. In addition also models addressing policy questions in the domain of monetary and tax policy have been developed which are suitable for enriching our understanding of the role of adaptive heterogeneous expectations in these areas. Each of the 15 Early Stage Researchers has already generated substantial research results and presented them at the ExSIDE jamboree in June 2018. In addition, more than 46 research presentations at international conferences and research seminars have been given in the 16 months between September 2017, when they entered the ExSIDE programme, and December 2018. In particular, special sessions dedicated to the research output of ExSIDE have been organized at two highly esteemed international conferences in 2018.

With respect to the training program, all planned Research Training Schools have been completed exactly as scheduled involving a large number of accomplished scientists both form within ExSIDE and outside ExSIDE as instructors. In addition, all ESRs have completed additional training attending local doctoral courses or summer schools during their first year of training. All ESRs have progressed substantially in their own research agenda and either have already completed their non-academic secondments or the start dates of their secondments have been fixed and agreed upon with the non-academic partners.

The ability to deliver a joint or double degree from two ExSIDE universities is an important aspect of ExSIDE. Joint Supervisory Agreements (JSA), which determine the details of the joint supervision and degree procedure, have been succesfully generated for all 15 ESRs in the ExSIDE program.
The research carried out by the ExSIDE Early Stage Researchers and supervisors has already made substantial contributions to the experimental as well as theoretical and computational literature dealing with processes of expectation formation and the role of expectations in economic dynamics. The publication of 10 Working Papers and 2 journal articles during the first reporting period give evidence of the research productivity during this time interval. Furthermore, in several of the projects the work in the first period has laid foundations (e.g. by running experiments or designing and implementing models) for research results which will be obtained in the second reporting period. In all four research -oriented Work-Packages a rich set of new research papers will be completed during the coming 24 months adressing the main research questions underlying ExSIDE.

All these insights have wider social implications. Apart from usual academic channels they have been disseminated through a policy maker meeting, social media and interaction with the non-academic partners in ExSIDE, in particular also during extensive secondments of the doctoral fellows at these partners. A project video explaining the societal challenges addressed by ExSIDE has been produced and put online, as well as short videos for the individual research projects of all ExSIDE early stage researchers. These activities will be intensified as more research results are generated by ExSIDE members. The international ExSIDE conference, also including a policy maker meeting, at the end of the project will also be an important event in this respect.

With respect to internationalization of doctoral education in Europe the establishment of joint and double degree arrangements at the different universities involved in ExSIDE has contributed to the strenghtening of institutional structures fostering joint supervision and graduation of doctoral students.