Arts and Sciences at the University of Toronto attracts high performers. New undergrads arrive on campus, hit the ground running, and expect to earn their degrees at top speed. Then, they find unexpected hurdles on the track. Like many students, alumnus En Hua Hu had to change pace and learn how deal with new challenges at the beginning of his university career.

“The first year is difficult, and part of it is the classes,” En Hua said, “but part of it is also being in a new environment, facing certain types of disappointments for the first time. I did poorly in my first-year classes. Nonetheless, the university experience is a marathon, not a sprint, so I encourage undergraduate students to not let their performance discourage them in first or second year. There is still a lot of time and there is so much potential in everyone.”

Living at Innis College gave En Hua the space he needed to overcome his own initial disappointments.

“As my family did not live in Toronto, Innis provided a space that felt safe and welcoming,” he remembered. “I stayed at the residence, and it was a great experience.”

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Small firms need to access R&D subsidies to grow, but if they grow, then they cannot continue to access R&D subsidies. Minor changes to eligibility constraints can and do address the catch-22 situation. That is according to new research by Alexandre Lehoux, a PhD candidate with the Department of Economics at the University of Toronto.

Lehoux examined how eligibility reforms to Canada’s largest R&D program in 2004 allowed firms to increase their production while maintaining eligibility for the program. He found the changes made no impact on R&D spending in the short-term, but that there were significant increases in value-added per worker following the reform. The key benefit to workers? Income improvements by around 2% after the reform.

“An important finding of my paper is that less financially constrained firms were the most responsive in expanding their production following the reform. This result emphasizes how the initial eligibility threshold was introducing what could be called a ‘growth tax’ for these firms,” Lehoux explained.

“Alexandre’s paper produces cutting-edge research on the impacts of R&D subsidies on firms and workers,” said Kory Kroft, Professor of Economics at the University of Toronto and Lehoux’s dissertation supervisor. “His findings indicate that subsidies which target small firms can prevent these firms from growing to maintain their eligibility. Relaxing eligibility constraints leads firms to expand production and he finds that workers capture some of these productivity gains.”

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If alcohol is on your annual holiday shopping list, you could soon have more choice. A University of Toronto researcher suggested a retail reform that would put a greater selection of products on LCBO shelves while increasing the Crown corporation’s profits by 16%.

Francis Guiton, a PhD Candidate with the Department of Economics, examined data from the Liquor Control Board of Ontario’s (LCBO) retail outlets. The data, obtained through a Freedom of Information request, details the inventories, product prices, and sales figures for each of the LCBO’s locations.

In Misaligned Objectives and Within-Firm Competition in Retail Chains, Guiton examined how performance-based bonuses paid to store managers effect the company’s profits and consumers’ interests.

“Individual store managers have the ability to choose which products to carry at their store, but pricing decisions are centralized and uniform across all the LCBO stores and managers take retail prices as given when making their inventory decisions,” Guiton explained in the paper. “Ultimately, the extent to which store managers behave in their own self-interest is correlated with the size of their store and the number of same-district stores in their neighbourhood.”

Across the retail industry, annual performance bonuses are a common incentive for retail managers. In the context of the LCBO, Guiton found that those bonuses work for the managers, but they do not necessarily work for the company because store managers compete with other LCBO outlets in their district.

“Within the LCBO, store managers, driven by annual bonuses tied to their stores’ profits, engage in competition for customers and higher bonus payments,” said Professor of Economics Victor Aguirregabiria, who sits on Guiton’s supervision committee. “While this competition enhances effort and sound decision-making, it introduces a misalignment between individual managers’ objectives and the company’s goals.”

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