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Faculty members in the Economics Department are engaged in cutting edge research. The department has built up a global reputation in empirical, experimental and theoretical methods.  Our research output continues to be published in the very top journals in economics including the American Economic Review.  In its latest study, the National Research Council ranked us as 11th in the nation in terms of per faculty productivity. Read below for some faculty research spotlights.

Defending Globalization

The process of globalization, so lauded until recently, is under attack. Many people blame international trade and migration for the stagnation of their incomes and the lack of good job opportunities. The economics profession is no stranger to this paradigm shift. Many recent studies are ambiguous about the benefits of globalization. However, as pointed out by Klaus Desmet and colleagues at Princeton and CREI, most of these assessments focus exclusively on the short run, thus completely ignoring the dynamic growth effects. After developing a dynamic model of the world economy at a high spatial resolution, they show that the long-run gains from globalization quantitatively dwarf any short-run costs. Completely lifting all migration restrictions would increase real world output by 126%. Turning back the clock on trade would have dire consequences. Increasing trade costs by 40% would lower real world output by 30%. Although globalization might create losers in the short run, allowing the free flow of goods and people is still one of the best ways we know to ensure our long-run well-being.

Over the last year, a key theme of Dr. Lake’s published research has been the use of game theory to understand why countries form trade agreements and why they do not. Why did the US-Australia and US-Korea trade agreements form before the Australia-Korea agreement? Why did Canada-Colombia negotiations start before US-Colombia negotiations yet the US-Colombia agreement formed before the Canada-Colombia agreement? Why do trade agreements that synchronize members’ trade policy (e.g. the EU Customs Union) tend to form between close countries yet agreements where members maintain sovereign discretion over trade policy (e.g. the US-Australia and US-Korea Free Trade Agreements) form between either close or far apart countries? Why has the proliferation of bilateral trade agreements since the 1994 Uruguay Round of global trade negotiations stopped far short of a tariff free world?

Recent elections around the world have highlighted once again that globalization, immigration and diversity are some of the most polarizing issues in economics and politics.  Thus, understanding the effects of increasing society’s diversity, e.g., via immigrations policies has become vital.  Assistant Professor Ömer Özak jointly with coauthor Emilio Depetris-Chauvin (Pontificia Universidad Católica de Chile) employ historical migration as a natural laboratory to student the effect of increased population diversity on the variety of occupations and the level of economic development.  Using novel statistical techniques and data, this study combines geocoded ethnographic, linguistic and genetic data sets.  The authors provide evidence that population diversity has had a positive effect on occupation heterogeneity, national as well as global trade, which have piloted persistent improvements in economic development.  Specifically, they show that more diversity leads to higher urbanization and increased stratification.  Moreover, they find evidence that these beneficial effects of diversity have persisted in generating a higher skilled labor market. This in turn increases the competitiveness of societies.