Department Overview

The Department of Economics at Brown is a vibrant and dynamic collection of scholars united by a commitment to path-breaking research and high quality teaching. The Department provides to both undergraduate and graduate students the technical and economic reasoning skills that will ensure long-term success in their chosen professions and a lifelong passion for thinking systematically about the world around them. The department is one of the largest at Brown, consisting of roughly 30 faculty, 80 graduate students, and, in each graduating class, about 200 undergraduate concentrators. The department also has an active Undergraduate Group that brings speakers to campus, organizes faculty-student lunches, and works with the chair to improve the quality of the undergraduate experience.

Economics at Brown has emerged in the last 10 years as one of the worldwide leaders in the cross-cutting areas of growth, economic development, and finance. The question of what causes some economies to grow and others to stagnate or even decline has long been central to economics as a discipline. The recent emergence of China and India as global political and economic forces has increased the recognition of people everywhere that the process of economic change around the world is not just a matter for scholars to debate. What happens in developing countries affects many aspects of the lives of those of us in the developed world, from the types of jobs that we do to the products that are available in the marketplace and the interest rate we pay on our mortgages. The tools that Brown researchers bring to this issue are both theoretical and empirical. The data they examine include “micro” data on individuals, households, and firms in both rich and poor countries (often collected by our own faculty and students) and “macro” data on individual countries or groups of countries, both contemporaneous and historical going back several hundred years.

One important contributor to the process of economic growth is technological change. Over time economies develop new and better ways of producing the goods and services that we all enjoy. But technologies do not simply emerge from nowhere. New technologies are created through direct investment in research and development. There is also a process of technological diffusion in which less advanced firms (and less advanced countries) acquire and adapt the methods of technological leaders. Brown economists have played a leading role in advancing our understanding of these processes. One recent strand of work examines the effects of competition on the process of innovation, arguing that innovation can be suppressed when there is either a very high or very low degree of competition among potentially innovative firms. Another strand of research takes a more micro-perspective and examines the diffusion of the “Green Revolution” technologies that have made it increasingly possible for the rapidly growing populations of many developing countries to be fed.

A second key component of growth is increased worker productivity arising from advances in education, nutrition, and health care. The poor health and low educational status of workers in many counties is a central explanation for their poverty; it is also one reason why relatively few jobs are moved from rich to poor countries, despite the large gap in wages. Again this is an area of research in which Brown economists are making significant contributions at both the micro and macro level. On the micro side Brown researchers have played a pioneering role in collecting the over-time micro-economic data that permits examination of how an adult’s productivity is affected by his nutrition, access to health care, schooling, and exposure to adverse environmental conditions such as arsenic in the water supply during childhood. Other research focuses in particular on the process of AIDS transmission, which will have a large impact on the workforce and thus economic growth in many parts of Africa and may also importantly affect parts of Asia. From a macro perspective, Brown researchers are examining how major public health interventions such as malaria eradication and iodine supplementation have contributed to the process of economic growth. Other recent work explores the role of international trade in affecting the relative returns to skilled and unskilled labor and thus relative rates of per-capita economic growth in developing and developed countries.

Brown researchers have also made important contributions to the understanding of how more efficient allocation of economic resources can contribute to economic growth. The development of the financial sector is particularly significant in this regard. Recent work suggests that increased capital mobility in India played an important role in ensuring that factories located in those areas with the cheapest labor costs, and that this had important effects in terms of poverty reduction. Several Brown economists are also studying the importance of social and ethnic ties as sources of financing for small and medium sized businesses. It has long been assumed that economic growth tends to result in the development of a formal sector that largely displaces these informal sources of credit. Recent research shows, however, that these informal sources play a critical role throughout the development process and can be complementary with the emergence of a strong formal sector. Other studies in the department have examined the role of bankruptcy protection in promoting economic growth and the tradeoff that exists between a dispersed and more centralized market for credit.

A second important determinant of how efficiently economic resources are allocated is the quality of corporate and financial sector governance. A prominent study by a recently recruited member of the department examines the relative merits of regulatory versus market-based systems of financial market governance. Another study explores the role of large pension fund managers in ensuring good governance at the corporate level in the US. A third project, which builds on a recently initiated survey of corporations in Indonesia, will examine the role of corruption as a barrier to efficient corporate management in Indonesia.

Brown also has expertise in the economic analyses of government processes, which clearly have an important effect on the efficiency of the allocation of scarce resources. To what extent, for example, does representation on Congressional committees in the U.S. influence the allocation of federal funds? The department also has a strong reputation in urban economics, which focuses on the factors governing the growth and decline of cities. Recent research has considered the development of markets for local services and the role of highway construction in reducing the relative importance of center cities.

Brown’s economists are not only concerned with the issue of economic growth for countries as a whole. A recently emerging area of strength within the department is the examination of how the benefits of economic growth are distributed to different sectors of the population. Several studies focus on the differential benefits of economic growth to individuals with different levels of ability (high versus low) or different types of skills (generalizeable versus specific). Other work examines the extent to which institutions or programs are able to reach different sectors of the population. One study by a recently recruited member of the faculty considers the implications for universities of the color-blind affirmative action policies that are being adopted in some states. Another study considers the extent to which targeted programs such as non-English language advertisements can help to address the low levels of Medicaid registration among poor people, which results in over-use of emergency care and inadequate preventative care for children..

Because economic research is distinguished by the extent to which methodological developments are complementary with the acquisition of new substantive knowledge, a first rate economics department must have strength in the core areas of theory and econometrics as well as a diverse collection of applied researchers. Brown Economics is fortunate to have strong traditions both in theory and econometrics. A key strength on the theory side is in the field of cooperative game theory. This body of work focuses on the processes by which outcomes such as trade and income generation are determined in complex economies. While simple theoretic models can provide many useful insights about how such processes work in a very stylized world, it is not always clear whether these results generalize to a more realistic world in which there is substantial variation in the characteristics as well as information available to economic actors.

Other researchers at Brown are exploring economic ideas using economic “laboratories” – rooms of individuals sitting at networked computers who communicate in structured ways and with whom randomized experiments may be conducted. Among the studies being conducted at Brown in this growing field of “experimental economics” are examinations of the extent to which individuals show willingness to trust each other and/or cooperate during economic interactions, evaluations of perceptions and preferences for inequality, and a study of whether there are differences between professional athletes and other individuals in the extent to which they follow the strategies that are predicted to be optimal in simple economic models.

Brown econometricians have provided important leadership to the discipline in the study of how statistical methods may be used to extract meaningful causal estimates from different types of data. While it is well recognized that random assignment of individuals to treatment and comparison is the gold standard for measuring causal effects, such random assignment studies are not feasible for the study of many important economic questions. The department’s econometricians have pioneered the development of new methods for addressing these issues, not only by extracting better information, but also in determining when it is not possible to extract meaningful causal estimates at all.

Finally, it is important to acknowledge the prominent role that the Department of Economics plays in the University as a whole. Economics as a discipline is largely defined by a coherent set of theories and methodologies, rather than a particular set of substantive issues. The potential value of this mode of thinking has been increasingly recognized by other units on campus, and, as a consequence, members of the department are become increasingly sought after to participate in the research and teaching activities of other departments and centers on campus. Economics has provided key leadership in the development of the new Commerce, Organization, and Entrepreneurship program, which will build on our experience with the business economics concentration to provide our students and faculty with access to the technical and product-development expertise from Engineering and to sociological insight into the organizational structure of firms. Brown economists are affiliated and/or participate in a number of other units at Brown including the Population Studies and Training Center, Community Health, Education, Urban Studies, Africana Studies, the Taubman Center for Public Policy, and the Watson Institute. They are also playing a significant role in both the Spatial Structures in the Social Sciences (S-4) and Environmental Change Initiatives.

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