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Faculty of Economics

In 2018, the editors of the Journal of Economic Perspectives invited Professor's from around the world to send examples of JEP articles that they had found useful for teaching, with a focus on undergraduate courses. They received 250 responses and compiled the results into a themed list of papers.

Papers by the following Faculty of Economics members and former Faculty members were among those selected.


Professor Vasco Carvalho

Professor Vasco Carvalho

"From Micro to Macro via Production Networks". Journal of Economic Perspectives 28 (4): 23–48.

Abstract:
A modern economy is an intricately linked web of specialized production units, each relying on the flow of inputs from their suppliers to produce their own output which, in turn, is routed towards other downstream units. In this essay, I argue that this network perspective on production linkages can offer novel insights on how local shocks occurring along this production network can propagate across the economy and give rise to aggregate fluctuations. First, I discuss how production networks can be mapped to a standard general equilibrium setup. In particular, through a series of stylized examples, I demonstrate how the propagation of sectoral shocks—and hence aggregate volatility—depends on different arrangements of production, that is, on different "shapes" of the underlying production network. Next I explore, from a network perspective, the empirical properties of a large-scale production network as given by detailed US input-output data. Finally I address how theory and data on production networks can be usefully combined to shed light on comovement and aggregate fluctuations.
Journal link: https://www.aeaweb.org/articles?id=10.1257/jep.28.4.23


Professor Sheilagh Ogilvie

Professor Sheilagh Ogilvie

"The Economics of Guilds". Journal of Economic Perspectives 28 (4): 169–92.

Abstract:
Occupational guilds in medieval and early modern Europe offered an effective institutional mechanism whereby two powerful groups, guild members and political elites, could collaborate in capturing a larger slice of the economic pie and redistributing it to themselves at the expense of the rest of the economy. Guilds provided an organizational mechanism for groups of businessmen to negotiate with political elites for exclusive legal privileges that allowed them to reap monopoly rents. Guild members then used their guilds to redirect a share of these rents to political elites in return for support and enforcement. In short, guilds enabled their members and political elites to negotiate a way of extracting rents in the manufacturing and commercial sectors, rents that neither party could have extracted on its own. First, I provide an overview of where and when European guilds arose, what occupations they encompassed, how large they were, and how they varied across time and space. I then examine how guild activities affected market competition, commercial security, contract enforcement, product quality, human capital, and technological innovation. The historical findings on guilds provide strong support for the view that institutions arise and survive for centuries not because they are efficient but because they serve the distributional interests of powerful groups.
Journal link: https://www.aeaweb.org/articles?id=10.1257/jep.28.4.169


Professor Sir Partha Dasgupta

Professor Sir Partha Dasgupta

with Kenneth Arrow, Lawrence Goulder, Gretchen Daily, Paul Ehrlich, Geoffrey Heal, Simon Levin, Karl-Göran Mäler, Stephen Schneider, David Starrett, and Brian Walker.
"Are We Consuming Too Much?" Journal of Economic Perspectives 18 (3): 147–72.

Abstract:
This paper articulates and applies frameworks for examining whether consumption is excessive. We consider two criteria for the possible excessiveness (or insufficiency) of current consumption. One is an intertemporal utility-maximization criterion: actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility. The other is a sustainability criterion, which requires that current consumption be consistent with non-declining living standards over time. We extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change. In applying this formula, we find that some poor regions of the world are failing to meet the sustainability criterion: in these regions, genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital.
Journal link: https://www.aeaweb.org/articles?id=10.1257/0895330042162377


Professor Hamish Low

Professor Hamish Low

with Costas Meghir.
"The Use of Structural Models in Econometrics". Journal of Economic Perspectives 31 (2): 33–58.

Abstract:
This paper discusses the role of structural economic models in empirical analysis and policy design. The central payoff of a structural econometric model is that it allows an empirical researcher to go beyond the conclusions of a more conventional empirical study that provides reduced-form causal relationships. Structural models identify mechanisms that determine outcomes and are designed to analyze counterfactual policies, quantifying impacts on specific outcomes as well as effects in the short and longer run. We start by defining structural models, distinguishing between those that are fully specified and those that are partially specified. We contrast the treatment effects approach with structural models, and present an example of how a structural model is specified and the particular choices that were made. We cover combining structural estimation with randomized experiments. We then turn to numerical techniques for solving dynamic stochastic models that are often used in structural estimation, again with an example. The penultimate section focuses on issues of estimation using the method of moments.
Journal link: https://www.aeaweb.org/articles?id=10.1257/jep.31.2.33


Professor Kaivan Munshi

Professor Kaivan Munshi

"Community Networks and the Process of Development" Journal of Economic Perspectives 28 (4): 49–76.

Abstract:
My objective in this paper is to lay the groundwork for a new network-based theory of economic development. The first step is to establish that community-based networks are active throughout the developing world. Plenty of anecdotal and descriptive evidence supports this claim. However, showing that these networks improve the economic outcomes of their members is more of a challenge. Over the course of the paper, I will present multiple strategies that have been employed to directly or indirectly identify network effects. The second step is to look beyond a static role for community networks, one of overcoming market failures and improving the outcomes of their members in the short-run, to examine how these informal institutions can support group mobility. A voluminous literature documents the involvement of communities in internal and international migration, both historically and in the contemporary economy. As with the static analysis, the challenge here is to show statistically that community networks directly support the movement of groups of individuals. I will show how predictions from the theory can be used to infer a link between networks and migration in very different contexts.
Journal link: https://www.aeaweb.org/articles?id=10.1257/jep.28.4.49


Tags:

Networks

Environment

Energy

Development

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