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Research

Income inequality is increasing around the world, both between and within countries, as growth seems to mainly benefit an urban elite of capital owners and highly-educated workers. This has triggered various kinds of social and political conflicts both in developed and in developing countries. Resolving these conflicts is one of the major societal challenges of our times and it requires solid understanding of the dynamics of global development and inequality, which is what this research area will focus on.

Specifically we aim at generating new explanations regarding the patterns of economic development and inequality in countries that are consistent with these long-run trends. We seek to identify the factors that determine the ability of particular countries, regions, and subgroups in the population to benefit from globalization and technological change and we want to understand how societies can harness them in order to develop in an sustainable and inclusive fashion. These explanations should provide a comparative perspective at global development and will incorporate insights from Economic Growth, International Economics, New Economic Geography, Labour Economics, Development Economics as well as International Business.

Themes

  • What drives demand for labour in a global economy?

As production processes fragment, tasks are increasingly traded across countries. In this sub-area we will study the effect of international trade and technological change on local labour demand and wages. We will achieve this by building a new ‘Global Value Chain model’ that conceptualises production as a series of tasks to be carried out by various combinations of machines and workers. The model will be implemented by the development of a global database on international production and trade linkages, as well as incomes.

  • How does economic growth translate into living standards?

Economic growth is conventionally measured by Gross Domestic Product. But this indicator does not always capture changes in living standards or a nation’s flow of welfare, nor does it account for changes in the distribution of income. It is therefore important to also focus on additional measures of human welfare, such as income inequality, human health, leisure and quality changes provided by new goods. Taking account of these broader measures of welfare not only enhances our understanding of living standards, but also their mutual relationship with income growth.

  • What are the spatial effects of growing interdependencies among nations and regions?

Countries and regions are increasingly linked through flows of products, workers, finance and technology. Urban areas are critical for growth as they provide the necessary agglomeration of knowledge and skills, driving new core-periphery patterns within countries This area considers the spatial dimension of this growing interdependency in such issues as the emergence of cities and the clustering of economic activity. It studies the varied response of firms, regions and countries to the rapidly changing economic environment.

  • How does cultural diversity affect development and inequality?

Economic inequality is not only rooted in economic determinants, but socio-institutional as well. An emerging literature has related economic prosperity with the extent of trust and the degree of diversity present in society. So far, diversity has only been captured by ethnic-linguistic, religious and genetic diversity. Cultural diversity, although acknowledged in the literature as a potentially important factor in understanding the willingness to share and public goods provision, has never been explored empirically. In this area we are interested in understanding how the prevailing attitudes among individuals and the extent to which these attitudes are shared in society affect the ability of countries and regions to engage in the global economy, effectively coordinate economic activity, and develop in a balanced and inclusive fashion.

  • How do financial interventions affect development and inequality?

There is an ongoing debate among social scientists about the importance of financial development for enhancing economic growth and reducing inequality. While there is an abundant literature on the macroeconomic growth effects of financial development, the distributional effects of financial depth received much less attention. Moreover, there is a shortage of rigorous impact studies of financial interventions at the micro-level. This area examines the impact of financial interventions on development and inequality. It considers interventions at the country level (e.g. financial liberalizations) as well as interventions within countries. The financial interventions we study include (micro) credit products, savings and insurance (index and indemnity) products. A variety of methodologies will be used, ranging from cross-country analyses to experimental approaches, such as randomised controlled trails and artefactual field experiments.

Last modified:19 February 2018 2.05 p.m.