This QED Spotlight article by Brock Mutic (JDI Research Associate) presents research by QED Professor Beverly Lapham and PhD Candidate Daniel Teeter.
It is widely agreed upon by economists that intra-national trade frictions—barriers to seamless trade between regions within a country—can impact a country’s economic performance. In the Canadian context, as each province and territory has its own regulatory environment and particular trade rules, provincial borders—in addition to being geographic—are also frictional and affect the flow of goods and services within the country. Understanding the size of inter-provincial trade frictions in reality, and their effect on the flow of trade in Canada, is an important question for understanding their costs to the Canadian economy. Queen’s Economics Department Professor Beverly Lapham recently teamed up with QED Ph.D. candidate Daniel Teeter to study this important issue in a recent QED Working Paper, where the team used a state-of-the-art gravity analysis to examine the size and importance of inter-provincial trade frictions in Canada between 1997 and 2019. Their research ultimately produced insightful and policy-relevant results.
QED Research Spotlight by JDI Research Associate Brock Mutic summarizes recent research by QED Professors Allen Head and Huw Lloyd-Ellis in collaboration with former PhD student Derek Stacey
Deciding whether to buy or rent a home is one of the largest financial decisions many people make. Across cities in the United States, however, this decision is not made equally, as the affordability of homeownership varies; in different cities, it is relatively more or less affordable to buy a home, compared with renting. Although economists hypothesize these differences are driven by local economic conditions, understanding which local factors are at play is no easy task: the effects in question lay submerged in the depths of the economic ocean, driven by the rough currents of the dynamic and complex housing market, and are not easily visible from the surface. Wading through the tide, and pulling the relevant effects up from below, is a task requiring a very precise net, and a very steady hand.
Recognizing that the determinants of home affordability are relevant for millions of people however, as everyone needs a home, Queen’s Economics Department researchers Dr. Allen Head and Dr. Huw Lloyd-Ellis, in collaboration with Dr. Derek Stacey of the University of Waterloo, were undeterred by the waves. Setting their boat on the water, they engaged in research to study the question, in a paper recently published in International Economic Review. The team built a ‘frictional assignment’ model of the housing market to study the factors affecting inter-city home affordability, calibrated it, and tested it against observational data. Ultimately, they produced insightful results, with relevance for housing policy.
QED Research Spotlight article by JDI Research Associate Brock Mutic highlighting recent research by QED Professor Sitian Liu
The COVID-19 pandemic upended our lives and the economy in unprecedented ways. Institutions and ways of organizing society which had previously been ubiquitous, had to be rethought and reworked on a dime, because of a deadly virus. One such institution was the office: although once a quintessential symbol of modern economic life, and an unquestioned premise of the modern labour market, the pandemic dissolved the office’s status as a synecdoche of work. In particular, it caused workers in unprecedented volumes and variations of jobs to transition to remote work, and to work-from-home models. The office was dead in the era of COVID-19, and Zoom had killed it.
Although remote workers gained increased work flexibility and safety from the virus, they lost their physical connectedness to each other. Coworkers were no longer separated by floors or cubicles, nor firms by blocks or kilometers. Economic relations, while previously physical and direct, became abstract and mediated; instead of relating directly to other people, remote workers separated by an unquantifiable digital distance could only directly relate to the shadows of the people on their screens.
JDI Research Associate Brock Mutic interviews Queen’s Economics Department (QED) Professor Allen Head about ongoing research and Canadian public policy
Queen’s Economics Department Professor Allen Head, in an ongoing research project in collaboration with Professor Beverly Lapham and former Queen’s Ph.D. student Dr. Alex Chernoff, has been investigating how productivity is distributed, and how consumers search for products, across the Canadian retail market. The research, in uncovering how Canadian retail prices are affected by cost pass-through and demand changes, has the potential to improve our understanding of how inflation operates in the Canadian context. This summer, the QED blog caught up with Dr. Head, in anticipation of his forthcoming research, to learn more about his exciting project.
QED Blog: It’s great to speak with you, Professor Head. Can you please tell us a bit about your current research project?
Dr. Allen Head (A.H): As you explained, the new research, in collaboration with Professor Lapham and Dr. Chernoff, jointly estimates the productivity distributions and consumer search processes for retail industries in Canada. We do this using detailed firm-level data on Canadian retail firms, including information on their revenue, costs of goods sold, and profits.
A PhD student research profile featuring Frédéric Tremblay, who completed his PhD at Queen’s in 2021 and is currently a postdoc at Queen’s for the NSERC One Society Network. Image provided by USAID.
Frédéric Tremblay’s research on savings groups grew out of work with Limestone Analytics on projects for organizations such as USAID and World Vision. Such organizations want to quantify the impact of their international development programs, but traditional tools for measuring such impact tend to underestimate the benefits of financial inclusion interventions. In his PhD dissertation, Tremblay proposed a new method for modelling the welfare gains from savings groups in developing countries.
Savings groups (SG) are institutions where small groups of people come together to save and take out loans. These simple, member-owned institutions can provide rudimentary financial services to communities who are marginalized or otherwise lack access to such services, often in the developing world. Queen’s Economic Department (QED) postdoc and former PhD student Frédéric Tremblay developed a model of SGs capable of capturing their core features and design elements in his PhD dissertation. His research has policy relevance for NGOs and policymakers hoping to better understand these institutions, and how they can help the most marginalized communities around the globe access basic financial services.
New research by Queen’s professor Sitian Liu studies the effects that exposure to mass incarceration has on the educational attainment of African Americans in a paper with relevance for policy makers hoping to understand the unintended effects of the criminal justice system in the United States.
In the United States, the educational attainment of black people has historically lagged behind that of white people. Between the 1960s and the mid-1980s, the gap began to close. Since the late-1980s, however, the gap has begun to widen again, with black men experiencing a greater decline in relative educational attainment than black women:
QED professor Karen Ye brings her work with the Joint Initiative for Latin American Experimental Economics (JILAEE) to Queen’s, building international connections, and providing research opportunities for students and faculty.
Queen’s Economics Department (QED) Assistant Professor Karen Ye joined Queen’s in 2020 after completing a postdoc at the the Joint Initiative for Latin American Initiative Experimental Economics (JILAEE). Dr. Ye continues to serve as Assistant Director of the institute, an experimental economics research initiative based in Buenos Aires, Argentina, founded in 2018 as a partnership between the University of Chicago—where Dr. Ye received her PhD in 2019—and the Universidad del CEMA (UCEMA) in Buenos Aires. It “use[s] insights from behavioral and experimental economics to reduce inequality and promote economic betterment in Latin America” [1], by “partner[ing] with public and private institutions to produce rigorous research, support[ing] researchers to run their own field experiments in Latin America, and bring[ing] together a network of world-class researchers and innovators” [1].
Testing the Waters
Dr. Ye herself is a behavioural and experimental economist, who combines insights from economics with psychology, sociology, and other disciplines in her research. She conducts experiments in the field to test economic theories. Much of Dr. Ye’s recent research has involved studying how peer effects can affect the human capital investment decisions of young people. “What I’m interested in,” she says, is “how people are affected by their peers and social network when making decisions”. Thus, when UCEMA professor Julio Elias approached Ye and her PhD supervisor at the University of Chicago, John List, with the idea to establish an experimental economics research initiative in Latin America, an area ripe with experimental potential, it was initially a very exciting idea. Before the team at UChicago was prepared to take the plunge into a new world of field work on a different continent however, they wanted to test the waters. Specifically, Dr. Ye and her colleagues wanted to know what kind of demand, if any, existed on the ground for the kind of research they were interested in.
Through droughts, a global pandemic, and a military coup, Queen’s PhD Student Ardyn Nordstrom has been studying the effects of education interventions on girls’ education in rural Zimbabwe since 2017. In Summer 2022, she finished her PhD studies and begin her new position as an Assistant Professor in Program and Policy Evaluation at Carleton University’s School of Public Policy and Administration.
Article by Brock Mutic Queen’s Economics Department with Chris Cotton
Ardyn Nordstrom, a recent PhD graduate from the Queen’s Economic Department (QED) and a John Deutsch Institute (JDI) fellow, had no idea her research on the effects of educational interventions in rural Zimbabwe would take her to the places it did. In fact, Nordstrom had not expected to be studying educational interventions in rural Zimbabwe at all.
Nordstrom’s undergraduate path, like many others, was formative and ended in a place it did not begin. Nordstrom studied commerce as an undergraduate at Carleton University, a world away from rural Zimbabwe. She became interested in development economics after taking several courses in the subject. The spark had caught fire. Going on several service trips to Guatemala and Mexico and working with people on the ground influenced her future path even more. Nordstrom’s travels inspired her to pursue a career in development and development economics.Read More »
By Christopher Cotton, Queen’s Economics Department
Limestone Analytics engaged several researchers from the Queen’s Economics Department to contribute to the Malawi Priorities project, which compared alternative social investments to determine which offer the greatest social and economic benefits per $1 spent. The analysis finds that investments focused on children tend to offer the largest benefits to society per dollar spent. Supporting community dialogues on child marriage results in $114 in benefits for every $1 spent. Investing in technology assisted learning in schools results in $106 worth of benefits to the community. Other promising investments involve maternal and neonatal health and nutrition, land and market reforms, and providing energy sector technical support.
Image from the Malawi Priorities Project, 2022
Malawi remains one of the world’s poorest countries. A landlocked country in Sub-Saharan Africa whose economic opportunities depend heavily on its neighbors. A country whose population is largely rural and dependent on agriculture, while facing water shortages and environmental challenges. A large youth population whose rapid growth outstrips growth in school capacity and formal employment opportunities.
Malawi faces many challenges. Because of this, there are countless opportunities for governments, NGOs, and social sector organizations to undertake investments that may have lasting effects on Malawi and its people. There are many opportunities, but few resources. Which raises the question: which opportunities result in the greatest social benefit and offer the greatest value for money? Which opportunities should be prioritized over others?
These are the questions asked by the Malawi Priorities project led by the Copenhagen Consensus Center and the National Planning Commission of Malawi, with support of the African Institute for Development Policy and the JBJ Foundation. The Malawi Priorities project worked to identify the most promising social investment opportunities across the country, from those focused on infrastructure and energy to agriculture and environment to public health and education to social inclusion and employment. It then applied rigorous, evidence-based cost-benefit analysis (CBA) of these opportunities for a head-to-head comparison of the society-wide benefits and costs of the alternative opportunities.
The research team at Limestone Analytics was engaged by the project to lead the assessment of nine separate research questions on behalf of the group. The team, which included Queen’s researchers Huw Lloyd-Ellis, Christopher Cotton, Ardyn Nordstrom, Frederic Tremblay, and Bahman Kashi, worked with Malawi based experts to identify the most promising solutions, and then conducted detailed CBAs for each opportunity. The questions how Malawi can improve outcomes on a range of dimensions, from the primary school education quality, secondary school retention, gender empowerment and inclusion, industrialization, youth employment, public utility reliability, and national resource management. Our team also provided macroeconomic projections for the project and the National Planning Commission the project to map out alternative COVID-19 recovery paths over the next five years.
Over the past year or so, most Canadians have experienced situations that appear to be associated with shortages of labour in various sectors of the economy. Whether they’ve been unable to obtain certain goods and services, have observed construction projects sitting idle or, most recently, have lost their luggage while travelling through Pearson airport, many experiences point to significant problems in the labour market. These issues are not unique to Canada, however, and similar trends are being observed in several other OECD countries (especially the USA, the UK and Australia).
Measuring Labour Shortages
While we all have anecdotes and there is ample discussion of the issue in the media, it is useful to have quantitative measures of labour shortages. This allows us to gauge more clearly (1) how significant these shortages are, (2) in what industries they are most acute and (3) the variation that has occurred over time. Understanding these features is essential for determining the underlying causes of labour shortages and therefore the likely role of policy in mitigating them. A labour shortage essentially means that employers have jobs that they want to fill but there are relatively few workers who are looking to take those jobs. Economists therefore typically measure the extent of such a shortage using “market tightness”: the ratio of the vacancy rate to the unemployment rate.[1] While unemployment rates across industries are commonly available via Statistics Canada’s Labour Force Survey (LFS), measures of vacancy rates that are comparable across industries and over time have only been available relatively recently through their Job Vacancy and Wage Survey (JVWS).
Economics and Policy 