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. 

By Brock Mutic, Queen’s Economics Department

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.