Theory and Methods
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| Programme Coordinator: Professor Daniel Bernhofen "The interactions between theory and empirics are at the core of any scientific approach". |
The mission of the Theory and Methods (TM) Programme is two-fold: first, the development of theoretical models that provide insights and/or testable hypotheses about globalisation; second, the fostering of a tighter integration between theoretical and empirical work on globalisation. Traditionally, international economics has been dominated by theoretical analysis. This has changed recently. Facilitated by the broader availability of data sets, the last decade has witnessed a dramatic increase in the empirical investigation of various aspects of globalisation like cross-border trade, cross-border investment and outsourcing. However, the theoretical and empirical literatures have moved along somewhat separate trajectories with only occasional interactions and feedback. With the establishment of the Theory and Methods Programme in 2005, GEP is providing a forum for collaboration between theorists and empiricists and in supporting research across all of the range of GEP Programmes.
Some current research activities:
Globalisation and Unemployment
(Udo Kreickemeier and Hartmut Egger)
This research investigates the impact of increased goods market integration, on national labour markets characterised by involuntary unemployment and identifies conditions under which globalisation will either create or destroy jobs in the local economy.
Education policies and comparative advantage
(Spiros Bougheas, Richard Kneller and Ray Riezman)
This work is motivated by recent policy developments in India and China targeted at altering their patterns of trade (moving up the quality ladder). It examines under what conditions it is optimal to choose education policies to change the patterns of trade, for example, from exporting low-tech to high-tech goods.
Environmental regulations and the location decisions of global firms
(Bouwe Dijkstra, Arijit Mukherjee and Anuj Mathew)
The ‘Pollution Haven Hypothesis’ - the notion that a lack of environmental regulation attracts investment from foreign polluters - is a contentious issue. Motivated by the fact that there is very little hard empirical evidence for the ‘Pollution Haven Hypothesis’, this research examines how environmental regulations affect the location decisions of global firms.
Using a natural experiment to test fundamental propositions in international trade theory
(Daniel Bernhofen and John Brown)
This research exploits Japan’s 19th century opening to world commerce after 200 years of self-imposed isolation to test key propositions in international trade theory. Methodologically, it breaks some new ground by combining economic history with trade theory.
General equilibrium analysis in the presence of heterogeneous firms
(David Greenaway, Rod Falvey and Zhihong Yu)
This research investigates international technology differences in general equilibrium models with heterogeneous firms. Some of this work is motivated by recent empirical evidence which suggests foreign-owned firms are ‘footloose’ and less likely to survive than indigenous firms. Hence, the authors construct models that investigate the role of productivity uncertainty and firm heterogeneity in the survival of multinationals' subsidiaries.
Current conference activities:
The TM Programme has been involved in the organisation of two research conferences in 2007. GEP’s annual June conference in 2007 focused on TM’s theoretical domain and was entitled ‘New Directions in International Trade Theory’. The conference participants came from Europe, North America and Asia and the conference papers are scheduled to appear in a special issue of Economic Theory.
In October 2007 the TM Programme is organising a conference on ‘Globalisation and Migration’. The aim is to explore international migration from different sub-disciplines of economics: trade theory, labour economics and economic history and highlight the different methodological perspectives in the evaluation of migration.
