ECONOMICS REVIEW 2017/18 CONTENTS 2017/18FEATURES 3 18 27 36 FACULTY PROFILE: LECTURE THEATRE ECONOMICS PROFESSOR WHAT DO STUDENTS FROM MAITREESH GHATAK NAMED FOR GENEROUS AWARDED PRESTIGIOUS THE DEPARTMENT OF LEGACY GIFT MEDAL FOR GROUND- ECONOMICS GO ON TO DO? BREAKING RESEARCH 20 38 STUDENTS AND STAFF FACE NEW APPOINTMENTS TO FACE 44 DISMAL IGNORANCE OF THE “DISMAL SCIENCE” 10 MAJOR ECONOMETRIC THEORY PRIZE AWARDED TO 32 JAVIER HIDALGO MEET OUR STUDENTS 22 35 JAMES MEADE, NOBEL ORIANA BANDIERA WINS LAUREATE 1077 ESTER BOSERUP PRIZE BY MERVYN KING 46 DOUBLE HONOUR 23 FOR ECONOMICS AWARD-WINNING UNDERGRADUATE STUDENT RESEARCH STUDENT PAPER TO BE PUBLISHED IN THE AMERICAN ECONOMIC REVIEW WELCOME TO THE DEPARTMENT DEPARTMENT OF ECONOMICS AT LSE OF ECONOMICS The London School of Economics and Political Science 1 Houghton Street London WC2A 2AE UK We continue to work on improving our educational offer and the overall student Tel: +44 (0)20 7955 7542 or 6426 experience. We have been extremely Fax: +44 (0)20 7955 6592 or 4626 fortunate to have been able to appoint Email: [email protected] Dimitra Petropoulou as Associate Web: lse.ac.uk/economics Professorial Lecturer, and Junius Twitter: @LSEEcon Olivier and Katarzyna Krajniewska as YouTube: EconomicsLSE Undergraduate Tutors. I am confident Facebook: LSE Economics Department that their contribution to the student Facebook alumni group: experience will be first rate. LSE Economics Alumni We have been privileged to have made other exceptional hires. I take The London School of Economics and this opportunity to welcome Nathifa Political Science is a School of the Hall-Ezea (Teaching Manager), Edel University of London. It is a charity and Ryall (MSc Programmes Manager), is incorporated in England as a company Charlotte Sedgwick Rough (Programme Welcome to the Economics Annual limited by guarantee under the Companies and Communications Assistant), Review of 2017/18. This has been a Acts (Reg. no 70527). Lorna Severn (Graduate Admissions significant and challenging year for Administrator) and Anna Watmuff The School seeks to ensure that people the Department of Economics. (Department and Graduate Admissions are treated equitably, regardless of The Department continues to Assistant). In addition, Professor Steve age, disability, race, nationality, ethnic demonstrate its academic excellence Pischke has been appointed as the new or national origin, sex, religion, sexual and impact on our profession and Head of Department and Professor orientation or personal circumstances. society. To give a few prominent Wouter Den Haan as the new Deputy The Economics Annual Review can be examples, in the Tilburg University Head for Education. made available in alternative formats, on Economics Ranking for the period 2013- request. Please contact Econ.Hub@lse. 2017, our department is ranked fourth Lastly, I would like to thank all students, ac.uk for more information. in research output among economics colleagues, and staff for their effort, department worldwide. Professor Daniel patience, and enthusiasm. I wish them all Sturm and his co-authors were awarded the best for the new academic year. the prestigious 2018 Frisch Medal for their paper “The Economics of Density: Professor Michele Piccione CONTRIBUTORS Evidence from the Berlin Wall”, published Interim Head of Department Editorial Team: Sarah Burton; Nathifa Hall- in Econometrica. Professor Tim Besley Ezea; Charlotte Sedgwick Rough; Emma was knighted in the 2018 New Year’s Taverner (Editor); Kalliopi Vacharapoulou; Honours for services to economics and Anna Watmuff. public policy and is currently serving as President of the Econometric Society. Contributors: Oriana Bandiera; Wouter Den Haan; Erik Eyster; Charlotte Knights; Steve Machin; Michele Piccione. Thanks to: Charlie Bean; Alessandro Gavazza; Maitreesh Ghatak; Martin Hannon; Claire Harrison, LSE Design Unit; Mervyn King; Daniel Reck; Daniel Sturm. Nick Stern made Companion of Honour Professor Lord Stern of Brentford, Chair “ This is a fitting tribute of the Grantham Research Institute on 2 Climate Change and the Environment to one of Britain’s and I G Patel Professor of Economics and Government at the London most outstanding School of Economics and Political Science, was included on the Queen’s and committed Birthday Honours earlier last year. It academics.” was announced on 16 June 2017 that Professor Lord Stern was to be made a Alun Evans, Chief Companion of Honour for his services to Executive of British Society economics, international relations and climate change. had only been four other academic Nick said he was “both deeply honoured economists who had ever received the and delighted” to have been made a Companion of Honour and this pointed Companion of Honour, one of the most to “the high esteem in which he is held, prestigious accolades that can be and the enormous impact he has had awarded to a civilian. The Companion throughout his career.” of Honour was first established by King George V in 1917 and recognises Nick has long been committed to services of national importance. improving the lives of poor people around action, clearly outweighed the expected Colleagues and peers alike have the world in his application of economics costs. Nick proposed an alternative celebrated Nick Stern’s achievement to encourage better public policy path forward by providing the necessary and noted his seminal contributions to making. Throughout his career Nick has economic policies to limit climate the study and application of economics. been called upon by governments, UK change and reduce carbon usage, and Alun Evans, Chief Executive of the and overseas, to advise on a range of a formula for durable environmentalism British Academy, noted that this was “a policies. With the landmark Stern Review: that bound business and government. fitting tribute to one of Britain’s most The Economics of Climate Change outstanding and committed academics.” (2006), Nick warned of the dangers of Nick has recast the environmental issue Director of LSE, Dame Minouche Shafik inaction in response to climate change as a global economic issue and helped to further celebrated her former teacher’s and demonstrated that the expected move it to the top of the global agenda, achievement, by noting that there long-term economic benefits of early fundamentally shaping the direction of travel for how humanity and global leaders address this great challenge. “ Many congratulations to Nick on this Nick has done so through collaboration outstanding achievement. The fact he is only with other disciplines, for example science and ethics, and proposed an the fourth academic economist to ever be optimistic look to the future whilst calling for urgent action. The Department made a Companion of Honour speaks to celebrates with him in the recognition of his latest achievement with the the high esteem in which he is held, and the conferment of the Companion of Honour. enormous impact he has had throughout his career. He has contributed on so many fronts ranging from cutting edge research to the front-lines of policy making, to teaching generations of students (including me) who are in his debt.” Dame Minnouche Shafik FACULTY PROFILE: MAITREESH GHATAK Maitreesh Ghatak is a Professor of Economics and Deputy Head 3 of Department for Research in the LSE Department of Economics. He is Director of the Development Economics group at STICERD, and was Lead Economist of the International Growth Centre’s India (Bihar) programme. He is a member of several international research networks. He sits on the Board of the Bureau for Research in the Economic Analysis of Development. He is a co-editor of Economica, having formerly being Editor-in-Chief of the Journal of Development Economics, and Managing Editor of the Review of What is your family background? Animated debate and discussions about Economic Studies. economic, political and social issues were I grew up in Calcutta in an urban, middle- Professor Ghatak is an applied a regular part of our social life at home. class, progressive family. My family microeconomic theorist with Pretty much everyone I knew was some includes several well-known writers and research interests in economic shade of Left or liberal in their politics – artists, such as my father’s eldest sister, development, public economics, there was general consensus about the Mahasweta Devi, who was one of the and the economics of need to fight poverty, inequality, religious most famous writers in modern India, and organisations. He has published intolerance, and caste and gender-based my grandfather’s youngest brother, Ritwik numerous papers on microfinance, discrimination, even though there was Ghatak, who is named, along with Satyajit property rights, occupational wide disagreement about how to combat Ray as a pioneer of arthouse cinema choice, collective action, and the them. in India. My paternal grandmother’s economics of NGOs and non- eldest brother, Sachin Chaudhuri, is the Both my parents started off by studying profits. He writes on economic founder-editor or the Economic and economics in college but switched and political issues for several Political Weekly of India which from its to political science when they did newspapers and magazines first appearance in 1949, remains the top their Master’s (which was also when including NDTV.com, Ideas for journal internationally on issues relating they met). My father was interested India, The Wire, the Tribune, The to India, and her youngest brother, Sankho in research and after a brief college Guardian, the Telegraph, and the Chaudhuri, was a well-known sculptor. teaching career, worked in various Economic Times. My mother is a third-generation college research organisations, and ran surveys In July 2018, he was elected Fellow teacher, after her father and grandfather for the DFID, the World Bank, and various of the British Academy (FBA). (the latter switched to practising law government bodies. He eventually later), and her mother did her PhD in started his own research consultancy ancient Indian history at Heidelberg firm.