A manifesto for economic research in Europe

Marc Ivaldi 08 June 2017

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Author's note: This column was written in collaboration with Richard Blundell, Estelle Cantillon, Barbara Chizzolini, Wolfgang Leininger, Laszlo Matyas, Ramon Marimon and Frode Steen.

Across the world, but particularly in Europe, economists have sometimes found themselves stereotyped as cold, remote, and inscrutable. They have been accused of understanding little about everyday reality or even of being slaves to corporate lobbies. Their field, some critics say, is not really science, and cannot produce clear policy recommendations (Luyendijk 2015).

The COoperation on European Research in Economics (COEURE) project (http://www.coeure.eu/) (which has received funding from the European Union’s Seventh Framework Programme for Research, Technological Development and Demonstration) has been evaluating future directions for European economics, and the best ways to communicate the value of that research. A full account of the project is available in a book published by Cambridge University Press (Matyas et al. 2017).


"Economics without Borders", edited by Laszlo Matyas, Richard Blundell, Estelle Cantillon, Barbara Chizzolini, Marc Ivaldi, Wolfgang Leininger, Ramon Marimon and Frode Steen is available here


An associated manifesto (Blundell et al. 2017) proposes ways in which economic research can be more productive and have more impact on policymaking and the public.

European research in economics has been successful at reversing the 'brain drain' to North America of the 1970s and 1980s, thanks to national and EU funding and the development of academic clusters of excellence. Data for 2016 show that 40% of the top quartile of economics departments in the world are in Europe.1

These clusters of excellence grew in three ways. Some were large research centres, such as those based at the ECB or the OECD. Others were based in large university departments of economics. In addition, there have been networks collaborating around a specialised research programme, which alone account for between 10% and 15% of author share. 

But the profession now faces new challenges with the changes in public funding of European research to focus on impact, as well as a move towards allocating a greater share of funding in a thematic way.

Strategic objectives for European economics

How can Europe's economists continue to develop the strength and relevance of their research? The COEURE manifesto identifies four main ways:

  • Foster long-term research capacity

European research centres need to be continuously enhancing, improving and expanding their production line. By doing this, Europe can catch up with the US in productivity and impact, while addressing the policy challenges and key research questions that are relevant to European policymakers and citizens.

This will need both more efficient research (more articles in economic journals), but also improved research quality (more of those articles should be in the best journals). We will also need to strengthen support for PhD programmes, and do a better job of monitoring, mentoring, and developing the careers of the next generation of European economists.

  • Establish Europe as a data powerhouse

Over the past 20-30 years, we have seen a steady rise in empirical research. This is good both for intellectual breakthroughs and for promoting evidence-based policy-making. But to lead on this, we need better and more accessible cross-country data for researchers.

In effect, this comprises two recommendations. The first is that the data collected and administered by public institutions and governments, covering entire populations rather than samples, should be made available to as many European-based researchers as is practical, for example by mandating statistical agencies, including Eurostat. National legislation to secure researcher access to selected data, as in Nordic countries, would also help.

The second recommendation is to improve data design and harmonisation. Data collection in Europe is still predominantly organised at the national level while the firms to which the data refer largely operate across boundaries. National data, for example household data, need to be compatible and comparable across the region.

  • Reinforce outreach

The communication gap between economic research and policymakers and the public is wider in some parts of Europe than in the US. Economists have often failed to make sufficient effort to explain what they do to their fellow citizens. Establishing continuing dialogue between the research community and the policy community through workshops, reports and research funding would help.

But outreach to policymakers alone will be insufficient to break down the stereotype of the economist as remote from real-world concerns. European economists should also establish an enhanced format for communication with the public. This requires more public lectures, more commitment to working through the media, and more teaching of economics and statistics in higher education.

  • Enhance research funding

Funding for economic research in Europe is small relative to the funding of other sciences, even other social sciences.2 We need to encourage more – and more successful – multi-year funding applications by economists to funding agencies.

To do this, we should evaluate the quality and productivity of the research output in Europe on an annual basis. This can be done at low cost, for example by surveys and citation counts. We should also revamp the ‘top down’ thematic funding approach currently used by both the EU and member state funding agencies.

One idea would be to create a 'funders' forum' with the European Economic Association (EEA) as an outside adviser, to support structured PhD programmes without imposing specific themes of research. We might also reduce the ex ante administrative burden for grant management, while increasing ex post accountability for the scientific quality of the output.

But we should also compete for every scrap of funding by streamlining the process. Some of this is a matter of providing better information on what grants are available to researchers. Some solutions for this could be regulatory – for example, an industry standard for ethics approval agreed by the ERC. There is also potential for collaboration across social science disciplines to establish the case for research.

Research frontiers

More capacity, better data, more outreach and more efficient funding are all necessary. The COEURE project has also defined 12 topics that provide a wide perspective on current ‘frontier’ research in economics in Europe:

R&D, innovation and growth will be key drivers of long-term prosperity. Recent research has shed new light on the role of competition and industrial policy, the welfare state, and macroeconomic policy. We need to foster methodological innovation, for example combining macro models with micro data, and improving researchers’ access to microdata. But we also need to support convergence between research on development, trade and the internal organisation of firms on the one hand, and the literature on growth on the other.

Labour market research was largely starved of funding before the Eurozone crisis. European labour markets have experienced variable employment performance during and after the crisis. We need to foster research into the socioeconomic effect of labour contracts (for example, ‘dual labour markets,’ where jobs created in the recovery – and destroyed in the crisis – are mostly temporary), and develop better and more open panel data in areas like productivity, innovation, and contracts.

Population, migration, ageing, and health will require research that follows migrants’ decisions over time. In particular, it is important for Europe to understand the determinants by skill type of migrants’ permanent, rather than temporary, migration. This will require the creation of long-term panel data, a homogeneous European database on migration flows and migrant characteristics, possibly using new technology like GPS tracking mobile applications. 

The formation of human capital through educational systems co-determines growth and prosperity, but it also influences social inequality. The EU’s Lisbon Agenda, for example, has prioritised developing competitiveness through creating more knowledge-based work. We need more research on human capital formation, on how to teach better, and on how schools should be governed. And we need to create the datasets – such as birth cohort surveys – that will provide insights into how policy is affecting human capital.

Competition and regulation in digital markets will require innovative techniques, because digital markets are more dynamic than traditional markets and they produce large amounts of data. In future, we are more likely to see competition for the market rather than competition in the market. Key questions include how this relates to traditional competition models, and their relations to the dynamics of innovation; as well as the likely nature and regulatory needs of the single market in the future.

Trade and development in a globalised world drives policy, which in turn drives research. But there is a tension between policymakers and researchers, for example over the value of mercantilism. Promoting research on the losers and winners from trade and globalisation, building better models of regulatory and information frictions, and understanding better how multinational firms and their global value chains operate are all urgent requirements.

Energy, the environment, and sustainability are at the core of the EU policy debate. Although an energy transition to a low carbon economy is widely accepted, how – and how fast – to do this are less obvious. Climate change should stimulate the inclusion of environmental systems in macro models, and foster research into individual and institutional attitudes and responses to the environment.

Since the Treaty of Rome, Europe has promised to reduce ‘disparities between the levels of development of the various regions’ (European Union 1957). Economic research into regional disparities and efficient transport systems can help this process. Economists should foster research on the impact of falling transport costs, new infrastructure projects, reassessment of existing transport infrastructure and the efficient use of road pricing systems.

The growth of skilled cities creates a need to study the phenomenon of agglomeration. Wealth will be created in Europe's cities and metropolitan areas. We need to know more about the theoretical and empirical costs and benefits of agglomeration, for example the impact of congestion pricing and the impact on social cohesion. A US-like categorisation of European agglomerations into more unified 'statistical metropolitan areas' would allow the creation of comparable local data about employment, transport, GDP, human capital and physical attributes.

Fiscal and monetary policy questions abound in the Eurozone. These concern both the design of stabilisation policies, and their effectiveness in stimulating growth and wellbeing. Politicians and policymakers need sound economic thinking, and credible policy and institutional design. In turn, this needs rigorous macroeconomic research, linking monetary, fiscal and financial policies and institutions, databases for studying how households and firms react to policies, and research that addresses the long-term impact of fiscal and monetary policies on Europe's citizens.

Financial markets played a role in the economic crisis that led to a debate on the need for coordinated intervention policies among European countries, the optimal degree of regulation and how to encourage the establishment of a Capital Markets Union. Now the literature on capital markets needs to catch up with the literature on financial stability in banking. We need more theoretical work, metrics and indicators that evaluate risks and conduct; and researchers need more open central bank and regulatory data. Economists can help to improve the financial literacy of European citizens.

Inequality in Europe is lower than in the US, but deeper European integration will be a failure if we do not cope with the welfare implications of the heterogeneity in mobility and migration. We need researchers to help understand how we create equality of opportunity, and we need panel data to study the dynamics of poverty. We will also need research on really big questions, such as the sustainability of national welfare states when capital and labour are mobile, and the convergence of southern societies to the social model of northern societies. This will help prepare economists to present policies to fight poverty and promote equal opportunities.

Editors’ note: The COEURE project was funded by the European Union’s Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 320300 (COEURE).

References

Blundell, R, E Cantillon, B Chizzolini, M Ivaldi, W Leininger, L Matyas, R Marimon and F Steen (2017), “A manifesto for economics research in Europe, proposed by the members of the COEURE executive committee”, COEURE.

EU (1957), Treaty Establishing the European Community: Article 158.

Luyendijk, J (2015), “Don’t let the Nobel prize fool you. Economics is not a science”, Opinion, The Guardian, 11 October.

Matyas, L, R Blundell, E Cantillon, B Chizzolini, M Ivaldi, W Leininger, R Marimon and F Steen (eds) (2017), Economics without Borders, Cambridge University Press. 

Endnotes

[1] Data from RePEc, see https://ideas.repec.org/top/top.econdept.html.

[2] Funding agencies, as a rule, do not publish data on disciplinary performance. In the case of Austria, where data is available, economics attracted 2.2% of research funding in the period 2009-2014. Social sciences including psychology attracted 3.8%.

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Topics:  Frontiers of economic research

Tags:  COEURE project, research, funding

Professor of Economics, Toulouse School of Economics and Ecole des Hautes Etudes en Sciences Sociales

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