MIT Reports to the President 1998-99

DEPARTMENT OF ECONOMICS

The goal of the MIT Department of Economics is to be the best economics department in the world. To achieve this goal, we strive to maintain an outstanding faculty, to have the best Ph.D. program in economics, and to provide an outstanding education in economics for MIT undergraduates.

The scientific and academic activities of the Economics Department continued at a strong pace during the year. Professor Stephen Ross was appointed the Franco Modigliani Professor of Finance and Management, effective July 1, 1998. Associate Professor Daron Acemoglu was given tenure, effective July 1. Professor Acemoglu's fields are labor economics, macroeconomics, and applied theory. Assistant Professors Susan Athey and Jaume Ventura were promoted to the rank of Associate Professor (without tenure) effective July 1. Professor Ventura was also named the Pentti Kouri Career Development Associate Professor. Sendhil Mullainathan joined the faculty as an Assistant Professor. The Department made three new junior appointments in the fields of development economics, labor economics, and international economics and finance.

Our faculty received its usual share of honors. Professor Joshua Angrist and Ricardo Caballero were elected Fellows of the Econometric Society. Professor Athey was elected Faculty Research Fellow of the National Bureau of Economic Research. Professor Olivier Blanchard delivered the Harry Johnson Lecture in England. Associate Professor Dora Costa received the 1998 Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security. Professor Rudiger Dornbusch received an honorary doctorate from the University of Lima, Peru. Professor Paul Joskow was appointed Director of the Center for Energy and Environmental Policy Research at MIT. Professor James Poterba received the National Academy of Sciences Award for Scientific Reviewing. Professor Nancy Rose was elected to the American Economic Association Executive Committee. Professor Peter Temin delivered the John R. Hicks Lecture at Oxford.

The Department was very successful in attracting an outstanding class of new PhD students for

AY 1999—00. We were equally successful in placing our new PhDs on the job market. A third of our graduating students obtained jobs in the top ten departments and business schools in the country.

We continued to receive gifts from alumni and other donors. We received a generous gift from an alumnus, establishing the Paul A. Samuelson Undergraduate Fund to support undergraduate research opportunities. The funding of the Robert M. Solow Endowment Fund has been largely completed and

this year's two Solow Endowment Fellows were appointed. A third Castle Krob International Fellow was named.

Professor Athey was elected Faculty Research Fellow is a Visiting Scholar at the Federal Reserve Bank of Minneapolis and was nominated for the Elaine Bennett Memorial Prize. Professor Blanchard delivered the Baffi Lecture in Italy and was awarded the Department Teaching Award by the Graduate Economic Association. Professor Costa received a Sloan Fellowship. Professor Dornbusch received the Concord Prize in Krefeld, Germany, and delivered both the Koc Memorial Lecture in Istanbul and the Bradbury Lecture at the University of Florida, Gainesville. Professor Glenn Ellison was awarded a National Science Foundation grant for his research, "Studies of Dynamic Phenomena in Industrial Organization," a fellowship by the Center for Advanced Studies in the Behavioral Sciences, and received the MIT Graduate Economic Association Outstanding Teacher Award. Lecturer Sara Ellison received a Hoover Institute National Fellowship. Professor Jonathan Gruber is a Co-Editor of the Journal of Health Economics and gave the keynote address to the Canadian Public Economics Group. Professor Jerry Hausman continued as an editor of the Journal of Econometrics. Professor Joskow was appointed to the EPA Science Advisory Board, and to the Academic Advisory Board for Brookings-AEI Joint Center for Regulatory Studies. Professor Michael Kremer was a Senior Fellow at the Brookings Institution and was elected Research Associate at the National Bureau of Economic Research. Professor Michael Piore received the Undergraduate Economics Association Teaching Award. Professor Poterba continued as Editor of the Journal of Public Economics, was on the Board of Economic Advisors for the Congressional Budget Office, and was the Inaugural Review of Economics and Statistics Lecturer. Professor Temin was elected Vice President of the Eastern Economic Association.

The World Economy Laboratory (WEL), the fundraising unit in the Department of Economics directed by Professor Dornbusch, continued to thrive and provide valuable resources for the Department. WEL conferences were held in New York and Washington, DC during the academic year. These conferences are designed to communicate research findings to a broad audience in business, the economic press, academia and government, and to establish a policy dialogue beneficial to both sides. WEL also made resources available to support policy research for several graduate students and junior faculty. Memberships in WEL continue to grow with each year and allow WEL to continue to support a wide array of student and faculty activities.

Next year's entering class of 31 Ph.D. students will include 15 international students and 10 women (32 percent). Six of our entering class have National Science Foundation Fellowships.

Undergraduate enrollment decreased slightly this year (by 8.6 percent). However, over time, the department has experienced a continued increase in enrollment for undergraduates with a total increase of 47 percent over the last fifteen years.

There were 129 undergraduate majors in economics (41 of whom are double majors), 133 undergraduate minors, and 357 concentrations completed in economics. Fifty-seven students received their S.B. in 1999.

Our students on the job market did well this year, with 31 percent receiving assistant professorships in top ten economics departments and business schools. A total of 62 percent accepted academic positions, 19 percent accepted government positions, 11 percent took positions in international organizations, 4 percent obtained positions in the private sector, and 4 percent took positions in non-profit research institutions.

Faculty research continues to be intense and highly productive: Professor Acemoglu published his paper "Information Accumulation in Development" (with Fabrizio Zilibotti) in the Journal of Economic Growth. Professor Angrist's "Using Maimonides' Rule to Estimate the Effect of Class Size on Student Achievement" is forthcoming in the Quarterly Journal of Economics. Professor Athey's "Adoption and Impact of Advanced Technologies in Emergency Response Systems" (with Scott Stern) is forthcoming in David Cutler, ed., Not-for-Profit Hospitals in a Changing Environment. Professor Blanchard's "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence" (with Justin Wolfers) is forthcoming in the Economic Journal. Professor Caballero published the paper "Explaining U.S. Manufacturing Investment: A Generalized (S,s) Approach," (with E. Engel) in Econometrica. Professor Costa's "The Wage and the Length of the Work Day: From the 1890s to 1991," is forthcoming the Journal of Labor Economics. Institute Professor Peter Diamond's "Efficiency Effects of Punitive Damages" is forthcoming in the Journal of Law, Economics, and Organization. Professor Dornbusch published his paper "Notes on Intertemporal Trade in Goods and Money" in the Journal of Applied Economics. Professor Ellison published "Career Concerns of Mutual Fund Managers" (with Judith Chevalier), in the Quarterly Journal of Economics. Lecturer Ellison's "A Simple Framework for Nonparametric Specification Testing" (with G. Ellison) is forthcoming in the Journal of Econometrics. Professor Frank Fisher's "Analyzing Agricultural Demand for Water with an Optimizing Model" (with I. Amir), is forthcoming in the Journal of Agricultural Systems. Professor Gruber's "Public Health Insurance and Private Savings" (with A. Yelowitz) is forthcoming in the Journal of Political Economy. Professor Jerry Hausman published the paper "Cellular Telephone, New Products, and the CPI" in the Journal of Business and Economics Statistics. Professor Jeffrey Harris published his paper "The Continuum of Addiction: Cigarette Smoking in Relation to Price Among Americans Aged 15-29" (with S. Chan) in Health Economics. Professor Bengt Holmstrom published "The Firm as a Subeconomy" in the Journal of Law, Economics, and Organization. Professor Joskow's "The Bell Doctrine: Applications in Telecommunications, Electricity and Other Network Industries" (with R. Noll) is forthcoming in the Stanford Law Review. Professor Kremer published the paper "Patent Buyouts: A Mechanism for Encouraging Innovation" in the Quarterly Journal of Economics. Professor Paul Krugman published the book, The Return of Depression Economics. Assistant Professor Guido Kuersteiner is working on the paper "Optimal Instrumental Variables Estimation for ARMA Models." Assistant Professor Sendhil Mullainathan's "Is There Discretion in Wage Setting?" (with M. Bertrand) is forthcoming in the Rand Journal of Economics. Professor Whitney Newey published his paper "Nonparametric Estimation of Triangular Simultaneous Equations Models" (with J.L. Powell and F. Vella) in Econometrica. Professor Piore published his paper "Various Columns on Economics and Social Policy" in the Folha de S. Paulo, Brazil. Associate Professor Jorn-Steffen Pischke published his paper "The Structure of Wages and Investment in General Training" (with D. Acemoglu) in the Journal of Political Economy. Professor Poterba published his paper "Public Finance and Public Choice" in the National Tax Journal. Nancy Rose published her paper "Airline Deregulation" (with S. Borenstein) in P. Newman, ed. The New Palgrave Dictionary of Economics and the Law. Assistant Professor David Spector's "Rational Debate and One-Dimensional Conflict" is forthcoming in the Quarterly Journal of Economics. Professor Temin's "The Stability of the American Business Elite" is forthcoming in Industrial and Corporate Change. Assistant Professor Robin Wells' "Time and Surplus Allocation in Marriage" is forthcoming in the American Economic Review. Professor William Wheaton's "Real Estate Cycles, Some Fundamentals" is forthcoming in Real Estate Economics.

Professor Acemoglu was awarded tenure and Professors Athey and Ventura were both promoted to the rank of Associate Professor (without tenure). Sendhil Mullainathan joined the faculty as an Assistant Professor. David Autor, Esther Duflo, and Xavier Gabaix will join the faculty as Assistant Professors effective July 1, 1999. David Autor received his Ph.D. from Harvard University and is a labor economist. Esther Duflo received her Ph.D. from MIT and is a development economist with interests in labor. Xavier Gabaix received his Ph.D. from Harvard University and has interests in international economics and finance. Lecturer Sara Ellison was promoted to Senior Lecturer, effective July 1.

Professor Michael Kremer resigned effective June 30, 1999. Professor Kremer will assume a position as Professor in the Economics Department at Harvard University.

The appointment of Professor Stanley Fischer was changed to Visiting Scholar; he remains First Deputy Director of the International Monetary Fund.

There were seven visiting faculty for all or part of the 1998-99 academic year. Visiting Professor Jean Tirole taught a topics course in industrial organization. Visiting Professor Roger Brinner taught macroeconomics. Visiting Associate Professor Beatriz Armendariz de Aghion taught development. Visiting Assistant Professor Jinyong Hahn taught econometrics. Visiting Professor Alberto Alesina taught macroeconomics. Visiting Professor Mathias Dewatripont taught theory. Post-Doctoral Associate, Xavier Gabaix, taught a topics course on psychology in economics.

The Department maintains its concern with increasing the representation of women and minorities in the economics profession. All search committees are instructed to make a special effort to identify outstanding women and minority candidates as an integral component of their search process. As part of the regular recruitment process for junior faculty, the Department solicited/received 193 CVs. Eighteen candidates (three of whom were women) were selected for interviews. All candidates were interviewed by at least two

members of the faculty. Subsequently, eight candidates were invited to come to MIT and present a seminar. As a result of this exhaustive process, three offers were made, one of them to a woman. All three offers were accepted.

Our Department is doing well. The research atmosphere is exciting, and faculty members are very productive. Our junior faculty is particularly outstanding, and we see this as a main strength for the future. Some fields where we were less strong, labor economics, and development in particular, are in sharp expansion and attracting an increasing number of students.

We feel we still have two major senior needs, one in theory, and one in macroeconomics. We have two search committees looking at potential candidates. Given our traditional strategy of going after "young senior" researchers, we also have a search committee looking at young researchers across fields.

We also feel we cannot rest on our laurels. Competition from other departments is becoming more intense, and our competitors are often bigger and richer. We feel that, to thrive in the long run, the Department must increase in size, both by expanding its core, and the number of faculty members in major fields. We also have to secure one of our main assets, the quality of our student pool, by increasing the number of fellowships we can offer. This is all the more urgent, given the decline in many of the traditional external sources of such fellowships.

More information about this department can be found on the World Wide Web at http://web.mit.edu/economics/www/.

Olivier Blanchard

MIT Reports to the President 1998-99