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Trade: Who Wins and Who Loses?

November 29, 2017

Portrait of Mons Chan

Portrait of Mons Chan
Photo by Matthew Weber, CLAgency Student

As a young student, Mons Chan saw the potential that economics had to solve problems like climate change, world hunger, and inequality. “I wanted to learn how to think like an economist,” Mons reflects, “I wanted to approach a question and deliberately try to avoid misconceptions or appeals to emotion and ask what’s the evidence, what’s the data, and what’s the best way to think about this.” He continues, “I really lucked out coming to Minnesota. There is an amazing tradition of economic research... a number of Nobel Prize winners taught here or graduated from here. The tools, and the way that people think at Minnesota, allow you to approach any economic problem in a rigorous, methodological, and effective manner,” Mons says. 

Catching the Data Wave

As a student in Minnesota’s PhD program, Mons found his niche in industrial organization and applied econometrics. Specifically, his research is based on the work of alumnus Dan McFadden, and Professor Amil Petrin has been instrumental in developing various techniques that Mons has employed.

Mons is part of the first wave of researchers who have access to and are taking advantage of very detailed, comprehensive data, most commonly available from countries in the European Union. His research uses industry, firm, and individual-level data from Denmark to analyze who specifically gains from trade, who loses, and appropriate policy responses to deal with this dynamic. Mons explains, “We are able to use data from both sides (firms and households) for the whole country, which is critical since everything is interconnected. Every policy has unintended consequences, and seeing all this data in concert allows us to think more carefully and see how to deal with these unintended consequences.”

Across the field of economics, it is a commonly accepted notion that trade is good and makes people better off overall. However, as with any policy, there are winners and losers. With the detailed data Mons has access to, he is able to see specifically which groups of people gain, which groups of people lose, why, by how much, and more.

Analyzing the effects of trade or changes in trading patterns is a field of study in itself, but Mons focuses on individuals’ skills, occupations, and where they work. One of Mons’ contributions is the development of econometric models to measure the relationships between people with different skill levels and different types of occupations when there is a change in trading practices.

“For example, if there is a tariff on textiles, that tariff is going to affect demand and wages for textile workers differently than it will affect lawyers or janitors.” In the early 2000s, tariffs in the European Union decreased significantly, and with Mons’ econometric models, he is able to say that the changes in tariffs had specific effects on labor demand, employment, and outsourcing patterns at the industry, firm, and occupation level. This type of analysis was simply not possible before.

Seeing the Big Patterns

In the long run, Mons envisions his research influencing policy and making contributions toward his initial desire to prevent severe economic disparities. His research has the ability to help direct policy, for the effects sustained by different groups of people need to be thoroughly understood and analyzed in order to think seriously about changes to trading patterns.

While he acknowledges his accomplishments thus far, he gives credit to his educational influences. “I am just applying the tools I was taught here. I am forever indebted to the training I received at Minnesota.”

This story was written by an undergraduate student account executive in CLAgency. Meet the team.