MICROECONOMIC THEORY

Microeconomic Theory is a broad area that examines foundational issues in economic modeling as well as providing the tools for more applied economic work. The field includes abstract general equilibrium theory, game theory, the economics of incentives and information, stochastic growth models and asset pricing models, dynamic programming, and mechanism design.

Students often find it helpful to take the microeconomics field to acquire the technical skills required to do rigorous applied work. Advanced courses in microeconomics offered by the Economics Department change as the frontiers of the subject and the interests of the faculty evolve.

ECONOMETRICS

Econometrics is concerned with the methods for empirical analysis in economics.Our program provides strong preparation and training for students interested in econometric methods and theory, and as well for students whose primary interest lies in applied economics.

All doctoral students in economics, regardless of field, take one year of econometrics (Economics 709, 710, which has an enrollment of about 40-50). In their second year of study, students who choose econometrics as their major field, or who simply want more advanced training, will take Economics 715, which covers the core theory of nonlinear estimation and inference. They will also take one or more of Economics 716-719, which cover selected topics on the frontiers of theoretical and applied econometrics. These courses have enrollments of about 10-20 students.

The scope of econometrics at Wisconsin is suggested by a list of recent research projects by the econometrics faculty (often with the assistance of graduate students). These include the generalized method of moments, nonparametric likelihood, bootstrap methods, interactions-based models, macroeconometrics, nonlinear time series, and semiparametric estimation. In addition, studies conducted by other faculty members and students--in public economics, labor, industrial organization, macroeconomics, trade, and microeconomics--often draw on appropriately sophisticated econometric techniques.

The econometrics program is augmented by course offerings in the Statistics Department, traditionally strong in time series analysis and stochastic processes.

INDUSTRIAL ORGANIZATION

The standard graduate preparation in industrial organization consists of one course on oligopoly and related theory and one on empirical industrial organization. Preparation usually also includes one or more courses in advanced topics, such as game theory, dynamic models of competition, and models of durable goods markets and bargaining. Students planning to write a dissertation in industrial organization should plan on attending the industrial organization workshop during their second year of study. After completing the field requirements, students are expected to actively participate in the industrial organization workshop, by presenting their research own research and critically analyzing and discussing that of others.

The two required courses focus on recent developments in theoretical and empirical industrial organization. Modern theoretical industrial organization studies the theory of the firm and contracting, static and dynamic models of oligopoly, the theory of price discrimination, the determinants of entry and exit behavior, models of product differentiation and advertising, and dynamic competition through R&D and the adoption of new technologies. The focus of modern empirical industrial organization has mostly shifted from discovering robust empirical regularities that hold across a broad cross section of industries to the detailed study of individual industries backed by a theoretical framework. This reflects the belief that industries have important idiosyncrasies, and that empirical regularities can be understood only in the context of a well-specified theoretical model. The range of topics studied includes the determinants of price-cost margins and numbers of entrants, the formation and enforcement of collusive arrangements, the dynamics of entry and exit, and the testing of auction theory and models in information economics.

The workshop draws participation from internal faculty members as well as invited speakers from other universities. Topics that have been recently discussed in the workshop include studies: of discrete choice models and hedonics, auction theory and empirics, asymmetric information, vertical integration and franchising.

INTERNATIONAL ECONOMICS

International Economics is divided into the real side and monetary side. The real side considers the causes and consequences of international trade and of policies that alter trade patterns. Increasingly, trade research also emphasizes the international movement of factors of production. A variety of both general equilibrium and partial equilibrium models are used to explore these issues. Recent work analyzes trade and factor movements when these models add dynamics, uncertainty, endogenous government policy reaction, strategic interaction across governments and firms, and selected distortions to various competitive norms. Economics 871 introduces students to the core of the real side of international economics. Economics 874 covers advanced topics and treatments.

The monetary side of international economics includes the theory of open-economy macroeconomics and the theory of international financial markets. The latter receives less attention here, and more in the Finance Department of the Business School. Open-economy macro-economic theory devotes attention to exchange rate determination, balance of payments, and real and financial interaction among open economies. It treats traditional and current analytical approaches to understanding the macroeconomic consequences of intervention in the foreign exchange market, devaluation and revaluation, monetary policy, fiscal policy, and policy coordination within and across borders; international capital mobility, transfer, and default; economic growth, expectations, disequilibrium, and optimal portfolio choices. Economics 872, 873, and 666 are the monetary-side analogues to the real-side courses 871, 874, and 664 respectively.

The weekly international economics workshop, 977-978 is an integral part of the program, in which both faculty and advanced graduate students participate actively.

LABOR ECONOMICS

Labor Economics has a long and distinguished history of scholarly research and the application of this research to policy issues, and Wisconsin has traditionally been an important center for this work. Students majoring in this field are expected to (eventually) understand relevant institutional features of labor markets, sources of data and econometric techniques needed to draw inferences from these data, and the models of rational economic behavior needed to organize coherent economic thinking about labor markets.

The core material deals with labor supply decisions made by rational households, labor demand decisions made by profit-maximizing firms, and the equilibrium wage differentials and employment patterns implied by these decisions when markets are competitive. Applications include the analysis of industry wage differentials, life-cycle age-earnings profiles, and returns to human capital investments. Further topics, emphasizing deviations from the competitive ideal, include efficiency wages and other incentive schemes, discrimination, bargaining between workers and employers to divide monopoly rents, and unemployment.

There are two required courses for the labor major, Economics 750 and 751, usually taken in the second year of the program. Both theoretical and empirical research is emphasized in these courses, and students begin work on a research paper that will help lay the foundation for dissertation research. These courses are supplemented by an active workshop program featuring speakers from various universities and research centers (including Wisconsin).

Labor economics is complemented by several research institutes connected with the department. These institutes are often a source for research assistantship positions and support for dissertation research for labor majors.

MACROECONOMICS AND MONETARY ECONOMICS

Macroeconomics and Monetary Theory at Wisconsin emphasizes research on dynamic stochastic environments, as these seem central to understanding basic macro problems like growth, business cycles and income distribution. The graduate program in Macroeconomics and Monetary economics equips students to conduct research in this lively and rapidly changing field through a variety of advanced courses. The course selection varies from year to year, but typically it includes at least one course emphasizing macroeconomic theory and one course emphasizing empirical methods in macroeconomics. In recent years, the field has offered courses in growth and development theory, which discusses recent advances in our understanding of the basic factors affecting long run growth, time series econometrics, which emphasizes both business cycle applications as well as structural estimation, and economies with incomplete markets and heterogeneous agents, with an emphasis on both the development of theories as well as econometric tools studying complex environments.

In addition to the courses offered in the department, (in general up to five per year) the field recognizes courses taken outside the department (e.g. mathematics courses for those interested in theory, probability and statistics, and courses for students planning to work on empirical topics), as well as other fields.

Students are required to participate --both presenting their own research and discussing research performed by others-- in the weekly macro workshop. In addition, during the Spring semester, the field usually organizes a brown bag seminar designed to encourage students to present research at an early stage. At these very informal brown bag seminars, students receive substantial feedback both from faculty and fellow students.

The third year field paper is due December 1, 2008.

PUBLIC ECONOMICS

Public Economics is the study of the government's role in promoting efficient and equitable allocations in the economy. Wisconsin has a long and distinguished tradition of teaching and research in Public Economics. Today the field encompasses a broad array of issues, but especially those dealing with poverty, income distribution, the effects of taxation on behavior, social insurance, savings, altruism, political economy and health economics. Students specializing in Public Economics will get intensive training in both theoretical and empirical methods.

Many of our faculty in public economics are also affiliated with the Institute for Research on Poverty. Many students find the IRP to be a valuable resource for data and technical support, and, for some, possible employment during graduate school.

For students interested in health economics, the health economics program within the public economics group annually supports several graduate trainees with a grant from the National Institute of Mental Health. The program is open to students in any field. Special course offerings in health economics include a lecture course and a research seminar. The research seminar explores a particular topic each semester and students (individually or in small groups) conduct original research.