Doctor Honoris Causa

Laudatio de Investidura

como Doctor Honoris Causa

del Prof. Dr. Geoffrey J.D. Hewings

University of Extremadura

Badajoz, 22 de septiembre de 2016

Mr. Rector, Authorities, Distinguished Colleagues from the University of Extremadura, Distinguished Visitors, colleagues and friends from other universities and institutions in Spain and several other countries.

My wife, Dr. Adrianna Hewings, and I are delighted to be here today to receive this wonderful honor that you have bestowed on me. As you will hear, the University of Extremadura has played a special role in the development of my Laboratory and I have become a frequent visitor to this city over the past 15 years.

In 1988, my late colleague Dr. Philip Israilevich (from the Federal Reserve Bank of Chicago) and I began to discuss the possibility of developing a research center in Chicago that would be collaboration between the Bank and the University of Illinois. A year later, in January 1989, the Regional Economics Applications Laboratory (REAL) was formed. Since its’ founding, REAL has helped provide funding for several post-doctoral students and over 60 Ph.D. students. In addition, REAL has received over 500 international visitors from 31 different countries [1] in Europe, Africa, Asia, Middle East and Central and South America. Many of these visitors were PhD students who spent 3 months to one year in REAL. Of these, 20 were part of a program, bolsa sanduiche, with Brazilian universities. REAL Alumni are working now in excellent universities throughout the world, but also they occupy important positions in other institutions, including a Minister in the Government of Indonesia, the Dominican Ambassador to the UK, members of the central banks of Colombia, Brazil and Guatemala, United Nations, Organization for Economic Co-operation and Development (OECD), European Commission, and governments in many countries of the world.

[1] UK, Ireland, Vietnam, Korea, Japan, Indonesia, China, Taiwan, India, Australia, Israel, Italy, Spain, Turkey, Greece, France, The Netherlands, Sweden, Russia, Ukraine, Portugal, Austria, Denmark, Mexico, Canada, Brazil, Venezuela, Colombia, Argentina, Chile, Tunisia

In developing REAL, we wanted to provide an institution that enhanced both professional and personal relationships. While competition is healthy and encouraged, we wanted to foster an environment where collaboration became an important component of research. In social science until recently, research collaboration was far less prominent than in the natural and agricultural sciences. What I saw in my wife’s academic environment, with professors and PhD students working together in a laboratory, impressed me as a model for the development of REAL. In addition, I wanted to provide the opportunity for succeeding generations to establish and enhance their own international networks that would be important for them in building their own careers.

Hence, we have a physical environment in which no one (not even me) has a private office; collaboration, interaction and conversation are encouraged – something that was obviously very appealing to our colleagues from Spain and South America! The result has been amazing – far beyond my expectations – as we watch the linkages developed in REAL expand to include the students of former participants, the development of new laboratories modeled on REAL in several other countries, and an appreciation of the importance of developing and enhancing both personal and professional relationships. Without the personal relationships, the professional ones would be less likely to be sustained, enhanced and expanded.

Dr. Miguel Angel Márquez from this university was our first visiting scholar from Spain, arriving in January 2001, so our relationship between REAL and the University of Extremadura now extends over 15 years. When he arrived, Miguel spoke an interesting form of Spanglish but quickly developed the skills to interact with his colleagues, attend classes and produce research that ended up in many prestigious international journals. After Miguel, came Dr. Julián Ramajo and then students Alejandro Ricci, Nuria Corrales and Alberto Franco. In 2002, Alejandro Cardenete from Sevilla became our first visitor from Andalusia followed by Isidoro Romero; then Coro Chasco, Carlos Llano and Nuria Gallego from Madrid and, most recently, the mafia from Oviedo lead by Esteban Fernandez and Fernando Rubiera, Blanca Moreno, Elena Lasarte, Lorena García, among others. Even more recently, we have received colleagues from Barcelona, A Coruña, Santiago de Compostela and Zaragoza. The REAL mafia, especially those from Asia, particular love to have visitors from Spain – they bring a joie de vivre that appeals to colleagues from cultures that are less expressive of their feelings. Spanish visitors know how to combine personal and professional relationships in a way that enhances both – they bring a passion for life that is very infectious. When they leave to return to Spain, there is always some sadness in REAL but we have been fortunate in recent years to have had a steady stream of Spanish visitors so the good feelings continue almost uninterrupted. It was here in Badajoz, over a decade ago, that colleagues decided to form a virtual laboratory, EU REAL, to bring together each year alumni from REAL who are now based in Europe and to introduce potential visitors to REAL to the atmosphere of a unique scholarly environment. The meeting is held annually (Portugal, Italy, Turkey, UK, Austria) and once again, this year, we are back in Badajoz.

Research on regional economies is now becoming even more important. International organizations like the World Bank, OECD, InterAmerican Development Bank and the Asian Development Bank have all discovered that models of national economies alone fail to capture significant disparities in the level of welfare between different regions within a country. This is just as true for Spain as it is for the rest of the EU, Brazil, US, Mexico – in fact, all countries. In Spain, for example, the collaboration with Professors Ramajo and Marquez has shown just how complex are the impacts of public investments in different parts of the country. Some of those investments, originally designed to help reduce the disparities between provinces in Spain have had the reverse effect – widening the gap between the richer and less prosperous regional economies. The challenges are both from a policy perspective and a modeling perspective. The EU has struggled for years to develop a coherent set of policies to address regional disparities – both between and within countries – with varying degrees of success. The structures of regional economies are changing rapidly in response to global pressures, decreases in real transportation costs and the increasing mobility of labor. However, some regional economies have found that their competitive positions have changed as increased exposure to international markets has often reduced the advantages their industries once enjoyed. Throughout the EU, we have seen the increase in disparities within countries generating very negative responses to national governments that have struggled to find policies that can address these structural problems. These economic challenges have also given rise to responses that have been critical of both national and supranational governments – and not just in the EU where independence movements such as those in Cataluña and Scotland have now extended to include very negative feels about immigration and social welfare programs. In the US, Donald Trump has used these developments as the basis for his campaign, drawing inspiration from similar movements in France, The Netherlands and the UK.

The challenge for regional economists is clear; we need to re-think our contribution to these debates while being much more creative in the way we try to understand and interpret how regional economies grow and change. Too many of our models reflect an economic reality that is no longer present; our fascination with equilibrium needs to be replaced with more realistic representations of disruptive events such as flooding, earthquakes, and global recessions. Within countries, pressures generated by fiscal federalism and pressures for greater regional autonomy will create economic growth and development trajectories that are likely to be non-equilibrium in form. Regions are unlikely to grow smoothly. In the US, the political tensions between those who seek greater involvement with the global economy are now being challenged by those who want a return to a more isolationist economic policy. At the regional level, for example, for some individual US states, the consequences would be very different; some states are very dependent upon exports while others are more focused on the domestic market. In addition, the spillover effects would be complicated since much of current interstate trade is indirectly dependent on international exports. Additional challenges arise from the tensions between those promoting greater fiscal restraints on the part of government in contrast to those who see public expenditures, especially for infrastructure, as essential to enhance the competitiveness of regional and national economies.

However, the most important challenge for regional economies will come from decisions about how much to invest in education – not just at the school and university levels, but broadly for the labor force. Robert Reich, the Secretary of Labor during President Clinton’s time, commented that an individual entering the labor force in this century will need to be trained and retrained up to six times. Most countries do well in initial training, but our institutions are not flexible enough to provide the re-training programs that will allow employees to adapt to new demands and provide them with the new skills that they will need to remain competitive. In the US, over 70% of our Gross Domestic Product is generated by consumer spending (it is just under 60% in Spain), yet we have spent far too little effort in developing models that capture the enormous differences in the sources of earnings and the differences in the way consumers of different income groups spend their income. Further, as Thomas Piketty and others have demonstrated, a major source of income inequality derives not from wage and salary income but from capital income – for example, ownership of land, buildings, and participation in the stock market. Our models need to be modified to include these forms of income.

If we are to contribute to the debate on inequality, we need to expand our understanding of household income dynamics and avoid over simplifications that hide the enormous differences across households of different size, income, age and location. The geography of income receipts and expenditure remains a major challenge and thus an opportunity for the next generation of regional economists. Fortunately, in Spain, this challenge is being addressed by many of our colleagues in this room as they explore the way in which public funds generate growth and development across the Spanish economy, how expenditures vary by household income and size and how changes in household composition (such as size and immigration status) will affect future consumption. However, the dynamics remain relatively unexplored and we need to consider a greater range of future scenarios to help policy-makers prepare for a more uncertain and unpredictable future.

In the last two decades, I have come to appreciate the quality of the research conducted in Spanish universities in my own field. It is rare to open an academic journal without finding several articles with one or more Spanish authors. During this time, the reputation of Spanish academics in the global community has increased significantly. It is one of the reasons why my lab and many others are so welcoming of Spanish visiting scholars. Whenever I come to Spain, I find colleagues who are writing articles for the newspapers or appearing on television, and who are actively involved in public policy decision-making. There seems to be a greater interaction between academics and policy-makers in Spain (and in the rest of Europe) and I hope that this relationship will continue and even grow in importance. However, academia in Spain faces challenges – funding cutbacks and uncertainties about future expenditures on education make it difficult to continue to sustain the current range of programs. I hope that future leaders will have the wisdom to see the importance of investment in human capital. Short-run decisions that reduce programs in universities will significantly disrupt the future competitiveness of the economy by reducing the number and quality of individuals who will be the future entrepreneurs, business and political leaders and the scholars whose research will help guide us in the uncertain future.

My first formal contacts with Spain started with colleagues from Extremadura and I am just delighted to be back here once again. By honoring me, you are also reflecting the great value that those of us outside of Spain place on your research and scholarship – as well as on the quality and character of the individuals who have come to serve in your universities.

I came to Spain, I saw and I was conquered; the affection is stronger than you can ever know. Thank you so very much for this great honor.