Markets network member Salvador Navarro recently sat down with HCEO to discuss his work on applied econometrics and what we can learn from model uncertainty.
"I work on what could broadly be called applied econometrics, which mostly means I find topics where people are working with data and I insert myself by working with the data or analyzing the econometrics of what people are doing," he says.
Navarro is currrently studying what unforeseen consequences migration might have on human capital formation. "It's a topic that people have overlooked somewhat, the idea of being: if you’re a migrant and when you migrate, at the origin place, the return to your human capital is not high, for whatever reason, then you have less incentive to accumulate human capital ex ante, whether you migrate or not. Compared to a world in which there's no migration, if there's suddenly migration, but the return to your human capital when you migrate is not that high, you end up with less human capital."
He is also working on research looking at the effects of penalties on crime. "There's a lot of work to be done on crime, on many, many aspects. But the aspects that have been less studied in crime is this notion that there's more than one possible choice that people can make," he says. "For example, If an intervention reduces one sort of crime, what are spillover effects of these people? We know very little, for example, what are the substitution patterns between crimes….because a lot of the focus has been on particular interventions of particular crimes without focusing on what's happening afterwards."
Lastly, Navarro has been working on acknowledging model uncertainties. "The notion that as scientists we know a lot less than we think we do, so we should acknowledge how ignorant we are in that respect and include that uncertainty when we make our conclusions or recommendations," he says.
Navarro is Professor of Economics at the University of Western Ontario.