Applied Economics

This programme plays a profiling role in Erasmus School of Economics. It aims to contribute to the development of new and fundamental fields in economics and to be active in areas of high societal relevance. Currently, the programme consists of three research areas: Behavioural Economics, Health Economics and Organisation, Strategy and Entrepreneurship. We aim to further integrate these different themes and to expand into other emerging areas of high scientific promise and societal relevance. Jointly with Erasmus University Rotterdam Holding B.V., initiatives have been undertaken around happiness economics, urban economics and development, and the economics of humanities.

Programme leaders

Research areas

Behavioural Economics

Economic analysis has been dominated by the neoclassical paradigm of human rationality. Behavioural research has shown that people often violate the basic tenets of rationality in a predictable way. Incorporating these insights have led to a behavioural revolution and the replacement of homo economicus by homo sapiens. Research in the area of Behavioural Economics concentrates mainly on decision making under ambiguity (probabilities unknown) and intertemporal choice. The particular strength of the area is that it can both do sophisticated theoretical research and experimental and field research. The interplay between these types of research leads to new models of decision making that better describe real-world behaviour.

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Health Economics

Health Economics is an important new area of Applied Economics in which fundamental developments and societal relevance come together. Core topics of the research programme include the theoretical and empirical explorations of the causes of social inequalities in health and inequities in health care access. This includes econometric analyses of health care utilisation as well as of behaviour more generally, including the linkages between health and labour force participation.

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Strategy and Entrepreneurship

Thorough strategic decisions of firms are decisive for survival and growth in modern economies characterised by flexibility and turbulence, and entrepreneurship plays an essential role as an agent of change and generator of new jobs. Within the Strategy and Entrepreneurship area, organisational theories are combined with the application of techniques in economics to generate new insights relevant for strategy, entrepreneurship and innovation policy.

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Synergy

Many synergies exist between the three areas as well as between the department of Applied Economics and the other departments of Erasmus School of Economics. For example, health insurance take-up in developing countries is often low because people have distorted beliefs about their probability of ill-health. Dealing with such distorted beliefs is part of the toolkit of behavioural economics and these insights may in turn lead to higher health insurance coverage and improvements in social welfare.

Key publications

  • Rietveld, C.A., et al. (2013), GWAS of 126,559 Individuals Identifies Genetic Variants Associated with Educational Attainment, Science, 340(6139), 1467-1471.
  • Abdellaoui, M., A. Baillon, L. Placido and P. Wakker (2011), The Rich Domain of Uncertainty: Source functions and their experimental implementation, American Economic Review, 101(2), 699-727.

Quality

Our programme’s focus on innovative topics and societal relevance has paid off as evidenced by its success in external grant applications in recent years (REI, ERC Starting Grant, Marie Curie, Veni, Vidi, Vici). The quality of our research programme is not only indicated by the number of publications in top (field) journals, but also by citation rankings of key authors, placements of our PhD students at other very good universities (for example, Bocconi, Harvard, Nottingham, Warwick, UCLA) and (editorial) board positions (for example Management Science). As young talent has grown into more senior positions, we expect a growing impact of our research by a further increase in citations, better placements of (PhD) students, and more positions on (editorial) boards.

Relevance to society

Health economics, behavioural economics, and entrepreneurship and strategy are all areas of research with high societal impact and this impact is likely to increase in the coming decade. Increasing health expenditures and the changing market for health have fuelled research in health economics, the realisation that people’s preferences are often unstable and they can be nudged in the direction of socially desirable behaviour has led to a strong increase in policy attention for behavioural economics, and the surge in innovation and new business formation has led to an increased interest in the economics of entrepreneurship and strategy. Other areas where our programme can have a societal impact are in the measurement of happiness and the inclusion of moral values into economic modelling. While our department’s focus has largely been on academic research, we are increasingly involved in policy advice and we expect that this interaction with society will increase.