Five Areas of Research

The central focus in this research area is the use of the Levy Institute's macroeconomic models in generating strategic analyses for the US, euro area, and world economies. The outcomes of alternative scenarios are projected and analyzed, with the results serving to help policymakers understand the implications of the available policy options.

The Levy Institute macroeconomic models, created by Distinguished Scholar Wynne Godley, are accounting based. The US model employs a complete and consistent system (in that all sectors “sum up”) of stocks and flows (such as income, production, and wealth). The world model is a “closed” system in which 11 trading blocs—of which the United States, China, Japan, and Western Europe are four—are represented. Each bloc’s imports are described in terms of exports from the other 10 blocs. With this information, and using alternative assumptions (e.g., growth rates and trade shares), trends are identified and trade and production patterns assessed.

In the aftermath of the worst economic crisis since the Great Depression, too many American workers are still facing unemployment or underemployment, with some full-time workers earning wages that place them at or below the official poverty line. Clearly, there is room for improvement on the jobs front.

In response to this problem, Levy Institute scholars have proposed a full employment, or job opportunity, program that would employ all who are willing to work, in order to increase flexibility between economic sectors and lower the social and economic costs of unemployment. In the postwar period, “Keynesian” policies to promote full employment have relied on a favorable business environment to stimulate investment spending, and they have been largely ineffective: unemployment rates have trended upward, real wages for most workers have declined, and poverty rates have remained stubbornly high.

Students in this area of research will focus on employment and labor markets, including the Levy Institute's proposed full employment program, as well as on researching the effects of technology on earnings and trends in productivity, the effects of a minimum-wage increase on hiring practices and earnings, and the impact of unions on economic performance in developing countries.

This research area encompasses the structure of markets and institutions operating in the financial sector. Research builds on the work of Distinguished Scholar Hyman P. Minsky—notably, his financial instability hypothesis—and examines the institutional, regulatory, and market arrangements that contribute to financial instability, as well as the policies necessary to contain it.

Recent research in this program area has concentrated on the structure of financial markets and institutions, with the aim of determining the fragility, and potential failure, of financial systems. Issues explored include the extent to which domestic and international economic events (such as the financial meltdown of 2007–8 and the subsequent Great Recession) coincide with the types of instabilities Minsky describes, and involve analyses of his policy recommendations for alleviating instability and other economic problems. Beginning in 2008, this research was extended to include financial re-regulation and, in 2011, provision of a government safety net in times of financial crisis, the focus of two multi-year projects underwritten by the Ford Foundation.

It is widely recognized that existing official measures of economic well-being need to be improved in order to generate accurate cross-sectional and intertemporal comparisons, as the picture of economic well-being can vary significantly depending on the measure used. Alternative measures are also crucially important for the formulation and evaluation of a wide variety of social and economic policies. Research on the intersection of gender inequality, expanded income, and time poverty was central to the development of the Levy Institute Measure of Time and Income Poverty (LIMTIP), a new, innovative income measure that accounts for the negative impact time deficits exert on living standards. Related studies include the effects of childcare subsidies on poverty and integrating time use into the formulation of public policy.

This area offers a broad view of what an economy is and how it functions, bringing into the analysis not only paid work but also unpaid work (subsistence activities, caring for household members, community volunteer work) as an integral component of any economy. Research in this area also includes studies on public and private pensions, the economic well-being of the elderly, well-being over the life course, the role of assets in economic well-being, and the determinants of wealth accumulation.

While the elimination of gender inequalities has become a focus of policy discussions in recent years, the vast majority of women around the world still do not enjoy equality in economic participation, physical security, access to land, and financial resources or earnings. Closing gender gaps requires policy interventions that enhance women's economic opportunities and outcomes.

The Levy Institute’s Gender Equality and the Economy research program focuses on the ways in which economic processes and policies affect gender equality, and examines the influence of gender inequalities on economic outcomes. Its goal is to stimulate reexamination of key economic concepts, models, and indicators—with a particular view to reformulating policy in order to recommend policies that promote gender equality.

The Levy Institute also conducts research on economic policy issues in the United States and globally (e.g., Mexico, Argentina, Brazil, Chile, Greece, the United Kingdom, Germany, France, Turkey, Israel, South Africa, China, India, and the Republic of Korea).