Professor Nader Habibi’s article “Why Iran’s protests matter this time” can be found here:

Also by Professor Habibi, “Will Protests in Iran Pave the Way for Economic Changes?”

Iran’s embattled government may respond to recent protests with populist measures – but those will not necessarily create more jobs, experts say.

Read the article here:

Turkey has experienced a rapid rise in university enrolment in the past decade. The total number of students in universities and other institutions of higher education increased by 91% from 3.5 million students in 2008 to 6.7 million in 2013. The uptrend has continued in recent years and as of December 2016, nearly 7.2 million students were enrolled in 118 public and 65 private foundation universities on various academic programmes.

This sharp increase is a direct result of the higher education policies of the Turkish government.

At the same time the unemployment rate among university graduates remains high. The most recent labour statistics show that among adult workers with university degrees (with a two-year degree or higher), the unemployment rate rose from 11.5% in June 2016 to 12.6% in June 2017. Most of this burden has fallen on women, who experienced 15.6% and 18.4% unemployment rates respectively.


In addition to high unemployment rates, university graduates are also at high risk of underemployment.

A university graduate is considered underemployed if his or her current job is a non-university job. Non-university jobs are the type of jobs that, according to the standards of the International Labour Organization, do not require a university degree. When we look at the education level of the Turkish labour force, it is clear there is a growing number of university graduates who fall into this category.

The most popular non-university jobs among Turkish university graduates are clerical, customer service and sales jobs, which enjoy more social status in comparison to manual low-skill jobs in industry and agriculture.

Some 11% of workers in clerical, customer service and sales jobs had a university degree in 2004, but this figure rose to 22% in 2016. When we look at workers in all jobs that do not require university skills, we can see that the number of graduates increased from 3% in 2004 to 9% in 2016.

Even in 2004 as many as 21% of workers with university degrees were employed in non-university jobs. Unfortunately, as a result of the rapid increase in the number of university graduates, this figure has steadily increased in the past 12 years and reached the alarming rate of 33% by 2016.

The implication is that in addition to a high rate of unemployment among university graduates, nearly one third of those who are working have found employment in professions that do not require university skills.

This growing rate of underemployment is alarming and it points to a major disconnect between the labour market job opportunities and the supply of university graduates in Turkey.

Clearly, no university graduate accepts a non-university job voluntarily after spending several years in pursuit of a university degree. They are forced to make this compromise because the supply of university graduates in many fields exceeds the available jobs.

Furthermore, the rapid increase in enrolment has forced some universities to compromise on the quality of training they offer because of a shortage of professors and educational resources. As a result some university graduates have not received adequate training to meet employers’ skills requirements.

As employers fill low skill and semi-skilled jobs with university graduates, the job market becomes less favourable for high school graduates. This creates a false incentive for many high school graduates to apply for university education.

Unfortunately, since social demand for university education is very strong, Turkish politicians are reluctant to call for substantial limits on university enrolment – a necessary step for reducing the oversupply of graduates.

A measured debate

Turkey would benefit from an honest and unbiased debate about the costs and benefits of mass higher education. Like many Asian and Middle Eastern countries there is a strong bias in favour of higher education in Turkey, which forces the government to heavily subsidise public universities. Families also spend large sums on preparation for university entrance exams and tuition for private universities.

But when more than 30% of university graduates cannot find adequate jobs after graduation, Turkey’s higher education system is not effective. Turkey would be better off if fewer students were enrolled in universities and a larger share of government resources was spent on improving the quality of higher education rather than the quantity of university graduates.

In September 2017, the Turkish government announced that it had designated 10 universities as research universities and would provide them with additional resources to achieve excellence in research and graduate education. This is a positive step, but it must be complemented by better regulation of enrolment in university disciplines that suffer from high rates of unemployment and underemployment.

The recent sacking of a large number of university teachers after the failed 15 July 2016 coup attempt is another cause for concern with regard to growing enrolment in universities. Many university departments have lost experienced faculty and have to manage the same number of courses or an even larger number with a smaller number of teaching staff.

What is more, the new faculty members who have been hired to fill the gap are young PhD graduates with limited teaching experience. Under these circumstances, increasing enrolment is likely to lead to a decline in the quality of education students are offered.

Nader Habibi is the Henry J Leir professor of the economics of the Middle East at the Crown Center for Middle East Studies, Brandeis University, United States. His research on the status of higher education in the Middle East is available at:

On Tuesday, March 7th, the economics department held it’s annual “Life After Brandeis” event.  We were pleased to have a great group of alumni attend to answer questions from our students. The panel, pictured from left to right, are: Haotian Shen ’15 MAief’16, Ben Luxenberg ’09, Axel Szmulewiez ’16, Anna Kaufman ’10, and Joey Wang ’15.  Thank you to all for a successful and very informative evening!

Prof. Raphael Schoenle’s work “Inflation Dynamics During the Crisis” with Simon Gilchrist, Jae Sim and Egon Zakrajsek was published in the 2017 March issue of the American Economic Review, the flagship journal of the American Economics Association.

From the latest issue of the Atlantic

A well-known study by the economists Eli Berman and Linda T.M. Bui of Boston University looked at the aftermath of new regulations governing air quality in Los Angeles. The South Coast Air Quality Management District in Los Angeles enacted some of the country’s most stringent air quality standards in the 1980s, and Berman and Bui compared Los Angeles firms with those in Louisiana and Texas to see if the more regulated firms cut jobs as a result. They found that the local air quality regulations were not responsible for a large decline in employment, and that the regulations might have actually increased labor demand since firms need to hire people to help them deal with the new regulations. They argued that because all firms in a region were affected by the same regulations, they were still able to compete against one another while facing the same costs. “We find no evidence that local air quality regulation substantially reduced employment,” they concluded.

Linda T.M. Bui is at Brandeis!

Liquidity constrained firms increased prices in 2008, while their unconstrained counterparts cut prices, a study by Simon Gilchrist, Raphael Schoenle, Jae Sim, and Egon Zakrajšek shows. This reflects decisions by the constrained firms to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups.

Prof. Schoenle presented his research “YOLO: Mortality Beliefs and Household Finance Puzzles” at the 2016 annual Academic Forum of the Defined Contribution Institutional Investment Association (DCIIA). The meeting took place November 29 and 30 at the Goldman Sachs Headquarters in New York City.

In his research, Prof. Schoenle studies how subjective mortality beliefs contribute to contradictory savings rate puzzles at opposite ends of the life-cycle. He shows that relative to a benchmark model using actuarial transition probabilities, the young under-save by 30%, and retirees draw down their assets 15% more slowly. Empirically, distorted mortality beliefs correlate with savings behavior, even controlling for risk preferences, and cognitive and socioeconomic factors. Salience of causes-of-death is a pivotal source of mortality belief distortions over the life-cycle.

Ad Blocking

November 11, 2016 | Leave a Comment

Prof. Ben Shiller is presenting his research on ad blocking at Harvard Business School this week, and at MIT in December.  The research was completed while visiting Harvard Business School during his sabbatical this semester.
Prof. Shiller’s research, with Joel Waldfogel, employs data on both traffic and the share of visitors blocking advertisements at roughly 2500 websites.  Using changes in traffic as a measure of changes in quality, they find that websites with a substantial fraction of ads blocked declined in quality relative to other websites, presumably because those sites had relatively less ad revenue to reinvest in producing high-quality content.  This implies a potential “web browser’s dilemma” (like a prisoner’s dilemma) – while installing ad blockers may help individual users, it may lead to quality changes which may harm consumers on balance.

On Wednesday, October 5th, the economics department held their “Meet the Majors” event in the World Court of the Lemberg Academic Center. Students enjoyed Lizzie’s Homemade Ice Cream with all of the fixings while chatting with faculty, UDR’s, and other econ majors.  The event is coordinated so that professors, TAs and UDRs are able to come and talk with prospective and declared Economics majors or minors who are looking for advice regarding courses, internships or jobs, and, of course, enjoy some ice cream!


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Professor Raphael Schoenle presented his latest research “The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy” at the bi-annual Federal Reserve Bank of Cleveland Inflation Conference on September 29-30. His research investigates how monetary policy shocks affect real economic activity when changing the conventional modeling of the economy. In particular, his paper studies the interaction of three kinds of heterogeneity not usually present in models of the monetary policy-makers: heterogeneity in customer-supplier relationships, heterogeneity of heavy-tailed frequencies of price changes and heterogeneity in the size of sectors.

On the theoretical side, one of the key findings is that it matters if the policy-maker chooses to work with a model with only a few sectors, and with a detailed model of many sectors. In a calibrated model, for example, a less disaggregated model of the economy with only 8 sectors understates the real effects of monetary policy by 20% relative to a 58-sector economy and by 34% relative to a more realistic 350-sector economy. The initial response of inflation – to which policy-makers pay a lot of attention – is similar across these calibrations, and thus does not provide sufficient information about where the economy is going. The paper also shows which of the heterogeneities matter the most quantitatively – it is the frequency of price changes – , which may prove useful for policy-makers.

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