A team of researchers at the Institute for International Economic Studies (IIES) at Stockholm University was granted approximately an amount of 6,4 million SEK by the Ragnar Söderbergs Stiftelse. The team is led by Associate Professor Konrad Burchardi and include as members, Ingvild Almås, Timo Boppart and Hannes Malmberg.

Study of income gaps between rich and poor countries

The team will study the large gaps in income between rich and poor countries. Two of the eldest and most difficult queries in national economy are why those differences have occurred, and why they remain, the researchers write in a presentation of the project.

Current macroeconomic models have not been able to fully explain economic development. One possible problem behind this can be the assumption that markets are well-functioning and integrated even in poor or low-income countries. However, evidence suggests that this is not right. Low-income countries have many households that are primarily subsistence farmers and commodity prices vary largely between regions; those two factors are a clear sign of a lack of market integration.

Measurement of the markets’ integration

The research project examines empirically and theoretically how this integration problem affects and limits the economic development. The theoretical part of the project aims to show how important it is for markets to be integrated in order to enable large-scale production and specialization. Whereas the empirical part will design and implement surveys to be able to measure how integrated markets are in different countries. The results will be used later to document and identify patterns that can be tested and developed later.

The results of the project will have a significant practical meaning according to the researchers. If increased market integration is a central factor for development. then it is essential that decision makers work to strengthen the domestic markets. The project's conclusions can thus support the formulation of effective development policies at national and international level.