Faculty Spotlight

What attracted me to economics is its mix of research methods and its aim to inform policies that can improve the lives of the most vulnerable.

Isabela Manelici

Isabela Manelici

Isabela Manelici tells us about her journey leading to economics, her research interest that focuses on the effects of prevalent industrial policies and a current piece of research on the incidence of Responsible Sourcing requirements by multinational enterprises on firms and workers in the developing countries they source from.

Hi Isabela, it's wonderful to speak to you. Please tell us a bit more about yourself:

I am excited to have joined LSE’s Department of Economics as an Assistant Professor in August 2021. I am from Galati, Romania. Galati is Romania’s version of Sheffield, a city organized around a steel plant that has been in decline due to global competition and several ill-fated rounds of foreign ownership after the fall of communism. Much of my family story is tied to this plant – starting with my parents’ meeting as workers on one of its production lines. To this day, my work remains motivated by the destiny of my hometown and its steel plant.

Why Economics?

I settled on economics after some iterations. I first studied civil engineering between École Nationale des Ponts et Chaussées, École des Mines and Écoles Polytechnique in Paris. This was followed by work as a civil engineer on maritime structures in Algeria and Morocco. As I got more interested in the importance of infrastructure for development (rather than in how to build that infrastructure), I switched to working at the World Bank. After two years split between projects in Brazil and policy-oriented research on infrastructure and climate change, I finally converged to academia in economics. What followed was an MA at CEMFI in Madrid, a PhD in Economics at Berkeley, and a one-year postdoctoral fellowship at Princeton. What attracted me to economics is its mix of research methods and its aim to inform policies that can improve the lives of the most vulnerable.

Could you tell us about your research interests?

I am interested in what can foster the industrial development of the less developed part of the world. The increasingly globalized nature of most economies (and how governments react to global threats or opportunities, see the rise of China as the world’s top trader) shapes the outcomes of firms and workers worldwide. My research to date focuses on the effects of prevalent industrial policies such as those aiming to attract (typically footloose) superstar firms to one’s economy. For developing countries, these superstar firms tend to be foreign multinationals – there are too few, if any, domestic firms that can come close in terms of size, productivity, innovation, managerial practices, etc. While the competition to attract these firms remains fierce, our knowledge of their local and aggregate effects is still incomplete.

Please tell us about a current piece of research you’re working on:

With my co-authors, we’ve been studying the incidence of Responsible Sourcing (RS) requirements by multinational enterprises (MNEs) on firms and workers in the developing countries they source from. Through their RS policies, MNEs impose minimum standards on worker compensation, benefits, working conditions, and other production practices at their suppliers worldwide. We first built a unique database covering the near-universe of RS rollouts by more than 480 MNE affiliates in Costa Rica (CR) since 2009 and combined it with firm-to-firm transaction records and matched employer-employee administrative data for all CR firms. We then found that RS is not just "hot air", documenting significant negative effects on the sales and employment of exposed suppliers and positive effects on the earnings of their workers (particularly the initially low-wage workers).

We then developed a quantitative general equilibrium model that allowed us to show that the welfare implications of Responsible Sourcing are a priori ambiguous – depending (among others) on the motivation behind RS by MNEs (is it profit-maximizing or not?), the labour and product market environment in which these policies are implemented, and the amount of leakage of RS policies into the domestic economy (which weakens the export tax channel of welfare gains from RS). Our current estimates suggest that MNE RS policies have increased domestic welfare in CR, in particular for low-wage workers. The average effect on low-wage workers masks significant heterogeneity: those employed at MNE suppliers pre-rollout experience significant welfare gains that outweigh the welfare losses among low-wage workers at other firms.

Anything else you’d like to include?

My office is 2.29 in SAL – do drop by! I always have a stash of dark chocolate and tea to share and love talking about research (or how to make the most of London).

NB: I will be visiting MIT Economics between January and December 2024, but I would be happy to (re)connect upon my return in early 2025.

Previous Spotlights

Dr Maarten de Ridder

Maarten de Ridder tells us about how the events of the Global Financial Crisis and the Eurozone debt crises instigated his career in economics, his work on how innovative investments by firms generate productivity growth, and a current piece of his research on the trends in intangible capital to the slowdown of productivity growth.

Hi Maarten, it's wonderful to speak to you. Please tell us a bit more about yourself:

I'm Assistant Professor in the LSE Department of Economics. Besides that, I'm a member of the Centre for Macroeconomics and a senior associate of the Programme on Innovation and Diffusion. I am originally from the Netherlands and after my undergraduate at Tilburg University I moved to Cambridge to do a Master’s in 2014. I stayed there for my PhD and joined LSE in September of 2020.

Why economics?

When I finished high school in 2010 the world had just gone through the Global Financial Crisis. The Eurozone debt crises had just kicked off with the Greek government’s admission that deficits were much larger than previously thought. It was a time of extraordinary intervention by governments and central banks, who were trying to prevent the financial crisis from causing a depression as large as the 1930s. These events showed me that economists deal with first-order questions and can make a tremendous positive impact on the world. From then on, I have found a fascinating subject to study and understand.

Could you tell us about your research interests?

While I find many topics in macroeconomics interesting, most of my work focuses on how innovative investments by firms generate productivity growth. Productivity growth is responsible for most economic growth in advanced economies, but has significantly slowed since around 2005. This is especially worrisome because productivity enables a high standard of living without a greater reliance on (natural) resources. Understanding the drivers and remedies for the slowdown of productivity growth can therefore be important to fight the consequences of things like climate change and aging.

Please tell us about a current piece of research you're working on?

Simultaneously with the slowdown of productivity growth, we have also witnessed a fundamental change in the way that firms produce and compete. Rather than producing with tangible inputs, like machinery, production increasingly relies on intangible inputs, like software. A key difference between intangible and other (tangible) inputs is that intangibles scale: they can be duplicated at close to zero marginal costs. This means that when intangible inputs are used to produce a good, the cost structure of production changes. Firms need to invest in the development and maintenance of intangible inputs but face minimal additional costs of using these intangibles when production is scaled up. A rise in the use of intangible inputs therefore shifts the cost of production away from variable costs and towards fixed costs.

One of the projects that I am working on relates the trends in intangible capital to the slowdown of productivity growth. With a combination of models and rich micro datasets, I show that intangible capital can give a rise to large `superstar’ firms. These deploy intangible capital very efficiently, which allows them to grow rapidly and to initially appear as very innovative. But in the long run such firms can use their cost advantage to undercut competitors on price. This dissuades other firms from entering new market and can eventually lower productivity growth. Besides explaining a significant part of the slowdown of growth, this may explain why a greater share of national income seems to be flowing towards corporate profits, and why there has been a long-term decline in the rate at which new start-ups enter the economy. The project shows that policy can do a lot to improve these outcomes by promoting the diffusion and adoption of intangible technologies.

Is there anything else you'd like to share with our community?

The Department of Economics at LSE is such a great place to work and be part of. Joining in the middle of the pandemic was difficult, but everyone at the Department and at the Centre for Macroeconomics has been incredibly helpful and the PhD students at LSE are great. Now that we are back in the office, I look forward to interacting with everyone much more over the coming years.

Dr Michael Callen

We spoke to Michael Callen about how a year abroad in Bejing motivated him to study economics, his current research on state building reforms in Afghanistan, and his interests outside of teaching or doing research.

Hi Michael, great to speak to you! Could you tell us a bit more about yourself:

I am an Associate Professor in the Department of Economics and I am a Research Programme Director for State Capabilities at the International Growth Centre. I am originally from Leadville, Colorado, USA a small mining town that also claims the highest elevation of any incorporated town in North America. My BSc is in Econometrics and Mathematical Economics from LSE and I did my PhD at UC San Diego. I have worked previously at the Harvard Kennedy School, UC San Diego, and UCLA.

Why Economics?

I spent a year in high school studying in Beijing and living with a Chinese family from 1999 to 2000. This provided me a very direct experience with how economic development can utterly transform people’s lives. I became fascinated with trying to understand how policy could change economies and thereby make people better off. Economics does not come very naturally to me. However, it is well worth the effort to grasp it, because it provides such a powerful tool to understand the world and to craft better policy. So, to students reading this who similarly find economics challenging, stick with it!

Could you tell us about your research interests?

I study political economy, development economics, and behavioural economics. I work primarily in fragile conflict-affected countries such as Afghanistan, Nepal, and Pakistan. My experiments often require me to work closely with governments, donors, and political parties in these countries. I find the experience of engaging with policy partners very rewarding.

Please tell us about a current piece of research you're working on?

From 2016 to 2020, I was part of a team that worked closely with Ashraf Ghani’s government to try to achieve a few basic, but essential, steps in state building through a reform to how teachers’ salaries are paid. We sought to build an accurate list of who worked for the government, and then eliminate a few basic problems that plague government salary payments in poor countries, such as very long delays and leakage in disbursements. We did this first by paying salaries using mobile money and second by working with the Ministry of Finance to help streamline and organize the backend processes related to salary payment. We evaluated every component that was amenable to randomization in the context of an at-scale Randomized Control Trial. In the process, we learned a tremendous amount about what works, and what does not, for state building reforms. The fall of the Afghan Government to the Taliban underscores to me the critical nature of trying to understand how to make state building effective. Most accounts of the failure of the Ghani government – such as claims that Afghan governments, by their nature, are hopelessly corrupt, or that Afghanistan is inevitably the `graveyard of empires’ – are mistaking symptoms for causes. They are far too simplistic, and therefore not very useful as we think about whether and how to engage in state building. In the coming months, I expect to write much more on this, including the results of our RCTs.

Is there anything else you'd like to share with our community?

Returning to LSE has been truly great, despite the limits imposed by the pandemic. Using social science to make the world a better place is in the fabric of the institution. As such, it is both a delight and honor to be back at LSE and to play some role in the mission of the institution. I am also thankful that my research helps me connect to people from all walks of life and from all over the world.

When not teaching or doing research, I am an avid rock climber. I enjoy all disciplines from bouldering to remote alpine trad climbing. Recently, I have been quite focused on sport climbing. I am also a big fan of music and enjoy all genres. I particularly like live music and look forward to seeing more shows as artists return to the stage.

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