Spotlight - Thomas Baranga
(2009) Q&A with Thomas Baranga, Assistant Professor of Economics
Thomas Baranga joined IR/PS in September 2009. He recently moved to San Diego from Boston, where he received his Ph.D. from Harvard University. A native of England, he did his undergraduate work at Balliol College, Oxford.
What brought you to San Diego?
This job opportunity. UC San Diego is a fantastic school, and it’s exciting to be in a department with both political scientists and economists. I applied to positions pretty broadly across the U.S. and the U.K., and UC San Diego seemed like the best academic opportunity for me. I’m also excited to discover California and the California lifestyle!
Tell us about your educational background before coming to San Diego
I did my undergrad in England – I studied Philosophy, Politics and Economics (PPE) at Oxford, and I specialized equally in international relations and economics. I knew I wanted to study further when I graduated, but I was torn as to which discipline to pursue and it was hard for me to choose between politics and economics. I almost started a Ph.D. program in Middle Eastern politics at Oxford, but in the end settled on economics. So I went to Harvard to start that, and six eventful years later I graduated.
What are some of your research interests, and what are you currently working on?
In terms of broad fields, my interests are in international trade and macroeconomics. My thesis looked at questions in both fields, but leaned more toward international trade: I looked at the effects of different monetary policy regimes on trade flows, to see whether externally oriented monetary policies that stabilize exchange rates have a beneficial impact on trade, by reducing foreign exchange risk. The second piece of the thesis was more of a methodological contribution, about getting around problems that arise in estimating the determinants of trade flows when some countries don’t trade at all and the quality of the data is questionable.
Since the summer I’ve started work on a couple of new projects. One is to explore the interactions between housing and labor markets. The idea is that the occupational diversity of a neighborhood should matter for housing demand in the neighborhood. If you live in a town like Detroit, which is heavily concentrated in one particular industry, then your neighbors’ labor income will be likely more highly correlated with your own; and this also means that demand for housing (and so your house price) will be more correlated with your own labor income. So a house is a riskier asset for people living in poorly diversified areas, because if they lose their job and need to sell their house, to release equity or move to another city, it’s more likely that the house will be worth less because more of their neighbors are also selling up at the same time. This suggests people should be willing to pay a premium to live in more (occupationally) diverse areas.
I’m starting a project on trade and the financial crisis. Trade has fallen very heavily in the recent financial crisis, in large part because incomes and demand have fallen; but I’m looking at the contribution of a neglected channel, the effect of real interest rates on exports. Exporting can tie up firms’ working capital longer than domestic trade, because it can take an extra six weeks for something to get from Japan to Europe on a boat, and the exporting firm won’t get paid until the goods arrive. In the financial crisis, a lot of firms had trouble raising working capital, because the cost of getting capital from banks was going up. While nominal interest rates dropped a lot, real interest rates actually rose quite sharply as credit was rationed and inflation fell. So one reason why exports may have dropped a bit more than everyone expected is through this channel of interest rates affecting effective transport costs, and there seems to be some evidence to support this effect in historical data.
Finally, I’m working with Professor Sylvain Champonnois at the Rady School of Management on another project. We are exploring how frictions between external investors and entrepreneurs affect the entrepreneurs’ incentives to invest in risky or less risky projects. We are working on a model that could explain how, as the entrepreneurs’ own wealth grows, they are increasingly able to take on more risk than the external investors would like, which could have interesting macroeconomic implications: as inside capital grows, firms’ risk profile and the economy’s volatility will increase.
How will you apply your experience and research to a new environment at UC San Diego, especially with the IR/PS focus on the Pacific region
I’m interested in international trade and international finance, and as the Pacific region is becoming more globalized, those issues are becoming more salient and important for those countries. I’m on the lookout for questions and opportunities to apply to the region. But I think the broad questions that I’ve been looking at so far will be important for the Pacific region as well as other areas of the world.
What are you looking forward to the most about your new position at IR/PS?
I’m excited to start teaching. I’m not teaching this semester, but I’ve started preparing classes, and it’s definitely exciting. I’m teaching a lot of these topics for the first time, so I’m trying to find the right balance between keeping the intuition clear and simple and getting stuck into the details of models. It’s making me think a lot about the material, which is good.
What classes will you be teaching?
I will be taking over two classes from Professor Takeo Hoshi; one is Fiscal and Monetary Policy, which is next quarter, and then the Open Economy section of International Economics in the spring. The third class, which I’ll teach next quarter, is a new one about the economics of trade policy, IRGN 490.
What do you like about teaching?
Students are really energetic and energizing. They’re fun to interact with, and it’s very satisfying when you get the feeling that you’ve communicated something important, when you know the students have gotten it and agree and understand. And I enjoy the discussion element – sometimes the issues are controversial, and you want to try and put forth a point of view, and people will argue back, and that’s a positive thing. I think teaching also deepens your understanding of the research questions out there; it makes you think more carefully about which topics are important and where puzzles persist.
Why did you decide to become a professor?
I always enjoyed schoolwork and studying, and my parents brought me up with a romantic attachment to the life of the mind. The idea of doing research is really inspiring to me. And I like the lifestyle – it’s great to be one’s own boss, in charge of one’s own time.
What is life like outside of academia for you?
Well, this is really the first time I’m living independently! I was living in the grad dorms one year at Harvard, and then in undergrad dorms for five years, because I had a job as an RA. And before that, I was in college, and then before that I was in boarding school. I’ve basically lived in dorms for half my life, so it’s fun to have my own flat and to be setting it up. I’m enjoying exploring San Diego and getting to know the local restaurants, going hiking and taking advantage of the amazing weather. I play the piano, and enjoy a game of cards.
Anything else you would like to share about yourself or your work?
I need to learn to surf!
For more information about Professor Baranga's work and areas of expertise, please visit his faculty page.
