Oded Izraeli is searching for the sweet spot.
The professor of economics at Oakland University’s School of Business Administration (SBA) has long wondered what amount of inequality in earnings is good for the so-called “Goldilocks economy:” one that is not too hot and not too cold, but sustains moderate growth and a low inflation, allowing for a market friendly monetary policy.
That quest had Izraeli, along with former faculty member Fuad Hasanov, now an economist with the International Monetary Fund, digging through economic data from 48 states for the census years 1960 to 2000. They wanted to discover new evidence of how inequality and growth are entwined.
After three years, they completed their research. They found that while modest increases can generate growth, heightened inequality may reduce growth. They argued that policies which aim for growth but ignore inequality, tend to be self-defeating; whereas policies that decrease inequality by boosting employment and education have beneficial effects on an economy.
They showcased these findings in an article titled “Income Inequality, Economic Growth, and the Distribution of Income Gains: Evidence from the U.S. States.” It was published in the Journal of Regional Science in August 2011.
Their paper caught the attention of the prestigious Harvard Business Review. It ran an abstract of the research last January, tying it in with the Occupy Wall Street movement, where protesters denounced the growing income and wealth distribution in the United States between the wealthiest 1 percent and the rest of the country’s population.
“The subject is very close to what’s happening in the real world,” says Izraeli, a native of Israel who joined OU’s faculty in 1978. “The timing was right.”
Appearing in the Harvard Business Review is considered a coup for the authors as well as Oakland University.
“Yes, it is an honor,” Izraeli says. “It’s very flattering to be in there. It’s flattering to have their interest in the Journal of Regional Science piece and then to publish an abstract in there.”
It’s a shot in the arm for Oakland University as well, he says. “Also, Oakland doesn’t usually appear in that publication, so it makes Oakland a little more known in places that do not know about it already.”
The success of the study and subsequent paper was ignited by working as a team, says Hasanov. “When we were discussing the project, you could sense the synergy,” he says. “We had a lot of fun.”
Izraeli agrees. “Two heads are better than one because when you have an idea, you can bounce ideas off of each other,” he adds.
Izraeli, who earned his bachelor’s degree at the Hebrew University and his master’s and doctorate at the University of Chicago, has moved on to his next research project, again a collaboration. He and Professor Kevin Murphy of OU’s Department of Economics are examining Michigan charter schools and how their MEAP scores compare to public schools.
If the Harvard Business Review comes knocking again, he’s ready. “It’s not something you plan, but the opportunity would be very nice to have,” he said.
Besides Harvard Business Review, Izraeli has published scholarly articles in journals such as: Journal of Urban Economics, Urban Studies, Regional Studies, Journal of Environmental Economics and Management, Economic Development and Cultural Change, Transport Economic and Policy, Logistics and Transportation Review, and the Annals of Regional Science.
His areas of interest are urban and regional economics, state and local public finance, environmental economics and labor economics. His specialties include interstate differences in state and local revenues, trade-off between environment quality and jobs, interstate equity implications of the 1986 tax reform, the effect of state governor party affiliation on state economic performance, convergence in state per capita income, and comparison of the impact of the environment on earnings and housing values over time.
“I’ve always had an interest in the social sciences and how society is working,” Izraeli says, explaining his passion for economics. “The economic aspect of it has always been fascinating to me.”
Izraeli has found his sweet spot.
By Rene Wisely