HSE Researchers Receive Gaidar Award for Young Economists

HSE Professors Alexander Tarasov and Roman Zakharenko have received the Gaidar Award for Young Economists for their article on the connection between trade costs and defense spending. A special award also went to the paper ‘Bad News: An Experimental Study on the Informational Effects of Rewards,’ whose authors include HSE Associate Professor Anton Suvorov.

The laureates of this year’s Gaidar Award were announced at the XVII April International Academic Conference on April 21^st.

In 2013, the Yegor Gaidar Foundation established the Gaidar Award for Young Economists, which is given to young economists under the age of 40 for exceptional scientific research. To receive the award, their article must be published in a leading international, peer-reviewed journal. The Gaidar Award’s objective is to help Russian economists integrate in the international academic community, but the award also aims to shed light on some of the most prospective areas of contemporary economics.

This year’s jury included Professor Sergei Izmalkov of the New Economic School, who was the jury’s chairman, as well as HSE Professor Maksim Nikitin and MIT Professor Victor Chernozhukov.

The article ‘Trade Costs, Conflicts, and Defense Spending’ by Alexander Tarasov, Assistant Professor in the Faculty of Economic Sciences, and Roman Zakharenko, Assistant Professor in the International College of Economics and Finance, was co-authored by Michael Seitz of the Munich University of Applied Sciences and published in the Journal of International Economics. According to the article’s authors, their work is unique in three important ways. First, they used one quantitative model to show the connection between trade, conflicts, and military spending. Second, they showed that war becomes less profitable as trade increases, which means that the likelihood of conflict declines, as does spending on military needs. Lastly, the authors measured the gains that a conflict’s potential participants and nations might receive by both increasing trade and cutting military spending. The authors used North and South Korea, the Soviet Union and the United States, and Israel and Jordan as key examples.

This model works well for countries that have a long history of conflict and opposition, the Cold War between the Soviet Union and the United States being one example. The researchers calculated, that when imports from the U.S. to Russia increase by $1, overall military spending around the world falls by $0.11-$0.12. In other words, past conflicts are a way of estimating the probability of future conflicts.

The jury also awarded a special prize for the paper ‘Bad News: An Experimental Study on the Informational Effects of Rewards’ by Anton Suvorov (HSE Faculty of Economic Sciences), Andrei Bremzen (CEFIR, New Economic School), Elena Khokhlova (McKinsey & Company), and Jeroen van de Ven (Amsterdam Center for Law and Economics, University of Amsterdam; Tinbergen Institute). The researchers tested out the hypothesis that an employee starts doubting their abilities when promised a large bonus for a task about which the boss is better informed. ‘If the task were easy, would I really be promised a large bonus?’ the employee thinks. This hypothesis is based on the game theory models of Roland Benabou and Jean Tirole. The ‘hidden costs of reward’ is an interesting topic in psychological and economic research on intrinsic motivation. The researchers’ task was difficult because they had to find that the promised reward simultaneously had a direct and positive effect on the employee (i.e., the employee tries harder), as well as caused the employee to doubt their own abilities (i.e., the employee definitely will not try without a bonus). To do this, the researchers came up with an untraditional experiment – the employee works on two tasks at the same time, one of which is carried out alongside the employee’s boss, while the other is done independently. This experiment proved the researchers’ main hypotheses; the bonus had a direct and positive effect, as well as a negative impact on intrinsic motivation.