The School of Economics and Management at Aarhus University has secured continued collaboration with Professor Dale T. Mortensen, who received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 at a ceremony in Stockholm on 10 December. A new agreement ensures the extension of the school’s collaboration with Professor Mortensen for a provisional period of five years. Professor Mortensen will work in close collaboration with a new research unit at Aarhus University.

Professor Mortensen’s current professorship is financed by a grant from the Danish National Research Foundation, which runs until the end of 2010. However, the Rector’s Office at Aarhus University has just granted DKK 600,000 (approximately EUR 80,500) per annum for a five-year period. This grant secures Professor Mortensen’s salary, and means that the school can continue its collaboration with the Nobel Laureate during the period 2011–2015.

“We’re naturally pleased about the extra support form the Rector’s Office at Aarhus University, because the school can now renew its contract with Dale T. Mortensen for a few more years. This new agreement means that we can carry on with the research projects already initiated in collaboration with him,” says Head of School Per Baltzer Overgaard, School of Economics and Management.

Collaboration with Nobel Laureate for 30 years

Dale T. Mortensen is a professor at Northwestern University (USA), and has been permanently affiliated with the School of Economics and Management at Aarhus University since 2006, when he was granted a so-called Niels Bohr visiting professorship by the Danish National Research Foundation. His collaboration with the school – which he still values highly – has been going on for thirty years, as Professor Mortensen has been working closely with the school’s labour market researchers since the early 1980s. Professor Mortensen says:
“In recent years, we’ve established a very active research group at Aarhus University, which has studied many areas involving labour market conditions, family relations and industrial economics. All these studies are based on data from the unique Danish registers, and I’m looking forward very much to continuing working on these research projects with my many good colleagues.”

New research unit with a focus on labour market conditions

The school’s strong research environment in labour market conditions was strengthened even further in September 2010, when Professor Bent Jesper Christensen, School of Economics and Management, was awarded a grant of DKK 10 million (approximately EUR 1.3 million) by the Danish Councils for Independent Research | Social Sciences (FSE) to set up a new research unit for the period 2011–2015.

This new research unit – Cycles, Adjustment and Policy – will provide better tools for managing unemployment, analysing wage dispersion and developing efficiency during cyclical swings. According to Professor Christensen, there is a great need for more knowledge about this field at present, and he emphasises the fact that the entire community would benefit from better clarification of labour market conditions:

“Some companies are simply better than others. They are capable of more efficient production and generating higher profits. This means they’re able to offer more pay, which helps to attract the best employees and to keep hold of them. This type of mechanism is important to understanding societal development, including corporate structure and wage dispersion. These will be key issues in the new research unit.”

Basic research with direct benefit for society

Professor Mortensen will work with other Danish researchers in the new unit to develop better models for dealing with major economic fluctuations in society, and to ensure the implementation of new theories and methods in the labour market, including ways of reducing unemployment.

In the last two years, unemployment has more than doubled in Denmark, just as wage dispersion – i.e. the variation in wages between highly and poorly paid workers – has been increasing. Unemployment is not just a significant threat to the well-being of the individual, but is also a serious threat to the welfare state in general. Existing analysis models do not make allowance for a number of factors that can be expected to have an impact on this development. Most analyses of unemployment rates during periods of prosperity and recession, for example, do not take wage dispersion into consideration, just as most studies of wage dispersion do not consider economic development. This means that two significant conditions that have a mutual effect on each other are not currently combined in one joint analysis model. Politicians therefore run the risk of making decisions and implementing measures that can have undesirable consequences.

The new research unit will have access to special Danish data that makes it possible to follow employees when they change jobs from one company to another, and compare this with aspects such as company capital and production. The Danish registers provide unique research opportunities in this field, which is one of the reasons that Professor wants to continue the close collaboration.

Markets with search costs

Along with Peter A. Diamond from the Massachusetts Institute of Technology (USA) and Christopher A. Pissarides from the London School of Economics and Political Science (UK), Dale T. Mortensen was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 at a ceremony in Stockholm on 10 December. They were awarded their prizes ‘for their analysis of markets with search frictions’, which means that if an individual wants to buy or sell something, it is necessary to find someone to trade with – and that requires both time and resources. The more difficult it is to find someone to trade with, the more time has to spent searching, and there is a greater chance – or risk – that the price is different. It all depends on who is finally located to trade with.

The theory is concerned with things – or markets – that we are all familiar with in our day-to-day lives. This could be the job market, for example, where many people spend time applying for jobs on a market that is currently affected by high unemployment. Another example is the housing market, where many people want to sell right now, but have difficulty finding a buyer. It could also include the marriage market – it takes time to find a partner and there is no guarantee of finding the perfect match as soon as possible.

A strong research environment

Labour market research is not the only area to receive attention. The School of Economics and Management has an international reputation for the exceptional research environments at a number of its core areas. This international recognition is also very important in connection with the school’s close collaboration with many foreign researchers, and these strong international ties naturally also support the school’s focused attention on young research talents.

“Recruiting the best young international research talents to our graduate programmes is one of the school’s strategic focus areas. For a number of years, we’ve admitted an increasing number of highly qualified PhD students. If the school’s positive development in recent years is to continue, it’s crucial that we enjoy international recognition in several of our core areas, and it’s clear that Professor Mortensen’s appointment is also of great importance in this regard,” says Professor Overgaard.