Modeling Eastern European Economics
College of Business and Economics undergraduates modeled the effects of Eastern European governments on economic growth
Dustin Cheney and Patrick McElligatt want to know what governments can do to grow economies. To narrow down this vast topic, they are investigating how governments in Eastern European countries promote or prevent economic growth.
Cheney and McElligatt love talking about money. Cheney worked as a page for the revenue and taxation committee in the Idaho House of Representatives during high school. At U of I, the 21-year-old junior from Weiser, Idaho, is a double major in business economics and accounting. McElligatt, a 20-year-old senior from Upland, California, enjoyed his business courses enough to double major in business economics and finance.
For their project, Cheney and McElligatt are working with Assistant Professor Akira Sasahara in the College of Business and Economics. Cheney said they were interested in former Soviet countries in Eastern Europe. Researchers and policymakers usually focus on high growth Asian countries, Sub-Saharan African nations, and rich Western countries, Cheney said.
“The countries we’re researching are not poor enough to be of interest to a lot of people,” Cheney said. “They’re not growing quickly enough to invest in, and they’re not developed enough to be on the world stage.”
What Eastern European countries do offer is a variety of what Cheney and McElligatt refer to as “political institutions.” They said institutions can be thought of as the rules of the economic game.
“These are the underlying principles that affect how you live your life: how you get contracts enforced, how the government treats you, how you find a job, and what laws, culture and history are in the background of how your country grows,” Cheney said.
Cheney and McElligatt used a mathematical model to isolate the impact of institutions on economies.
“We want to show quantitatively how the underlying political system you have is related to your economic growth,” McElligatt said.
Cheney gives the example of Serbia. Before the 1980s, Albanians living in Serbia were relatively free. Then in 1987, the Serbian president took away Albanians’ right to work, move about the country freely and go to school. Their model shows how these political restrictions negatively affected the economy.
Cheney and McElligatt hope the backbone of their mathematical model can be applied beyond Eastern Europe.
“The underlying methodology we have can be used everywhere — you just need to change your data,” Cheney said. “We’re going to be able to inform policymakers and invested parties of the things they can do to make their countries better.”
Article by Danny Bugingo, a junior from Portland, Oregon, double majoring in math and French.
Photos by Madelen Johansson, a senior from Tibro, Sweden, studying interior design.
Published in July 2018.