Elhanan Helpman (Dzalabad, former USSR, 1946) spent his young years in Poland and Israel. He graduated with a BA in Economics and Statistics from Tel Aviv University in 1971, followed by an MA in Economics from the same institution, then went on to earn a PhD degree in Economics in 1974 from Harvard University.
Between 1974 and 2004, he held a series of positions at Tel Aviv University, culminating in his appointment as Professor of Economics. Since 1997, he has been Professor of International Trade at Harvard University. From 2004 to 2014, he combined his Harvard post with the leadership of the Program on Institutions, Organizations and Growth of the Canadian Institute for Advanced Research.
Helpman has published eighteen books and some 150 papers in leading international journals. A past president of the Econometric Society, he has also been coeditor of the Journal of International Economics and editor of European Economic Review and the Quarterly Journal of Economics. He currently serves on the Advisory Board of the Central European Economic Journal.
Speech
Economics, Finance and Management, 6th edition
“Model building is an art, even when it addresses scientific problems. It’s hard to imagine that the economy could have progressed as it has without good theoretical models.” If economist Elhanan Helpman had thought differently, the new trade theory or the theory of economic growth might never have experienced an innovative conceptual advance, and we would be left with only partial answers to questions such as why do some countries grow faster than others? or why do countries trade? It was for these “fundamental contributions to the understanding of modern international economics and of economic growth,” that the jury granted him the BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category.
Finding himself less than convinced with the trade theories taught at universities back in the 1970s, this Israeli economist, born in Dzalabad, in the former Soviet Union, in 1946, decided it was time to consider them afresh. And he soon observed that data on trade flows could not be explained with the then current theory of comparative advantage: “I noted that most foreign trade takes place between countries at similar levels of development, with no strong comparative advantage, and in products belonging to the same industries.” How could it be that numerous industries were seeing their exports and imports expand in tandem? The reason that occurred to him was simplicity itself, building on the notion that “products traded within industries are differentiated.” This view also served to explain the growing role of multinational corporations in the global economy.
His interest in knowing facts and getting to grips with real-world phenomena steered him towards what he calls his own “comparative advantage”: the development of analytical models for understanding economic issues. For, in the words of this theoretical economist, “a good model is simple enough to focus on the main issues, but rich enough to provide nontrivial answers.” He also expresses a deep respect for empirical research, referring to it as “work that tells us, with data, what has happened in a country.” Hence his preference at times for having a co-author well versed in empirical methods.
In 1985, he brought together these new insights in a publication with Paul Krugman titled Market Structure and Foreign Trade. The book has since become a standard text within the field, although, as Helpman admits, it was not designed with this in mind: “We started by integrating various parts of the theory into a single analytical framework. Then we realized that we could improve it significantly and decided to broaden the theory as much as possible.” The result, in the words of the Frontiers jury, transformed the theory of international trade “by giving it a strong grounding in the theory of the firm and of monopolistic competition.”
Helpman has also made singular contributions to other lines of research, such as the relationship between international trade, foreign direct investment and economic growth. And he has turned his eye to economic policies and political economy. But at the heart of his work has always been the international economy, an “area that provides an opportunity to explore rich and varying approaches to vital issues.” Along with economist Gene Grossman, he wrote the 1991 book Innovation and Growth in the Global Economy, a landmark publication in the literature on trade and endogenous growth that has advanced the understanding of economic growth based on innovation.
Amongst his achievements, the jury cites his theoretical model of “quality ladders,” which, it remarks, provides a novel analysis of how cumulative innovation promotes economic growth. Helpman himself summarizes it thus:“When a company invests in new products and production techniques, it also contributes to general knowledge on which other companies can build their innovations, thereby inducing a cycle of cumulative R&D-based growth by reducing future costs of R&D.”
“When a company invests in new products and production techniques, it also contributes to general knowledge on which other companies can build their innovations, thereby inducing a cycle of cumulative R&D-based growth by reducing future costs of R&D.”
TUITEAR
Professor of International Trade at Harvard University since 1997, he combines this post with his leadership of the Program on Institutions, Organizations and Growth of the Canadian Institute for Advanced Research. But the road traveled has been a long one. Although brought up in Poland, he spent his teenage years in Israel. There he was originally drawn to the study of engineering, but his mind was changed by an act of fate. At the age of 19, during compulsory military service, a female comrade studying economics lent him one of the great books on economic analysis: Paul Samuelson’s Economics: An Introductory Analysis: “I started to read it and couldn’t stop. I was struck by his way of explaining social issues as well as his analytical methods. By the end of the book I knew that it was economics that interested me most… and I love it to this day.”
This fascination had its reflection in a brilliant academic record. Helpman graduated in economics with the highest honors from the University of Tel Aviv, and in 1971 moved on to Harvard University, where he specialized in economic theory under some of the names he most admired. Three years later, after earning his PhD, he returned to Israel with a purpose he would maintain throughout his professional life: “I wanted to do research.”
For almost four decades he has pursued a prolific and increasingly influential career as a teacher and researcher, penning more than 140 papers and a number of internationally renowned books. His interest in specific issues has led him to extend his research into numerous other fields. Lately, Helpman has been concerned with one of the big items on governments’ policy agendas, the question of inequality, with a focus on its sources in a globalized world and how it interacts with trade integration and growth.
“We have found that a substantial component of inequality rises in the initial phases of trade liberalization, but turns down once a certain point is reached.” Although it remains to be seen whether this study will join his long list of achievements, it will certainly not be for lack of trying. Patience, tenacity and discipline are three virtues he has put into practice all his life. “I am persistent and resilient; I do not give up on dealing with difficult issues. At most I put aside difficult problems, but I come back to them later, sometimes after several years.”
