Maryland Population Research Center

Kranton is a Professor in the Department of Economics. Kranton’s interests in population-related research rest in two broad areas: (1) the role of “identity,” or self-image, in economic decisions, and (2) the role of social relationships in the economy, particularly in developing countries. Kranton’s research considers how racial, ethnic, and gender identity affect economic outcomes. Because of its explanatory power, numerous scholars outside economics have adopted identity as a central concept. In psychology and sociology, a major theme is that a person’s sense of self is associated with different social categories and how people in these categories should behave. In a series of journal articles, Kranton and her co-author George Akerlof bring identity into economic models to show how it affects outcomes in particular settings. Their models of the labor market, education, poverty, and household division of labor generate new predictions that are broadly consistent with stylized facts. The analysis also suggests how policies can decrease racial and ethnic disparities. In another series of papers, “Reciprocal Exchange: A Self-Sustaining System” (American Economic Review, 1996), “The Formation of Cooperative Relationships” (Journal of Law, Economics, & Organization, 12, 1996), “Public Goods in Networks,” (Journal of Economic Theory, forthcoming), and “Risk-Sharing in Networks” (working paper 2006), Kranton investigates the role and formation of relationships in economic exchange. While developed nations rely on markets to exchange goods and services, people in developing nations rely to a much greater extent on social interactions for exchange. Kranton investigates when such personal exchange is beneficial, and when it hinders economic growth. She shows that relationships have benefits that can be lost in the transition from traditional to modern economies. These losses can also occur in advanced society where market relations take the place of traditional family obligations, such as child-rearing and elder care. Kranton is among a handful of theorists in economics applying economic theory to population related issues. Her current work (described below) strives to integrate economics with other social science disciplines and investigate empirical tests of her theories. She has contributed her insights from economic theory and prepared a paper on identity and family change for the Unions Group of the Explaining Family Change project.

Funded Research

In 1996-97, Kranton was a Russell Sage Foundation Fellow and in 2001-02, she was a member of the Institute of Advanced Study, Princeton, NJ. She has been awarded two National Science Foundation grants for her work on identity and her work on networks. Her current grant, looking at the Economic Theory of Networks runs until June 2007.

Future Research Plans

Over the next few years, Kranton will continue her work on Economics and Identity with two new related empirical projects. George Akerlof successfully resubmitted their project “Identity and the Economics of Education” to the National Science Foundation to continue their research on ethnic, racial, and gender identity (since Kranton is already supported by an NSF grant she was not eligible for further funding). The research considers how the students’ social system affects educational attainment, and they are testing their theories using the High School and Beyond data set. Kranton and Akerlof are writing a book on identity and economic decision making that is aimed at a wide social science audience. This book will not only explain their theory, it strives to bridge disciplinary divides and to provide a general framework to study the influence of culture and society on individual outcomes and population patterns. Kranton will continue to work on economic theory of networks, including how networks allow individuals in developing countries to pool risk. Kranton is also currently integrating her insights from economic theory to understand changes in union formation and childbearing. She is a contributing author to the Romantic Unions group of the Explaining Family Change project.

Maryland Population Research Center
0124N Cole Student Activities Building (#162)
College Park, MD 20742
Phone: 301-405-6403
Fax: 301-405-5743