Exploring How Policies Shape Markets, Communities and Everyday Life

When leaders set tax policy or adjust interest rates, the effects don’t have the same impact on every household. Wendy Morrison, new Assistant Professor of Economics, studies how differences in saving habits and job skills shape the broader influence of monetary and fiscal policy on the economy. 

Morrison examines how policies, such as taxes or changes to interest rates, impact people across different income groups, not just the “average household.” This is called heterogeneous agent macroeconomics, and it takes into account differences among individuals. This helps provide economists with models that are more realistic and provide more targeted insights. 

Morrison explained her approach with a simple example: “If the Federal Reserve cuts interest rates to stimulate the economy, that makes it cheaper for Wegmans to puts in a new automatic checkout machine. That might be good for you as a manager, but bad for the worker who’s replaced. If the worker’s consumption is especially sensitive to their income, this makes the stimulus less effective. In other words, differences in savings behavior and skills can change the consequences of policy,” she said. 

Her research looks at how those differences can generate unintended consequences of policy, and shape both the effectiveness of monetary policy and the fairness of tax and redistribution policies. Taking stock of all those differences helps us figure out how to make policy more effective and more fair,” Morrison said.

Morrison has always been interested in the practical questions of economics. In the second year of her Ph.D, a group of junior professors set up a reading group for students on cutting-edge macro topics. She was assigned to present on heterogeneous agent models, which piqued her interest. 

The techniques were challenging, and Morrison had to learn new math and computational tools. But as she worked through them, the ideas clicked with her, especially that people with different incomes, skills and saving and spending habits respond in different ways to policies.

In a somewhat full-circle moment, Morrison will be teaching second-year Ph.D students, something she’s looking forward to, on top of the research she’s doing. 

“I think you never really understand something as well as when you have to explain it to somebody else,” Morrison said. She values teaching motivated Ph.D students and will use the opportunity to guide them through the latest research while deepening her own understanding of complex macroeconomic concepts. 

When she entered the job market, Morrison was looking for a department that was very well respected in the field but also still hungry to grow. She found it at Duke. 

“This is my dream job,” said Morrison. 

Morrison’s perspective benefits both her colleagues and students, and her work advances scholarship while shedding light on the systems that shape markets and communities. 

Along with Morrison, Duke Economics also hired Yingni Guo and Christopher Walker. Chair James W. Roberts is looking forward to the way Morrison and the rest of the new faculty will improve the department and Duke as a whole. 

“These new faculty bring expertise in a wide variety of subfields within the economics discipline and will also bring great energy to the department and our students,” said Roberts.