• MIT Department of Economics

    Robert M. Townsend, Elizabeth & James Killian Professor of Economics

    Professor Townsend began his work as a theorist working on general equilibrium models, contract theory, and mechanism design. He is known for his seminal work on costly state verification, the revelation principle, optimal multi-period contracts, the decentralization of economies with private information, models of money with spatially separated agents, and forecasting the forecasts of others. Townsend's recent work focuses on analyzing the role and contributions of financial systems on developing economies by studying applied dynamic general equilibrium models and contract theory.

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Featured Working Papers

  • "No Bank, Several Banks: Does It Matter for Investment?" Alexander Karaivanov, Sonia Ruano, Jesus Saurina, and Robert M. Townsend. Working paper, 2010. ABSTRACT PDF

    This paper examines whether financial constraints affect firms’ investment decisions for older (larger) firms. The authors compare a group of unbanked firms to firms that rely on formal financing, using data from Spain to classify firms according to their number of banking relations: one, several, or none. The paper’s empirical strategy combines two approaches based on a common theoretical model.

  • "Market-Based, Segregated Exchanges in Securities with Default Risk."  Weerachart Tee Kilenthong and Robert M. Townsend.  Working paper, 2011. ABSTRACT PDF

    This paper studies a competitive general equilibrium model with default and endogenous collateralized contracts.  It outlines the possibility of trade in spot markets to create externalities, as spot prices and the bindingness of collateral constraints interact. This work contributes to the field by proposing a solution to the problem using market-based, segregated exchanges in securities.  Initial findings indicate that it is possible to have multiple market fundamentals with segregation into distinct competitive securities exchanges in which endogenous entry fees accrue to borrowers who are otherwise collateral constrained.

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Featured Publication

  • "A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative." Joseph Kaboski and Robert M. Townsend. Econometrica 79(5), September 2011: 1357-1406. ABSTRACT PDF

    This paper understands, predicts, and evaluates the Thai Million Baht Village Fund, a microcredit intervention program launched in Thailand in 2001.  Using pre-program data, the authors are able to study the impact of the fund, using a structural model and a cost-benefit analysis.  The paper finds a greater increase in consumption than credit and shows the program costs 20% more than the sum of its benefits.

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Research

  • Consortium on Financial Systems and Poverty
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    The Consortium oversees the development of a growing body of research that seeks to put financial services for the poor, with an emphasis on the impact of savings, second generation banking, and policy, on a firm empirical and theoretical foundation and serves as a reliable guide to effective action. It is composed of top-tier researchers across a variety of institutions who work to understand the impact of financial products, the macro and micro policies that are associated with financial access, and technological innovations in financial service delivery.

  • Townsend Thai Project
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    The Townsend Thai Project brings together one of the most detailed and longest running panel datasets in the developing world and archived secondary data for researchers at universities around the world.

  • The Enterprise Initiative
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    The Enterprise Initiative explores entrepreneurship in developing economies. Using analytic economic modeling, researchers study the factors that contribute to economic success at different levels of aggregation.

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Latest News

Townsend Gives Chief Economist Talk at World Bank
All About Finance World Bank Blog
December 21, 2011
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Robert Townsend gave the Financial and Private Sector Development (FPD) Network Chief Economist Talk at the World Bank in November. Townsend's talk, entitled "Informal Networks and Shadow Banking: Policy Implications" presented an overview of research lessons on risk sharing and networks in Thai villages as well as the importance of extensive panel data in understanding these occurrences.  The lecture was also geared toward policymakers, highlighting potential policy implications, backed by the current research.

Townsend Awarded 2011 Laffont Prize in Economics
MIT News
November 18, 2011
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Dr. Robert M. Townsend has been named the 2011 recipient of the Jean-Jacques Laffont Prize in economics for his work in Thailand, combining the theoretical and applied aspects of economics.  The prize will be awarded by the Institute of Industrial Economics (IDEI) in January 2012.

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