As part of our interview series, we ask renowned experts in the field about the future of research in development economics, and for their advice to young researchers. For this interview, we got the opportunity to talk to Prof. Dean Karlan.
Dean Karlan is the Frederic Esser Nemmers Distinguished Professor of Economics and Finance at Northwestern University, co-Director with Nancy Qian and Christopher Udry of the Global Poverty Research Lab at Northwestern University, former Chief Economist of USAID (2022-2025), and the Founder of Innovations for Poverty Action.
ETRM: We’ll start with a general question we ask all our guests: What first inspired your interest in development economics?
Karlan: I was initially drawn to development economics through hands-on experience. I was working with a microcredit organization in El Salvador and found the work incredibly inspiring. But what struck me was how little evidence there was to guide decisions—on everything from lending models to interest rates and training programs. Smart, compassionate people were making big decisions based on instinct rather than data. That gap is what led me to pursue a PhD in economics: I wanted to bring evidence into those decisions and help shape better policies.
ETRM: A topic that emerged in some of our recent interviews is a growing interest in joining topics and tools from development economics and macroeconomics. Do you think these fields have been separated? What can we gain from integrating them?
Karlan: I see a lot of promise in this integration. It’s not necessarily that micro and macro are more separated in developing countries than in richer ones—it’s just that, historically, they’ve existed as somewhat distinct worlds in economics overall. That’s been changing, with increasing efforts to ground macroeconomic models in micro-level theory and behavior, and I think applying that approach to development work is especially exciting.
Take any government program. If you’re setting policy at the national level—like infrastructure investment, tax reform, or industrial policy—you inevitably need to think about broader macroeconomic effects: How will prices shift? What will happen to labor migration or structural transformation? Sometimes you can extrapolate from micro estimates. But doing so assumes certain linearities or ignores spillovers, and that’s where a good macro model can provide essential insight.
There’s also an important discussion to be had around trade-offs in resource allocation. For instance, if you have a fixed pot of money, do you spend it on programs targeted at the poorest of the poor, or on infrastructure and industrial policy that could raise GDP per capita more broadly? If we better understood how much of those broader gains actually trickle down—and under what conditions—we could make far more informed decisions. That’s the kind of work where integrating macro and micro perspectives becomes incredibly valuable.
ETRM: There’s often a perception that the benefits of development aid aren’t visible to citizens in developed countries. How do you think the knowledge in development economics can be used within countries like the US?
Karlan: In theory, we could try to present more evidence to shift public opinion. But I’m not sure that would really move the needle. And honestly, I’m not convinced that a lack of evidence is the main reason aid isn’t more supported. It’s a bit of an oversimplification to say, “People don’t see the benefits, so they don’t support it.”
There are many things governments do that only benefit a small segment of the population—like specific research initiatives or industry subsidies—and yet we still do them. If our standard were that every policy has to directly benefit 51% of people to be justified, we’d hardly get anything done. So, I don’t think that’s a fair criticism of foreign aid.
Also, the best evidence we can provide is about whether aid is effective—not whether it tangibly benefits, say, a middle-income family in Kansas. Sometimes there are material connections—like if USAID buys wheat from Kansas and a local farmer benefits—but those are exceptions. Most aid programs don’t have a direct economic payoff for Americans. Instead, the benefit is about soft power, about global leadership, and most importantly, about doing the right thing.
And that moral stand—that’s something a lot of Americans already live by. Most Americans donate to charity. Most care about others. We talk about ourselves as a generous, giving nation. So what’s wrong with living up to that identity as a country? Why shouldn’t our foreign policy reflect those values?
It’s strange to hear someone say, “We should only help ourselves,” while also claiming to believe in American generosity, or in Judeo-Christian values, or in any religious tradition that emphasizes helping the vulnerable. Whether you’re Christian, Jewish, Muslim—those texts are full of passages about aiding the downtrodden, the marginalized, the people without access.
So I don’t think we need to show a financial return on foreign aid to justify it. And I don’t think a lack of direct benefit to Americans is the reason it sometimes loses support. That’s the long version of what I argued in a recent op-ed , actually.
ETRM: What about applying findings from development work abroad to U.S. contexts—like lessons from cash or food transfer programs?
Karlan: I’m a big believer in theory-informed policy. If we know why something works and under what conditions, we can think about how it might translate to other contexts. But context matters. The U.S. has different income levels and functioning markets, which all affect how a policy plays out.
While we can build hypotheses based on findings from other countries, we still need to test them here. Fortunately, we’re seeing more randomized trials of cash transfers in the U.S., and the results aren’t always the same as in lower-income countries. For policymakers here, those local studies should carry more weight. In general, before extrapolating findings, we need to understand the mechanisms behind the outcomes and the key differences between settings.
ETRM: What advice would you give to PhD students in development economics who are aiming for academic or research positions in this current market?
Karlan: First, don’t lose hope. If anything, the need for rigorous research is even greater now. The current challenges—funding cuts, hiring freezes—are real, but they also highlight how critical it is to do this work.
Yes, some funding from agencies like USAID may be uncertain, but that was never the sole source of research opportunities. Many projects are driven by local governments, NGOs, or independent initiatives. There’s still an enormous amount to study and a lot of data being generated.
So be patient. You may need to extend your timeline—maybe an extra year in grad school or postdoc. But long-term, universities will continue hiring. Student numbers are still growing, and demand for faculty will follow. When hiring resumes, there could even be a rebound effect as institutions catch up.
ETRM: Even beyond USAID, many international organizations and universities are facing freezes. This may take time to recover—and when it does, there could be more competition for fewer jobs.
Karlan: That’s true. But many of those university freezes are tied to reductions in medical research funding, not just development aid. It’s a broader structural issue. My advice remains the same: play the long game. This moment is hard, but it’s temporary.
And don’t overlook the many other ways to contribute. Go to Uganda, find a grassroots organization, and figure out what questions they’re grappling with. Many important research ideas come from the field, not from big donors. And while some doors may be closing, others will open.
ETRM: Last question—how do you see development economics evolving in the coming years? And as a follow-up—given recent policy shifts—how do you see aid organizations or governments that worked closely with USAID responding?
Karlan: On the second part, I honestly don’t know—there’s a lot of uncertainty right now, and I don’t want to speculate too broadly. But on the first part, I’d say the field has changed dramatically, even just in the last 20 years. When I look at the number of graduate students and faculty working in development now compared to when I started, it’s truly exciting. One of the biggest shifts is the explosion of data—both in quantity and in accessibility. There’s a lot more high-quality data available now, and that opens up a ton of opportunities.
Another major change is how we approach data collection. When I was in grad school, if you wanted to test a theory that involved randomized assignment—like giving some people cash and others not—you had to go out and run the whole experiment yourself. That was the only way. But now, we have access to hundreds of completed studies, many of which have publicly available microdata.
So, if a student today has a theory they want to test, they might be able to do it by pulling from five or six existing datasets. In fact, that could be better than running a new experiment—because they can test whether their idea holds across different contexts, countries, and populations. That kind of robustness is incredibly valuable.
To make the most of this shift, though, we need to continue improving the infrastructure for sharing data—better harmonized datasets, more open-access microdata, and stronger public goods in the research community. We’ve made big strides, but there’s still work to do.
ETRM: Thank you so much for your time and insights. We really appreciate you joining us today!
Karlan: My pleasure – Thank you!
