Mayara Felix is an economist who specializes in economic development and international trade. A native of Brazil, Felix came to the U.S. in 2008 for her undergraduate studies and earned her PhD in economics at MIT.  Before joining the Jackson School this fall as an assistant professor of economics and global affairs, she spent several years conducting research at Harvard, Princeton and Yale’s Cowles Foundation.

Felix’s research focuses on policies intended to improve market efficiency in developing countries, such as import tariff reductions, free trade agreements and outsourcing. She focuses primarily on Latin America.

She recently sat down for an interview to discuss her research projects and what she loves about the Yale community and living in New Haven.

This interview has been edited for clarity and length.

Before starting your current position, you spent a year as a postdoctoral fellow at Yale, as well as time in other Ivy League economics departments. What are your first impressions of the Yale community and of the Jackson School?

I deeply admire the work of our colleagues here at Jackson, in the Economics Department, and at SOM. I think Yale is unique in terms of the caliber of its people. I’d say we have the number one department in international trade in the world. I feel so lucky to be here. Most of my work is focused on firms and on policy evaluation. In the 1990s, there was this huge push for liberalization policies throughout the world, and especially in Latin America. It was not just trade, but domestic liberalization policies, making labor markets more flexible, making banking sectors more flexible, all these kinds of things. I lived through the liberalization process, and it made a big imprint on me. And so a huge part of my work is to understand these policies.

Something that’s very rich about Jackson is the interaction with colleagues from other disciplines. Often in economics, the primary guidance of how we think comes from models of how firms or people respond to incentives. But different disciplines have different approaches. So, it’s very interesting to talk, for example, to a political scientist with deep knowledge of political theory or to a historian with intricate knowledge about certain events in history. I think talking to historians is extremely fertile ground for future research.

While much of your work focuses on Latin America, one of your most recent papers examined tax administration in Indonesia. How did you become interested in that region and in this specific research question?

When I was at MIT, I asked my advisor Ben Olken whether he had any ongoing projects on government reforms. He mentioned having recently met a finance minister of Indonesia, who was visiting the Harvard Kennedy School at the time, and learning about various reforms that happened in 2007. Together with Rema Hanna, a professor at HKS, we decided to investigate further the types of reforms that took place in 2007. So, I went to Indonesia in December 2015, and spent all of January 2016, plus shorter trips over the next three years, just talking to policymakers and people in the finance ministry. We learned that a key aspect of the reform was to change the way Indonesia administered corporate taxation. In developing countries, most of the tax revenue collected from comes from firms because it’s hard to tax individuals (personal income taxes), as many people are very poor.

Our study analyzed the effects of the tax reform on medium-sized firms across the country. The Indonesian tax authorities created special tax offices just to deal with these firms, with more staff and enforcement capacity. And what we found is remarkable. Comparing the firms that were treated by the reform versus the ones that were not treated, but very similar, we found that that the reform more than doubled tax reporting and tax payments, for both VAT and corporate income tax. Over the six years that we evaluated, the reform collected nearly $4 billion extra in tax.

Plus, the cost of implementing the reform was so small—essentially staffing the additional tax offices, which cost less than 1% of the entire revenue that they took in—that the reform was very cost-effective. Based on these findings the Indonesian government decided to expand the treatment, creating 18 more of these specialized tax offices.

That is a remarkable outcome! Was it difficult to get access to this data in the first place?

The paper could not have happened without us being on the ground. We really needed to interview the policymakers and the people in the ministry to understand all the different aspects of the reform and to find an aspect of the reform that was amenable to quantitative analysis. We needed to find the natural experiment essentially, and being on the ground was pivotal for doing that.

But being on the ground also matters for other reasons. Every time that you’re working with a government or with a community that’s not your own—or even if it is your own—trust is the number one thing you need from both parties to have a successful research relationship. I think it’s very hard to quantify, but the value of being there is immense—of being close to the policymakers to show your goodwill and to show that we’re interested.

The other reason is that when you’re working with sensitive government data, this data is not out there. I couldn’t just analyze it from anywhere. So, we had to do a lot of work to request access to the data, access it securely, etc.

Overall, I think our job as educators is not just to educate our students, but it is to educate the public about what it takes to produce trusted, policy-informed evidence. Rich data is a key part of what you need to be able to do this.

One of the four required courses for Jackson M.P.P. students is GLBL 5010, “Economics for Global Affairs.” What do you think are the most important economic principles or ideas that future policymakers should take into their careers?

It’s a great question. I think the answer goes back to very basic core economic theory. In general, prices are efficient allocation mechanisms. That is, in a market economy, prices incentivize the people who would benefit the most from producing stuff to produce it (supply), and the people who would benefit the most from consuming stuff at that price to consume it (demand). So, policy intervention in any market system needs to be thought through carefully so as not to disturb this efficient mechanism.

There are, however, important situations, known as market failures, where a well-designed policy intervention can greatly improve people’s lives. Number one, externalities—when the production of a good or service affects other people in ways that are not taken into account by the producer. These can be positive as in the case of education or healthcare, or negative as in the case of pollution. For example, learning how to read and write helps individuals earn higher salaries in the future, yet the schools in which they were educated do not have any claims over those future salaries. This means that, in equilibrium, education will be under-provided by the private sector and its price system. An appropriate government intervention in this context is public education.

Number two, imperfect information. When consumers don’t know all information needed to judge the quality of a product, regulation might be warranted to incentivize firms not to hide bad information or not to make up false good information. A whole regulatory environment—with a legal system behind it that ensures its laws are enforced—needs to exist to incentivize firms to behave properly and punish them when they do not.

And number three, market power. A great deal of my research is focused on how policy affects firm behavior and tests whether, potentially inadvertently, a policy might lead markets to become more concentrated and/or more dominated by a handful of large firms. But more often than not, regulation works the other way around: when a market is characterized by market power, less output is produced (and prices are kept higher) by the firms engaged in this market then it would otherwise occur in a free market economy where there is perfect competition. Regulations might be needed in this case to prevent the emergence of monopolies or oligopolies.

Since coming to the U.S. in 2008 from your home country of Brazil, you’ve spent much of that time in the New England region. How do you like living in Connecticut, and specifically in New Haven?

I love living here! New Haven is a manageable version of a big city and a beautiful place to live, with variety in everything you might need, from hospital services to restaurants. The medical center here is amazing—I had my daughter here. It has a lot of restaurants. I love Ethiopian food and I’m able to find it here.

I think because Yale is such a big part of New Haven, there’s so much culture here compared to anywhere else. There is diversity in the city—I very much appreciate that. Plus, New Haven has great nature all around it. We really like going to East Rock Park.